ANNUAL FINANCIAL REPORTS Offices of Fiscal Affairs and Internal Audit For the Year Ended: June 30, 2007 Welcome to the CD version of the Fiscal Year 2007 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 2007 Board of Regents of the University System of Georgia ANNUAL FINANCIAL REPORT (GAAP Basis) UNIVERSITY SYSTEM OF GEORGIA For the Year Ended: June 30, 2007 [ return to home ] 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, 2007 [ return to home ] 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, 2007 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 Reports June 30, 2007 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 .................................................................................................... 14 Statement of Revenues, Expenses and Changes in Net Assets ........................................ 34 Statement of Cash Flows .................................................................................................. 54 Notes to the Financial Statements Note 1 Summary of Significant Accounting Policies .................................................. 55 Note 2 Deposits and Investments................................................................................. 62 Note 3 Accounts Receivable........................................................................................ 70 Note 4 Inventories........................................................................................................ 70 Note 5 Notes/Loans Receivable................................................................................... 70 Note 6 Capital Assets................................................................................................... 71 Note 7 Deferred Revenue............................................................................................. 72 Note 8 Long Term Liabilities ...................................................................................... 72 Note 9 Significant Commitments................................................................................ 72 Note 10 Lease Obligations............................................................................................. 72 Note 11 Retirement Plans .............................................................................................. 81 Note 12 Risk Management............................................................................................. 84 Note 13 Contingencies................................................................................................... 85 Note 14 Post Employment Benefits Other Than Pension Benefits................................ 86 Note 15 Natural Classifications with Functional Classifications .................................. 87 Note 16 Component Units ............................................................................................. 88 Financial Statements (Statutory Basis) Balance Sheet (Non-GAAP Basis) ...................................................................................209 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) ...........................210 BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA June 30, 2007 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 Robert F. Hatcher..............................Macon State-At-Large Term Expires January 1, 2013 James A. Bishop...........................Sea Island First District Term Expires January 1, 2011 Doreen Stiles Poitevint ..................Bainbridge Second District Term Expires January 1, 2011 Allan Vigil ..............................McDonough Third District Term Expires January 1, 2010 Wanda Yancey Rodwell...........Stone Mountain Fourth District Term Expires January 1, 2012 Elridge W. McMillan ..................Atlanta Fifth District Term Expires January 1, 2010 Vacant Sixth District Term Expires January 1, 2008 Richard L. Tucker ......................Duluth Seventh District Term Expires January 1, 2012 W. Mansfield Jennings, Jr. .....Hawkinsville Eighth District Term Expires January 1, 2013 James R. Jolly ...........................Dalton Ninth District Term Expires January 1, 2008 Patrick S. Pittard .....................Lakemont Tenth District Term Expires January 1, 2008 Willis J. Potts ............................Rome Eleventh District Term Expires January 1, 2013 Benjamin J. Tarbutton, III ......Sandersville Twelfth District Term Expires January 1, 2013 Kenneth R. Bernard, Jr. .........Douglasville Thirteenth District Term Expires January 1, 2014 OFFICERS OF THE BOARD OF REGENTS Allan Vigil...................................Chairman William H. Cleveland...............Vice Chairman Erroll B. Davis, Jr. ......................Chancellor William R. Bowes ...................Treasurer Julia M. Murphy......Secretary to the Board Annual Financial Report FY2007 1 OFFICE OF BUSINESS AND FISCAL AFFAIRS OFFICE OF INTERNAL AUDIT 270 WASHINGTON STREET, S.W. ATLANTA, GEORGIA 30334 December 14, 2007 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, 2007. 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 FY2007 2 UNIVERSITY SYSTEM OF GEORGIA Annual Financial Report FY2007 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 FY2007 4 STATE RESOURCES The General Appropriations Act of 2007, as amended, provided a total of $1,917,562,898 to the University System of Georgia. In addition, House Bill 1027 provided $15,732,554 from Tobacco funds. The amounts were as follows: STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2007 House Bill 1027 General State Funds Tobacco funds House Bill 94 General State Funds TOTAL STATE APPROPRIATIONS AVAILABLE $1,917,240,948 15,732,554 321,950 $1,933,295,452 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 M ilitary College Georgia Public Telecommunications Commission Public Libraries Research Consortium Total Other Activities Special Initiative Funding Total Educational and General $12,730,454 36,430,154 1,032,148 2,660,060 17,023,143 37,968,698 25,650,251 TOTAL ALLOCATIONS BY BOARD OF REGENTS $1,615,305,109 141,345,322 15,732,554 133,494,908 27,417,559 1,933,295,452 $1,933,295,452 Annual Financial Report FY2007 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, 2007. The University System continues to thrive as shown by the following statistics: FY2007 FY2006 FY2005 Students- StudentsFaculty Headcount FTE 10,093 9,721 9,335 259,945 225,197 253,552 218,617 250,659 214,863 Overview of the Financial Statements and Financial Analysis The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2007. 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 compact disc. 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 2007 and 2006. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University System of Georgia 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 Annual Financial Report FY2007 6 Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (assets minus liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the University System. They are also able to determine how much the University System 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. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the University System of Georgia's equity in property, plant and equipment owned by its institutions. 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 institutions within the University System, 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 institutions within the University System for any lawful purpose of the respective institution. Statement of Net Assets, Condensed Assets: Current Assets Capital Assets, net Other Assets Total Assets June 30, 2007 $1,157,762,551 5,150,217,912 179,777,799 6,487,758,262 June 30, 2006 $1,009,710,744 4,588,411,513 186,508,292 5,784,630,549 Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities 579,979,308 1,253,090,173 1,833,069,481 517,527,418 890,816,145 1,408,343,563 Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets 3,948,707,929 127,857,042 215,423,585 53,667,781 309,032,444 $4,654,688,781 3,756,425,368 116,812,689 203,025,824 19,248,501 280,774,604 $4,376,286,986 The total assets of the University System of Georgia increased by approximately $703 million. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $562 million of Capital Assets, net of accumulated depreciation and an increase of $119 million in Cash and Investments. The total liabilities for the year increased by approximately $425 million. The primary components of this increase were increases of $365 million in lease purchase obligations and $35 Annual Financial Report FY2007 7 million in accounts payable. The combination of the increase in total assets of $703 million and the increase in total liabilities of $425 million yielded a net increase in total net assets of $278 million, or 6.4%. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of related debt in the amount of $192 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 University System of Georgia, both operating and non-operating, and the expenses paid by the University System, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the University System. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institutions. 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 missions of the institutions. 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 System without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2007 June 30, 2006 Operating Revenues Operating Expenses Operating Loss $2,852,965,328 4,871,469,225 (2,018,503,897) $2,666,117,984 4,591,770,541 (1,925,652,557) Nonoperating Revenues and Expenses Income (Loss) Before other revenues, expenses, gains or losses 2,069,761,573 51,257,676 1,913,241,920 (12,410,637) Other revenues, expenses, gains, losses and transfers Increase in Net Assets 222,159,611 273,417,287 189,378,834 176,968,197 Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated 4,376,286,986 4,984,508 4,381,271,494 4,199,305,635 13,154 4,199,318,789 Net Assets at End of Year $4,654,688,781 $4,376,286,986 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 FY2007 8 Revenue by Source For the Years Ended June 30, 2007 and 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 June 30, 2007 $839,004,413 17,390,952 1,298,338,449 115,843,964 500,905,604 81,481,946 2,852,965,328 1,931,813,311 64,533,847 63,500,857 59,319,097 4,915,332 2,124,082,444 Capital Gifts and Grants State Other Capital Gifts and Grants Total Capital Gifts and Grants Special Item Transfers Total Revenues 197,794,495 24,316,821 222,111,316 48,295 $5,199,207,383 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 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, 2007 $1,243,360,766 716,786,462 405,219,847 359,378,722 187,227,234 734,087,541 385,913,708 146,093,867 430,608,320 76,439,730 186,353,028 4,871,469,225 54,320,871 $4,925,790,096 June 30, 2006 $778,546,436 15,764,281 1,241,458,815 105,560,471 445,156,679 79,631,302 2,666,117,984 1,817,258,595 76,184,808 37,490,128 38,830,965 (12,612,266) 1,957,152,230 149,618,884 39,712,338 189,331,222 47,612 $4,812,649,048 June 20, 2006 $1,136,097,589 699,292,562 385,137,832 338,041,955 174,407,248 693,500,532 382,900,429 143,900,127 388,780,429 74,498,187 175,213,651 4,591,770,541 43,910,310 $4,635,680,851 Annual Financial Report FY2007 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, 2007 and 2006, 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, 2007 ($1,711,860,614) 2,091,570,178 (304,343,901) 56,701,786 132,067,449 593,143,824 $725,211,273 June 30, 2006 ($1,679,012,681) 1,926,902,737 (244,102,912) 48,687,351 52,474,495 540,669,329 $593,143,824 Capital Assets The University System of Georgia had many significant capital asset additions and renovations during fiscal 2007 including the following: Georgia Institute of Technology: The Institute had three significant capital additions in fiscal year 2007 totaling $140 million. Two of the three additions were research buildings. The Molecular Science and Engineering Building was completed this year, resulting in an addition of $80 million. Also, the Klaus Advanced Computing Building was completed at a cost of $50 million, which includes a $10 million parking facility. The third significant capital addition in fiscal year 2007 was the $10 million addition of the museum collection at the Institute of Paper Science and Technology. Georgia State University: In fiscal year 2006, the State Legislature approved funding for the Science Teaching Laboratory Building, and this remains the University's top capital priority. The 213,000 gross square foot building is projected to cost a total of $77 million. The University will receive State funding of $40 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 $78 million Annual Financial Report FY2007 10 estimated cost to construct the building, the University has requested $58 million, and the remainder is to be funded through non-state sources. The only new item of funding the University received in fiscal 2007 was a minor capital project of approximately $5 million to renovate the roof and the exhaust stacks on the Natural Science Center Building. Medical College of Georgia: Numerous projects were completed during the fiscal year totaling $37 million. Medical College of Georgia also completed the Health Sciences Building in fiscal year 2007. A total of $35 million for this project was funded by Georgia State Financing and Investment Commission (GSFIC). Other on-going projects funded by the GSFIC during fiscal 2007 included $5 million. University of Georgia: In fiscal year 2007, the University had $104 million in capital asset additions. The Animal Health Research Center was completed, which is the only BSL-3-Ag (biosafety lab-level 3-agriculture) research facility located on a university campus. This project was completed at a cost of $38 million and was funded by many sources including the Georgia State Financing and Investment Commission. In October 2006, the University celebrated the 200th birthday and most recent renovation of its most significant building, Old College. The renovation of the University's first permanent building included work that restored and preserved historic features while adding modern amenities. Georgia Southern University: Capital assets, net, increased $49 million. The University had a significant capital asset addition in fiscal year 2007. The GSU Housing Foundation, Inc. renovated the Recreation Activities Complex at a cost of $40 million and leased the facility to Georgia Southern University beginning August, 2006. Georgia Southern University had two major construction-in-progress capital additions for renovation of two former student residence halls. The residence halls are being converted to office space for new faculty members and to allow for conversion of space in academic buildings to student classroom and lab space. Valdosta State University: The University had one significant capital asset addition for facilities in fiscal year 2007. The Patterson Hall renovation was completed and was reopened during fiscal year 2007. The renovation cost of approximately $10 million was financed through a capital lease with the Valdosta State University Foundation Real Estate I, LLC. Albany State University: The University had one significant capital asset addition for facilities in fiscal year 2007. The residence halls were completed, resulting in capital additions of $34 million. In addition, the Early Learning Center was under construction in fiscal year 2007. Georgia College and State University: The University had three significant capital asset additions for facilities in fiscal year 2007. The University entered into capital leases with GCSU Foundation, resulting in capital additions of $94 million for the Student Residential Facilities; $6 million for the Student Union Building and $2 million for the Irwin Street parking facility. Kennesaw State University: Kennesaw State University had $15 million in capital asset additions in fiscal year 2007, of which $8 million was funded by the Georgia State Financing and Investment Commission, primarily for completion of the Social Science Building. The University also entered into three new capital leases with the Foundation. The leases added $2 million to capital assets for additional space in Chastain Pointe and Town Point, as well as the Village Centre classroom. Annual Financial Report FY2007 11 North Georgia College and State University: The University had significant capital additions totaling $18 million during fiscal 2007, which included Land ($1 million), Owen Residence Hall ($11 million), Infrastructure ($4 million) and a Main Street office building ($2 million). University of West Georgia: The University had $64 million in capital additions for residence halls and a University Center that were financed through capital leases with University of West Georgia Foundation, Inc. and University of West Georgia Real Estate Foundation, Inc., both discretely presented component units in this report. Gordon College: The College had a capital addition in fiscal 2007 of $16 million for the Gordon Commons. This was funded through a capital lease with Gordon College Properties, LLC. Middle Georgia College: The College had two significant capital asset additions for facilities in fiscal year 2007. Gateway dormitory was opened in August 2006, resulting in a capital addition of $10 million. This facility was financed through a capital lease with the MGC Real Estate Foundation, LLC. Middle Georgia College also completed the new Chiller Plant, the installation of improved lighting and the related poles and portions of the campus utilities loop during the year. This is part of a $16 million Campus Utilities Loop project funded by the Georgia State Financing and Investment Commission. Georgia Perimeter College: The College had one significant capital asset addition of $11 million for facilities in fiscal year 2007. Construction of the College Center on the Clarkston campus was completed and placed into service early in calendar year 2007. University System Office: The System Office had significant capital additions of over $11 million during fiscal 2007. Over $7 million of this total were Equipment additions financed through capital leases. The balance of $4 million represents land and equipment transferred to the University System Office through an intergovernmental agreement with The Georgia Public Telecommunications Commission. Long-Term Debt and Liabilities The University System of Georgia had Long-Term Debt and Liabilities of $1.4 billion, excluding related party liabilities and deferred revenue, of which $123 million was reflected as current liability at June 30, 2007. For additional information concerning Long-Term Debt, see notes 1, 8 and 10 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, the University System of Georgia has included the financial statements and notes for all required component units for fiscal 2007. System-wide, there were 57 component units at 32 of the colleges and universities. All 57 component units are discretely presented in this consolidated Annual Financial Report. Fourteen of the component Annual Financial Report FY2007 12 units were deemed significant for reporting purposes to the State of Georgia and are also reported in the State Comprehensive Annual Financial Report (CAFR) for fiscal 2007. The 57 component units had combined total assets of $6.5 billion and total liabilities of $3.2 billion at June 30, 2007. The assets included $3.0 billion in investments and $1.5 billion in capital assets. The liabilities included $2.7 billion in long-term liabilities. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University System of Georgia has had significant increases in state appropriations during the last two years, owing to enrollment growth and the recent creation of Georgia Gwinnett College as the 35th institution in the system. Fiscal year 2008 state appropriations for current University System of Georgia operations, including institutions and other organized activities, are $2.1 billion, an increase of 10.5% over fiscal year 2007 state appropriations. Additionally, the University System of Georgia received $271 million in general obligation bond funding for capital facilities. The recent growth in enrollment has strengthened tuition revenues as well. 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. 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 at rates higher than originally expected for the time period, with a higher than anticipated increase in FTE student enrollment. 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 FY2007 13 Statement of Net Assets UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 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 Inventories (note 4) Prepaid Items Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Due from Component Units Investments (including real estate) Notes Receivable, net Capital Assets, net (note 6) Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations (current portion) Compensated Absences (current portion) US DOE Settlement (current portion) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compensated Absences (noncurrent) US DOE Settlement (noncurrent) 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 University System of Georgia (Primary Government) $709,561,879 104,917,827 45,016,992 9,921,362 141,257,192 78,374,644 20,459,595 48,233,909 19,151 1,157,762,551 15,649,394 3,947,800 2,003,034 113,907,644 44,269,927 5,150,217,912 5,329,995,711 6,487,758,262 109,388,839 15,399,195 27,331,432 18,036,910 31,508,735 190,645,670 6,061,147 57,206,944 34,229,883 88,641,955 206,277 1,193,388 128,933 579,979,308 1,166,364,008 9,977,107 70,052,831 746,126 3,500,000 2,450,101 1,253,090,173 1,833,069,481 3,948,707,929 127,857,042 215,423,585 53,667,781 309,032,444 $4,654,688,781 Annual Financial Report FY2007 14 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $8,359,000 905,029 10,117 3,852,749 6,637,289 1,341,000 21,105,184 $6,544,312 1,798,759 280 2,066,187 789,474 11,199,012 $42,799,436 31,689,662 19,407 32,730,988 107,239,493 1,348,124,536 167,891,090 34,194,211 39,123,000 20,037,493 1,609,370,330 1,630,475,514 6,998,307 2,206,210 250,000 245,178 4,605,000 1,357,838 429,687 43,725,993 59,818,213 42,616,317 207,330,000 9,116,999 90,332,000 20,000,000 369,395,316 429,213,529 592,820 353,617,657 417,988,082 11,386,657 417,676,769 $1,201,261,985 80,967,000 470,259 8,816,470 98,484,948 2,490,340 190,758,758 201,957,770 5,915,129 8,082,575 456,265 1,044,814 1,925,000 26,979 17,450,762 1,669,985 2,140,244 109,379,737 1,699,877 33,215,545 33,389,771 68,305,193 104,093,678 936,332 105,030,010 122,480,772 (5,103,357) 16,466,611 63,770,532 4,343,212 $79,476,998 0 68,305,193 1,669,985 39,404,559 $41,074,544 Annual Financial Report FY2007 15 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Georgia Advanced Technology Ventures, Inc. Component Units Georgia Tech Facilities, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $1,462,199 514,799 50,000 2,026,998 269,336 1,005,000 $4,343,000 33,000 429,687 5,813,000 896,000 11,514,687 13,852,000 9,365,000 157,687,000 758,790 111,176,844 113,209,970 115,236,968 674,488 496,578 3,585,561 246,109 1,640,295 6,643,031 85,145,694 34,752,000 4,863,313 220,519,313 232,034,000 5,411,000 2,098,000 3,921,000 11,430,000 7,394,000 607,000 206,204,000 6,407,057 91,552,751 98,195,782 19,583,798 897,392 (3,440,004) $17,041,186 214,205,000 225,635,000 (10,286,000) 14,295,000 2,390,000 $6,399,000 Georgia Tech Alumni Association $575,497 190,447 18,182 47,314 831,440 469,905 469,905 1,301,345 227,105 311,050 47,173 185,161 10,397 780,886 0 780,886 469,905 50,554 $520,459 Annual Financial Report FY2007 16 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS Georgia State University Foundation, Inc. Component Units Georgia State University Research Foundation, Inc. $24,537,320 167,083 6,306,977 114,883 31,126,263 44,002,266 130,677,338 $5,937,628 5,860,843 73,912 4,236,085 16,108,468 2,004,631 4,463,141 3,161,452 223,631,470 7,446,113 408,918,639 440,044,902 20,442,215 722,430 1,615,000 22,779,645 9,000,026 837,532 33,520 249,059,710 260,992 5,812,394 773,294 265,777,468 288,557,113 6,183,126 78,702,404 49,443,877 17,158,382 $151,487,789 5,024,806 11,492,578 27,601,046 26,098 4,236,085 5,095,568 9,357,751 0 9,357,751 5,024,806 2,000,000 982,649 10,235,840 $18,243,295 MCG Health, Inc. $41,448,111 30,181,019 63,354,846 78,138 193,474 7,626,746 803,299 143,685,633 88,015,660 74,510,746 771,696 163,298,102 306,983,735 16,200,967 4,308,583 202,511 2,324,000 17,751,953 3,058,375 11,190,803 320,674 55,357,866 8,614,579 6,974,000 15,588,579 70,946,445 62,837,792 173,199,498 $236,037,290 Annual Financial Report FY2007 17 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Medical College of Georgia Foundation, Inc. Component Units Medical College of Georgia PPG Foundation ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $15,870,777 350,000 186,325 43,305 16,450,407 133,402,427 119,206 1,957,565 361,113 135,840,311 152,290,718 $19,604,686 26,708,294 326,155 320,674 2,175,624 117,863 49,253,296 558,885 17,308,336 59,874,379 6,199,020 1,280,391 85,221,011 134,474,307 1,741,466 940,085 2,363,015 2,744,740 0 2,342,658 2,342,658 2,342,658 1,957,565 120,241,872 15,714,845 12,033,778 $149,948,060 78,138 670,000 8,537,444 32,611,077 558,885 32,019,063 65,189,025 73,726,469 6,199,020 54,548,818 $60,747,838 Medical College of Georgia Research Institute, Inc. $6,965,332 3,601,054 6,701 10,573,087 16,728 16,728 10,589,815 109,909 10,000 77,659 4,615,057 4,812,625 0 4,812,625 16,728 136,025 5,624,437 $5,777,190 Annual Financial Report FY2007 18 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Medical College of Georgia Dental Foundation Component Units University of Georgia Foundation University of Georgia Athletic Association, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $90,396 18,952 419,416 102,303 631,067 538,707 2,789,427 3,328,134 3,959,201 581,404 3,187,418 3,768,822 $11,052,551 39,897,092 2,502,648 6,175,994 17,378 173,658 2,110,293 61,929,614 13,509,424 599,781,509 67,505 13,787,452 179,778,304 6,026,467 812,950,661 874,880,275 2,463,928 1,265,398 837,591 905,752 29,495 3,485,000 539,149 3,025,134 10,628,504 23,179,951 0 3,768,822 172,182,798 11,147,013 10,063,029 193,392,840 216,572,791 190,379 $190,379 284,918,541 341,558,451 31,830,492 $658,307,484 $65,606,584 2,235,542 3,025,134 211,353 71,078,613 7,358,609 187,025,258 1,340,782 195,724,649 266,803,262 5,294,172 17,757,579 1,937,917 2,090,000 500,000 87,113 27,666,781 2,003,034 95,470,000 1,340,782 913,495 99,727,311 127,394,092 94,400,327 45,008,843 $139,409,170 Annual Financial Report FY2007 19 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Arch Foundation for the University of Georgia, Inc. Component Units University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $19,562,384 474,046 500,000 18,453,341 38,989,771 913,495 19,781,151 12,456,376 33,151,022 72,140,793 72,335 172,333 373,389 618,057 0 618,057 25,279,166 45,498,963 744,607 $71,522,736 $9,800,115 16,977,081 474,161 47,702 13,656,257 40,955,316 3,500,000 40,773,566 514,994 1,001,803 45,790,363 86,745,679 11,786,489 13,656,257 3,787,091 15,843,599 45,073,436 4,095,914 4,095,914 49,169,350 514,994 37,061,335 $37,576,329 $119,886 41,964,044 79,342 856,398 25,034 43,044,704 158,900 3,183,096 419,749 106,825 3,868,570 46,913,274 69,086 50,000 438,954 558,040 148,460 148,460 706,500 419,749 27,156,274 15,500,236 3,130,515 $46,206,774 Annual Financial Report FY2007 20 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Georgia Southern University Housing Foundation, Inc. Component Units (Georgia Southern University) Southern Boosters, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $2,006,665 10,000 438,955 8,130,071 47,444 10,633,135 14,928,390 176,016,345 190,944,735 201,577,870 3,462,436 630,000 5,558,366 2,685,000 12,335,802 75,007,737 109,765,827 184,773,564 197,109,366 4,695,777 (227,273) $4,468,504 $1,055,124 579,513 461,017 2,095,654 700,363 1,276,958 1,977,321 4,072,975 73,967 76,113 25,391 175,471 553,411 553,411 728,882 910,148 2,225,265 208,680 $3,344,093 Georgia Southern University Research and Service Foundation, Inc. $1,434,323 1,376,015 25,181 21,455 2,856,974 0 2,856,974 12,000 783,260 207,719 1,471,666 2,474,645 0 2,474,645 382,329 $382,329 Annual Financial Report FY2007 21 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Valdosta State University Foundation Component Units Albany State University Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $4,793,090 43,996 15,965 40,585 36,399 4,930,035 5,460,278 19,597,341 133,682 199,384 35,117,010 1,087,535 61,595,230 66,525,265 601,973 7,250 111,174 97,687 6,352 404,424 1,040,109 2,268,969 14,823 37,716,312 394,948 596 303,811 38,430,490 40,699,459 3,553,563 18,559,581 2,080,113 1,632,549 $25,825,806 $9,868 20,989 80,000 110,857 1,361,198 4,880,608 1,859,391 36,282,005 1,156,526 45,539,728 45,650,585 1,146,192 225,000 2,270,134 3,641,326 34,730,276 39,943 34,770,219 38,411,545 4,666,572 941,462 (842,359) 2,473,365 $7,239,040 Armstrong Atlantic State University Foundation, Inc. $1,137,028 95,224 1,232,252 5,733,281 5,233 5,738,514 6,970,766 14,000 14,000 0 14,000 4,019,499 2,836,470 100,797 $6,956,766 Annual Financial Report FY2007 22 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS AASU Educational Properties Foundation, Inc. Component Units Augusta State University Foundation, Inc. $955,219 17,587 972,806 4,819,624 35,021,490 1,448,232 41,289,346 42,262,152 1,107,970 15,278 321,709 930,000 21,188 2,396,145 41,891,797 $1,366,522 1,114,936 75,203 1,864,177 38,919 284,000 4,743,757 4,566,956 18,139,746 1,260,695 59,598,747 671,201 845,485 85,082,830 89,826,587 720,976 1,638,566 1,926 255,000 142,000 2,758,468 27,424,401 30,512,518 596,812 42,488,609 44,884,754 (2,167,527) (455,075) ($2,622,602) 1,259,883 59,196,802 61,955,270 15,747,124 6,416,738 5,707,455 $27,871,317 Augusta State University Athletic Foundation $236,375 12,133 4,766 253,274 1,909,963 1,909,963 2,163,237 160,155 6,801 14,055 17,430 293,158 491,599 30,323 1,273,109 1,303,432 1,795,031 295,943 72,263 $368,206 Annual Financial Report FY2007 23 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Walter & Emilie Spivey Foundation Component Units Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $171,456 171,456 7,479,018 20,331 147,575 7,646,924 7,818,380 0 $583,604 169,795 56,000 1,830 811,229 4,332,905 788,405 9,400 5,130,710 5,941,939 18,970 788,405 807,375 $1,944,474 29,445 1,125,128 12,086,813 732 48,837 304,431 15,539,860 2,977,848 25,260,039 15,209,513 43,447,400 58,987,260 84,329 12,041 5,594,853 110,245 14,985 5,816,453 0 0 147,575 7,670,805 $7,818,380 0 807,375 788,405 1,467,808 3,577,266 (698,915) $5,134,564 1,181,908 1,181,908 6,998,361 25,352,984 15,280,774 7,594,548 3,760,593 $51,988,899 Annual Financial Report FY2007 24 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 (Columbus State University) Foundation Properties, Inc. Component Units Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $1,365,605 244,899 50,000 301,256 2,119 1,963,879 2,088,974 6,068,326 113,740,376 1,657,997 123,555,673 125,519,552 6,745,491 23,559,301 1,146,806 1,124,629 5,836,324 38,412,551 $60,834 89,943 14,985 51,220 3,058 2,292 222,332 373,949 1,646,844 34,106 2,054,899 2,277,231 68,858 28,542 31,102 50,000 178,502 69,625,000 101,625 69,726,625 108,139,176 40,288,935 (22,908,559) $17,380,376 0 178,502 1,335,372 710,842 52,515 $2,098,729 $43,889 8,043 481 350 23,507 76,270 33,013 120,334 3,144 156,491 232,761 5,553 4,940 499 10,992 0 10,992 3,144 84,061 134,564 $221,769 Annual Financial Report FY2007 25 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS Fort Valley State University Foundation, Inc. Component Units Georgia College & State University Alumni Association, Inc. Georgia College & State University Foundation, Inc. $1,022,497 797,234 176,131 65,412 2,061,274 9,066,157 5,052,682 545,328 104,108 35,200,590 1,536,166 51,505,031 53,566,305 173,856 1,779,069 44,619 316,399 2,313,943 43,254,894 1,160,916 44,415,810 46,729,753 2,506,806 2,572,835 3,174,980 110,881 (1,528,950) $6,836,552 $252,756 1,000 8,111 1,748 263,615 5,822,122 86,864 4,500 5,913,486 6,177,101 1,199 1,199 0 1,199 86,864 4,208,367 1,661,950 218,721 $6,175,902 $5,214,397 1,724 4,130,286 447,276 25,621 167 9,819,471 14,818,374 13,415,858 185,930,136 3,266,060 2,138,326 219,568,754 229,388,225 397,861 2,439,182 644,572 508,813 275,000 4,265,428 107,359,845 109,173,601 46,652 2,670,957 219,251,055 223,516,483 (11,682,982) 10,186,200 3,845,758 3,522,766 $5,871,742 Annual Financial Report FY2007 26 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Georgia Southwestern Foundation, Inc. Component Units GSW Research and Development Corp., Inc. (Ceased Operations) ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Other Due from Component Units Leases Receivable Pledges Receivable Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid Items Notes and Mortgages Receivable Other Assets Total Current Assets $2,409,502 $0 1,421,133 73,237 287,030 6,724 4,197,626 0 Noncurrent Assets Noncurrent Cash 2,324,768 Short-Term Investments (noncurrent portion) Due from Component Units Due from Primary Government Investments (including real estate) 24,606,380 Notes Receivable, net Leases Receivable Receivables Other Contributions Receivable Pledges Receivable 430,691 Capital Assets, net (note 6) 23,615,507 Other Assets 769,694 Total Noncurrent Assets 51,747,040 0 TOTAL ASSETS 55,944,666 0 LIABILITIES Current Liabilities Accounts Payable 10,323 Salaries Payable Contracts Payable 610,840 Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government 97,962 Lease Purchase Obligations (current portion) Compensated Absences (current portion) Revenue/Mortgage Bonds payable (current) 250,000 Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities 969,125 0 Noncurrent Liabilities (note 8) Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) 26,983,914 Deposits Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities 26,983,914 0 TOTAL LIABILITIES 27,953,039 0 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted (2,938,226) 8,597,523 5,651,170 16,681,160 TOTAL NET ASSETS $27,991,627 $0 Kennesaw State University Foundation, Inc. $2,365,529 184,563 4,117,899 614,778 158,060 576,246 288,867 275,692 8,581,634 23,036,689 25,681,236 80,104,849 1,240,501 104,680,065 5,564,751 240,308,091 248,889,725 5,584,421 95,105 3,768,170 1,210,237 4,230,000 35,232 2,220,615 17,143,780 35,372,341 177,560,167 188,652 213,121,160 230,264,940 (4,875,297) 13,513,494 7,412,490 1,000,000 1,574,098 $18,624,785 Annual Financial Report FY2007 27 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS North Georgia College & State University Foundation, Inc. Component Units Southern Polytechnic State University Foundation, Inc. $98,450 565,754 1,039,477 88,305 103,078 1,895,064 29,822,875 26,863,108 27,907,664 3,151,223 3,718,551 1,056,767 92,520,188 94,415,252 989,128 777,634 243,681 555,000 2,500 2,567,943 18,009,150 46,424,761 20,165 300,873 64,754,949 67,322,892 (2,576,749) 22,131,247 6,206,475 1,331,387 $27,092,360 $498,996 964,485 2,460,125 83,859 3,944 4,011,409 4,119,621 3,895,606 49,915,259 110,361 517,247 58,558,094 62,569,503 623,843 1,683,490 900,000 3,207,333 20,034,483 33,457,823 551,896 54,044,202 57,251,535 2,008,952 1,547,762 1,761,254 $5,317,968 University of West Georgia Foundation, Inc. $2,940,063 5,019,626 64,311 2,600,360 853,198 11,477,558 15,603,044 50,431,527 1,268,609 6,170,270 1,085,985 74,559,435 86,036,993 553,026 1,860,559 839,743 5,700,000 8,953,328 18,196,848 32,349,438 56,377 395,000 50,997,663 59,950,991 795,556 10,145,595 15,456,341 (311,490) $26,086,002 Annual Financial Report FY2007 28 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS UWG Real Estate Foundation, Inc. Component Units Abraham Baldwin Agricultural College Foundation, Inc. $4,105,470 23,521 1,760,000 9,549 1,981 5,900,521 54,810,000 758,838 55,568,838 61,469,359 582,741 1,559,051 50 367,476 2,509,318 26,738,400 30,555,424 $2,418,828 401,854 487,042 3,183 1,812 14,225 3,326,944 11,606,509 7,488,636 508,333 38,305,273 2,323,437 60,232,188 63,559,132 1,566,340 190,720 423,875 785,000 128,253 3,094,188 47,450,847 57,293,824 59,803,142 249,246 1,416,971 $1,666,217 656,822 48,107,669 51,201,857 1,058,101 7,199,767 3,570,234 529,173 $12,357,275 Dalton State College Foundation, Inc. $778,631 2,111 2,163,635 160,268 3,104,645 12,471,910 7,279,474 4,878,531 34,292 24,664,207 27,768,852 82,350 16,564 17,112 47,717 163,743 2,377,228 2,377,228 2,540,971 2,453,586 8,627,546 2,015,132 12,131,617 $25,227,881 Annual Financial Report FY2007 29 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Gainesville State College Foundation, Inc. Component Units Gordon College Foundation Macon State College Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS 2,975 290,806 $122,528 5,318,636 293,781 105,240 11,768,732 5,441,164 2,950,000 688,000 8,400 11,882,372 12,176,153 12,708,215 16,346,215 21,787,379 295,708 $252,334 233,117 10,000 495,451 7,673,396 317,550 7,990,946 8,486,397 78,667 405,000 10,486 0 711,194 78,667 0 0 8,400 3,180,824 7,580,240 1,406,689 $12,176,153 14,694,554 46,763 14,741,317 15,452,511 (445,204) 86,843 6,693,229 $6,334,868 0 78,667 7,066,742 775,224 565,764 $8,407,730 Annual Financial Report FY2007 30 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Middle Georgia College Foundation, Inc. Component Units Bainbridge College Foundation ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $54,358 350,000 10,471 266,860 $39,492 107,693 681,689 5,718,415 848,396 21,703,531 11,023,575 640,771 39,934,688 40,616,377 2,191,523 147,185 0 147,185 18,959 2,210,482 11,193,535 26,850,000 38,043,535 40,254,017 1,309,617 802,928 471,250 (2,221,435) $362,360 0 0 0 107,693 39,492 $147,185 Coastal Georgia Community College Foundation, Inc. $1,059,229 69,451 1,128,680 7,482,670 8,586 7,491,256 8,619,936 0 0 0 4,284,665 1,212,101 849,351 2,273,819 $8,619,936 Annual Financial Report FY2007 31 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Darton College Foundation Component Units East Georgia College Foundation Georgia Highlands College Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $130,661 435,099 140,103 453 706,316 155,636 1,088,379 159,556 660,331 2,063,902 2,770,218 $101,350 39,233 1,565 34,130 5,000 181,278 879,080 168,600 118,572 1,166,252 1,347,530 $480,483 7,176 5,095 492,754 752,755 62,205 814,960 1,307,714 1,100 2,800 0 1,100 2,800 0 0 660,331 1,094,832 388,666 551,851 74,538 $2,770,218 0 1,100 168,600 1,011,156 166,674 $1,346,430 0 2,800 471,044 731,394 102,476 $1,304,914 Annual Financial Report FY2007 32 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Georgia Perimeter College Foundation, Inc. Component Units South Georgia College Foundation, Inc. Waycross College Foundation, Inc. ASSETS Current Assets 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 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) 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 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (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 LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS $113,380 $129,080 31,893 113,380 14,211,732 992,993 49,237 16,334,171 713,350 32,301,483 32,414,863 1,219,001 1,009,660 160,973 7,474,284 30,500 2,843,579 8,214,375 229,807 18,792,545 18,953,518 145,875 104,499 2,333,160 145,875 $140,207 1,820 63 581 142,671 1,508,728 1,508,728 1,651,399 3,070 4,498 7,568 25,140,501 15,801,289 25,140,501 27,473,661 6,010,253 3,447,645 691,853 (5,208,549) $4,941,202 15,801,289 15,947,164 117,177 2,211,518 162,165 515,494 $3,006,354 0 7,568 1,394,394 112,451 136,986 $1,643,831 Annual Financial Report FY2007 33 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET ASSETS June 30, 2007 REVENUES 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 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 Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, losses and transfers Capital Grants and Gifts State Other Special Item Transfers Total other revenues, expenses, gains, losses and transfers 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 University System of Georgia (Primary Government) $1,063,824,053 (224,819,640) 17,390,952 685,601,962 246,512,571 366,223,916 115,843,964 3,389,796 165,294,183 74,162,522 92,693,547 46,986,024 34,669,448 62,605,265 24,494,615 78,092,150 2,852,965,328 966,937,670 1,422,502,008 374,101,861 9,738,156 52,492,493 176,531,980 163,640,176 1,433,640,624 271,884,257 4,871,469,225 (2,018,503,897) 1,931,813,311 18,234,832 2,147,585 44,151,430 63,500,857 59,319,097 (54,320,871) 4,915,332 2,069,761,573 51,257,676 197,794,495 24,316,821 48,295 222,159,611 273,417,287 4,376,286,986 4,984,508 4,381,271,494 $4,654,688,781 Annual Financial Report FY2007 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, 2007 Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association REVENUES Operating Revenues 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 State 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 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 $52,201,244 44,200,000 $5,498,256 258,189 16,802,000 27,998,723 7,127,049 198,339 113,659,772 40,624,028 2,006,945 371,323 51,852 71,782 3,598 1,510,416 2,134,160 9,852,439 84,566,420 100,568,935 13,090,837 12,949,266 2,700,887 2,671,449 6,267,728 6,242,259 4,608,768 8,519,343 43,959,700 (3,335,672) 178,686,420 (15,419,272) 163,267,148 176,357,985 4,810,707 14,235,900 (6,160,868) 12,885,739 9,550,067 27,948,000 27,948,000 204,305,985 996,956,000 996,956,000 $1,201,261,985 2,797,004 2,797,004 12,347,071 67,129,927 67,129,927 $79,476,998 Georgia Tech Research Corporation $0 238,042,766 11,163,981 102,613,448 6,758,668 88,842 358,667,705 56,965 5,191,222 516,883 348,934,399 354,699,469 3,968,236 1,453,172 1,453,172 5,421,408 240,735 240,735 5,662,143 35,412,401 35,412,401 $41,074,544 Annual Financial Report FY2007 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, 2007 Georgia Advanced Technology Ventures, Inc. Component Units Georgia Tech Facilities, Inc. REVENUES Operating Revenues 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) $127,621 34,647 360,887 8,919,094 $0 232,000 12,998,000 728,320 10,170,569 8,000 13,238,000 46,811 14,379 415,766 5,361,477 1,892,310 237,946 7,968,689 2,201,880 480,000 60,000 159,000 363,000 1,062,000 12,176,000 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State 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 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 59,014 (4,420,878) (4,361,864) (2,159,984) 1,585,000 (6,677,000) (5,092,000) 7,084,000 0 (2,159,984) 18,379,648 821,522 19,201,170 $17,041,186 0 7,084,000 3,715,000 (4,400,000) (685,000) $6,399,000 Georgia Tech Alumni Association $4,112,305 1,078,624 810,380 83,971 194,742 6,280,022 3,090,420 774,702 312,273 62,405 1,364,741 126,232 797,602 6,528,375 (248,353) 0 (248,353) 0 (248,353) 768,812 768,812 $520,459 Annual Financial Report FY2007 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, 2007 Component Units Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $7,653,144 3,221,449 11,428,169 $0 34,058,822 6,968,377 12,395,098 66,673 22,369,435 1,909,300 302,416 1,275,020 2,056,693 8,056,414 2,415,675 12,158,055 28,173,573 (5,804,138) 53,422,297 1,889,947 91,700 50,924,581 52,906,228 516,069 13,719,459 (1,124,425) 12,595,034 6,790,896 1,343,645 1,343,645 1,859,714 4,195,614 4,195,614 10,986,510 144,670,935 (4,169,656) 140,501,279 $151,487,789 0 1,859,714 16,383,581 16,383,581 $18,243,295 MCG Health, Inc. $0 4,431,135 687,968 340,867,183 345,986,286 154,528,150 42,277,612 33,225,247 729,066 4,106,398 115,842,331 16,929,890 367,638,694 (21,652,408) 32,272,644 1,144,056 3,767,797 8,472,852 (749,474) (9,921,362) (182,530) 34,803,983 13,151,575 0 13,151,575 222,885,715 222,885,715 $236,037,290 Annual Financial Report FY2007 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, 2007 Component Units Medical College of Georgia Foundation, Inc. Medical College of Georgia PPG Foundation Medical College of Georgia Research Institute, Inc. REVENUES Operating Revenues 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 State 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 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 $4,151,505 $0 869,252 848,880 2,170,994 (28,276) 1,920,004 101,792 7,863,157 88,596,411 90,767,405 477,802 225,327 120,911 207,960 7,755,156 8,787,156 (923,999) 10,018,388 12,290,439 1,324,192 374,460 54,221 7,556,246 690,427 4,592,488 53,938,061 90,838,922 (71,517) $0 44,246,970 9,990,955 66,336 341,634 54,645,895 3,054,176 5,735 51,160,531 54,220,442 425,453 20,076,599 20,076,599 19,152,600 4,929,839 1,423,412 (1,475,325) 338 4,878,264 4,806,747 2,057,166 2,057,166 21,209,766 128,738,294 128,738,294 $149,948,060 0 4,806,747 55,941,091 55,941,091 $60,747,838 300,523 300,523 725,976 0 725,976 5,051,214 5,051,214 $5,777,190 Annual Financial Report FY2007 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, 2007 Component Units Medical College of Georgia Dental Foundation University of Georgia Foundation REVENUES Operating Revenues 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 State 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 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 $12,274,134 17,900,723 287,855 5,185,587 17,765,154 4,848,702 5,136,557 53,125,598 1,417,822 91,182 5,808 40,382 2,535,125 1,209,820 5,300,139 (163,582) 592,823 71,347 355,942 171,560 5,816,781 5,753,220 799,745 20,115,391 33,676,809 19,448,789 220,887 220,887 57,305 85,598,712 (7,131,797) 78,466,915 97,915,704 0 57,305 133,074 133,074 $190,379 15,402,622 15,402,622 113,318,326 544,989,158 544,989,158 $658,307,484 University of Georgia Athletic Association, Inc. $0 71,532,102 71,532,102 3,428,884 19,359,289 5,249,889 83,147 25,899,753 54,020,962 17,511,140 101,248 3,049,029 (3,698,892) (83,376) (631,991) 16,879,149 0 16,879,149 122,530,021 122,530,021 $139,409,170 Annual Financial Report FY2007 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, 2007 Component Units Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $20,965,309 952,065 4,258,404 $0 118,557,298 318,185 16,232,119 $1,933,715 5,197,288 167,872 26,175,778 1,070 135,108,672 177,208 7,476,083 43,215 1,092,449 3,708,541 4,844,205 21,331,573 10,857,008 46,082 119,723,520 130,626,610 4,482,062 136,206 564,619 1,667 3,347,366 4,049,858 3,426,225 1,449,725 1,449,725 22,781,298 7,218,476 7,218,476 29,999,774 41,522,962 41,522,962 $71,522,736 4,611,236 4,611,236 9,093,298 0 9,093,298 28,483,031 28,483,031 $37,576,329 1,128,576 1,128,576 4,554,801 1,235,623 1,235,623 5,790,424 40,416,350 40,416,350 $46,206,774 Annual Financial Report FY2007 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, 2007 Component Units Georgia Southern University Housing Foundation, Inc. (Georgia Southern University) Southern Boosters, Inc. REVENUES Operating Revenues 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 State 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 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 $1,472,548 6,549,416 35,175 175,750 122,500 6,671,916 129,916 1,813,389 1,487 59,686 61,173 6,610,743 799,680 18,820 901,176 1,719,676 93,713 70,266 (3,268,723) 77,156 (3,121,301) 3,489,442 48,638 (49,755) (1,117) 92,596 0 3,489,442 979,062 979,062 $4,468,504 0 92,596 3,251,497 3,251,497 $3,344,093 Georgia Southern University Research and Service Foundation, Inc. $0 4,928,689 77,630 560,253 5,566,572 68,299 5,469,335 5,537,634 28,938 63,105 63,105 92,043 0 92,043 530,800 (240,514) 290,286 $382,329 Annual Financial Report FY2007 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, 2007 Component Units Valdosta State University Foundation Albany State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $977,566 693,390 559,790 3,188,603 81,884 5,501,233 830,257 938,685 1,976,418 3,745,360 1,755,873 1,501,725 (1,419,065) 82,660 1,838,533 764,813 764,813 2,603,346 23,222,460 23,222,460 $25,825,806 $582,334 360,260 942,594 349,761 420,916 524,196 1,294,873 (352,279) 469,779 (1,790,808) 70,000 (1,251,029) (1,603,308) 0 (1,603,308) 9,745,614 (903,266) 8,842,348 $7,239,040 $2,322,894 518,592 2,841,486 449,223 921,109 468,795 1,839,127 1,002,359 86,639 86,639 1,088,998 130,481 130,481 1,219,479 5,737,287 5,737,287 $6,956,766 Annual Financial Report FY2007 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, 2007 Component Units AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $1,333,800 615,313 4,002,413 1,806,726 2,655 4,005,068 108,189 23,993 73,648 1,490,341 697,119 2,393,290 1,611,778 795,032 238,206 78,639 4,867,716 518,057 2,036,068 2,554,125 2,313,591 322,031 (1,668,119) (1,346,088) 265,690 652,269 (1,546,458) 779,160 (115,029) 2,198,562 0 265,690 (2,888,292) (2,888,292) ($2,622,602) 2,348,730 2,348,730 4,547,292 23,324,025 23,324,025 $27,871,317 Augusta State University Athletic Foundation $0 749,861 12,570 4,775 767,206 441,265 31,343 3,004 61,284 167,826 148,659 58,709 912,090 (144,884) 11,553 (108,277) 160,500 63,776 (81,108) 0 (81,108) 449,314 449,314 $368,206 Annual Financial Report FY2007 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, 2007 Component Units Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $575,496 $4,170,473 85,128 249,338 0 28,545 467,397 495,942 (495,942) 660,624 179,192 151,259 335,312 665,763 (5,139) 352,221 4,772,032 907,474 114,901 1,467,668 254,324 973,154 3,717,521 1,054,511 860,012 860,012 364,070 0 364,070 7,454,310 7,454,310 $7,818,380 243,497 1,150,547 243,497 238,358 1,150,547 2,205,058 71,353 71,353 309,711 4,824,853 4,824,853 $5,134,564 492,257 492,257 2,697,315 49,291,584 49,291,584 $51,988,899 Annual Financial Report FY2007 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, 2007 (Columbus State University) Foundation Properties, Inc. Component Units Columbus State University Athletic Fund, Inc. REVENUES Operating Revenues 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) $1,393,897 2,150,945 2,256,443 5,801,285 325,385 36,979 294,990 1,671,911 1,627,570 110,000 669,715 4,736,550 1,064,735 $123,586 231,791 229,336 584,713 6,288 1,437 292,922 354 80,567 32,545 414,113 170,600 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State 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 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 411,310 (2,753,413) (2,342,103) (1,277,368) 0 (1,277,368) 18,657,744 18,657,744 $17,380,376 1,693 1,693 172,293 51,134 51,134 223,427 1,875,302 1,875,302 $2,098,729 Columbus State University Alumni Association, Inc. $101,703 4,550 62,532 168,785 52,226 8,434 70,975 660 16,025 17,484 165,804 2,981 1,804 1,804 4,785 0 4,785 216,984 216,984 $221,769 Annual Financial Report FY2007 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 2007 Fort Valley State University Foundation, Inc. Component Units Georgia College & State University Alumni Association, Inc. REVENUES Operating Revenues 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) $702,635 21,140 410,235 61,046 1,195,056 $42,717 814,647 133,402 990,766 243,410 26,311 41,050 1,179,871 1,490,642 (295,586) 5,315 165,789 4,851 157,645 333,600 657,166 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State 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 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 110,794 110,794 (184,792) 110,882 626,627 737,509 552,717 6,283,835 6,283,835 $6,836,552 0 657,166 22,469 22,469 679,635 5,496,267 5,496,267 $6,175,902 Georgia College & State University Foundation, Inc. $2,039,381 1,466,934 385,880 9,340,958 24,965 13,258,118 1,823,989 254,480 320,376 1,181,407 12,333 2,068,025 126,158 1,156,729 6,943,497 6,314,621 743,290 (4,449,316) (3,706,026) 2,608,595 (7,721,750) 297,809 (7,423,941) (4,815,346) 10,952,905 (265,817) 10,687,088 $5,871,742 Annual Financial Report FY2007 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, 2007 Georgia Southwestern Foundation, Inc. Component Units GSW Research and Development Corp., Inc. (Ceased Operations) REVENUES Operating Revenues 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 State 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 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 $640,114 2,346,323 330,552 499,626 $118,848 71,000 32,138 3,848,753 148,779 34,069 3,271 781,737 591,022 102,012 1,464,621 3,125,511 723,242 189,848 153,534 32,782 1,882 3,663 240,720 2,650 60,180 495,411 (305,563) 1,516,937 (783,557) (40,555) 692,825 1,416,067 297,133 297,133 1,713,200 25,721,746 556,681 26,278,427 $27,991,627 0 (305,563) 0 (305,563) 305,563 305,563 $0 Kennesaw State University Foundation, Inc. $4,352,065 899,947 97,000 20,388,395 25,737,407 1,726,356 1,789,757 4,575,411 4,088,857 4,125,711 16,306,092 9,431,315 2,694,940 (8,736,485) (6,041,545) 3,389,770 1,175,818 1,175,818 4,565,588 14,059,197 14,059,197 $18,624,785 Annual Financial Report FY2007 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, 2007 North Georgia College & State University Foundation, Inc. Component Units Southern Polytechnic State University Foundation, Inc. University of West Georgia Foundation, Inc. REVENUES Operating Revenues 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) $727,940 616,641 $1,971,416 383,780 $4,433,025 1,884,808 1,330,342 2,563,822 543,580 262,587 2,937,510 34,631 113,950 11,676 472,661 115,142 278,120 205,781 1,685,181 2,917,142 20,368 4,919,018 5,168 68,991 109,137 1,197,164 238,946 537,749 2,157,155 2,761,863 1,685,380 561,366 9,108,159 411,713 137,433 2,854 797,807 94,653 91,419 1,547,361 3,083,240 6,024,919 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State 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 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 2,881,437 (1,470,472) 70,790 1,481,755 1,502,123 (541,686) 10,468,995 9,927,309 11,429,432 15,662,928 15,662,928 $27,092,360 196,490 (1,604,483) (1,407,993) 1,353,870 (1,816,961) (1,816,961) 4,207,958 11,047 11,047 1,364,917 3,953,051 3,953,051 $5,317,968 715,612 715,612 4,923,570 15,936,073 5,226,359 21,162,432 $26,086,002 Annual Financial Report FY2007 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, 2007 UWG Real Estate Foundation, Inc. Component Units Abraham Baldwin Agricultural College Foundation, Inc. Dalton State College Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $1,175,338 $10,153,122 941,937 72,500 3,601,214 740,532 1,221,347 1,293,847 83,476 83,476 1,210,371 4,776,552 134,747 27,599 99,526 16,007 2,901,136 1,343,662 4,151 326,018 4,852,846 (76,294) 11,835,591 151,982 12,365 352,245 2,692 58,537 347,046 81,515 1,235 1,330,217 2,337,834 9,497,757 177,055 (1,411,271) 16,271 (1,217,945) (7,574) 1,540,307 (1,313,929) 226,378 150,084 (137,499) (137,499) 9,360,258 0 (7,574) 1,673,791 1,673,791 $1,666,217 363,758 363,758 513,842 11,843,433 11,843,433 $12,357,275 602,389 602,389 9,962,647 15,265,234 15,265,234 $25,227,881 Annual Financial Report FY2007 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, 2007 Component Units Gainesville State College Foundation, Inc. Gordon College Foundation Macon State College Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $2,237,884 693,440 $874,391 649,354 $390,212 256,772 2,140 103,381 3,034,705 1,523,745 649,124 179,093 479,068 658,161 2,376,544 239 21,403 373,137 30,850 53,520 479,149 1,044,596 99,225 512,879 612,104 37,020 202,308 202,308 2,578,852 36,124 36,124 2,614,976 9,561,177 9,561,177 $12,176,153 647,899 (716,562) (68,663) 975,933 754,079 754,079 791,099 0 975,933 5,358,935 5,358,935 $6,334,868 84,875 84,875 875,974 7,531,756 7,531,756 $8,407,730 Annual Financial Report FY2007 50 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, 2007 Component Units Middle Georgia College Foundation, Inc. Bainbridge College Foundation REVENUES Operating Revenues 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 State 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 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 $158,736 96,336 521,103 $3,381 776,175 295 3,676 163,705 44,518 208,223 567,952 759 759 2,917 225,796 (560,203) (1,032,167) (1,366,574) (798,622) 15,200 15,200 (783,422) 1,145,782 1,145,782 $362,360 345 345 3,262 31,150 31,150 34,412 112,773 112,773 $147,185 Coastal Georgia Community College Foundation, Inc. $574,082 268,159 842,241 31,773 656,559 688,332 153,909 469,815 469,815 623,724 2,185 2,185 625,909 7,994,027 7,994,027 $8,619,936 Annual Financial Report FY2007 51 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, 2007 Component Units Darton College Foundation East Georgia College Foundation Georgia Highlands College Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $562,413 37,202 $240,945 28,436 9,688 $289,820 117,230 69,120 2,962 602,577 3,444 324,681 328,125 274,452 279,069 31 1,149 92,983 42,838 137,001 142,068 476,170 23,443 39,681 305,961 369,085 107,085 31,733 31,733 306,185 0 306,185 2,464,033 2,464,033 $2,770,218 82,675 82,675 224,743 0 224,743 1,121,687 1,121,687 $1,346,430 0 107,085 1,428 1,428 108,513 1,196,401 1,196,401 $1,304,914 Annual Financial Report FY2007 52 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, 2007 Component Units Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. REVENUES Operating Revenues 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 State 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 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 $970,269 $95,711 70,411 $40,898 53,019 970,269 166,122 309,213 609,179 918,392 51,877 36,650 169,887 206,537 (40,415) 93,917 1,114 637 3,056 85,555 90,362 3,555 1,052,193 (93,502) 958,691 1,010,568 324,528 324,528 284,113 548,310 548,310 1,558,878 3,382,324 3,382,324 $4,941,202 65,586 65,586 349,699 2,656,655 2,656,655 $3,006,354 153,565 153,565 157,120 40,044 40,044 197,164 1,446,667 1,446,667 $1,643,831 Annual Financial Report FY2007 53 Statement of Cash Flows UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS June 30, 2007 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 Interest Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year 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 Benefits Payable Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities ** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS Fixed assets acquired by incurring capital lease obligations Non-capital items acquired by incurring capital lease obligations Change in accounts receivable related to private gifts Change in fair value of investments recognized as a component of interest income Special Item Transfer Change in accrued interest payable affecting interest paid Gift reducing proceeds of Gifts and Grants received for other than capital purposes Gift of capital assets reducing proceeds of capital grants and gifts Annual Financial Report FY2007 54 June 30, 2007 $848,386,966 17,522,100 1,267,831,122 115,635,824 (2,001,394,331) (2,375,360,937) (175,440,297) (15,200,945) 15,432,870 161,236,637 69,192,410 96,764,922 47,134,834 34,897,164 63,450,179 25,921,841 92,129,027 (1,711,860,614) 1,931,813,311 16,611,350 131,136,852 (499,062) (93,643) 12,601,370 2,091,570,178 88,072,051 5,750,298 (314,665,133) (30,975,303) (52,525,814) (304,343,901) 24,348,688 44,076,527 (11,723,429) 56,701,786 132,067,449 593,143,824 $725,211,273 ($2,018,503,897) 271,884,257 (22,506,782) (709,805) 449,850 (197,713) 1,150,859 39,238,282 11,148,693 (836,182) (4,346,433) 11,368,257 ($1,711,860,614) $385,781,803 $5,058,668 $13,452 $15,239,445 $48,295 $874,357 ($1,169,009) ($132,357,893) UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 57 component units of the University System of Georgia. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University System was also required to adopt GASB Statements No. 34 and Annual Financial Report FY2007 55 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 FY2007 56 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, 2007, GSFIC transferred capital additions valued at $146,541,945 to the University System of Georgia. This includes projects completed during fiscal 2007 and additional expenditures for projects completed in prior years. This resulted in a cumulative total of $2,436,285,970 as of June 30, 2007. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University System residence hall. Annual Financial Report FY2007 57 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 $146,088,649 as of 7-1-2006. For fiscal 2007, $109,107,438 was earned in compensated absences and employees were paid $96,501,301 for a net increase of $12,606,137. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $158,694,786. 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 FY2007 58 Expendable Restricted Net Assets include the following: June 30, 2007 Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Total Restricted Expendable $122,641,129 44,726,427 21,123,266 5,640,601 21,292,162 $215,423,585 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: R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets June 30, 2007 $77,870,242 202,356,721 3,364,638 25,440,843 $309,032,444 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 FY2007 59 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. Auxiliary Enterprise revenue reported in the Statement of Revenues, Expenses and Changes in Net Assets is reported net of $2,684,849 allowances. Special Item Transfers There was one Special Item transfer in fiscal 2007 in the amount of $48,295 at Bainbridge College. Bainbridge College absorbed the Early County Site of the Albany Technical College during the fiscal year and as a result, the Equipment assets for the Early County Campus were transferred to Bainbridge College as of July 1, 2006. The Equipment capital assets transferred had a value of $234,440, with an accumulated depreciation balance of $186,145 as of July 1, 2006. The net transfer to Bainbridge College was $48,295. This amount is reported as a Special Item on the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flows. See Note 6 Capital Assets for additional information. Annual Financial Report FY2007 60 Restatement of Prior Year Balances The following institutions had restatements of prior year balances in fiscal 2007: Prior Year Adjustments: Effect on Beginning Net Assets Fort Valley State University Georgia Highlands College $2,484,508 2,500,000 Total $4,984,508 Fort Valley State University had a restatement of prior year net assets increasing beginning net assets by $2,484,508. This was due to removing capital assets that were disposed in prior years as well as adjusting the useful lives of certain buildings to reflect the University's accounting policy. Georgia Highlands College had a restatement of prior year net assets increasing beginning net assets by $2,500,000. This was due to the donation of land for the Cartersville campus that was not reported in the prior year. Annual Financial Report FY2007 61 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, 2007, the carrying values of deposits were $370,780,125 and the bank balances were $420,320,782. Of the University System's deposits, $416,432,835 were uninsured. Of these uninsured deposits, $99,848,220 were collateralized with securities held by the financial institution's trust department or agent in the University System's name, $237,315,732 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name and $79,268,883 were uncollateralized. 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. Annual Financial Report FY2007 62 The University System's investments as of June 30, 2007 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 U.S. Agencies - Implicitly Guaranteed Corporate Debt General Obligation Bonds Municipal Obligations Mutual Bond Funds Fair Value LessThan 1 Year Investment Maturity More Than 1-5 Years 6-10 Years 10 Years $9,769,817 6,418,607 127,490,064 2,970,618 1,060,321 5,000 36,994,749 $184,709,176 $791,603 3,319,690 58,294,098 1,062,921 5,000 7,058 $63,480,370 $4,494,751 3,083,025 67,573,317 1,340,425 163,650 34,162,508 $110,817,676 $4,227,572 15,892 819,640 561,779 438,018 2,825,183 $8,888,084 $255,891 803,009 5,493 458,653 $1,523,046 Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Real Estate Investment Funds Cash Surrender Value Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool 8,244,426 75,853,828 15,306,895 241,927 6,953,416 8,657 274,139,567 5,997,750 $571,455,642 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 15 days at June 30, 2007. 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 $1.99 at June 30, 2007. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The effective duration of the fund for the month of June, 2007 was .91 years. Annual Financial Report FY2007 63 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 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. Annual Financial Report FY2007 64 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 stocks 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. Annual Financial Report FY2007 65 Condensed financial information for the investment pool follows: Regents Investment Pool Statement of Net Assets June 30, 2007 Assets Cash and Cash Equivalents Investments Interest Receivable Net Assets $ 3,586,128 126,295,038 226,590 $ 130,107,756 Distribution of Net Assets External Participant Account Balance $ Internal Participant Account Balance $ 6,389,790 123,717,966 130,107,756 Regents Investment Pool Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2007 Additions Investment Income Interest $ Fair Value Increases Less: Investment Expense Total Additions $ 4,720,065 8,799,549 (358,794) 13,160,820 Deductions Pool Participant Withdrawals Capital Transactions Total Deductions Net Decrease Net Assets July 1, 2006 June 30, 2007 $ (41,532,793) 13,283,345 $ (28,249,448) $ (15,088,628) 145,196,384 $ 130,107,756 Annual Financial Report FY2007 66 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, except in the Diversified Fund, shall be limited to US government agency and corporate debt instruments that meet investment eligibility under Georgia Code 50-17-63. 4. The fixed income target allocation is defined in the investment policy guidelines for each pooled investment fund. These targets may be modified upon recommendation of the fund's investment manager and approval by the Board of Regents. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University System will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System's policy for managing custodial credit risk for investments is: 1. The University System has appointed a federally regulated banking institution as custodian. The custodian performs its duties to the standards of a professional custodian and is liable to the University System 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, 2007, $159,484,881 of the University System's applicable investments were uninsured and held by the investment's counterparty in the University System's name and $2,614,635 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 FY2007 67 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 eligible investments under Georgia Code 50-17-63. Portfolios of debt security funds also must meet the eligible investment criteria under the same code section. 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: Related Debt Investments U. S. Agencies Corporate Debt General Obligation Bonds Municipal Obligations Mutual Bond Funds Fair Value AAA AA A Baa Unrated $127,490,064 2,970,618 1,060,321 5,000 36,994,749 $21,846,281 347,936 1,060,321 5,000 493,859 808,969 1,078,786 493,859 330,081 $105,643,783 404,846 36,007,031 $168,520,752 $23,753,397 $1,302,828 $1,078,786 $330,081 $142,055,660 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. 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, 2007: Investment Amount % of Total Federal National Mortgage Association $72,484,111 13% Federal Home Loan Mortgage Corporation $35,462,924 6% Annual Financial Report FY2007 68 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 is 0 10%. 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 FY2007 69 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: 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, 2007 $22,834,271 15,728,433 45,016,992 13,954,170 9,921,362 78,374,644 102,101,888 287,931,760 13,361,570 $274,570,190 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookstore Food Services Physical Plant Other Total June 30, 2007 $13,530,429 1,782,832 2,285,372 2,860,962 $20,459,595 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, 2007. 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, 2007 the allowance for uncollectible loans was approximately $2,501,000. Annual Financial Report FY2007 70 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Restated Beg. Bal. July 1, 2006 Special Item Transfer Additions Reductions End. Bal. June 30, 2007 Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated $186,037,960 19,847,789 165,632,377 371,518,126 $0 $5,514,450 $153,027 $191,399,383 11,276,231 32,582 31,091,438 149,505,138 125,564,442 189,573,073 0 166,295,819 125,750,051 412,063,894 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 154,275,863 4,549,579,362 227,048,094 976,777,667 312,811,275 597,651,498 1,065,201 6,819,208,960 234,440 234,440 17,958,089 343,822,430 9,804,686 92,432,694 306,752,959 32,348,880 302,075 803,421,813 2,130,188 15,493,125 1,399,784 56,912,967 1,841,065 1,741,734 9,500 79,528,363 170,103,764 4,877,908,667 235,452,996 1,012,531,834 617,723,169 628,258,644 1,357,776 7,543,336,850 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation 51,212,504 1,310,130,073 75,520,762 690,747,292 28,235,238 441,060,665 424,531 2,597,331,065 186,145 186,145 4,181,862 124,436,670 6,086,935 81,468,828 23,923,813 31,758,587 27,562 271,884,257 1,746,053 5,433,673 1,251,187 53,227,618 677,378 1,874,856 7,870 64,218,635 53,648,313 1,429,133,070 80,356,510 719,174,647 51,481,673 470,944,396 444,223 2,805,182,832 Total Capital Assets, Being Depreciated, Net 4,221,877,895 48,295 531,537,556 15,309,728 4,738,154,018 Capital Assets, net $4,593,396,021 $48,295 $697,833,375 $141,059,779 $5,150,217,912 Annual Financial Report FY2007 71 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Prepaid Tuition and Fees Research Other Deferred Revenue Totals June 30, 2007 $114,328,391 33,200,650 43,116,629 $190,645,670 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences US DOE Settlement Notes & Loans Total Total Long Term Obligations Beg. Bal. July 1, 2006 Additions Reductions End. Bal. June 30, 2007 $835,432,764 146,088,649 1,211,885 2,554,919 149,855,453 $985,288,217 $396,250,129 109,107,438 150,000 109,257,438 $505,507,567 $31,089,002 96,501,301 259,482 125,885 96,886,668 $127,975,670 $1,200,593,891 158,694,786 952,403 2,579,034 162,226,223 $1,362,820,114 Current Portion $34,229,883 88,641,955 206,277 128,933 88,977,165 $123,207,048 Note 9. Significant Commitments The University System of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $101,804,481 as of June 30, 2007. In addition, Fort Valley State University executed a rental agreement for a Student Housing Complex with the Fort Valley State University Foundation, Inc. in June 2006. The rental agreement commences in fiscal year 2008 and will expire in fiscal year 2037. The present value of the minimum lease payments over the life of the rental agreement is $43,334,897. These amounts are 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. Annual Financial Report FY2007 72 CAPITAL LEASES The University System of Georgia is obligated under approximately $1.2 billion in capital lease liability as of June 30, 2007. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2037. Expenditures for fiscal year 2007 were $85,409,873 of which $54,320,871 represented interest. Total principal paid on capital leases was $31,089,002 for the fiscal year ended June 30, 2007. Interest rates range from 0.65 percent to 12 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Land Infrastructure Buildings Facilities Equipment Total Assets Held Under Capital Lease $14,460,922 6,890,313 1,174,334,012 233,750 36,634,904 $1,232,553,901 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 reports. Major capital lease details are listed below: Georgia Institute of Technology Georgia Institute of Technology had six capital leases with related parties in fiscal year 2007. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $18,535,000. In August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200 with the Georgia Tech Foundation, Inc. for a complex of buildings collectively named "Technology Square". Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $131,660,360. In February 2001 Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $41,745,000. In May 2005 Georgia Institute of Technology entered into a capital lease of $70,320,000 with Georgia Tech Facilities, Inc., an affiliated organization, for two structures/buildings: (1) A Annual Financial Report FY2007 73 complex of buildings collectively named "Married Family Housing", including an adjoining parking deck; and (2) The underground parking deck for the Klaus Advanced Computing Center. The lease terms are 25 years on the Housing complex and 20 years on the Klaus parking deck. The lease expires in June, 2030. At June 30, 2007 the remaining long-term debt obligation under the lease was $67,080,000. 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 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, 2007 the remaining longterm debt obligation (principal) under the lease was $62,191,204. 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. In May 2004 Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June, 2036. At June 30, 2007 the remaining long-term debt obligation under the lease was $75,205,000. The Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2012. At June 30, 2007, the total obligation under these agreements was $13,553,117. Georgia State University 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 with an effective interest rate of 6.985 percent with the Georgia State University Foundation, Inc. (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 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, 2007 on these capital leases is $28,711,360 and $10,946,828 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 and software with an outstanding balance at June 30, 2007 in the amount of $4,248,587. University of Georgia The University of Georgia occupies six real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2032, 2033, three expire in 2034, and one expires in 2036. The equipment capital leases expire between 2008 and 2011. Interest rates range from 0.65 percent to 8.48 percent. Annual Financial Report FY2007 74 All six of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), an entity that is wholly owned by the University of Georgia Foundation, a related entity. In August 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 2002, the University of Georgia entered into the second 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 2003, The University of Georgia entered into the third capital lease with the UGAREF, whereby, the University leases the Complex Carbohydrate Research Center for a 30-year period that began on September 25, 2003 and expires September 30, 2033. The University of Georgia entered into the fourth and fifth 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 sixth 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, 2007 on these capital leases is $161,497,319. The University of Georgia Foundation considers these leases to be operating leases and includes the value of the related properties in their capital assets. The University also has various capital leases for equipment with an outstanding balance of $241,587 at June 30, 2007. Georgia Southern University Georgia Southern University has six 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 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, 2007, for this capital lease was $39,298,099. In July 2005, Georgia Southern University entered into a capital lease of $2,230,350 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, 2007, for this capital lease was $2,132,577. In July 2005, Georgia Southern University entered into a capital lease of $694,056 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, 2007 for this capital lease was $663,592. In July 2005, Georgia Southern University entered into a capital lease of $1,677,441 at 4.94 percent with the Housing Foundation, whereby the University leases a facility (Soccer Stadium) Annual Financial Report FY2007 75 for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2007 for this capital lease was $1,603,463. In July 2005, Georgia Southern University entered into a capital lease of $30,179,998 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, 2007, for this capital lease was $28,938,674. In August 2006, Georgia Southern University entered into a capital lease of $40,264,056 at 4.73 percent with the Housing Foundation, whereby the University leases buildings (Recreational Activities Complex-RAC) for a twenty-five year period that began August 2006 and expires July 2031. The outstanding liability at June 30, 2007, for this capital lease was $41,351,115, which includes $1,087,059 in capitalized interest. Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2007 in the amount of $250,337. Valdosta State University Valdosta State University has four 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 2008 to 2031. In fiscal year 2007, the University entered into a capital lease of $10,399,786 at a varying interest rate with Valdosta State University Foundation Real Estate I, LLC for Patterson Hall, a 300 bed housing unit located on the main campus. This lease spans a twenty-five year period. In 2006, Valdosta State University leased Lowndes Hall for $7,116,694 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC for a 25 year period. In 2005, the University entered into a capital lease for a twenty-five year period at an amount of $19,285,471 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 at 6.25 percent with the Valdosta State University Foundation, also a related party, whereby the University leases a building for a sixyear period. The outstanding liability at June 30, 2007 on these capital leases is $10,364,017, $7,170,241, $18,171,546, and $623,712 respectively. Valdosta State University entered into a new equipment capital lease during fiscal 2007 in the amount of $6,338 and also has various other capital leases for equipment with an outstanding balance at June 30, 2007 in the amount of $65,100. All equipment leases are with third parties. Georgia College & State University Georgia College & State University had three capital leases with related entities in the current fiscal year. Interest rates range from 4.10 percent to 8.30 percent and have terms expiring in various years between 2008 and 2034. In June 2007, Georgia College & State University entered into a capital lease of $94,350,650 at 4.715 percent with GCSU Foundation, a discretely presented component unit, whereby the Annual Financial Report FY2007 76 University leases Student Housing for a twenty-seven year period that began June 15, 2007 and expires March 25, 2034. In February 2005, the University entered into a capital lease of $6,382,006 at 4.1 percent with GCSU Foundation, whereby the University leases land and a building for a twenty-one year period that began February 1, 2005 and expires June 30, 2025. In addition, Georgia College & State University entered into a capital lease of $1,595,163 at 4.1 percent with GCSU Foundation, whereby the University leases a Parking facility for a twentyone year period that began September 1, 2004 and expires June 30, 2025. The outstanding liability at June 30, 2007 on these capital leases is $94,350,650 for Student Housing; $5,874,100 for the Student Center and $1,449,453 for the Parking facility. Georgia College & State University also has various capital leases for equipment with third parties with an outstanding balance at June 30, 2007 in the amount of $388,124. These leases expire in fiscal years from 2008 through 2011. Augusta State University Augusta State University had three capital leases with related entities in the current fiscal year. In August 2004, Augusta State University entered into a capital lease of $20,246,137 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 at 4.72 percent with ASU Foundation, whereby the University leases a student center building for a 29 year term 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, 2007, on these capital leases is $20,546,264 and $11,860,938, 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 Instruction Technology (OIIT), a related state agency, on December 1, 2004. The final installment under this agreement was paid in December 2006. There is no outstanding liability for this lease as of June 30, 2007. Kennesaw State University Kennesaw State University had eight 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 $3,965,768 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, 2007 on this capital lease is $3,656,077. In August 2002, the University entered into a capital lease of $21,016,938 at 4.7 percent whereby the University leases two parking decks for a twenty-four-year period that expires July 2026. In Annual Financial Report FY2007 77 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. 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, 2007 on this capital lease is $20,944,602. In January 2004, the University entered into a capital lease of $2,718,028 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 5.5% for additional space in the complex, bringing the value of the lease to $3,378,929. In February 2007, the University substituted space and added additional space in a capital lease at 5.5% bringing the value of the lease to $4,326,537. The outstanding liability at June 30, 2007 on these capital leases is $4,050,922. In February 2004, the University entered into a capital lease of $200,000 at 2.0 percent whereby the University leases a house for a fifteen-year period that expires January 2019. The outstanding liability at June 30, 2007 on this capital lease is $159,567. In September 2004, the University entered into a capital lease of $14,323,134 at 5.79 percent whereby the University leases a parking deck for a twenty-five year period that 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 annually for a period of twenty-five years commencing in September 2004. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $13,471,967. In April 2006, the University entered into a capital lease of $4,015,944 at 8.22 percent whereby the University leases a portion of an office building for a twenty-four-year period that 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. In September 2006, the University entered into a capital lease at 8.22 percent for additional space in the complex, bringing the value of the lease to $4,157,971. The outstanding liability at June 30, 2007 on these capital leases is $4,063,171. In April 2006, the University entered into a capital lease of $1,814,402 at 5.07 percent whereby the University leases 7.242 acres of unimproved land for a twenty-four-year period that expires June 30, 2030. At the expiration of the lease, ownership of the land transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $1,765,607. In November 2006, the University entered into a capital lease of $1,041,207 at 5.38 percent whereby the University leases classroom space in a multi-purpose building. The building is constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $10 for a twenty-five year period commencing in June 2004. At the Annual Financial Report FY2007 78 expiration of the ground lease, ownership of the building transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $978,979. In March 2006, the Board of Regents had approved a lease for an office/classroom building that would have been classified as a capital lease; however, the lease had not been executed as of the statement date. Southern Polytechnic State University Southern Polytechnic State University had two capital leases with related entities in the current fiscal year. In July 2005, Southern Polytechnic State University entered into a capital lease of $11,643,862 at 5.0 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 $22,148,456 at 5.0 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, 2007 on these capital leases is $32,179,013. 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. University of West Georgia University of West Georgia has three capital leases with related entities with terms expiring in various years between 2009 and 2035. Interest rates range from 3.0 percent to 4.75 percent. Two separate capital leases for student residence halls are with the University of West Georgia Foundation, Inc., a discretely presented component unit in these financial statements. The University Suites lease began in August 2004 and expires in August 2029. Its outstanding principal balance at June 30, 2007 is $12,408,641. The Arbor View Apartments lease began in August 2005 and expires in June 2030. The outstanding principal balance is $20,223,471 as of June 30, 2007. Last year these two leases were considered operating leases and have been reclassified as capital leases for this and all future periods. The University Center is being leased from the University of West Georgia Real Estate Foundation, Inc., UWG Campus Center, LLC, also a discretely presented component unit in these financial statements. The lease began in September 2006 and expires in June 2035. The remaining balance on this lease as of June 30, 2007 is $30,413,308. University of West Georgia also has a capital lease for PBX equipment with a third party that has an outstanding principal balance at June 30, 2007 in the amount of $668,340. This lease expires in December 2009. Albany State University Albany State University had one capital lease with a related entity in the current fiscal year. In August 2006, Albany State University entered into a capital lease of $34,320,000 at 3.25 percent to 5.5 percent with the Albany State University Foundation, a discretely presented component Annual Financial Report FY2007 79 unit, whereby the University leases a building for a twenty-nine year period that began August 2006 and expires July 2034. The outstanding liability at June 30, 2007 on this capital lease is $34,320,000. 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 2008 through 2032. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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 2007 was $34,087,091. System-wide future operating lease commitments total $90,608,234. 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, 2007, are as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Total minimum lease payments Less: Interest Less: Executory costs Principal Outstanding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Total Capital Leases $97,633,188 98,898,803 97,868,248 94,118,966 90,238,122 453,627,117 464,151,646 421,235,178 322,266,933 91,007,524 2,231,045,725 981,690,746 48,761,088 $1,200,593,891 Total Operating Leases $26,278,563 9,997,886 9,125,787 8,891,077 8,638,009 27,676,762 50 50 50 $90,608,234 Annual Financial Report FY2007 80 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $115,443,652 $109,977,005 $106,062,477 Employees' Retirement System of Georgia Plan Description The University System of Georgia participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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. Annual Financial Report FY2007 81 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University System of Georgia's payroll for the year ended June 30, 2007 for employees covered by ERS was $4,621,119. The University System of Georgia's total payroll for all employees was $2,389,439,678. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the University System of Georgia 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 of Georgia also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, the ERS employer contribution rate for the University System of Georgia 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 2007 amounted to $555,304, of which $485,973 was made by the University System of Georgia and $69,331 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, 2007 financial report, which may be obtained through ERS. Annual Financial Report FY2007 82 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University System of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $66,198,943 (9.66% or 8.13%) and $37,233,293 (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 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. Annual Financial Report FY2007 83 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 2007 amounted to $6,760,845 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The University System of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. 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. Annual Financial Report FY2007 84 A reconciliation of total estimated claims liabilities for the fiscal year ended June 30, 2007, is shown below: Unpaid Claims and Claim Adjustments July 1, 2006 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, 2007 $ 27,983,473 264,356,511 265,192,693 $ 27,147,291 The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University System of Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the 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 Annual Financial Report FY2007 85 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, 2007. 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, 2007, there were 12,909 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, the University System of Georgia recognized as incurred $58,606,344 of expenditures, which was net of $21,263,805 of participant contributions. Annual Financial Report FY2007 86 Note 15. Natural Classifications with Functional Classifications The University System's operating expenses by functional classification for fiscal 2007 are shown below: Functional Classification FY2007 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Instruction $684,796,885 241,700,421 130,308,757 2,432,155 14,032,780 9,429,093 6,211,195 121,984,257 32,465,223 Research $210,920,117 232,905,070 53,588,805 397,943 18,409,633 2,444,601 1,566,341 174,742,339 21,811,613 Public Service $50,602,541 135,198,622 29,241,727 962,734 6,275,005 1,667,854 19,504,433 155,368,126 6,398,805 Academic Support $14,969,077 182,458,512 32,190,029 173,053 4,973,462 201,060 2,189,454 84,576,459 37,647,616 Student Services Institutional Support $1,005,212 105,910,196 17,117,586 42,628 2,571,679 2,401,900 1,686,901 52,586,018 3,905,114 $1,159,624 231,779,229 61,535,429 5,147,198 3,909,018 1,638,823 8,855,241 399,131,802 20,931,177 Total Expenses $1,243,360,766 $716,786,462 $405,219,847 $359,378,722 $187,227,234 $734,087,541 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Plant Operations Scholarships & Maintenance & Fellowships $115,487 114,267,999 22,475,531 (8,657,692) (2,444) 103,273,310 119,218,876 35,222,641 $51,264 19,159 50,575 354,684 4,484 145,453,446 160,255 Functional Classification FY2007 Auxiliary Enterprises Unallocated Expenses $956,386 107,159,502 15,758,854 8,885,453 2,008,378 13,295,203 19,993,525 225,474,569 37,076,450 $0 14,112 76,425,618 MCG only Patient Care Total Expenses $2,361,077 71,103,298 11,820,456 310,498 359,776 100,397,923 $966,937,670 1,422,502,008 374,101,861 9,738,156 52,492,493 176,531,980 163,640,176 1,433,640,624 271,884,257 Total Expenses $385,913,708 $146,093,867 $430,608,320 $76,439,730 $186,353,028 $4,871,469,225 Annual Financial Report FY2007 87 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 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 2007, the Foundation distributed approximately $84.6 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, Inc. holds investments totaling $1.348 billion as of June 30, 2007, of which $353.6 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 values of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2007, the Foundation allocated 5.10% of that average. Investments are comprised of the following amounts at June 30, 2007: Annual Financial Report FY2007 88 Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Venture Capital Real Estate Diversifying Strategies Total Investments Cost $24,102,221 21,517,393 30,132,667 438,278,014 55,602,454 191,376,488 27,068,525 294,031,933 $1,082,109,695 Fair Value $24,102,221 20,849,807 29,752,474 593,816,539 56,373,609 257,975,006 30,633,358 334,621,522 $1,348,124,536 Capital Assets for Component Units: Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2007: June 30, 2007 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 2,553,000 38,051,000 7,145,000 45,196,000 8,626,000 36,570,000 $39,123,000 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $282,570 44,220,000 216,256,000 9,598,253 $270,356,823 $314,102 20,000,000 876,584 $21,190,686 $351,494 494,007 4,321,000 $5,166,501 $245,178 63,725,993 211,935,000 10,474,837 $286,381,008 $245,178 43,725,993 4,605,000 1,357,838 $49,934,009 Notes and Loans Payable: The Foundation has two $30 million revolving lines of credit. At June 30, 2007, $44.925 million was the total aggregate outstanding on the lines of credit. Interest is calculated using the 30-day LIBOR rate plus 0.25%, which was 5.57% at June 30, 2007. One line of credit expires on June Annual Financial Report FY2007 89 30, 2008 and the other on December 31, 2008. The Foundation expects to renew both lines of credit upon expiration. The Foundation also has a $30 million line of credit for the purpose of funding the construction of the Nanotechnology Research Center Building on the Institute's campus. As of June 30, 2007, $18.801 million was outstanding on the line of credit. Interest is calculated using the 30day LIBOR rate plus 0.25%, which was 5.57% at June 30, 2007. The line of credit expires on June 30, 2008. The Foundation also has available one other line of credit in the amount of $20 million. As of June 30, 2007, no amounts have been drawn on this credit facility. This line of credit expires on June 30, 2008. Annual estimated debt service requirements to maturity for Notes and Loans Payable are as follows: Year Ending June Year 2008 1 2009 2 Notes and Loans Payable Principal Interest Total $43,725,993 20,000,000 $63,725,993 $3,549,538 557,000 $4,106,538 $47,275,531 20,557,000 $67,832,531 Revenue Bonds Payable: 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 range 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 debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows: Annual Financial Report FY2007 90 Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 2018 through 2022 11-15 2023 through 2027 16-20 2028 through 2032 21-25 Bond Discount, net Principal $4,605,000 4,825,000 5,060,000 5,310,000 5,600,000 33,215,000 44,180,000 49,120,000 61,575,000 213,490,000 (1,555,000) $211,935,000 Bonds Payable Interest $11,662,200 11,437,491 11,203,637 10,945,586 10,653,002 48,054,824 37,082,836 24,126,187 8,603,942 173,769,705 $173,769,705 Total $16,267,200 16,262,491 16,263,637 16,255,586 16,253,002 81,269,824 81,262,836 73,246,187 70,178,942 387,259,705 (1,555,000) $385,704,705 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 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, 2007, the Athletic Association distributed approximately $8.5 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. Deposits and Investments for Component Units: Deposits: The Athletic Association does not have a policy that addresses custodial credit risk. As of June 30, 2007, $3,500,799 of the Athletic Association's bank balance of $3,600,799 was uncollateralized and exposed to custodial credit risk. Annual Financial Report FY2007 91 Investments: The Athletic Association's investments are held and reported by Georgia Tech Foundation, Inc. and are represented by a $80,967,000 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, 2007: Beginning Ending Balances Balance 7/1/2006 Additions Reductions 6/30/2007 Capital Assets, Not Being Depreciated: Land (and other assets) $49,946 $0 $0 $49,946 Construction Work-in-Progress 473,447 459,393 724,165 208,675 Total Capital Assets Not Being Depreciated 523,393 459,393 724,165 258,621 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Total Assets Being Depreciated 125,109,785 423,778 5,593,098 131,126,661 985,401 29,300 115,701 1,130,402 126,095,186 453,078 5,708,799 0 132,257,063 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Total Accumulated Depreciation 26,607,789 300,097 2,514,082 29,421,968 3,990,216 47,497 571,055 4,608,768 30,598,005 347,594 3,085,137 0 34,030,736 Total Capital Assets, Being Depreciated, Net 101,704,693 (3,478,366) 0 98,226,327 Capital Assets, net $102,228,086 ($3,018,973) $724,165 $98,484,948 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $938,994 988,214 107,961,507 $109,888,715 $642,442 $642,442 $536,622 24,903 1,942,829 $2,504,354 $1,044,814 963,311 106,018,678 $108,026,803 $1,044,814 26,979 1,925,000 $2,996,793 Notes and Loans Payable: Notes payable at June 30, 2007 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, 2007 is 4.92%. Annual Financial Report FY2007 92 Annual debt service requirements to maturity for the Athletic Association's note payable are as follows: Notes and Loans Payable Principal Interest Total Year ending June 30: 2008 1 $26,979 $47,670 $74,649 2009 2 27,978 46,376 74,354 2010 3 29,477 44,998 74,475 2011 4 30,975 43,510 74,485 2012 5 32,474 41,917 74,391 2013 through 2017 6-10 190,848 180,300 371,148 2018 through 2022 11-15 240,309 131,456 371,765 2023 through 2027 16-20 311,252 59,743 370,995 2028 through 2032 21-25 73,019 1,811 74,830 $963,311 $597,781 $1,561,092 Revenue Bonds Payable: 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 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, 2007, the swaption had a fair value (representing a liability) of $5,110,882, 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: Annual Financial Report FY2007 93 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Discount/Swaption Premium Principal Bonds Payable Interest $1,925,000 2,025,000 2,120,000 2,210,000 2,315,000 13,675,000 18,740,000 23,755,000 30,300,000 7,815,000 104,880,000 1,138,678 $106,018,678 $5,332,336 5,233,586 5,137,911 5,045,346 4,939,956 22,612,594 17,539,356 12,523,891 8,963,216 200,259 87,528,451 $175,056,902 Total $7,257,336 7,258,586 7,257,911 7,255,346 7,254,956 36,287,594 36,279,356 36,278,891 39,263,216 8,015,259 192,408,451 1,138,678 $193,547,129 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 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 GTRC's assets, liabilities, net assets, revenues, expenses, and changes in net assets. The Georgia Tech Research Corporation's fiscal year is July 1 through June 30. During fiscal year 2007, GTRC distributed approximately $349 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. Annual Financial Report FY2007 94 Deposits and Investments for Component Units: Deposits: At June 30, 2007, the carrying value of deposits was $1,049,436 and the bank balance was $1,820,259. Of GTRC's deposits, $1,620,259 were uninsured and uncollateralized. Investments: GTRC's investments at June 30, 2007 were as follows: Fair Value Commercial Paper Equity Securities $41,750,000 470,259 Total Investments $42,220,259 Capital Assets for Component Units: GTRC had the following Capital Asset activity for the year ended June 30, 2007: Capital Assets, Not Being Depreciated: Capitalized Collections Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Equipment Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $0 0 13,570 4,298,912 4,312,482 1,131 2,462,038 2,463,169 1,849,313 $1,849,313 Additions $240,735 240,735 Reductions $0 0 7,563 89,257 96,820 890,067 890,067 1,925 514,958 516,883 (420,063) ($179,328) 890,067 890,067 0 $0 Ending Balance 6/30/2007 $240,735 240,735 21,133 3,498,102 3,519,235 3,056 2,086,929 2,089,985 1,429,250 $1,669,985 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 Annual Financial Report FY2007 95 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, 2007, GATV distributed $237,946 to the Institute for operating expenses. Complete financial statements for GATV can be requested at the following address: Georgia Advanced Technology Ventures, Inc., Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257, Attention: Joel Hercik. Prior Period Restatement: GATV understated the value of unconditional promises to give and unrestricted donations by $821,522 at June 30, 2006. This was the result of an unrecorded pledge, which was made in fiscal year 2006 from TUFF. Accordingly, the financial statements have been restated to properly record this activity. The effect of the correction of this prior period error was to increase unrestricted net assets by $821,522. Investments for Component Units: GATV holds investments in the amount of $1.005 million. These funds are invested in Georgia Venture Partners, LLC. Capital Assets for Component Units: GATV holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $11,428,531 42,769 11,471,300 101,672,190 3,287,774 1,047,396 106,007,360 6,301,816 99,705,544 $111,176,844 Long-term Liabilities for Component Units: Changes in long-term liabilities for GATV for the year ended June 30, 2007 are shown below: Annual Financial Report FY2007 96 Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Capital Lease Obligations Notes and Loans Payable $50,613,331 10,707,440 $34,532,363 1,752,795 $0 4,412,883 $85,145,694 8,047,352 $0 1,640,295 Total Long Term Liabilities $61,320,771 $36,285,158 $4,412,883 $93,193,046 $1,640,295 Capital Lease Obligations: GATV is party to a lease agreement with TUFF ATDC LLC under which GATV leases space on the first through third floors of the Centergy One Building on Fifth Street in Atlanta. GATV subleases this space to organizations compatible with its mission. The lease extends for thirty years, after which GATV may purchase the property for a nominal charge. The leased space was occupied in August 2003. GATV is also party to a lease agreement with TUFF GATV45 LLC under which GATV leases space on the fourth and fifth floors of the Centergy One Building, which it subleases to organizations compatible with its mission. This lease commenced April 1, 2005, and extends to December 2034, at which time GATV may purchase the property for a nominal charge. Additionally, GATV may purchase the property during the lease term at an amount determined by a formula accounting for interest rates and the total previous payments made. The properties under the above capital leases are recorded as assets in the accompanying financial statements at the value of certain pre-occupancy payments plus the present value of the future minimum lease payments. The obligations under the capital lease have been recorded at the present value of future minimum lease payments, discounted at an interest rate appropriate to GATV's estimated borrowing rate at the time of lease inception. Those interest rates are 6.25% for floors one through three and 7.75% for floors four and five. The capital lease obligation balance at June 30, 2007 includes $1,288,478 in accrued, but unpaid interest. GATV is party to a lease agreement with TUFF TEPB LLC under which GATV leases a building at Technology Enterprise Park. GATV subleases space in the building to organizations compatible with its mission. This lease commenced June 30, 2007 and extends to June 30, 2037, at which time GATV may purchase the property during the lease term at an amount determined by a formula accounting for interest rates and the total previous payments made. The property under the above capital lease is recorded as building, infrastructure and leasehold improvement assets in the accompanying financial statements. The obligations under the capital lease have been recorded at the value of the contractor's cost of construction plus capitalized interest during the construction period. The effective overall average interest rate on the purchase, given an escalating lease payment schedule over the life of the agreement, is 9.078%. Future minimum lease payments under the capital leases, and the net present value of future minimum lease payments are as follows at June 30, 2007: Annual Financial Report FY2007 97 Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 Thereafter 6-29 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $6,264,254 6,493,283 6,645,872 6,790,386 6,938,415 190,827,745 223,959,955 138,814,261 $85,145,694 Notes and Loans Payable: GATV has a line of credit arrangement with TUFF, with a limit of $1.9 million. Interest at prime plus 2% is payable each December 31; however, GATV currently chooses to make interest payments on a quarterly basis. Principal is payable within 30 days of demand by TUFF. No collateral is specified, but GATV is required to obtain the consent of TUFF before granting a security interest in its general assets to any other entity. At June 30, 2007, advances under this line of credit total $1.6 million. GATV has a long-term note payable to TUFF with monthly payments of $4,164 through October 2015 at 6% interest. The outstanding principal balance of the loan at June 30, 2007 is $327,032. GATV has a long-term note payable to TUFF requiring monthly payments, with the principal maturing October 2033 at 6.55% interest. The loan is secured by Technology Enterprise Park land. The outstanding principal balance of the loan at June 30, 2007 is $6,120,320. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Notes and Loans Payable Interest $1,640,295 50,831 62,348 74,938 88,700 612,256 984,893 1,896,982 1,960,621 675,488 $8,047,352 $428,543 434,381 440,373 446,538 452,894 2,372,631 2,651,687 3,109,731 2,518,822 708,197 $13,563,797 Total $2,068,838 485,212 502,721 521,476 541,594 2,984,887 3,636,580 5,006,713 4,479,443 1,383,685 $21,611,149 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 Annual Financial Report FY2007 98 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 $157,687,000 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 2007, Facilities distributed $363,000 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. Prior Period Restatement: Georgia Tech Facilities, Inc. did not properly record capitalized interest for certain projects during relevant periods. In addition, Facilities did not appropriately account for direct financing leases with the Institute. Accordingly, the financial statements have been restated to properly capitalize interest and reflect Facilities' investment in direct financing leases, which are reported as Investments in Real Estate on the Statement of Net Assets. The effect of the correction on beginning net assets was a decrease of ($4,400,000). Investments for Component Units: Georgia Tech Facilities, Inc. holds investments in the amount of $157.7 million on its balance sheet which is composed of investments in Real Estate. Capital Assets for Component Units: Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2007: Annual Financial Report FY2007 99 June 30, 2007 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 33,494,000 34,092,000 1,200,000 1,200,000 540,000 660,000 $34,752,000 Long-term Liabilities for Component Units: Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Capital Lease Obligations Revenue/Mortgage Bonds Payable $9,734,000 212,675,000 $0 $242,000 0 2,550,000 $9,492,000 210,125,000 $2,098,000 3,921,000 Total Long Term Liabilities $222,409,000 $0 $2,792,000 $219,617,000 $6,019,000 Capital Lease Obligations: On February 17, 2006, Facilities entered into an installment sale agreement with the Institute for telecommunications equipment and installation. The agreement commences on the date the equipment is accepted and is renewable at the option of the Institute annually on July 1 for five successive one-year terms. At June 30, 2007, installation had not been completed, the equipment had not been accepted by the Institute and the agreement had not yet commenced. To finance the equipment, Facilities entered into a Master Lease and Sublease Agreement with SunTrust Leasing Corporation (as Lessor) and the Development Authority of Fulton County (as lessee) in the amount of $9,734,000. The outstanding principal balance of the obligation as of June 30, 2007 is $9,492,000. Annual debt service requirements to maturity for capital lease obligations are as follows: Capital Leases Year ending June 30: 2008 1 $2,429,000 2009 2 2,430,000 2010 3 2,430,000 2011 4 2,430,000 2012 5 608,000 Total minimum lease payments 10,327,000 Less: Interest 835,000 Principal Outstanding $9,492,000 Annual Financial Report FY2007 100 Revenue Bonds Payable: Facilities has five bond issues outstanding with balances totaling $210,125,000. The proceeds from the bond issues were used to acquire or construct (for the benefit of the Institute) 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 Electrical Substation 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, 2007, the value is $896,000 and is reported as Other Current Assets in the Statement of Net Assets. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $3,921,000 4,795,000 4,950,000 4,574,000 4,780,000 29,445,000 38,725,000 47,795,000 43,250,000 27,890,000 $210,125,000 $9,913,000 9,789,000 9,642,000 9,429,000 9,221,000 42,019,000 33,368,000 22,589,000 10,910,000 3,404,000 $160,284,000 Total $13,834,000 14,584,000 14,592,000 14,003,000 14,001,000 71,464,000 72,093,000 70,384,000 54,160,000 31,294,000 $370,409,000 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. Annual Financial Report FY2007 101 During the year ended June 30, 2007, the Alumni Association distributed $797,602 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. Capital Assets for Component Units: Georgia Tech Alumni Association holds the following Capital Assets as of June 30, 2007: June 30, 2007 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated $717,814 694,051 1,411,865 Less Total Accumulated Depreciation 941,960 Total Capital Assets being Depreciated, Net 469,905 Capital Assets, Net $469,905 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 37-member board of the Foundation, of which 6 members are exofficio, is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources 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, 2007, the Foundation distributed $12,158,055 to the University. A copy of the annual audited 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. Prior Period Adjustment: Beginning Net Assets for fiscal 2007 were adjusted for a prior period adjustment of ($4,169,656), representing fiscal year 2006 interest earned on the proceeds from tax-exempt Annual Financial Report FY2007 102 bonds. This amount was recorded as interest income; however, should have been netted against the capitalized interest expense in accordance with FASB Statement Number 62. The restatement resulted in the interest income, property and equipment, and net asset account balances for 2006 to be reduced by $4,169,656. Investments for Component Units: Georgia State University Foundation holds endowment and other investments in the amount of $130.7 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, 2007: Cost Fair Value Equity Securities Mutual Funds Venture Capital Real Estate Total Investments $368,078 102,918,990 4,660,218 2,822,293 $110,769,579 $368,078 122,180,766 2,921,154 5,207,340 $130,677,338 Capital Assets for Component Units: Georgia State University Foundation holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $10,090,265 125,700,200 135,790,465 109,386,131 109,386,131 21,545,126 87,841,005 $223,631,470 Annual Financial Report FY2007 103 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Liabilities under split interest agreement Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $19,101 249,819 10,408,677 194,186,673 5,197,804 $210,062,074 $14,419 11,173 58,385,000 614,590 $59,025,182 $0 686,221 1,896,963 $2,583,184 $33,520 260,992 9,722,456 250,674,710 5,812,394 $266,504,072 $0 722,430 1,615,000 $2,337,430 Capital Lease Obligations: 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 of the University. The liability of the Foundation is limited to the interest of the Foundation in the project and the rents, profits, issues, products and proceeds thereof. The City of Alpharetta is obligated to make 100% of the principal and interest payments on the bonds to the extent rental payments derived from the project are insufficient for such purposes. The lease liability at June 30, 2007 was $6,433,675. 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. Annual Financial Report FY2007 104 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. The lease liability at June 30, 2007 was $3,288,781. Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 Total minimum lease payments Less: Interest Principal Outstanding 1 2 3 4 5 6-10 11-15 Capital Leases $1,215,523 1,214,618 1,212,585 1,209,232 1,208,651 5,178,977 1,424,043 12,663,629 2,941,173 $9,722,456 Revenue Bonds Payable: Student Recreation Center Bonds On October 15, 1998, $33,430,000 of revenue bonds were issued by the Atlanta Development Authority (ADA) with the proceeds to be loaned to the Foundation for the purpose of financing the acquisition, construction, improvement and equipping of a student recreation center for the benefit of the University. The bonds are special limited obligation bonds of the ADA payable from funds received from the Foundation pursuant to a promissory note between the ADA and the Foundation. The Foundation leases the facilities to the Board of Regents for the use of the University. The Foundation's liability on the note is limited to its interest in the project and the rents and revenues from the project, including amounts received pursuant to the rental agreement with the Board of Regents. Payment of principal and interest on the bonds are insured by 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%. The bond liability at June 30, 2007 was $24,975,000. 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 Annual Financial Report FY2007 105 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 semi-annually through 2036 at a rate specified in the revenue bonds ranging from 3.875% to 5.0%. The principal outstanding on the bonds at June 30, 2007 was $161,330,000 and the unamortized bond premium balance was $5,984,710. Panther Place Bonds On May 31, 2007, $58,385,000 of revenue bonds (tax-exempt of $49,175,000 and taxable of $9,210,000) were issued by the Atlanta Development Authority (ADA) on behalf of the Foundation with the proceeds used to finance the costs of acquiring land, buildings, improvements, machinery, fixtures, furnishings, equipment, and other real and personal property to be used for office space. SunTrust Bank, as tenant may remain in the building for up to five years. Upon expiration of the lease or early termination by SunTrust Bank, the Foundation will lease the property to the Board of Regents of the University System of Georgia on an annually renewable basis. Interest to bond holders is paid monthly by AMBAC Financial Services, LLC (AFS) in accordance with the terms of the interest rate swap agreement. The Foundation is to begin making semi-annual interest payments on January 1, 2008 at a rate of 4.289% on taxexempt bonds and 5.409% on taxable bonds. The taxable bonds will be refinanced in the year 2012. Principal payments are to be made annually starting July 1, 2008 and ending July 2037. The bond liability at June 30, 2007 was $58,385,000. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $1,615,000 1,680,000 3,210,000 3,655,000 12,900,000 29,625,000 34,755,000 38,140,000 48,915,000 62,335,000 7,860,000 244,690,000 5,984,710 $250,674,710 Bonds Payable Interest $11,457,887 11,385,338 11,253,066 11,092,476 10,878,877 48,654,999 40,916,429 32,459,073 21,760,144 8,149,836 208,008,125 $208,008,125 Total $13,072,887 13,065,338 14,463,066 14,747,476 23,778,877 78,279,999 75,671,429 70,599,073 70,675,144 70,484,836 7,860,000 452,698,125 5,984,710 $458,682,835 Georgia State University Research Foundation, Inc. Georgia State University Research Foundation, Inc. (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, Annual Financial Report FY2007 106 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 self-perpetuating 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, 2007, the Research Foundation paid to the University $50,337,959 in grant revenue and $586,622 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. 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 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, 2007, the Research Foundation's carrying amount of deposits was $7,942,259 and the bank balance was $8,585,047. Of the bank balance, $100,000 was covered by FDIC Annual Financial Report FY2007 107 insurance, and $6,480,416 was collateralized by the State of Georgia pledging pool which thereby guarantees collateralization of any uninsured bank deposit balances. The remaining uncollateralized balance of $2,004,631 consists of cash equivalents held by investment custodians. Investments: The Research Foundation's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Maturity Fair Value 1-5 Years Investment type Debt Securities Mutual Bond Fund $657,022 $657,022 $657,022 $657,022 Other Investments Bond/Fixed Income Mutual Funds Equity Securities - Domestic Equity Securities - International Real Estate Investment Fund 720,614 1,892,427 965,715 227,363 $4,463,141 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 Research 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 the 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. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Research Foundation's investment policies are consistent with the investment policies of Georgia State University Foundation, Inc. The Research Foundation does not have a formal policy related to credit quality risk of investments. The investments subject to credit quality risk are reflected below: Fair Value AAA AA A Baaa Related Debt Investments Mutual Bond Fund $657,022 $528,443 $33,048 $50,591 $44,940 $657,022 $528,443 $33,048 $50,591 $44,940 Annual Financial Report FY2007 108 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 the possession of an outside party. The Research Foundation does not have a formal policy for managing custodial credit risk for investments. At June 30, 2007, $4,463,141 of the Research Foundation's applicable investments were uninsured and held by the Research Foundation's counterparty in the Research Foundation's name. 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 Research Foundation's policy for managing concentration of credit risk is divided amongst investment type as follows: Domestic equities 44% International equities 7% Bonds 16% Real estate 11% Alternative investments 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 Research Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy. Capital Assets for Component Units: The Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2007: Beginning Ending Balances Balance 7/1/2006 Additions Reductions 6/30/2007 Capital Assets, Not Being Depreciated: Land (and other assets) $1,643,991 $0 $1 $1,643,990 Total Capital Assets Not Being Depreciated 1,643,991 0 1 1,643,990 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Total Assets Being Depreciated 3,894,651 359,744 4,254,395 (52,559) 3,947,210 52,558 307,186 0 (1) 4,254,396 Less: Accumulated Depreciation Buildings Facilities and Other improvements Total Accumulated Depreciation 490,577 291,303 781,880 90,323 1,377 91,700 (14,813) 14,813 0 595,713 277,867 873,580 Total Capital Assets, Being Depreciated, Net 3,472,515 (91,700) (1) 3,380,816 Capital Assets, net $5,116,506 ($91,700) $0 $5,024,806 Annual Financial Report FY2007 109 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. Deposits and Investments Deposits: At June 30, 2007, $42,721,729 of MCG Health, Inc.'s deposits were uninsured, uncollateralized, or collateralized by securities held by the pledging institution or by its trust department or agent in other than the Company's name. Investments: At June 30, 2007, 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 with 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: Annual Financial Report FY2007 110 Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) Other Investments Equity Securities - Domestic Equity Securities - International Joint Venture Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $21,319,958 372,968 24,815,383 25,493,459 19,360,524 $91,362,292 25,103,846 762,537 968,004 $118,196,679 $21,319,958 $1,940,555 2,374,081 $4,314,636 18,902,215 22,980,283 7,173,281 $70,375,737 $366,067 139,095 2,865,087 $3,370,249 $372,968 3,606,546 9,322,156 $13,301,670 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, 2007, none of the Company'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 or Moody's. The investments subject to credit quality risk at June 30, 2007 are rated as follows: Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) Fair Value $24,815,383 25,493,459 19,360,524 $69,669,366 AAA $24,815,383 1,936,715 19,261,595 $46,013,693 AA A $10,144,562 98,929 $10,243,491 $12,915,012 $12,915,012 Unrated $497,170 $497,170 Annual Financial Report FY2007 111 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. Except for U.S. Government and agency obligations, each fixed income investment manager's portfolio should contain no more than 5% of any single issue, at cost. Individual U.S. Treasury securities may represent up to 30% of the total investment portfolio, while the total allocation of U.S. Treasury notes and bonds may represent up to 100% of the Company's aggregate bond position. As of June 30, 2007, the following MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance: Federal National Mortgage Association 8% Federal Home Loan Mortgage 7% Federal Home Loan Bank 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 Company does not have a policy for managing exposure to foreign currency risk. MCG Health, Inc. holds investments totaling $762,537, or 0.6% in International equity securities. Foreign currency risk is considered negligible related to this holding in comparison to total investments. Capital Assets for Component Units: MCG Health, Inc.'s capital asset activity for the year ending June 30, 2007 was as follows: Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beg.Bal. 7/1/2006 $4,744,278 7,538,283 12,282,561 Additions $2,394,276 15,710,806 18,105,082 Reductions $0 12,556,448 12,556,448 End.Bal. 6/30/2007 $7,138,554 10,692,641 17,831,195 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Total Assets Being Depreciated 3,637,147 16,085,995 117,932,694 13,741,700 151,397,536 758,787 5,090,969 11,437,985 4,188,664 21,476,405 459,812 29,355 5,280,593 5,769,760 3,936,122 21,147,609 124,090,086 17,930,364 167,104,181 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 197,822 4,892,687 90,494,736 2,976,519 98,561,764 52,835,772 $65,118,333 195,530 2,862,528 10,818,160 3,053,672 16,929,890 4,546,515 $22,651,597 2,348 5,064,676 5,067,024 702,736 $13,259,184 393,352 7,752,867 96,248,220 6,030,191 110,424,630 56,679,551 $74,510,746 Annual Financial Report FY2007 112 Long-term Liabilities for Component Units: MCG Health, Inc. is the lessee of certain equipment under noncancellable leases expiring in various years through 2012. Interest rates range from 3.35% to 6.98%. Other Long-Term Liabilities represent 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, 2007 are shown below: Compensated Absences Capital Lease Obligations Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2006 $9,731,260 8,632,486 8,555,000 $26,918,746 Additions $16,373,352 5,823,145 1,065,111 $23,261,608 Reductions $14,913,809 2,782,677 322,111 $18,018,597 Ending Balance June 30, 2007 $11,190,803 11,672,954 9,298,000 $32,161,757 Amounts due within One Year $11,190,803 3,058,375 2,324,000 $16,573,178 Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $3,625,829 3,510,877 3,179,482 1,787,403 880,491 12,984,082 1,311,128 $11,672,954 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 on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Under this basis, revenue and the related assets are recognized when collected rather than when earned and expenses are generally recognized when paid rather than when incurred. Consequently, contributions receivable from donors, investment income receivables, accounts payable to vendors and accrued expenses are not included in the consolidated financial statements. The modified cash basis reports were Annual Financial Report FY2007 113 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, 2007, the Foundation distributed $7.8 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 919 15th Street, FI-1036, Augusta, GA 30912. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Co st Fair Value Cash held by invest m ent organizat ion Cert ificat es of Deposit Fixed Income Dom est ic Equit y Securit ies Int ernat ional Equit y Securit ies Real Est at e Alt ernat ive St rat egies $1,203,990 350,000 19,376,797 40,629,438 15,472,255 6,020,425 18,539,210 $1,203,990 350,000 18,832,585 54,534,342 24,717,794 6,598,729 27,514,987 T ot al Invest ment s $101,592,115 $133,752,427 Capital Assets for Component Units: Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2007: June 30, 2007 Capit al Asset s not being Depreciat ed: Land and ot her Asset s T ot al Capit al Asset s not being Depreciat ed Capit al Asset s being Depreciat ed: Buildings and Im provem ent s Machinery and Equipm ent T ot al Capit al Asset s being Depreciat ed Less T ot al Accum ulat ed Depreciat ion T ot al Capit al Asset s being Depreciat ed, Net Capit al Asset s, Net $1,170,420 1,170,420 2,636,908 360,234 2,997,142 2,209,997 787,145 $1,957,565 Long-term Liabilities for Component Units: At June 30, 2007, Medical College of Georgia Foundation's long-term liabilities consisted of a $2,342,658 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 Annual Financial Report FY2007 114 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 the 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, 2007, the PPG distributed $53.9 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 classified as current. Investment income or loss (including realized gains and losses, interest and dividends) is included in the nonoperating revenue section of the accompanying Statement of Revenues, Expenses and Changes in Net Assets. Annual Financial Report FY2007 115 Investments are comprised of the following amounts at June 30, 2007: Government and Agency Securities Corporate Bonds Mortgage Backed Securities Equity Securities Mutual Funds Joint Ventures/Partnerships Total Investments Capital Assets for Component Units: Cost $8,344,708 7,838,567 4,805,874 9,900,549 6,992,651 585,000 $38,467,349 Fair Value $8,188,780 7,647,138 4,765,934 14,853,755 7,976,023 585,000 $44,016,630 PPG held the following Capital Assets as of June 30, 2007: June 30, 2007 Capit al Asset s not being Depreciat ed: Land and ot her Asset s T ot al Capit al Asset s not being Depreciat ed Capit al Asset s being Depreciat ed: Buildings and Im provem ent s Machinery and Equipm ent T ot al Capit al Asset s being Depreciat ed Less T ot al Accum ulat ed Depreciat ion T ot al Capit al Asset s being Depreciat ed, Net Capit al Asset s, Net $3,198,307 3,198,307 2,324,603 6,015,472 8,340,075 5,339,362 3,000,713 $6,199,020 Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable Other Long Term Liabilities Total Long Term Liabilities $33,349,307 505,990 $33,855,297 $0 52,895 $52,895 $660,244 $660,244 $32,689,063 558,885 $33,247,948 $670,000 $670,000 Notes and Loans 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 Annual Financial Report FY2007 116 percent. Principal payments are due annually beginning December 2006 and continuing through December 2034. The outstanding principal balance of the loan payable as of June 30, 2007 was $32,220,000. The loan is secured by certain personal property constituting a portion of the building recorded as Leases Receivable and Deferred Revenue in the Statement of Net Assets. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Notes and Loans Payable Principal Interest Total $670,000 685,000 705,000 725,000 745,000 4,095,000 4,920,000 6,160,000 7,825,000 5,690,000 32,220,000 469,063 $32,689,063 $1,400,184 1,384,150 1,365,798 1,344,953 1,321,829 6,187,715 5,284,473 4,023,968 2,356,725 421,511 25,091,306 $25,091,306 $2,070,184 2,069,150 2,070,798 2,069,953 2,066,829 10,282,715 10,204,473 10,183,968 10,181,725 6,111,511 57,311,306 469,063 $57,780,369 PPG administers a deferred compensation plan for various current and former MCG faculty members. Deferred Compensation is reported in Other Long Term Liabilities in the Statement of Net Assets and represents the accounts held on behalf of these members in the amount of $558,885 at June 30, 2007. 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 subcontracted 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 subcontracted and managed by the College. Because of the 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. Annual Financial Report FY2007 117 During the year ended June 30, 2007, the Institute subcontracted approximately $51.2 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, 2007, $7,515,374 of the Institute's bank balance was exposed to custodial credit risk. Of that amount, $200,000 was insured by Federal depository insurance and $7,315,374 was uninsured and uncollateralized. The Institute had no investments as of June 30, 2007. Capital Assets for Component Units: The Institute's Capital Asset activity for the year ending June 30, 2007 was as follows: Capital Assets, Being Depreciated: Equipment Total Assets Being Depreciated Beginning Balances 7/1/2006 $28,676 28,676 Additions $0 0 Reductions $0 0 Ending Balance 6/30/2007 $28,676 28,676 Less: Accumulated Depreciation Equipment Total Accumulated Depreciation 6,213 6,213 5,735 5,735 11,948 0 11,948 Total Capital Assets, Being Depreciated, Net Capital Assets, net 22,463 $22,463 (5,735) ($5,735) 0 16,728 $0 $16,728 Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The 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 is used in direct support of Medical College of Georgia. Because of this, the Foundation is considered to be a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue Annual Financial Report FY2007 118 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, 2006 through February 28, 2007. 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, 2007, 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: Investments are stated at fair value and are comprised of the following amounts at February 28, 2007: Cost Fair Value Unit Investment Trust Annuities Closed End Funds Other Investments Government Bonds Domestic Equities Total Investments $50,522 200,000 100,000 220,000 57,030 1,928,982 $2,556,534 $54,747 254,541 100,050 215,260 52,125 2,112,704 $2,789,427 University of Georgia The University of Georgia Foundation The University of Georgia Foundation (the "Foundation") is a legally separate, tax-exempt component unit of The University of Georgia (the "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 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, 2007, the Foundation distributed $20,115,391 to and on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for Annual Financial Report FY2007 119 the Foundation can be obtained from the Foundation Office at 394 South Milledge Avenue, Athens, GA 30602 or from the Foundation's website at www.ugafoundation.org. Investments for Component Units: Investments in trust funds and securities with an established market value are carried at market value. The market values for investments are estimated based on quoted market prices for those or similar investments where a market price is available or an amount determined by external investment managers if quoted market prices are not available. Investments in real estate and securities without an established market value are carried at the lower of estimated market value at the date of gift or current market value as estimated by management of the Foundation. Realized gains and losses are computed using the specific identification method. Temporary investments have an original maturity of greater than three months and represent operating funds in excess of immediate cash requirements. The Board of Trustees of the Real Estate Foundation has designated certain temporary investment balances to fund future obligations. As of June 30, 2007, the temporary investment amount included $1,276,600 reserved for debt service. As of June 30, 2007, the long-term investment pool consists of investments in domestic and international equities (72.6%), fixed income instruments (9.8%), private equity investments (4.9%), real estate funds (4.6%), hedge funds (7.2%), timber, gas & oil (0.5%), and deposits (0.4%) that are held by outside investment managers. Fair value for financial reporting purposes is based on quoted market prices or an amount determined by external investment managers if quoted market prices are not available. Management reviews and evaluates fair value provided by the external investment managers as well as the valuation methods and assessments used in determining the fair value of such investments. Such estimated fair values (amounting to $410,993,738 for investments with estimated fair values based on quoted market prices and $169,695,610 for investments with estimated fair values provided by external investment managers at June 30, 2007) may differ from the ultimate realizable value of the investments, and these differences may be material. Net realized and unrealized gain on investments include $64,702,427 for investments with estimated fair values based on quoted market prices and $26,483,392 for investments with estimated fair values provided by external investment managers at June 30, 2007. Investments are comprised of the following amounts at June 30, 2007: Annual Financial Report FY2007 120 Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split-Interest Investments Real Estate Investment Pools Total Investments Cost $38,875,694 2,245,109 1,003,145 3,963,772 1,174,007 14,678,914 19,092,161 359,604,977 $440,637,779 Fair Value $38,875,694 2,224,690 979,788 4,666,421 1,359,535 17,149,724 19,092,161 555,330,588 $639,678,601 Capital Assets for Component Units: The University of Georgia Foundation holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $21,492,929 307,415 21,800,344 176,180,268 1,023,245 177,203,513 19,225,553 157,977,960 $179,778,304 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Liabilities under split-interest agreement Capital Lease Obligations Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $26,883 11,291,219 0 14,350,346 190,515,024 $216,183,472 $2,612 1,838,582 8,598,269 $10,439,463 $0 1,443,639 2,257,082 14,847,226 $18,547,947 $29,495 11,686,162 0 20,691,533 175,667,798 $208,074,988 $29,495 539,149 10,628,504 3,485,000 $14,682,148 Annual Financial Report FY2007 121 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. The agreement expires on November 30, 2007. The revolving credit agreement provides for 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, 2007, amounts outstanding or issued under this agreement included borrowings of $10,499,210 and letters of credit and bank reserves of $8,373,507, resulting in $31,127,283 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30-day London InterBank Offered Rate ("LIBOR") plus 32.5 basis points (or 0.325%). At June 30, 2007, the rates applicable to the borrowings were 5.645%. On July 1, 2005, the cooperative organization agreement between the Foundation and the Board of Regents ended which constituted a termination event under the revolving credit agreement that provided the bank with certain rights after a 90-day forbearance period. 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 where the bank agreed not to call any borrowings or letters of credit and to continue to make loans under certain conditions. On July 1, 2007, effective with the transfer of sole membership of the Real Estate Foundation, the previous termination event was nullified rendering the forbearance agreement obsolete. All borrowings under this revolving credit agreement are subject to a guarantee requirement except for those borrowings for projects supported by a rental or license agreement with the Board of Regents or the University. As of June 30, 2007, the borrowings subject to this guarantee requirement were $34,995. The Foundation had guaranteed these obligations of the Real Estate Foundation through June 30, 2007. As of July 1, 2007, the Research Foundation has guaranteed these obligations under this revolving credit agreement. 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% 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, 2007 is $42,981 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $81,116 on the fair value of the derivative for the year ended June 30, 2007 as an adjustment to interest expense. $9,800,000 Credit Agreement During 2007, the Foundation established a $9.8 million revolving credit agreement with a bank. The agreement expires in August 2008. The revolving credit agreement provides for borrowings or letters of credit at the Foundation's option. Credit available under the revolving credit agreement is reduced by outstanding borrowings and outstanding letters of credit. As of June 30, 2007, the amount outstanding or issued under this agreement is $8,083,918, resulting in Annual Financial Report FY2007 122 $1,716,082 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's adjusted LIBOR rate plus 32.5 basis points (or 0.325%). At June 30, 2007, the rate applicable to the borrowings was 5.65%. $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, 2007, $1,090,250 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, 2012. As of June 30, 2007, $1,018,155 was outstanding under this agreement. Interest is charged at the bank's 30 day LIBOR rate plus 45 basis points (or 0.45%), or 5.77% at June 30, 2007. Principal and interest are payable monthly. The Foundation has an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $1,117,865 note payable from variable to a 5.75% fixed rate over the term of the note payable. As of June 30, 2007, the fair value of the termination benefit of the interest rate swap was $5,024 and was recorded as an asset in accordance with SFAS No. 133. The Foundation recorded a loss of $9,464 for the year ended June 30, 2007 as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 1 2 3 4 5 6-10 11-15 Principal Notes and Loans Payable Interest $10,628,504 8,219,361 138,185 141,088 919,145 445,000 200,250 $20,691,533 $831,755 200,149 114,938 105,688 92,531 154,677 17,847 $1,517,585 Total $11,460,259 8,419,510 253,123 246,776 1,011,676 599,677 218,097 $22,209,118 Revenue Bonds Payable: $25,620,000 Bond Issue In 2001, the Development Authority of the Unified Government of Athens -- Clarke County, Georgia (the "Development Authority") issued Revenue Bonds (UGA Real Estate Foundation, Inc. Project), Series 2001 (the "2001 Bonds") and entered into an agreement (the "2001 Loan Agreement") to loan $25,620,000 to the Real Estate Foundation. The 2001 Bonds are secured by a letter of credit issued on behalf of the Real Estate Foundation in favor of the Development Authority under the Real Estate Foundation's $50 million credit agreement discussed above. During 2002, the Real Estate Foundation used the proceeds of this loan to fund purchases and improvements of certain properties. Annual Financial Report FY2007 123 Borrowings under the 2001 Loan Agreement bear interest payable monthly at a formula rate adjusted each week (3.74% at June 30, 2007). The loan matures in 2031, subject to certain early repayment provisions. During the year ended June 30, 2007, principal payments of $11,395,000 were made. At June 30, 2007, the balance of this obligation was $8,425,000. 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, 2007 was $15,495, and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $87,011 on the fair value of the derivative for the year ended June 30, 2007 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 semi-annually 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, 2007, principal payments of $780,000 were made. At June 30, 2007, the balance of this obligation was $36,989,507. $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 semi-annually 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, 2007 principal payments of $1,875,000 were made. At June 30, 2007, the balance of this obligation was $97,558,764. Annual Financial Report FY2007 124 $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 semi-annually 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, 2007, principal payments of $250,000 were made. At June 30, 2007, the balance of this obligation was $7,325,511. $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 year ended June 30, 2007, 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 semi-annually 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. During the year ended June 30, 2007, a principal payment of $460,000 was made to pay off the $425,000 Series 2004B bonds and reduce the outstanding Series 2004A bonds by $35,000. At June 30, 2007, the balance of this obligation was $25,369,016. Annual debt service requirements to maturity for Bonds Payable are as follows: Annual Financial Report FY2007 125 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $3,485,000 3,595,000 3,695,000 3,825,000 3,970,000 22,160,000 27,970,000 35,985,000 51,735,000 17,830,000 174,250,000 1,417,798 $175,667,798 Bonds Payable Interest $8,051,316 7,990,243 7,870,527 7,735,415 7,591,118 35,373,004 29,405,582 21,503,293 11,416,115 964,951 137,901,564 $137,901,564 Total $11,536,316 11,585,243 11,565,527 11,560,415 11,561,118 57,533,004 57,375,582 57,488,293 63,151,115 18,794,951 312,151,564 1,417,798 $313,569,362 The bonds payable, credit agreements, and notes payable require the Foundation and Real Estate Foundation to meet certain covenants. At June 30, 2007 the Foundation and Real Estate Foundation were in compliance with all covenants. In 2008, the Real Estate Foundation plans to issue $59 million in bonds at a fixed rate to finance the expansion of a campus facility. During the year ended June 30, 2007, the Real Estate Foundation entered into an interest rate hedge agreement at no cost locking in the then current interest rate on this future borrowing. The fair value of the interest rate hedge as of June 30, 2007, was $2,046,793 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $2,046,793 on the fair value of the derivative for the year ended June 30, 2007, as an adjustment to interest expense. 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 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 Athletic Association is considered a component unit of the University and is discretely presented in the University's financial statements. For financial reporting purposes, the Athletic 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, 2007, the Athletic 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 $25,899,753 and were recognized as expenses of the Athletic Association. Annual Financial Report FY2007 126 Capital assets net of accumulated depreciation of $187 million are included in the financial statements of the Athletic Association. These capital assets, excluding moveable equipment and construction work in progress, 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. At June 30, 2007, the book-carrying amount of the Athletic Association's deposits, including noncurrent cash and cash equivalents, was $72,965,193 and the bank balance was $73,819,887. The Athletic Association's bank balance is classified as follows at June 30, 2007: Amount insured by the FDIC and FSLIC Collateralized with securities held in the Athletic Association's name Uncollateralized $ 333,000 64,624,866 8,862,021 $73,819,887 Annual Financial Report FY2007 127 Capital Assets for Component Units: The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2007: Beginning Ending Balances Balance 7/1/2006 Additions Reductions 6/30/2007 Capital Assets, Not Being Depreciated: Construction Work-in-Progress $8,955,870 $20,537,490 $0 $29,493,360 Total Capital Assets Not Being Depreciated 8,955,870 20,537,490 0 29,493,360 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Total Assets Being Depreciated 176,253,763 19,283,369 7,303,241 202,840,373 581,000 192,692 618,714 1,392,406 1,042,668 1,042,668 176,834,763 19,476,061 6,879,287 203,190,111 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Total Accumulated Depreciation 31,840,446 5,538,900 3,938,540 41,317,886 3,178,443 835,670 1,235,776 5,249,889 909,562 909,562 35,018,889 6,374,570 4,264,754 45,658,213 Total Capital Assets, Being Depreciated, Net 161,522,487 (3,857,483) 133,106 157,531,898 Capital Assets, net $170,478,357 $16,680,007 $133,106 $187,025,258 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable-Primary Government Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $2,650,400 167,401 99,515,000 3,250,438 $105,583,239 $0 $313,972 $2,336,428 $333,394 80,288 1,955,000 87,113 97,560,000 87,113 2,090,000 496,161 2,754,277 500,000 $0 $2,845,421 $102,737,818 $3,010,507 Notes Payable-Due to Primary Government: Under an agreement with The University of Georgia, the Athletic Association assumed the responsibility for a portion of the funding for the construction of the Ramsey Student Center for Physical Activities. In fiscal 1996, the Athletic Association recorded as property approximately $7,800,000, representing the Athletic Association's share of the Ramsey Center based on estimated usage as defined in the agreement. The Athletic Association paid cash of $2,858,928, and subsequently recorded a liability of $4,941,072 at June 30, 1996, representing the remaining principal balance of the obligation. This balance is reported as the note payable to the University of Georgia above and has an outstanding principal balance at June 30, 2007 of $2,336,428. The principal balance due within one year, $333,394, is reflected in Due to Primary Government Current Liabilities. The Association made payments of principal and interest of $477,917 during Annual Financial Report FY2007 128 the year June 30, 2007, and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%. Notes Payable: At June 30, 2007, the Athletic Association had an $87,113 remaining liability for a vendor note payable. The 1998 note was payable over 10 years in annual payments of $94,518 through 2008. The implicit interest rate is 8.5% and the note is secured by a first priority purchase money security interest on equipment with a net book value of $1,011,626. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Notes and Loans Payable Principal Interest Total $420,507 354,016 375,915 399,167 423,858 450,078 $2,423,541 $151,928 123,901 102,002 78,750 54,059 27,839 $538,479 $572,435 477,917 477,917 477,917 477,917 477,917 $2,962,020 Revenue Bonds Payable: On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Athletic 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, 2008, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.89% on June 30, 2007). The loan matures in 2031, subject to certain early repayment provisions. At June 30, 2007, the balance of this obligation was $33,100,000. 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 Athletic 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, 2007, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.90% on June 30, 2007). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds. The remaining obligation at June 30, 2007 was $18,765,000. 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 Annual Financial Report FY2007 129 million to the Athletic 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, 2008 and must be renewed annually. Under the Loan Agreement, the Athletic 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 (5.32% on June 30, 2007). The loan matures in 2021 and requires yearly principal reductions. At June 30, 2007, the balance of this obligation was $16,195,000. 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 Athletic 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, 2007, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.90% on June 30, 2007). The loan matures in 2035, subject to certain early repayment provisions. The June 30, 2007 remaining obligation for these revenue bonds was $29,500,000. Interest Rate Swap Agreements The Athletic Association is a party to interest rate swap agreements that are not recorded in the financial statements. Following are disclosure of key aspects of the agreements. Objective and Terms - As a means of interest rate management, the Athletic Association entered into three separate interest rate swap transactions with Bank of America, N.A. (the "Counterparty") relating to its variable rate tax-exempt Series 2001 Bonds, tax-exempt Series 2003 Bonds, taxable Series 2005 Bonds and tax-exempt Series 2005B Bonds. Pursuant to an ISDA Master Agreement and Schedule to ISDA Master Agreement each dated as of January 27, 2005 between the Athletic Association and the Counterparty and three Confirmations, the Athletic Association has agreed to pay to the Counterparty a fixed rate of interest in an amount equal to: (1) 3.49% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2001 Bonds until September 2021; (2) 3.38% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2003 Bonds until August 2033; (3) 5.05% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2005 Bonds until July 2021; and (4) 3.483% per annum multiplied by the notional amount which is equal to the principal amount of the Series 2005B Bonds until August 2033. In return, the Counterparty has agreed to pay to the Athletic Association a floating rate of interest in an amount equal to: (1) 67% of LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2001 Bonds until September 2021; (2) 67% of LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2003 Bonds until August 2033; (3) LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2005 Bonds until July 2021; and (4) 67% of LIBOR multiplied by the notional amount which is equal to the principal amount of the Series 2005B Bonds until July 2035. Annual Financial Report FY2007 130 Fair Value The Athletic Association will be exposed to variable rates if the counterparty to a swap defaults or if a swap is terminated. A termination of the swap agreement may also result in the Athletic Association's making or receiving a termination payment As of June 30, 2007, the fair value of the interest rate swap agreement on the 2001 Series Bonds was $848,751, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2003 Series Bonds was $620,162, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2005A Series Bonds was $418,172, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2005B series Bonds was $817,093, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. Swap Payments and Associated Debt As of June 30, 2007, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term were as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. Year Variable Rate Bonds Interest Rate Ending Principal Interest Swaps, Net Total 2008 $ 2,090,000 $ 3,936,996 $ (389,629) $ 5,637,367 2009 2,140,000 3,840,259 (381,464) 5,598,795 2010 2,195,000 3,741,022 (373,099) 5,562,923 2011 2,245,000 3,639,551 (364,545) 5,520,006 2012 2,295,000 3,535,775 (355,814) 5,474,961 2013-2017 12,380,000 16,028,390 (1,640,024) 26,768,366 2018-2022 13,990,000 13,020,594 (1,386,855) 25,623,739 2023-2027 9,080,000 10,683,880 (1,154,744) 18,609,136 2028-2032 43,480,000 7,690,918 (818,470) 50,352,448 2033-2037 7,665,000 396,614 (43,617) 8,017,997 Total $ 97,560,000 $ 66,513,999 $ (6,908,261) $ 157,165,738 Credit Risk As of June 30, 2007, the fair value of the swaps represents the Athletic Association's credit exposure to the Counterparty. Should the Counterparty fail to perform in accordance with the terms of the swap agreements, the Athletic Association faces a possible loss equivalent to $6.9 million less the cumulative fair value of $2.7 million. As of June 30, 2007, the Counterparty was rated AAA by Moody's and AA+ by S&P. Basis Risk The swaps expose the Athletic Association to basis risk. The interest rate on the Series 2001 Bonds, the Series 2003 Bond and the Series 2005B Bonds is a tax-exempt interest rate while the LIBOR basis on the variable rate receipt on the interest rate swap agreements is taxable. Tax-exempt interest rates can change without a corresponding change in the 30 day LIBOR rate due to factors affecting the tax-exempt market which do not have a similar effect on Annual Financial Report FY2007 131 the taxable market. The Athletic Association will be exposed to basis risk under the swaps to the extent that the interest rates on the tax-exempt bonds trades at greater than 67% of LIBOR for extended periods of time. The Athletic Association would also be exposed to tax risk stemming from changes in the marginal income tax rates or those caused by a reduction or elimination in the benefits of tax exemption for municipal bonds. Termination Risk The interest rate swap agreement uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Athletic Association or the Counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable rate bonds would no longer carry a synthetically fixed interest rate. Also, if at the time of termination, the swap has a negative fair value, then the Athletic Association would be liable to the Counterparty for a payment equal to the swap's fair value. The Arch Foundation for the University of Georgia, Inc. The Arch Foundation for the University of Georgia, Inc. (Arch Foundation) is a legally separate, tax-exempt component unit of The University of Georgia (University). The Arch 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-one member board of the Arch 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 Arch Foundation, the majority of resources or income thereon that the Arch Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Arch Foundation can only be used by, or for the benefit of the University, the Arch Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Arch 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 Arch Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2007, the Arch Foundation distributed $3,708,541 to or on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the External Affairs Office of Financial Services at 394 S. Milledge Avenue, Athens, GA 30602 or from the Foundation's website at www.uga.edu/archfoundation. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Annual Financial Report FY2007 132 Equity Securities Joint Ventures/Partnerships Investment Pools Total Investments Cost $34,554 630,000 17,864,126 $18,528,680 Fair Value $34,554 630,000 19,116,597 $19,781,151 University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia (the University). The Research Foundation serves to enhance the research mission of the University by securing sponsored research funding and by providing funding of special research initiatives. All University intellectual property developed through these research programs are managed by the Research Foundation. The eighteen-member board of directors consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Research Foundation itself. Although the University does not control the timing or amount of receipts from the Research Foundation, all sponsored research awards are subcontracted to the University and other resources and related income are restricted to benefit the research mission of the University. Consequently, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation is considered a special-purpose government entity engaged only in business-type activities and is required to follow all applicable GASB pronouncements. The Research Foundation's fiscal year is July 1 through June 30. During fiscal year 2007, the Research Foundation transferred approximately $120 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. 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 for Component Units: 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. The Research Foundation does not have a deposit policy for custodial credit risk. At June 30, 2007, the book value of the Research Foundation's deposits was $9,800,115. The bank and investment account balances at June 30, 2007 were $10,317,911 of which $10,217,911 was uninsured. Of these uninsured deposits, $10,217,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Research Foundation's name and $911 were uncollateralized. Investments: The Research Foundation maintains both short-term and long-term investment policies. Both establish primary and secondary objectives, specify allowable investments, set target investment mix, and provide investment guidelines. Annual Financial Report FY2007 133 The Research Foundation's investments as of June 30, 2007 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 (Commercial) Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $1,155,456 1,846,778 5,071,194 1,180,167 15,769,776 1,980,065 $27,003,436 $0 347,659 1,180,167 14,024,284 1,945,652 $17,497,762 $337,846 2,472,179 1,526,778 $4,336,803 $659,875 1,935,062 218,714 $2,813,651 $157,735 1,846,778 316,294 34,413 $2,355,220 Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Equity Securities - International Managed Futures/Hedge Funds 4,357,875 5,861,132 1,581,459 1,969,664 $40,773,566 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 Research 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 the 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 Research Foundation does not have a formal policy for managing custodial credit risk for investments. At June 30, 2007, $34,446,027 of the Research Foundation's applicable investments were uninsured and held by the investment's counterparty in the Research 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 Research 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. Annual Financial Report FY2007 134 The Research Foundation's investments as of June 30, 2007 are presented below. All investments are presented by investment type and fixed income securities are presented by credit quality ratings. Fair Value U.S. Agencies Implicitily Guaranteed Certificates of Deposit Corporate Debt Related Debt Investments Standard & Poor's Quality Ratings A+ 350,563 350,563 A 657,095 657,095 A- 306,442 306,442 BBB+ BBB 7,732,839 2,138,510 7,732,839 2,138,510 BBBBB- 1,945,927 1,392,146 1,945,927 1,392,146 Moody's Quality Ratings Aaa 790,292 674,732 115,560 Aa1 70,033 70,033 Aa2 65,686 65,686 Aa3 215,983 215,983 A1 321,460 321,460 A2 1,562,498 1,180,167 382,331 A3 1,981,044 1,981,044 Baaa3 Ba3 UNRATED 20,288 53,934 4,396,462 4,396,462 20,288 53,934 $24,001,202 $5,071,194 $1,180,167 $17,749,841 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 Research 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, 2007, investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 7% 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 Research Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy. Annual Financial Report FY2007 135 Capital Assets for Component Units: The Research Foundation had Capital Assets activity as follows for the year ended June 30, 2007: Beginning Ending Balances Balance 7/1/2006 Additions Reductions 6/30/2007 Capital Assets, Not Being Depreciated: Land (and other assets) $110,000 $0 $0 $110,000 Total Capital Assets Not Being Depreciated 110,000 0 0 110,000 Capital Assets, Being Depreciated: Building and Building Improvements Total Assets Being Depreciated 1,142,307 1,142,307 1,142,307 0 0 1,142,307 Less: Accumulated Depreciation Buildings Total Accumulated Depreciation 691,231 691,231 46,082 46,082 737,313 0 737,313 Total Capital Assets, Being Depreciated, Net Capital Assets, net 451,076 $561,076 (46,082) ($46,082) 0 404,994 $0 $514,994 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 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, 2007, the Foundation distributed $3,347,366 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at P.O. Box 8040, Statesboro, GA 30460. Annual Financial Report FY2007 136 Investments for Component Units: Georgia Southern University Foundation, Inc. holds endowment and other investments of approximately $42.1 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by donors. Georgia Southern University Foundation, Inc., 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. Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Certificates of Deposit Mutual Funds Real Estate Total Investments Cost $552,679 58,314 37,461,321 158,900 $38,231,214 Fair Value $552,679 58,314 41,353,051 158,900 $42,122,944 Capital Assets for Component Units Georgia Southern University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $395,860 395,860 50,000 50,000 26,111 23,889 $419,749 Long-Term Liabilities for Component Units Georgia Southern Foundation, Inc. had $148,460 in Liabilities Under Split-interest Agreements as of June 30, 2007. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Housing Foundation, Inc. and Subsidiaries (GSUHF) is a legally separate, tax-exempt component unit of Georgia Southern University (University). GSUHF acts primarily as an organization to issue bonds where the funds are utilized to construct student housing and other university facilities that are available to the University in support of its programs. The board of the GSUHF is self-perpetuating and consists of employees and friends Annual Financial Report FY2007 137 of the University. Because this organization's purpose is for the benefit of the University, GSUHF is considered a component unit of the University and is discretely presented in the University's financial statements. GSUHF 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. GSUHF's fiscal year is July 1 through June 30. Complete financial statements for GSUHF can be obtained from Dabbs, Hickman, Hill and Cannon, LLP, P.O. Box 727, Statesboro, GA 30459. Long-Term Liabilities for Component Units Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Revenue/Mortgage Bonds Payable $114,280,000 Total Long Term Liabilities $114,280,000 Additions $0 $0 Reductions $1,829,173 $1,829,173 Ending Balance June 30, 2007 $112,450,827 $112,450,827 Amounts due within One Year $2,685,000 $2,685,000 Georgia Southern University Housing Foundation One, LLC has a bond obligation to Wachovia Bank for the construction of the student housing facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $38,180,000 of Student Housing Lease Revenue Bonds, Series 2002. The bonds were issued in $5,000 denominations, and consist of $22,930,000 Serial Bonds, maturing annually through 2022; $5,000,000 Term I Bonds, due August 1, 2028; and $10,250,000 Term II Bonds, due August 1, 2028. Principal payments are due annually and interest payments are due semi-annually on January 25 and July 25 in the amounts so as to enable Wachovia Bank to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of Wachovia Bank, as security for the payment of the bonds. Principal payments are due every July 25th, commencing in 2004. Interest payments are due every January and July 25th, commencing in 2003. Interest rates vary from 3% to 5% over the obligation term. The balance of the bond obligation was $35,990,000 as of June 30, 2007. Georgia Southern University Housing Foundation Two, LLC has a bond obligation to BB&T for the construction of the student housing facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $35,900,000 of Student Housing Lease Revenue Bonds, Series 2004. The bonds were issued in $5,000 denominations, and consist of $19,375,000 Serial Bonds, maturing annually through 2024; $4,035,000 Term I Bonds, due Annual Financial Report FY2007 138 August 1, 2019; $5,885,000 Term II Bonds, due August 1, 2027; and $6,605,000 Term III Bonds, due August 1, 2030. Principal payments are due annually and interest payments are due semi-annually on February 1 and August 1 in the amounts so as to enable BB&T to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of BB&T, as security for the payment of the bonds. Principal payments are due every August 1st, commencing in 2005. Interest payments are due every February and August 1st commencing on August 1, 2004. Interest rates vary from 2.75% to 5.25% over the obligation term. The balance of the bond obligation was $34,925,000 as of June 30, 2007. Georgia Southern University Housing Foundation Three, LLC has a bond obligation to BB&T for the construction of the recreation facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $40,540,000 of Student Housing Lease Revenue Bonds, Series 2005A (tax-exempt) and 2005B (non-exempt). The bonds were issued in $5,000 denominations, and consist of $13,235,000 Serial 2005A Bonds, maturing annually through 2021; $9,800,000 Term I 2005A Bonds, due August 1, 2026; $7,135,000 Term II 2005A Bonds, due August 1, 2029; $5,360,000 Term III 2005A Bonds, due August 1, 2031; and $5,010,000 Serial 2005B Bonds, maturing annually through 2012. Principal payments are due annually and interest payments are due semi-annually, on February 1 and August 1 in the amounts so as to enable BB&T to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of BB&T, as security for the payment of the bonds. Principal payments are due every August 1st, commencing in 2008. Interest payments are due every February and August 1st, commencing on August 1, 2005. Interest rates vary from 3.5% to 5.25% over the obligation term. The balance of the bond obligation was $40,540,000 as of June 30, 2007. The Foundation will incur a bond obligation for the construction of student housing facilities. It is anticipated that the Development Authority of Bulloch County will issue approximately $62,725,000 of Student Housing Lease Revenue Bonds. The details of the bond issue and construction are currently in the planning stages as of the date of this report. Annual debt service requirements to maturity for revenue bonds payable are as follows: Annual Financial Report FY2007 139 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $2,685,000 2,840,000 3,000,000 3,170,000 3,275,000 18,460,000 22,870,000 29,060,000 26,095,000 111,455,000 995,827 $112,450,827 Bonds Payable Interest $5,191,104 5,116,823 5,014,733 4,899,705 4,771,489 21,716,921 17,231,571 10,962,079 2,872,500 77,776,925 $77,776,925 Total $7,876,104 7,956,823 8,014,733 8,069,705 8,046,489 40,176,921 40,101,571 40,022,079 28,967,500 189,231,925 995,827 $190,227,752 Southern Boosters, Inc. Southern Boosters, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University (University). The fifty-two member board of Southern Boosters 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 Southern Boosters, the majority of resources or income thereon that Southern Boosters holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by Southern Boosters 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, Southern Boosters is considered a component unit of the University and is discretely presented in the University's financial statements. Southern Boosters, 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. Southern Boosters, Inc. fiscal year is July 1 through June 30. During the year ended June 30, 2007, Southern Boosters, Inc. distributed $500,000 to the University for athletic scholarship support and approximately $401,176 for the support of other University programs. Complete financial statements for Southern Boosters, Inc. can be obtained from the Administrative Office at P.O. Box 811501, Statesboro, GA 30460. Capital Assets for Component Units Southern Boosters, Inc. has the following Capital Assets as of June 30, 2007: Annual Financial Report FY2007 140 June 30, 2007 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 $80,301 897,738 978,039 324,687 95,585 420,272 121,353 298,919 $1,276,958 Long-Term Liabilities for Component Units Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220 including interest at a variable rate (8.25% at June 30, 2007), through September 14, 2013, unsecured. The original note amount was $279,000 and the principal balance outstanding on the note at June 30, 2007 was $211,992. 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, 2007) and the note matures on January 15, 2009. This debt is secured by the Golf Practice facility. The outstanding principal balance was $366,810 at June 30, 2007. Changes in long-term liabilities for Southern Boosters, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable Total Long Term Liabilities $630,304 $630,304 $0 $51,502 $0 $51,502 $578,802 $578,802 $25,391 $25,391 Annual requirements to maturity for notes payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Total Notes and Loans Payable Notes and Loans Payable Principal Interest Total $25,391 378,550 20,794 22,510 24,367 107,190 $578,802 $47,829 32,073 14,426 12,710 10,853 11,080 $128,971 $73,220 410,623 35,220 35,220 35,220 118,270 $707,773 Annual Financial Report FY2007 141 Georgia Southern University Research and Service Foundation, Inc. Georgia Southern University Research and 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 six-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 2007, the Research Foundation transferred $5,469,335 in sponsored research to the University. Complete financial statements for the Research Foundation can be obtained from the Administrative Office at P.O. Box 8005, Statesboro, GA 30460. Valdosta State University Valdosta State University Foundation, Inc. Valdosta State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The thirty-one member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Because the University's fiscal year end is June 30, the amounts reported as due to or due from the related entities do not agree. Annual Financial Report FY2007 142 During the year ended December 31, 2006, the Foundation distributed $1,976,418 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 102 Georgia Avenue, Valdosta, Georgia 31698. Investments for Component Units: Valdosta State University Foundation, Inc. holds endowment and other investments in the amount of $19.6 million. The $18.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Valdosta State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 3% of the earnings may be used per the donor's stipulation. The remainder of the earnings are set aside as a reserve. Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Money Market Accounts Equity Securities Mutual Funds Split Interest Investments $392,247 2,595,234 11,410,120 682,898 $392,247 2,997,292 15,524,904 682,898 Total Investments $15,080,499 $19,597,341 Capital Assets for Component Units: The Foundation holds the following Capital Assets as of December 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 December 31, 2006 $3,166,925 3,166,925 34,680,154 25,939 34,706,093 2,756,008 Total Capital Assets being Depreciated, Net 31,950,085 Capital Assets, Net $35,117,010 Long-term Liabilities for Component Units: Changes in long-term debt for Valdosta State Foundation, Inc. for the fiscal year ended December 31, 2006 are shown below: Annual Financial Report FY2007 143 Beginning Balance January 1, 2006 Additions Reductions Ending Balance December 31, 2006 Amounts due within One Year Liabilities under split interest agreement Capital Lease Obligations Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $0 0 1,263,581 38,490,518 0 $39,754,099 $430,303 21,175 121,082 596 $573,156 $35,355 40,743 369,782 $445,880 $394,948 21,175 1,343,920 38,120,736 596 $39,881,375 $0 6,352 1,040,109 404,424 $1,450,885 Capital Lease Obligations: During the year, the Foundation leased a vehicle from Ford Credit under a capital lease through April 11, 2010. The balance of this obligation as of December 31, 2006 is $21,175. Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending December 31: 2007 1 2008 2 2009 3 2010 4 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $7,014 7,012 7,012 2,779 23,817 2,642 $21,175 Notes and Loans Payable: The Foundation 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. The balance of this obligation was $165,581 as of December 31, 2006. In April 2005, the Foundation entered into a loan with a local financial institution to purchase property contiguous to the University. The interest rate is variable and is based on prime. The maturity date is March 2008 and the balance of the obligation at December 31, 2006 is $182,663. The Foundation has two lines of credit and a short-term note payable with a total outstanding principal balance of $995,676 as of December 31, 2006. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Notes and Loans Payable Principal Interest Total Year ending December 31: 2007 1 $1,040,109 $14,634 $1,054,743 2008 2 220,863 6,504 227,367 2009 3 43,565 2,583 46,148 2010 4 39,383 687 40,070 Total Notes and Loans Payable $1,343,920 $24,408 $1,368,328 Annual Financial Report FY2007 144 Revenue Bonds Payable: Valdosta State University Foundation, Inc. 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 balance of this obligation was $2,248,621 as of December 31, 2006. 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 semi-annually and principal is due annually. The balance of the obligation at December 31, 2006 is $35,872,115. Annual debt service requirements to maturity for bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Total Bonds Payable 1 2 3 4 5 6-10 11-16 17-21 22-26 27-31 Principal $404,424 1,022,783 1,126,917 1,151,074 1,115,055 6,273,367 9,327,344 10,196,120 7,481,120 22,532 $38,120,736 Bonds Payable Interest $1,716,230 1,716,230 1,694,905 1,668,455 1,640,805 7,545,963 6,085,335 3,964,675 9,716,120 $35,748,718 Total $2,120,654 2,739,013 2,821,822 2,819,529 2,755,860 13,819,330 15,412,679 14,160,795 17,197,240 22,532 $73,869,454 Albany State University Albany State University Foundation, Inc. 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 Management's Discussion and Analysis- for State and Local Governments, GASB Statement 35, Basic Financial Statements Management's Discussion and Analysis for Public Colleges and Annual Financial Report FY2007 145 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, 2007, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 504 College Drive, Albany, GA 31705. Prior Period Adjustment: A prior period adjustment in the amount of ($903,266) was made to restate the prior year's Repurchase Agreement balance and corresponding accrued interest. The adjustment had the effect of reducing Beginning Net Assets for the fiscal year that ended June 30, 2007. Deposits and Investments for Component Units: Deposits: As of June 30, 2007, the carrying amount of the Foundation's bank deposits was $1,366,018 and the respective bank balances totaled $1,429,626. Of the total bank balance, $211,346 was insured through the Federal Deposit Insurance Corporation (FDIC). The remaining $1,218,280 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, 2007 are summarized as follows: Fair Value Investment Maturity Less Than 1 Year 1-5 Years Investment type Certificates of Deposit General Obligation Bonds Money Market Mutual Fund Repurchase Agreements $1,030,578 695,276 133,537 4,880,608 $6,739,999 $133,537 4,880,608 $5,014,145 $1,030,578 695,276 $1,725,854 Capital Assets for Component Units: The Foundation had the following Capital Asset activity for the year ended June 30, 2007: Annual Financial Report FY2007 146 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 Beginning Balances 7/1/2006 $25,244,504 25,244,504 Additions Reductions $0 $25,244,504 0 25,244,504 7,773,248 29,305,356 24,340 7,797,588 29,305,356 0 291,497 520,699 5,246 3,497 296,743 524,196 0 7,500,845 28,781,160 0 Ending Balance 6/30/2007 $0 0 37,078,604 24,340 37,102,944 812,196 8,743 820,939 36,282,005 Capital Assets, net $32,745,349 Long-term Liabilities for Component Units: $28,781,160 $25,244,504 $36,282,005 The Foundation had the following activity in long-term liabilities for the year ended June 30, 2007: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable $2,392,978 34,978,805 $0 $82,901 $2,310,077 $2,270,134 23,529 34,955,276 225,000 Total Long Term Liabilities $37,371,783 $0 $106,430 $37,265,353 $2,495,134 Notes and Loans Payable: Albany State Foundation, Inc. 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. 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, 2007 is $2,181,889. 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, 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 are due with final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2007 is $128,188. Annual Financial Report FY2007 147 Annual debt service requirements to maturity for Albany Municipal Coliseum installment loans with SunTrust Bank are as follows: Notes and Loans Payable Principal Interest Total Year ending June 30: 2008 1 $2,270,134 $105,816 $2,375,950 2009 2 39,943 799 40,742 Total Notes and Loans Payable $2,310,077 $106,615 $2,416,692 Revenue Bonds Payable: On July 1, 2005, the Foundation issued $33,110,000 Albany-Dougherty Inner City Authority Revenue Bonds, Series 2005A and $1,210,000 Albany-Dougherty City Authority Taxable Revenue Bonds, Series 2005B. The Bonds were issued for the purpose of financing and refinancing in whole or in part, the cost of the acquisition, construction and equipping of certain land, buildings and personal property, known as Albany State University Student Housing Project. These bonds are carried as liabilities of Albany State Real Estate Foundation, LLC, a single member Limited Liability Company. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Bonds Payable Principal Interest Total Year ending June 30: 2008 1 $225,000 $1,576,737 $1,801,737 2009 2 230,000 1,567,175 1,797,175 2010 3 240,000 1,557,400 1,797,400 2011 4 250,000 1,516,898 1,766,898 2012 through 2016 5-9 3,025,000 7,456,523 10,481,523 2017 through 2021 10-14 5,335,000 6,692,925 12,027,925 2022 through 2026 15-19 7,815,000 5,277,905 13,092,905 2027 through 2031 20-24 9,975,000 3,190,144 13,165,144 2032 through 2034 25-29 7,225,000 820,931 8,045,931 34,320,000 29,656,638 63,976,638 Bond Premium/(Discount) 635,276 635,276 Total Revenue Bonds Payable $34,955,276 $29,656,638 $64,611,914 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. Annual Financial Report FY2007 148 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, 2006, the Foundation distributed $468,795 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, Inc. holds endowment and other investments in the amount of $5.7 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds $167,312 1,714,999 386,417 2,316,585 14,000 $167,312 1,703,258 384,437 3,464,274 14,000 Total Investments $4,599,313 $5,733,281 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 purchases buildings and leases them to the University for housing, recreation, etc. 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. Annual Financial Report FY2007 149 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. Complete financial statements for the Foundation may 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, 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 Long-term Liabilities for Component Units: $475,561 466,436 941,997 35,770,028 2,635,460 38,405,488 4,325,995 34,079,493 $35,021,490 Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2006 are shown below: Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance January 1, 2006 $0 43,799,420 $43,799,420 Additions $618,000 0 $618,000 Reductions $0 977,623 $977,623 Ending Balance December 31, 2006 Amounts due within One Year $618,000 42,821,797 $21,188 930,000 $43,439,797 $951,188 Notes and Loans Payable: On November 15, 2006, the AASU Women's Field House, LLC obtained a promissory note payable with Wachovia Bank, N.A. to provide financing for the construction of the field house in the amount of $618,000. Interest is payable monthly from the date of the note until and including February 1, 2007, at the rate of 7.20%. As of March 1, 2007, the note is payable in equal monthly installments of principal and interest in an amount necessary to amortize the principal amount outstanding over a 173 month term, with all unpaid principal and accrued interest due on June 1, 2021. The note is collateralized by a deed to secure debt and an assignment of rents. In addition, the note is guaranteed by Armstrong Atlantic State University Foundation, Inc. The balance outstanding at December 31, 2006 is $618,000. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Annual Financial Report FY2007 150 Year ending December 31: 2007 1 2008 2 2009 3 2010 4 2011 5 Thereafter 6-15 Notes and Loans Payable Principal Interest $21,188 27,157 29,178 31,350 33,683 475,444 $618,000 $36,514 42,086 40,065 37,893 35,560 149,313 $341,431 Total $57,702 69,243 69,243 69,243 69,243 624,757 $959,431 Revenue Bonds Payable: Student Housing Bonds are 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 between 3.00% and 5.00%. Resident Instruction Bonds are 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 between 3.25% and 5.00%. Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Bonds Payable Principal Interest Total Year ending December 31: 2007 1 $930,000 $1,857,502 $2,787,502 2008 2 970,000 14,824,214 15,794,214 2009 3 980,000 1,788,914 2,768,914 2010 4 1,015,000 1,757,065 2,772,065 2011 5 1,050,000 1,720,802 2,770,802 2012 through 2016 6-10 5,845,000 7,987,695 13,832,695 2017 through 2021 11-15 7,085,000 6,733,170 13,818,170 2022 through 2026 16-20 8,720,000 5,029,922 13,749,922 2027 through 2031 21-25 11,555,000 2,630,690 14,185,690 2032 through 2036 26-30 3,985,000 433,225 4,418,225 42,135,000 44,763,199 86,898,199 Bond Premium, net 686,797 686,797 $42,821,797 $44,763,199 $87,584,996 Annual Financial Report FY2007 151 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 Foundation is the single member of the following three limited liability companies: 1) ASU Jaguar Student Housing I, LLC which is a limited liability company organized for the purpose of constructing and holding an apartment complex for the benefit of students attending Augusta State University; 2) ASU Jaguar Student Center, LLC which is a limited liability company organized for the purpose of constructing and holding the student center property located on the campus of the University for the benefit of its students; and 3) ASU Jaguar Ventures, LLC which is a limited liability company organized for the purpose of constructing a golf course clubhouse. 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, 2007, the Foundation distributed $2,036,068 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, 2007: Cost Fair Value Government and Agency Securities Corporate Stocks and Bonds Mutual Funds Investment Pools Total Investments $4,074,011 9,822,746 2,814,926 1,060,747 $17,772,430 $4,045,997 11,155,531 2,938,217 1,114,937 $19,254,682 Long-term Liabilities for Component Units: Changes in long-term liabilities for Augusta State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Annual Financial Report FY2007 152 Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable $1,544,695 30,852,518 $0 $142,812 $1,401,883 $142,000 85,000 30,767,518 255,000 Total Long Term Liabilities $32,397,213 $0 $227,812 $32,169,401 $397,000 Notes and Loans Payable: 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 $1,401,883 at June 30, 2007. 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% (6.5593% at June 30, 2007). Interest payments are due monthly. In August 2006, the loan converted 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 which had a fair market value of $2,912,688 at June 30, 2007. Interest expense on this loan for the year ending June 30, 2007 was $108,757. Annual debt service requirements to maturity for the construction loan are as follows: Notes and Loans Payable Principal Interest Total Year ending June 30: 2008 1 $142,000 $82,846 $224,846 2009 2 142,000 90,650 232,650 2010 3 142,000 81,111 223,111 2011 4 975,883 71,572 1,047,455 Total Notes and Loans Payable $1,401,883 $326,179 $1,728,062 Revenue Bonds Payable: ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2007: $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, due through February 1, 2035, interest at 4.375% to 5.375%. Interest incurred on the bonds totaled $1,009,587 during the year ending June 30, 2007. The bonds are secured by a deed on the University Village Apartments and repayment responsibility of the bonds lies solely with the ASU Jaguar Student Housing I, LLC. The outstanding principal amount of the bonds as of June 30, 2007 is $19,430,000. ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2007: $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, due through July 1, 2034, interest at 3.25% to 5%. Interest incurred during the year ending June 30, 2007 totaled $503,864. Interest capitalized to construction in progress totaled $95,174 for the year ending June 30, 2007. The outstanding principal amount of the bonds as of June 30, 2007, including unamortized bond premium is $11,337,518. Annual Financial Report FY2007 153 Annual debt service requirements to maturity for Student Housing and Educational Facilities revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $255,000 260,000 330,000 395,000 465,000 3,125,000 4,630,000 6,580,000 8,390,000 6,145,000 30,575,000 192,518 $30,767,518 Bonds Payable Interest $1,511,442 1,500,987 1,489,487 1,476,049 1,459,549 6,955,794 6,138,037 4,795,013 2,932,113 645,725 28,904,196 $28,904,196 Total $1,766,442 1,760,987 1,819,487 1,871,049 1,924,549 10,080,794 10,768,037 11,375,013 11,322,113 6,790,725 59,479,196 192,518 $59,671,714 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 Athletic Association promotes the educational, athletic, and physical education programs of the University. The Athletic Association leases Forest Hills Golf Club (the Club), an 18-hole golf course, from the Board of Regents of the University System of Georgia for a nominal fee. The Athletic Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the AGA) to manage, operate and maintain Forest Hills Golf Club. The income of the Athletic Association is solely derived from the revenues of the Golf Club and interest income. 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 Athletic Association 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, 2007, the Athletic Association disbursed $0 funds to the University. Completed financial statements for the Athletic Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, Georgia 30904-2200. Capital Assets for Component Units: The Athletic Association held the following Capital Assets as of June 30, 2007: Annual Financial Report FY2007 154 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 June 30, 2007 $3,416,691 930,804 4,347,495 2,437,532 1,909,963 $1,909,963 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Capital Lease Obligations Notes and Loans Payable Total Long Term Liabilities Beginning Balance July 1, 2006 $73,814 1,574,723 $1,648,537 Additions $0 $0 Reductions $26,061 8,456 $34,517 Ending Balance June 30, 2007 Amounts due within One Year $47,753 1,566,267 $17,430 293,158 $1,614,020 $310,588 Capital Lease Obligations: The Athletic Association leases golf course equipment under capital leases that expire in July 2007, October 2007 and April 2010. The terms of the leases require monthly payments totaling $2,521. Future minimum lease payments are: Year ending June 30: 2008 1 2009 2 2010 3 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $20,490 17,832 14,860 53,182 5,429 $47,753 Notes and Loans Payable: The Athletic Association holds a note payable to First Bank dated September 22, 2005 in the original amount of $35,961, with an interest rate of 8%. The note is payable in monthly installments of $879 through September 20, 2009 and is secured by equipment. The outstanding principal balance of the note is $21,572 as of June 30, 2007. The Athletic Association holds a note payable to Augusta State University Foundation, Inc., a related party, dated May 24, 2005 in the original amount of $1,544,695, secured by first priority Annual Financial Report FY2007 155 security interest. The note is payable in quarterly installments of interest only through May 2006, then in consecutive quarterly payments equal to $35,500, plus accrued interest at the LIBOR rate plus 1.2%, commencing on August 24, 2006, and continuing on the same day each third month thereafter, with the total remaining balance due May 24, 2011. The outstanding principal balance of the note is $1,544,695 as of June 30, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 Total Notes and Loans Payable Clayton State University Notes and Loans Payable Principal Interest Total $293,158 151,918 144,496 976,695 $1,566,267 $181,223 77,066 67,476 382,156 $707,921 $474,381 228,984 211,972 1,358,851 $2,274,188 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. Amounts reported due to or due from the University do not agree because of the different fiscal year ends. During the year ended December 31, 2006, the Foundation distributed $467,397 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 and Emilie Spivey Foundation holds investments in the amount of $7.5 million. Investments consist of marketable securities within an investment pool and real property. Annual Financial Report FY2007 156 Investments are comprised of the following amounts at December 31, 2006: Real Estate Investment Pools Suntrust Investment Pool Total Investments Cost $137,518 7,341,500 $7,479,018 Fair Value $137,518 7,341,500 $7,479,018 Capital Assets for Component Units: The Walter & Emilie Spivey Foundation held the following Capital Assets as of December 31, 2006: December 31, 2006 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated 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 $139,882 139,882 15,384 15,384 7,691 7,693 $147,575 Clayton State University Foundation, Inc. Clayton State University Foundation, Inc. (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, 2007, the Foundation distributed $335,312 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can Annual Financial Report FY2007 157 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, Inc. holds endowment and other investments in the amount of $4.5 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Real Estate Investment Pools BOR Short Term Fund Total Return Fund Total Investments Cost $1,836,498 169,580 2,365,657 $4,371,735 Fair Value $1,836,498 169,795 2,496,407 $4,502,700 Capital Assets for Component Units: Clayton State University Foundation, Inc. held $788,405 in Construction Work In Progress as of June 30, 2007. 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. 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. The amount due to Columbus State University of $5,594,853, results primarily from funds that are designated for payment on the construction of the RiverPark Campus. It is the intent of the Foundation that the facility be Annual Financial Report FY2007 158 transferred to the University upon completion. The Due from Component Unit 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, 2006, the Foundation distributed $973,154 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 and other investments in the amount of $25,260,039. The corpus of the endowment portion 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, 2006: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Fixed Income Fund Investment Pool Total Investments Cost $27,007 3,128,278 3,112,639 11,480,590 426,178 6,102,992 $24,277,684 Fair Value $27,007 3,062,991 2,736,966 12,722,824 424,898 6,285,353 $25,260,039 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended July 31, 2006 are shown below: Beginning Ending Amounts due Balance Balance within August 1, 2005 Additions Reductions July 31, 2006 One Year Liabilities under split interest agreement Total Long Term Liabilities $0 $1,292,153 $0 $1,292,153 $0 $1,292,153 $0 $1,292,153 $110,245 $110,245 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 FY2007 159 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 fiscal year of Foundation Properties, Inc. is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. The amount due to Columbus State University of $23,559,301 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, 2006, Foundation Properties, Inc. distributed $669,715 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 for Component Units: Foundation Properties, Inc. holds investments as of July 31, 2006 in the amount of $6,068,326. Investments consist of marketable securities and bonds as follows: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities $952,977 1,018,120 3,607,892 $925,977 995,726 4,146,623 Total Investments $5,578,989 $6,068,326 Capital Assets for Component Units: Foundation Properties, Inc. held the following Capital Assets as of July 31, 2006: Annual Financial Report FY2007 160 July 31, 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 $10,608,141 58,348,660 68,956,801 49,452,091 1,651,341 51,103,432 6,319,857 44,783,575 $113,740,376 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 RiverPark Campus, as well as the construction of the Cunningham Conference Center. Parking Facility Revenue Bonds are issued by Foundation Properties, Inc. to finance parking facilities on university property. The bonds, serial and term, are secured by pledges of gross receipts from parking deck fees at Columbus State University. Changes in long-term liabilities for component units for the fiscal year ended July 31, 2006 are shown below: Beginning Ending Amounts due Balance Balance within August 1, 2005 Additions Reductions July 31, 2006 One Year Revenue/Mortgage Bonds Payable $42,342,700 $40,655,000 $12,225,894 $70,771,806 $1,146,806 Total Long Term Liabilities $42,342,700 $40,655,000 $12,225,894 $70,771,806 $1,146,806 Debt Service Obligations: Annual debt service requirements to maturity for Student Housing, Educational Programming and Parking Facility revenue bonds payable are as follows: Annual Financial Report FY2007 161 Year ending July 31: 2007 1 2008 2 2009 3 2010 4 2011 5 2012 through 2016 6-10 Principal Bonds Payable Interest $1,146,806 1,515,000 12,480,000 1,315,000 36,055,001 18,259,999 $70,771,806 $2,925,054 3,001,847 2,904,404 2,391,797 2,333,951 787,287 $14,344,340 Total $4,071,860 4,516,847 15,384,404 3,706,797 38,388,952 19,047,286 $85,116,146 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 are 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 fiscal year of the Athletic Fund is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. During the year ended July 31, 2006 the Athletic Fund distributed $32,545 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 of $31,102 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, 2007. Investments for Component Units: Columbus State University Athletic Fund, Inc. holds endowment and other investments in the amount of $1,646,844. The corpus of the endowment portion 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 Annual Financial Report FY2007 162 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, 2006: Equity Securities Total Investments Cost $1,246,139 $1,246,139 Fair Value $1,646,844 $1,646,844 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 are 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 fiscal year of the Association is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due from Columbus State University of $23,507 is not reflected as a payable on the University's Statement of Net Assets. This amount was paid by the University before its year end of June 30, 2007. During the year ended July 31, 2006, the Association distributed $17,484 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. Investments for Component Units: Columbus State University Alumni Association, Inc. holds endowment and other investments in the amount of $128,377. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Columbus State Annual Financial Report FY2007 163 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, 2006: Cost Fair Value Certificates of Deposit Equity Mutual Funds Total Investments $81,586 70,123 $151,709 $81,586 46,791 $128,377 Capital Assets for Component Units: Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2006 as follows: July 31, 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 $9,900 400 10,300 7,156 3,144 $3,144 Fort Valley State University Fort Valley State University Foundation, Inc. Fort Valley State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Fort Valley State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is 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 FY2007 164 During the year ended June 30, 2007, the Foundation distributed $1,179,871 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1005 State University Drive, Fort Valley, GA 31030 or from the Foundation's website at www.FVSU.edu. Investments for Component Units: Fort Valley State University Foundation, Inc. holds endowment and other investments in the amount of $5.8 million, excluding investments limited to use (bond proceeds). The $2.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds $558,782 797,234 276,523 88,929 649,584 3,148,611 $558,782 797,234 275,633 86,143 786,237 3,345,887 Total Investments $5,519,663 $5,849,916 Capital Assets for Component Units: Fort Valley State University Foundation, Inc. holds the following capital asset amounts at June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Land and other Assets $153,815 Construction in Progress 34,200,540 Total Capital Assets not being Depreciated 34,354,355 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated 1,065,982 18,042 1,084,024 Less Total Accumulated Depreciation 237,789 Total Capital Assets being Depreciated, Net 846,235 Capital Assets, Net $35,200,590 Long-term Liabilities for Component Units: Changes in long-term liabilities for the fiscal year ended June 30, 2007 are shown below: Annual Financial Report FY2007 165 Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $1,562,133 43,254,894 $44,817,027 $83,250 0 $83,250 $168,068 0 $168,068 $1,477,315 43,254,894 $44,732,209 $316,399 0 $316,399 Notes and Loans Payable: Notes Payable consists of three loans: 1) Unsecured bank loan with interest at 8 percent that is due June 20, 2008. The outstanding principal balance at June 30, 2007 was $254,395. 2) Note Payable to the Department of Agriculture, Rural Business-Cooperative Services of $1,000,000, due in annual installments of $42,450, with interest of 1% through December 2027, collateralized by real and personal property, including mortgage loans. The outstanding principal balance at June 30, 2007 was $800,367. 3) Note Payable to the Department of Agriculture, Rural Business-Cooperative Services of $396,438 with interest of 1%, through August 2031, collateralized by real and personal property including mortgage loans. Annual installments began August 2005 and the unadvanced amount at June 30, 2007 was $270,312. The outstanding principal balance at June 30, 2007 was $422,553. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 Notes and Loans Payable Principal Interest Total 1 2 3 4 5 6-10 11-15 16-20 21-25 $316,399 62,626 63,255 63,891 64,532 332,518 327,796 203,934 42,364 $1,477,315 $32,637 11,663 11,034 10,398 9,756 38,924 21,784 8,316 426 $144,938 $349,036 74,289 74,289 74,289 74,288 371,442 349,580 212,250 42,790 $1,622,253 Revenue Bonds Payable: On June 1, 2006, Fort Valley State University Foundation Property, LLC entered into a loan agreement with the Development Authority of Peach County (the Authority) whereby the Authority would issue certain bonds (June 29, 2006) totaling $44,060,000 and loan the entire proceeds to the LLC. As part of the loan agreement, the LLC agreed to use the bond proceeds to finance (i) the construction, equipping and installation of certain buildings and personal property to be used as student housing facilities, related parking, a student amenities building, relocation of an existing softball field and infrastructure improvements located on the Fort Valley State University campus, (ii) establish a debt service reserve fund for the Series 2006 Bonds, (iii) fund capitalized interest for the Series 2006 Bonds and (iv) pay cost of issuance of the Series 2006 Annual Financial Report FY2007 166 Bonds, including the insurance policy premium. The principal and interest are payable solely from and secured by a lien upon certain interest in real property and certain assignments of rental income originating from a rental agreement between the LLC and Board of Regents of the University System of Georgia. The rental agreement is for an initial one-year term (annual renewals for thirty years) and will commence following the issuance of a certificate of occupancy estimated in August 2007. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. Additionally, the trust indenture requires the maintenance of certain deposits with a trustee, which are reported in Noncurrent Cash. The serial bonds have various annual maturities with the final payment scheduled for June 1, 2026. The bond discount is amortized on the effective interest rate of the bonds. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Principal Bonds Payable Interest 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 $0 70,000 130,000 195,000 260,000 1,965,000 4,175,000 6,695,000 10,685,000 19,885,000 44,060,000 (805,106) $43,254,894 $1,987,394 1,987,394 1,984,594 1,979,394 1,971,594 9,675,770 9,112,164 7,979,626 6,106,025 3,146,100 45,930,055 $45,930,055 Total $1,987,394 2,057,394 2,114,594 2,174,394 2,231,594 11,640,770 13,287,164 14,674,626 16,791,025 23,031,100 89,990,055 (805,106) $89,184,949 Georgia College & State University Georgia College & State University Foundation, Inc. Georgia College & State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of 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 thirty-eight 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 Annual Financial Report FY2007 167 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, 2007, the Foundation distributed $1,156,729 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Campus Box 96, 100 E. Greene Street, Suite 200, Milledgeville, GA 31061. Prior Period Adjustment In prior years, the Foundation recognized a lease as an operating lease instead of a direct financing lease. During the year ended June 30, 2007, the Foundation retroactively changed its method of accounting to record this lease as a direct financing lease, in accordance with generally accepted accounting principles. This change had the effect of decreasing the beginning balance in unrestricted net assets by ($265,817). Investments for Component Units: Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $13.4 million. The $10.2 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 5% of the calendar year-end market value of the investment based on a rolling 3 year average can be spent. 95% is to be spent based on donor intent and 5% is to be spent as an administrative fee. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Corporate Bonds Equity Securities Real Estate $610,895 3,147,285 6,927,075 1,088,000 $610,895 3,099,257 8,566,509 1,139,197 Total Investments $11,773,255 $13,415,858 Capital Assets for Component Units: Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: Annual Financial Report FY2007 168 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 June 30, 2007 $372,188 42,560 414,748 2,822,585 45,379 2,867,964 16,652 2,851,312 $3,266,060 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia College & State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable $0 450,000 96,057,000 $63,373 2,837,623 102,666,601 $16,721 616,666 89,275,000 $46,652 2,670,957 109,448,601 $0 0 275,000 Total Long Term Liabilities $96,507,000 $105,567,597 $89,908,387 $112,166,210 $275,000 Notes and Loans Payable: During the year ending June 30, 2007, the Foundation purchased space in an office building in Macon, Georgia to house the Macon Campus of the University. A line of credit to a financial institution was taken out for the purchase and related renovation. The line requires monthly interest payments at LIBOR plus 1.88% (7.20% at June 30, 2007). The line is due October 2009 and is collateralized by certain real property and an assignment of certain rents. The balance on the line of credit at June 30, 2007 is $2,670,957. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Notes and Loans Payable Principal Interest Total Year ending June 30: 2008 1 $0 $192,309 $192,309 2009 2 2,670,957 56,090 2,727,047 Total Notes and Loans Payable $2,670,957 $248,399 $2,919,356 Revenue Bonds Payable: On December 1, 2003, Property II, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County whereby the Authority would issue certain bonds totaling $7,840,000 and loan the entire proceeds to Property II, LLC. As part of the loan agreement, Property II, LLC agreed to use the proceeds to construct and equip a student center and a parking lot located on the campus of the University, to establish a debt service reserve, to establish certain amounts for capitalized interest and to pay the cost of issuance of the Annual Financial Report FY2007 169 bonds. The principal and interest are payable solely from and secured by a lien upon certain interest in real property and certain assignments of rental income originating from rental agreements between Property II, LLC and the Board of Regents. The rental agreements are annual arrangements and commence following the issuance of a certificate of occupancy. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for September 1, 2022. The balance of the bonds at June 30, 2007 was $7,310,529, net of unamortized premium of $10,529. On July 14, 2004, Property III, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County 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 proceeds to refund and redeem $55,875,000 in outstanding principal of Property I, LLC, to complete certain uncompleted projects of Property I, LLC, 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. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for September 1, 2015. During the year ending June 30, 2007, the 2004 bonds were refunded. The refunding was undertaken to reduce total future debt service payments. The transaction resulted in a net estimated present value economic gain of $2,117,581. On June 15, 2007, Property V, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County whereby the Authority would issue certain bonds totaling $102,470,000 and loan the entire proceeds to Property V, LLC. As part of the loan agreement, Property V, LLC agreed to use the proceeds to refund and redeem $89,000,000 in outstanding principal of Property III, LLC, 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. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for October 1, 2033. The balance of the bonds at June 30, 2007 was $102,138,072, net of unamortized discount of $331,928. In connection with the 2007 series bonds, the Foundation entered into an interest rate swap transaction to convert its variable rate bond obligation to fixed rates. The resulting cost of funds is lower than it would have been had fixed rate borrowings been issued directly. The level of fixed rate debt resulting from the effective interest rate swap is 100% of the total bond debt of the 2007 series. A liability from interest rate swap transactions of $644,572 has been recorded as of June 30, 2007 and is reported as Other Current Liabilities on the Statement of Net Assets. The amount was recorded based on calculated mathematical approximations of market values using certain assumptions regarding past, present, and future market conditions. Annual debt service requirements to maturity for Bonds Payable are as follows: Annual Financial Report FY2007 170 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $275,000 455,000 590,000 760,000 945,000 7,975,000 14,980,000 24,100,000 34,650,000 25,040,000 109,770,000 (321,399) $109,448,601 $5,096,071 5,099,033 5,075,932 5,044,978 5,006,223 24,100,664 21,438,117 16,777,363 9,861,594 1,066,300 98,566,275 $98,566,275 Total $5,371,071 5,554,033 5,665,932 5,804,978 5,951,223 32,075,664 36,418,117 40,877,363 44,511,594 26,106,300 208,336,275 (321,399) $208,014,876 Georgia College & State University Alumni Association, Inc. Georgia College & State University Alumni Association, Inc. (Alumni Association) is a legally separate, tax-exempt component unit of Georgia College & State University (University). The Alumni Association acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The thirty-eight member board of the Alumni 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 Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Alumni Association can only be used by, or for the benefit of the University, the Alumni Association is considered a component unit of the University and is discretely presented in the University'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, 2007, the Alumni Association distributed $157,645 to the University for both restricted and unrestricted purposes. Complete financial statements for the Alumni Association can be obtained from the Administrative Office at Campus Box 96, 100 E. Greene Street, Suite 200, Milledgeville, GA 31061. Investments for Component Units: The Alumni Association investments are comprised of the following amounts at June 30, 2007: Annual Financial Report FY2007 171 Cost Fair Value Money Market Accounts Corporate Bonds Equity Securities Mutual Funds Real Estate $8,357 1,354,966 3,114,238 555,000 3,500 $8,357 1,333,729 3,893,814 582,722 3,500 Total Investments $5,036,061 $5,822,122 Capital Assets for Component Units: Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated $24,000 24,000 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated 227,692 110,600 338,292 Less Total Accumulated Depreciation 275,428 Total Capital Assets being Depreciated, Net Capital Assets, Net 62,864 $86,864 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 presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. Annual Financial Report FY2007 172 During the year ended June 30, 2007, the Foundation distributed $1,464,621 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. Prior Year Adjustment: A prior year adjustment was necessary to correct the prior year's ending net assets amount $25,721,427. The prior year's numbers were not finalized as of the FY2006 Annual Financial Report date. The net effect of the change was to increase beginning net assets by $556,681. Investments for Component Units: Georgia Southwestern Foundation holds endowment and other investments in the amount of $26 million. The $8.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southwestern Foundation, in conjunction with the donors, has established a spending plan whereby 6% of the earnings may be used for academic scholarships or other related academic purposes as outlined by the donor. The remaining of the earnings are set aside as a reserve. Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $712,544 1,421,133 903,779 4,196,644 15,436,559 $22,670,659 Fair Value $712,544 1,421,133 847,536 4,034,641 19,011,659 $26,027,513 Capital Assets for Component Units: Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2007: Capital Assets not being Depreciated: Land and other Assets $941,953 Construction in Progress 25,159 Total Capital Assets not being Depreciated 967,112 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation 22,277,181 1,073,100 23,350,281 701,886 Total Capital Assets being Depreciated, Net 22,648,395 Capital Assets, Net $23,615,507 Annual Financial Report FY2007 173 Long-term Liabilities for Component Units: The Americus-Sumter Payroll Department Authority ("PDA") issued $27,365,000 of its Revenue Bonds (GSW Foundation Housing, LLC Student Housing Project), Series 2005 ("the Bonds"). The proceeds of the sale of the Bonds have been loaned to the GSW Foundation Housing, LLC pursuant to the terms and provision of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated November 1, 2005, between the PDA and the Company. The proceeds are being used to construct 2 student housing buildings and parking facilities for use by 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, 2007 is as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable $27,233,914 $0 $0 $27,233,914 $250,000 Total Long Term Liabilities $27,233,914 $0 $0 $27,233,914 $250,000 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $250,000 65,000 105,000 145,000 190,000 1,720,000 3,375,000 4,990,000 6,265,000 10,260,000 27,365,000 (131,086) $27,233,914 $1,284,108 1,274,108 1,271,508 1,267,307 1,261,507 6,147,237 5,641,719 4,723,669 3,455,037 1,731,744 28,057,944 $28,057,944 Total $1,534,108 1,339,108 1,376,508 1,412,307 1,451,507 7,867,237 9,016,719 9,713,669 9,720,037 11,991,744 55,422,944 (131,086) $55,291,858 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 FY2007 174 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; however, it ceased operations on March 31, 2007. The financial statements presented in this report are as of March 31, 2007 and for the period August 1, 2006 through March 31, 2007. Complete financial statements for the Research Foundation can be obtained from the Georgia Southwestern State University at 800 Georgia Southwestern State University Drive, Americus, GA 31709. Kennesaw State University Kennesaw State University Foundation, Inc. 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, 2007, the Foundation distributed $4,125,711 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, Inc. holds endowment and other investments in the amount of $25.7 million. The $12.4 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 Annual Financial Report FY2007 175 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, 2007: Cost Fair Value Mutual Funds Total Investments $22,588,020 $22,588,020 $25,681,236 $25,681,236 Capital Assets for Component Units: Kennesaw State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $8,880,890 2,236,436 11,117,326 104,420,856 3,459,588 107,880,444 14,317,705 93,562,739 $104,680,065 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $243,896 133,157 185,644,104 $186,021,157 $0 2,220,615 $2,220,615 $20,012 133,157 3,853,937 $4,007,106 $223,884 2,220,615 181,790,167 $184,234,666 $35,232 2,220,615 4,230,000 $6,485,847 Notes and Loans Payable: Notes Payable of $2,220,615 represents an unsecured line of credit with a financial institution to provide interim financing for new student housing construction. The line of credit bears interest at the 30 day LIBOR plus 1% (6.32% at June 30, 2007) and matures September 2007. Annual Financial Report FY2007 176 Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $2,220,615 $2,220,615 $29,238 $29,238 Total $2,249,853 $2,249,853 Revenue Bonds Payable: 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. University Facilities 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. Annual debt service requirements to maturity for Student Housing, Parking and Teaching and Administrative bonds payable are as follows: Bonds Payable Principal Interest Total Year ending June 30: 2008 1 $4,230,000 $7,823,319 $12,053,319 2009 2 4,400,000 7,686,589 12,086,589 2010 3 4,585,000 7,537,474 12,122,474 2011 4 4,765,000 7,392,476 12,157,476 2012 5 4,945,000 7,250,866 12,195,866 2013 through 2017 6-10 27,620,000 33,652,454 61,272,454 2018 through 2022 11-15 30,550,000 27,594,022 58,144,022 2023 through 2027 16-20 35,740,000 19,624,125 55,364,125 2028 through 2032 21-25 30,515,000 11,123,731 41,638,731 2033 through 2037 26-30 30,495,000 3,872,276 34,367,276 177,845,000 133,557,332 311,402,332 Bond Premium/(Discount) 3,945,167 3,945,167 Total Bonds Payable $181,790,167 $133,557,332 $315,347,499 Annual Financial Report FY2007 177 North Georgia College & State University North Georgia College & State University Foundation, Inc. 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, 2007, the Foundation distributed $1,685,181 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's website at www.ngcsu.edu. Investments for Component Units: North Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $26,863,108. The $22.1 million corpus of the endowment portion 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 which distributes 5% of the endowment fund balance each year for the operating purposes stated for each fund. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate $683,128 4,155,001 2,266 17,192,980 1,640,027 $683,128 4,171,926 6,061 20,361,965 1,640,027 Total Investments $23,673,402 $26,863,108 Annual Financial Report FY2007 178 Capital Assets for Component Units: North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net $3,718,551 3,718,551 $3,718,551 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the year ended June 30, 2007 are as follows: Beginning Balance July 1, 2006 Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable $24,940 0 10,700,000 Total Long Term Liabilities $10,724,940 Additions $0 300,873 46,979,761 $47,280,634 Reductions $2,275 10,700,000 $10,702,275 Ending Balance June 30, 2007 $22,665 300,873 46,979,761 $47,303,299 Amounts due within One Year $2,500 555,000 $557,500 Notes and Loans Payable: The $300,873 Notes and Loans Payable balance at June 30, 2007 represents the outstanding borrowings under a $1,200,000 line of credit with a financial institution to purchase real estate. The interest rate charge is the financial institution's prime rate (7.75% at June 30, 2007) less .50%. Payments of quarterly interest only are required through January 5, 2009, at which time the line of credit matures. Revenue Bonds Payable: In September 2001, the Downtown Development Authority of the City of Dahlonega (the Authority) issued $11.2 million in Revenue Bonds Series 2001A (the Bonds) to allow North Georgia Student Housing LLC, a subsidiary of the North Georgia College & State University Foundation, Inc., to construct Student Housing. On February 27, 2007, the Authority issued Bond Series 2007C in the amount of $16,215,000 allowing North Georgia Student Housing to retire the 2001A bonds, to pay off an existing debt of $1,158,000 on 110 acres of land it held for the future use of the University, to provide $3,000,000 to build a road, sidewalks, walking trails and other infrastructure necessary for future campus development and to lower its cost of capital. The new bonds were issued at an average interest rate of 4.4%. The Series 2007C bonds will mature in 2028. An interest swap termination fee of $508,000 was paid. The security for the Series 2007C bonds is a rental agreement with the University which will pass title to the University at the final maturity of the bonds. The balance on the bond liability on June 30, 2007 is $16,215,000. Also on February 27, 2007 the Authority issued $29,330,000 in tax-exempt revenue bonds (Series 2007A) and $940,000 in taxable revenue bonds (Series 2007B) and entered into an agreement to loan the proceeds to North Georgia Parking & Recreation Center, LLC, a Annual Financial Report FY2007 179 subsidiary of the North Georgia College & State University Foundation, Inc., to construct a new parking deck, a student recreation center and to purchase a 33,000 square foot office building adjacent to campus. The bonds are secured by rental agreements with the University and with BB&T for continuation of the banking business. The loan matures in 2037 and has an average maturity rate of 4.4% on the exempt bonds and 5.35% on the taxable. Upon the final maturity of the bonds, title of the property will transfer to the University. The bond liability at June 30, 2007 was $30,270,000. Annual debt service obligations to maturity for the revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 Bond Premium 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $555,000 500,000 545,000 625,000 705,000 4,680,000 7,220,000 10,915,000 9,800,000 8,835,000 2,105,000 46,485,000 494,761 $46,979,761 Bonds Payable Interest $880,673 2,098,415 2,078,915 2,057,415 2,035,130 9,536,441 8,198,462 6,477,724 3,818,825 1,771,794 109,575 39,063,369 $39,063,369 Total $1,435,673 2,598,415 2,623,915 2,682,415 2,740,130 14,216,441 15,418,462 17,392,724 13,618,825 10,606,794 2,214,575 85,548,369 494,761 $86,043,130 Southern Polytechnic State University Southern Polytechnic State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Southern Polytechnic State University (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. Annual Financial Report FY2007 180 During the year ended June 30, 2007, the Foundation distributed $537,749 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office, Southern Polytechnic State University, 1100 South Marietta Pkwy., Marietta, GA, 30060-2896. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment and other investments in the amount of $8 million. The $2 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, 2007: Cost Fair Value Corporate Bonds Equity Securities Mutual Funds $3,480,727 2,302,121 1,827,458 $3,608,274 2,579,495 1,827,458 Total Investments $7,610,306 $8,015,227 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, 2007 are as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $35,192,327 0 $35,192,327 $0 551,896 $551,896 $834,504 $834,504 $34,357,823 551,896 $34,909,719 $900,000 $900,000 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Annual Financial Report FY2007 181 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $900,000 970,000 1,000,000 1,030,000 1,065,000 5,980,000 7,615,000 9,780,000 5,690,000 34,030,000 327,823 $34,357,823 Bonds Payable Interest $1,599,420 1,576,020 1,546,920 1,515,920 1,481,415 6,748,275 5,111,675 2,945,094 543,750 23,068,489 $23,068,489 Total $2,499,420 2,546,020 2,546,920 2,545,920 2,546,415 12,728,275 12,726,675 12,725,094 6,233,750 57,098,489 327,823 $57,426,312 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 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, 2006 through December 31, 2006. Investments carried as leases receivable are valued at $53 million and the associated long-term debt of $33.2 million are included in the financial statements of the Foundation. The corresponding buildings and associated capital leases are included in the University's report. Note 10 of this financial report provides information on related party leases. During the year ended December 31, 2006, the Foundation distributed $1,547,361 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. Annual Financial Report FY2007 182 Prior Year Adjustment: A prior year adjustment was necessary to correct an error in the accounting of a capital lease. In the prior year, the lease was accounted for as an operating lease when it should have been treated as a capital lease. The net effect of the change was to increase beginning net assets by $5,226,359. Investments for Component Units: University of West Georgia Foundation, Inc. holds endowment and other investments in the amount of $20.6 million. The corpus of the endowment portion 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. The University of West Georgia Foundation, Inc. investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Cash held by investment organization Money Market Accounts Stocks and Options Certificates of Deposit Fixed income securities Managed Futures Total Investments $615,982 4,033,600 9,316,352 370,044 4,076,270 251,669 $18,663,917 $615,982 4,033,600 11,210,950 370,044 4,137,272 254,822 $20,622,670 Capital Assets for Component Units: The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 2006: December 31, 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 $2,589,218 2,589,218 3,786,134 3,786,134 Less Total Accumulated Depreciation 205,082 Total Capital Assets being Depreciated, Net Capital Assets, Net 3,581,052 $6,170,270 Annual Financial Report FY2007 183 Long-term Liabilities for Component Units: Long-term liability activity for the Foundation for the year ended December 31, 2006 was as follows: Beginning Ending Amounts due Balance Balance within January 1, 2006 Additions Reductions December 31, 2006 One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 5,700,000 33,563,924 $39,263,924 $56,377 395,000 $451,377 $0 374,743 $374,743 $56,377 6,095,000 33,189,181 $39,340,558 $0 5,700,000 839,743 $6,539,743 Notes and Loans Payable: 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, 2006 the rate was 6.54%. Principal is due on September 29, 2007. In January 2006, the Foundation established a line of credit in order to purchase a piece of real estate which serves as collateral for the loan. The amount borrowed was $395,000 and has a maturity date of December 6, 2008. Interest is computed based on the LIBOR rate plus 1.2% annum. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2007 1 2008 2 Notes and Loans Payable Principal Interest Total $5,700,000 395,000 $6,095,000 $305,418 23,680 $329,098 $6,005,418 418,680 $6,424,098 Revenue Bonds Payable: Student Housing Revenue Bonds were issued by the University of West Georgia Foundation, Inc. to finance student housing on university property in the amount of $33,215,000. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia. The outstanding principal balance of the bonds at December 31, 2006 is $33,189,181, which includes unamortized bond premiums of $334,181. 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 rates of 3.4% Annual Financial Report FY2007 184 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% Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2029 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal Bonds Payable Interest $839,743 884,743 924,743 1,014,743 1,054,743 5,863,715 7,193,715 8,978,715 6,434,321 $33,189,181 $1,418,689 1,391,369 1,363,344 1,328,819 1,294,569 5,831,011 4,542,694 2,759,406 597,839 $20,527,738 Total $2,258,432 2,276,112 2,288,087 2,343,562 2,349,312 11,694,726 11,736,409 11,738,121 7,032,160 $53,716,919 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 institution. 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 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 July 1 through June 30. Investments carried as leases receivable are valued at $56.6 million and the associated long-term debt of $30.9 million are included in the financial statements of the Foundation. The corresponding buildings and associated capital leases are included in the University's report. Note 10 of this financial report provides information on related party leases. Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance, 1601 Maple Street, Carrollton, Georgia 30118 Annual Financial Report FY2007 185 Long-term Liabilities for Component Units: Resident Instruction Bonds are 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, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $30,930,376 $30,930,376 $0 $7,476 $30,922,900 $367,476 $0 $7,476 $30,922,900 $367,476 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $367,476 397,476 432,476 472,476 512,476 3,217,380 4,632,380 6,747,380 8,637,380 5,506,000 30,922,900 $1,422,120 1,410,383 1,395,545 1,378,326 1,360,770 6,486,557 5,710,008 4,320,288 2,345,164 391,876 26,221,037 Total $1,789,596 1,807,859 1,828,021 1,850,802 1,873,246 9,703,937 10,342,388 11,067,668 10,982,544 5,897,876 57,143,937 Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College Foundation, Inc. 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 Annual Financial Report FY2007 186 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, 2007, the Foundation distributed $326,018 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, 2007: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments $1,442,502 688,805 3,867,154 1,037,759 $7,036,220 $1,433,867 656,075 4,091,347 1,307,347 $7,488,636 Capital Assets for Component Units: Abraham Baldwin Agricultural College Foundation, Inc. held the following Capital Assets as of June 30, 2007: June 30, 2007 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 $2,080,799 2,080,799 38,483,590 1,246,202 39,729,792 3,505,318 36,224,474 $38,305,273 Annual Financial Report FY2007 187 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $0 31,859,292 8,667 $31,867,959 $785,075 17,142,960 $17,928,035 $0 766,405 8,667 $775,072 $785,075 48,235,847 0 $49,020,922 $128,253 785,000 $913,253 Notes and Loans Payable: On April 20, 2006 the Development Authority of Tift County issued a $1,000,250 note payable in nine equal and consecutive annual installments of $100,000 each and a final installment of unpaid principal and accrued interest on November 1, 2015. The interest rate is a variable rate at 65 percent of the Wall Street Journal Prime Rate (the "Index"). This Note is a general obligation of the Foundation and is partially secured by a Joint Resolution of the Tift County Hospital Authority, Abraham Baldwin Agricultural College Foundation, Inc. and the Tift County Development Authority, later ratified and adopted by the Development Authority of Tift County. The principal balance of these notes totaled $717,046 at June 30, 2007. The Foundation has a credit line of $75,000 with South Georgia Banking Company which matures on January 15, 2008 and is renewable at maturity. The interest rate is variable based on the Wall Street Journal Prime Rate (the "Index"). Interest is payable at maturity. This credit line has an outstanding balance of $68,029 at June 30, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Total Notes and Loans Payable Notes and Loans Payable Principal Interest Total $128,253 63,452 66,853 70,437 74,588 381,492 $785,075 $42,816 36,548 33,147 29,563 25,412 55,311 $222,797 $171,069 100,000 100,000 100,000 100,000 436,803 $1,007,872 Revenue Bonds Payable: First ABAC, L.L.C. has issued, through the Tift County Development Authority, $31,615,000 in revenue bonds to finance student housing at the College. The bonds carry an interest rate ranging from 1.75% to 4.25%. The bonds are secured by pledges of gross revenues from the housing project and are covered by a financial guaranty insurance policy issued by AMBAC Assurance Corporation. The principal balance of these bonds at June 30, 2007 totals $30,205,000. The bonds were issued at a premium of $1,049,632, which is being amortized over the life of the bonds. The accumulated amortization to date is $160,453. Annual Financial Report FY2007 188 Second ABAC, L.L.C. has issued, through the Tift County Development Authority, $17,075,000 in revenue bonds to finance student housing at the College. The bonds carry an interest rate ranging from 4.0% to 5.0%. The bonds are secured by pledges of gross revenues from the housing project and are covered by a financial guaranty insurance policy issued by CIFG Assurance North America, Inc. The principal balance of these bonds at June 30, 2007 totals $17,075,000. The bonds were issued at a premium of $67,960, which is being amortized over the life of the bonds. The accumulated amortization to date is $1,292. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Bonds Payable Principal Interest Total Year ending June 30: 2008 1 $785,000 $2,057,781 $2,842,781 2009 2 925,000 2,035,993 2,960,993 2010 3 980,000 2,010,043 2,990,043 2011 4 990,000 1,982,081 2,972,081 2012 5 1,040,000 1,947,293 2,987,293 2013 through 2017 6-10 6,190,000 9,140,521 15,330,521 2018 through 2022 11-15 8,305,000 7,643,774 15,948,774 2023 through 2027 16-20 11,385,000 5,271,296 16,656,296 2028 through 2032 21-25 10,125,000 2,499,860 12,624,860 2033 through 2037 26-30 5,320,000 1,000,500 6,320,500 2038 through 2042 31-35 1,235,000 30,875 1,265,875 47,280,000 35,620,017 82,900,017 Bond Premium/(Discount) 955,847 955,847 $48,235,847 $35,620,017 $83,855,864 Dalton State College Dalton State College Foundation, Inc. The 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 seven-member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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 these different fiscal year-ends. Annual Financial Report FY2007 189 During the year ended March 31, 2007, the Foundation distributed $1,330,217 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Fiscal Affairs Office at 650 College Drive, Dalton, GA 30720. Investments for Component Units: Dalton State College Foundation holds endowment and other investments in the amount of $12.47 million. The $8.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at March 31, 2007 Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Total Investments Cost $19,277 387,867 2,882,166 9,127,108 $12,416,418 Fair Value $19,277 402,696 2,895,684 9,154,253 $12,471,910 Capital Assets for Component Units: March 31, 2007 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 $2,037,963 2,037,963 2,948,671 5,527 2,954,198 113,630 2,840,568 $4,878,531 Long-term Liabilities for Component Units: Long-term liability activity for the year ended March 31, 2007 was as follows: Notes and Loans Payable Total Long Term Liabilities Beginning Balance April 1, 2006 $2,470,407 $2,470,407 Additions $0 $0 Reductions Ending Balance March 31, 2007 $45,462 $2,424,945 $45,462 $2,424,945 Amounts due within One Year $47,717 $47,717 Annual Financial Report FY2007 190 In September 30, 2006 Dalton State College Foundation, Inc. assumed an outstanding note payable dated February 2, 2005 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 accrues interest at an annual rate of 5.54%. Interest only was payable for the first twelve months and beginning on March 11, 2006 principle and interest is payable in monthly installments of $15,258. The note matures on March 11, 2015 with a final payment due at that time of $1,969,256. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending March 31: 2008 1 2009 2 2010 3 2011 4 2012 through 2015 5-8 Total Notes and Loans Payable Notes and Loans Payable Principal Interest Total $47,717 50,833 53,763 56,862 2,215,770 $2,424,945 $135,380 132,263 129,333 126,234 485,869 $1,009,079 $183,097 183,096 183,096 183,096 2,701,639 $3,434,024 Gainesville State College Gainesville State College Foundation, Inc. Gainesville State College Foundation, Inc. is a legally separate, tax-exempt component unit of Gainesville State 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 sevenmember 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 to December 31. During the year ended December 31, 2006, the Foundation distributed $479,068 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3820 Mundy Mill Road, Oakwood, GA. Investments for Component Units: Gainesville State College Foundation, Inc. holds endowment and other investments in the amount of $11.8 million. Investment income has been reported as an increase in unrestricted net assets unless the donor placed restrictions on the income's use. If the income is restricted, it is Annual Financial Report FY2007 191 reported as an increase in restricted expendable or restricted nonexpendable net assets, depending on the nature of the restrictions. Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Cash held by investment organization Money Market Accounts Certificates of Deposit Equity Securities Mutual Funds $944,800 1,022,742 1,001,039 1,665,101 6,343,078 $981,607 1,022,742 1,015,112 1,918,644 6,830,627 Total Investments $10,976,760 $11,768,732 Capital Assets for Component Units: Gainesville State College Foundation holds $8,400 in Land capital assets as of December 31, 2006. Gordon College Gordon College Foundation, Inc. Gordon College Foundation, Inc. (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 fortyfour 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, 2006, the Foundation distributed $53,520 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, Inc. holds non-real estate investments in the amount of $5.3 million. The Foundation also holds investments in real property valued at $688,000. Annual Financial Report FY2007 192 Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Government and Agency Securities Equity Securities Mutual Funds Real Estate $1,115,204 8,280 3,000,524 688,000 $1,138,314 8,280 4,172,042 688,000 Total Investments $4,812,008 $6,006,636 Capital Assets for Component Units: The following represents Gordon College Foundation, Inc.'s Capital Assets as of December 31, 2006: December 31, 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 $12,649,270 582,676 13,231,946 523,731 12,708,215 $12,708,215 Long-term Liabilities for Component Units: Long-term liability activity for the year ended December 31, 2006 was as follows: Beginning Balance January 1, 2006 Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable $0 357,904 16,135,000 Total Long Term Liabilities $16,492,904 Additions $57,249 $57,249 Reductions Ending Balance December 31, 2006 $0 357,904 1,035,446 $57,249 0 15,099,554 $1,393,350 $15,156,803 Amounts due within One Year $10,486 405,000 $415,486 On August 1, 2004, the Barnesville-Lamar County Industrial Development Authority (the "Authority") issued certain bonds totaling $16,135,000. Proceeds on the sale of the bonds were loaned to Gordon College Properties Foundations, LLC whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2004 Bonds were used by Gordon College Properties, LLC to finance or reimburse, in whole or in part, 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 (the Project) located on the campus of Gordon College, a unit of the University System of Georgia; fund capitalized interest on the Series 2004 Bonds; fund a debt service reserve fund for the Series 2004 bonds; and pay costs of issuance of the Series 2004 Bonds. The real property upon which Annual Financial Report FY2007 193 the Project is located is owned by the Board of Regents of the University System and will be leased by the Board of Regents to the Properties, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties, LLC will rent the projects, on an annually renewable basis, to the Board of Regents for use by the College. The Board of Regents will make monthly fixed rental payments for the use and occupancy of the Project, in amounts that the Properties, LLC estimates will be sufficient to pay, among other things, debt service on the Series 2004 Bonds. Interest rates on the bonds range from 3% - 5%. The balance owed on the bonds at December 31, 2006 was $15,099,554. Annual debt service requirements to maturity for Gordon Commons' Student Housing bonds payable are as follows: Bonds Payable Principal Interest Total Year ending December 31: 2007 1 $405,000 $709,700 $1,114,700 2008 2 415,000 697,550 1,112,550 2009 3 430,000 685,100 1,115,100 2010 4 440,000 671,125 1,111,125 2011 5 455,000 656,825 1,111,825 2012 through 2016 6-10 2,550,000 3,012,538 5,562,538 2017 through 2021 11-15 3,140,000 2,427,963 5,567,963 2022 through 2026 16-20 3,965,000 1,599,750 5,564,750 2027 through 2031 21-25 3,945,000 505,250 4,450,250 15,745,000 10,965,801 26,710,801 Bond Discount (645,446) (645,446) $15,099,554 $10,965,801 $26,065,355 Macon State College Macon State College Foundation, Inc. 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. Annual Financial Report FY2007 194 During the year ended June 30, 2007, the Foundation distributed $512,879 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development and Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206 or from the College's website at http://www.maconstate.edu/foundation/. Investments for Component Units: Macon State College Foundation, Inc. holds endowment and other investments in the amount of $7,673,396. The $7,066,742 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 intact. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Suntrust Diversified Fund $7,016,676 $7,673,396 Total Investments $7,016,676 $7,673,396 Middle Georgia College Middle Georgia College Foundation, Inc. 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, 2007, the Foundation distributed $44,518 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Fiscal Affairs at 1100 Second Street, Cochran, GA 31014. Annual Financial Report FY2007 195 Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Certificates of Deposit Government and Agency Securities Equity Securities Mutual Funds Total Investments Cost $48,574 350,000 15,000 574,992 193,034 $1,181,600 Fair Value $48,574 350,000 14,967 599,349 185,506 $1,198,396 Capital Assets for Component Units: Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2007 as follows: Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net June 30, 2007 $79,482 10,944,093 11,023,575 $11,023,575 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. Final maturity is scheduled for July 1, 2036. Proceeds of the Series 2005 Bonds will be used by the MGC Real Estate Foundation, LLC to finance or reimburse, in whole or in part, the cost of construction and equipping of three new residence halls containing approximately 704 beds including related parking (the "Project") located on the campus of Middle Georgia College. The interest rates are as follows: Series 2005 A, 3.5-3.75%; Series 2005A, 5.0%; Series 2005A, 4.125-4.625%; Series 2005B, 5.25%. The balance of this obligation at June 30, 2007 is $26,850,000. Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2006 $26,850,000 $26,850,000 Additions $0 $0 Reductions $0 $0 Ending Balance June 30, 2007 $26,850,000 $26,850,000 Amounts due within One Year $0 $0 Annual Financial Report FY2007 196 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Total 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 0 40,000 80,000 120,000 1,320,000 2,875,000 5,105,000 7,625,000 9,685,000 $26,850,000 Bonds Payable Interest $1,292,460 1,292,460 1,292,460 1,290,360 1,287,560 6,317,902 5,898,444 5,011,595 3,545,219 1,499,745 $28,728,205 Total $1,292,460 1,292,460 1,332,460 1,370,360 1,407,560 7,637,902 8,773,444 10,116,595 11,170,219 11,184,745 $55,578,205 Bainbridge College Bainbridge College Foundation 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 sevenmember 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 November 1 through October 31. The Foundation reported activity through June 30, 2006 in Bainbridge College's FY2006 Annual Financial Report. This statement represents activity for the period July 1, 2006 through October 31, 2006. During the period July 1, 2006 through October 31, 2006, the Foundation distributed $759 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 2500 E. Shotwell Street, Bainbridge, GA 39819. Annual Financial Report FY2007 197 Investments for Component Units: Bainbridge College Foundation holds endowment investments in the amount of $107,693. 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 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve. Investments are comprised of the following amounts at October 31, 2006: Cost Fair Value Certificates of Deposit Total Investments $107,693 $107,693 $107,693 $107,693 Coastal Georgia Community College Coastal Georgia Community College Foundation, Inc. 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. During the year ended December 31, 2006, the Foundation distributed $656,559 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 endowments and other investments in the amount of $7.5 million. The $4.3 million corpus of the endowment portion is nonexpendable, but the earnings of the investment may be expended as restricted by the donors. Annual Financial Report FY2007 198 Coastal Georgia Community College Foundation, Inc. investments are comprised of the following amounts at December 31, 2006: Certificates of Deposit Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $1,787,000 1,935,073 4,636 2,984,429 $6,711,138 Fair Value $1,764,075 2,192,554 5,730 3,520,311 $7,482,670 Darton College Darton College Foundation, Inc. Darton College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Darton College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of trustees 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, 2007, the Foundation distributed $324,681 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Treasurer at 2400 Gillionville Road, Albany, GA 31707. Investments for Component Units: Darton College Foundation holds endowment and other investments in the amount of $1.7 million. The corpus of the endowment is nonexpendable, and the earnings on the investment may be expended as directed by the board of trustees. The majority of the earnings on the endowment funds are spent on scholarships for students. Investments are comprised of the following amounts at June 30, 2007: Annual Financial Report FY2007 199 Cost Fair Value Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Total Investments $27,791 562,944 612,057 453,078 $1,655,870 $27,791 562,944 597,264 491,115 $1,679,114 Capital Assets for Component Units: Darton College Foundation, Inc. held the following capital assets as of June 30, 2007: June 30, 2007 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 $308,826 235,382 544,208 123,324 123,324 7,201 116,123 $660,331 East Georgia College East Georgia College Foundation, Inc. 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 FY2007 200 During the year ended June 30, 2007, the Foundation distributed $42,838 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the Vice President for Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College holds investments in the amount of $918,313, 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 investments may be expended as restricted by the donors. Some of the restricted net assets are defined as fully expendable by the donor for the purposed specified by the donor. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Equity Securities Investment Pools: BOR Short Term Fund BOR Balanced Income Fund Diversified Fund $5,805 41,779 39,631 219,738 589,286 $5,805 41,779 39,232 199,116 632,380 Total Investments $896,240 $918,313 Capital Assets for Component Units: East Georgia College Foundation, Inc. held the following Capital Assets at June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets, Net $168,600 168,600 $168,600 Georgia Highlands College Georgia Highlands College Foundation, Inc. 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. The Foundation board 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 Annual Financial Report FY2007 201 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, 2007, the Foundation distributed $305,961 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, Inc. holds endowment and other investments in the amount of $752,755. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Equity Securities Mutual Funds Total Investments $621,392 38,574 $659,966 $709,122 43,633 $752,755 Georgia Perimeter College Georgia Perimeter College Foundation, Inc. Georgia Perimeter College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Perimeter College (College). The Foundation is a nonprofit entity comprised of a volunteer group entrusted with the oversight for private fund raising to benefit Georgia Perimeter College. The Foundation provides volunteer leadership to the college's development and fund raising programs. In addition, the board monitors the administration of the assets of the Foundation, resulting in a broadening of opportunities for learning by students and a continued investment in faculty and staff. 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. The Foundation is a private nonprofit organization that has adopted Statement of Financial Accounting Standards (SFAS) No. 117, Financial Reporting for Not-for-Profit Organizations. Annual Financial Report FY2007 202 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, 2006, the Foundation distributed $609,179 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3251 Panthersville Rd, Decatur, GA 30034. Investments for Component Units: Georgia Perimeter College Foundation, Inc. holds endowment and other investments in the amount of $992,993. Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Cash held by investment organization Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Total Investments $78,272 513,000 40,000 75,000 266,004 $972,276 $78,272 516,797 39,661 75,054 283,209 $992,993 Capital Assets for Component Units: Georgia Perimeter College Foundation, Inc. holds the following Capital Assets as of December 31, 2006: December 31, 2006 Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net $3,000,000 13,334,171 16,334,171 $16,334,171 Long-term Liabilities for Component Units: On December 29, 2005, the Newton County Industrial Revenue Authority effected a revenue bond issue "Series 2005" in the amount of $22,695,000. These proceeds will fund the building project, which is expected to be completed by July 1, 2007. Rental payments from the Board of Regents of the University System of Georgia will be used to amortize this bonded indebtedness. The repayment of this debt is due in annual installments ranging from $430,000 to $1,400,000 through 2035 at 4.6% per annum. An additional bond issuance (Series 2005) was also effected on December 29, 2005 for the same purpose as the aforementioned issuance. The amount of this issuance was $2,550,000. This bond issuance was transacted separately because of different security (secured by Newton County through an intergovernmental contract). This was packaged as a single bond that was Annual Financial Report FY2007 203 sold directly to Wachovia Bank. Consequently, the amortization of this issuance is similar to a conventional loan as opposed to a standard bond issue. The repayment of this debt is due in monthly installments of $20,472 through January, 2021 at 5.15% per annum. The Foundation's LLC received a gift of real estate during the years ended December 31, 2005 and 2006. The gift, a tract/parcel of land in Newton County, Georgia, was donated by Mt. Pleasant, LLC for the purpose of the construction of the new Georgia Perimeter College campus in Newton County. The land has been capitalized on the Foundation's books and is included in the asset section of the Statement of Net Assets. Changes in long-term liabilities for component units for the fiscal year ended December 31, 2006 are shown below: Beginning Ending Amounts due Balance Balance within January 1, 2006 Additions Reductions December 31, 2006 One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $25,245,000 $0 $25,245,000 $0 $25,245,000 $104,499 $0 $25,245,000 $104,499 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 Principal $104,499 550,841 576,962 599,095 626,266 3,552,771 4,464,566 4,240,000 5,315,000 5,215,000 $25,245,000 Bonds Payable Interest $1,162,610 1,166,739 1,143,419 1,118,286 1,092,514 5,033,832 4,142,665 3,123,575 2,051,400 674,750 $20,709,790 Total $1,267,109 1,717,580 1,720,381 1,717,381 1,718,780 8,586,603 8,607,231 7,363,575 7,366,400 5,889,750 $45,954,790 South Georgia College South Georgia College Foundation, Inc. South Georgia College Foundation, Inc. is a chartered not for profit corporation. The Foundation was created for the express purpose of serving the interests of the College in carrying out its programs and activities including the solicitation, receipt and investment of gifts, donations, and grants. The Foundation is a legal entity separate from the College. On July 26, 2006, South Georgia College Foundation, Inc. formed its wholly owned subsidiary, SGC Real Estate Foundation, LLC. SGC Real Estate Foundation, LLC was created for a project that includes the design, construction and equipping of new student housing facilities and other improvements related thereto including parking and other amenities for the benefit of the Annual Financial Report FY2007 204 students of South Georgia College. SGC Real Estate Foundation, LLC has borrowed the funds necessary to construct the project and was in the process of constructing the project at June 30, 2007. SGC Real Estate Foundation, LLC has also entered into a ground lease and rental agreement with the Board of Regents of the University System of Georgia for the rent and use of the premises. 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, 2007, the Foundation distributed $169,887 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the office of the Vice President for Business Affairs, South Georgia College, 100 West College Park Drive, Douglas, GA 31533. Investments for Component Units: South Georgia College Foundation, Inc. holds investments in the amount of $2.9 million. The $2.2 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. South Georgia College Foundation, Inc., 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, 2007: Cost Fair Value Cash held by investment organization Certificates of Deposit Equity Securities Mutual Funds Real Estate Investment Pools: BOR Balanced Income Fund Total Return Fund & Holding Fund $77,419 30,500 56,769 31,829 13,500 89,510 2,336,456 $77,419 30,500 61,945 37,272 13,500 88,541 2,564,902 Total Investments $2,635,983 $2,874,079 Annual Financial Report FY2007 205 Capital Assets for Component Units: South Georgia College Foundation, Inc. holds the following capital assets as of June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Construction in Progress Capital Assets, Net $8,214,375 $8,214,375 Long-term Liabilities for Component Units: Long-term liability activity for the year ended June 30, 2007 was as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $15,801,289 $0 $15,801,289 $0 $0 $15,801,289 $0 $15,801,289 $0 On December 14, 2006, the Atkinson County - Coffee County Joint Development Authority (the "Authority") issued certain bonds totaling $15,395,000. Proceeds of the sale of the bonds will be loaned to SGC Real Estate Foundation, LLC whose sole member is South Georgia College Foundation, Inc. Proceeds of the Series 2006 Bonds will be used by SGC Real Estate Foundation, LLC to finance or reimburse, in whole or in part, the cost of construction and equipping of a new student housing complex containing approximately 252 beds including related parking and the acquisition and renovation of the property known as the "Clower Center" all located on the campus of South Georgia College, a unit of the University System of Georgia; fund capitalized interest on the Series 2006 Bonds; fund a debt service reserve fund for the Series 2006 Bonds; and pay costs of issuance of the Series 2006 Bonds. Interest rates on the bonds range from 4% to 6%. The real property upon which the Project is located is owned by the Board of Regents of the University System of Georgia and is leased by the Board of Regents to SGC Real Estate Foundation, LLC pursuant to a Ground Lease. Pursuant to the commencement of a Rental Agreement upon completion of the project, SGC Real Estate Foundation, LLC will rent the Project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents will make monthly fixed rental payments for the use and occupancy of the Project, in amounts that SGC Real Estate Foundation, LLC estimates will be sufficient to pay, among other things, the debt service on the Series 2006 Bonds. Annual Financial Report FY2007 206 Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 50,000 75,000 100,000 125,000 1,060,000 1,855,000 2,790,000 3,995,000 5,345,000 15,395,000 406,289 $15,801,289 Bonds Payable Interest $730,625 730,625 728,625 725,625 721,625 3,504,275 3,196,575 2,664,125 1,847,625 743,650 15,593,375 $15,593,375 Total $730,625 780,625 803,625 825,625 846,625 4,564,275 5,051,575 5,454,125 5,842,625 6,088,650 30,988,375 406,289 $31,394,664 Waycross College Waycross College Foundation, Inc. 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, 2007, the Foundation distributed $85,555 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2001 South Georgia Parkway, Waycross, GA 31503. Investments for Component Units: Waycross College Foundation holds endowment and other investments in the amount of $1.5 million. The $1.4 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Waycross College Foundation, Annual Financial Report FY2007 207 Inc., 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. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Certificates of Deposit Investment Pools: BOR Short-Term Fund Total Diversified Fund $14,000 30,321 1,330,112 $14,000 29,789 1,464,939 Total Investments $1,374,433 $1,508,728 Capital Assets for Component Units: Capital Assets are comprised of the following at June 30, 2007: June 30, 2007 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 $1,740 1,740 1,740 0 $0 Annual Financial Report FY2007 208 Balance Sheet (Non-GAAP Basis) UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets Total Assets $341,226,714.10 36,849,730.70 62,370,471.34 153,807,986.42 9,696,195.00 37,970,532.23 4,014,805.70 66,824.12 $646,003,259.61 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Grants Payable 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 Inventories Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $2,091,267.51 11,874.16 1,677.00 12,996,511.97 211,445,756.92 320,323.78 163,285,786.82 17,790,142.07 5,704,522.67 $413,647,862.90 $30,257,359.91 16,083,848.46 49,515,237.87 8,906,160.51 101,631,908.17 10,186,001.82 3,082,602.36 3,551,735.24 7,172,101.53 1,968,148.72 292.12 $232,355,396.71 $646,003,259.61 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 FY2007 209 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) UNIVERS ITY S YS TEM OF GEORGIA CONS OLIDATED BUDGET COMPARIS ON AND S URPLUS ANALYS IS REPORT (NON-GAAP BAS IS ) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $1,917,240,948 15,732,554 1,595,296,985 1,154,687,977 $4,682,958,464 $1,917,562,898 15,732,554 1,667,356,532 1,561,012,311 $5,161,664,295 $1,917,562,898.00 15,732,554.00 1,291,406,055.98 1,484,479,762.05 $4,709,181,270.03 $0.00 0.00 (375,950,476.02) (76,532,548.95) ($452,483,024.97) Advanced Technology Development Center/EDI Agricultural Experiment Station Athens Tifton Vet Labs Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia M ilitary College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute M CG Hospitals and Clinics M arine Institute M arine Resources Extension Center Office of M inority 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 M edicine Experiment Station Veterinary M edicine Teaching Hospital Total Expenditures Excess of Funds Available over Expenditures $27,447,215 72,948,126 4,737,054 56,648,411 659,442 3,134,341 2,660,060 31,247,434 3,625,810 130,466,440 32,272,644 1,711,549 2,713,007 860,161 9,982,554 40,477,906 7,984,377 26,400,251 7,292,073 32,417,559 308,315 4,176,524,431 3,249,577 7,189,727 $4,682,958,464 $28,697,215 78,258,188 6,237,054 65,445,620 1,121,275 6,261,341 2,660,060 31,247,434 3,625,810 138,720,640 32,272,644 1,759,290 3,865,007 860,161 9,982,554 46,409,673 8,100,801 26,925,251 7,292,073 32,417,559 308,315 4,613,946,753 3,249,577 12,000,000 $5,161,664,295 FUND BALANCE JULY 1 Reserved Unreserved ADJUS TMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2005 Year Ended June 30, 2006 M andatory Transfers Non-M andatory Transfers $27,980,921.29 76,085,751.98 5,418,667.01 62,559,056.23 945,228.65 6,446,832.34 2,660,060.00 17,023,143.00 0.00 134,899,475.96 32,272,644.00 1,372,806.65 3,759,806.12 858,710.40 9,982,261.88 45,493,454.78 7,946,485.71 26,909,343.96 6,952,564.75 32,288,469.85 308,315.00 4,153,748,725.34 3,249,577.00 10,162,081.72 $4,669,324,383.62 $39,856,886.41 184,724,593.39 1,482,141.24 1,887,318.82 (1,662,261.39) 33,212.31 (549,203.98) (580,151.09) (352,786.18) 8,215,785.30 1,368,519.36 (2,068,657.48) $716,293.71 2,172,436.02 818,386.99 2,886,563.77 176,046.35 (185,491.34) 0.00 14,224,291.00 3,625,810.00 3,821,164.04 0.00 386,483.35 105,200.88 1,450.60 292.12 916,218.22 154,315.29 15,907.04 339,508.25 129,089.15 0.00 460,198,027.66 0.00 1,837,918.28 $492,339,911.38 FUND BALANCE JUNE 30 $232,355,396.71 Annual Financial Report FY2007 210 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis), continued UNIVERS ITY S YS TEM OF GEORGIA CONSOLIDATED BUDGET COMPARIS ON AND SURPLUS ANALYS IS REPORT (NON-GAAP BAS IS ) BUDGET FUND Year Ended June 30, 2007 S UMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Early Retirement Program Total Reserved Unreserved Surp lus Total Fund Balance $30,257,359.91 16,083,848.46 49,515,237.87 8,906,160.51 101,631,908.17 10,186,001.82 3,082,602.36 3,551,735.24 7,172,101.53 $ 230,386,955.87 1,968,440.84 $ 232,355,396.71 Actual amounts were prep ared 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 FY2007 211 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, 2007 Abraham Baldwin Agricultural College Tifton, Georgia Dr. David C. Bridges President John T. Clemens Vice President for Fiscal Affairs ABRAHAM BALDWIN AGRICULTURAL COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments................................................................................................ 17 Note 3. Accounts Receivable...................................................................................................... 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 .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 24 Note 13. Contingencies................................................................................................................ 25 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 25 Note 15. Natural Classifications with Functional Classifications .............................................. 26 Note 16. Component Units .......................................................................................................... 27 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 University 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 3,500 students. The institution continues to grow as shown by the comparison numbers that follow. FY2007 FY2006 FY2005 Students Students Faculty (Headcount) (FTE) 116 3,574 3,114 114 3,423 2,929 95 3,362 2,849 Overview of the Financial Statements and Financial Analysis Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2007. 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 2007 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. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $5,158,429 30,108,793 398,884 35,666,106 June 30, 2006 $5,288,356 28,964,321 419,179 34,671,856 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,302,493 330,228 2,632,721 2,643,059 294,821 2,937,880 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 30,108,793 646,704 2,277,888 $33,033,385 28,964,321 609,909 2,159,746 $31,733,976 The total assets of the institution increased by $994,250. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,144,472 in the category of Capital Assets, net. The total liabilities for the year decreased by ($305,159). The combination of the increase in total assets of $994,250 and the decrease in total liabilities of ($305,159) yields an increase in total net assets of $1,299,409. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,144,472. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $15,175,188 29,609,948 (14,434,760) 14,070,492 (364,268) 1,663,677 1,299,409 31,733,976 0 31,733,976 $33,033,385 $13,964,520 28,353,312 (14,388,792) 14,131,985 (256,807) 4,236,647 3,979,840 24,758,811 2,995,325 27,754,136 $31,733,976 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Abraham Baldwin Agricultural College Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $3,890,719 6,092,751 274,689 4,702,461 214,568 15,175,188 13,574,045 479,515 33,712 (16,780) 14,070,492 572,555 1,091,122 1,663,677 $30,909,357 June 30, 2006 $3,138,515 6,235,521 362,415 4,115,837 112,232 13,964,520 12,885,970 1,214,926 37,065 (5,976) 14,131,985 4,229,431 7,216 4,236,647 $32,333,152 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $10,225,439 849,194 2,558,246 2,126,973 4,094,917 3,700,418 1,682,551 4,372,210 0 29,609,948 0 $29,609,948 June 30, 2006 $9,624,930 956,451 2,379,624 2,019,342 4,320,577 3,552,768 1,204,297 4,295,285 38 28,353,312 0 $28,353,312 Operating revenues increased by $1,210,668 in fiscal 2007. Tuition & Fees included an 8% increase and although revenues decreased in Grants and Contracts and Sales and Services categories, Auxiliary revenues increased to offset the decline. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $586,624 is a result of a growth in the overall student population and the changing environment of residential life on the College's campus. Nonoperating revenues decreased by ($61,493) for the year primarily due to an increase of $688,075 in State Appropriations along with a decrease in non-capital state gifts. The compensation and employee benefits category increased by $722,480 and primarily affected the Instruction and Academic Support categories. The increase reflects the addition of 2 faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($131,580) during the past year. The decrease was primarily associated with the improvements in the energy efficiency of the College's facilities affecting the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Abraham Baldwin Agricultural College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($12,966,755) 14,052,951 (1,196,982) 33,712 (77,074) 1,787,863 $1,710,789 June 30, 2006 ($13,686,890) 13,927,733 (907,094) 37,063 (629,188) 2,417,051 $1,787,863 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 5 Capital Assets The University had two significant capital asset additions for facilities in fiscal year 2007. The Health Sciences Building was completed and construction of a $1 million Athletics Facility began in 2007. Approximately $5 million of the Health Science Building project was funded by the Georgia State Financing and Investment Commission (GSFIC). With the balance of the $6+ million project being funded through the College's foundation. The athletic field project was funded through Auxiliary operation reserves. 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 $761,251 of which $431,023 was reflected as current liability at June 30, 2007. 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 FY2007. The Abraham Baldwin Agricultural College Foundation, Inc. had investments of $7.5 million as of June 30, 2007. The Abraham Baldwin Agricultural College Foundation, Inc. had long-term debt of $49 million in the form of two bond issues and notes payable. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University 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. David C. Bridges, President Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College Annual Financial Report FY 2007 6 Statement of Net Assets A B R A H A M B A L D W IN A G R IC UL T UR A L C O L L EG E S T A T EM EN T O F N ET A S S ET S June 30, 2007 A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s Sh o rt -t e r m I n v e st m e n t s A cco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial A ssist an ce Receiv ables - O t h er D ue Fro m Co m p o n en t U n it s P ledges Receiv able D ue Fro m P rim ary Go v ern m en t In v en t o ries (n o t e 4 ) P rep aid it em s N o t es an d M o rt gages Receiv able T o t al Curren t A sset s Non cu rre n t Asse ts N o n curren t Cash In v est m en t s (in cludin g Real E st at e) N o t es Receiv able, n et P ledges Receiv able Cap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la rie s P a y a ble Co n t ract s P ay able D eferred Rev en ue (n o t e 7 ) D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t Co m p en sat ed A bsen ces (curren t p o rt io n ) Rev en ue/M o rt gage Bo n ds P ay able (curren t ) D ue t o Co m p o n en t U n it s N o t es an d L o an s P ay able (curren t p o rt io n ) T o t al Curren t L iabilit ies Non cu rre n t Liabilitie s Co m p en sat ed A bsen ces (n o n curren t ) Rev en ue/M o rt gage Bo n ds P ay able (n o n curren t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in Cap it al A sset s, n et o f relat ed debt Rest rict ed fo r N o n ex p en dable E x p en dable U n rest rict ed TO TA L N ET A S S ETS Abrah am B aldwin Agricu ltu ral C ollege $ 1,7 10 ,78 9 1 10 ,12 8 5 99 ,20 7 1 ,8 5 8 ,3 5 0 4 23 ,87 5 4 42 ,38 3 13 ,69 7 5 ,1 5 8 ,4 2 9 3 98 ,88 4 3 0,1 08 ,79 3 3 0,5 07 ,67 7 3 5,6 66 ,10 6 8 74 ,65 5 2 86 ,73 9 46 ,02 5 3 27 ,16 6 3 33 ,70 2 4 31 ,02 3 3 ,18 3 2 ,3 0 2 ,4 9 3 3 30 ,22 8 3 30 ,22 8 2 ,6 3 2 ,7 2 1 3 0,1 08 ,79 3 6 46 ,70 4 2 ,2 7 7 ,8 8 8 $ 3 3,0 33 ,38 5 C om pon e n t Un it Abrah am B aldwin Agricu ltu ral C ollege Fo u n da ti o n , In c. $ 2 ,4 1 8 ,8 2 8 4 0 1,85 4 4 8 7,04 2 3,18 3 1,81 2 1 4,22 5 3 ,3 2 6 ,9 4 4 1 1 ,6 0 6 ,5 0 9 7 ,4 8 8 ,6 3 6 5 0 8,33 3 3 8 ,3 0 5 ,2 7 3 2 ,3 2 3 ,4 3 7 6 0 ,2 3 2 ,1 8 8 6 3 ,5 5 9 ,1 3 2 1 ,5 6 6 ,3 4 0 1 9 0,72 0 4 2 3,87 5 7 8 5,00 0 1 2 8,25 3 3 ,0 9 4 ,1 8 8 4 7 ,4 5 0 ,8 4 7 6 5 6,82 2 4 8 ,1 0 7 ,6 6 9 5 1 ,2 0 1 ,8 5 7 1 ,0 5 8 ,1 0 1 7 ,1 9 9 ,7 6 7 3 ,5 7 0 ,2 3 4 5 2 9,17 3 $ 1 2 ,3 5 7 ,2 7 5 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Other Sales and Services Rent s 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense P ayment s t o or on behalf of Abraham Baldwin Agricult ural College T ot al Operat ing Expenses Operat ing Income (loss) Abrah am Baldwin Ag ri cu l tu ra l College Abraham Baldwin Ag ri cu l tu ra l C ol l e ge Fou n dati on , In c. $6,421,188 (2,530,469) 5,724,808 53,384 314,559 274,689 29,384 263,212 2,366,066 670,894 40,020 501,741 497,725 362,803 185,184 15,175,188 5,729,005 6,101,564 3,922,374 219,498 2,267,222 783,624 9,363,459 1,223,202 29,609,948 (14,434,760) $0 1,175,338 3,601,214 4,776,552 134,747 27,599 99,526 16,007 2,901,136 1,343,662 4,151 326,018 4,852,846 (76,294) Abraham Baldwin Agricultural College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Abrah am Baldwin Ag ri cu l tu ra l C olle ge Abraham Baldwin Ag ri cu l tu ra l C ol l e ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Ot h er Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 13,574,045 479,515 33,712 (16,780) 14,070,492 (364,268) 572,555 1,091,122 1,663,677 1,299,409 31,733,976 0 31,733,976 $33,033,385 1,540,307 (1,313,929) 226,378 150,084 363,758 363,758 513,842 11,843,433 0 11,843,433 $12,357,275 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 9 Statement of Cash Flows ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 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, 2007 $3,832,615 6,762,329 274,689 (14,227,436) (11,756,270) (2,118,207) 20,295 263,212 1,833,451 457,237 40,199 495,242 494,894 344,838 316,157 (12,966,755) 13,574,045 (609) 479,515 14,052,951 436,150 (1,633,132) (1,196,982) 33,712 33,712 (77,074) 1,787,863 $1,710,789 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($14,434,760) 1,223,202 30,725 27,598 4,601 20,295 205,695 (101,962) (610) 58,461 ($12,966,755) ($1,227,527) Abraham Baldwin Agricultural College Annual Financial Report FY 2007 11 ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Abraham Baldwin Agricultural College is reporting the activity for the Abraham Baldwin Agricultural 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 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 12 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the 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. 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. 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 average-cost basis. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 13 Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred $136,405 in capital additions to Abraham Baldwin Agricultural College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences 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 $702,790 as of 7-1-2006. For FY2007, Abraham Baldwin Agricultural College Annual Financial Report FY 2007 14 $521,201 was earned in compensated absences and employees were paid $462,740, for a net increase of $58,461. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $761,251. 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, 2007 Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable $618,282 28,422 $646,704 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 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 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 Reserve Reserve for Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $816,540 1,765,650 (304,302) $2,277,888 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Abraham Baldwin Agricultural College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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 2007 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, 2007, the carrying value of deposits was $1,813,867 and the bank balance was $2,586,215. Of the College's deposits, $2,285,924 were uninsured. Of these uninsured deposits, $2,285,924 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments Abraham Baldwin Agricultural College had no investments as of June 30, 2007. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 17 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $102,963 38,209 599,207 226,316 423,875 1,501,101 2,891,671 10,239 $2,881,432 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore T otal June 30, 2007 $442,383 $442,383 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $6,151. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $67,441 5,996,911 6,064,352 32,550,161 607,439 3,462,708 2,863,099 156,200 39,639,607 11,523,218 546,695 2,185,242 2,463,214 21,269 16,739,638 22,899,969 $28,964,321 Addi ti o n s $0 1,018,881 1,018,881 Re ductions $0 5,996,911 5,996,911 7,095,683 245,205 31,435 7,372,323 145,214 185,136 330,350 811,672 326,006 84,147 1,377 1,223,202 6,149,121 $7,168,002 118,595 185,136 303,731 26,619 $6,023,530 En di n g B al a n ce 6 /3 0 /2 0 0 7 $67,441 1,018,881 1,086,322 39,645,844 607,439 3,562,699 2,709,398 156,200 46,681,580 12,334,890 546,695 2,392,653 2,362,225 22,646 17,659,109 29,022,471 $30,108,793 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $327,166 $327,166 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $702,790 Additions $521,201 Re du cti on s Ending Balance June 30, 2007 $462,740 $761,251 Current Portion $431,023 Total Long Term Obligations $702,790 $521,201 $462,740 $761,251 $431,023 Note 9. Significant Commitments The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2007. Note 10. Lease Obligations Abraham Baldwin Agricultural College had no outstanding noncancellable lease obligations as of June 30, 2007, and the College had no expense for rental of real property or equipment under operating leases. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 20 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $748,785 $731,016 $700,908 Employees' Retirement System of Georgia Plan Description Abraham Baldwin Agricultural College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 21 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, 2007, for employees covered by ERS was $45,353. The College's total payroll for all employees was $11,830,569. For the year ended June 30, 2007 under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $5,401, of which $4,721 was made by the College and $680 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, 2007 financial report, which may be obtained through ERS. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 22 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $247,618 (9.66% or 8.13%) and $136,678 (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 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 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 23 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 2007 amounted to $18,635 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 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 2007 24 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, 2007. 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, 2007, there were 155 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Abraham Baldwin Agricultural College recognized as incurred $678,847 of expenditures, which was net of $212,916 of participant contributions. Abraham Baldwin Agricultural College Annual Financial Report FY 2007 25 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits T ravel Scholarship s and Fellowship s Utilities Sup p lies and Others Services D ep reciat ion Total Exp enses Natural Classification F acult y Staff Benefits T ravel Scholarship s and Fellowship s Utilities Sup p lies and Others Services Dep reciation Total Exp enses In st ruct io n Functional Classification FY2007 P ublic Service Academic Support St uden t Services In st it ut io n al Support $ 5,725,780 1,19 5 ,9 4 8 1,8 5 3 ,8 8 0 9 4 ,8 12 13 6 ,7 0 5 9 ,19 2 8 9 2 ,0 6 1 3 17 ,0 6 1 $ 3,225 3 5 1,9 0 9 9 8 ,8 8 7 6 ,4 6 1 2 0 ,0 5 7 (2) 3 6 7 ,5 5 3 1,10 4 $0 1,14 9 ,4 6 9 3 2 2 ,0 15 2 4 ,17 2 2 ,8 16 8 6 5 ,0 19 19 4 ,7 5 5 $0 1,2 7 2 ,4 9 7 3 4 1,5 3 4 4 9 ,7 2 3 2 6 ,8 16 7 ,0 15 4 2 3 ,14 6 6 ,2 4 2 $0 1,7 9 2 ,7 7 8 1,2 16 ,2 6 2 3 3 ,0 3 4 14 9 ,0 15 6 4 ,14 8 2 9 4 ,3 4 4 5 4 5 ,3 3 6 $ 10,225,439 $ 849,194 $ 2,558,246 $ 2,126,973 $ 4,094,917 P lan t Op erat io n s & Maintenance Functional Classification FY2007 Sch o lar sh ip s & Fellowships Auxiliary E n t er p rises T otal E x p en ses $0 6 8 5 ,7 3 3 2 ,9 5 8 ,7 7 5 5 5 ,9 10 $0 1,6 8 2 ,5 5 1 $0 3 3 8 ,9 6 3 8 9 ,7 9 6 11,2 9 6 2 5 2 ,0 7 8 14 ,7 2 2 3 ,5 6 2 ,5 6 1 10 2 ,7 9 4 $ 5,729,005 6 ,10 1,5 6 4 3 ,9 2 2 ,3 7 4 2 19 ,4 9 8 2 ,2 6 7 ,2 2 2 7 8 3 ,6 2 4 9 ,3 6 3 ,4 5 9 1,2 2 3 ,2 0 2 $ 3,700,418 $ 1,682,551 $ 4,372,210 $ 29,609,948 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 26 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, 2007, the Foundation distributed $326,018 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, 2007: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds $1,442,502 688,805 3,867,154 1,037,759 $1,433,867 656,075 4,091,347 1,307,347 Total Investments $7,036,220 $7,488,636 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 27 Capital Assets for Component Units: Abraham Baldwin Agricultural College Foundation, Inc. held the following Capital Assets as of June 30, 2007: June 30, 2007 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 $2,080,799 2,080,799 38,483,590 1,246,202 39,729,792 3,505,318 36,224,474 $38,305,273 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $0 31,859,292 8,667 $31,867,959 $785,075 17,142,960 $17,928,035 $0 766,405 8,667 $775,072 $785,075 48,235,847 0 $49,020,922 $128,253 785,000 $913,253 Notes and Loans Payable: On April 20, 2006 the Development Authority of Tift County issued a $1,000,250 note payable in nine equal and consecutive annual installments of $100,000 each and a final installment of unpaid principal and accrued interest on November 1, 2015. The interest rate is a variable rate at 65 percent of the Wall Street Journal Prime Rate (the "Index"). This Note is a general obligation of the Foundation and is partially secured by a Joint Resolution of the Tift County Hospital Authority, Abraham Baldwin Agricultural College Foundation, Inc. and the Tift County Development Authority, later ratified and adopted by the Development Authority of Tift County. The principal balance of these notes totaled $717,046 at June 30, 2007. The Foundation has a credit line of $75,000 with South Georgia Banking Company which matures on January 15, 2008 and is renewable at maturity. The interest rate is variable based on Abraham Baldwin Agricultural College Annual Financial Report FY 2007 28 the Wall Street Journal Prime Rate (the "Index"). Interest is payable at maturity. This credit line has an outstanding balance of $68,029 at June 30, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $128,253 63,452 66,853 70,437 74,588 381,492 $785,075 $42,816 36,548 33,147 29,563 25,412 55,311 $222,797 Total $171,069 100,000 100,000 100,000 100,000 436,803 $1,007,872 Revenue Bonds Payable: First ABAC, L.L.C. has issued, through the Tift County Development Authority, $31,615,000 in revenue bonds to finance student housing at the College. The bonds carry an interest rate ranging from 1.75% to 4.25%. The bonds are secured by pledges of gross revenues from the housing project and are covered by a financial guaranty insurance policy issued by AMBAC Assurance Corporation. The principal balance of these bonds at June 30, 2007 totals $30,205,000. The bonds were issued at a premium of $1,049,632, which is being amortized over the life of the bonds. The accumulated amortization to date is $160,453. Second ABAC, L.L.C. has issued, through the Tift County Development Authority, $17,075,000 in revenue bonds to finance student housing at the College. The bonds carry an interest rate ranging from 4.0% to 5.0%. The bonds are secured by pledges of gross revenues from the housing project and are covered by a financial guaranty insurance policy issued by CIFG Assurance North America, Inc. The principal balance of these bonds at June 30, 2007 totals $17,075,000. The bonds were issued at a premium of $67,960, which is being amortized over the life of the bonds. The accumulated amortization to date is $1,292. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Abraham Baldwin Agricultural College Annual Financial Report FY 2007 29 Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $785,000 925,000 980,000 990,000 1,040,000 6,190,000 8,305,000 11,385,000 10,125,000 5,320,000 1,235,000 47,280,000 955,847 $48,235,847 Bonds Payable Interest $2,057,781 2,035,993 2,010,043 1,982,081 1,947,293 9,140,521 7,643,774 5,271,296 2,499,860 1,000,500 30,875 35,620,017 $35,620,017 Total $2,842,781 2,960,993 2,990,043 2,972,081 2,987,293 15,330,521 15,948,774 16,656,296 12,624,860 6,320,500 1,265,875 82,900,017 955,847 $83,855,864 Abraham Baldwin Agricultural College Annual Financial Report FY 2007 30 ALBANY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Albany State University Albany, Georgia Dr. Everette Freeman President Larry Wakefield Vice President for Fiscal Affairs ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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......................................................................................................... 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 3,900 students each year. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 125 FY2006 137 FY2005 130 3,927 3,649 3,668 3,594 3,302 3,297 Overview of the Financial Statements and Financial Analysis Albany State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $8,692,602 131,686,366 276,026 140,654,994 June 30, 2006 $5,796,977 98,302,819 274,220 104,374,016 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,594,914 33,981,785 38,576,699 3,802,924 717,324 4,520,248 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 97,366,366 364,493 4,347,436 $102,078,295 98,302,819 326,001 1,224,948 $99,853,768 The total assets of the institution increased by $36,280,978. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $33,383,547 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $34,056,451. The combination of the increase in total assets of $36,280,978 and the increase in total liabilities of $34,056,451 yields an increase in total net assets of $2,224,527. The increase in total net assets is primarily in the category of Unrestricted in the amount of $3,122,488. Albany State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $38,532,944 57,633,061 (19,100,117) 21,324,644 2,224,527 2,224,527 99,853,768 0 99,853,768 $102,078,295 $31,906,038 54,585,766 (22,679,728) 19,736,899 (2,942,829) (2,942,829) 102,796,597 0 102,796,597 $99,853,768 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: Albany State University Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e Ot h er T ot al Nonoperat ing Revenue T ot al Revenues June 30, 2007 $7,881,331 19,789,503 189,389 10,614,991 57,730 38,532,944 21,202,714 77,258 295,948 (50,684) 21,525,236 $60,058,180 June 30, 2006 $8,161,718 15,060,485 1,064,949 7,368,544 250,342 31,906,038 19,816,926 455,806 171,809 (707,642) 19,736,899 $51,642,937 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $20,545,762 1,059,524 261,837 3,168,161 3,137,226 9,676,405 6,654,679 3,957,546 9,171,921 57,633,061 200,592 $57,833,653 June 30, 2006 $20,293,792 1,455,270 375,629 3,105,006 2,642,169 9,993,794 4,550,844 3,897,181 8,272,081 54,585,766 0 $54,585,766 Operating revenues increased by $6,626,906 in fiscal 2007. Revenues increased in Grants and Contracts and Auxiliary categories. The Auxiliary revenue increase of $3,246,447 is a result of the changing environment of residential life on the University's campus. During the year, residential life constructed 1,200 beds of new housing on the campus using a third party developer in a construction and leasing Albany State University Annual Financial Report FY 2007 4 relationship. The net effect to the campus is that the students actually have more on-campus residential life availability. Nonoperating revenues increased by $1,788,337 for the year primarily due to an increase of $1,385,788 in State Appropriations. The compensation and employee benefits category increased by $2,151,221 and primarily affected the Instruction, Student Services and Auxiliary Enterprise categories. The increase reflects the addition of staff members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $203,860 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Albany State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($16,514,184) 21,319,938 (2,737,944) 295,948 2,363,758 1,547,213 $3,910,971 June 30, 2006 ($19,428,992) 19,915,904 (436,409) 171,809 222,312 1,324,901 $1,547,213 Albany State University Annual Financial Report FY 2007 5 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2007. The residence halls were completed and the Early Learning Center was under construction in fiscal year 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 Albany State University had Long-Term Debt and Liabilities of $35,763,169 of which $1,781,384 was reflected as current liability at June 30, 2007. 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 FY2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University 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 Freeman, President Albany State University Albany State University Annual Financial Report FY 2007 6 Statement of Net Assets A L B A N Y S T A T E UN IV ER S IT Y S TA TEM EN T O F N ET A S S ETS June 30, 2007 A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s A cco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial A ssist an ce Receiv ables - O t h er In v en t o ries (n o t e 4 ) N o t es an d M o rt gages Receiv able T o t al Curren t A sset s Non cu rre n t Asse ts N o n curren t Cash Sh o r t - t e r m I n v e st m e n t s In v est m en t s (in cludin g Real E st at e) N o t es Receiv able, n et Cap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la r ie s P a y a ble Co n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) O t h er L iabilit ies D ep o sit s H eld fo r O t h er O rgan izat io n s L ease P urch ase O bligat io n s (curren t p o rt io n ) Co m p en sat ed A bsen ces (curren t p o rt io n ) Rev en ue/M o rt gage Bo n ds P ay able (curren t ) N o t es an d L o an s P ay able (curren t p o rt io n ) T o t al Curren t L iabilit ies Non cu rre n t Liabilitie s L ease P urch ase O bligat io n s (n o n curren t ) Co m p en sat ed A bsen ces (n o n curren t ) Rev en ue/M o rt gage Bo n ds P ay able (n o n curren t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in Cap it al A sset s, n et o f relat ed debt Rest rict ed fo r E x p en dable Cap it al P ro ject s U n rest rict ed TO TA L N ET A S S ETS Alban y S tate U n i ve rs i ty $ 3 ,9 1 0 ,9 7 1 2 ,0 1 9 ,9 3 3 2 ,3 0 4 ,5 4 6 4 5 7 ,1 5 2 8 ,6 9 2 ,6 0 2 2 7 6 ,0 2 6 1 3 1 ,6 8 6 ,3 6 6 1 3 1 ,9 6 2 ,3 9 2 1 4 0 ,6 5 4 ,9 9 4 1 4 9 ,8 4 6 2 0 4 ,4 8 1 2 5 4 ,5 8 6 3 2 7 ,7 4 7 1 ,5 3 0 ,9 0 5 1 1 ,2 5 4 3 3 4 ,7 1 1 1 ,1 8 3 ,4 4 8 5 9 7 ,9 3 6 4 ,5 9 4 ,9 1 4 3 3 ,1 3 6 ,5 5 2 8 4 5 ,2 3 3 3 3 ,9 8 1 ,7 8 5 3 8 ,5 7 6 ,6 9 9 9 7 ,3 6 6 ,3 6 6 3 6 4 ,4 9 3 4 ,3 4 7 ,4 3 6 $ 1 0 2 ,0 7 8 ,2 9 5 C om pon e n t Unit Alban y S tate U n i ve rs i ty Fo u n da ti o n , In c. $ 9 ,8 6 8 2 0 ,9 8 9 8 0 ,0 0 0 1 1 0 ,8 5 7 1 ,3 6 1 ,1 9 8 4 ,8 8 0 ,6 0 8 1 ,8 5 9 ,3 9 1 3 6 ,2 8 2 ,0 0 5 1 ,1 5 6 ,5 2 6 4 5 ,5 3 9 ,7 2 8 4 5 ,6 5 0 ,5 8 5 1 ,1 4 6 ,1 9 2 2 2 5 ,0 0 0 2 ,2 7 0 ,1 3 4 3 ,6 4 1 ,3 2 6 3 4 ,7 3 0 ,2 7 6 3 9 ,9 4 3 3 4 ,7 7 0 ,2 1 9 3 8 ,4 1 1 ,5 4 5 4 ,6 6 6 ,5 7 2 9 4 1 ,4 6 2 (8 4 2 ,3 5 9 ) 2 ,4 7 3 ,3 6 5 $ 7 ,2 3 9 ,0 4 0 Albany State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets ALBANY S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Albany State Un i ve rsi ty C om pon e n t Unit Alban y S tate Un i ve rs i ty Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal St at e Ot h er 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n T ot al Operat ing Expenses Operat ing Income (loss) $11,954,383 (4,073,052) 18,532,943 780,519 476,041 189,389 25,630 4,194,884 1,675,754 2,319,669 124,156 403,695 1,723,589 173,244 32,100 38,532,944 $0 582,334 360,260 942,594 10,743,484 15,224,472 7,348,033 408,861 397,566 4,535,135 2,350,787 13,201,553 3,423,170 57,633,061 (19,100,117) 349,761 420,916 524,196 1,294,873 (352,279) Albany State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued ALBANY S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Albany State Un i ve rsi ty C om pon e n t Unit Alban y S tate Un i ve rs i ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 21,202,714 77,258 295,948 (200,592) (50,684) 21,324,644 2,224,527 0 2,224,527 99,853,768 0 99,853,768 $102,078,295 469,779 (1,790,808) 70,000 (1,251,029) (1,603,308) 0 (1,603,308) 9,745,614 (903,266) 8,842,348 $7,239,040 Albany State University Annual Financial Report FY 2007 9 Statement of Cash Flows ALBANY S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 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 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, 2007 $7,935,482 20,078,659 189,389 (23,705,715) (25,906,449) (4,535,135) (1,805) 4,128,724 894,756 2,340,650 127,387 387,521 1,656,286 181,416 (285,350) (16,514,184) 21,202,714 39,966 77,258 21,319,938 (2,537,352) (200,592) (2,737,944) 295,948 295,948 2,363,758 1,547,213 $3,910,971 Albany State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued ALBANY S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 June 30, 2007 ($19,100,117) 3,423,170 (755,720) 215,258 (8,609) (1,806) 8,596 (584,429) 221,261 68,212 ($16,514,184) $34,320,000 Albany State University Annual Financial Report FY 2007 11 ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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. 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 FY2007, 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 State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 Albany State University Annual Financial Report FY 2007 12 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. Albany State University splits summer activity between fiscal years. 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. Albany State University Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Albany State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Albany State University Annual Financial Report FY 2007 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 compensated absences 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 $1,374,957 as of 7-1-2006. For FY2007, $937,825 was earned in compensated absences and employees were paid $869,613, for a net increase of $68,212. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,443,169. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Albany State University Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $9,694 352,085 2,714 $364,493 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, 2007 $240,480 2,385,298 1,721,658 $4,347,436 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Albany State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Albany State University Annual Financial Report FY 2007 16 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 FY 2007 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, 2007, the carrying value of deposits was $3,901,575 and the bank balance was $4,759,877. Of the University's deposits, $4,659,877 were uninsured and collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. B. Investments Albany State University does not hold any investments as of June 30, 2007. Albany State University Annual Financial Report FY 2007 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $881,397 612,057 2,019,933 1,020,709 4,534,096 209,617 $4,324,479 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore T otal $457,152 $457,152 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Albany State University Annual Financial Report FY 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $2,922,366 2,922,366 Addi ti o n s $0 1,743,593 1,743,593 12,621,336 115,643,413 4,317,641 4,586,404 0 5,662,714 0 142,831,508 623,884 34,320,000 169,875 35,113,759.00 2,295,182 34,070,772 3,144,871 2,877,651 5,058,567 4,012 47,451,055 95,380,453 $98,302,819 234,182 2,598,914 137,195 268,978 180,455 3,446 3,423,170 31,690,589 $33,434,182.00 Re ductions $0 0 340,896 374,154 25,200 740,250 340,896 315,383 27,545 5,791 689,615 50,635 $50,635 En di n g B al a n ce 6/30/2007 $2,922,366 1,743,593 4,665,959 12,621,336 115,643,413 3,976,745 4,836,134 34,320,000 5,807,389 0 177,205,017 2,529,364 36,669,686 2,941,170 2,831,246 5,211,477 1,667 50,184,610 127,020,407 $131,686,366 Albany State University Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $398,083 1,132,822 $1,530,905 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $0 Additions $34,320,000 Re du cti on s Ending Balance June 30, 2007 $0 $34,320,000 Current Portion $1,183,448 Other Liabilities Compensated Absences T ot al 1,374,957 1,374,957 937,825 937,825 869,613 869,613 1,443,169 1,443,169 597,936 597,936 Total Long Term Obligations $1,374,957 $35,257,825 $869,613 $35,763,169 $1,781,384 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $29,917 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. 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 is obligated under one capital lease agreement for the acquisition of real property. CAPITAL LEASES Capital leases are generally payable in monthly installments and expire in 2034. Expenditures for fiscal year 2007 were $200,592 which represented interest expense. Interest rates range from 3.25 percent to 5.5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Albany State University Annual Financial Report FY 2007 21 Buildings Total Assets Held Under Capital Lease $34,320,000 $34,320,000 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. Albany State University had one capital lease with related entities in the current fiscal year. In August 2006, Albany State University entered into a capital lease of $34,320,000 at 3.25 percent to 5.5 percent with the Albany State University Foundation, a discretely presented component unit, whereby the University leases a building for a twenty-nine year period that began August 2006 and expires July 2034. The outstanding liability at June 30, 2007 on this capital lease is $34,320,000. OPERATING LEASES Albany State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $1,773,070 1,875,108 1,881,373 1,887,393 2,088,175 11,398,479 13,206,833 14,134,729 14,388,145 6,073,182 68,706,487 34,386,487 $34,320,000 $156,466 71,232 30,067 $257,765 During fiscal 2007, Albany State University's operating lease expense for rental of real property and equipment was $423,362. Albany State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,505,814 $1,397,830 $1,407,599 Employees' Retirement System of Georgia Plan Description Albany State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 Albany State University Annual Financial Report FY 2007 23 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, 2007, for employees covered by ERS was $9,613. The University's total payroll for all employees was $25,967,956. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $1,145, of which $1,001 was made by the University and $144 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, 2007 financial report, which may be obtained through ERS. Albany State University Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $545,551 (9.66% or 8.13%) and $306,445 (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 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 Albany State University Annual Financial Report FY 2007 25 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 2007 amounted to $46,968 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 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. Albany State University Annual Financial Report FY 2007 26 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although 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, 2007. 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, 2007, there were 175 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Albany State University recognized as incurred $656,981 of expenditures, which was net of $229,934 of participant contributions. Albany State University Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 10,280,264 3,387,006 3,258,532 121,882 376,131 115,376 2,897,348 109,223 $ 104,831 340,088 81,067 21,979 180 1,633 481,022 28,724 $ 16,254 61,962 12,249 8,795 500 162,077 $ 25,900 1,878,982 502,159 44,977 51,765 476,622 187,756 $ 60,343 1,630,444 480,016 53,505 39,400 871,492 2,026 $ 204,628 4,725,158 2,091,549 102,222 89,375 7,608 105,106 2,315,403 35,356 $ 20,545,762 $ 1,059,524 $ 261,837 $ 3,168,161 $ 3,137,226 $ 9,676,405 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 1,837,447 573,867 (679,015) 3,887 1,642,523 198,031 3,077,939 $ 51,264 17,490 18,003 306,639 4,484 3,521,846 37,820 $0 1,345,895 330,591 679,015 48,682 628,870 394,984 5,761,738 (17,854) $ 10,743,484 15,224,472 7,348,033 408,861 397,566 4,535,135 2,350,787 13,201,553 3,423,170 $ 6,654,679 $ 3,957,546 $ 9,171,921 $ 57,633,061 Albany State University Annual Financial Report FY 2007 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 Management's 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, 2007, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 504 College Drive, Albany, GA 31705. Prior Period Adjustment: A prior period adjustment in the amount of ($903,266) was made to restate the prior year's Repurchase Agreement balance and corresponding accrued interest. The adjustment had the effect of reducing Beginning Net Assets for the fiscal year that ended June 30, 2007. Deposits and Investments for Component Units: Deposits: As of June 30, 2007, the carrying amount of the Foundation's bank deposits was $1,366,018 and the respective bank balances totaled $1,429,626. Of the total bank balance, $211,346 was insured through the Federal Depository Insurance Corporation (FDIC). The remaining $1,218,280 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 FY 2007 29 Investments: Investments as of June 30, 2007 are summarized as follows: Investment type Certificates of Deposit General Obligation Bonds Money Market Mutual Fund Repurchase Agreements Fair Value $1,030,578 695,276 133,537 4,880,608 $6,739,999 Investment Maturity Less Than 1 Year 1-5 Years 133,537 4,880,608 $5,014,145 $1,030,578 695,276 $1,725,854 Capital Assets for Component Units: Albany State University Foundation Inc. had the following Capital Asset activity for the year ended June 30, 2007: 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 7/1/2006 $25,244,504 25,244,504 Additions $0 0 Reductions $25,244,504 25,244,504 Ending Balance 6/30/2007 $0 0 7,773,248 24,340 7,797,588 29,305,356 29,305,356 37,078,604 24,340 0 37,102,944 291,497 5,246 296,743 7,500,845 $32,745,349 520,699 3,497 524,196 28,781,160 $28,781,160 0 0 $25,244,504 812,196 8,743 820,939 36,282,005 $36,282,005 Albany State University Annual Financial Report FY 2007 30 Long-term Liabilities for Component Units: The Foundation had the following activity in long-term liabilities for the year ended June 30, 2007: Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2006 $2,392,978 34,978,805 $37,371,783 Additions $0 $0 Reductions $82,901 23,529 $106,430 Ending Balance June 30, 2007 $2,310,077 34,955,276 $37,265,353 Amounts due within One Year $2,270,134 225,000 $2,495,134 Notes and Loans Payable Albany State Foundation, Inc. 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. 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, 2007 is $2,181,889. 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, 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 are due with final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2007 is $128,188. Annual debt service requirements to maturity for Albany Municipal Coliseum installment loans with SunTrust Bank are as follows: Year ending June 30: 2008 1 2009 2 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $2,270,134 39,943 $2,310,077 $105,816 799 $106,615 Total $2,375,950 40,742 $2,416,692 Revenue Bonds Payable On July 1, 2005, the Foundation issued $33,110,000 Albany-Dougherty Inner City Authority Revenue Bonds, Series 2005A and $1,210,000 Albany-Dougherty City Authority Taxable Revenue Bonds, Series 2005B. The Bonds were issued for the purpose of financing and refinancing in whole or in part, the cost of the acquisition, construction and equipping of certain land, buildings and personal property, known as Albany State University Student Housing Albany State University Annual Financial Report FY 2007 31 Project. These bonds are carried as liabilities of Albany State Real Estate Foundation, LLC, a single member Limited Liability Company. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2034 Bond Premium/(Discount) Total Revenue Bonds Payable 1 2 3 4 5-9 10-14 15-19 20-24 25-29 Principal $225,000 230,000 240,000 250,000 3,025,000 5,335,000 7,815,000 9,975,000 7,225,000 34,320,000 635,276 $34,955,276 Bonds Payable Interest $1,576,737 1,567,175 1,557,400 1,516,898 7,456,523 6,692,925 5,277,905 3,190,144 820,931 29,656,638 $29,656,638 Total $1,801,737 1,797,175 1,797,400 1,766,898 10,481,523 12,027,925 13,092,905 13,165,144 8,045,931 63,976,638 635,276 $64,611,914 Albany State University Annual Financial Report FY 2007 32 ARMSTRONG ATLANTIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 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 2007 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 6,700 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 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% non-traditional/traditional students. The average student is 26. The average SAT for fall 2006 entering freshmen was 1018. FY2007 FY2006 FY2005 Faculty 269 276 237 Students (Headcount) 6,728 6,710 7,009 Students (FTE) 5,565 5,502 5,614 Overview of the Financial Statements and Financial Analysis Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. Armstrong Atlantic State University Annual Financial Report FY 2007 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 As s e ts June 30, 2007 $13,867,474 56,489,121 2,814,887 73,171,482 June 30, 2006 $12,870,079 55,911,621 2,398,100 71,179,800 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 12,085,868 1,821,488 13,907,356 9,764,925 657,321 10,422,246 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 55,672,639 2,518,930 217,417 855,140 $59,264,126 55,911,621 2,396,793 104,514 2,344,626 $60,757,554 The total assets of the institution increased by $1,991,682. A review of the Statement of Net Assets will reveal that the increase was primarily due to increases of $3,687,758 in receivables, $577,500 in Capital Assets, net and offset by a decrease in cash of ($2,753,742). The total liabilities for the year increased by $3,485,110. This was due in part by an increase in deferred revenue of $2,297,616. The combination of the increase in total assets of $1,991,682 and the increase in total liabilities of $3,485,110 yields a decrease in total net assets of ($1,493,428). The decrease in total net assets is primarily in the category of Unrestricted Net Assets, in the amount of ($1,489,486). Armstrong Atlantic State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $39,808,243 74,764,827 (34,956,584) 32,115,346 (2,841,238) 1,347,810 (1,493,428) 60,757,554 0 60,757,554 $59,264,126 $33,155,194 66,825,630 (33,670,436) 30,872,897 (2,797,539) 4,085,473 1,287,934 59,469,620 0 59,469,620 $60,757,554 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a negative year with a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Armstrong Atlantic State University Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $17,445,772 10,034,993 1,993,208 9,725,332 608,938 39,808,243 31,424,581 0 713,967 (3,817) 32,134,731 1,341,734 6,076 1,347,810 $73,290,784 June 30, 2006 $14,664,830 8,890,552 1,194,497 7,983,422 421,893 33,155,194 29,717,480 573,633 588,550 (6,766) 30,872,897 4,085,473 0 4,085,473 $68,113,564 Armstrong Atlantic State University Annual Financial Report FY 2007 4 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $30,885,962 0 868,338 7,184,189 4,337,574 7,808,363 6,713,746 5,136,087 10,147,273 1,683,295 74,764,827 19,385 $74,784,212 June 30, 2006 $25,924,596 2,552 1,193,604 6,919,468 3,524,273 9,080,155 6,331,994 3,037,034 8,507,401 2,304,553 66,825,630 0 $66,825,630 Operating revenues increased by $6,653,049 in fiscal 2007. This was primarily due to an increase in tuition and fees and grants. The Auxiliary revenue increase of $1,741,910 is primarily due to increases in housing. Non-operating revenues and expenses increased by $1,242,449 for the year primarily due to an increase of $1,707,101 in State Appropriations. The compensation and employee benefits category increased by $2,771,357 and primarily affected the Instruction and Public Service categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $1,019,389 during the past year. The increase was primarily associated with the increased utility rates in Plant Operations and Auxiliary Enterprises. Residential life has approximately 800 students on the campus using a third party developer in a construction and leasing relationship. An independent foundation, Educational Properties Foundation, Inc. (EPFI), owns the units, and a division of the University, Student Affairs, manages these units. An auxiliary enterprise, Housing, receives rent from students and pays EPFI for the leasing of those units. Armstrong Atlantic State University Annual Financial Report FY 2007 5 Statement of Cash Flows The final statement presented by 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($33,441,204) 31,344,954 (1,089,138) 431,646 (2,753,742) 6,323,693 $3,569,951 June 30, 2006 ($30,685,788) 31,554,222 (521,692) 448,120 794,862 5,528,831 $6,323,693 Capital Assets The University had three significant capital asset additions for facilities in fiscal year 2007 and involved moving construction work in progress to Capital Assets. The areas affected were the Library and Administration Building renovations and an ARC system upgrade. 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 $3,046,218 of which $1,224,730 was reflected as current liability at June 30, 2007. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Armstrong Atlantic State University Annual Financial Report FY 2007 6 Component Units In compliance with GASB Statement No. 39, Armstrong Atlantic State University has included the financial statements and notes for all required component units for FY2007. The Armstrong Atlantic State University Foundation, Inc. had investments of $5.7 million as of December 31, 2006. The AASU Educational Properties Foundation, Inc. had long-term debt of $43.4 million in the form of two bond issues and a note payable. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. 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 2007 7 Statement of Net Assets ARMSTRONG ATLANTIC STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C om pon e n t Un i t AS S ETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Contributions Receivable Inventories (note 4) Prepaid items T otal Current Assets Arm s tro n g Atlantic State Un i ve rs i ty Arm s tro n g Atlantic State Un i ve rs i ty Foundation, Inc. $3,435,185 550,000 1,937,695 7,154,485 790,109 13,867,474 $1,137,028 95,224 1,232,252 Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Contributions Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 134,766 2,668,467 11,654 56,489,121 59,304,008 73,171,482 5,733,281 5,233 5,738,514 6,970,766 LIABILITIES Current Liabilities Accounts Payable Deposit s Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations (current portion) Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) Notes and Loans Payable (current portion) T otal Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES 904,735 7,522,445 2,433,958 282,111 942,619 12,085,868 1,012,876 808,612 1,821,488 13,907,356 14,000 14,000 0 14,000 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrest rict ed TO TAL NET ASSETS 55,672,639 2,518,930 217,417 855,140 $59,264,126 4,019,499 2,836,470 100,797 $6,956,766 Component Unit Arm s tro n g Atlantic State University EP Foundation, Inc. $955,219 17,587 972,806 4,819,624 35,021,490 1,448,232 41,289,346 42,262,152 1,107,970 15,278 321,709 930,000 21,188 2,396,145 41,891,797 596,812 42,488,609 44,884,754 (2,167,527) (455,075) ($2,622,602) Armstrong Atlantic State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets ARMSTRONG ATLANTIC STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 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 St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total 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 Other Operating Expense Payments to or on behalf of Armstrong Atlantic State University Total Operating Expenses Operating Income (loss) Armstrong Atlantic State Un i ve rs i ty C om pon e n t Un i t Armstrong Atlantic State Un i ve rs i ty Fou n dati on , Inc. $24,352,717 (6,906,945) 8,113,284 618,857 1,302,852 1,993,208 4,009,844 3,079,313 494,565 102,511 180,306 1,804,671 54,122 608,938 39,808,243 $0 2,322,894 518,592 2,841,486 16,880,783 16,824,054 8,520,102 (143) 513,943 6,634,391 4,252,257 18,486,712 2,652,728 74,764,827 (34,956,584) 449,223 921,109 468,795 1,839,127 1,002,359 C om pon e n t Un i t Armstrong Atlantic State University EP Fou n dati on , Inc. $0 4,002,413 2,655 4,005,068 108,189 23,993 73,648 1,490,341 697,119 2,393,290 1,611,778 Armstrong Atlantic State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued ARMSTRONG ATLANTIC STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 Armstrong Atlantic State Un i ve rs i ty C om pon e n t Un i t Armstrong Atlantic State Un i ve rs i ty Fou n dati on , Inc. C om pon e n t Un i t Armstrong Atlantic State University EP Fou n dati on , Inc. NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 her 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 31,424,581 713,967 (19,385) (3,817) 32,115,346 (2,841,238) 1,341,734 6,076 1,347,810 (1,493,428) 60,757,554 60,757,554 $59,264,126 86,639 86,639 1,088,998 130,481 130,481 1,219,479 5,737,287 5,737,287 $6,956,766 322,031 (1,668,119) (1,346,088) 265,690 0 265,690 (2,888,292) (2,888,292) ($2,622,602) Armstrong Atlantic State University Annual Financial Report FY 2007 10 Statement of Cash Flows ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships 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 P rincipal P aid on Inst allment Debt Int erest P aid on Inst allment Debt 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 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, 2007 $17,386,194 6,640,631 1,993,208 (31,404,297) (33,768,542) (6,344,905) 300 4,012,596 2,692,553 505,130 102,523 178,845 1,802,547 54,122 2,707,891 (33,441,204) 31,424,581 37,572 (96,495) (20,704) 31,344,954 1,347,810 (2,323,298) (94,265) (19,385) (1,089,138) 431,646 431,646 (2,753,742) 6,323,693 $3,569,951 Armstrong Atlantic State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 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 Non-capit al it ems acquired by incurring capit al lease obligat ions Change in fair value of invest ment s recognized as a component of int erest income June 30, 2007 ($34,956,584) 2,652,728 (3,687,759) (198,145) 300 413,055 2,297,616 (113,186) 150,771 ($33,441,204) $910,747 $575,000 $282,321 Armstrong Atlantic State University Annual Financial Report FY 2007 12 ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Armstrong Atlantic State University is reporting the activity for the Armstrong Atlantic State University Foundation, Inc. and the Armstrong Atlantic State University Educational Properties 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 Armstrong Atlantic State University Annual Financial Report FY 2007 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. Armstrong Atlantic State University Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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. Armstrong Atlantic State University Annual Financial Report FY 2007 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 compensated absences 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 $1,600,461 as of 7-1-2006. For FY2007, $1,266,961 was earned in compensated absences and employees were paid $1,116,191, for a net increase of $150,770. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,751,231. 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 2007 16 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $172,442 10,702 34,273 $217,417 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, 2007 $589,537 121,727 73,766 70,110 $855,140 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Armstrong Atlantic State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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. Armstrong Atlantic State University Annual Financial Report FY 2007 17 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. In prior year financial statements, a portion of tuition and fee wavers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Armstrong Atlantic State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $4,093,003 and the bank balance was $5,139,556. Of the University's deposits, $4,839,556 were uninsured. Of these uninsured deposits, $4,839,556 were collateralized with securities held by the financial institution's trust department or agent in the University's name. B. Investments At June 30, 2007, the carrying value of the University's investments was $2,668,467, 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: Armstrong Atlantic State University Annual Financial Report FY 2007 19 Investment Pools Board of Regents Legal Fund Diversified Fund $244,723 2,423,744 T otal Investment Pools $2,668,467 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/searchRpts.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 Legal Fund is 4.1 years. Of the University's total investment of $244,723 in the Legal Fund, $242,619 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 8.86 years. Of the University's total investment of $2,423,744 in the Diversified Fund, $620,236 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 does not have a formal policy for managing credit quality risk. As previously stated, the Board of Regents investment pools are not rated. Armstrong Atlantic State University Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $725,468 723,932 1,937,695 5,909,564 9,296,659 204,479 $9,092,180 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $723,718 66,391 $790,109 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program and Federal Nursing Loan Program comprise substantially all of the loans receivable at June 30, 2007. There was no allowance for uncollectible loans at June 30, 2007. Armstrong Atlantic State University Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $4,678,254 4,495,276 9,173,530 2,597,715 57,518,701 3,246,634 4,367,909 0 8,960,528 10,500 76,701,987 576,659 18,162,224 1,210,370 3,458,213 0 6,553,542 2,888 29,963,896 46,738,091 $55,911,621 Addi ti o n s $0 1,481,730 1,481,730 Re ductions $0 5,454,206 5,454,206 5,454,206 219,295 910,747 616,198 6,075 7,206,521 86,418 1,823,000 95,674 274,694 49,540 323,000 402 2,652,728 4,553,793 $6,035,523 1,568,000 88,368 24,360 1,680,728 1,568,000 84,551 24,360 1,676,911 3,817 $5,458,023 En di n g B al a n ce 6/30/2007 $4,678,254 522,800 5,201,054 2,597,715 61,404,907 3,246,634 4,498,836 910,747 9,552,366 16,575 82,227,780 663,077 18,417,224 1,306,044 3,648,356 49,540 6,852,182 3,290 30,939,713 51,288,067 $56,489,121 Armstrong Atlantic State University Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $2,992,325 4,530,120 $7,522,445 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $0 Additions $1,485,747 Reductions Ending Balance June 30, 2007 $190,760 $1,294,987 Current Portion $282,111 Other Liabilities Compensated Absences Total 1,600,461 1,600,461 1,266,961 1,266,961 1,116,191 1,116,191 1,751,231 1,751,231 942,619 942,619 Total Long Term Obligations $1,600,461 $2,752,708 $1,306,951 $3,046,218 $1,224,730 Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation contracts executed. 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, and also is obligated under capital leases and installment purchase agreements for the acquisition of equipment. CAPITAL LEASES Capital Leases are generally payable in installments, ranging from monthly to annually and have terms expiring in various years between 2008 and 2012. Expenditures for fiscal year 2007 were $230,849 of which $40,089 represented interest. Total principal paid on capital leases was $190,760 for fiscal year 2007. Interest rates range from 3.75% to 4.3%. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Armstrong Atlantic State University Annual Financial Report FY 2007 23 Equipment Total Assets Held Under Capital Lease $861,207 $861,207 Armstrong Atlantic State University has various capital leases with third party vendors for equipment with an outstanding balance at June 30, 2007 in the amount of $1,294,987. OPERATING LEASES For fiscal year 2007, Armstrong Atlantic State University had seven operating leases. One lease is with Michael Porton, Inc. to rent offices and classroom space in Hinesville, Georgia for the Liberty Center. That lease is $8,750 per month. Another lease is with SSF Savannah Properties, LLC to rent space for a dental clinic operated by our Department of Dental Hygiene. The monthly rent is $25,580. The five remaining leases are all with Educational Properties Foundation, Inc. (EPFI), a related party. All five leases are for the following properties and amounts: Property Recreation Center Armstrong Center Campus Housing: Compass Point, University Crossing, University Terrace Women's Field House Monthly Rent $ 28,666 121,876 161,898 46,564 5,926 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $329,284 329,284 329,284 329,284 95,923 1,413,059 118,072 $1,294,987 $4,887,000 4,887,000 4,887,000 4,887,000 4,887,000 24,435,000 $48,870,000 Armstrong Atlantic State University's FY2007 expense for rental of real property and equipment under operating leases was $4,610,174. Armstrong Atlantic State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,472,188 $1,376,453 $1,281,526 Employees' Retirement System of Georgia Plan Description Armstrong Atlantic State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 2007 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, 2007, for employees covered by ERS was $86,427. The University's total payroll for all employees was $33,704,837. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $10,293, of which $8,997 was made by the University and $1,296 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, 2007 financial report, which may be obtained through ERS. Armstrong Atlantic State University Annual Financial Report FY 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $1,119,049 (9.66% or 8.13%) and $628,703 (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 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 Armstrong Atlantic State University Annual Financial Report FY 2007 27 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 2007 amounted to $117,958 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 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 2007 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, 2007. 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, 2007, there were 156 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Armstrong Atlantic State University recognized as incurred $635,454 of expenditures, which was net of $266,364 of participant contributions. Armstrong Atlantic State University Annual Financial Report FY 2007 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses In st ruct io n $ 16,522,802 3,548,635 4,578,182 254,702 255,725 134,019 5,492,556 99,341 $ 30,885,962 Functional Classification FY2007 P ublic Service Academic Support St uden t Services $ 20,070 523,866 93,303 $ 325,091 3,975,471 1,022,308 $ 3,740 2,286,243 553,616 11,503 2,439 211,543 5,614 101,302 500 111,340 1,266,195 381,982 31,719 29,916 42,188 1,387,725 2,427 $ 868,338 $ 7,184,189 $ 4,337,574 In st it ut io n al Support $0 4,508,714 1,778,815 (143) 108,668 289,486 136,397 854,262 132,164 $ 7,808,363 Natural Classification Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses P lan t Op erat io n s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary En t erp rises Un allo cat ed Expenses $0 745,918 206,957 $0 $ 9,080 $0 1,235,207 286,921 1,621 2,962,871 2,462,440 333,939 5,135,363 724 4 ,4 2 8 923,401 8 6 3 ,0 0 3 6 ,8 11,2 6 7 13 ,9 6 6 1,683,295 $ 6,713,746 $ 5,136,087 $ 10,147,273 $ 1,683,295 T otal Expenses $ 16,880,783 16,824,054 8,520,102 (143) 513,943 6,634,391 4,252,257 18,486,712 2,652,728 $ 74,764,827 Armstrong Atlantic State University Annual Financial Report FY 2007 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, 2006, the Foundation distributed $468,795 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, Inc. holds endowment and other investments in the amount of $5.7 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at December 31, 2006: Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $167,312 1,714,999 386,417 2,316,585 14,000 $4,599,313 Fair Value $167,312 1,703,258 384,437 3,464,274 14,000 $5,733,281 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 purchases Armstrong Atlantic State University Annual Financial Report FY 2007 31 buildings and leases them to the University for housing, recreation, etc. 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. Complete financial statements for the Foundation may 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, 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 $475,561 466,436 941,997 35,770,028 2,635,460 38,405,488 4,325,995 34,079,493 $35,021,490 Armstrong Atlantic State University Annual Financial Report FY 2007 32 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended December 31, 2006 are shown below: Beginning Balance January 1, 2006 Additions Reductions Ending Balance December 31, 2006 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 43,799,420 $43,799,420 $618,000 0 $618,000 $0 977,623 $977,623 $618,000 42,821,797 $43,439,797 $21,188 930,000 $951,188 Notes and Loans Payable: On November 15, 2006, the AASU Women's Field House, LLC obtained a promissory note payable with Wachovia Bank, N.A. to provide financing for the construction of the field house in the amount of $618,000. Interest is payable monthly from the date of the note until and including February 1, 2007, at the rate of 7.20%. As of March 1, 2007, the note is payable in equal monthly installments of principal and interest in an amount necessary to amortize the principal amount outstanding over a 173 month term, with all unpaid principal and accrued interest due on June 1, 2021. The note is collateralized by a deed to secure debt and an assignment of rents. In addition, the note is guaranteed by Armstrong Atlantic State University Foundation, Inc. The balance outstanding at December 31, 2006 is $618,000. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 Thereafter 1 2 3 4 5 6-15 Notes and Loans Payable P rin c ip a l Interest T o tal $21,188 27,157 29,178 31,350 33,683 475,444 $618,000 $36,514 42,086 40,065 37,893 35,560 149,313 $341,431 $57,702 69,243 69,243 69,243 69,243 624,757 $959,431 Revenue Bonds Payable: Student Housing Bonds are 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 between 3.00% and 5.00%. Resident Instruction Bonds are 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 between 3.25% and 5.00%. Armstrong Atlantic State University Annual Financial Report FY 2007 33 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 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 Premium, net Principal Bonds Payable Interest $930,000 970,000 980,000 1,015,000 1,050,000 5,845,000 7,085,000 8,720,000 11,555,000 3,985,000 42,135,000 686,797 $42,821,797 $1,857,502 14,824,214 1,788,914 1,757,065 1,720,802 7,987,695 6,733,170 5,029,922 2,630,690 433,225 44,763,199 $44,763,199 Total $2,787,502 15,794,214 2,768,914 2,772,065 2,770,802 13,832,695 13,818,170 13,749,922 14,185,690 4,418,225 86,898,199 686,797 $87,584,996 Armstrong Atlantic State University Annual Financial Report FY 2007 34 ATLANTA METROPOLITAN COLLEGE Financial Report For the Year Ended June 30, 2007 Atlanta Metropolitan College Atlanta, Georgia Dr. Gary A. McGaha Interim President Tracey Cook-Robinson Vice President for Fiscal Affairs ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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. 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 .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 23 Note 13. Contingencies................................................................................................................ 23 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 24 Note 15. 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. Students Students Faculty (Headcount) (FTE) FY2007 50 1,683 1,299 FY2006 51 1,748 1,351 FY2005 40 1,802 1,382 Overview of the Financial Statements and Financial Analysis Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2007. 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 2007 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. Atlanta Metropolitan College Annual Financial Report FY 2007 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 Total As s e ts June 30, 2007 $3,039,451 12,951,015 15,990,466 June 30, 2006 $2,619,272 12,721,263 15,340,535 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,435,158 242,928 1,678,086 1,224,922 227,432 1,452,354 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 12,951,015 1,361,365 $14,312,380 12,721,263 1,166,918 $13,888,181 The total assets of the College increased by $649,931. A review of the Statement of Net Assets will reveal that the increase was due in part to an increase of $229,752 in the category of Capital Assets, net. The balance of the increase is mainly in cash. The total liabilities for the year increased by $225,732. The combination of the increase in total assets of $649,931 and the increase in total liabilities of $225,732 yields an increase in total net assets of $424,199. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $229,752. Atlanta Metropolitan College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $6,490,155 15,787,482 (9,297,327) 9,077,036 (220,291) 644,490 424,199 13,888,181 0 13,888,181 $14,312,380 $6,586,575 15,383,806 (8,797,231) 8,849,865 52,634 198,195 250,829 13,637,352 0 13,637,352 $13,888,181 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e 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 June 30, 2007 $2,319,767 3,004,120 17,699 1,094,450 54,119 6,490,155 7,757,794 1,131,775 73,754 113,713 9,077,036 641,315 3,175 644,490 $16,211,681 June 30, 2006 $2,359,588 2,868,725 36,072 1,195,865 126,325 6,586,575 7,541,311 1,120,414 109,021 79,119 8,849,865 195,535 2,660 198,195 $15,634,635 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $3,950,170 1,194,768 864,982 1,750,144 2,999,468 2,447,482 1,581,567 998,901 15,787,482 0 $15,787,482 June 30, 2006 $3,893,202 1,181,422 696,355 1,570,185 3,012,735 2,242,109 1,556,689 1,231,109 15,383,806 0 $15,383,806 Operating revenues decreased by ($96,420) in fiscal 2007. Although Grants and Contracts increased, Auxiliary and certain other categories decreased. Atlanta Metropolitan College Annual Financial Report FY 2007 4 The College realized an increase of $135,395 in grants and contracts. This was mainly due to a 3% increase in the number of Pell awards granted during the fiscal year. The Auxiliary revenue decreased by ($101,415). The discontinuation of the athletic program caused a decrease in auxiliary enterprise revenue. As part of the phase-out of the program, the College discontinued the athletic student meal plan, a key source of food service revenue, and decreased athletic fees. Nonoperating revenues and expenses increased by $227,171 for the year primarily due to an increase of $216,483 in State Appropriations. State capital gifts and grants increased by $445,780. The sole source of this revenue was GSFIC. The increase is mainly due to the increase in funds received for the Entry and Roadway Improvement Project. The compensation and employee benefits category increased by $281,507. This reflects a merit increase of 3% and increased health insurance costs. Utilities decreased by ($244,515) during the past year. As an effort to reduce overall utility costs, an energy-operational audit was performed by the physical plant staff. The primary gas powered water chiller was replaced with an electric chiller and water conservation measures were implemented. These actions resulted in significant reductions in natural gas and water costs. 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. Atlanta Metropolitan College Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($8,524,488) 8,990,860 (193,740) 113,713 386,345 1,738,840 $2,125,185 June 30, 2006 ($8,395,722) 8,824,578 (133,702) 79,119 374,273 1,364,567 $1,738,840 Capital Assets Atlanta Metropolitan College continued work on the Campus Entry and Roadway Improvement Project. GSFIC has provided funding of approximately $1.3 million for this project to date, which includes approximately $369,000 in the current fiscal year. It is anticipated that the project will be complete in FY2008. The project to upgrade the chiller system in the Central Energy Plant was completed during the fiscal year. The total cost of the project including movable equipment was approximately $256,000. The $130,368 in construction work-in-progress represents improvements made to the Harmon House. The total cost of the project is estimated at $182,000 and will be complete in FY2008. For additional information concerning Capital Assets, see Notes 1, 6, and 9 in the notes to the financial statements. Long Term Debt and Liabilities Atlanta Metropolitan College had Long-Term Debt and Liabilities of $517,958 of which $275,030 was reflected as current liability at June 30, 2007. For additional information concerning Long-Term Debt and Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. Component Units Atlanta Metropolitan College does not have a component unit that meets the criteria set forth in GASB Statement No. 39. Atlanta Metropolitan College Annual Financial Report FY 2007 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. The College received a three percent increase in funding and 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. Gary A. McGaha, Interim President Atlanta Metropolitan College Atlanta Metropolitan College Annual Financial Report FY 2007 7 Statement of Net Assets ATLANTA METROPOLITAN COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Receivables - Federal Financial Assist ance Receivables - Ot her Invent ories (note 4) P repaid Items T ot al Current Asset s Noncurre nt Asse ts Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Unrest rict ed TO TAL NET AS S ETS June 30, 2007 $2,125,185 222,619 316,078 345,743 29,826 3,039,451 12,951,015 12,951,015 15,990,466 453,424 255,477 129,062 2,929 319,236 275,030 1,435,158 242,928 242,928 1,678,086 12,951,015 1,361,365 $14,312,380 Atlanta Metropolitan College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets ATLANTA METROPOLITAN COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES June 30, 2007 Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Grant s and Cont ract s Federal St at e Ot her Sales and Services Rent s and Royalt ies Auxiliary Ent erprises Bookst ore Food 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion T ot al Operat ing Expenses Operat ing Income (loss) $3,566,898 (1,247,131) 2,982,404 727 20,989 17,699 5,050 717,185 232,326 135,118 9,821 49,069 6,490,155 2,812,486 4,969,171 2,014,280 73,364 110,949 1,664,704 479,997 3,054,053 608,478 15,787,482 (9,297,327) Atlanta Metropolitan College Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued ATLANTA METROPOLITAN COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 June 30, 2007 NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other T ot al Ot her Revenues Increase in Net Asset s NET AS S ETS Net Asset s-beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 7,757,794 1,119,373 12,402 73,754 113,713 9,077,036 (220,291) 641,315 3,175 644,490 424,199 13,888,181 13,888,181 $14,312,380 Atlanta Metropolitan College Annual Financial Report FY 2007 10 Statement of Cash Flows ATLANTA METROPOLITAN COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2007 C ASH FLO WS FRO M O PERATING ACTIVITIES T uition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Bookst ore Food Services Intercollegiate Athletics Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities C ASH FLO WS FRO M NO N-CAPITAL FINANC ING ACTIVITIES State Appropriations Agency Funds T ransactions Gifts and Grants Received for Other T han Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities C ASH FLO WS FRO M CAPITAL AND RELATED FINANCING AC TIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Net Cash used by Capital and Related Financing Activities C ASH FLO WS FRO M INVESTING AC TIVITIES 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, 2007 $2,323,668 3,040,682 17,699 (5,571,609) (7,741,919) (1,664,704) 599,959 234,927 139,360 7,881 89,568 (8,524,488) 7,757,794 27,536 1,205,530 8,990,860 641,315 (835,055) (193,740) 113,713 113,713 386,345 1,738,840 $2,125,185 Atlanta Metropolitan College Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued ATLANTA METROPOLITAN COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences Net Cash P rovided (used) by Operat ing Act ivit ies ** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($9,297,327) 608,478 86,452 (105,177) (15,109) 197,272 (7,685) (1,907) 10,515 ($8,524,488) ($3,175) Atlanta Metropolitan College Annual Financial Report FY 2007 12 ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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 Atlanta Metropolitan College Annual Financial Report FY 2007 13 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 and demand deposits. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants 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 or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land Atlanta Metropolitan College Annual Financial Report FY 2007 14 improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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 compensated absences 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 $507,443 as of 7-1-2006. For FY2007, $357,387 was earned in compensated absences and employees were paid $346,872, for a net increase of $10,515. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $517,958. 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 Atlanta Metropolitan College Annual Financial Report FY 2007 15 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. Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $1,745,227 53,934 (437,796) $1,361,365 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. 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 Atlanta Metropolitan College Annual Financial Report FY 2007 16 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. At June 30, 2007, the carrying value of deposits was $2,122,834 and the bank balance was $2,451,941. Of the College's deposits, $2,251,941 were uninsured. Of these uninsured deposits, $2,195,187 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $56,754 were uncollateralized. Atlanta Metropolitan College Annual Financial Report FY 2007 17 B. Investments The College did not have any investments at June 30, 2007. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $172,150 60,718 222,620 39,438 61,535 556,461 17,764 $538,697 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Food Services Ot h er T otal $286,839 4,016 54,888 $345,743 Note 5. Notes/Loans Receivable The College did not have any notes/loans receivable at June 30, 2007. Atlanta Metropolitan College Annual Financial Report FY 2007 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $2,637,979 99,155 2,737,134 15,598,084 863,547 2,758,906 1,919,071 21,139,608 6,677,718 605,006 2,100,892 1,771,863 11,155,479 9,984,129 $12,721,263 Addi ti o n s $369,760 31,213 400,973 Re ductions $0 0 179,207 249,623 8,427 437,257 124,733 124,733 382,546 17,171 164,685 44,076 608,478 (171,221) $229,752 124,733 124,733 0 $0 En di n g B al a n ce 6 /3 0 /2 0 0 7 3,007,739 130,368 3,138,107 15,777,291 863,547 2,883,796 1,927,498 21,452,132 7,060,264 622,177 2,140,844 1,815,939 11,639,224 9,812,908 12,951,015 Atlanta Metropolitan College Annual Financial Report FY 2007 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $129,062 $129,062 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Total Long Term Obligations Beginning Bal an ce July 1, 2006 $507,443 $507,443 Addi ti on s $357,387 $357,387 Re du cti on s En di n g Balance June 30, 2007 $346,872 $346,872 $517,958 $517,958 C u rre n t Porti on $275,030 $275,030 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $77,623 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations CAPITAL LEASES The College did not have any capital leases at June 30, 2007. OPERATING LEASES The College did not have any operating leases at June 30, 2007. Atlanta Metropolitan College Annual Financial Report FY 2007 20 Note 11. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $ 540,884 $ 546,315 $ 566,523 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 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Atlanta Metropolitan College and the covered employees made the required contributions of $68,547 (9.66% or 8.13%) and $38,889 (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 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 2007 amounted to $49,397 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Atlanta Metropolitan College Annual Financial Report FY 2007 22 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. 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 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 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 Atlanta Metropolitan College Annual Financial Report FY 2007 23 disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Atlanta Metropolitan College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Atlanta Metropolitan College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 53 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Atlanta Metropolitan College recognized as incurred $204,899 of expenditures, which was net of $78,600 of participant contributions. Atlanta Metropolitan College Annual Financial Report FY 2007 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses Inst ruct ion $ 2,759,997 325,122 661,969 10,124 10,062 19,023 124,728 39,145 $ 3,950,170 Functional Classification FY2007 P ublic Service Academic Support St uden t Services $0 660,998 137,680 $ 52,489 395,715 93,945 $0 1,219,984 310,186 25,271 53,295 5,249 312,275 5,309 18,666 17,057 229,234 52,567 36,553 1,114 10,891 167,491 3,925 $ 1,194,768 $ 864,982 $ 1,750,144 Inst it ut ional Support $0 1,489,369 570,512 73,364 32,200 39,628 723,611 70,784 $ 2,999,468 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses P lant Op erat ion s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary En t erp rises $0 631,741 205,102 $0 $0 246,242 34,886 992 383,585 785,260 440,802 1,581,567 500 4,564 711,454 1,255 $ 2,447,482 $ 1,581,567 $ 998,901 T otal Expenses $ 2,812,486 4,969,171 2,014,280 73,364 110,949 1,664,704 479,997 3,054,053 608,478 $ 15,787,482 Atlanta Metropolitan College Annual Financial Report FY 2007 25 AUGUSTA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Augusta State University Augusta, Georgia William A. Bloodworth, Jr. President N. Dan Whitfield Vice President of Business Operations AUGUSTA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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......................................................................................................... 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 AUGUSTA STATE UNIVERSITY Management's Discussion and Analysis Introduction Augusta State University is one of 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 educational opportunities for people of all ages and backgrounds, with a specific emphasis on service to Georgians in the Central Savannah River Area. FY 2007 FY 2006 FY 2005 Faculty 205 202 190 Students (Headcount) 6,573 6,333 6,368 Students (FTE) 5,571 5,361 5,354 Overview of the Financial Statements and Financial Analysis Augusta State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $11,470,039 104,331,602 975,303 116,776,944 June 30, 2006 $10,922,310 103,105,989 1,198,997 115,227,296 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 6,261,062 32,825,349 39,086,411 5,640,287 33,026,923 38,667,210 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 71,753,459 333,470 1,375,785 4,227,819 $77,690,533 70,297,171 305,891 1,452,689 4,504,335 $76,560,086 The Total Assets of the institution increased by $1,549,648. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,225,613 in the category of Capital Assets, net. The major assets added included a privately funded Golf House, increased parking and improved fire protection in the Library. The Total Liabilities for the year increased by $419,201, primarily in Current Liabilities with increases in Accounts Payable and Deferred Revenue partially offset by a decrease in Salaries Payable. The combination of the increase in Total Assets of $1,549,648 and the increase in Total Liabilities of $419,201 yields an increase in Total Net Assets of $1,130,447. The increase in Total Net Assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,456,288. Augusta State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $31,687,990 60,993,947 (29,305,957) 26,573,304 (2,732,653) 3,863,100 1,130,447 76,560,086 0 76,560,086 $77,690,533 $27,932,554 55,285,757 (27,353,203) 25,354,119 (1,999,084) 1,228,182 (770,902) 77,330,988 0 77,330,988 $76,560,086 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Augusta State University Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $16,729,413 6,754,192 566,549 7,130,969 506,867 31,687,990 26,466,011 701,368 592,756 510,773 (60,295) 28,210,613 2,706,381 1,156,719 3,863,100 $63,761,703 June 30, 2006 $13,868,341 6,565,191 533,376 6,698,813 266,833 27,932,554 25,213,486 688,301 221,968 335,601 (14,458) 26,444,898 1,144,697 83,485 1,228,182 $55,605,634 Operating Revenues increased by $3,755,436, or 13 percent, versus FY 2006. Tuition and Fee revenue was up $2,861,072, or 21 percent, from tuition increases ranging from 5 to 8 percent, enrollment growth of 4 percent, and a full year impact of the new student center fee. Auxiliary Revenue grew $432,156 from increased student housing rental income. Nonoperating Revenue improved by $1,765,715, or 7 percent, due to increased State appropriations along with higher Investment Income and Gifts. State Appropriations rose by $1,252,525, or 5 percent reflecting the University's continued enrollment growth. The increase in Investment Income is due to the higher interest rates available. Capital Gifts and Grants increased significantly from the prior year. The increase in State Capital Gifts covers a range of projects, while the gain in Other Capital Gifts and Grants is due primarily to contributions for the new Golf House which was completed this fiscal year. Augusta State University Annual Financial Report FY 2007 4 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $22,100,834 90,070 366,400 6,018,871 3,655,415 6,920,182 9,733,668 5,531,792 6,576,715 60,993,947 1,637,309 $62,631,256 June 30, 2006 $20,809,959 85,735 359,946 5,927,662 3,325,753 6,472,980 8,506,845 3,804,457 5,992,420 55,285,757 1,090,779 $56,376,536 The University's Total Expenses, as shown above, increased 11 percent versus last year. Excluding Scholarships and Auxiliary Enterprises, core University operating expenses rose by 7 percent versus FY 2006. The year-to-year increase came in part from higher compensation expenses, up $1.7 million, or 5 percent. Merit increases and additional faculty positions were the primary factors in the growth in compensation expense. Also, operating and equipment expenditures increased by $1.2 million over last year to support continued campus growth. By function, Instruction expenses rose by 6.2 percent versus last year due to merit increases and additional faculty positions. Academic Support expenses were up only 1.5 percent due to very modest increases in the Library, IT Academic Services and Media Services. Student Services expenses increased by 9.9 percent due to anticipated increases related to the new student center and to the filling of vacant positions. Institutional Support costs rose 6.9 percent versus the prior year from growth in University Advancement with the addition of a new director level position to increase fundraising efforts, higher employee fringe benefit costs and additional support costs in Public Safety and IT Administrative Services. Plant Operations expenses, as reported above, were up 14 percent primarily due to increased project spending, principally for the storm water containment project. Utilities included in Plant Operations increased $236,136, or 15 percent from higher electricity and natural gas prices and from the addition of the new student center building. Excluding Utilities, ongoing Plant Operations expenses were up just 3.9 percent versus last year. The large increase shown in Scholarships and Fellowships versus last year is due almost entirely to an accounting reclassification of certain expenses. Auxiliary Enterprises expenses grew primarily due to increased occupancy at University Village, ASU's student housing. Augusta State University Annual Financial Report FY 2007 5 Statement of Cash Flows The final statement presented by 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($24,974,071) 27,892,609 (2,828,883) 470,916 560,571 7,810,840 $8,371,411 June 30, 2006 ($23,722,199) 26,844,327 (2,211,919) 336,624 1,246,833 6,564,007 $7,810,840 Capital Assets The University's Capital Assets increased by $1,225,613, or 1.2 percent during FY 2007. The largest addition was the J. Fleming Norvell Golf House which was privately funded. Other asset additions included increased parking and a new fire protection system for the campus library. 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 $33,816,080 of which $990,731 was reflected as current liability at June 30, 2007. 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 2007 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 FY2007. The Component Units shown are the Augusta State University Foundation, Inc. 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 2007 7 Statement of Net Assets A UG US T A S T A T E UN IV ER S IT Y S T A T EM EN T O F N ET A S S ET S June 30, 2007 A S S ETS C u rre n t A sse ts C ash an d C ash E quiv alen t s Sh o r t - t e r m I n v e st m e n t s A cco un t s R eceiv able, n et (n o t e 3 ) R eceiv ables - Federal Fin an cial A ssist an ce R eceiv ables - O t h er D ue Fro m C o m p o n en t U n it s L eases R eceiv able P ledges R eceiv able In v en t o ries (n o t e 4 ) P rep aid it em s N o t es an d M o rt gages R eceiv able T o t al C urren t A sset s N on cu rre n t A sse ts N o n curren t Cash In v est m en t s (in cludin g R eal E st at e) N o t es R eceiv able, n et L eases R eceiv able P ledges R eceiv able C ap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la r ie s P a y a ble C o n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t L ease P urch ase O bligat io n s (curren t p o rt io n ) C o m p en sat ed A bsen ces (curren t p o rt io n ) R ev en ue/M o rt gage B o n ds P ay able (curren t ) N o t es an d L o an s P ay able (curren t p o rt io n ) T o t al C urren t L iabilit ies N on cu rre n t Liabilitie s L ease P urch ase O bligat io n s (n o n curren t ) D eferred Rev en ue (n o n curren t ) C o m p en sat ed A bsen ces (n o n curren t ) R ev en ue/M o rt gage B o n ds P ay able (n o n curren t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in C ap it al A sset s, n et o f relat ed debt R est rict ed fo r N o n ex p en dable E x p en dable U n rest rict ed TO TA L N ET A S S ETS A u gu sta S tate U n i ve rs i ty $ 8 ,3 5 7 ,4 1 1 2 3 ,8 3 5 1 ,2 4 2 ,2 8 1 1 ,9 2 6 4 4 3 ,4 0 6 1 ,4 0 1 ,1 8 0 1 1 ,4 7 0 ,0 3 9 1 4 ,0 0 0 4 3 1 ,4 9 3 5 2 9 ,8 1 0 1 0 4 ,3 3 1 ,6 0 2 1 0 5 ,3 0 6 ,9 0 5 1 1 6 ,7 7 6 ,9 4 4 9 0 0 ,1 7 9 1 7 0 ,9 4 1 2 ,2 7 6 3 ,4 4 8 ,4 1 3 7 4 8 ,5 2 2 2 3 5 ,8 5 4 7 5 4 ,8 7 7 6 ,2 6 1 ,0 6 2 3 2 ,1 7 1 ,3 4 8 6 5 4 ,0 0 1 3 2 ,8 2 5 ,3 4 9 3 9 ,0 8 6 ,4 1 1 7 1 ,7 5 3 ,4 5 9 3 3 3 ,4 7 0 1 ,3 7 5 ,7 8 5 4 ,2 2 7 ,8 1 9 $ 7 7 ,6 9 0 ,5 3 3 C om pon e n t U n it A u gu sta S tate U n i ve rs i ty Fo u n da ti o n , In c. $ 1 ,3 6 6 ,5 2 2 1 ,1 1 4 ,9 3 6 7 5 ,2 0 3 1 ,8 6 4 ,1 7 7 3 8 ,9 1 9 2 8 4 ,0 0 0 4 ,7 4 3 ,7 5 7 4 ,5 6 6 ,9 5 6 1 8 ,1 3 9 ,7 4 6 1 ,2 6 0 ,6 9 5 5 9 ,5 9 8 ,7 4 7 6 7 1 ,2 0 1 8 4 5 ,4 8 5 8 5 ,0 8 2 ,8 3 0 8 9 ,8 2 6 ,5 8 7 7 2 0 ,9 7 6 1 ,6 3 8 ,5 6 6 1 ,9 2 6 2 5 5 ,0 0 0 1 4 2 ,0 0 0 2 ,7 5 8 ,4 6 8 2 7 ,4 2 4 ,4 0 1 3 0 ,5 1 2 ,5 1 8 1 ,2 5 9 ,8 8 3 5 9 ,1 9 6 ,8 0 2 6 1 ,9 5 5 ,2 7 0 1 5 ,7 4 7 ,1 2 4 6 ,4 1 6 ,7 3 8 5 ,7 0 7 ,4 5 5 $ 2 7 ,8 7 1 ,3 1 7 C om pon e n t Un it A u gu sta S tate U n i ve rs i ty A th le tic A ssociation $ 2 3 6 ,3 7 5 1 2 ,1 3 3 4 ,7 6 6 2 5 3 ,2 7 4 1 ,9 0 9 ,9 6 3 1 ,9 0 9 ,9 6 3 2 ,1 6 3 ,2 3 7 1 6 0 ,1 5 5 6 ,8 0 1 1 4 ,0 5 5 1 7 ,4 3 0 2 9 3 ,1 5 8 4 9 1 ,5 9 9 3 0 ,3 2 3 1 ,2 7 3 ,1 0 9 1 ,3 0 3 ,4 3 2 1 ,7 9 5 ,0 3 1 2 9 5 ,9 4 3 7 2 ,2 6 3 $ 3 6 8 ,2 0 6 Augusta State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets AUGUSTA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 REVENUES Augusta State Un i ve rs i ty C om pon e n t Un i t Augusta State Un i ve rs i ty Fou n da ti on , Inc. 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 Parking/T ransportation Intercollegiate Athletics Other Organizations 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 Other Operating Expense Payments to or on behalf of Augusta State University T otal Operating Expenses Operating Income (loss) $22,483,037 (5,753,624) 6,641,963 85,631 26,598 566,549 181,792 2,072,459 2,924,367 245,662 1,805,630 82,851 325,075 31,687,990 $0 1,333,800 615,313 1,806,726 795,032 238,206 78,639 4,867,716 15,385,067 14,128,434 7,874,898 303,464 332,255 6,180,813 2,111,405 11,137,977 3,539,634 60,993,947 (29,305,957) 518,057 2,036,068 2,554,125 2,313,591 C om pon e n t Un i t Augusta State Un i ve rs i ty Ath l e ti c As s o ci ati on $0 749,861 12,570 4,775 767,206 441,265 31,343 3,004 61,284 167,826 148,659 58,709 912,090 (144,884) Augusta State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued AUGUSTA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 Augusta State Un i ve rs i ty C om pon e n t Un i t Augusta State Un i ve rs i ty Fou n dati on , Inc. C om pon e n t Un i t Augusta State Un i ve rs i ty Ath l e ti c As s oci ati on 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 26,466,011 29,958 69,754 601,656 592,756 510,773 (1,637,309) (60,295) 26,573,304 (2,732,653) 2,706,381 1,156,719 3,863,100 1,130,447 76,560,086 0 76,560,086 $77,690,533 652,269 (1,546,458) 779,160 (115,029) 2,198,562 2,348,730 2,348,730 4,547,292 23,324,025 0 23,324,025 $27,871,317 11,553 (108,277) 160,500 63,776 (81,108) 0 (81,108) 449,314 0 449,314 $368,206 Augusta State University Annual Financial Report FY 2007 10 Statement of Cash Flows AUGUS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 P arking/T ransport at ion Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from Sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES 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, 2007 $16,965,214 6,824,281 566,549 (21,400,801) (29,614,791) (6,180,813) (268,693) 532,244 2,174,089 2,974,439 243,517 1,822,804 80,690 307,200 (24,974,071) 26,466,011 132,474 1,294,124 27,892,609 2,322,421 124,266 (3,313,081) (325,180) (1,637,309) (2,828,883) 470,916 470,916 560,571 7,810,840 $8,371,411 Augusta State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued AUGUS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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, 2007 ($29,305,957) 3,539,634 (181,476) 75,199 117,576 263,551 145,814 292,007 (6,239) 85,820 ($24,974,071) $39,857 ($1,540,679) Augusta State University Annual Financial Report FY 2007 12 AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations Augusta State University serves the state of Georgia and the Central Savannah River Area by providing its students with academic instruction that is focused on excellence in teaching, advancement of knowledge and enrichment of the community in a climate that fosters humane values and a lifelong love of learning. 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 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 FY2007, Augusta State University is reporting the activity for the Augusta State University Foundation, Inc. and the Augusta State University Athletic Association. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Augusta State University Annual Financial Report FY 2007 13 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 Augusta State University Annual Financial Report FY 2007 14 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $633,553 to Augusta State University. Augusta State University Annual Financial Report FY 2007 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 compensated absences 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 $1,323,059 as of 7-1-2006. For FY2007, $1,016,283 was earned in compensated absences and employees were paid $930,464, for a net increase of $85,819. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,408,878. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Augusta State University Annual Financial Report FY 2007 16 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $319,376 809,817 246,592 $1,375,785 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, 2007 $127,514 4,899,103 38,526 (837,324) $4,227,819 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. Augusta State University Annual Financial Report FY 2007 17 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of the difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Augusta State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $4,712,977 and the bank balance was $5,074,935. Of the University's deposits, $4,974,935 were uninsured. Of these uninsured deposits, $4,974,935 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. B. Investments At June 30, 2007, the carrying value of the University's investments was $4,070,926, 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: Augusta State University Annual Financial Report FY 2007 19 Investment Pools Board of Regents Short-T erm Fund T otal Return Fund Sub T otal Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal T otal Investment Pools $3,546,210 431,493 3,977,703 93,223 93,223 $4,070,926 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 days. Interest rate risk Interest rate risk is the risk that changes in interest rates or 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 2.24 years. Of the University's total investment of $3,546,210 in the Short Term Fund, $3,532,735 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the University's total investment of $431,493 in the Total Return Fund, $122,500 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 does not have a formal policy for managing credit quality risk. Augusta State University Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $476,188 260,214 23,835 1,926 777,314 1,539,477 271,435 $1,268,042 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore P hysical P lant Ot h er T otal $403,546 26,853 13,007 $443,406 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $135,644. Augusta State University Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $5,558,065 75,006 1,741,454 7,374,525 Addi ti o n s $0 3,027,011 3,027,011 Re ductions $0 1,534,881 1,534,881 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 1,792,483 70,126,858 5,374,383 7,536,310 32,404,599 7,401,849 124,636,482 1,416,317 1,457,341 472,480 109,997 3,456,135 1,491,864 123,855 8,580 1,624,299 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 357,832 14,520,926 1,584,762 5,159,803 735,132 6,546,563 28,905,018 71,240 1,713,742 242,003 486,888 961,465 64,296 3,539,634 1,428,811 3,890 8,580 1,441,281 T ot al Capit al Asset s, Being Depreciat ed, Net 95,731,464 (83,499) 183,018 Capit al Asset s, net $103,105,989 $2,943,512 $1,717,899 En di n g B al a n ce 6/30/2007 $5,558,065 75,006 3,233,584 8,866,655 1,792,483 71,543,175 6,831,724 6,516,926 32,280,744 7,503,266 126,468,318 429,072 16,234,668 1,826,765 4,217,880 1,692,707 6,602,279 31,003,371 95,464,947 $104,331,602 Augusta State University Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $3,353,167 95,246 $3,448,413 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $32,732,382 Additions $0 Re du cti on s Ending Balance June 30, 2007 $325,180 $32,407,202 Current Portion $235,854 Other Liabilities Compensated Absences T ot al 1,323,059 1,323,059 1,016,283 1,016,283 930,464 930,464 1,408,878 1,408,878 754,877 754,877 Total Long Term Obligations $34,055,441 $1,016,283 $1,255,644 $33,816,080 $990,731 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $874,919 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. 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. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2035. Expenditures for fiscal year 2007 were $2,126,156 of which $1,637,309 represented interest and $163,667 represented executory costs. Total principal paid on capital leases was $325,180 for the fiscal year ended June 30, 2007. 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, 2007: Augusta State University Annual Financial Report FY 2007 23 Buildings Equipment $30,387,624 200,413 Total Assets Held Under Capital Lease $30,588,037 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. Augusta State University had three capital leases with related entities in the current fiscal year. In August 2004, Augusta State University entered into a capital lease of $20,246,137 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 at 4.72 percent with ASU Foundation, whereby the University leases a student center building for a 29 year term 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, 2007, on these capital leases is $20,546,264 and $11,860,938 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 Instruction Technology (OIIT), a related state agency, on December 1, 2004. The final installment under this agreement was paid in December, 2006. There is no outstanding liability for this lease as of June 30, 2007. OPERATING LEASES Augusta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2010. 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. 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, 2007, were as follows: Augusta State University Annual Financial Report FY 2007 24 Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 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 ropert y and Equipm ent Capit al Leases Operat ing Leases $2,032,754 2,064,169 2,140,170 2,199,881 2,251,741 11,788,068 12,737,277 13,520,430 13,775,124 6,025,515 68,535,129 29,055,721 7,072,206 $32,407,202 $60,541 18,605 8,065 $87,211 Augusta State University's FY2007 expense for rental of real property and equipment under operating leases was $98,121. Augusta State University Annual Financial Report FY 2007 25 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,427,681 $1,359,864 $1,271,794 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 Augusta State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Augusta State University Annual Financial Report FY 2007 26 accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Augusta State University and the covered employees made the required contributions of $1,014,545 (9.66% or 8.13%) and $572,277 (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 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 2007 amounted to $78,206 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 2007 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. 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 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 2007 28 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, 2007. 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, 2007, there were 158 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Augusta State University recognized as incurred $670,780 of expenditures, which was net of $258,994 of participant contributions. Augusta State University Annual Financial Report FY 2007 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support $ 15,363,895 1,444,688 3,645,391 31,813 150,268 104,764 98,787 1,007,859 253,369 $ 5,445 41,227 590 10 28,354 238 14,206 $0 144,185 45,683 3,963 171,650 919 $ 15,577 3,337,031 809,735 5,332 46,006 30,397 1,558,160 216,633 $ 22,100,834 $ 90,070 $ 366,400 $ 6,018,871 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 2,326,597 774,484 (77,527) 6,682 1,844,241 2,514,111 2,345,080 $0 1,669 5,530,123 $0 988,845 246,102 78,959 37,104 540,631 31,494 4,012,216 641,364 $ 15,385,067 14,128,434 7,874,898 303,464 332,255 6,180,813 2,111,405 11,137,977 3,539,634 $ 9,733,668 $ 5,531,792 $ 6,576,715 $ 60,993,947 Student Services Institutional Support $ 150 2,063,313 545,022 18,984 37,538 5,295 42,450 917,430 25,233 $0 $ 3,780,879 1,807,891 245,893 26,303 59,835 942,345 57,036 $ 3,655,415 $ 6,920,182 Augusta State University Annual Financial Report FY 2007 30 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 Foundation is the single member of the following three limited liability companies: 1) ASU Jaguar Student Housing I, LLC which is a limited liability company organized for the purpose of constructing and holding an apartment complex for the benefit of students attending Augusta State University; 2) ASU Jaguar Student Center, LLC which is a limited liability company organized for the purpose of constructing and holding the student center property located on the campus of the University for the benefit of its students; and 3) ASU Jaguar Ventures, LLC which is a limited liability company organized for the purpose of constructing a golf course clubhouse. 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, 2007, the Foundation distributed $ 2,036,068 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, 2007: Cost Fair Value Government and Agency Securities Corporate Stocks and Bonds Mutual Funds Investment Pools Total Investments $4,074,011 9,822,746 2,814,926 1,060,747 $17,772,430 $4,045,997 11,155,531 2,938,217 1,114,937 $19,254,682 Augusta State University Annual Financial Report FY 2007 31 Long-term Liabilities for Component Units: Changes in long-term liabilities for Augusta State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $1,544,695 30,852,518 $32,397,213 $0 $142,812 $1,401,883 $142,000 85,000 30,767,518 255,000 $0 $227,812 $32,169,401 $397,000 Notes and Loans Payable 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 $1,401,883 at June 30, 2007. 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% (6.5593% at June 30, 2007). Interest payments are due monthly. In August 2006, the loan converted 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 which had a fair market value of $2,912,688 at June 30, 2007. Interest expense on this loan for the year ending June 30, 2007 was $108,757. Annual debt service requirements to maturity for the construction loan are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $142,000 142,000 142,000 975,883 $1,401,883 $82,846 90,650 81,111 71,572 $326,179 Total $224,846 232,650 223,111 1,047,455 $1,728,062 Revenue Bonds Payable ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2007: $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, due through February 1, 2035, interest at 4.375% to 5.375%. Interest incurred on the bonds totaled $1,009,587 during the year ending June 30, 2007. The bonds are secured by a deed on the University Village Apartments and repayment responsibility of the bonds lies solely with the ASU Jaguar Student Housing I, LLC. The outstanding principal amount of the bonds as of June 30, 2007 is $19,430,000. Augusta State University Annual Financial Report FY 2007 32 ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2007: $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, due through July 1, 2034, interest at 3.25% to 5%. Interest incurred during the year ending June 30, 2007 totaled $503,864. Interest capitalized to construction in progress totaled $95,174 for the year ending June 30, 2007. The outstanding principal amount of the bonds as of June 30, 2007, including unamortized bond premium is $11,337,518. Annual debt service requirements to maturity for Student Housing and Educational Facilities revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $255,000 260,000 330,000 395,000 465,000 3,125,000 4,630,000 6,580,000 8,390,000 6,145,000 30,575,000 192,518 $30,767,518 Bonds Payable Interest $1,511,442 1,500,987 1,489,487 1,476,049 1,459,549 6,955,794 6,138,037 4,795,013 2,932,113 645,725 28,904,196 $28,904,196 Total $1,766,442 1,760,987 1,819,487 1,871,049 1,924,549 10,080,794 10,768,037 11,375,013 11,322,113 6,790,725 59,479,196 192,518 $59,671,714 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 Athletic Association promotes the educational, athletic, and physical education programs of the University. The Athletic Association leases Forest Hills Golf Club (the Club), an 18-hole golf course, from the Board of Regents of the University System of Georgia for a nominal fee. The Athletic Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the AGA) to manage, operate and maintain Forest Hills Golf Club. The income of the Athletic Association is solely derived from the revenues of the Golf Club and interest income. 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 Athletic Association 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 Augusta State University Annual Financial Report FY 2007 33 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, 2007, the Athletic Association disbursed $0 funds to the University. Completed financial statements for the Athletic 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, 2007: June 30, 2007 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 $3,416,691 930,804 4,347,495 2,437,532 1,909,963 $1,909,963 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Capital Lease Obligations Notes and Loans Payable Total Long Term Liabilities $73,814 1,574,723 $1,648,537 $0 $26,061 8,456 $0 $34,517 $47,753 1,566,267 $1,614,020 $17,430 293,158 $310,588 Capital Lease Obligations: The Athletic Association leases golf course equipment under capital leases that expire in July 2007, October 2007 and April 2010. The terms of the leases require monthly payments totaling $2,521. Augusta State University Annual Financial Report FY 2007 34 Future minimum lease payments are: Year ending June 30: 2008 1 2009 2 2010 3 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $20,490 17,832 14,860 53,182 5,429 $47,753 Notes and Loans Payable: The Athletic Association holds a note payable to First Bank dated September 22, 2005 in the original amount of $35,961, with an interest rate of 8%. The note is payable in monthly installments of $879 through September 20, 2009 and is secured by equipment. The outstanding principal balance of the note is $21,572 as of June 30, 2007. The Athletic Association holds a note payable to Augusta State University Foundation, Inc., a related party, dated May 24, 2005 in the original amount of $1,544,695, secured by first priority security interest. The note is payable in quarterly installments of interest only through May 2006, then in consecutive quarterly payments equal to $35,500, plus accrued interest at the LIBOR rate plus 1.2%, commencing on August 24, 2006, and continuing on the same day each third month thereafter, with the total remaining balance due May 24, 2011. The outstanding principal balance of the note is $1,544,695 as of June 30, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 Total Notes and Loans Payable Notes and Loans Payable Principal Interest Total $293,158 151,918 144,496 976,695 $1,566,267 $181,223 77,066 67,476 382,156 $707,921 $474,381 228,984 211,972 1,358,851 $2,274,188 Augusta State University Annual Financial Report FY 2007 35 BAINBRIDGE COLLEGE Financial Report For the Year Ended June 30, 2007 Bainbridge College Atlanta, Georgia Dr. Thomas A Wilkerson President Natalie Higley Vice President for Fiscal Affairs BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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 Note 16. Special Items ................................................................................................................ 28 Note 17. Component Units .......................................................................................................... 28 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. The College has seen some growth in headcount, as shown by the following chart: Faculty Students Students (Headcount) (FTE) FY2007 FY2006 FY2005 70 2,783 2,085 58 2,475 1,825 49 2,620 1,979 Overview of the Financial Statements and Financial Analysis Bainbridge College is proud to present its financial statements for fiscal year 2007. 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 2007 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 FY2007 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 As s e ts June 30, 2007 $5,256,825 6,472,893 656,158 12,385,876 June 30, 2006 $3,494,261 5,986,633 615,920 10,096,814 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,942,897 177,411 2,120,308 1,599,994 177,399 1,777,393 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 6,472,893 586,433 98,975 3,107,267 $10,265,568 5,986,633 546,054 96,669 1,690,065 $8,319,421 The total assets of the institution increased by $2,289,062. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $486,260 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $342,915. The combination of the increase in total assets of $2,289,062 and the increase in total liabilities of $342,915 yields an increase in total net assets of $1,946,147. The increase in total net assets is primarily in the categories of Invested in Capital Assets, net of debt, in the amount of $486,260 and Unrestricted Net Assets in the amount of $1,417,202. Bainbridge College Annual Financial Report FY2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $11,323,426 18,348,411 (7,024,985) 8,691,906 1,666,921 279,226 1,946,147 8,319,421 0 8,319,421 $10,265,568 $9,122,485 15,310,908 (6,188,423) 7,320,911 1,132,488 1,002,363 2,134,851 6,184,570 0 6,184,570 $8,319,421 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 FY2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s and Special It em St at e Special It em T ot al Capit al Gift s and Grant s and Special It em T ot al Revenues June 30, 2007 $2,039,717 8,074,216 326,087 846,092 37,314 11,323,426 8,588,452 29,500 73,000 954 8,691,906 230,931 48,295 279,226 $20,294,558 June 30, 2006 $1,731,968 6,023,582 246,523 964,908 155,504 9,122,485 7,300,821 0 34,117 (14,027) 7,320,911 1,002,363 0 1,002,363 $17,445,759 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $7,735,491 1,082,691 1,095,474 2,604,150 1,557,316 3,367,698 887,284 18,307 18,348,411 0 $18,348,411 June 30, 2006 $6,862,722 814,756 933,930 1,825,948 932,614 2,928,594 822,526 189,818 15,310,908 0 $15,310,908 Operating revenues increased by $2,200,941 in fiscal 2007. The increase was primarily driven by Tuition & Fees, which increased 18% and Grants and Contracts, which increased 34%. Bainbridge College Annual Financial Report FY2007 4 The Auxiliary revenue decrease of ($118,816) is a result of the changing environment of the outsourcing of the College Bookstore. In the process of outsourcing the Bookstore, the store was closed periodically as the change over occurred. In addition, the College will no longer see a revenue stream from the Bookstore in the form of sales, but instead will receive a quarterly commission payment from the management of the store. Non-operating revenues and expenses increased by $1,370,995 for the year primarily due to an increase of $1,287,631 in State Appropriations. The compensation and employee benefits category increased by $1,394,253 and primarily affected the Instruction and Academic Support categories. The increase reflects the addition of faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $136,253 during the past year. The increase was primarily associated with the addition of the new site in Early County and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Bainbridge College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($7,603,895) 8,751,934 (717,045) 32,621 463,615 1,916,949 $2,380,564 June 30, 2006 ($6,015,171) 7,300,985 (705,952) (577,956) 1,906 1,915,043 $1,916,949 Bainbridge College Annual Financial Report FY2007 5 Capital Assets Bainbridge College absorbed the Early County Site of the Albany Technical College during the fiscal year. The capital asset transfer between the campuses is being phased, with the Equipment transfer occurring as of July 1, 2006 and the Land and Building transfers to occur in fiscal 2008. The net book value of the Equipment transfer was $48,295. This amount is reported as a Special Item on the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flows. See Note 16 for additional information. 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 $392,819 of which $215,408 was reflected as current liability at June 30, 2007. 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 FY2007. The Bainbridge College Foundation had endowment investments of $107,693 as of October 31, 2006. Details are available in Note 1, Summary of Significant Accounting Policies and Note 17, 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. Thomas A. Wilkerson, President Bainbridge College Bainbridge College Annual Financial Report FY2007 6 Statement of Net Assets BAINBRIDGE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest m ent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Inventories (note 4) T ot al Current Asset s Noncurrent Asse ts Invest m ent s (including Real Est at e) Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Deposit s Deferred Revenue (not e 7) Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n dable E x p e n dable Unrest rict ed TO TAL NET AS S ETS Bain bridge C olle ge $2,380,564 512,530 2,355,132 8,599 5,256,825 652,452 3,706 6,472,893 7,129,051 12,385,876 159,393 77,621 (53) 1,195,476 295,052 215,408 1,942,897 177,411 177,411 2,120,308 6,472,893 586,433 98,975 3,107,267 $10,265,568 C om pone nt Un i t B a i n bri dg e C olle ge Fou n dati on $39,492 107,693 147,185 0 147,185 0 0 0 107,693 39,492 $147,185 Bainbridge College Annual Financial Report FY2007 7 Statement of Revenues, Expenses and Changes in Net Assets BAINBRIDGE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore Food Services P arking/T ransport at ion Ot her Operat ing Revenues T ot al Operat ing Revenues EXPENS ES Operat ing Expenses Salaries: Facult y St aff Employee Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P ayment s t o or on behalf of Bainbridge College T ot al Operat ing Expenses Operat ing Incom e (loss) B a i n bri dg e College $4,592,489 (2,552,772) 6,351,013 1,640,957 82,246 326,087 80 767,551 14,629 63,912 37,234 11,323,426 4,688,821 3,895,223 2,244,120 74,795 176,094 3,380,682 389,336 3,065,145 434,195 18,348,411 (7,024,985) C om pone nt Unit B a i n bri dg e C olle ge Fou n dati on $0 3,381 295 3,676 759 759 2,917 Bainbridge College Annual Financial Report FY2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued BAINBRIDGE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 B a i n bri dg e C olle ge C om pone nt Unit B a i n bri dge C olle ge Fou n dati on NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriations Gift s Investment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, losses or special it em Capit al Grants and Gift s St at e Special It em Addit ions t o permanent endowments T ot al Ot her Revenues Increase in Net Asset s NET AS S ETS Net Assets-beginning of year, as originally reported P rior Year Adjust ment s Net Assets-beginning of year, restated Net Assets-End of Year 8,588,452 29,500 73,000 954 8,691,906 1,666,921 230,931 48,295 279,226 1,946,147 8,319,421 0 8,319,421 $10,265,568 345 345 3,262 31,150 31,150 34,412 112,773 0 112,773 $147,185 Bainbridge College Annual Financial Report FY2007 9 Statement of Cash Flows BAINBRIDGE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 Auxiliary Ent erprise Charges: Bookst ore Food Services P arking/T ransport at ion 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 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, 2007 $2,144,747 7,216,141 326,087 (5,928,334) (8,513,734) (3,380,682) 141 1,143,951 (10,748) 63,912 (665,376) (7,603,895) 8,588,452 133,028 30,454 8,751,934 230,931 (947,976) (717,045) 32,621 32,621 463,615 1,916,949 $2,380,564 Bainbridge College Annual Financial Report FY2007 10 Statement of Cash Flows, Continued BAINBRIDGE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Change in fair value of invest m ent s recognized as a com ponent of int erest incom e Special It em - Albany T echnical College Early Count y cam pus equipm ent t ransfer June 30, 2007 ($7,024,985) 434,195 (1,712,951) 406,619 7,499 141 (7,220) 283,819 (36,539) 45,527 ($7,603,895) $40,379 $48,295 Bainbridge College Annual Financial Report FY2007 11 BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Bainbridge College is reporting the activity for the Bainbridge College Foundation. 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 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 FY2007 12 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. Bainbridge College Annual Financial Report FY2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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. Bainbridge College Annual Financial Report FY2007 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 compensated absences 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 $347,293 as of 7-1-2006. For FY2007, $349,915 was earned in compensated absences and employees were paid $304,389, for a net increase of $45,526. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $392,819. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Bainbridge College Annual Financial Report FY2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $27,101 5,705 66,169 $98,975 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, 2007 $2,059 1,751,433 21,099 1,332,676 $3,107,267 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 Bainbridge College Annual Financial Report FY2007 16 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. In prior year financial statements, a portion of tuition and fee waivers granted by the College were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Bainbridge College Annual Financial Report FY2007 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, 2007, the carrying value of deposits was $2,375,714 and the bank balance was $2,706,793. Of the College's deposits, $2,606,793 were uninsured. Of these uninsured deposits, $2,606,793 were collateralized with securities held by the financial institution's trust department or agent in the College's name. Bainbridge College Annual Financial Report FY2007 18 B. Investments At June 30, 2007, the carrying value of the College's investments was $652,452, 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 $652,452 T otal Investment Pools $652,452 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/searchRpts.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 Balanced Income Fund is 9.35 years. Of the College's total investment of $652,452 in the Balanced Income Fund, $393,820 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 since all investments are in the Board of Regents Investment Pool. Bainbridge College Annual Financial Report FY2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $5,329 13,241 512,530 2,377,609 2,908,709 41,047 $2,867,662 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 P hysical P lant T otal $8,599 $8,599 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, 2007. At June 30, 2007, no provision has been made for uncollectible loans. Bainbridge College Annual Financial Report FY2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Library Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $99,269 1,384,972 1,484,241 Special Item Transfer $0 0 6,986,880 332,813 1,740,930 961,725 10,022,348 234,440 234,440 3,328,195 245,866 1,104,139 841,756 5,519,956 4,502,392 $5,986,633 186,145 186,145 48,295 $48,295 Additions $0 908,647 908,647 Reductions $0 596,287 596,287 400,513 131,938 42,404 574,855 38,489 209,140 247,629 211,271 16,641 176,962 29,321 434,195 140,660 $1,049,307 23,434 209,140 232,574 15,055 $611,342 Ending Balance 6/30/2007 $99,269 1,697,332 1,796,601 7,387,393 332,813 2,068,819 794,989 10,584,014 3,539,466 262,507 1,443,812 661,937 5,907,722 4,676,292 $6,472,893 Bainbridge College Annual Financial Report FY2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $1,008,207 187,269 $1,195,476 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $347,293 $347,293 Additions $349,915 $349,915 Reductions Ending Balance June 30, 2007 $304,389 $392,819 $304,389 $392,819 Current Portion $215,408 $215,408 Note 9. Significant Commitments There were no significant unearned, outstanding construction or renovation contracts as of June 30, 2007. Note 10. Lease Obligations Bainbridge College has no lease obligations as of June 30, 2007. Bainbridge College had no expense for rental of real property and equipment under operating leases for the year ended June 30, 2007. Bainbridge College Annual Financial Report FY2007 22 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $492,798 $421,648 $369,397 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. Bainbridge College Annual Financial Report FY2007 23 Funding Policy Bainbridge College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $155,781 (9.66% or 8.13%) and $86,922 (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 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 2007 amounted to $51,781 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Bainbridge College Annual Financial Report FY2007 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. 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 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. Bainbridge College Annual Financial Report FY2007 25 Litigation, claims and assessments filed against Bainbridge College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 40 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Bainbridge College recognized as incurred $214,510 of expenditures, which was net of $67,701 of participant contributions. Bainbridge College Annual Financial Report FY2007 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion $ 4 ,6 47 ,8 21 9 11,93 3 1,20 6 ,45 4 9 7 ,33 4 28 ,9 91 60 8 ,66 5 23 4 ,29 3 $ 7 ,7 35 ,4 91 Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es $ 41,00 0 6 16 ,9 66 158 ,7 05 $0 6 58 ,6 35 170 ,8 74 12 ,69 6 4 ,4 87 2 40 ,5 31 8 ,3 06 19 ,8 82 15 ,9 74 8 ,5 93 2 10 ,9 48 10 ,5 68 $ 1,0 82 ,6 91 $ 1,0 95 ,4 74 Inst it ut ional Sup p o r t $0 1,0 9 4,6 8 3 5 0 8,5 0 8 7 4,7 9 5 4 4,5 7 3 4 9,312 6 8 4,6 4 9 14 7,6 3 0 $ 2,60 4,15 0 Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses P lant Operat ions & Maintenance Functional Clas s ification FY2007 Sc h o lar sh ip s & Fellowships A ux ilia r y Ent erprises Unallocat ed E x p e n se s $0 5 63 ,167 186 ,134 (6 ,2 15 ) 1,6 00 2 97 ,3 47 5 02 ,2 5 1 13 ,0 32 $0 2 ,99 0 3,36 4 ,70 8 $0 49 ,8 3 9 10 ,4 5 5 6 ,2 15 9 606 8 18 ,10 1 2,0 5 9 $0 18 ,3 07 $ 1,5 57 ,3 16 $ 3,36 7 ,69 8 $ 8 8 7,2 8 4 $ 18 ,30 7 T otal E x p e n se s $ 4 ,6 8 8,8 2 1 3 ,8 95 ,2 23 2 ,2 4 4,120 74 ,7 9 5 176 ,0 94 3 ,3 80 ,6 82 3 89 ,3 36 3 ,0 6 5,145 4 3 4,195 $ 18,34 8,411 Bainbridge College Annual Financial Report FY2007 27 Note 16. Special Item Bainbridge College absorbed the Early County Site of the Albany Technical College during the fiscal year and as a result, the Equipment assets for the Early County Campus were transferred to Bainbridge College as of July 1, 2006. The Equipment capital assets transferred had a value of $234,440, with an accumulated depreciation balance of $186,145 as of July 1, 2006. The net transfer to Bainbridge College was $48,295. This amount is reported as a Special Item on the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flows. See Note 6 Capital Assets for additional information. Note 17. 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 sevenmember 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 November 1 through October 31. The Foundation reported activity through June 30, 2006 in Bainbridge College's FY2006 Annual Financial Report. This statement represents activity for the period July 1, 2006 through October 31, 2006. During the period July 1, 2006 through October 31, 2006, the Foundation distributed $759 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 2500 E. Shotwell Street, Bainbridge, GA 39819. Investments for Component Units: Bainbridge College Foundation holds endowment investments in the amount of $107,693. 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 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve. Bainbridge College Annual Financial Report FY2007 28 Investments are comprised of the following amounts at October 31, 2006: Certificates of Deposit Total Investments Cost $107,693 $107,693 Fair Value $107,693 $107,693 Bainbridge College Annual Financial Report FY2007 29 CLAYTON STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 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 2007 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 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 over 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 culminated the year with the Laker women's basketball team reaching the NCAA Division II "Final Four". FY2007 FY2006 FY2005 Faculty 129 141 140 Students (Headcount) 6,081 6,212 5,954 Students (FTE) 4,919 4,967 4,673 During the 2007 year, Clayton State University had two new graduate degree programs approved: the Master of Health Administration (MHA) and the Master of Business Administration (MBA). Classes for these programs will begin in FY08. This brings the total number of programs for Clayton State University to four Master degree programs and thirtyseven undergraduate majors available. On June 12, 2007 the University System of Georgia Board of Regents approved the lease for land on the Clayton State University campus to build a student housing unit and a student activity center. The property, which belongs to the University System of Georgia, will be leased to Clayton State University Foundation, Inc. for the purpose of constructing the housing facility and the student activity center. Construction will begin this fall and if all goes according to plan will be completed for the fall term, 2008. The 451-bed on-campus housing facility will be the first-ever for the University and the student activity center will house a recreation center and student union. It is expected that this facility will become the hub of student activities on-campus. The Student Activity Center, a 62,000 square foot building, will house a two-court gymnasium, fitness areas (cardio vascular equipment and free weights) and aerobics studios. In addition, the facility will have meeting rooms for student organizations and clubs, a ballroom, game room spaces, lounge/study areas and a caf. Clayton State University Annual Financial Report FY 2007 1 The addition of these two buildings will serve to augment the total college experience for students and enhance the already exceptional reputation of excellence in education, the arts and athletics at Clayton State University. Overview of the Financial Statements and Financial Analysis Clayton State University is proud to present its financial statements for fiscal year 2007. 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 2007 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. Clayton State University Annual Financial Report FY 2007 2 Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $8,097,814 53,315,488 1,084,204 62,497,506 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,986,832 863,017 4,849,849 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 As s e ts 53,315,488 1,076,036 12,333 0 3,243,800 $57,647,657 June 30, 2006 $5,956,664 55,050,334 991,335 61,998,333 3,243,952 1,077,954 4,321,906 54,634,412 983,115 22,263 741,425 1,295,212 $57,676,427 The total assets of the institution increased by $499,173. A review of the Statement of Net Assets will reveal that the increase was due to a decrease of ($1,734,846) in Capital Assets, net, offset by increases in Cash and Cash Equivalents, Accounts Receivables and Inventories. The total liabilities for the year increased $527,943. The combination of the increase in total assets of $499,173 and the increase in total liabilities of $527,943 yields a decrease in total net assets of ($28,770). 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 FY 2007 3 Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $34,194,551 58,608,764 (24,414,213) 23,670,322 (743,891) 715,121 (28,770) 57,676,427 0 57,676,427 $57,647,657 $33,752,841 55,275,761 (21,522,920) 20,847,424 (675,496) 1,363,855 688,359 56,988,068 0 56,988,068 $57,676,427 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a relatively flat year with a small 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: Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest m ent Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $14,249,066 10,427,263 2,555,327 6,785,578 177,317 34,194,551 23,038,790 253,435 436,933 (39,525) 23,689,633 715,121 715,121 $58,599,305 June 30, 2006 $14,273,124 9,232,655 3,003,922 6,794,322 448,818 33,752,841 21,783,648 937,788 178,495 (2,043,673) 20,856,258 1,363,855 1,363,855 $55,972,954 Clayton State University Annual Financial Report FY 2007 4 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $20,977,173 6,171 759,098 7,611,135 4,806,133 7,461,673 4,251,701 4,583,286 6,233,402 1,918,992 58,608,764 19,311 $58,628,075 June 30, 2006 $20,740,687 838,887 6,630,332 4,530,290 8,547,799 4,528,519 3,947,619 3,651,701 1,859,927 55,275,761 8,834 $55,284,595 Operating revenues increased by $441,710 in fiscal 2007; mostly due to increase in grants and contracts along with the increase in tuition and fee revenue. Nonoperating revenues and expenses increased by $2,822,898 for the year partially due to an increase of $1,255,142 in State Appropriations and a decrease in other nonoperating expenses. Provost expenses of $899,698 were reclassified from Institutional Support to Academic Support. Also, the Avaya Telecommunications equipment lease payment was allocated to functional categories in fiscal 2007. In fiscal 2006, this payment was categorized entirely as Institutional Support. The effect of this was an increase in Academic Support expenses between fiscal 2006 and 2007 and a decrease in Institutional Support. The compensation and employee benefits category increased by $1,053,681, a 3% increase. The increase reflects the merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($494,562) during the past year. The decrease was primarily associated with the stabilization of natural gas costs in the winter of fiscal year 2007 along with conservation efforts on behalf of the University. 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 Clayton State University Annual Financial Report FY 2007 5 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($21,991,680) 23,201,194 (652,372) (631,052) (73,910) 4,573,573 $4,499,663 June 30, 2006 ($19,859,549) 21,805,677 (1,764,983) 178,495 359,640 4,213,933 $4,573,573 Capital Assets The University had no significant capital asset additions for facilities in fiscal year 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 Clayton State University had Long-Term Debt and Liabilities of $1,680,905 of which $817,888 was reflected as current liability at June 30, 2007. 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, Clayton State University has included the financial statements and notes for all required component units for FY2007. The Walter and Emilie Spivey Foundation had investments of $7.5 million as of December 31, 2006. The Clayton State University Foundation, Inc. had investments of $4.5 million as of June 30, 2007. Clayton State University Annual Financial Report FY 2007 6 Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant negative 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 dormitory space the University anticipates increased enrollment along with a higher rate of graduation and retention. The University will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Thomas K. Harden, President Clayton State University Clayton State University Annual Financial Report FY 2007 7 Statement of Net Assets CLAYTON STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 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 Inventories (note 4) Prepaid items T otal Current Assets Noncurre nt Asse ts Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS LIAB ILITIES C urre nt Liabilitie s Accounts Payable Salaries Payable Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) T otal Current Liabilities Noncurre nt Liabilitie s 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 Un rest rict ed TO TAL NET ASSETS Clayton State Unive rsity $4,491,663 287,486 1,696,205 799,445 711,795 111,220 8,097,814 8,000 1,067,984 8,220 53,315,488 54,399,692 62,497,506 1,712,089 756 1,379,148 13,752 63,199 817,888 3,986,832 863,017 863,017 4,849,849 53,315,488 1,076,036 12,333 3,243,800 $57,647,657 C ompone nt Un i t The W alte r & Emilie Spive y Fo u n da ti o n C ompone nt Un i t Clayton State Unive rsity Foundation, Inc. $171,456 $583,604 169,795 171,456 7,479,018 20,331 147,575 7,646,924 7,818,380 56,000 1,830 811,229 4,332,905 788,405 9,400 5,130,710 5,941,939 18,970 0 0 0 0 147,575 7,670,805 $7,818,380 788,405 807,375 0 0 807,375 788,405 1,467,808 3,577,266 (698,915) $5,134,564 Clayton State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets CLAYTON STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 Component Unit Clayton State Uni ve rs i ty The Walter & Emilie Spivey Foundation REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises 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 Other Personal Services 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) $17,700,183 $0 (3,451,117) 8,673,578 1,175,037 578,648 2,555,327 16,681 3,556,526 136,123 302,110 443,076 2,043,322 304,421 160,636 34,194,551 0 13,581,130 16,042,288 7,476,378 233,983 463,453 5,603,995 1,273,383 11,333,465 2,600,689 58,608,764 (24,414,213) 28,545 467,397 495,942 (495,942) Component Unit Clayton State Uni ve rs i ty Foundation, Inc. $0 575,496 85,128 660,624 179,192 151,259 335,312 665,763 (5,139) Clayton State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued CLAYTON STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 C ompone n t Unit Clayton State Uni ve rs i ty The Walter & Emilie Spivey Foundation Component Unit Clayton State Uni ve rs i ty 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 23,038,790 253,435 436,933 (19,311) (39,525) 23,670,322 (743,891) 715,121 715,121 (28,770) 57,676,427 57,676,427 $57,647,657 860,012 860,012 364,070 0 364,070 7,454,310 7,454,310 $7,818,380 243,497 243,497 238,358 71,353 71,353 309,711 4,824,853 4,824,853 $5,134,564 Clayton State University Annual Financial Report FY 2007 10 Statement of Cash Flows CLAYTON S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: 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 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, 2007 $14,569,234 10,429,266 2,560,128 (20,028,813) (29,773,573) (5,603,995) 3,644,980 112,500 295,429 395,103 1,988,801 (104,921) (475,819) (21,991,680) 23,038,790 (117,923) 280,327 23,201,194 715,121 (932,260) (415,922) (19,311) (652,372) 344,063 (975,115) (631,052) (73,910) 4,573,573 $4,499,663 Clayton State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued CLAYTON S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) BY O PERATING AC TIVITIES : Operating Income (loss) Adjust ment s to Reconcile Net Income (loss) to Net Cash P rovided (used) by Operating Activities Dep reciat io n Change in Assets and Liabilities: Receivables, net In v en t o ries Prepaid Items Notes Receivable, Net Account s Payable Deferred Revenue Other Liabilit ies Net Cash P rovided (used) by Operating Act ivit ies ** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS Change in fair value of investments recognized as a component of interest income June 30, 2007 ($24,414,213) 2,600,689 (789,578) (369,154) (81,212) 600,635 (83,405) 513,234 31,324 ($21,991,680) $92,870 Clayton State University Annual Financial Report FY 2007 12 CLAYTON STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Clayton State University is reporting the activity for the Walter and Emilie Spivey Foundation and the Clayton State University Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Clayton State University Annual Financial Report FY 2007 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. The University, as required by Generally Accepted Accounting Principles (GAAP) reports summer school revenues and expenses between fiscal years. 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. Clayton State University Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred no capital additions to Clayton 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 Clayton State University Annual Financial Report FY 2007 15 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences 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 in the amount of $1,649,581 as of 7-1-2006. For FY2007, $1,198,759 was earned in compensated absences and employees were paid $1,167,435, for a net increase of $31,324. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,680,905. 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, 2007 Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable $8,607 3,726 $12,333 Clayton State University Annual Financial Report FY 2007 16 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $1,122,114 1,419,215 702,471 $3,243,800 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: 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. Clayton State University Annual Financial Report FY 2007 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal year 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in better gauge of the year over year change. Clayton State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $3,860,171 and the bank balance was $4,393,326. Of the University's deposits, $4,293,326 were uninsured and uncollateralized. B. Investments At June 30, 2007, the carrying value of the University's investments was $1,698,970, 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: Clayton State University Annual Financial Report FY 2007 19 Investment Pools Board of Regents Short-T erm Fund T otal Return Fund Sub T otal $299,056 1,068,036 1,367,092 Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal 331,878 331,878 T otal Investment Pools $1,698,970 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 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 2.24 years. Of the University's total investment of $ 299,056 in the Short Term Fund, $297,920 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the University's total investment of $1,068,036 in the Total Return Fund, $303,215 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 does not have a formal policy for managing credit quality risk. Clayton State University Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $609,061 53,625 287,486 799,445 1,198,919 2,948,536 165,400 $2,783,136 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore T otal $711,795 $711,795 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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. This loan fund has been closed by the Federal program administrators. The University had $0 in allowance for uncollectible loans at June 30, 2007. Clayton State University Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $640,501 57,838 698,339 64,017,373 758,454 6,535,981 0 4,886,423 76,198,231 12,922,266 518,276 4,724,426 3,681,268 21,846,236 54,351,995 $55,050,334 Addi ti o n s $0 364,833 364,833 Re ductions $0 0 266,854 300,573 567,427 1,931,662 22,867 404,365 241,795 2,600,689 (2,033,262) ($1,668,429) 961,926 10,243 972,169 895,509 10,243 905,752 66,417 $66,417 En di n g B al a n ce 6 /3 0 /2 0 0 7 $640,501 422,671 1,063,172 64,017,373 758,454 5,840,909 0 5,176,753 75,793,489 14,853,928 541,143 4,233,282 3,912,820 23,541,173 52,252,316 $53,315,488 Clayton State University Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $1,135,314 243,834 $1,379,148 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $415,922 1,649,581 $2,065,503 Additions $0 1,198,759 $1,198,759 Reductions Ending Balance June 30, 2007 $415,922 $0 1,167,435 1,680,905 $1,583,357 $1,680,905 Current Portion $0 817,888 $817,888 Note 9. Significant Commitments The University had no significant outstanding, construction or renovation contracts executed as of June 30, 2007. Note 10. Lease Obligations Clayton State University has no capital or operating lease obligation as of June 30, 2007, as an equipment capital lease was paid off during the fiscal year. Expenditures for fiscal year 2007 related to the capital lease were $435,233 of which $19,311 represented interest. Total principal paid on the capital lease was $415,922 for the fiscal year ended June 30, 2007. Clayton State University had no expense for rental of real property and equipment under operating leases in FY2007. Clayton State University Annual Financial Report FY 2007 23 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,331,801 $1,309,323 $1,126,247 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. Clayton State University Annual Financial Report FY 2007 24 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $984,737 (9.66% or 8.13%) and $561,310 (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 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 2007 amounted to $192,054 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. Clayton State University Annual Financial Report FY 2007 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. 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Clayton State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are 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. Clayton State University Annual Financial Report FY 2007 26 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, 2007. 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, 2007, there were 126 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Clayton State University recognized as incurred $534,563 of expenditures, which was net of $175,580 of participant contributions. Clayton State University Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 13,343,296 2,080,311 3,270,291 187,190 240,392 11,283 1,797,711 46,699 $ 70 671 26 570 4,834 $ 56,597 527,318 137,087 6,771 767 30,558 $ 165,860 4,098,615 970,112 112,323 24,550 12,979 1,905,497 321,199 $0 2,852,823 631,698 60,097 450 3,015 1,241,927 16,123 $ 15,307 3,777,443 1,761,889 233,983 41,110 4,000 55,638 1,372,879 199,424 $ 20,977,173 $ 6,171 $ 759,098 $ 7,611,135 $ 4,806,133 $ 7,461,673 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Total Expenses $0 1,304,273 386,923 (41,610) 4,388 1,187,285 1,396,616 13,826 $0 4,583,286 $0 1,400,834 318,352 41,610 51,574 750,747 2,416 3,583,443 84,426 $0 1,918,992 $ 13,581,130 16,042,288 7,476,378 233,983 463,453 5,603,995 1,273,383 11,333,465 2,600,689 $ 4,251,701 $ 4,583,286 $ 6,233,402 $ 1,918,992 $ 58,608,764 Clayton State University Annual Financial Report FY 2007 28 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. Amounts reported due to or due from the University do not agree because of the different fiscal year ends. During the year ended December 31, 2006, the Foundation distributed $467,397 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 and Emilie Spivey Foundation holds investments in the amount of $7.5 million. Investments consist of marketable securities within an investment pool and real property. Investments are comprised of the following amounts at December 31, 2006: Real Estate Investm ent Pools Suntrust Investm ent Pool Total Investm ents Cost $137,518 7,341,500 $7,479,018 Fair Value $137,518 7,341,500 $7,479,018 Clayton State University Annual Financial Report FY 2007 29 Capital Assets for Component Units: The Walter & Emilie Spivey Foundation held the following Capital Assets as of December 31, 2006: December 31, 2006 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated 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 $139,882 139,882 15,384 15,384 7,691 7,693 $147,575 Clayton State University Foundation, Inc. Clayton State University Foundation, Inc. (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, 2007, the Foundation distributed $335,312 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 FY 2007 30 Investments for Component Units: Clayton State University Foundation, Inc. holds endowment and other investments in the amount of $4.5 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Real Estate Investment Pools BOR Short Term Fund Total Return Fund Total Investments Cost $1,836,498 169,580 2,365,657 $4,371,735 Fair Value $1,836,498 169,795 2,496,407 $4,502,700 Capital Assets for Component Units: Clayton State University Foundation, Inc. held $788,405 in Construction Work In Progress as of June 30, 2007. Clayton State University Annual Financial Report FY 2007 31 COASTAL GEORGIA COMMUNITY COLLEGE Financial Report For the Year Ended June 30, 2007 Coastal Georgia Community College Brunswick, Georgia Dr. Dorothy L. Lord President C. Thomas Saunders Vice President for Business Affairs COASTAL GEORGIA COMMUNITY COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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 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) FY2007 87 3,054 2,175 FY2006 85 3,063 2,144 FY2005 73 2,879 2,032 Overview of the Financial Statements and Financial Analysis Coastal Georgia Community College is proud to present its financial statements for fiscal year 2007. 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 2007 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. Coastal Georgia Community College Annual Financial Report FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $2,142,987 28,627,183 98,739 30,868,909 June 30, 2006 $1,801,864 27,652,911 89,383 29,544,158 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,287,652 181,293 1,468,945 1,125,378 133,636 1,259,014 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 28,627,183 68,879 48,935 654,967 $29,399,964 27,652,911 68,879 44,098 519,256 $28,285,144 The total assets of the institution increased by $1,324,751. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $974,272 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents. The total liabilities for the year increased by $209,931. The combination of the increase in total assets of $1,324,751 and the increase in total liabilities of $209,931 yields an increase in total net assets of $1,114,820. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $974,272. Coastal Georgia Community College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $8,354,116 22,505,573 (14,151,457) 13,181,531 (969,926) 2,084,746 1,114,820 28,285,144 28,285,144 $29,399,964 $7,882,337 20,833,237 (12,950,900) 12,031,555 (919,345) 1,125,016 205,671 28,079,473 28,079,473 $28,285,144 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $3,056,829 3,402,490 366,826 1,471,063 56,908 8,354,116 10,048,197 2,614,895 444,151 74,288 13,181,531 2,084,746 2,084,746 $23,620,393 June 30, 2006 $2,799,364 3,328,596 301,698 1,405,277 47,402 7,882,337 9,331,822 2,487,097 158,593 60,886 (6,843) 12,031,555 1,125,016 1,125,016 $21,038,908 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Expenses June 30, 2007 $9,246,490 41,384 1,017,746 1,504,387 3,170,375 3,303,375 2,167,188 1,454,093 600,535 $22,505,573 June 30, 2006 $8,610,046 161,595 1,028,184 1,445,016 2,837,745 2,754,110 1,940,532 1,456,075 599,934 $20,833,237 Operating revenues increased by $471,779 in fiscal 2007. Tuition & Fees increased 9% while sales and services increased 22% due to increased Continuing Education enrollment. Grants and Contracts and Other Revenue increased slightly. The Auxiliary revenue increase of $65,786 is a result of higher bookstore sales. Coastal Georgia Community College Annual Financial Report FY 2007 4 Nonoperating revenues and expenses increased by $1,149,976 for the year primarily due to an increase of $716,375 in State Appropriations. The compensation and employee benefits category increased by $721,609 and primarily affected the Instruction category. The increase reflects the addition of faculty and staff, merit increases and an increased cost of health insurance for the employees of the institution. Utilities modestly increased by $1,554 during the past year. Statement of Cash Flows The final statement presented by the Coastal Georgia Community College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($12,460,740) 13,269,357 (425,612) 65,790 448,795 653,122 $1,101,917 June 30, 2006 ($11,465,181) 11,975,887 (530,598) 60,957 41,065 612,057 $653,122 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2007. The construction of the temporary classroom/warehouse building was completed and placed into service late in fiscal year 2007. Subsequently, renovation of the Physical Education building began and is reflected in Construction Work-In-Progress. Coastal Georgia Community College Annual Financial Report FY 2007 5 Construction Work-In-Progress also reflects the beginning of Library restroom renovations and Infrastructure improvements in the electrical distribution and cooling systems. 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 $603,064 of which $421,771 was reflected as current liability at June 30, 2007. 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, Coastal Georgia Community College has included the financial statements and notes for all required component units for FY2007. The Coastal Georgia Community College Foundation, Inc. had investments of $7.5 million as of December 31, 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. 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 2007 6 Statement of Net Assets COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Un i t AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Cont ribut ions Receivable Inventories (note 4) P repaid it ems T ot al Current Asset s Noncurrent Asse ts Invest m ent s (including Real Est at e) Not es Receivable, net Cont ribut ions Receivable Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Deferred Revenue (not e 7) Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n dable E x p e n dable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS C oastal Ge orgia C ommunity C olle ge C oastal Georgia C om m u n ity C olle ge Fou n dati on , In c. $1,101,917 141,650 601,804 293,512 4,104 2,142,987 97,102 1,637 28,627,183 28,725,922 30,868,909 298,076 294,560 35,523 237,722 421,771 1,287,652 181,293 181,293 1,468,945 28,627,183 68,879 48,935 654,967 $29,399,964 $1,059,229 69,451 1,128,680 7,482,670 8,586 7,491,256 8,619,936 0 0 0 4,284,665 1,212,101 849,351 2,273,819 $8,619,936 Coastal Georgia Community College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e n t Un it REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P aym ent s t o or on behalf of Coast al Georgia Com m unit y College T ot al Operat ing Expenses Operat ing Income (loss) C oastal Georgia C om m u n i ty College C oastal Ge orgia C ommunity College Fou n dati on , In c. $5,077,694 (2,020,865) 3,402,490 366,826 22,346 1,257,842 197,927 15,294 34,562 8,354,116 4,219,163 6,245,364 2,898,312 116,675 208,879 2,257,796 731,494 4,291,804 1,536,086 22,505,573 (14,151,457) $0 574,082 268,159 842,241 31,773 656,559 688,332 153,909 Coastal Georgia Community College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e n t Un it C oastal Georgia C om m u n ity C olle ge C oastal Ge orgia C ommunity C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 10,048,197 836,403 1,139,440 639,052 444,151 74,288 13,181,531 (969,926) 2,084,746 2,084,746 1,114,820 28,285,144 28,285,144 $29,399,964 469,815 469,815 623,724 2,185 2,185 625,909 7,994,027 7,994,027 $8,619,936 Coastal Georgia Community College Annual Financial Report FY 2007 9 Statement of Cash Flows COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 Em ployees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Bookst ore 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 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 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, 2007 $3,002,718 3,522,029 366,826 (8,232,889) (10,386,142) (2,257,796) (1,509) 652 1,153,891 194,891 15,294 161,295 (12,460,740) 10,048,197 162,115 3,059,045 13,269,357 2,066,869 (2,492,481) (425,612) 77,509 (11,719) 65,790 448,795 653,122 $1,101,917 Coastal Georgia Community College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 Change in fair value of invest ment s recognized as a component of int erest income Gift reducing proceeds of Gift s and Grant s received for ot her t han capit al purposes Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($14,151,457) 1,536,086 130,927 (27,075) 3,819 (857) 33,703 (53,076) 4,407 62,783 ($12,460,740) ($3,221) ($2,362) ($17,877) Coastal Georgia Community College Annual Financial Report FY 2007 11 COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Coastal Georgia Community College is reporting the activity for the Coastal Georgia Community College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Coastal Georgia Community College Annual Financial Report FY 2007 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 Coastal Georgia Community College Annual Financial Report FY 2007 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 grants 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $17,877 to Coastal Georgia Community College. Coastal Georgia Community College Annual Financial Report FY 2007 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 compensated absences 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 $540,281 as of 7-1-2006. For FY2007, $467,486 was earned in compensated absences and employees were paid $404,703, for a net increase of $62,783. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $603,064. 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. Coastal Georgia Community College Annual Financial Report FY 2007 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: Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $42,304 6,631 $48,935 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $44,143 349,351 21,000 240,473 $654,967 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Coastal Georgia Community College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Coastal Georgia Community College Annual Financial Report FY 2007 16 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. In prior year financial statements, a portion of tuition and fee waivers granted by the College were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Coastal Georgia Community College Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $1,098,517 and the bank balance was $656,752. Of the College's deposits, $556,752 were uninsured. Of these uninsured deposits, $556,752 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 2007 18 B. Investments At June 30, 2007, the carrying value of the College's investments was $97,102, 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 T otal Return Fund $97,102 T otal Investment Pools $97,102 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/searchRpts.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 9.35 years. Of the College's total investment of $97,102 in the Total Return Fund, $27,567 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 obligation. The College has no formal policy for managing credit quality risk since all investments are in the Board of Regents Investment Pool. Coastal Georgia Community College Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $126,375 146,171 141,650 33,596 328,334 776,126 32,672 $743,454 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $263,874 29,638 $293,512 Note 5. Notes/Loans Receivable Institutional loans comprise all of the loans receivable at June 30, 2007. There is no allowance for uncollectible loans. Coastal Georgia Community College Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $1,578,017 479,148 2,057,165 998,920 30,671,320 1,256,195 5,195,114 2,073,173 40,194,722 672,173 8,568,975 530,349 3,337,913 1,489,566 14,598,976 25,595,746 $27,652,911 Addi ti o n s $0 523,226 523,226 Re ductions $0 479,148 479,148 2,046,903 311,860 107,517 2,466,280 30,628 926,217 42,760 470,823 65,658 1,536,086 930,194 $1,453,420 485,101 65,299 550,400 485,101 65,299 550,400 0 $479,148 En di n g B al a n ce 6 /3 0 /2 0 0 7 $1,578,017 523,226 2,101,243 998,920 32,718,223 1,256,195 5,021,873 2,115,391 42,110,602 702,801 9,495,192 573,109 3,323,635 1,489,925 15,584,662 26,525,940 $28,627,183 Coastal Georgia Community College Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $35,523 $35,523 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $540,281 Additions $467,486 Re du cti on s Ending Balance June 30, 2007 $404,703 $603,064 Total Long Term Obligations $540,281 $467,486 $404,703 $603,064 Current Portion $421,771 $421,771 Note 9. Significant Commitments The College had no significant commitments as of June 30, 2007. 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 2007 22 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Coastal Georgia Community College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Coastal Georgia Community College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Coastal Georgia Community College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $538,489 $520,382 $492,920 Employees' Retirement System of Georgia Plan Description Coastal Georgia Community College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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. Coastal Georgia Community College Annual Financial Report FY 2007 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 College's payroll for the year ended June 30, 2007, for employees covered by ERS was $33,961. The College's total payroll for all employees was $10,464,527. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $4,044, of which $3,535 was made by the College and $509 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, 2007 financial report, which may be obtained through ERS. Coastal Georgia Community College Annual Financial Report FY 2007 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 Coastal Georgia Community College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $287,850 (9.66% or 8.13%) and $162,227 (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 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 Coastal Georgia Community College Annual Financial Report FY 2007 25 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 2007 amounted to $56,197 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. 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 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. Coastal Georgia Community College Annual Financial Report FY 2007 26 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Coastal Georgia Community College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Coastal Georgia Community College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 83 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Coastal Georgia Community College recognized as incurred $267,960 of expenditures, which was net of $97,650 of participant contributions. Coastal Georgia Community College Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 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 Instruction Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 4,219,163 2,240,347 1,501,903 117,986 15,518 113,237 926,672 111,664 $0 21,545 540 17,561 1,738 $0 645,690 163,585 23,545 7,444 102,477 75,005 $0 850,534 226,118 25,059 5,290 10,584 377,047 9,755 $0 1,598,785 744,436 116,675 35,004 17,456 615,707 42,312 $ 9,246,490 $ 41,384 $ 1,017,746 $ 1,504,387 $ 3,170,375 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocat ed Expenses T ot al Expenses $0 765,547 226,018 (19,831) 1,092 578,598 1,065,621 686,330 $0 2,167,188 $0 122,916 35,712 19,831 6,193 69,800 4,175 1,186,719 8,747 $0 600,535 $ 4,219,163 6,245,364 2,898,312 116,675 208,879 2,257,796 731,494 4,291,804 1,536,086 $ 3,303,375 $ 2,167,188 $ 1,454,093 $ 600,535 $ 22,505,573 Coastal Georgia Community College Annual Financial Report FY 2007 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. During the year ended December 31, 2006, the Foundation distributed $656,559 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 endowments and other investments in the amount of $7.5 million. The $4.3 million corpus of the endowment portion is nonexpendable, but the earnings of 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, 2006: Certificates of Deposit Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $1,787,000 1,935,073 4,636 2,984,429 $6,711,138 Fair Value $1,764,075 2,192,554 5,730 3,520,311 $7,482,670 Coastal Georgia Community College Annual Financial Report FY 2007 29 COLUMBUS STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Columbus State University Columbus, Georgia Dr. Frank D. Brown President John Thomas Helton Vice President for Business & Finance COLUMBUS STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 9 Statement of Cash Flows .............................................................................................................. 13 Note 1. Summary of Significant Accounting Policies ................................................................ 15 Note 2. Deposits and Investments............................................................................................... 21 Note 3. Accounts Receivable...................................................................................................... 23 Note 4. Inventories...................................................................................................................... 23 Note 5. Notes/Loans Receivable................................................................................................. 23 Note 6. Capital Assets................................................................................................................. 24 Note 7. Deferred Revenue........................................................................................................... 25 Note 8. Long-Term Liabilities .................................................................................................... 25 Note 9. Significant Commitments............................................................................................... 25 Note 10. Lease Obligations......................................................................................................... 25 Note 11. Retirement Plans .......................................................................................................... 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 .............................................. 32 Note 16. Component Units ......................................................................................................... 33 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 over 7,500 students. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 256 FY2006 246 FY2005 184 7,597 7,475 7,224 6,394 6,240 6,025 Overview of the Financial Statements and Financial Analysis Columbus State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $17,451,900 52,434,293 3,459,446 73,345,639 June 30, 2006 $16,494,951 52,152,070 3,254,959 71,901,980 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 6,670,510 1,007,763 7,678,273 5,876,357 882,070 6,758,427 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 52,434,293 1,650,195 2,811,232 8,771,646 $65,667,366 52,152,070 1,603,862 2,669,831 8,717,790 $65,143,553 The total assets of the institution increased by $1,443,659. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $604,936 in the receivable category. The balance of the increase is mainly due to an increase of $282,223 in the category of Capital Assets, net. The total liabilities for the year increased by $919,846. The combination of the increase in total assets of $1,443,659 and the increase in total liabilities of $919,846 yields an increase in total net assets of $523,813. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $282,223. Columbus State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $38,483,148 78,534,936 (40,051,788) 40,438,251 386,463 137,350 523,813 65,143,553 0 65,143,553 $65,667,366 $32,446,055 69,444,987 (36,998,932) 37,863,384 864,452 56,780 921,232 64,222,321 0 64,222,321 $65,143,553 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $19,134,195 8,782,843 2,029,850 8,361,907 174,353 38,483,148 34,596,786 4,036,299 611,332 1,205,735 (11,901) 40,438,251 137,350 137,350 $79,058,749 June 30, 2006 $16,051,576 8,389,201 1,768,548 6,015,188 221,542 32,446,055 31,593,295 4,078,796 1,395,329 867,702 (71,738) 37,863,384 56,780 56,780 $70,366,219 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $29,820,123 7,335,473 4,411,932 11,700,706 10,020,178 7,203,830 6,225,317 1,817,377 78,534,936 0 $78,534,936 June 30, 2006 $27,447,173 6,275,075 4,378,108 9,428,316 9,965,248 4,656,213 5,227,799 2,067,055 69,444,987 0 $69,444,987 Operating revenues increased by $6,037,093 in fiscal 2007. Revenues associated with tuition and fees, net of sponsored and unsponsored scholarships increased approximately $3,082,619. This increase reflects a moderate increase in fees per semester as well as an increase in enrollment. Columbus State University Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $2,346,719 is a result of the changing environment of residential life on the University's campus as well as a slight increase in student housing fees. Under non-operating revenues (expenses), State Appropriations increased by approximately $3,003,491 based on formula funding and other such factors such as additional square footage. The compensation and employee benefits category increased by $4,575,593 and primarily affected the Instruction category. The increase reflects the addition of faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $263,263 during the past year. The increase was primarily associated with additional facilities as well as a utility rate increase. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($37,887,226) 39,985,680 (2,796,512) 1,047,834 349,776 14,131,911 $14,481,687 June 30, 2006 ($33,618,890) 37,175,659 (1,678,264) 879,041 2,757,546 11,374,365 $14,131,911 Capital Assets The university acquired land in the amount of $593,662 as well as a building in the amount of $256,338. The total acquisition increased Capital Assets by $850,000. The building is currently being utilized by the Center for International Education. Columbus State University Annual Financial Report FY 2007 5 Various equipment purchases in the amount of $1,172,386 were acquired during FY 2007. Several chillers were purchased as part of the institution's mission to address increasing energy costs. Other equipment consists of furnishings for the 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 $2,029,083 of which $1,021,320 was reflected as current liability at June 30, 2007. 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, Columbus State University has included the financial statements and notes for all required component units for FY2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University continues to have significant economic concerns regarding the lack of funding for support of the RiverPark campus which was fully operational effective 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 facilities of RiverPark campus were built with 100% private funding. Furthermore, the Columbus State University Foundation made the financial commitment to support the downtown campus for the fiscal year 2007. The presence of 100 faculty and staff and approximately 500 to 600 hundred students on a daily basis at the RiverPark campus has had a positive economic impact relative to the city of Columbus and in particular has improved the economic status of downtown Columbus. This project is in keeping with the institution's strategic goal to develop and sustain partnerships for the benefit of Columbus State University and the surrounding community as well as the mission of the University System of Georgia to contribute to the economic advancement of Georgia by bringing these resources to bear on the economic development of the State. Dr. Frank D. Brown, President Columbus State University Columbus State University Annual Financial Report FY 2007 6 Statement of Net Assets COLUMBUS S TATE UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2007 C om pon e n t Unit AS S ETS C urrent Assets Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Due From Component Unit s P ledges Receivable Due From P rimary Government Inventories (not e 4) P repaid items Ot her Asset s T ot al Current Asset s Noncurre nt 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 abil itie 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 Due t o P rim ary Government Compensat ed Absences (current port ion) Revenue/Mort gage Bonds P ayable (current ) Liabilit ies under Split -Int erest Agreement s (current ) Due t o Component Unit s Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi li ti e s Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Deposit s Liabilit ies under Split -Int erest Agreement s (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n ex p en dable E x p e n da ble Capital P roject s Unrest rict ed TO TAL NET AS S ETS C olum bus State Un i ve rsi ty C olum bus State Un i ve rsi ty Fou n dati on , In c. $14,080,320 401,119 2,471,012 187,606 311,843 17,451,900 401,367 2,124,628 933,451 52,434,293 55,893,739 73,345,639 256,683 209,845 176,095 3,613,251 2,794 1,390,522 1,021,320 6,670,510 1,007,763 1,007,763 7,678,273 52,434,293 1,650,195 2,811,232 8,771,646 $65,667,366 $1,944,474 29,445 1,125,128 12,086,813 732 48,837 304,431 15,539,860 2,977,848 25,260,039 15,209,513 43,447,400 58,987,260 84,329 12,041 5,594,853 110,245 14,985 5,816,453 1,181,908 1,181,908 6,998,361 25,352,984 15,280,774 7,594,548 3,760,593 $51,988,899 Columbus State University Annual Financial Report FY 2007 7 Statement of Net Assets, Continued COLUMBUS STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 Component Unit Component Unit ASSETS 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 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 Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Deposits Liabilities under Split-Interest Agreements (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrest rict ed TOTAL NET ASSETS Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. $1,365,605 $60,834 244,899 50,000 301,256 2,119 1,963,879 2,088,974 6,068,326 113,740,376 1,657,997 123,555,673 125,519,552 6,745,491 23,559,301 1,146,806 1,124,629 5,836,324 38,412,551 69,625,000 101,625 69,726,625 108,139,176 40,288,935 (22,908,559) $17,380,376 89,943 14,985 51,220 3,058 2,292 222,332 373,949 1,646,844 34,106 2,054,899 2,277,231 68,858 28,542 31,102 50,000 178,502 0 178,502 1,335,372 710,842 52,515 $2,098,729 Component Unit Columbus State Un i ve rsi ty Alumni Association, Inc. $43,889 8,043 481 350 23,507 76,270 33,013 120,334 3,144 156,491 232,761 5,553 4,940 499 10,992 0 10,992 3,144 84,061 134,564 $221,769 Columbus State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets COLUMBUS S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES C olum bus State Un i ve rs i ty C om pone nt Unit C olum bu s S tate Un i ve rsi ty Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal St at e Ot her 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion P ayments to other Component Units P ayment s t o or on behalf of Columbus St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) $27,294,135 (8,159,940) 8,084,711 613,597 84,535 2,029,850 42,295 4,306,009 221,272 175,155 1,016,328 494,100 2,031,600 117,443 132,058 38,483,148 $0 4,170,473 249,338 352,221 4,772,032 18,012,369 19,452,645 9,938,764 179,466 447,152 7,973,670 3,033,886 16,855,991 2,640,993 78,534,936 (40,051,788) 907,474 114,901 1,467,668 254,324 973,154 3,717,521 1,054,511 Columbus State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued COLUMBUS S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C olum bus State Un i ve rs i ty C om pone nt Unit C olum bu s S tate Un i ve rsi ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) State Appropriat ions Grant s and Contracts St at e Ot her Gift s Investment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Other Nonoperat ing Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowments T otal Ot her Revenues Increase in Net Assets NET AS S ETS Net Assets-beginning of year, as originally reported P rior Year Adjust ment s Net Assets-beginning of year, rest at ed Net Assets-End of Year 34,596,786 203,986 3,832,313 611,332 1,205,735 (11,901) 40,438,251 386,463 137,350 137,350 523,813 65,143,553 65,143,553 $65,667,366 1,150,547 1,150,547 2,205,058 492,257 492,257 2,697,315 49,291,584 49,291,584 $51,988,899 Columbus State University Annual Financial Report FY 2007 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued COLUMBUS STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 REVENUES C ompone nt Un i t Fou n da ti o n Prope rtie s, Inc. C ompone nt Un i t C olumbus State Unive rsity Athle tic Fund, In c. 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 Bo o k st ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues EXPENS ES Operating Expenses Salaries: Facult y St aff Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n Payments to other Component Units Payments to or on behalf of Columbus State University T otal Operating Expenses Operating Income (loss) $0 1,393,897 2,150,945 2,256,443 5,801,285 325,385 36,979 294,990 1,671,911 1,627,570 110,000 669,715 4,736,550 1,064,735 $0 123,586 231,791 229,336 584,713 6,288 1,437 292,922 354 80,567 32,545 414,113 170,600 C ompone nt Unit C olumbus State Unive rsity Al u m n i Association, Inc. $0 101,703 4,550 62,532 168,785 52,226 8,434 70,975 660 16,025 17,484 165,804 2,981 Columbus State University Annual Financial Report FY 2007 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued COLUMBUS STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 C om pon e n t Un i t Fou n dati on Properties, Inc. C om pon e n t Un i t C ol u m bu s State Un i ve rs i ty Athletic Fund, In c. Component Unit Columbus State Un i ve rs i ty Al u m n i Association, Inc. NONOPERATING 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 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 411,310 (2,753,413) (2,342,103) (1,277,368) 0 (1,277,368) 18,657,744 18,657,744 $17,380,376 1,693 1,693 172,293 51,134 51,134 223,427 1,875,302 1,875,302 $2,098,729 1,804 1,804 4,785 0 4,785 216,984 216,984 $221,769 Columbus State University Annual Financial Report FY 2007 12 Statement of Cash Flows COLUMBUS S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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, 2007 $19,271,402 10,383,681 2,029,850 (30,760,940) (37,232,302) (7,973,670) (1,446,370) 1,399,784 2,697,867 221,378 175,155 1,048,565 563,541 2,278,749 117,443 (661,359) (37,887,226) 34,596,786 742,517 4,646,377 39,985,680 137,350 (2,933,862) (2,796,512) 110,877 936,957 1,047,834 349,776 14,131,911 $14,481,687 Columbus State University Annual Financial Report FY 2007 13 Statement of Cash Flows, Continued COLUMBUS S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2007 ($40,051,788) 2,640,993 (604,936) (2,237) (46,586) (320,785) 227,804 57,170 213,139 ($37,887,226) $261,249 Columbus State University Annual Financial Report FY 2007 14 COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Columbus State University is reporting the activity for the Columbus State University Foundation, Inc., Foundation Properties, Inc., Columbus State University Athletic Fund, Inc. and 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 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Columbus State University Annual Financial Report FY 2007 15 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place. Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. Columbus State University Annual Financial Report FY 2007 16 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Columbus State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Columbus State University Annual Financial Report FY 2007 17 revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences 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 $1,815,944 as of 7-1-2006. For FY2007, $1,406,941 was earned in compensated absences and employees were paid $1,193,802, for a net increase of $213,139. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $2,029,083. 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 2007 18 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $1,044,322 594,672 989,698 182,540 $2,811,232 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, 2007 $106,829 5,313,568 194,424 3,156,825 $8,771,646 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: 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. Columbus State University Annual Financial Report FY 2007 19 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal year 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Columbus State University Annual Financial Report FY 2007 20 Note 2. Deposits and Investments A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the 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, 2007, the carrying value of deposits was $13,451,820 and the bank balance was $15,182,773. Of the University's deposits, $15,082,773 were uninsured. Of these uninsured deposits, $15,082,773 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. 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. Columbus State University Annual Financial Report FY 2007 21 The University's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Invest ment t ype Debt Securit ies U.S. Agencies Explicit ly Guarant eed Corporat e Debt Municipal Obligat ion Ot her Invest ment s Equit y Securit ies - Domest ic Invest ment P ools Board of Regent s Short -T erm Fund Balanced Income Fund T ot al Invest ment s Fair Value Inves tment Maturity Less Than 1 Year $387 11,383 5,000 $16,770 288,957 1,021,447 1,818,901 $3,146,075 $387 11,383 5,000 $16,770 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/searchRpts.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 2.24 years. Of the University's total investment of $ $1,021,447 in the Short Term Fund, $1,017,565 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the University's total investment of $1,818,901 in the Balanced Income Fund, $1,097,888 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 Columbus State University Annual Financial Report FY 2007 22 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, 2007, $269,423 of the University's applicable investments were uninsured and held by the investment's counterparty 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 investments subject to credit quality risk are reflected below: Related Debt Inves tments Corporat e Debt Municipal Obligat ion Note 3. Accounts Receivable Fair Value $11,383 5,000 $16,383 AAA $5,000 $5,000 Unrated $11,383 $11,383 Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $1,094,238 1,247,391 401,119 187,606 170,594 3,100,948 41,211 $3,059,737 Note 4. Inventories Columbus State University had no inventories on June 30, 2007. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007, Notes Receivable contained $0 in allowance for uncollectible accounts. Columbus State University Annual Financial Report FY 2007 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $1,821,881 1,821,881 2,309,513 66,391,680 2,584,312 8,700,324 7,178,741 22,000 87,186,570 1,192,086 21,155,290 1,789,889 6,015,976 6,703,140 36,856,381 50,330,189 $52,152,070 Addi ti o n s $593,662 137,350 731,012 Re ductions 0 819,317 1,172,386 211,147 2,202,850 79,959 1,579,424 94,218 737,600 149,792 2,640,993 (438,143) $292,869 78,952 78,952 68,306 68,306 10,646 $10,646 En di n g B al a n ce 6 /3 0 /2 0 0 7 $2,415,543 137,350 2,552,893 2,309,513 67,210,997 2,584,312 9,793,758 7,389,888 22,000 89,310,468 1,272,045 22,734,714 1,884,107 6,685,270 6,852,932 39,429,068 49,881,400 $52,434,293 Columbus State University Annual Financial Report FY 2007 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $3,452,899 160,352 $3,613,251 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $1,815,944 Additions $1,406,941 Reductions Ending Balance June 30, 2007 $1,193,802 $2,029,083 Total Long Term Obligations $1,815,944 $1,406,941 $1,193,802 $2,029,083 C urre nt Portion $1,021,320 $1,021,320 Note 9. Significant Commitments Columbus State University had no significant commitments as of June 30, 2007. 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, 2007. OPERATING LEASES Columbus State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2011. 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. Columbus State University Annual Financial Report FY 2007 25 Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 T ot al m inim um lease paym ent s Year 1 2 3 4 Real P roperty and Equipm ent Operat ing Leases $38,064 33,845 29,369 6,924 $108,202 Columbus State University's FY2007 expense for rental of real property and equipment under operating leases was $34,303. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $ 2,016,878 $ 1,898,175 $ 1,770,292 Columbus State University Annual Financial Report FY 2007 26 Employees' Retirement System of Georgia Plan Description Columbus State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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, 2007, for employees covered by ERS was $46,000. The University's total payroll for all employees was $37,465,014. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 Columbus State University Annual Financial Report FY 2007 27 member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $5,479, of which $4,789 was made by the University and $690 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, 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Columbus State University and the covered employees made the required contributions of $941,382 (9.66% or 8.13%) and $527,569 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Columbus State University Annual Financial Report FY 2007 28 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 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 2007 amounted to $163,793 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 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. Columbus State University Annual Financial Report FY 2007 29 The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Columbus State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Columbus State University expects such amounts, if any, to be immaterial to its overall financial position. 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, 2007. 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 Columbus State University Annual Financial Report FY 2007 30 individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. As of June 30, 2007, there were 251 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Columbus State University recognized as incurred $1,042,573 of expenditures, which was net of $445,023 of participant contributions. Columbus State University Annual Financial Report FY 2007 31 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic e s Inst it ut ional Sup p o r t $ 17 ,6 34 ,4 66 4 ,0 79 ,9 96 4,7 11,9 52 190 ,8 13 180 ,7 52 2 ,9 00 ,9 43 12 1,2 01 $ 37 4,65 3 3 ,6 43 ,2 11 90 3,20 8 12 5,33 0 5,50 0 7 7,27 7 1,915,78 6 29 0,50 8 $ 650 2 ,6 32 ,3 87 6 72 ,6 34 39 ,9 96 500 72 ,7 96 9 88 ,2 46 4 ,7 23 $ 2,6 0 0 5 ,6 29 ,4 9 5 2 ,7 35 ,6 0 9 17 9,4 6 6 2 8,13 2 3 3 9,0 8 3 2,59 5,26 1 19 1,0 6 0 $ 29 ,8 20 ,123 $ 7,33 5,47 3 $ 4,4 11,9 32 $ 11,7 0 0,7 0 6 P lant Operat ions & Maintenance Functional Clas s ification FY2007 Sc h o lar sh ip s & Fellowships A ux ilia r y Ent erprises Unallocat ed E x p e n se s T otal E x p e n se s $0 2 ,4 47 ,157 6 7 5,18 1 10 ,7 73 2 ,3 18 ,9 59 4 ,3 91,4 79 176 ,6 29 $0 7,20 3 ,83 0 $0 1,0 2 0,3 9 9 2 4 0,18 0 5 2,10 8 7 63 ,8 4 0 4 5,019 4 ,0 6 4,2 7 6 39 ,4 9 5 $0 1,8 17 ,37 7 $ 18 ,0 12 ,3 6 9 19 ,4 52 ,6 4 5 9 ,9 38 ,7 64 179 ,4 66 4 4 7,152 7 ,9 73 ,6 70 3 ,0 33 ,8 86 16 ,8 5 5,9 9 1 2 ,6 40 ,9 93 $ 10 ,0 20 ,178 $ 7,20 3 ,83 0 $ 6,22 5,317 $ 1,8 17 ,37 7 $ 78 ,5 34 ,9 3 6 Columbus State University Annual Financial Report FY 2007 32 Note 16. Component Units Columbus State University Foundation, Inc. Columbus State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Columbus State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The fifty-seven-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is August 1 through July 31. The amount due to Columbus State University of $5,594,853, results primarily from funds that are designated for payment 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 Component Unit 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, 2006, the Foundation distributed $973,154 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 and other investments in the amount of $25,260,039. The corpus of the endowment portion 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 2007 33 Investments are comprised of the following amounts at July 31, 2006: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Fixed Income Fund Investment Pool Total Investments Cost $27,007 3,128,278 3,112,639 11,480,590 426,178 6,102,992 $24,277,684 Fair Value $27,007 3,062,991 2,736,966 12,722,824 424,898 6,285,353 $25,260,039 Long-term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended July 31, 2006 are shown below: Beginning Balance August 1, 2005 Additions Reductions Ending Balance July 31, 2006 Amounts due within One Year Liabilities under split interest agreement Total Long Term Liabilities $0 $1,292,153 $0 $1,292,153 $0 $1,292,153 $0 $1,292,153 $110,245 $110,245 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 fiscal year of Foundation Properties, Inc. is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. The amount due to Columbus Columbus State University Annual Financial Report FY 2007 34 State University of $23,559,301 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, 2006, Foundation Properties, Inc. distributed $669,715 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 for Component Units: Foundation Properties, Inc. holds investments as of July 31, 2006 in the amount of $6,068,326. Investments consist of marketable securities and bonds as follows: Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $952,977 1,018,120 3,607,892 $5,578,989 Fair Value $925,977 995,726 4,146,623 $6,068,326 Capital Assets for Component Units: Foundation Properties, Inc. held the following Capital Assets as of July 31, 2006: Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated Capital Assets being Depreciated: B uildings and Im provem ents M achinery and Equipment Total Capital Assets being Depreciated Less Total Accum ulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net July 31, 2006 $10,608,141 58,348,660 68,956,801 49,452,091 1,651,341 51,103,432 6,319,857 44,783,575 $113,740,376 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. Columbus State University Annual Financial Report FY 2007 35 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 RiverPark Campus, as well as the construction of the Cunningham Conference Center. Parking Facility Revenue Bonds are issued by Foundation Properties, Inc. to finance parking facilities on university property. The bonds, serial and term, are secured by pledges of gross receipts from parking deck fees at Columbus State University. Changes in long-term liabilities for component units for the fiscal year ended July 31, 2006 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance August 1, 2005 $42,342,700 Additions $40,655,000 Reductions $12,225,894 $42,342,700 $40,655,000 $12,225,894 Ending Balance July 31, 2006 $70,771,806 Amounts due within One Year $1,146,806 $70,771,806 $1,146,806 Debt Service Obligations Annual debt service requirements to maturity for Student Housing, Educational Programming and Parking Facility revenue bonds payable are as follows: Year ending July 31: 2007 1 2008 2 2009 3 2010 4 2011 5 2012 through 2016 6-10 Principal Bonds Payable Interest $1,146,806 1,515,000 12,480,000 1,315,000 36,055,001 18,259,999 $70,771,806 $2,925,054 3,001,847 2,904,404 2,391,797 2,333,951 787,287 $14,344,340 Total $4,071,860 4,516,847 15,384,404 3,706,797 38,388,952 19,047,286 $85,116,146 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 are 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. Columbus State University Annual Financial Report FY 2007 36 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 fiscal year of the Athletic Fund is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. During the year ended July 31, 2006 the Athletic Fund distributed $32,545 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 of $31,102 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, 2007. Investments for Component Units: Columbus State University Athletic Fund, Inc. holds endowment and other investments in the amount of $1,646,844. The corpus of the endowment portion 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, 2006: Equity Securities Total Investments Cost $1,246,139 $1,246,139 Fair Value $1,646,844 $1,646,844 Columbus State University Annual Financial Report FY 2007 37 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 are 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 fiscal year of the Association is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2006. Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due from Columbus State University of $23,507 is not reflected as a payable on the University's Statement of Net Assets. This amount was paid by the University before its year end of June 30, 2007. During the year ended July 31, 2006, the Association distributed $17,484 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. Investments for Component Units: Columbus State University Alumni Association, Inc. holds endowment and other investments in the amount of $128,377. The corpus of the endowment portion 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 2007 38 Investments are comprised of the following amounts at July 31, 2006: Certificates of Deposit Equity Mutual Funds Total Investments Cost $81,586 70,123 $151,709 Fair Value $81,586 46,791 $128,377 Capital Assets for Component Units: Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2006 as follows: Capital Assets being Depreciated: Buildings and Im provem ents Machinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net July 31, 2006 $9,900 400 10,300 7,156 3,144 $3,144 Columbus State University Annual Financial Report FY 2007 39 DALTON STATE COLLEGE Financial Report For the Year Ended June 30, 2007 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 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 19 Note 4. Inventories...................................................................................................................... 19 Note 5. Notes/Loans Receivable................................................................................................. 19 Note 6. Capital Assets................................................................................................................. 20 Note 7. Deferred Revenue........................................................................................................... 21 Note 8. Long-Term Liabilities .................................................................................................... 21 Note 9. Significant Commitments............................................................................................... 21 Note 10. Lease Obligations......................................................................................................... 21 Note 11. Retirement Plans .......................................................................................................... 22 Note 12. Risk Management......................................................................................................... 24 Note 13. Contingencies............................................................................................................... 25 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 25 Note 15. Natural Classifications with Functional Classifications .............................................. 26 Note 16. Component Units ......................................................................................................... 27 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. Students Students Faculty (Headcount) (FTE) FY2007 123 FY2006 119 FY2005 113 4,349 4,267 4,252 3,208 3,122 2,997 Overview of the Financial Statements and Financial Analysis Dalton State College is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Total As s e ts June 30, 2007 $4,629,818 23,938,062 28,567,880 June 30, 2006 $4,308,838 23,394,238 27,703,076 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,693,242 189,896 1,883,138 1,888,485 155,158 2,043,643 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 23,938,062 1,167 2,745,513 $26,684,742 23,394,238 1,961 2,263,234 $25,659,433 The total assets of the institution for FY07 increased by $864,804. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $543,824 in the category of Capital Assets, net, as well as, an increase of $320,980 in the category of Current Assets. The total liabilities for the current year decreased by ($160,505). The combination of the increase in total assets of $864,804 and the decrease in total liabilities of ($160,505) yields an increase in total net assets of $1,025,309. The increase in total net assets is primarily a result of the increase in the categories of Current Assets and Capital Assets, Net as mentioned in the above paragraph. Dalton State College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $15,575,783 28,557,451 (12,981,668) 12,981,990 322 1,024,987 1,025,309 25,659,433 0 25,659,433 $26,684,742 $13,854,720 27,839,637 (13,984,917) 12,389,477 (1,595,440) 4,498,791 2,903,351 22,756,082 0 22,756,082 $25,659,433 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $5,598,731 7,828,915 392,137 1,617,204 138,796 15,575,783 12,660,079 111,356 209,013 1,542 12,981,990 1,024,987 1,024,987 $29,582,760 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $14,200,709 1,939,223 2,126,695 3,309,280 2,528,476 2,357,801 1,531,911 563,356 28,557,451 0 $28,557,451 June 30, 2006 $4,674,191 6,970,897 388,287 1,702,837 118,508 13,854,720 12,048,721 192,887 159,174 (11,305) 12,389,477 4,492,278 6,513 4,498,791 $30,742,988 June 30, 2006 $13,423,986 (43) 2,302,084 2,012,300 3,196,979 2,752,671 1,882,315 1,616,399 652,946 27,839,637 0 $27,839,637 Operating revenues increased by $1,721,063 in fiscal year 2007. This was due primarily to increases in three areas. Tuition, along with two other mandatory fees, were increased during FY07. Second, both enrollment and FTE increased during the 06-07 school year. Lastly, the College received an increase in grant funding from such grants as DTAE, PELL, etc. Dalton State College Annual Financial Report FY 2007 4 The Auxiliary revenue decrease of ($85,633) is a result of an increase in competition at the Bookstore from outside competitors, primarily internet services. Nonoperating revenues increased by $592,513 for the year primarily due to an increase of $611,358 in State Appropriations. Total revenues decreased ($1,160,228) year over year. This decrease was due to the completion of the James E. Brown Center (Continuing Education building). Although the building was completed in FY07 only $58,305 was received from GSFIC in capital gift revenue in the current fiscal year, whereas nearly $4.5 million was received during FY07. Expenses increased by $717,814 year over year. This increase can be attributed to both the addition of a new department in the Educational Technology Training Center, as well as several other new faculty and staff positions. 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 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($12,938,962) 12,915,977 (757,876) 209,013 (571,848) 2,588,032 $2,016,184 June 30, 2006 ($12,377,051) 12,285,280 (785,278) 159,174 (717,875) 3,305,907 $2,588,032 Dalton State College Annual Financial Report FY 2007 5 Capital Assets The College had only one significant capital asset addition for facilities in fiscal year 2007. The construction of the Continuing Education building was completed and placed into service early in fiscal year 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 Dalton State College had Long-Term Debt and Liabilities of $570,184 of which $380,288 was reflected as current liability at June 30, 2007. 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 FY2007. Dalton State College Foundation, Inc. had investments of $12.5 million as of March 31, 2007. 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. James A. Burran, Ph.D., President Scott Bailey, VP of Fiscal Affairs Dalton State College Annual Financial Report FY 2007 6 Statement of Net Assets DALTON S TATE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash an d Cash Equivalent s Accoun t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial Assist an ce Receiv ables - Ot her Due Fro m Com p o nen t Un it s P ledges Receiv able Inventories (note 4) P repaid it em s T o t al Curren t Asset s Noncurrent Asse ts In vest m ent s (in cludin g Real Est at e) P ledges Receiv able Capit al Asset s, net (not e 6) Ot her Asset s T o t al No n curren t Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Accoun t s P ay able Salaries P ay able Deposit s Deferred Rev en ue (no t e 7 ) Ot h er Liabilit ies Dep o sit s Held for Ot h er Organ izat ion s Due t o P rim ary Go v ern m en t Co m p en sat ed Absen ces (curren t p o rt io n) Not es and Lo an s P ay able (curren t p o rt ion) T o t al Curren t Liabilit ies Non cu rre n t Liabilitie s Co m p en sat ed Absen ces (n o ncurren t ) Not es and Lo an s P ay able (n o ncurren t ) T o t al No n curren t Liabilit ies TO TAL LIAB ILITIES NET AS S ETS In v est ed in Cap it al Asset s, n et o f relat ed debt Rest rict ed for No nexp endable Exp endable Unrest rict ed TO TAL NET AS S ETS Dalton State C olle ge $2,016,184 768,814 1,376,418 124,077 341,453 2,872 4,629,818 23,938,062 23,938,062 28,567,880 570,576 436,031 33,281 35 273,031 380,288 1,693,242 189,896 189,896 1,883,138 23,938,062 1,167 2,745,513 $26,684,742 C om pone n t Un i t Dalton State C olle ge Fou n dati o n , In c. $778,631 2,111 2,163,635 160,268 3,104,645 12,471,910 7,279,474 4,878,531 34,292 24,664,207 27,768,852 82,350 16,564 17,112 47,717 163,743 2,377,228 2,377,228 2,540,971 2,453,586 8,627,546 2,015,132 12,131,617 $25,227,881 Dalton State College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets DALTON S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Dalton State C olle ge C om pone nt Unit Dalton State C olle ge Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore Food Services Ot her Operat ing Revenues T ot al Operat ing Revenues EXPENS ES Operat ing Expenses Salaries: Facult y St aff Employee Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense P ayment s t o or on behalf of Dalt on St at e College T ot al Operat ing Expenses Operat ing Incom e (loss) $7,207,661 (1,608,930) 4,773,777 1,731,724 1,323,414 392,137 1,306,303 310,901 138,796 15,575,783 $0 10,153,122 941,937 740,532 11,835,591 7,981,279 6,201,780 4,042,686 106,212 157,799 2,551,880 797,759 5,484,009 1,234,047 28,557,451 (12,981,668) 151,982 12,365 352,245 2,692 58,537 347,046 81,515 1,235 1,330,217 2,337,834 9,497,757 Dalton State College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued DALTON S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Dalton State C olle ge C om pone nt Unit Dalton State C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 12,660,079 111,356 209,013 1,542 12,981,990 322 1,024,987 1,024,987 1,025,309 25,659,433 25,659,433 $26,684,742 (137,499) (137,499) 9,360,258 602,389 602,389 9,962,647 15,265,234 15,265,234 $25,227,881 Dalton State College Annual Financial Report FY 2007 9 Statement of Cash Flows DALTON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food Services 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 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, 2007 $5,630,347 7,205,479 392,137 (10,782,486) (14,080,625) (2,551,880) 848,823 298,441 462,632 (361,830) (12,938,962) 12,660,079 138,008 117,890 12,915,977 1,024,987 (1,782,863) (757,876) 209,013 209,013 (571,848) 2,588,032 $2,016,184 Dalton State College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued DALTON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 Dalton State College had no non-cas h trans actions for fis cal 2007. June 30, 2007 ($12,981,668) 1,234,047 (840,590) (65,273) 13,034 (161,780) (216,565) (2,232) 82,065 ($12,938,962) Dalton State College Annual Financial Report FY 2007 11 DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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 2007 12 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 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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 2007 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 compensated absences 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 $488,119 as of 7-1-2006. For FY2007, $426,416 was earned in compensated absences and employees were paid $344,351, for a net increase of $82,065. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $570,184. 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 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable June 30, 2007 $1,167 $1,167 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, 2007 $582,418 904,289 10,585 1,248,221 $2,745,513 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Dalton State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Dalton State College Annual Financial Report FY 2007 16 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Note 2. Deposits and Investments A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus 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, 2007, the carrying value of deposits was $936,979 and the bank balance was $1,664,007. Of the College's deposits, $1,464,007 was uninsured and uncollateralized. Dalton State College Annual Financial Report FY 2007 17 B. Investments At June 30, 2007, the carrying value of the College's investments was $1,063,310, 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 pool as follows: Investment Pools Office of T reasury and Fiscal Services Georgia Fund 1 $1,063,310 T otal Investment Pools $1,063,310 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 15 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 credit quality risk. Dalton State College Annual Financial Report FY 2007 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $176,356 159,715 768,814 124,077 1,147,568 2,376,530 107,221 $2,269,309 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Food Services P hysical P lant Ot h er T otal $318,018 12,475 4,166 6,794 $341,453 Note 5. Notes/Loans Receivable Dalton State College does not have any note/loans receivables as of June 30, 2007 . Dalton State College Annual Financial Report FY 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $435,065 4,941,695 5,376,760 1,346,095 22,437,771 1,172,871 3,837,359 4,944,011 33,738,107 974,870 8,035,759 917,745 2,072,994 3,719,261 15,720,629 18,017,478 $23,394,238 Addi ti o n s $0 1,023,672 1,023,672 Re ductions $0 4,941,695 4,941,695 5,291,645 138,362 270,879 5,700,886 19,587 557,313 20,608 395,809 240,730 1,234,047 4,466,839 $5,490,511 158,651 9,323 167,974 153,659 9,323 162,982 4,992 $4,946,687 En di n g B al a n ce 6 /3 0 /2 0 0 7 $435,065 1,023,672 1,458,737 1,346,095 27,729,416 1,172,871 3,817,070 5,205,567 39,271,019 994,457 8,593,072 938,353 2,315,144 3,950,668 16,791,694 22,479,325 $23,938,062 Dalton State College Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $33,281 $33,281 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $488,119 Additions $426,416 Re du cti on s Ending Balance June 30, 2007 $344,351 $570,184 Current Portion $380,288 Total Long Term Obligations $488,119 $426,416 $344,351 $570,184 $380,288 Note 9. Significant Commitments Dalton State College had no significant commitments as of June 30, 2007. Note 10. Lease Obligations Dalton State College is obligated under one operating lease for the use of real property (land, buildings, and office facilities). CAPITAL LEASES Dalton State College had no capital leases for FY2007. OPERATING LEASES Dalton State College had only one lease for FY2007. This facility was leased for instructional classes at the following cost: $2,993/month, year by year lease, $35,916 annual lease. Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Dalton State College Annual Financial Report FY 2007 21 Year Ending June 30: 2008 T ot al fut ure lease paym ent s Year 1 Real P roperty and Equipm ent Operat ing Leases $35,916 $35,916 Dalton State College's FY2007 expense for rental of real property and equipment under operating leases was $35,916. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $795,321 $728,884 $717,456 Dalton State College Annual Financial Report FY 2007 22 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Dalton State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $344,339 (9.66% or 8.13%) and $191,245 (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 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 Dalton State College Annual Financial Report FY 2007 23 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 2007 amounted to $46,057 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Dalton State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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. Dalton State College Annual Financial Report FY 2007 24 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Dalton State College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Dalton State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 90 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Dalton State College recognized as incurred $361,224 of expenditures, which was net of $159,212 of participant contributions. Dalton State College Annual Financial Report FY 2007 25 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt 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 T otal Exp enses Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es Inst it ut ional Sup p o r t $ 7 ,98 0,69 3 1,80 6,63 0 2 ,34 2,80 9 98 ,18 2 19 4,07 9 106 ,67 1 1,58 4,50 6 87 ,13 9 $0 8 52 ,8 24 2 42 ,4 86 5 ,7 69 8 ,5 95 5 25 ,2 04 3 04 ,3 45 $0 96 2,3 2 2 30 5,0 2 6 2 9,7 6 3 16,2 8 7 80 3,6 5 7 9,6 4 0 $ 586 1,69 8,74 8 84 7,26 2 106 ,212 21,25 1 3 5,50 4 54 8,43 7 51,28 0 $ 14 ,20 0,70 9 $ 1,9 39 ,2 23 $ 2 ,12 6,6 9 5 $ 3 ,30 9,28 0 P lant Op erat io n s & Maintenance Functional Clas s ification FY2007 Sch o la r sh ip s & Fellowships A ux iliar y Ent erprises U n allo cat ed E x p en se s $0 70 2 ,0 61 25 9,08 6 (9,54 8 ) 2,29 2 62 7 ,17 4 73 7 ,10 4 210,30 7 $0 2,3 5 7,80 1 $0 17 9 ,19 5 4 6 ,0 17 9,54 8 542 3,52 8 1,2 85 ,101 7,98 0 $0 5 63 ,3 56 $ 2,52 8,47 6 $ 2,3 5 7,80 1 $ 1,5 3 1,9 11 $ 5 63 ,3 56 T otal E x p e n se s $ 7 ,9 8 1,2 79 6 ,2 0 1,7 80 4 ,0 42 ,6 86 10 6,212 157 ,7 9 9 2 ,5 5 1,8 80 7 97 ,7 5 9 5 ,4 84 ,0 09 1,2 34 ,0 47 $ 28 ,5 5 7,4 5 1 Dalton State College Annual Financial Report FY 2007 26 Note 16. Component Units The 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 seven-member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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 these different fiscal year-ends. During the year ended March 31, 2007, the Foundation distributed $1,330,217 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Fiscal Affairs Office at 650 College Drive, Dalton, GA 30720. Investments for Component Units: Dalton State College Foundation holds endowment and other investments in the amount of $12.47 million. The $ 8.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at March 31, 2007 Cost Fair Value Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities $19,277 387,867 2,882,166 9,127,108 $19,277 402,696 2,895,684 9,154,253 Total Investments $12,416,418 $12,471,910 Dalton State College Annual Financial Report FY 2007 27 Capital Assets for Component Units: March 31, 2007 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 $2,037,963 2,037,963 2,948,671 5,527 2,954,198 113,630 2,840,568 $4,878,531 Long-term Liabilities for Component Units: Long-term liability activity for the year ended March 31, 2007 was as follows: Beginning Balance April 1, 2006 Additions Reductions Ending Balance March 31, 2007 Amounts due within One Year Notes and Loans Payable Total Long Term Liabilities $2,470,407 $2,470,407 $0 $45,462 $2,424,945 $47,717 $0 $45,462 $2,424,945 $47,717 In September 30, 2006 Dalton State College Foundation, Inc. assumed an outstanding note payable dated February 2, 2005 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 accrues interest at an annual rate of 5.54%. Interest only was payable for the first twelve months and beginning on March 11, 2006 principle and interest is payable in monthly installments of $15,258. The note matures on March 11, 2015 with a final payment due at that time of $1,969,256. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending March 31: 2008 1 2009 2 2010 3 2011 4 2012 through 2015 5-8 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $47,717 50,833 53,763 56,862 2,215,770 2,424,945 $135,380 132,263 129,333 126,234 485,869 1,009,079 Total $183,097 183,096 183,096 183,096 2,701,639 3,434,024 Dalton State College Annual Financial Report FY 2007 28 DARTON COLLEGE Financial Report For the Year Ended June 30, 2007 Peter J. Sireno President DARTON COLLEGE Albany, Georgia Ronnie A. Henry Vice President for Business and Financial Services DARTON COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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......................................................................................................... 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 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. This wide 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. Students Students Faculty (Headcount) (FTE) FY2007 101 FY2006 107 FY2005 92 4,679 4,578 4,126 3,357 3,408 3,088 Overview of the Financial Statements and Financial Analysis Darton College is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Total As s e ts June 30, 2007 $5,639,568 33,887,975 39,527,543 June 30, 2006 $5,256,422 30,313,904 35,570,326 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,343,382 817,471 3,160,853 2,307,597 946,606 3,254,203 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 33,285,315 3,081,375 $36,366,690 29,577,640 2,738,483 $32,316,123 The total assets of the institution increased by $3,957,217. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,574,071 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents. The total liabilities for the year decreased by ($93,350). The combination of the increase in total assets of $3,957,217 and the decrease in total liabilities of ($93,350) yields an increase in total net assets of $4,050,567. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $3,707,675. Darton College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $16,579,731 31,657,191 (15,077,460) 15,255,937 178,477 3,872,090 4,050,567 32,316,123 32,316,123 $36,366,690 $16,641,883 31,378,145 (14,736,262) 14,327,895 (408,367) 138,661 (269,706) 32,585,829 32,585,829 $32,316,123 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Darton College Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest m ent Income Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $5,485,175 8,082,755 240,615 2,654,763 116,423 16,579,731 15,181,317 22,096 90,901 15,294,314 3,872,090 3,872,090 $35,746,135 June 30, 2006 $5,253,380 8,303,832 282,340 2,702,011 100,320 16,641,883 13,845,044 413,015 74,689 (1,317) 14,331,431 138,661 138,661 $31,111,975 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $12,846,728 421,229 2,202,930 2,246,890 3,538,555 2,638,467 4,089,324 2,695,437 977,631 31,657,191 38,377 $31,695,568 June 30, 2006 $12,487,738 316,662 1,971,578 2,262,097 3,441,955 3,363,066 4,110,680 2,609,908 814,461 31,378,145 3,536 $31,381,681 Operating revenues decreased by ($62,152) in fiscal 2007. Although Tuition & Fees revenue was relatively flat from 2006 to 2007, revenues decreased in Grants and Contracts, and Auxiliary revenue. Darton College Annual Financial Report FY 2007 4 The Auxiliary revenue decrease of ($47,248) is a result of the changing environment of the competition for Bookstore sales. There is a steady increase in competition from online retailers for text book sales. Nonoperating revenues and expenses increased by $928,042 for the year primarily due to an increase of $1,336,273 in State Appropriations. The compensation and employee benefits category increased by $1,016,729 and primarily affected the Instruction, Institutional Support and Student Services categories. The increase reflects the addition of faculty or staff members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($112,070) during the past year. The decrease was primarily associated with careful monitoring of the amount of electricity and natural gas consumed by the College. During fiscal year 2007 the College hired an energy manager to pursue additional areas where the College could save utility costs. Statement of Cash Flows The final statement presented by the 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($13,104,849) 15,210,004 (1,429,990) 90,901 766,066 3,079,517 $3,845,583 June 30, 2006 ($13,744,818) 14,435,211 (625,548) 74,687 139,532 2,939,985 $3,079,517 Darton College Annual Financial Report FY 2007 5 Capital Assets The College has one significant capital asset project under construction. The Academic Services Building is scheduled for completion during October 2007. This project recorded an additional $4,757,090 of construction cost on the books of the College during FY 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 $1,316,031 of which $498,560 was reflected as current liability at June 30, 2007. 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, Darton College has included the financial statements and notes for all required component units for FY2007. Darton College Foundation, Inc. had investments of $1.7 million as of June 30, 2007. 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. Peter J. Sireno, President Darton College Darton College Annual Financial Report FY 2007 6 Statement of Net Assets DARTON COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Unit AS S ETS C urre nt Assets Cash and Cash Equivalent s Sh o rt -t erm In vest m en t s Acco un t s Receivable, n et (n o t e 3 ) Receivables - Federal Financial Assist ance Receivables - Ot her P ledges Receivable Inventories (note 4) P repaid item s T o t al Curren t Asset s Noncurre nt Asse ts Non curren t Cash In v est m en t s (in cluding Real Est at e) P ledges Receivable Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Acco un t s P ay able Deferred Reven ue (n ot e 7 ) Dep o sit s Held for Ot h er Organ izat io n s Lease P urchase Obligat ions (current port ion) Co m p en sat ed Absences (curren t po rt ion ) T o t al Curren t Liabilit ies Non cu rre n t Li abi li tie s Lease P urchase Obligat ions (noncurrent ) Com pensat ed Absences (noncurrent ) T o t al No ncurren t Liabilit ies TO TAL LIAB ILITIES NET AS S ETS In v est ed in Cap it al Asset s, net o f relat ed debt Rest rict ed for No n ex p endable E x p en dable Capital P rojects Unrest rict ed TO TAL NET AS S ETS Darton C ollege Darton C ollege Fo u n da ti o n , In c. $3,845,583 214,965 1,377,444 201,576 5,639,568 33,887,975 33,887,975 39,527,543 $130,661 435,099 140,103 453 706,316 155,636 1,088,379 159,556 660,331 2,063,902 2,770,218 789,058 664,852 390,912 141,395 357,165 2,343,382 461,265 356,206 817,471 3,160,853 33,285,315 3,081,375 $36,366,690 0 0 0 660,331 1,094,832 388,666 551,851 74,538 $2,770,218 Darton College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets DARTON COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore Food Services Int ercollegiat e At hlet ics Ot her Organizat ions Int erest and Dividend income Ot her Operat ing Revenues T ot al Operat ing Revenues EXPENS ES Operat ing Expenses Salaries: Facult y St aff Employee Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P ayment s t o or on behalf of Dart on College T ot al Operat ing Expenses Operat ing Income (loss) Darton C ollege Darton C ollege Fou n dati on , In c. $8,015,192 (2,530,017) 7,000,910 543,941 537,904 240,615 57,717 1,882,614 105,606 621,611 44,932 58,706 16,579,731 7,933,962 7,207,006 3,964,101 121,078 171,991 4,352,888 857,710 5,492,428 1,556,027 31,657,191 (15,077,460) $0 562,413 37,202 2,962 602,577 3,444 324,681 328,125 274,452 Darton College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued DARTON COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Darton C ollege Darton C ollege Fou n dati on , In c. 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) Int erest Expense (capit al asset s) 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 15,181,317 22,096 90,901 (38,377) 15,255,937 178,477 3,872,090 3,872,090 4,050,567 32,316,123 32,316,123 $36,366,690 31,733 31,733 306,185 0 306,185 2,464,033 2,464,033 $2,770,218 Darton College Annual Financial Report FY 2007 9 Statement of Cash Flows DARTON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food 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 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, 2007 $6,031,723 8,666,965 240,615 (10,587,416) (15,780,676) (4,352,888) 1,673,386 101,191 619,194 101,410 181,647 (13,104,849) 15,181,317 6,591 22,096 15,210,004 3,872,090 (5,130,099) (133,604) (38,377) (1,429,990) 90,901 90,901 766,066 3,079,517 $3,845,583 Darton College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued DARTON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 June 30, 2007 ($15,077,460) 1,556,027 259,576 123,343 (139,025) 157,055 (29,816) 45,451 ($13,104,849) Darton College Annual Financial Report FY 2007 11 DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Darton College is reporting the activity for Darton 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 Darton College Annual Financial Report FY 2007 12 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. Darton College Annual Financial Report FY 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at cost using the weighted average method. Resale Inventories are 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Darton College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a residence hall. Since the College has no student housing, the College has no deposits of this nature on its books. Darton College Annual Financial Report FY 2007 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 compensated absences 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 $667,920 as of 7-1-2006. For FY2007, $593,896 was earned in compensated absences and employees were paid $548,445, for a net increase of $45,451. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $713,371. 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. As of June 30, 2007 the College had no expendable restricted net assets. Darton College Annual Financial Report FY 2007 15 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $514,688 1,314,674 46,140 1,205,873 $3,081,375 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Darton College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Darton College Annual Financial Report FY 2007 16 Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Darton College Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $3,834,483 and the bank balance was $4,799,748. Of the College's deposits, $4,202,992 was uninsured. Of these uninsured deposits, $4,202,992 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments As of June 30, 2007 the College had no investments. Darton College Annual Financial Report FY 2007 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $241,934 515,255 214,965 982,390 1,954,544 362,135 $1,592,409 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $159,565 42,011 $201,576 Note 5. Notes/Loans Receivable As of June 30, 2007 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 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $989,113 380,861 1,369,974 34,527,282 1,537,473 3,132,612 963,811 3,114,477 43,275,655 8,125,565 999,743 2,353,308 229,202 2,623,907 14,331,725 28,943,930 $30,313,904 Addi ti o n s $0 4,757,090 4,757,090 Re ductions $0 0 290,791 82,218 373,009 1,006,871 66,357 234,077 149,412 99,310 1,556,027 (1,183,018) $3,574,072 100,425 1,119 101,544 100,424 1,119 101,543 1 $1 En di n g B al a n ce 6 /3 0 /2 0 0 7 $989,113 5,137,951 6,127,064 34,527,282 1,537,473 3,322,978 963,811 3,195,576 43,547,120 9,132,436 1,066,100 2,486,961 378,614 2,722,098 15,786,209 27,760,911 $33,887,975 Darton College Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $664,852 $664,852 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $736,264 667,920 $1,404,184 Additions $0 593,896 $593,896 Reductions Ending Balance June 30, 2007 $133,604 $602,660 548,445 713,371 $682,049 $1,316,031 Current Portion $141,395 357,165 $498,560 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,000,000 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. 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 Expenditures for fiscal year 2007 were $171,981 of which $38,377 represented interest. Total principal paid on capital leases was $133,604 for the fiscal year ended June 30, 2007. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Telephone Equipment Total Assets Held Under Capital Lease $585,197 $585,197 Darton College has one capital lease executed for the purchase of telephone equipment in the amount of $747,060. The lease is financed through SunTrust Bank and carries an interest rate of Darton College Annual Financial Report FY 2007 21 5.68 percent. The term of the lease will extend until June 2011, and the outstanding liability on this lease at June 30, 2007 was $602,660. OPERATING LEASES Darton College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $171,982 171,982 171,982 157,651 673,597 70,937 $602,660 $59,536 38,510 36,042 4,026 $138,114 Darton College's FY2007 expense for rental of real property and equipment under operating leases was $206,934. Darton College Annual Financial Report FY 2007 22 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $783,095 $754,167 $692,495 Employees' Retirement System of Georgia Plan Description Darton College participates in the Employees' Retirement System of Georgia (ERS), a costsharing multiple-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 Darton College Annual Financial Report FY 2007 23 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, 2007, for employees covered by ERS was $34,149. The College's total payroll for all employees was $15,140,968. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $4,067, of which $3,555 was made by the College and $512 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, 2007 financial report, which may be obtained through ERS. Darton College Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $274,355 (9.66% or 8.13%) and $154,568 (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 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 Darton College Annual Financial Report FY 2007 25 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 2007 amounted to $147,063 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 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 Darton College Annual Financial Report FY 2007 26 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 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, 2007. 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, 2007, there were 70 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Darton College recognized as incurred $381,078 of expenditures, which was net of $124,131 of participant contributions. Darton College Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses Inst ruct ion $ 7,885,624 1,738,802 2,161,620 58,519 14,862 438 894,928 91,935 $ 12,846,728 Functional Classification FY2007 P ublic Service Academic Support St uden t Services Inst it ut ional Support $0 182,265 56,996 16,952 41,719 123,297 $0 1,349,835 333,971 21,830 5,276 372,953 119,065 $ 25,000 1,406,001 344,996 40,537 2,509 427,847 $0 1,558,815 856,876 121,078 25,494 50,817 845,196 80,279 $ 421,229 $ 2,202,930 $ 2,246,890 $ 3,538,555 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises Unallocat ed Expenses $0 706,480 138,076 (16,891) 2,345 759,460 766,481 282,516 $0 4,089,324 $ 23,338 264,808 71,566 16,891 6,314 246,193 2,061,726 4,601 $0 977,631 $ 2,638,467 $ 4,089,324 $ 2,695,437 $ 977,631 T otal Expenses $ 7,933,962 7,207,006 3,964,101 121,078 171,991 4,352,888 857,710 5,492,428 1,556,027 $ 31,657,191 Darton College Annual Financial Report FY 2007 28 Note 16. Component Units Darton College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Darton College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The board of trustees 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, 2007, the Foundation distributed $324,681 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Treasurer at 2400 Gillionville Road, Albany, GA 31707. Investments for Component Units: Darton College Foundation holds endowment and other investments in the amount of $1.7 million. The corpus of the endowment is nonexpendable, and the earnings on the investment may be expended as directed by the board of trustees. The majority of the earnings on the endowment funds are spent on scholarships for students. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities $27,791 562,944 612,057 453,078 $27,791 562,944 597,264 491,115 Total Investments $1,655,870 $1,679,114 Darton College Annual Financial Report FY 2007 29 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 Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2007 $308,826 235,382 544,208 123,324 123,324 7,201 116,123 $660,331 Darton College Annual Financial Report FY 2007 30 EAST GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2007 Dr. John Black President East Georgia College Swainsboro, Georgia Adriance M. Galloway Vice President for Fiscal Affairs EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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 .......................................................................................................... 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 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 1,700 students. The institution's headcount enrollment increased by 13.8 percent in the Fall Semester 2006 and by 12.8 percent in the Spring Semester 2007. The institution's historical enrollment data (as of Fall semester) follows: Students Students Faculty (Headcount) (FTE) FY2007 23 1,719 1,524 FY2006 24 1,511 1,338 FY2005 26 1,318 1,142 Overview of the Financial Statements and Financial Analysis East Georgia College is proud to present its financial statements for fiscal year 2007. 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 2007 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. East Georgia College Annual Financial Report FY 2007 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 As s e ts June 30, 2007 $1,078,190 15,740,648 479,532 17,298,370 June 30, 2006 $1,292,246 12,746,720 447,787 14,486,753 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,386,654 263,393 1,650,047 807,298 264,245 1,071,543 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 15,599,845 37,100 9,277 2,101 $15,648,323 12,594,504 37,100 8,893 774,713 $13,415,210 The total assets of the institution increased by $2,811,617. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,993,928 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $578,504. The combination of the increase in total assets of $2,811,617 and the increase in total liabilities of $578,504 yields an increase in total net assets of $2,233,113. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $3,005,341. This increase in Capital Assets is due to the completion of our new Student Center Complex addition. East Georgia College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $4,360,303 10,604,745 (6,244,442) 5,504,163 (740,279) 2,973,392 2,233,113 13,415,210 0 13,415,210 $15,648,323 $3,884,763 10,066,886 (6,182,123) 5,565,539 (616,584) 1,199,236 582,652 12,832,558 0 12,832,558 $13,415,210 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $1,535,718 2,705,742 51,156 51,854 15,833 4,360,303 5,489,057 110,051 31,807 140,786 (252,505) 5,519,196 2,973,392 2,973,392 $12,852,891 June 30, 2006 $1,341,519 2,350,509 51,510 39,377 101,848 3,884,763 5,117,150 95,348 290,479 82,611 (2,251) 5,583,337 1,199,236 1,199,236 $10,667,336 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $3,208,276 746,751 911,786 838,530 2,170,980 1,232,767 1,437,856 57,799 10,604,745 15,033 $10,619,778 June 30, 2006 $3,022,091 618,272 890,415 705,367 1,595,432 1,934,782 1,285,527 15,000 10,066,886 17,798 $10,084,684 Operating revenues increased $475,540 in fiscal 2007. Although Tuition & Fees include a 14% increase, Grants and Contracts include a 15% increase, Auxiliary, Sales & Service and Other categories combined decreased 38%, with an overall increase in operating revenues of 12%. East Georgia College Annual Financial Report FY 2007 4 East Georgia College is a commuter institution without a residential population. Revenues associated with auxiliary services increased by $12,477 during the year due primarily to an increase in commission revenues from privatized operations that include the snack bar, the bookstore, and vending operations. Non-operating Capital Gift revenue decreased by $1,774,156 for the year. While State Appropriations, Grants and Contracts, and Investment Income increased by $444,785, Gifts decreased by $258,672 and Other Non-operating revenues decreased by $250,254. The compensation and employee benefits category increased by $572,444 and primarily affected the Instruction and Institutional Support categories. The increase reflects an increase in staff positions, merit increases, and an increased cost of health insurance for the employees of the institution. Utilities increased by $19,402 during the past year. The increase was primarily associated with increased electricity and water costs that were experienced over the entire fiscal year. Statement of Cash Flows The final statement presented by 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($5,665,402) 5,609,736 (332,242) 92,328 (295,580) 1,075,287 $779,707 June 30, 2006 ($5,004,295) 5,539,437 (203,044) (224,494) 107,604 967,683 $1,075,287 East Georgia College Annual Financial Report FY 2007 5 Capital Assets The College had capital asset additions for the Student Services Building Expansion and Renovation project (minor capital project) in fiscal year 2007. The expansion project was completed and occupied in March. The renovation has not been completed as of June 30, 2007. This project is being funded with bond funds provided by the Georgia State Financing 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 East Georgia College had Long-Term Debt and Liabilities of $457,468 of which $194,075 was reflected as current liability at June 30, 2007. 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 FY2007. East Georgia College Foundation, Inc. had investments of $918,313 as of June 30, 2007. 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. John Black, President East Georgia College East Georgia College Annual Financial Report FY 2007 6 Statement of Net Assets EAS T GEORGIA COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash an d Cash Equivalent s Sh o rt -t erm In v est m en t s Accoun t s Receivable, n et (n o t e 3 ) Receiv ables - Federal Fin an cial Assist an ce Receivables - Ot her Due From Com ponent Unit s P ledges Receivable Inventories (note 4) P repaid it em s T ot al Current Asset s Noncurre nt Asse ts No n current Cash In v est m ent s (in cludin g Real Est at e) 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 Liabilitie s Account s P ayable Salaries P ay able Co n t ract s P ay able Deferred Rev en ue (no t e 7 ) Ot h er Liabilit ies Dep o sit s Held for Ot h er Organ izat ion s Due t o P rim ary Go v ern m en t Lease P urch ase Obligat io ns (curren t p o rt io n) Co m p en sat ed Absen ces (curren t p o rt io n) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Lease P urch ase Obligat io ns (n o ncurren t ) Co m p en sat ed Absen ces (n o ncurren t ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS In v est ed in Cap it al Asset s, net of relat ed debt Rest rict ed for No nexp endable E x p e n dable Unrest rict ed TO TAL NET AS S ETS Ea s t G e o rg i a C olle ge $762,207 9,822 144,859 1,100 968 159,234 1,078,190 17,500 462,032 15,740,648 16,220,180 17,298,370 28,598 26,884 645,661 368,527 64,746 58,163 45,278 148,797 1,386,654 95,525 167,868 263,393 1,650,047 15,599,845 37,100 9,277 2,101 $15,648,323 C om pone nt Un i t Ea s t G e o rg i a C olle ge Fo u n da ti o n , In c. $101,350 39,233 1,565 34,130 5,000 181,278 879,080 168,600 118,572 1,166,252 1,347,530 1,100 1,100 1,100 168,600 1,011,156 166,674 $1,346,430 East Georgia College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets EAST GEORGIA COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Eas t Ge orgi a C olle ge C om pone nt Unit Eas t Ge orgi a C olle ge Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal Sales and Services Auxiliary Ent erprises Bookst ore Food Services P arking/T ransport at ion 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion P aym ent s t o or on behalf of East Georgia College T ot al Operat ing Expenses Operat ing Incom e (loss) $2,792,070 (1,256,352) 2,705,742 51,156 27,245 1,413 21,394 1,802 15,833 4,360,303 2,071,859 2,532,667 1,381,393 54,993 76,497 1,438,906 403,528 2,080,959 563,943 10,604,745 (6,244,442) $0 240,945 28,436 9,688 279,069 31 1,149 92,983 42,838 137,001 142,068 East Georgia College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued EAS T GEORGIA COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Eas t G e orgi a C olle ge C om pone nt Unit Eas t G e orgi a C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 5,489,057 70,769 39,282 31,807 140,786 (15,033) (252,505) 5,504,163 (740,279) 2,973,392 2,973,392 2,233,113 13,415,210 13,415,210 $15,648,323 82,675 82,675 224,743 0 224,743 1,121,687 1,121,687 $1,346,430 East Georgia College Annual Financial Report FY 2007 9 Statement of Cash Flows EAS T GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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: Bookst ore Food Services P arking/T ransport at ion 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 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 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, 2007 $1,553,687 2,702,434 51,156 (4,018,376) (4,554,910) (1,438,906) (234) 447 19,252 1,273 22,659 4,273 (8,157) (5,665,402) 5,489,057 (23,731) 141,858 2,552 5,609,736 2,973,840 (3,253,598) (37,451) (15,033) (332,242) 110,406 (18,078) 92,328 (295,580) 1,075,287 $779,707 East Georgia College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued EAS T GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 June 30, 2007 ($6,244,442) 563,943 (43,662) 362 (22,171) 213 (6,414) 32,077 6,063 48,629 ($5,665,402) $26,038 $30,380 East Georgia College Annual Financial Report FY 2007 11 EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, East Georgia College is reporting the activity for the East 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 East Georgia College Annual Financial Report FY 2007 12 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 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. East Georgia College Annual Financial Report FY 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's 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. 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred no capital additions to East Georgia College. Deposits Deposits represent good faith deposits from students to reserve lab kits for on-line Chemistry courses and deposits from outside organizations who will utilize college facilities after June 30, 2007. East Georgia College Annual Financial Report FY 2007 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 compensated absences 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 $268,036 as of 7-1-2006. For FY2007, $202,223 was earned in compensated absences and employees were paid $153,594, for a net increase of $48,629. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $316,665. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. East Georgia College Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $3,552 5,725 $9,277 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $23,036 748,522 720 (770,177) $2,101 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes East Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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 East Georgia College Annual Financial Report FY 2007 16 scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. East Georgia College Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $257,223 and the bank balance was $490,796. Of the College's deposits, $390,796 were uninsured. Of these uninsured deposits, $390,796 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments At June 30, 2007, the carrying value of the College's investments was $984,852, 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: East Georgia College Annual Financial Report FY 2007 18 Investment Pools Board of Regents Short-T erm Fund Balanced Income Fund T otal Return Fund Diversified Fund $522,819 363,334 19,594 79,105 T otal Investment Pools $984,852 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/searchRpts.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 2.24 years. Of the College's total investment of $522,819 in the Short Term Fund, $520,832 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the College's total investment of $363,334 in the Balanced Income Fund, $219,308 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the College's total investment of $19,594 in the Total Return Fund, $5,563 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 8.86 years. Of the College's total investment of $79,105 in the Diversified Fund, $20,243 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. As previously stated, the Board of Regents Investment Pools are not rated. East Georgia College Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $26,031 8,941 9,821 1,100 113,359 159,252 3,471 $155,781 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Ot h er T otal $968 $968 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, 2007. 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 2007, one new loan was made to students. As of June 30, 2007, the outstanding notes receivable was $0. There was no allowance for uncollectible loans as of year end. East Georgia College Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $221,959 1,450,240 1,672,199 860,105 13,442,106 421,017 1,449,980 195,464 1,098,176 17,466,848 605,048 3,271,062 381,405 1,113,542 37,464 983,806 6,392,327 11,074,521 $12,746,720 Addi ti o n s $0 1,886,606 1,886,606 Re ductions $0 1,417,830 1,417,830 3,147,365 162,762 26,038 7,987 3,344,152 860,105 46 860,151 407,035 119,502 11,587 25,819 563,943 2,780,209 $4,666,815 605,048 46 605,094 255,057 $1,672,887 En di n g B al a n ce 6 /3 0 /2 0 0 7 $221,959 1,919,016 2,140,975 0 16,589,471 421,017 1,612,742 221,502 1,106,117 19,950,849 0 3,678,097 381,405 1,233,044 49,051 1,009,579 6,351,176 13,599,673 $15,740,648 East Georgia College Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $347,488 21,039 $368,527 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $152,216 Additions $26,038 Reductions Ending Balance June 30, 2007 $37,451 $140,803 Current Portion $45,278 Other Liabilities Compensated Absences Total 268,036 268,036 202,223 202,223 153,594 153,594 316,665 316,665 148,797 148,797 Total Long Term Obligations $420,252 $228,261 $191,045 $457,468 $194,075 Note 9. Significant Commitments The College did not have any unearned, outstanding, construction or renovation contracts executed as of June 30, 2007. Note 10. Lease Obligations East Georgia College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2011. Expenditures for fiscal year 2007 were $52,484 of which $15,033 represented interest. Total principal paid on capital leases was $37,451 for the fiscal year ended June 30, 2007. Interest rates range from 5.50 percent to 11.91 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: East Georgia College Annual Financial Report FY 2007 22 Equipment Total Assets Held Under Capital Lease $172,451 $172,451 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 East Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2010. 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. 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 FY2007, the annual lease payment was $39,600 and the annual lease payment has increased by $1,200 each year since the first year; East Georgia College's FY2007 expense for rental of real property under operating leases was $39,730. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $56,886 54,726 51,750 3,409 166,771 25,968 $140,803 $40,800 42,000 43,200 $126,000 East Georgia College's FY2007 expense for rental of real property and equipment under operating leases was $77,181. East Georgia College Annual Financial Report FY 2007 23 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $267,303 $302,018 $231,234 Employees' Retirement System of Georgia Plan Description East Georgia College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 East Georgia College Annual Financial Report FY 2007 24 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, 2007, for employees covered by ERS was $34,583. The College's total payroll for all employees was $4,604,526. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $4,119, of which $3,600 was made by the College and $519 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, 2007 financial report, which may be obtained through ERS. East Georgia College Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $102,596 (9.66% or 8.13%) and $57,605 (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 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 East Georgia College Annual Financial Report FY 2007 26 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 2007 amounted to $10,538 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. 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 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. East Georgia College Annual Financial Report FY 2007 27 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although 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, 2007. 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, 2007, there were 30 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, East Georgia College recognized as incurred $151,343 of expenditures, which was net of $54,337 of participant contributions. East Georgia College Annual Financial Report FY 2007 28 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses In st ruct io n Functional Classification FY2007 P ublic Service Academic Support St uden t Services In st it ut io n al Support $ 2,071,507 168,418 545,636 5,369 10,753 43,570 333,957 29,066 $ 1,802 144,924 39,276 17,765 1,573 5 3 1,4 12 9,999 $ 1,935 468,880 125,395 2,722 18,947 8,129 224,849 60,929 $0 407,984 118,566 4,762 8,706 1,050 7,931 284,802 4,729 ($ 3,385) 1,014,379 431,056 42,140 17,807 23,268 645,715 $ 3,208,276 $ 746,751 $ 911,786 $ 838,530 $ 2,170,980 P lan t Op erat io n s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary En t erp rises T otal Expenses $0 328,082 121,464 2,519 318,087 16,379 446,236 $0 1,437,856 $0 970 43,845 12,984 $ 2,071,859 2,532,667 1,381,393 54,993 76,497 1,438,906 403,528 2,080,959 563,943 $ 1,232,767 $ 1,437,856 $ 57,799 $ 10,604,745 East Georgia College Annual Financial Report FY 2007 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, 2007, the Foundation distributed $42,838 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the Vice President for Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College holds investments in the amount of $918,313, 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 investments may be expended as restricted by the donors. Some of the restricted net assets are defined as fully expendable by the donor for the purposed specified by the donor. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Equity Securities Investment Pools: BOR Short Term Fund BOR Balanced Income Fund Diversified Fund $5,805 41,779 39,631 219,738 589,286 $5,805 41,779 39,232 199,116 632,380 Total Investments $896,240 $918,313 East Georgia College Annual Financial Report FY 2007 30 Capital Assets for Component Units: East Georgia College Foundation, Inc. held the following Capital Assets at June 30, 2007: Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets, Net June 30, 2007 $168,600 168,600 $168,600 East Georgia College Annual Financial Report FY 2007 31 FORT VALLEY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Fort Valley State University Fort Valley, Georgia Dr. Larry Rivers President Arthur Henderson Vice President for Business & Finance FORT VALLEY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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................................................................................................................ 26 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 26 Note 15. Natural Classifications with Functional Classifications .............................................. 27 Note 16. Component Units .......................................................................................................... 28 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. Fort Valley State University is a land-grant university with state-wide commitments and responsibilities. It is the fifth oldest diversified institution of higher education. As a comprehensive land-grant institution, 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 students each year. The institution's enrollment data is shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 110 FY2006 117 FY2005 126 2,176 2,174 2,558 2,043 2,000 2,345 Overview of the Financial Statements and Financial Analysis Fort Valley State University is proud to present its financial statements for fiscal year 2007. 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 2007 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. Fort Valley State University Annual Financial Report FY 2007 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 As s e ts June 30, 2007 $3,582,014 49,876,441 2,154,409 55,612,864 June 30, 2006 $2,306,385 46,959,833 2,354,255 51,620,473 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,570,245 1,150,802 5,721,047 4,543,220 1,741,976 6,285,196 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 49,876,441 68,099 2,084,767 (2,137,490) $49,891,817 46,959,833 69,317 2,307,514 (4,001,387) $45,335,277 The total assets of the institution increased by $3,992,391. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,916,608 in the category of Capital Assets, net. The total liabilities for the year decreased by ($564,149). The combination of the increase in total assets of $3,992,391 and the decrease in total liabilities of ($564,149) yields an increase in total net assets of $4,556,540. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $2,916,608. Fort Valley State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $30,717,999 54,320,413 (23,602,414) 23,320,478 (281,936) 2,353,968 2,072,032 45,335,277 2,484,508 47,819,785 $49,891,817 $26,865,944 49,791,870 (22,925,926) 20,196,837 (2,729,089) 4,464,348 1,735,259 43,600,018 0 43,600,018 $45,335,277 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and 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 ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $4,538,830 5,049,637 14,524,794 142,940 6,222,490 239,308 30,717,999 22,971,005 418,577 89,501 (158,605) 23,320,478 2,353,968 2,353,968 $56,392,445 June 30, 2006 $4,348,605 4,697,025 13,509,480 129,799 4,027,094 153,941 26,865,944 19,057,949 1,474,566 63,268 (398,946) 20,196,837 4,464,348 4,464,348 $51,527,129 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $12,345,473 5,910,422 2,790,103 6,715,956 3,749,347 7,334,717 6,009,484 2,174,851 5,467,747 1,822,313 54,320,413 0 $54,320,413 June 30, 2006 $12,586,514 3,952,375 2,628,062 6,106,503 3,838,723 6,393,989 5,189,648 2,033,044 5,320,279 1,742,733 49,791,870 0 $49,791,870 Operating revenues increased by $3,852,055 in fiscal 2007. Tuition & Fees included a 4% increase and revenues increased in Grants and Contracts, Auxiliary and Other categories. Fort Valley State University Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $2,195,396 is a result of the changing environment of residential life on the University's campus. During the year, residential life constructed over 950 beds of new housing on the campus using the Fort Valley State University Foundation in a construction and leasing relationship. The net effect to the campus is that the students actually have more on-campus residential life availability. The housing complex rental agreement commences August 1, 2007 and will be treated as a capital lease. Nonoperating revenues increased by $3,123,641 for the year; however, there was an increase of $3,913,056 in State Appropriations partially offset by a decrease in Gifts. The compensation and employee benefits category decreased by ($308,789) and primarily affected the Instruction, Research, Public Service and Plant Operations and Maintenance categories. Utilities increased by $27,736 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Fort Valley State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($20,448,763) 23,194,424 (1,906,104) 243,905 1,083,462 (970,539) $112,923 June 30, 2006 ($20,215,477) 20,435,424 (2,841,882) 1,418,578 (1,203,357) 232,818 ($970,539) Fort Valley State University Annual Financial Report FY 2007 5 Capital Assets The University had two significant capital asset additions for facilities in fiscal year 2007. The renovation of the Health and Physical Education Building was completed and the building reopened for the 20062007 basketball season. Renovation of the Warner Robins site was completed and placed into service early in fiscal year 2007. Projected funding by GSFIC for FY2008 will be approximately the same. The University has one significant project in progress at June 30, 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 Fort Valley State University had Long-Term Debt and Liabilities of $2,682,110 of which $1,531,308 was reflected as current liability at June 30, 2007. 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, Fort Valley State University has included the financial statements and notes for all required component units for FY2007. The Fort Valley State University Foundation, Inc. had investments of $5.8 million as of June 30, 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 having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Larry Rivers, President Fort Valley State University Fort Valley State University Annual Financial Report FY 2007 6 Statement of Net Assets Fo r t V a l l e y S ta te Un i ve r s i ty S T A T EM EN T O F N ET A S S ET S June 30, 2007 A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s Sh o rt -t e r m I n v e st m e n t s A cco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial A ssist an ce Receiv ables - O t h er D ue Fro m Co m p o n en t U n it s Co n t ribut io n s Receiv able N o t es an d M o rt gages Receiv able T o t al Curren t A sset s Non cu rre n t Asse ts N o n curren t Cash In v est m en t s (in cludin g Real E st at e) N o t es Receiv able, n et Co n t ribut io n s Receiv able Cap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la rie s P a y a ble Co n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) O t h er L iabilit ies D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t Co m p en sat ed A bsen ces (curren t p o rt io n ) U S D O E Se t t le m e n t ( c ur r e n t p o r t io n ) N o t es an d L o an s P ay able (curren t p o rt io n ) T o t al Curren t L iabilit ies Non cu rre n t Liabilitie s Co m p en sat ed A bsen ces (n o n curren t ) Rev en ue/M o rt gage Bo n ds P ay able (n o n curren t ) U S D O E Se t t le m e n t ( n o n c ur r e n t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in Cap it al A sset s, n et o f relat ed debt Rest rict ed fo r N o n ex p en dable E x p en dable Cap it al P ro ject s U n rest rict ed TO TA L N ET A S S ETS Fo rt V a l le y S ta te U n ive rs ity $ 1 1 2 ,9 2 3 7 2 ,7 8 9 2 ,5 4 6 ,9 0 2 8 0 4 ,7 8 1 4 4 ,6 1 9 3 ,5 8 2 ,0 1 4 4 3 ,6 2 9 2 ,1 1 0 ,7 8 0 4 9 ,8 7 6 ,4 4 1 5 2 ,0 3 0 ,8 5 0 5 5 ,6 1 2 ,8 6 4 1 ,0 3 1 ,2 8 9 1 7 6 ,5 0 5 1 ,1 5 0 1 ,1 5 5 ,9 4 5 2 ,8 6 7 6 7 1 ,1 8 1 1 ,3 2 5 ,0 3 1 2 0 6 ,2 7 7 4 ,5 7 0 ,2 4 5 4 0 4 ,6 7 6 7 4 6 ,1 2 6 1 ,1 5 0 ,8 0 2 5 ,7 2 1 ,0 4 7 4 9 ,8 7 6 ,4 4 1 6 8 ,0 9 9 2 ,0 8 4 ,7 6 7 (2 ,1 3 7 ,4 9 0 ) $ 4 9 ,8 9 1 ,8 1 7 C om pon e n t Un it Fo rt V a lle y S ta te U n i ve rs ity Fo u n da ti o n , In c. $ 1 ,0 2 2 ,4 9 7 7 9 7,2 34 1 7 6,1 31 6 5,4 12 2 ,0 6 1 ,2 7 4 9 ,0 6 6 ,1 5 7 5 ,0 5 2 ,6 8 2 5 4 5,3 28 1 0 4,1 08 3 5 ,2 0 0 ,5 9 0 1 ,5 3 6 ,1 6 6 5 1 ,5 0 5 ,0 3 1 5 3 ,5 6 6 ,3 0 5 1 7 3,8 56 1 ,7 7 9 ,0 6 9 4 4,6 19 3 1 6,3 99 2 ,3 1 3 ,9 4 3 4 3 ,2 5 4 ,8 9 4 1 ,1 6 0 ,9 1 6 4 4 ,4 1 5 ,8 1 0 4 6 ,7 2 9 ,7 5 3 2 ,5 0 6 ,8 0 6 2 ,5 7 2 ,8 3 5 3 ,1 7 4 ,9 8 0 1 1 0,8 81 (1 ,5 2 8 ,9 5 0 ) $ 6 ,8 3 6 ,5 5 2 Fort Valley State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets Fort Valley S tate Univers ity S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Federal Appropriat ions Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rent s and Royalt ies 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 Realized/Unrealized Gains (Losses) Int erest and Dividend income 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 Ut ilit ies Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense P aym ent s t o or on behalf of Fort Valley St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) Fort Val l e y S tate Un i ve rsi ty Fort Val l e y S tate Un i ve rs i ty Fou n dati on , In c. $7,653,759 (3,114,929) 5,049,637 13,802,233 307,998 414,563 142,940 2,566,669 51,296 2,117,894 106,013 349,037 949,353 82,228 239,308 30,717,999 7,135,517 17,430,510 7,342,226 499,881 3,823,719 2,905,961 11,513,232 3,669,367 54,320,413 (23,602,414) $0 702,635 21,140 410,235 61,046 1,195,056 243,410 26,311 41,050 1,179,871 1,490,642 (295,586) Fort Valley State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued Fort Valley S tate Univers ity S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Fort Val l e y S tate Un i ve rsi ty Fort Val l e y S tate Un i ve rs i ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s Federal St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 22,971,005 418,577 89,501 (158,605) 23,320,478 (281,936) 2,353,968 2,353,968 2,072,032 45,335,277 2,484,508 47,819,785 $49,891,817 110,794 110,794 (184,792) 110,882 0 626,627 737,509 552,717 6,283,835 0 6,283,835 $6,836,552 Fort Valley State University Annual Financial Report FY 2007 9 Statement of Cash Flows Fort Valley S tate Univers ity S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 P rincipal P aid on Inst allment Debt 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 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, 2007 $4,538,830 5,049,637 14,434,067 142,940 (22,645,656) (24,648,266) (3,823,719) (263,952) 305,558 2,566,669 51,296 2,117,894 106,013 349,037 949,353 82,228 239,308 (20,448,763) 22,971,005 64,324 418,577 (259,482) 23,194,424 (1,906,104) (1,906,104) 150,000 93,905 243,905 1,083,462 (970,539) $112,923 Fort Valley State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued Fort Valley S tate Univers ity S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 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 Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($23,602,414) 3,669,367 (401,862) 213,530 41,606 (425,138) 311,135 (162,624) (92,363) ($20,448,763) ($2,353,968) Fort Valley State University Annual Financial Report FY 2007 11 FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations Fort Valley State University serves the state, national and international 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 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 FY2007, Fort Valley State University is reporting the activity for the Fort Valley State University Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Fort Valley State University Annual Financial Report FY 2007 12 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. Fort Valley State University Annual Financial Report FY 2007 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 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $2,353,968 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 2007 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 compensated absences 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 $1,822,070 as of 7-1-2006. For FY2007, $559,936 was earned in compensated absences and employees were paid $652,299, for a net decrease of ($92,363). The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,729,707. 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 2007 15 Expendable Restricted Net Assets include the following: Federal Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $2,042,681 42,086 $2,084,767 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, 2007 $25,902 988,160 (3,151,552) ($2,137,490) When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Fort Valley State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored 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 Fort Valley State University Annual Financial Report FY 2007 16 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 Fort Valley State University has a restatement of prior year net assets increasing beginning net assets by $2,484,508. This is due to removing capital assets that were disposed in prior years as well as adjusting the useful lives of certain buildings to reflect the University's accounting policy. Fort Valley State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $183,912 and the bank balance was $1,816,343. Of the University's deposits, $1,544,160 were uninsured. Of these uninsured deposits, $1,544,160 were uncollateralized. Fort Valley State University Annual Financial Report FY 2007 18 B. Investments At June 30, 2007, the carrying value of the University's investments was $43,629, 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 $43,629 T otal Investment Pools $43,629 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/searchRpts.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 practice is to follow the System's policy for managing interest rate risk which is contained in the investment policy guidelines for the various pooled investments. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the University's total investment of $43,629 in the Balanced Income Fund, $26,334 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's practice is to invest in high quality institutional money market mutual funds or other high quality short term instruments. As previously stated, the BOR Investment pool is not rated. Fort Valley State University Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $863,439 2,546,902 44,619 396,342 3,851,302 455,000 $3,396,302 Note 4. Inventories Fort Valley University had no Inventory at June 30, 2007. Note 5. Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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 allowance for uncollectible loans was $1,301,169 as of June 30, 2007. Fort Valley State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Re s tate d Beginning B al an ce s 7/1/2006 $3,762,548 0 3,762,548 Addi ti o n s $0 1,382,221 1,382,221 Re ductions $0 0 Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed $60,288,090 $1,506,124 $7,563,474 $6,310,077 75,667,765 2,353,968 343,729 180,154 2,877,851 200,264 200,264 Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion $19,323,456 $1,342,637 $3,944,020 $5,375,859 29,985,972 2,009,103 9,453 1,460,457 190,354 3,669,367 41,659 41,659 T ot al Capit al Asset s, Being Depreciat ed, Net 45,681,793 (791,516) 158,605 Capit al Asset s, net $49,444,341 $590,705 $158,605 En di n g B al a n ce 6/30/2007 $3,762,548 1,382,221 5,144,769 62,642,058 1,506,124 7,706,939 6,490,231 78,345,352 21,332,559 1,352,090 5,362,818 5,566,213 33,613,680 44,731,672 $49,876,441 Fort Valley State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $87,264 1,068,681 $1,155,945 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences US DOE Settlement Total Long Term O bligations Beginning Balance July 1, 2006 $1,822,070 1,211,885 $3,033,955 Additions $559,936 $559,936 Re du cti on s En di n g Bal an ce June 30, 2007 $652,299 259,482 $911,781 $1,729,707 952,403 $2,682,110 C u rre n t Porti on $1,325,031 206,277 $1,531,308 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $705,118 as of June 30, 2007. In addition, the University executed a rental agreement for a Student Housing Complex with the Fort Valley State University Foundation, Inc. in June 2006. The rental agreement commences in FY2008 and will expire in FY2037. The present value of the minimum lease payments over the life of the rental agreement is $43,334,897. These amounts are not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Fort Valley State University has no capital or operating lease obligations as of June 30, 2007. Fort Valley State University's FY2007 expense for rental of real property and equipment under operating leases was $6,074. Fort Valley State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,597,028 $1,593,422 $1,622,022 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 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 Fort Valley State University Annual Financial Report FY 2007 23 accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Fort Valley State University and the covered employees made the required contributions of $398,015 (9.66% or 8.13%) and $223,523 (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 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 2007 amounted to $43,940 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. Fort Valley State University Annual Financial Report FY 2007 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. 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Fort Valley State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Fort Valley State University Annual Financial Report FY 2007 25 Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Fort Valley State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Fort Valley State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 204 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Fort Valley State University recognized as incurred $841,605 of expenditures, which was net of $269,744 of participant contributions. Fort Valley State University Annual Financial Report FY 2007 26 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $ 7,123,313 1,693,365 2,022,335 97,011 395,388 102,782 809,944 101,335 $ 12,345,473 Research Functional Classification FY2007 Public Service Academic Support $ 12,204 2,829,029 786,504 88,114 15,194 34,727 1,758,013 386,637 $0 1,443,796 425,649 119,642 3,244 23,053 675,255 99,464 $0 3,674,418 1,030,640 75,578 2,832 116,605 1,427,923 387,960 $ 5,910,422 $ 2,790,103 $ 6,715,956 Student Services Institutional Support $0 2,218,172 555,342 62,670 60,151 35,319 815,239 2,454 $0 3,416,787 1,806,046 48,409 545,859 61,624 1,439,751 16,241 $ 3,749,347 $ 7,334,717 Natural Classification Faculty Staff Benefits Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses $0 1,177,485 458,966 (391,595) 2,303,963 962,303 1,498,362 $0 2,174,851 $0 977,458 234,170 400,052 626,200 227,888 3,624,804 (622,825) $0 22,574 1,799,739 $ 6,009,484 $ 2,174,851 $ 5,467,747 $ 1,822,313 Total Expenses $ 7,135,517 17,430,510 7,342,226 499,881 3,823,719 2,905,961 11,513,232 3,669,367 $ 54,320,413 Fort Valley State University Annual Financial Report FY 2007 27 Note 16. Component Units Fort Valley State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Fort Valley State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is 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, 2007, the Foundation distributed $1,179,871 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1005 State University Drive, Fort Valley, GA 31030 or from the Foundation's website at www.FVSU.edu. Investments for Component Units: Fort Valley State University Foundation, Inc. holds endowment and other investments in the amount of $5.8 million, excluding investments limited to use (bond proceeds). The $2.6 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds $558,782 797,234 276,523 88,929 649,584 3,148,611 $558,782 797,234 275,633 86,143 786,237 3,345,887 Total Investments $5,519,663 $5,849,916 Fort Valley State University Annual Financial Report FY 2007 28 Capital Assets for Component Units: Fort Valley State University Foundation, Inc. holds the following capital asset amounts at June 30, 2007: June 30, 2007 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 $153,815 34,200,540 34,354,355 1,065,982 18,042 1,084,024 237,789 846,235 $35,200,590 Long-term Liabilities for Component Units: Changes in long-term liabilities for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $1,562,133 43,254,894 $44,817,027 $83,250 0 $83,250 $168,068 0 $168,068 $1,477,315 43,254,894 $44,732,209 $316,399 0 $316,399 Notes and Loans Payable: Notes Payable consists of three loans: 1) Unsecured bank loan with interest at 8 percent that is due June 20, 2008. The outstanding principal balance at June 30, 2007 was $254,395. 2) Note Payable to the Department of Agriculture, Rural Business-Cooperative Services of $1,000,000, due in annual installments of $42,450, with interest of 1% through December 2027, collateralized by real and personal property, including mortgage loans. The outstanding principal balance at June 30, 2007 was $800,367. 3) Note Payable to the Department of Agriculture, Rural Business-Cooperative Services of $396,438 with interest of 1%, through August 2031, collateralized by real and personal property including mortgage loans. Annual installments began August 2005 and the Fort Valley State University Annual Financial Report FY 2007 29 unadvanced amount at June 30, 2007 was $270,312. The outstanding principal balance at June 30, 2007 was $422,553. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal Notes and Loans Payable Interest $316,399 62,626 63,255 63,891 64,532 332,518 327,796 203,934 42,364 $1,477,315 $32,637 11,663 11,034 10,398 9,756 38,924 21,784 8,316 426 $144,938 Total $349,036 74,289 74,289 74,289 74,288 371,442 349,580 212,250 42,790 $1,622,253 Revenue Bonds Payable: On June 1, 2006, Fort Valley State University Foundation Property, LLC entered into a loan agreement with the Development Authority of Peach County (the Authority) whereby the Authority would issue certain bonds (June 29, 2006) totaling $44,060,000 and loan the entire proceeds to the LLC. As part of the loan agreement, the LLC agreed to use the bond proceeds to finance (i) the construction, equipping and installation of certain buildings and personal property to be used as student housing facilities, related parking, a student amenities building, relocation of an existing softball field and infrastructure improvements located on the Fort Valley State University campus, (ii) establish a debt service reserve fund for the Series 2006 Bonds, (iii) fund capitalized interest for the Series 2006 Bonds and (iv) pay cost of issuance of the Series 2006 Bonds, including the insurance policy premium. The principal and interest are payable solely from and secured by a lien upon certain interest in real property and certain assignments of rental income originating from a rental agreement between the LLC and Board of Regents of the University System of Georgia. The rental agreement is for an initial one-year term (annual renewals for thirty years) and will commence following the issuance of a certificate of occupancy estimated in August 2007. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. Additionally, the trust indenture requires the maintenance of certain deposits with a trustee, which are reported in Noncurrent Cash. The serial bonds have various annual maturities with the final payment scheduled for June 1, 2026. The bond discount is amortized on the effective interest rate of the bonds. Fort Valley State University Annual Financial Report FY 2007 30 Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 70,000 130,000 195,000 260,000 1,965,000 4,175,000 6,695,000 10,685,000 19,885,000 44,060,000 (805,106) $43,254,894 Bonds Payable Interest $1,987,394 1,987,394 1,984,594 1,979,394 1,971,594 9,675,770 9,112,164 7,979,626 6,106,025 3,146,100 45,930,055 $45,930,055 Total $1,987,394 2,057,394 2,114,594 2,174,394 2,231,594 11,640,770 13,287,164 14,674,626 16,791,025 23,031,100 89,990,055 (805,106) $89,184,949 Fort Valley State University Annual Financial Report FY 2007 31 GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Georgia College & State University Milledgeville, Georgia Dr. Dorothy Leland President Paul Jones Interim Vice President for Business & Finance GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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. Students Students Faculty (Headcount) (FTE) FY2007 286 FY2006 260 FY2005 288 6,040 5,662 5,531 5,591 5,202 4,987 Overview of the Financial Statements and Financial Analysis Georgia College & State University is proud to present its financial statements for fiscal year 2007. 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 2007 and FY 2006. Georgia College & State University Annual Financial Report FY 2007 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 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 e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $11,650,447 148,312,808 6,550,463 166,513,718 June 30, 2006 $10,319,122 50,765,434 8,076,248 69,160,804 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 7,227,913 102,472,538 109,700,451 6,061,933 968,392 7,030,325 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 50,734,149 2,075,090 4,951,374 (947,346) $56,813,267 50,711,523 2,962,312 5,883,413 2,573,231 $62,130,479 The total assets of the institution increased by $97,352,914. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $97,547,374 in the Georgia College & State University Annual Financial Report FY 2007 2 category of Capital Assets, net. The balance of the increase is primarily in the Short-term investments category. Of significance to the Statement of Net Assets is the decrease of ($1,120,513) in the Investments category. This decrease is attributed to the transfer of $1,837,376 endowment funds to the Georgia College & State University Foundation (GCSU Foundation). The total liabilities for the year increased by $102,670,126. The combination of the increase in total assets of $97,352,914 and the increase in total liabilities of $102,670,126 yields a decrease in total net assets of ($5,317,212). The decrease in total net assets is primarily in the category of Unrestricted Net Assets in the amount of ($3,520,577). 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $38,595,809 81,458,892 (42,863,083) 35,627,160 (7,235,923) 1,918,711 (5,317,212) 62,130,479 0 62,130,479 $56,813,267 $34,128,015 77,099,606 (42,971,591) 39,540,933 (3,430,658) 493,097 (2,937,561) 65,068,040 0 65,068,040 $62,130,479 Georgia College & State University Annual Financial Report FY 2007 3 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a negative year with a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $22,320,758 382,965 1,081,880 14,068,018 742,188 38,595,809 29,833,637 4,114,928 1,343,466 822,939 35,603 36,150,573 1,257,444 661,267 1,918,711 $76,665,093 June 30, 2006 $18,844,655 308,521 1,136,269 13,134,059 704,511 34,128,015 30,074,288 5,072,987 3,799,265 565,584 30,709 39,542,833 461,297 31,800 493,097 $74,163,945 Georgia College & State University Annual Financial Report FY 2007 4 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $26,749,151 324,302 111,475 9,208,123 6,107,933 11,648,269 6,986,853 1,640,804 16,596,949 2,085,033 81,458,892 523,413 $81,982,305 June 30, 2006 $29,087,939 426,142 100,047 7,082,735 4,510,526 9,355,755 9,579,174 1,402,124 13,149,941 2,405,223 77,099,606 1,900 $77,101,506 Operating revenues increased by $4,467,794 in fiscal 2007. Although Tuition & Fees included an 8% increase, revenues also increased in Grants and Contracts, Auxiliary and Other categories with a decrease in Sales and Services. The Auxiliary revenue increase of $933,959 is a result of the changing environment of residential life on the University's campus. The Freshmen residency requirement is in place; thereby, producing related increases in Residence Halls, Food Service and Vending Operation. In addition, since there are increasing numbers of students at the Milledgeville campus, mandatory fees for Parking/Transportation, Health Services and Athletics have significantly increased. Also, the Bookstore has realized an almost 4% increase in sales revenue. Of significance for Auxiliaries are the Capital Leases that were entered into with GCSU Foundation for the student residential facilities and the Irwin Street Parking Facility. Nonoperating revenues and expenses decreased by ($3,913,773) for the year primarily due to a decrease of ($240,651) in State Appropriations, a decrease of Gifts for GSFIC transfers of ($2,455,799) due to no major assets being transferred and an increase of $521,513 for interest expense for Capital Leases. The compensation and employee benefits category increased by $2,901,216 and primarily affected the Academic Support, Student Services, Institutional Support and Auxiliary Enterprises categories. The increase reflects the addition of positions in these areas, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($519,625) during the past year. The decrease was primarily associated with the decreased cost of heating due to a mild winter of fiscal year 2007 and increased energy conservation. These affected the Plant Operations and Maintenance category. Georgia College & State University Annual Financial Report FY 2007 5 Statement of Cash Flows The final statement presented by 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. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($32,463,689) 35,336,189 (1,837,081) 392,743 1,428,162 6,073,587 $7,501,749 June 30, 2006 ($37,872,487) 39,033,403 (834,554) 565,833 892,195 5,181,392 $6,073,587 Capital Assets The University had three significant capital asset additions for facilities in fiscal year 2007 and one significant equipment capital asset addition. The University entered into a Capital Lease with GCSU Foundation for the Student Residential Facilities for $94,350,650; the Student Union Building for $6,382,006 and the Irwin Street Parking facility for $1,595,163. The University also had a Capital Lease with a third party for an Abtech Server for $429,404. 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 College & State University had Long-Term Debt and Liabilities of $104,224,304 of which $1,751,766 was reflected as current liability at June 30, 2007. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Georgia College & State University Annual Financial Report FY 2007 6 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 FY2007. The Georgia College & State University Foundation, Inc. had investments of $13.4 million and long-term debt of $112.1 million in the form of two bond issues and a note payable as of June 30, 2007. Georgia College & State University Alumni Association, Inc. had investments of $5.8 million. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University realized a decrease in Net Assets due to the Capital Leases discussed earlier. The University anticipates the current fiscal year will be positive 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 2007 7 Statement of Net Assets G EO R G IA C O L L EG E & S T A T E UN IV ER S IT Y S T A T EM EN T O F N ET A S S ET S June 30, 2007 C om pon e n t Un it C om pon e n t Un it A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s Sh o r t - t e r m I n v e st m e n t s A cco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial A ssist an ce Receiv ables - O t h er D ue Fro m Co m p o n en t U n it s L eases Receiv able P ledges Receiv able D ue Fro m P rim ary Go v ern m en t In v en t o ries (n o t e 4 ) P rep aid it em s T o t al Curren t A sset s Non cu rre n t Asse ts N o n curren t Cash In v est m en t s (in cludin g Real E st at e) N o t es Receiv able, n et L eases Receiv able Cap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la r ie s P a y a ble Co n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) O t h er L iabilit ies D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t L ease P urch ase O bligat io n s (curren t p o rt io n ) Co m p en sat ed A bsen ces (curren t p o rt io n ) Rev en ue/M o rt gage Bo n ds P ay able (curren t ) D ue t o Co m p o n en t U n it s T o t al Curren t L iabilit ies Non cu rre n t Liabilitie s L ease P urch ase O bligat io n s (n o n curren t ) D eferred Rev en ue (n o n curren t ) Co m p en sat ed A bsen ces (n o n curren t ) Rev en ue/M o rt gage Bo n ds P ay able (n o n curren t ) L ia bilit ie s un de r Sp lit - I n t e r e st A gr e e m e n t s ( n o n c ur r e n t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in Cap it al A sset s, n et o f relat ed debt Rest rict ed fo r N o n ex p en dable E x p en dable U n rest rict ed TO TA L N ET A S S ETS G e orgia C olle ge & S tate U n i ve rs i ty G e orgia C olle ge & S ta te U n i ve rs i ty Alum ni A s s o ci a ti o n , In c. G e orgia C olle ge & S ta te U n i ve rs i ty Fo u n da ti o n , In c. $ 7 ,3 3 1 ,5 9 9 2 2 2 ,3 8 0 1 6 7 ,7 9 8 1 ,8 1 2 ,1 2 0 5 0 8 ,8 1 3 1 ,4 4 0 ,7 1 1 1 6 7 ,0 2 6 1 1 ,6 5 0 ,4 4 7 1 7 0 ,1 5 0 3 ,8 6 4 ,0 7 3 2 ,5 1 6 ,2 4 0 1 4 8 ,3 1 2 ,8 0 8 1 5 4 ,8 6 3 ,2 7 1 1 6 6 ,5 1 3 ,7 1 8 6 9 1 ,2 2 7 2 5 9 ,9 2 6 2 1 ,2 8 7 4 6 0 ,5 4 0 3 ,2 3 1 ,4 0 0 3 7 3 ,5 5 7 4 1 2 ,5 8 9 4 1 7 ,8 6 5 1 ,3 3 3 ,9 0 1 2 5 ,6 2 1 7 ,2 2 7 ,9 1 3 1 0 1 ,6 4 4 ,4 6 2 8 2 8 ,0 7 6 1 0 2 ,4 7 2 ,5 3 8 1 0 9 ,7 0 0 ,4 5 1 5 0 ,7 3 4 ,1 4 9 2 ,0 7 5 ,0 9 0 4 ,9 5 1 ,3 7 4 (9 4 7 ,3 4 6 ) $ 5 6 ,8 1 3 ,2 6 7 $ 2 5 2 ,7 5 6 1 ,0 0 0 8 ,1 1 1 1 ,7 4 8 2 6 3 ,6 1 5 5 ,8 2 2 ,1 2 2 8 6 ,8 6 4 4 ,5 0 0 5 ,9 1 3 ,4 8 6 6 ,1 7 7 ,1 0 1 1 ,1 9 9 1 ,1 9 9 0 1 ,1 9 9 8 6 ,8 6 4 4 ,2 0 8 ,3 6 7 1 ,6 6 1 ,9 5 0 2 1 8 ,7 2 1 $ 6 ,1 7 5 ,9 0 2 $ 5 ,2 1 4 ,3 9 7 1 ,7 2 4 4 ,1 3 0 ,2 8 6 4 4 7 ,2 7 6 2 5 ,6 2 1 167 9 ,8 1 9 ,4 7 1 1 4 ,8 1 8 ,3 7 4 1 3 ,4 1 5 ,8 5 8 1 8 5 ,9 3 0 ,1 3 6 3 ,2 6 6 ,0 6 0 2 ,1 3 8 ,3 2 6 2 1 9 ,5 6 8 ,7 5 4 2 2 9 ,3 8 8 ,2 2 5 3 9 7 ,8 6 1 2 ,4 3 9 ,1 8 2 6 4 4 ,5 7 2 5 0 8 ,8 1 3 2 7 5 ,0 0 0 4 ,2 6 5 ,4 2 8 1 0 7 ,3 5 9 ,8 4 5 1 0 9 ,1 7 3 ,6 0 1 4 6 ,6 5 2 2 ,6 7 0 ,9 5 7 2 1 9 ,2 5 1 ,0 5 5 2 2 3 ,5 1 6 ,4 8 3 (1 1 ,6 8 2 ,9 8 2 ) 1 0 ,1 8 6 ,2 0 0 3 ,8 4 5 ,7 5 8 3 ,5 2 2 ,7 6 6 $ 5 ,8 7 1 ,7 4 2 Georgia College & State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA COLLEGE& STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 Component Unit 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 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 Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of Georgia College & State University Total Operating Expenses Operating Income (loss) Georgia College & State University Georgia College & State University Alumni Association, Inc. $26,716,938 (4,396,180) 209,678 23,959 149,328 1,081,880 31,835 3,947,742 2,995,743 3,315,575 684,839 785,191 2,045,884 293,044 710,353 38,595,809 18,378,084 19,744,425 10,649,971 215,062 681,699 2,312,071 3,389,132 22,528,774 3,559,674 81,458,892 (42,863,083) $0 42,717 814,647 133,402 990,766 5,315 165,789 4,851 157,645 333,600 657,166 Georgia College & State University Foundation, Inc. $0 2,039,381 1,466,934 385,880 9,340,958 24,965 13,258,118 1,823,989 254,480 320,376 1,181,407 12,333 2,068,025 126,158 1,156,729 6,943,497 6,314,621 Georgia College & State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA COLLEGE& STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 Component Unit Component Unit 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 Loss on Bond Retirement Additions to permanent endowments Total Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Georgia College & State University Georgia College & State University Alumni Association, Inc. Georgia College & State University Foundation, Inc. 29,833,637 3,152,793 116,853 845,282 1,343,466 822,939 (523,413) 35,603 35,627,160 (7,235,923) 1,257,444 661,267 1,918,711 (5,317,212) 62,130,479 0 62,130,479 $56,813,267 0 657,166 22,469 22,469 679,635 5,496,267 0 5,496,267 $6,175,902 743,290 (4,449,316) (3,706,026) 2,608,595 (7,721,750) 297,809 (7,423,941) (4,815,346) 10,952,905 (265,817) 10,687,088 $5,871,742 Georgia College & State University Annual Financial Report FY 2007 10 Statement of Cash Flows GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 P rincipal P aid on Inst allment Debt Int erest P aid on Inst allment Debt 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 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, 2007 $22,650,148 653,846 1,081,880 (31,416,834) (38,047,381) (2,312,071) (352,280) 572,046 4,124,299 2,702,656 3,498,851 697,145 793,927 1,984,969 115,174 789,936 (32,463,689) 29,833,637 85,538 5,622,000 (138,150) (66,836) 35,336,189 744,265 (1,699,472) (610,657) (271,217) (1,837,081) 205,788 279,335 (92,380) 392,743 1,428,162 6,073,587 $7,501,749 Georgia College & State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) BY O PERATING AC TIVITIES : Operating Income (loss) Adjust ment s to Reconcile Net Income (loss) to Net Cash P rovided (used) by Operating Activities Dep reciat io n Change in Assets and Liabilities: Receivables, net Invent ories Other Asset s P repaid Items Notes Receivable, Net Account s P ayable Deferred Revenue Other Liabilit ies Compensated Absences Net Cash P rovided (used) by Operating 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 capital lease obligat ions Non-capital items acquired by incurring capital lease obligations Change in account s receivable related t o private gifts Change in fair value of investments recognized as a component of interest income Change in accrued int erest payable affect ing int erest paid Gift reducing proceeds of Gifts and Grant s received for ot her t han capital purposes Gift of capital asset s reducing proceeds of capital grant s and gift s June 30, 2007 ($42,863,083) 3,559,674 490,156 (227,411) 748,172 19,702 312,042 5,221,055 269,541 (46,786) 53,249 ($32,463,689) $98,273,555 $4,483,668 $13,452 $543,604 $185,360 ($117,849) ($1,174,446) Georgia College & State University Annual Financial Report FY 2007 12 GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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 notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Georgia College & State University Annual Financial Report FY 2007 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 College & State University Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $513,179 to Georgia College & State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. In Fiscal Year 2004, the University implemented an application Georgia College & State University Annual Financial Report FY 2007 15 confirmation deposit. 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 compensated absences 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 $2,108,730 as of 7-1-2006. For FY2007, $1,590,968 was earned in compensated absences and employees were paid $1,537,721, for a net increase of $53,247. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $2,161,977. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia College & State University Annual Financial Report FY 2007 16 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $510,104 3,563,499 877,771 $4,951,374 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, 2007 $2,126,611 6,687,740 (9,761,697) ($947,346) 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. 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. Georgia College & State University Annual Financial Report FY 2007 17 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Auxiliary Intercollegiate Athletics revenue of $2,045,884 is net of fee waivers of $464,277. Auxiliary Scholarships were $543,145 for fiscal year 2007. Georgia College & State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $7,693,029 and the bank balance was $8,661,942. Of the University's deposits, $8,294,454 were uninsured. Of these uninsured deposits, $4,525,149 were collateralized with securities held by the financial institution's trust department or agent in the University's name, $8,537 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $3,760,768 were uncollateralized. Georgia College & State University Annual Financial Report FY 2007 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Treasuries Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $168,415 $168,415 $83,118 $83,118 $0 $0 $85,297 $0 $0 $85,297 Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Investment Pools Board of Regents Total Return Fund Total Investments 389,270 311,842 1,079,572 1,914,973 $3,864,072 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/searchRpts.html. During fiscal year 2007, all Georgia College & State University endowment funds with the exception of Gilbert, which is held and managed by the Board of Regents, were transferred to the Georgia College & State University Foundation. The following information represents the investment policy followed during the period of fiscal year 2007 that the University held and managed these certain endowment funds. Georgia College & State University Annual Financial Report FY 2007 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. During fiscal year 2007, the University held and invested certain endowment funds. 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 & Poor's. 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 9.35 years. Of the University's total investment of $ 1,914,973 in the Total Return Fund, $543,661 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 the Assistant Vice President for Financial Services/comptroller of the institution concerning all significant matters pertaining to the portfolio. Georgia College & State University Annual Financial Report FY 2007 21 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 the Assistance Vice President for financial Services/Comptroller for 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, 2007, $1,247,987 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 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. As of June 30, 2007, none of the University's investments in debt securities were subject to Credit Quality Risk disclosure. 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 in any one issuer in concentrations of greater than 5% of total investments held. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University does not have a formal policy for managing exposure to foreign currency risk. Of the University's total investments, $ 144,622, or 3.74% is invested in an International equity mutual fund. Foreign currency risk associated with this investment is considered minimal. Georgia College & State University Annual Financial Report FY 2007 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $27,915 593,897 167,798 508,813 1,246,093 2,544,516 55,785 $2,488,731 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $1,405,560 35,151 $1,440,711 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was zero. Georgia College & State University Annual Financial Report FY 2007 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $634,079 424,198 1,058,277 70,010,892 867,019 8,464,444 142,695 6,699,728 160,800 86,345,578 24,782,160 638,530 5,724,819 73,946 5,377,238 41,730 36,638,423 49,707,155 $50,765,432 Addi ti o n s $373,659 1,127,964 1,501,623 Re ductions $0 0 En di n g B al a n ce 6 /3 0 /2 0 0 7 $1,007,738 1,552,162 2,559,900 591,672 985,822 97,899,895 189,748 99,667,137 676,949 38,838 22,884 9,500 748,171 70,602,564 867,019 8,773,317 98,003,752 6,866,592 151,300 185,264,544 2,464,766 39,016 719,731 52,230 279,488 4,443 3,559,674 96,107,463 $97,609,086 654,220 7,120 22,884 2,237 686,461 61,710 $61,710 27,246,926 677,546 5,790,330 119,056 5,633,842 43,936 39,511,636 145,752,908 $148,312,808 Georgia College & State University Annual Financial Report FY 2007 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $3,146,995 84,405 $3,231,400 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $53,911 Additions $102,757,223 Re du cti on s Ending Balance June 30, 2007 $748,807 $102,062,327 Current Portion $417,865 Other Liabilities Compensated Absences T ot al 2,108,730 2,108,730 1,590,968 1,590,968 1,537,721 1,537,721 2,161,977 2,161,977 1,333,901 1,333,901 Total Long Term Obligations $2,162,641 $104,348,191 $2,286,528 $104,224,304 $1,751,766 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $4,561,955 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Georgia College & State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2034. Expenditures for fiscal year 2007 were $1,086,860 of which $338,053 represented interest. Total principal paid on capital leases was $748,807 for the fiscal year ended June 30, 2007, $383,970 of which relates to a correction of previous years' accounting treatment on two of the leases as operating. Interest rates range from 4.10 percent to 8.30 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Georgia College & State University Annual Financial Report FY 2007 25 Land Buildings & Facilities Equipment Total Assets Held Under Capital Lease $373,659 97,362,912 521,784 $98,258,355 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Georgia College & State University had three capital leases with related entities in the current fiscal year. In June 2007, Georgia College & State University entered into a capital lease of $94,350,650 at 4.715 percent with GCSU Foundation, a discretely presented component unit, whereby the University leases Student Housing for a twenty-seven year period that began June 15, 2007 and expires March 25, 2034. In February 2005, the University entered into a capital lease of $6,382,006 at 4.1 percent with GCSU Foundation, whereby the University leases land and a building for a twenty-one year period that began February 1, 2005 and expires June 30, 2025. In addition, Georgia College & State University entered into a capital lease of $1,595,163 at 4.1 percent with GCSU Foundation, whereby the University leases a Parking facility for a twenty-one year period that began September 1, 2004 and expires June 30, 2025. The outstanding liability at June 30, 2007 on these capital leases is $94,350,650 for Student Housing; $5,874,100 for the Student Center and $1,449,453 for the Parking facility. Georgia College & State University also has various capital leases for equipment with third parties with an outstanding balance at June 30, 2007 in the amount of $388,124. These leases expire in fiscal years from 2008 through 2011. OPERATING LEASES Georgia College & State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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 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. In fiscal year 2007, Georgia College & State University entered into a real property operating lease with GCSU Foundation, a related party, for the Macon Graduate and Professional Programs from November 26, 2006 through November 26, 2009 for annual rentals of $238,831. The agreement does contain an option to renew or extend the Agreement at the expiration of the term on a year to year basis for three (3) consecutive years. Under this agreement, Georgia College & State University paid $141,972 in the current year. Following are the Operating Leases held by the University: Georgia College & State University Annual Financial Report FY 2007 26 Facility Leased Location Lessor Annual Lease Macon Graduate & Professional Programs Center 433 Cherry St Macon, GA GCSU Foundation $238,831 Pawprints Bookstore 115 S Wilkinson St McComb Family Milledgeville, GA Trust 26,436 Office Space 100 E Greene St Bank of Eastman Milledgeville, GA 30,258 Parking Lot 425 N Clark Street Wilkinson Colonial Milledgeville, GA Properties 40,000 Storage 121 Blandy Rd, NW Warehouse Solutions, 15,000 Milledgeville, GA LLC 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $4,243,046 5,362,271 5,451,772 5,593,855 5,639,473 30,565,704 34,982,485 38,964,975 43,192,537 16,512,065 190,508,183 88,445,856 $102,062,327 $317,987 28,054 28,894 29,758 10 50 50 50 50 $404,903 Georgia College & State University's FY2007 expense for rental of real property and equipment under operating leases was $259,553. Georgia College & State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,991,790 $1,862,778 $1,752,523 Employees' Retirement System of Georgia Plan Description Georgia College & State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 2007 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, 2007, for employees covered by ERS was $90,320. The University's total payroll for all employees was $38,122,509. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $10,757, of which $9,402 was made by the University and $1,355 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, 2007 financial report, which may be obtained through ERS. Georgia College & State University Annual Financial Report FY 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $1,129,875 (9.66% or 8.13%) and $632,792 (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 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 Georgia College & State University Annual Financial Report FY 2007 30 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 2007 amounted to $47,962 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 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 2007 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, 2007. 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, 2007, there were 253 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia College & State University recognized as incurred $926,071 of expenditures, which was net of $290,102 of participant contributions. Georgia College & State University Annual Financial Report FY 2007 32 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Inst ruct ion $ 17,414,134 2,087,373 4,708,126 186,805 127,912 118,572 2,006,558 99,671 $ 26,749,151 Research Functional Classification FY2007 Public Service Academic Support $ 17,333 166,247 23,745 $0 78,327 20,592 $ 833,547 3,980,102 1,193,762 10,612 616 102,172 3,577 2,308 10,248 285,770 210 90,853 2,068,409 755,470 $ 324,302 $ 111,475 $ 9,208,123 St udent Services $ 28,496 2,661,414 646,492 69,006 60,768 2,633,772 7,985 $ 6,107,933 Inst it ut ional Support $0 5,216,057 2,442,950 211,242 90,477 66,659 3,347,319 273,565 $ 11,648,269 Natural Classification Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises Unallocat ed Expenses Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $0 3,292,910 1,055,214 (1,059,261) 3,354 1,827,579 1,763,587 103,470 $0 1,640,804 $ 84,574 2,261,995 559,090 1,063,081 35,675 543,145 1,221,777 10,596,709 230,903 $0 2,085,033 Total Expenses $ 6,986,853 $ 1,640,804 $ 16,596,949 $ 2,085,033 T ot al Expenses $ 18,378,084 19,744,425 10,649,971 215,062 681,699 2,312,071 3,389,132 22,528,774 3,559,674 $ 81,458,892 Georgia College & State University Annual Financial Report FY 2007 33 Note 16. Component Units Georgia College & State University Foundation, Inc. Georgia College & State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of 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 thirty eight-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, 2007, the Foundation distributed $1,156,729 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at Campus Box 96, 100 E. Greene Street, Suite 200, Milledgeville, GA 31061. Prior Period Adjustment In prior years, the Foundation recognized a lease as an operating lease instead of a direct financing lease. During the year ended June 30, 2007, the Foundation retroactively changed its method of accounting to record this lease as a direct financing lease, in accordance with generally accepted accounting principles. This change had the effect of decreasing the beginning balance in unrestricted net assets by ($265,817). Investments for Component Units: Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $13.4 million. The $10.2 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia College & State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 5% of the calendar year-end market value of the investment based on a rolling 3 year average can be spent. 95% is to be spent based on donor intent and 5% is to be spent as an administrative fee. Georgia College & State University Annual Financial Report FY 2007 34 Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Corporate Bonds Equity Securities Real Estate $610,895 3,147,285 6,927,075 1,088,000 $610,895 3,099,257 8,566,509 1,139,197 Total Investments $11,773,255 $13,415,858 Capital Assets for Component Units: Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $372,188 42,560 414,748 2,822,585 45,379 2,867,964 16,652 2,851,312 $3,266,060 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia College & State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 450,000 96,057,000 $96,507,000 $63,373 2,837,623 102,666,601 $105,567,597 $16,721 616,666 89,275,000 $89,908,387 $46,652 2,670,957 109,448,601 $112,166,210 $0 0 275,000 $275,000 Georgia College & State University Annual Financial Report FY 2007 35 During the year ending June 30, 2007, the Foundation purchased space in an office building in Macon, Georgia to house the Macon Campus of the University. A line of credit to a financial institution was taken out for the purchase and related renovation. The line requires monthly interest payments at LIBOR + 1.88% (7.20% at June 30, 2007). The line is due October 2009 and is collateralized by certain real property and an assignment of certain rents. The balance on the line of credit at June 30, 2007 is $2,670,957. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $0 2,670,957 $2,670,957 $192,309 56,090 $248,399 Total $192,309 2,727,047 $2,919,356 On December 1, 2003, Property II, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County whereby the Authority would issue certain bonds totaling $7,840,000 and loan the entire proceeds to Property II, LLC. As part of the loan agreement, Property II, LLC agreed to use the proceeds to construct and equip a student center and a parking lot located on the campus of the University, 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 interest in real property and certain assignments of rental income originating from rental agreements between Property II, LLC and the Board of Regents. The rental agreements are annual arrangements and commence following the issuance of a certificate of occupancy. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for September 1, 2022. The balance of the bonds at June 30, 2007 was $7,310,529, net of unamortized premium of $10,529. On July 14, 2004, Property III, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County 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 proceeds to refund and redeem $55,875,000 in outstanding principal of Property I, LLC, to complete certain uncompleted projects of Property I, LLC, 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. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for September 1, 2015. During the year ending June 30, 2007, the 2004 bonds were refunded. The refunding was undertaken to reduce total future debt service payments. The transaction resulted in a net estimated present value economic gain of $2,117,581. Georgia College & State University Annual Financial Report FY 2007 36 On June 15, 2007, Property V, LLC entered into a loan agreement with the Development Authority of the City of Milledgeville and Baldwin County whereby the Authority would issue certain bonds totaling $102,470,000 and loan the entire proceeds to Property V, LLC. As part of the loan agreement, Property V, LLC agreed to use the proceeds to refund and redeem $89,000,000 in outstanding principal of Property III, LLC, 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. The bonds are subject to certain optional and extraordinary mandatory redemption provisions. The serial bonds have various maturities with the final payment scheduled for October 1, 2033. The balance of the bonds at June 30, 2007 was $102,138,072, net of unamortized discount of $331,928. In connection with the 2007 series bonds, the Foundation entered into an interest rate swap transaction to convert its variable rate bond obligation to fixed rates. The resulting cost of funds is lower than it would have been had fixed rate borrowings been issued directly. The level of fixed rate debt resulting from the effective interest rate swap is 100% of the total bond debt of the 2007 series. A liability from interest rate swap transactions of $644,572 has been recorded as of June 30, 2007 and is reported as Other Current Liabilities on the Statement of Net Assets. The amount was recorded based on calculated mathematical approximations of market values using certain assumptions regarding past, present, and future market conditions. Annual debt service requirements to maturity for Bonds Payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $275,000 455,000 590,000 760,000 945,000 7,975,000 14,980,000 24,100,000 34,650,000 25,040,000 109,770,000 (321,399) $109,448,601 Bonds Payable Interest $5,096,071 5,099,033 5,075,932 5,044,978 5,006,223 24,100,664 21,438,117 16,777,363 9,861,594 1,066,300 98,566,275 $98,566,275 Total $5,371,071 5,554,033 5,665,932 5,804,978 5,951,223 32,075,664 36,418,117 40,877,363 44,511,594 26,106,300 208,336,275 (321,399) $208,014,876 Georgia College & State University Alumni Association, Inc. Georgia College & State University Alumni Association, Inc. (Alumni Association) is a legally separate, tax-exempt component unit of Georgia College & State University (University). The Alumni Association acts primarily as a fund-raising organization to supplement the resources Georgia College & State University Annual Financial Report FY 2007 37 that are available to the University in support of its programs. The thirty eight-member board of the Alumni 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 Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Alumni Association can only be used by, or for the benefit of the University, the Alumni Association is considered a component unit of the University and is discretely presented in the University'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, 2007, the Alumni Association distributed $157,645 to the University for both restricted and unrestricted purposes. Complete financial statements for the Alumni Association can be obtained from the Administrative Office at Campus Box 96, 100 E. Greene Street, Suite 200, Milledgeville, GA 31061. Investments for Component Units: Georgia College & State University Alumni Association, Inc. investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Corporate Bonds Equity Securities Mutual Funds Real Estate $8,357 1,354,966 3,114,238 555,000 3,500 $8,357 1,333,729 3,893,814 582,722 3,500 Total Investments $5,036,061 $5,822,122 Georgia College & State University Annual Financial Report FY 2007 38 Capital Assets for Component Units: Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 24,000 227,692 110,600 338,292 275,428 62,864 $86,864 Georgia College & State University Annual Financial Report FY 2007 39 GEORGIA HIGHLANDS COLLEGE Financial Report For the Year Ended June 30, 2007 J. Randy Pierce President Georgia Highlands College Atlanta, Georgia Wilbur Shuler Vice President, Finance & Business GEORGIA HIGHLANDS COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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 ................................................................ 11 Note 2. Deposits and Investments................................................................................................ 17 Note 3. Accounts Receivable...................................................................................................... 19 Note 4. Inventories...................................................................................................................... 19 Note 5. Notes/Loans Receivable................................................................................................. 19 Note 6. Capital Assets................................................................................................................. 20 Note 7. Deferred Revenue........................................................................................................... 21 Note 8. Long-Term Liabilities .................................................................................................... 21 Note 9. 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 GEORGIA HIGHLANDS COLLEGE Management's Discussion and Analysis Introduction Georgia Highlands College is one of the 35 institutions of higher education of the College System of Georgia. 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 approximately 4,000 students each year. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) 109 3,933 3,214 102 3,817 3,072 90 3,416 2,724 Overview of the Financial Statements and Financial Analysis Georgia Highlands College is proud to present its financial statements for fiscal year 2007. 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 2007 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. 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 Highlands College Annual Financial Report FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $3,623,507 33,379,650 28,365 37,031,522 June 30, 2006 $2,192,460 29,758,419 26,612 31,977,491 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,456,572 210,191 2,666,763 1,674,115 250,751 1,924,866 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 As s e ts 33,379,650 26,612 50,011 0 908,486 $34,364,759 29,758,419 26,612 75,311 38,590 153,693 $30,052,625 The total assets of the institution increased by $5,054,031. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,621,231 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $741,897. The combination of the increase in total assets of $5,054,031 and the increase in total liabilities of $741,897 yields an increase in total net assets of $4,312,134. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $3,621,231. Georgia Highlands College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $9,343,974 22,699,145 (13,355,171) 13,485,485 130,314 1,681,820 1,812,134 30,052,625 2,500,000 32,552,625 $34,364,759 $10,840,602 24,926,699 (14,086,097) 13,634,446 (451,651) 18,295,880 17,844,229 12,561,118 (352,722) 12,208,396 $30,052,625 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $5,651,403 2,776,044 221,653 461,591 233,283 9,343,974 13,065,414 469,394 30,337 114,571 (194,231) 13,485,485 1,681,820 1,681,820 $24,511,279 June 30, 2006 $5,609,317 3,672,234 213,830 1,136,224 208,997 10,840,602 12,203,145 375,452 971,436 79,844 4,768 13,634,645 18,295,880 18,295,880 $42,771,127 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $10,095,747 1,313,911 1,815,797 5,507,621 2,303,801 1,779,715 (117,447) 0 22,699,145 0 $22,699,145 June 30, 2006 $10,238,921 1,833,942 1,637,082 4,142,723 2,437,240 2,730,588 1,148,831 757,372 24,926,699 199 $24,926,898 Operating revenues decreased by ($1,496,628) in fiscal 2007. Revenues decreased in Grants and Contracts and Auxiliary categories. The Auxiliary revenue decrease of ($674,633) is primarily due to the sale of the bookstore to Barnes & Noble during the prior year. Fiscal year 2007 is the first full year reflecting this Georgia Highlands College Annual Financial Report FY 2007 4 impact. In addition, food services were terminated during 2007 leaving primarily a vending operation. Nonoperating revenues decreased by ($149,160) for the fiscal year. An increase of $862,269 in State Appropriations was offset by the effect of a gift in 2006 that was not repeated. The compensation and employee benefits category increased by $473,142. In addition to rate increases in salaries, benefits, etc., this increase also reflects the growth and expansion of the College. Supplies and Other services decreased by ($2,114,756) largely due to prior year expenses related to the establishment of the Cartersville Campus. Statement of Cash Flows The final statement presented by 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($12,030,290) 13,663,490 (2,441,734) 112,818 (695,716) 1,009,325 $313,609 June 30, 2006 ($13,052,593) 13,388,178 (525,952) 86,889 (103,478) 1,112,803 $1,009,325 Georgia Highlands College Annual Financial Report FY 2007 5 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2007. Construction in Progress includes $1.4 million in major renovations of a classroom building in Rome. This project is managed by the College and is funded by the Georgia State Financing 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 Georgia Highlands College had Long-Term Debt and Liabilities of $654,094 of which $443,903 was reflected as current liability at June 30, 2007. 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 Highlands College has included the financial statements and notes for all required component units for FY2007. The Georgia Highlands College Foundation, Inc. had investments of $752,755 as of June 30, 2007. 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. J. Randy Pierce, President Georgia Highlands College Georgia Highlands College Annual Financial Report FY 2007 6 Statement of Net Assets GEORGIA HIGHLANDS COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her P ledges Receivable P repaid it ems T ot al Current Asset s G e orgi a H i gh l a n ds C olle ge $313,609 216,681 2,620,829 472,388 3,623,507 C om pone nt Un i t Ge orgia High lan ds C olle ge Fou n dati on , In c. $480,483 7,176 5,095 492,754 Noncurrent Asse ts Invest m ent s (including Real Est at e) P ledges Receivable Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Cont ract s P ayable Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n dable E x p e n dable Unrest rict ed TO TAL NET AS S ETS 28,365 33,379,650 33,408,015 37,031,522 246,256 97,972 203,837 1,284,595 20,213 159,796 443,903 2,456,572 210,191 210,191 2,666,763 33,379,650 26,612 50,011 908,486 $34,364,759 752,755 62,205 814,960 1,307,714 2,800 2,800 0 2,800 471,044 731,394 102,476 $1,304,914 Georgia Highlands College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA HIGHLANDS COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Ge orgia Highlan ds College C om pon e n t Unit G e orgi a H i gh l a n ds College Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore Food Services 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P ayment s t o or on behalf of Georgia Highlands College T ot al Operat ing Expenses Operat ing Income (loss) $6,896,320 (1,244,917) 2,767,315 1,693 7,036 221,653 5,840 171,438 22,556 267,597 227,443 9,343,974 5,990,884 5,996,968 3,367,613 48,779 243,947 1,796,399 1,060,196 2,858,546 1,335,813 22,699,145 (13,355,171) $0 289,820 117,230 69,120 476,170 23,443 39,681 305,961 369,085 107,085 Georgia Highlands College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA HIGHLANDS COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Ge orgia Highlan ds C olle ge C om pon e n t Unit G e orgi a H i g h l a n ds College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 13,065,414 175,552 115,247 178,595 30,337 114,571 (194,231) 13,485,485 130,314 1,681,820 1,681,820 1,812,134 30,052,625 2,500,000 32,552,625 $34,364,759 0 107,085 1,428 1,428 108,513 1,196,401 0 1,196,401 $1,304,914 Georgia Highlands College Annual Financial Report FY 2007 9 Statement of Cash Flows GEO R GIA HIGHLA N D S C O LLEGE S TA TEM EN T O F C A S H FLO W S For th e Ye ar En de d J u n e 3 0 , 2 0 0 7 C A S H FL O W S FR O M O P ER A TIN G A C TIV ITIES T uit io n an d Fees Gran t s an d Co n t ract s (E x ch an ge) Sa le s a n d Se r v ic e s P a y m e n t s t o Sup p lie r s P ay m en t s t o E m p lo y ees P a y m e n t s f o r Sc h o la r sh ip s a n d F e llo wsh ip s A ux iliary E n t erp rise Ch arges: Bo o k st o re F o o d Se r v ic e s O t h er O rgan izat io n s O t h er Receip t s (p ay m en t s) N et Cash P ro v ided (used) by O p erat in g A ct iv it ies C A S H FL O W S FR O M N O N - C A P ITA L FIN A N C IN G A C TIV ITIES St a t e A p p r o p r ia t io n s A gen cy Fun ds T ran sact io n s Gift s an d Gran t s Receiv ed fo r O t h er T h an Cap it al P urp o ses N et Cash Flo ws P ro v ided by N o n -cap it al Fin an cin g A ct iv it ies C A S H FL O W S FR O M C A P ITA L A N D R EL A TED FIN A N C IN G A C TIV ITIES P urch ases o f Cap it al A sset s N et Cash used by Cap it al an d Relat ed Fin an cin g A ct iv it ies C A S H FL O W S FR O M IN V ES TIN G A C TIV ITIES In t erest o n In v est m en t s N et Cash P ro v ided (used) by In v est in g A ct iv it ies N et In crease/D ecrease in Cash Cash an d Cash E quiv alen t s - Begin n in g o f y ear Cash an d Cash E quiv alen t s - E n d o f Y ear R EC O N C IL IA TIO N O F O P ER A TIN G L O S S TO N ET C A S H P R O V ID ED ( U S ED ) B Y O P ER A TIN G A C TIV ITIES : O p erat in g In co m e (lo ss) A djust m en t s t o Reco n cile N et In co m e (lo ss) t o N et Cash P ro v ided (used) by O p erat in g A ct iv it ies D ep reciat io n Ch an ge in A sset s an d L iabilit ies: Receiv ables, n et In v en t o ries P rep aid It em s A cco un t s P ay able D eferred Rev en ue O t h er L iabilit ies Co m p en sat ed A bsen ces N et Cash P ro v ided (used) by O p erat in g A ct iv it ies * * N O N - C A SH I N VE ST I N G, N O N - C A P I T A L F I N A N C I N G, A N D C A P I T A L A N D R E L A T E D F I N A N C I N G T R A N SA C T I O N S Ch an ge in fair v alue o f in v est m en t s reco gn ized as a co m p o n en t o f in t erest in co m e June 30, 2007 $ 5 ,6 8 4 ,5 3 8 2 ,2 5 3 ,2 9 2 2 2 1 ,6 5 3 (7 ,6 0 8 ,4 2 6 ) (1 1 ,8 3 2 ,2 7 6 ) (1 ,7 9 6 ,3 9 9 ) 1 5 3 ,2 6 1 2 1 ,8 0 0 3 0 1 ,9 3 3 5 7 0 ,3 3 4 (1 2 ,0 3 0 ,2 9 0 ) 1 3 ,0 6 5 ,4 1 4 9 7 ,8 4 1 5 0 0 ,2 3 5 1 3 ,6 6 3 ,4 9 0 (2 ,4 4 1 ,7 3 4 ) (2 ,4 4 1 ,7 3 4 ) 1 1 2 ,8 1 8 1 1 2 ,8 1 8 (6 9 5 ,7 1 6 ) 1 ,0 0 9 ,3 2 5 $ 3 1 3 ,6 0 9 ($ 1 3 ,3 5 5 ,1 7 1 ) 1 ,3 3 5 ,8 1 3 (1 ,4 6 9 ,5 6 8 ) 9 ,6 5 2 (2 2 ,3 7 0 ) 5 4 ,8 1 8 1 ,2 8 4 ,5 9 6 7 0 ,1 4 0 6 1 ,8 0 0 ($ 1 2 ,0 3 0 ,2 9 0 ) $ 1 ,7 5 3 Georgia Highlands College Annual Financial Report FY 2007 10 GEORGIA HIGHLANDS COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 College 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 College 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 College 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 College 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 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 FY2007, Georgia Highlands College is reporting the activity for the Georgia Highlands 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 Georgia Highlands College Annual Financial Report FY 2007 11 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 College 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. Georgia Highlands College Annual Financial Report FY 2007 12 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 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. No inventories were held on June 30, 2007. 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. There were no noncurrent cash and investments as of June 30, 2007. 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/or 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 College System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Georgia Highlands College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. There were no deposits as of June 30, 2007. Georgia Highlands College Annual Financial Report FY 2007 13 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 Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Highlands College had accrued liability for compensated absences in the amount of $592,295 as of 7-1-2006. For FY2007, $446,673 was earned in compensated absences and employees were paid $384,874, for a net increase of $61,799. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $654,094. 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 2007 14 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable June 30, 2007 $50,011 $50,011 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 College System of Georgia, College 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, 2007 $102,488 972,361 (166,363) $908,486 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 scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Georgia Highlands College Annual Financial Report FY 2007 15 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. In prior year financial statements, a portion of tuition and fee waivers granted by the College were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Restatement of Prior Year Net Assets Georgia Highlands College has a restatement of prior year net assets increasing beginning net assets by $2,500,000. This is due to the donation of land for the Cartersville campus that was not reported in the prior year. Georgia Highlands College Annual Financial Report FY 2007 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 College System of Georgia. At June 30, 2007, the carrying value of deposits was $308,659 and the bank balance was $910,187. Of the College's deposits, $810,187 were uninsured. Of these uninsured deposits, $810,187 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments At June 30, 2007, the carrying value of the College's investments was $28,365, 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: Georgia Highlands College Annual Financial Report FY 2007 17 Investment Pools Board of Regents Balanced Income Fund T otal Investment Pools $28,365 $28,365 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 College 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/searchRpts.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. College does not have a formal policy for managing interest rate risk. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the College's total investment of $ 28,365 in the Balanced Income Fund, $17,121 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. Georgia Highlands College Annual Financial Report FY 2007 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $250,406 1,834 216,681 1,681,820 724,278 2,875,019 37,509 $2,837,510 Note 4. Inventories Georgia Highlands College had no inventories as of June 30, 2007. Note 5. Notes/Loans Receivable Georgia Highlands College had no Notes or Loans Receivable as of June 30, 2007. Georgia Highlands College Annual Financial Report FY 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed (Re state d) Beginning B al an ce s 7/1/2006 $3,069,490 226,191 3,295,681 Addition s $0 1,885,657 1,885,657 Re ductions $0 226,191 226,191 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilit ies and Ot her Improvement s E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed 1,831,261 36,592,223 1,375,203 2,296,005 2,312,040 44,406,732 459,243 290,537 236,325 986,105 (8,096) 106,113 208,971 269,094 552 576,634 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildings Facilit ies and Ot her improvement s E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion 1,095,815 9,682,507 1,107,251 1,607,378 1,951,043 15,443,994 14,208 1,110,746 9,113 111,979 89,767 1,335,813 (68,704) (30,310) 181,462 188,813 116,846 388,107 T ot al Capit al Asset s, Being Depreciat ed, Net 28,962,738 (349,708) 188,527 Capit al Asset s, net $32,258,419 $1,535,949 $414,718 En di n g B a l a n ce 6 /3 0 /2 0 0 7 $3,069,490 1,885,657 4,955,147 1,839,357 36,945,353 1,166,232 2,317,448 2,547,813 44,816,203 1,178,727 10,823,563 934,902 1,530,544 1,923,964 16,391,700 28,424,503 $33,379,650 Georgia Highlands College Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $979,841 304,754 $1,284,595 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: O th e r Li abi li ti e s Com pensat ed Absences Total Lon g Te rm O bl i gati on s Beginning B al an ce July 1, 2006 Addition s Re ductions En di n g B a l a n ce June 30, 2007 C urre nt Portion $592,295 $592,295 $446,673 $446,673 $384,874 $384,874 $654,094 $654,094 $443,903 $443,903 Note 9. Significant Commitments Georgia Highlands College had no significant commitments as of June 30, 2007. 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 fiscal year 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, and leasing of parking lot space. Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Georgia Highlands College Annual Financial Report FY 2007 21 Year Ending June 30: 2008 T ot al m inim um lease paym ent s Year 1 Real P ropert y and Equipm ent Operat ing Leases $158,282 $158,282 Georgia Highlands College's FY2007 expense for rental of real property and equipment under operating leases was $154,269. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $663,994 $665,258 $587,585 Employees' Retirement System of Georgia Plan Description Georgia Highlands College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 Georgia Highlands College Annual Financial Report FY 2007 22 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, 2007, for employees covered by ERS was $75,412. The College's total payroll for all employees was $11,987,852. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $8,982, of which $7,850 was made by the College and $1,132 was made by employees. These contributions met the requirements of the plan. Georgia Highlands College Annual Financial Report FY 2007 23 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007 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 College System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible College system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Georgia Highlands College and the covered employees made the required contributions of $282,675 (9.66% or 8.13%) and $150,071 (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 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 Georgia Highlands College Annual Financial Report FY 2007 24 of Trustees. If a member has less than $3,500 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 2007 amounted to $70,237 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 College 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 College System of Georgia College System Office. All units of the College 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 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 College 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 College 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 Georgia Highlands College Annual Financial Report FY 2007 25 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 College 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 College 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, 2007. 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 College System of Georgia has established group health and life insurance programs for regular employees of the College System of Georgia. It is the policy of the Board of Regents to permit employees of the College 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 College 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 College 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, 2007, there were 87 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Highlands College recognized as incurred $413,352 of expenditures, which was net of $166,700 of participant contributions. Georgia Highlands College Annual Financial Report FY 2007 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Natural Classification F acu lt y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Functional Clas s ification FY2007 Inst ruct ion Academ ic Sup p o r t St udent Se r v ic e s Inst it ut ional Sup p o r t $ 5 ,99 0 ,8 84 1,3 08 ,7 01 1,67 4 ,8 89 142 ,146 50 9 ,9 70 92 6 ,2 77 4 2 ,8 30 $0 8 3 4,82 3 2 3 2,84 0 2 6 ,8 17 1,50 0 1,09 2 17 2 ,5 18 4 4 ,3 21 $0 1,0 8 9,16 8 3 0 1,8 2 3 36 ,8 3 2 15,13 4 3 72 ,8 4 0 $0 2 ,2 39 ,3 62 1,0 0 0,172 48 ,7 7 9 36 ,9 0 8 55 ,2 0 8 9 59 ,4 5 5 1,167 ,7 37 $ 10 ,09 5 ,7 47 $ 1,3 13 ,9 11 $ 1,8 15 ,7 9 7 $ 5 ,5 0 7,6 2 1 Functional Clas s ification FY2007 P lant Operat ions Scholarships A ux ilia r y & Maint enance & Fellowships Ent erprises T otal E x p en ses $0 49 1,6 80 14 9,5 69 12 5 9 93 ,9 26 5 95 ,6 60 7 2,84 1 $0 1,7 79 ,7 15 $0 3 3,23 4 8,32 0 1,119 (16 8,20 4) 8,08 4 $ 5,99 0,88 4 5,99 6,96 8 3 ,36 7,613 4 8,77 9 24 3,94 7 1,79 6,3 9 9 1,06 0 ,19 6 2,85 8,54 6 1,33 5 ,813 $ 2,30 3,80 1 $ 1,7 79 ,7 15 ($ 117 ,44 7) $ 2 2 ,69 9,14 5 Georgia Highlands College Annual Financial Report FY 2007 27 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. The Foundation board 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, 2007, the Foundation distributed $305,961 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, Inc. holds endowment and other investments in the amount of $752,755. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Equity Securities Mutual Funds $621,392 38,574 $709,122 43,633 Total Investments $659,966 $752,755 Georgia Highlands College Annual Financial Report FY 2007 28 GAINESVILLE STATE COLLEGE Financial Report For the Year Ended June 30, 2007 Gainesville State College Gainesville, Georgia Dr. Martha T. Nesbitt, President Mr. Paul Glaser, VP for Business and Finance GAINESVILLE STATE COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 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 .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 23 Note 13. Contingencies............................................................................................................... 23 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 24 Note 15. Natural Classifications with Functional Classifications .............................................. 25 Note 16. Component Units ......................................................................................................... 26 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, offered 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 7,000 students. The institution continues to grow as shown by the comparative data that follows. Students Students Faculty (Headcount) (FTE) FY2007 149 FY2006 132 FY2004 119 6,719 5,985 5,781 5,593 4,892 4,787 Overview of the Financial Statements and Financial Analysis Gainesville State College is proud to present its financial statements for fiscal year 2007. 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 2007 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 Gainesville State College Annual Financial Report FY 2007 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 e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $9,483,486 22,290,884 0 31,774,370 June 30, 2006 $8,227,708 22,111,230 10,723 30,349,661 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,929,496 361,474 3,290,970 2,579,626 275,203 2,854,829 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 22,290,884 0 0 6,192,516 $28,483,400 22,111,230 10,723 462,704 4,910,175 $27,494,832 The total assets of the institution increased by $1,424,709. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $179,654 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents, receivables and inventory categories. The total liabilities for the year increased by $436,141. The combination of the increase in total assets of $1,424,709 and the increase in total liabilities of $436,141 yields an increase in total net assets of $988,568. The increase in total net assets is primarily in the category of Unrestricted Net Assets in the amount of $1,282,341. Gainesville State College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $17,724,995 36,378,921 (18,653,926) 19,195,230 541,304 447,264 988,568 27,494,832 0 27,494,832 $28,483,400 $14,749,534 30,726,125 (15,976,591) 16,933,056 956,465 2,856,152 3,812,617 23,682,215 0 23,682,215 $27,494,832 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $10,702,690 3,230,891 558,068 3,047,163 186,183 17,724,995 17,873,267 727,476 131,123 489,228 (25,864) 19,195,230 447,264 447,264 $37,367,489 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $13,264,478 107,871 3,940,535 2,924,263 3,968,993 6,428,804 2,080,788 2,623,801 1,039,388 36,378,921 0 $36,378,921 June 30, 2006 $8,831,094 2,575,600 529,016 2,728,765 85,059 14,749,534 16,049,235 628,360 200,083 74,400 (19,022) 16,933,056 2,856,152 2,856,152 $34,538,742 June 30, 2006 $12,045,168 85,192 4,015,452 2,849,264 4,164,219 3,101,759 1,577,419 2,275,150 612,502 30,726,125 0 $30,726,125 Gainesville State College Annual Financial Report FY 2007 4 Operating revenues increased by $2,975,461 in fiscal 2007. This reflects a 21% increase in Tuition & Fees as well as increased revenues in Grants and Contracts, Auxiliary and Other categories. The Auxiliary revenue increase of $318,398 is a result of increased enrollment for Gainesville State College. Future plans include an expanded bookstore to accommodate the increase in student enrollment and increased activity for Auxiliary services. Nonoperating revenues increased by $2,262,174 for the year primarily due to an increase of $1,824,032 in State Appropriations and an increase in investment income of $414,828. The compensation and employee benefits category increased by $3,013,435 and primarily affected the Instruction category. The increase reflects the addition of faculty and staff members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($24,232) during the past year. The decrease was associated with the installation of a more efficient and centrally controlled energy management system as well as the implementation of Voice over IP for telecommunications. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($16,533,423) 18,719,626 (1,220,819) 489,228 1,454,612 6,843,451 $8,298,063 June 30, 2006 ($13,303,459) 16,915,542 (1,534,584) 74,400 2,151,899 4,691,552 $6,843,451 Gainesville State College Annual Financial Report FY 2007 5 Capital Assets The College had one significant capital asset additions for facilities in fiscal year 2007. The Quadrangle renovation project was completed and was reopened in the Spring of 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 Gainesville State College had Long-Term Debt and Liabilities of $808,085 of which $446,611 was reflected as current liability at June 30, 2007. 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, Gainesville State College has included the financial statements and notes for all required component units for FY2007. Gainesville State College Foundation, Inc. had investments of $11.8 million as of December 31, 2006. The Gainesville State 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. With the highest enrollment increase within the University System of Georgia, the College was able to generate a significant increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Dr. Martha T. Nesbitt, President Gainesville State College Gainesville State College Annual Financial Report FY 2007 6 Statement of Net Assets GAINES VILLE S TATE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Un i t AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her P ledges Receivable Inventories (note 4) P repaid it ems T ot al Current Asset s G ai n e s vi l l e State C ollege G ai n e s vi l l e State C ollege Fou n dati on , In c. $8,298,063 12,528 556,192 394,599 222,104 9,483,486 $0 2,975 290,806 293,781 Noncurrent Asse ts Noncurrent Cash Invest m ent s (including Real Est at e) Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Deferred Revenue (not e 7) Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n dable E x p e n dable Unrest rict ed TO TAL NET AS S ETS 22,290,884 22,290,884 31,774,370 105,240 11,768,732 8,400 11,882,372 12,176,153 675,370 1,515,934 291,581 446,611 2,929,496 361,474 361,474 3,290,970 22,290,884 6,192,516 $28,483,400 0 0 0 8,400 3,180,824 7,580,240 1,406,689 $12,176,153 Gainesville State College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets GAINES VILLE S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES G ai n e svi l l e S tate College C om pone nt Unit G ai n e s vi l l e State C ollege Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal St at e Other Sales and Services Auxiliary Ent erprises Bookst ore Food Services P arking/T ransport at ion 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Dep r eciat io n P ayment s t o or on behalf of Gainesville St at e College T ot al Operat ing Expenses Operat ing Income (loss) $11,872,775 (1,170,085) 3,092,788 23,617 114,486 558,068 3,000,389 9,041 13,506 24,227 186,183 17,724,995 $0 2,237,884 693,440 103,381 3,034,705 8,803,976 8,444,617 4,553,217 88,352 297,873 2,084,150 948,739 9,695,431 1,462,566 36,378,921 (18,653,926) 179,093 479,068 658,161 2,376,544 Gainesville State College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued GAINES VILLE S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 G ai n e svi l l e S tate C olle ge C om pone nt Unit G ai n e s vi l l e State C ollege Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 17,873,267 574,883 50,422 102,171 131,123 489,228 (25,864) 19,195,230 541,304 447,264 447,264 988,568 27,494,832 27,494,832 $28,483,400 202,308 202,308 2,578,852 36,124 36,124 2,614,976 9,561,177 9,561,177 $12,176,153 Gainesville State College Annual Financial Report FY 2007 9 Statement of Cash Flows GAINES VILLE S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food Services P arking/T ransport at ion 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 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, 2007 $10,870,100 3,237,585 558,068 (14,944,061) (17,113,071) (2,084,150) 2,461,200 9,041 13,506 24,227 434,132 (16,533,423) 17,873,267 (12,240) 858,599 18,719,626 447,264 (1,668,083) (1,220,819) 489,228 489,228 1,454,612 6,843,451 $8,298,063 Gainesville State College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued GAINES VILLE S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 Gaines ville State College had no non-cas h trans actions for fis cal 2007. June 30, 2007 ($18,653,926) 1,462,566 (120,875) (61,187) 391,029 123,509 191,979 986 132,496 ($16,533,423) Gainesville State College Annual Financial Report FY 2007 11 GAINESVILLE STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Gainesville State College is reporting the activity for Gainesville 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 Gainesville State College Annual Financial Report FY 2007 12 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. Gainesville State College Annual Financial Report FY 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's 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 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred no 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 2007 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 compensated absences 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 $$675,590 as of 7-1-2006. For FY2007, $$620,291 was earned in compensated absences and employees were paid $$487,796, for a net increase of $132,495. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $$808,085. 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: Gainesville State College has no nonexpendable restricted net assets as of June 30, 2007. Restricted net assets - expendable: Gainesville State College has no expendable restricted net assets as of June 30, 2007. Restricted net assets expendable Capital Projects: Gainesville State College has no expendable restricted net assets capital projects as of June 30, 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. Gainesville State College Annual Financial Report FY 2007 15 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, 2007 $18,050 3,495,968 2,678,498 $6,192,516 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. 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. Gainesville State College Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $8,296,593 and the bank balance was $8,862,636. Of the College's deposits, $8,457,673 were uninsured and collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments Gainesville State College has no Investments as of June 30, 2007. Gainesville State College Annual Financial Report FY 2007 17 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $339,805 2,445 12,528 35,521 178,421 568,720 0 $568,720 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore T otal $394,599 $394,599 Note 5. Notes/Loans Receivable Gainesville College has no loans receivable as of June 30, 2007. Gainesville State College Annual Financial Report FY 2007 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $105,849 105,849 1,114,655 29,827,357 1,188,698 2,471,948 1,923,116 36,525,774 319,958 9,820,602 983,927 1,638,347 1,757,559 14,520,393 22,005,381 $22,111,230 Addi ti o n s $0 0 Re ductions $0 0 1,049,233 136,235 375,710 106,905 1,668,083 126,859 28,249 155,108 44,982 1,078,547 11,072 251,095 76,870 1,462,566 205,517 $205,517 100,996 28,249 129,245 25,863 $25,863 En di n g B al a n ce 6 /3 0 /2 0 0 7 $105,849 105,849 2,163,888 29,963,592 1,188,698 2,720,799 2,001,772 38,038,749 364,940 10,899,149 994,999 1,788,446 1,806,180 15,853,714 22,185,035 $22,290,884 Gainesville State College Annual Financial Report FY 2007 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion & Fees Ot her Deferred Revenue T otals June 30, 2007 $1,395,102 120,832 $1,515,934 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $675,590 Additions $620,291 Re du cti on s Ending Balance June 30, 2007 $487,796 $808,085 Current Portion $446,611 Total Long Term Obligations $675,590 $620,291 $487,796 $808,085 $446,611 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $5.8M as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Gainesville State College has no outstanding capital or operating lease obligations at June 30, 2007. Gainesville State College had no expense for rental of real property and equipment under operating leases in FY2007. Gainesville State College Annual Financial Report FY 2007 20 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $947,090 $931,369 $786,859 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007 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 Gainesville State College Annual Financial Report FY 2007 21 to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Gainesville State College and the covered employees made the required contributions of $345,514 (9.66% or 8.13%) and $194,907 (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 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 2007 amounted to $88,674 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. Gainesville State College Annual Financial Report FY 2007 22 The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Gainesville 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 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 Gainesville State College Annual Financial Report FY 2007 23 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 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, 2007. 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, 2007, there were 103 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Gainesville State College recognized as incurred $391,312 of expenditures, which was net of $197,895 of participant contributions. Gainesville State College Annual Financial Report FY 2007 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 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 Dep reciat ion Total Expenses Instruction Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 8,776,026 1,406,127 2,288,052 98,365 3,362 45,264 610,330 36,952 $0 83,128 18,346 2,199 4,198 $ 24,200 2,075,743 555,208 90,883 41,396 1,037,490 115,615 $ 3,750 2,012,721 504,954 64,237 19,501 312,901 6,199 $0 1,812,867 883,250 88,352 38,843 21,928 1,086,054 37,699 $ 13,264,478 $ 107,871 $ 3,940,535 $ 2,924,263 $ 3,968,993 Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Expenses $0 900,645 262,394 (40,766) 1,794 819,187 4,264,871 220,679 $0 2,080,788 $0 153,386 41,013 40,766 1,552 1,463 2,379,587 6,034 $0 1,039,388 $ 8,803,976 8,444,617 4,553,217 88,352 297,873 2,084,150 948,739 9,695,431 1,462,566 $ 6,428,804 $ 2,080,788 $ 2,623,801 $ 1,039,388 $ 36,378,921 Gainesville State College Annual Financial Report FY 2007 25 Note 16. Component Units Gainesville State College Foundation, Inc. is a legally separate, tax-exempt component unit of Gainesville State 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 sevenmember 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 to December 31. During the year ended December 31, 2006, the Foundation distributed $479,068 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3820 Mundy Mill Road, Oakwood, GA. Investments for Component Units: Gainesville State College Foundation, Inc. holds endowment and other investments in the amount of $11.8 million. Investment income has been reported as an increase in unrestricted net assets unless the donor placed restrictions on the income's use. If the income is restricted, it is reported as an increase in restricted expendable or restricted nonexpendable net assets, depending on the nature of the restrictions. Gainesville State College Foundation, Inc. Investments are comprised of the following amounts at December 31, 2006 Cost Fair Value Cash held by investment organization Money Market Accounts Certificates of Deposit Equity Securities Mutual Funds $944,800 1,022,742 1,001,039 1,665,101 6,343,078 $981,607 1,022,742 1,015,112 1,918,644 6,830,627 Total Investments $10,976,760 $11,768,732 Gainesville State College Annual Financial Report FY 2007 26 Capital Assets for Component Units: Gainesville State College Foundation holds the following Capital Assets as of December 31, 2006: Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets, Net $8,400 8,400 $8,400 Gainesville State College Annual Financial Report FY 2007 27 GEORGIA PERIMETER COLLEGE Financial Report For the Year Ended June 30, 2007 Georgia Perimeter College Atlanta, Georgia Dr. Anthony S. Tricoli President Ronald L. Carruth Executive Vice President for Financial and Administrative Affairs GEORGIA PERIMETER COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 18 Note 4. Inventories...................................................................................................................... 19 Note 5. Notes/Loans Receivable................................................................................................. 19 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 .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 23 Note 13. Contingencies............................................................................................................... 23 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 24 Note 15. Natural Classifications with Functional Classifications .............................................. 25 Note 16. Component Units ......................................................................................................... 26 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. Students Students Faculty (Headcount) (FTE) FY2007 495 FY2006 492 FY2005 366 19,955 20,461 20,316 14,964 15,327 15,395 Overview of the Financial Statements and Financial Analysis Georgia Perimeter College is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $25,577,111 91,165,960 1,055,328 117,798,399 June 30, 2006 $19,672,355 83,444,623 1,047,838 104,164,816 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 13,559,831 1,642,292 15,202,123 10,431,827 1,335,566 11,767,393 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 As s e ts 91,165,960 31,338 80,901 1,000,216 10,317,861 $102,596,276 83,444,623 31,338 141,960 1,000,216 7,779,286 $92,397,423 The total assets of the institution increased by $13,633,583. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $7,721,337 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $3,434,730. The combination of the increase in total assets of $13,633,583 and the increase in total liabilities of $3,434,730 yields an increase in total net assets of $10,198,853. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $7,721,337. Georgia Perimeter College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $64,031,575 125,359,016 (61,327,441) 62,924,660 1,597,219 8,601,634 10,198,853 92,397,423 0 92,397,423 $102,596,276 $55,489,606 112,231,460 (56,741,854) 58,847,662 2,105,808 (14,591,396) (12,485,588) 104,883,011 0 104,883,011 $92,397,423 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 Perimeter College Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Special It em T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $33,900,003 22,578,165 1,271,727 4,751,107 1,530,573 64,031,575 59,476,678 929,484 1,020,577 1,497,921 62,924,660 8,601,634 0 8,601,634 $135,557,869 June 30, 2006 $32,156,781 17,676,682 1,626,854 2,547,257 1,482,032 55,489,606 57,466,393 296,495 701,232 383,542 58,847,662 6,689,784 (21,281,180) (14,591,396) $99,745,872 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $48,890,215 0 9,348,802 12,256,413 26,376,026 8,008,629 12,398,470 5,471,863 2,608,598 125,359,016 0 $125,359,016 June 30, 2006 $40,725,890 (36) 9,809,293 11,429,124 18,904,074 11,633,108 15,146,915 2,038,178 2,544,914 112,231,460 0 $112,231,460 Operating revenues increased by $8,541,969 in fiscal 2007. Although Tuition & Fees included an 8% increase, revenues decreased in Sales and Services, Food Services and other categories. Georgia Perimeter College Annual Financial Report FY 2007 4 Nonoperating revenues increased by $4,076,998 for the year primarily due to an increase of $2,010,285 in State Appropriations as well as increases in Gift, Investment and Other revenues. The compensation and employee benefits category increased by $3,196,330 and primarily affected the Instruction and Institutional Support categories. The increase reflects the addition of recruitment staff, merit increases and an increased cost of health insurance for the employees of the institution. Statement of Cash Flows The final statement presented by Georgia Perimeter College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($61,477,062) 66,122,713 (3,129,530) 1,020,577 2,536,698 14,462,517 $16,999,215 June 30, 2006 ($53,922,600) 57,848,247 (5,191,641) 701,232 (564,762) 15,027,279 $14,462,517 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2007. Construction of the College Center on the Clarkston campus was completed and placed into service early in calendar year 2007. Georgia Perimeter College also completed renovations to the Theatre/Multi Purpose Room of the Fine Arts building as well as to the Learning Resources Center on the Dunwoody Campus. The $4.7 million for these projects were funded by the Georgia State Financing and Investment Commission (GSFIC). Other ongoing renovations funded by the GSFIC included $2.9 million Georgia Perimeter College Annual Financial Report FY 2007 5 for an electrical system upgrade on the Clarkston Campus. Projected funding by GSFIC for FY2008 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 Georgia Perimeter College had Long-Term Debt and Liabilities of $3,263,009 of which $1,620,717 was reflected as current liability at June 30, 2007. 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 Perimeter College has included the financial statements and notes for all required component units for FY2007. Georgia Perimeter College Foundation, Inc. had investments of $992,993 as of December 31, 2006, and long-term debt of $25.2 million. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The College has responded to the increasing higher education needs of the Newton and Rockdale County areas by establishing a Newton Campus which opened June 4, 2007. The College has closed the Rockdale Center as the enrollment had outgrown the facilities available. The University System administration is working closely with Georgia Perimeter College on the transition of students, administrative operations and the 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. 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. Anthony S. Tricoli, President Georgia Perimeter College Georgia Perimeter College Annual Financial Report FY 2007 6 Statement of Net Assets GEORGIA PERIMETER COLLEGE STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -term Investment s Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Ot her Inventories (note 4) Prepaid it ems T otal Current Assets Noncurrent Asse ts Noncurrent Cash Investment s (including Real Estate) Not es Receivable, net Receivables Other Capit al Asset s, net (note 6) Other Asset s T otal Noncurrent Assets TO TAL ASS ETS LIAB ILITIES C u rre nt Liabil iti e s Accounts P ayable Salaries P ayable Contracts P ayable Deposit s Deferred Revenue (note 7) Other Liabilit ies Deposit s Held for Other Organizations Compensat ed Absences (current port ion) Revenue/Mortgage Bonds P ayable (current ) T otal Current Liabilities Noncu rre n t Liabili ti e s Compensat ed Absences (noncurrent) Revenue/Mortgage Bonds P ayable (noncurrent ) T otal Noncurrent Liabilities TO TAL LIABILITIES NET AS S ETS Invested in Capit al Asset s, net of related debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Un r est r ict ed TO TAL NET AS S ETS Ge ori ga Pe rimete r College $15,956,250 17,069 3,340,133 6,134,988 127,031 1,640 25,577,111 1,042,965 12,363 91,165,960 92,221,288 117,798,399 1,775,851 611,194 358,438 5,248,563 145,766 3,799,302 1,620,717 13,559,831 1,642,292 1,642,292 15,202,123 91,165,960 31,338 80,901 1,000,216 10,317,861 $102,596,276 C ompone nt Un i t Ge orgia Pe ri m e te r College Fou n dation , In c. $113,380 113,380 14,211,732 992,993 49,237 16,334,171 713,350 32,301,483 32,414,863 1,219,001 1,009,660 104,499 2,333,160 25,140,501 25,140,501 27,473,661 6,010,253 3,447,645 691,853 (5,208,549) $4,941,202 Georgia Perimeter College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA PERIMETER COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Georiga Pe rim e te r C olle ge C om pone nt Unit G e orgi a Pe rim eter College Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal St at e Other Sales and Services Rents and Royalt ies Auxiliary Ent erprises Bookst ore Food 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Dep r eciat io n P ayment s t o or on behalf of Georgia P erimet er College T ot al Operat ing Expenses Operat ing Income (loss) $42,048,065 (8,148,062) 17,838,234 4,411,982 327,949 1,271,727 58,449 984,813 4,057 1,191,007 2,571,230 1,472,124 64,031,575 29,353,320 34,642,158 15,203,614 239,713 776,354 13,125,843 3,064,933 24,661,014 4,292,067 125,359,016 (61,327,441) $0 970,269 970,269 309,213 609,179 918,392 51,877 Georgia Perimeter College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA PERIMETER COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Georiga Pe rim e te r C olle ge C om pone nt Unit G e orgi a Pe rim eter C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 59,476,678 929,484 1,020,577 1,497,921 62,924,660 1,597,219 8,601,634 8,601,634 10,198,853 92,397,423 92,397,423 $102,596,276 1,052,193 (93,502) 958,691 1,010,568 548,310 548,310 1,558,878 3,382,324 3,382,324 $4,941,202 Georgia Perimeter College Annual Financial Report FY 2007 9 Statement of Cash Flows GEORGIA PERIMETER COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 Auxiliary Ent erprise Charges: Bookst ore Food 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 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, 2007 $34,430,863 18,251,203 1,271,519 (44,892,187) (64,900,811) (13,125,843) (7,490) 1,273,856 4,070 894,906 3,004,940 2,317,912 (61,477,062) 59,476,678 2,932,338 3,713,697 66,122,713 4,578,788 (7,708,318) (3,129,530) 1,020,577 1,020,577 2,536,698 14,462,517 $16,999,215 Georgia Perimeter College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued GEORGIA PERIMETER COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($61,327,441) 4,292,067 (3,397,604) 25,550 (7,490) 4,450 (774,361) 897,751 (229,822) (960,162) ($61,477,062) ($4,022,846) Georgia Perimeter College Annual Financial Report FY 2007 11 GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Georgia Perimeter College is reporting the activity for the Georgia Perimeter 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 Georgia Perimeter College Annual Financial Report FY 2007 12 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, otherwise known as the Local Government Investment Pool (LGIP). 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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Georgia Perimeter College Annual Financial Report FY 2007 13 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/or 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 College 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, 2002, 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, 2007, GSFIC transferred $4,022,846 in 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 compensated absences 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 $3,016,608 as of 7-1-2006. For FY2007, $3,565,252 was earned in compensated absences and employees were paid $3,318,851, for a net decrease of Georgia Perimeter College Annual Financial Report FY 2007 14 $246,401. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $3,263,009. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 ($75,580) 17,543 127,528 11,410 $80,901 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 Georgia Perimeter College Annual Financial Report FY 2007 15 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, 2007 $90,118 6,818,182 175,369 3,234,192 $10,317,861 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. 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 Georgia Perimeter College Annual Financial Report FY 2007 16 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. At June 30, 2007, the carrying value of deposits was $14,006,346 and the bank balance was $17,126,060. Of the College's deposits, $17,006,213 were uninsured. Of these uninsured deposits, $17,006,213 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. Georgia Perimeter College Annual Financial Report FY 2007 17 B. Investments At June 30, 2007, the carrying value of the College's investments was $2,975,437, 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 T reasury and Fiscal Services Georgia Fund 1 $2,975,437 T otal Investment Pools $2,975,437 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 15 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. 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $1,928,287 451,662 3,340,133 5,189,909 10,909,991 1,434,870 $9,475,121 Georgia Perimeter College Annual Financial Report FY 2007 18 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 P hysical P lant T otal $127,031 $127,031 Note 5. Notes/Loans Receivable Georgia Perimeter College has loans/notes receivable of $12,363 as of June 30, 2007. Institutional Loans to Nursing students comprises a majority of the loans/notes receivable amount. As of June 30, 2007, there is no allowance for uncollectible loans receivable. Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $4,420,776 9,704,090 14,124,866 92,334,490 4,784,924 11,675,392 12,002,356 120,797,162 31,845,203 2,461,714 7,145,441 10,025,047 51,477,405 69,319,757 $83,444,623 Addi ti o n s $0 9,918,603 9,918,603 Re ductions $0 14,054,892 14,054,892 13,991,811 6,370 1,522,838 633,561 16,154,580 23,095 6,370 222,175 223,115 474,755 2,523,855 97,574 1,290,689 379,949 4,292,067 11,862,513 $21,781,116 385 3,981 242,387 223,115 469,868 4,887 $14,059,779 En di n g B al a n ce 6 /3 0 /2 0 0 7 $4,420,776 5,567,801 9,988,577 106,303,206 4,784,924 12,976,055 12,412,802 136,476,987 34,368,673 2,555,307 8,193,743 10,181,881 55,299,604 81,177,383 $91,165,960 Georgia Perimeter College Annual Financial Report FY 2007 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $4,720,453 528,110 $5,248,563 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $3,016,608 Additions $3,565,252 Reductions Ending Balance June 30, 2007 $3,318,851 $3,263,009 Current Portion $1,620,717 Total Long Term Obligations $3,016,608 $3,565,252 $3,318,851 $3,263,009 $1,620,717 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $738,315 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Georgia Perimeter College had no capital or operating leases at June 30, 2007. Georgia Perimeter College had no operating lease expense for the year ended June 30, 2007. Georgia Perimeter College Annual Financial Report FY 2007 20 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $3,394,465 $3,043,707 $2,875,101 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 2007 21 accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Georgia Perimeter College and the covered employees made the required contributions of $1,537,231 (9.66% or 8.13%) and $866,518 (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 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 2007 amounted to $687,744 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Georgia Perimeter College Annual Financial Report FY 2007 22 Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Perimeter College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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. Georgia Perimeter College Annual Financial Report FY 2007 23 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 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, 2007. 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, 2007, there were 263 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Perimeter College recognized as incurred $1,245,603 of expenditures, which was net of $377,023 of participant contributions. Georgia Perimeter College Annual Financial Report FY 2007 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt 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 T otal Exp enses Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es Inst it ut ional Sup p o r t $ 29 ,2 06 ,43 1 6 ,13 6,84 5 6 ,96 6,03 6 32 9,93 4 16 4,82 8 16 2,67 3 5 ,4 77 ,10 7 4 46 ,36 1 $ 7 ,3 90 6,6 82 ,9 50 1,32 1,4 57 107 ,6 34 9 ,5 00 67 ,0 28 9 53 ,5 97 199 ,2 46 $ 5 1,0 7 6 7 ,50 1,5 6 8 1,76 0,8 8 4 13 5,6 9 4 2 11,919 6 2,2 4 6 2,52 9,7 0 0 3,3 2 6 $ 8 8,42 3 9 ,24 2,45 2 3 ,72 2,09 9 2 39 ,713 13 2,60 9 6 45 ,36 1 11,6 13,28 8 6 92 ,08 1 $ 48 ,8 90 ,215 $ 9,3 48 ,8 02 $ 12 ,25 6,413 $ 2 6 ,37 6,02 6 P lant Operat ions & Maintenance Functional Clas s ification FY2007 Sc h o lar sh ip s & Fellowships A ux ilia r y Ent erprises Unallocat ed E x p e n se s T otal E x p e n se s $0 4 ,4 84 ,107 1,3 18 ,7 00 (99 ,0 60 ) 21,9 68 2 ,109 ,5 57 (135 ,2 99 ) 3 08 ,6 56 $0 12,39 8 ,47 0 $0 5 94 ,2 3 6 114 ,4 3 8 99 ,0 6 0 4 8,515 34 1,12 6 18 ,0 6 8 4,2 2 2,62 1 33 ,7 9 9 $0 2,60 8 ,59 8 $ 29 ,3 53 ,3 2 0 34 ,6 4 2,15 8 15 ,2 0 3,6 14 2 3 9,7 13 7 76 ,3 54 13 ,125 ,8 43 3 ,0 64 ,9 33 2 4,66 1,0 14 4 ,2 92 ,0 67 $ 8 ,0 08 ,6 29 $ 12,39 8 ,47 0 $ 5,47 1,8 6 3 $ 2,60 8 ,59 8 $ 125 ,3 5 9,016 Georgia Perimeter College Annual Financial Report FY 2007 25 Note 16. Component Units Georgia Perimeter College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Perimeter College (College). The Foundation is a nonprofit entity comprised of a volunteer group entrusted with the oversight for private fund raising to benefit Georgia Perimeter College. The Foundation provides volunteer leadership to the college's development and fund raising programs. In addition, the board monitors the administration of the assets of the Foundation, resulting in a broadening of opportunities for learning by students and a continued investment in faculty and staff. 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. The Foundation is a private nonprofit organization that has adopted Statement of Financial Accounting Standards (SFAS) 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, 2006, the Foundation distributed $609,179 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3251 Panthersville Rd, Decatur, GA 30034. Investments for Component Units: Georgia Perimeter College Foundation, Inc. holds endowment and other investments in the amount of $992,993. Investments are comprised of the following amounts at December 31, 2006: Cash held by investment organization Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $78,272 513,000 40,000 75,000 266,004 $972,276 Fair Value $78,272 516,797 39,661 75,054 283,209 $992,993 Georgia Perimeter College Annual Financial Report FY 2007 26 Capital Assets for Component Units: Georgia Perimeter College Foundation, Inc. holds the following Capital Assets as of December 31, 2006: Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net December 31, 2006 $3,000,000 13,334,171 16,334,171 $16,334,171 Long-term Liabilities for Component Units: On December 29, 2005, the Newton County Industrial Revenue Authority effected a revenue bond issue "Series 2005" in the amount of $22,695,000. These proceeds will fund the building project, which is expected to be completed by July 1, 2007. Rental payments from the Board of Regents of the University System of Georgia will be used to amortize this bonded indebtedness. The repayment of this debt is due in annual installments ranging from $430,000 to $1,400,000 through 2035 at 4.6% per annum. An additional bond issuance (Series 2005) was also effected on December 29, 2005 for the same purpose as the aforementioned issuance. The amount of this issuance was $2,550,000. This bond issuance was transacted separately because of different security (secured by Newton County through an intergovernmental contract). This was packaged as a single bond that was sold directly to Wachovia Bank. Consequently, the amortization of this issuance is similar to a conventional loan as opposed to a standard bond issue. The repayment of this debt is due in monthly installments of $20,472 through January, 2021 at 5.15% per annum. The Foundation's LLC received a gift of real estate during the years ended December 31, 2005 and 2006. The gift, a tract/parcel of land in Newton County, Georgia, was donated by Mt. Pleasant, LLC for the purpose of the construction of the new Georgia Perimeter College campus in Newton County. The land has been capitalized on the Foundation's books and is included in the asset section of the Statement of Net Assets. Changes in long-term liabilities for component units for the fiscal year ended December 31, 2006 are shown below: Beginning Balance January 1, 2006 Additions Reductions Ending Balance December 31, 2006 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $25,245,000 $0 $25,245,000 $0 $25,245,000 $104,499 $0 $25,245,000 $104,499 Georgia Perimeter College Annual Financial Report FY 2007 27 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 2032 through 2036 Principal $104,499 550,841 576,962 599,095 626,266 3,552,771 4,464,566 4,240,000 5,315,000 5,215,000 $25,245,000 Bonds Payable Interest $1,162,610 1,166,739 1,143,419 1,118,286 1,092,514 5,033,832 4,142,665 3,123,575 2,051,400 674,750 $20,709,790 Total $1,267,109 1,717,580 1,720,381 1,717,381 1,718,780 8,586,603 8,607,231 7,363,575 7,366,400 5,889,750 $45,954,790 Georgia Perimeter College Annual Financial Report FY 2007 28 GEORGIA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Carl V. Patton President Georgia State University Atlanta, Georgia Jerry J. Rackliffe Vice President for Finance and Administration GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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 .......................................................................................................... 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 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: Students Students Faculty (Headcount) (FTE) FY2007 FY2006 FY2005 864 934 1,055 26,135 25,967 27,261 22,748 22,635 23,242 Overview of the Financial Statements and Financial Analysis Georgia State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $163,413,445 328,827,899 6,518,372 498,759,716 June 30, 2006 $135,410,372 317,722,929 6,664,256 459,797,557 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 52,840,699 45,547,700 98,388,399 47,036,085 43,763,091 90,799,176 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 As s e ts 284,921,124 49,957 10,976,247 1,763,282 102,660,707 $400,371,317 275,556,140 45,959 16,596,237 598,193 76,201,852 $368,998,381 The total assets of the institution increased by $38,962,159. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $11,104,970 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents and receivable categories. The total liabilities for the year increased by $7,589,223. The combination of the increase in total assets of $38,962,159 and the increase in total liabilities of $7,589,223 yields an increase in total net assets of $31,372,936. The increase in total net assets is primarily in the category of Unrestricted Net Assets in the amount of $26,458,855. Georgia State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $237,916,539 425,057,948 (187,141,409) 210,827,321 23,685,912 7,687,024 31,372,936 368,998,381 368,998,381 $400,371,317 $229,787,148 430,023,087 (200,235,939) 203,118,200 2,882,261 25,120,269 28,002,530 340,995,851 340,995,851 $368,998,381 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 June 30, 2007 $111,233,207 76,812,343 13,632,930 32,312,724 3,925,335 237,916,539 200,710,980 6,736,565 79,187 7,468,797 (1,052,420) 213,943,109 7,530,520 156,504 7,687,024 $459,546,672 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $147,644,503 64,411,421 22,132,658 47,576,942 22,525,634 45,898,767 34,325,981 14,537,933 26,004,109 425,057,948 3,115,788 $428,173,736 June 30, 2006 $117,012,954 73,223,811 6,011,417 29,968,560 3,570,406 229,787,148 194,839,880 5,881,413 154,487 5,267,441 (119,658) 206,023,563 11,379,003 13,741,266 25,120,269 $460,930,980 June 30, 2006 $142,183,784 65,664,011 22,760,795 47,247,251 22,896,039 41,779,918 38,199,853 25,501,289 23,790,147 430,023,087 2,905,363 $432,928,450 Georgia State University Annual Financial Report FY 2007 4 Operating revenues increased by $8,129,391 in fiscal 2007 primarily due to an increase in Sales and Services. Nonoperating revenues and expenses increased by $7,709,121 for the year primarily due to an increase of $5,871,100 in State Appropriations. The compensation and employee benefits category increased by $8,347,430 and primarily affected the Instruction, Academic Support and Public Service categories. Utilities decreased by ($504,128) during the past year. In fiscal 2007, a change was made to the reporting of scholarships and waivers. See Note 1, Scholarship Allowances for further detail. Statement of Cash Flows The final statement presented by Georgia State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($172,295,428) 209,811,643 (29,214,867) 7,464,241 15,765,589 118,991,853 $134,757,442 June 30, 2006 ($177,052,109) 203,349,677 (19,104,889) 5,267,413 12,460,092 106,531,761 $118,991,853 Capital Assets There were no major changes in capital funding in 2007. In fiscal year 2006, the State Legislature approved funding for the Science Teaching Laboratory Building, and this remains the University's top capital priority. The 213,000 gross square foot building is projected to cost Georgia State University Annual Financial Report FY 2007 5 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. The only new item of funding the University received in Fiscal Year 2007 was a minor capital project of approximately $4.8 million to renovate the roof and the exhaust stacks on the Natural Science Center 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 Georgia State University had Long-Term Debt and Liabilities of $54,873,199 of which $9,325,499 was reflected as current liability at June 30, 2007. 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 FY2007. The Georgia State University Foundation, Inc. had endowment and other investments of $130.7 million, bonds payable of $250.7 million and long term capital leases of $9.7 million as of June 30, 2007. The Georgia State University Research Foundation, Inc. had endowment and other investments of $4.5 million and no long-term debt. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Carl V. Patton, President Georgia State University Georgia State University Annual Financial Report FY 2007 6 Statement of Net Assets G EO R G IA S T A T E UN IV ER S IT Y S T A T EM EN T O F N ET A S S ET S June 30, 2007 A S S ETS C u rre n t A sse ts C ash an d C ash E quiv alen t s A cco un t s R eceiv able, n et (n o t e 3 ) R eceiv ables - F ederal F in an cial A ssist an ce R eceiv ables - O t h er D ue F ro m C o m p o n en t U n it s P ledges R eceiv able D ue F ro m P rim ary Go v ern m en t In v en t o ries (n o t e 4 ) P rep aid it em s T o t al C urren t A sset s N on cu rre n t A sse ts N o n curren t Cash In v est m en t s (in cludin g R eal E st at e) N o t es R eceiv able, n et P ledges R eceiv able C ap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la rie s P a y a ble C o n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) O t h er L iabilit ies D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t L ease P urch ase O bligat io n s (curren t p o rt io n ) C o m p en sat ed A bsen ces (curren t p o rt io n ) R ev en ue/M o rt gage B o n ds P ay able (curren t ) D ue t o C o m p o n en t U n it s T o t al C urren t L iabilit ies N on cu rre n t Liabilitie s L ease P urch ase O bligat io n s (n o n curren t ) D eferred Rev en ue (n o n curren t) Co m p en sat ed A bsen ces (n o n curren t ) R ev en ue/M o rt gage B o n ds P ay able (n o n curren t ) L ia bilit ie s un de r Sp lit -In t e re st A gre e m e n t s (n o n c urre n t ) O t h er L o n g-T erm L iabilit ies D ue t o C o m p o n en t U n it s T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in C ap it al A sset s, n et o f relat ed debt R est rict ed fo r N o n ex p en dable E x p en dable C ap it al P ro ject s U n rest rict ed TO TA L N ET A S S ETS G e orgia S tate U n i ve rs ity $ 1 3 3 ,8 5 1 ,6 9 9 4 ,4 5 8 ,1 0 5 1 6 ,0 3 5 ,0 0 9 5 ,0 9 5 ,5 6 8 1 4 6 ,7 1 8 3 ,8 2 6 ,3 4 6 1 6 3 ,4 1 3 ,4 4 5 9 0 5 ,7 4 3 5 2 ,0 3 0 5 ,5 6 0 ,5 9 9 3 2 8 ,8 2 7 ,8 9 9 3 3 5 ,3 4 6 ,2 7 1 4 9 8 ,7 5 9 ,7 1 6 7 ,4 4 1 ,5 7 8 5 5 1 ,9 3 3 1 ,2 6 5 ,0 7 3 6 9 2 ,5 1 5 3 0 ,0 1 8 ,0 9 4 2 5 4 ,9 9 3 3 ,2 1 7 ,1 0 2 2 ,9 7 0 ,7 6 6 6 ,3 5 4 ,7 3 3 7 3 ,9 1 2 5 2 ,8 4 0 ,6 9 9 4 0 ,9 3 6 ,0 0 9 4 ,6 1 1 ,6 9 1 4 5 ,5 4 7 ,7 0 0 9 8 ,3 8 8 ,3 9 9 2 8 4 ,9 2 1 ,1 2 4 4 9 ,9 5 7 1 0 ,9 7 6 ,2 4 7 1 ,7 6 3 ,2 8 2 1 0 2 ,6 6 0 ,7 0 7 $ 4 0 0 ,3 7 1 ,3 1 7 C om pon e n t U n it G e orgia S tate U n i ve rs i ty Fo u n da ti o n , In c. $ 2 4 ,5 3 7 ,3 2 0 1 6 7 ,0 8 3 6 ,3 0 6 ,9 7 7 1 1 4 ,8 8 3 3 1 ,1 2 6 ,2 6 3 4 4 ,0 0 2 ,2 6 6 1 3 0 ,6 7 7 ,3 3 8 3 ,1 6 1 ,4 5 2 2 2 3 ,6 3 1 ,4 7 0 7 ,4 4 6 ,1 1 3 4 0 8 ,9 1 8 ,6 3 9 4 4 0 ,0 4 4 ,9 0 2 2 0 ,4 4 2 ,2 1 5 7 2 2 ,4 3 0 1 ,6 1 5 ,0 0 0 2 2 ,7 7 9 ,6 4 5 9 ,0 0 0 ,0 2 6 8 3 7 ,5 3 2 3 3 ,5 2 0 2 4 9 ,0 5 9 ,7 1 0 2 6 0 ,9 9 2 5 ,8 1 2 ,3 9 4 7 7 3 ,2 9 4 2 6 5 ,7 7 7 ,4 6 8 2 8 8 ,5 5 7 ,1 1 3 6 ,1 8 3 ,1 2 6 7 8 ,7 0 2 ,4 0 4 4 9 ,4 4 3 ,8 7 7 1 7 ,1 5 8 ,3 8 2 $ 1 5 1 ,4 8 7 ,7 8 9 C om pon e n t Un it G e orgia S tate U n i ve rs i ty R e se arch Fo u n da ti o n , In c. $ 5 ,9 3 7 ,6 2 8 5 ,8 6 0 ,8 4 3 7 3 ,9 1 2 4 ,2 3 6 ,0 8 5 1 6 ,1 0 8 ,4 6 8 2 ,0 0 4 ,6 3 1 4 ,4 6 3 ,1 4 1 5 ,0 2 4 ,8 0 6 1 1 ,4 9 2 ,5 7 8 2 7 ,6 0 1 ,0 4 6 2 6 ,0 9 8 4 ,2 3 6 ,0 8 5 5 ,0 9 5 ,5 6 8 9 ,3 5 7 ,7 5 1 0 9 ,3 5 7 ,7 5 1 5 ,0 2 4 ,8 0 6 2 ,0 0 0 ,0 0 0 9 8 2 ,6 4 9 1 0 ,2 3 5 ,8 4 0 $ 1 8 ,2 4 3 ,2 9 5 Georgia State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 C ompon e n t Un i t Georgia State Un i ve rs i ty Georgia State Un i ve rs i ty 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 Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciation Payments to or on behalf of Georgia State University Total Operating Expenses Operating Income (loss) $123,433,204 (12,199,997) 56,862,436 9,224,699 10,725,208 13,632,930 24,000 15,233,375 724,024 127,370 5,040,924 7,711,642 3,475,389 3,901,335 237,916,539 $0 7,653,144 3,221,449 11,428,169 66,673 22,369,435 85,631,548 139,975,005 49,677,847 15,044 4,133,356 18,468,351 9,917,350 96,461,024 20,778,423 425,057,948 (187,141,409) 1,909,300 302,416 1,275,020 2,056,693 8,056,413 2,415,675 12,158,055 28,173,572 (5,804,137) C ompon e n t Un i t Georgia State Un i ve rs i ty Re s e arch Foundation, Inc. $0 34,058,822 6,968,377 12,395,098 53,422,297 1,889,947 91,700 50,924,581 52,906,228 516,069 Georgia State University Annual Financial Report FY 2007 8 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, 2007 C ompon e n t Un i t Georgia State Un i ve rs i ty Georgia State Un i ve rs i ty 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 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 200,710,980 35,114 6,701,451 79,187 7,468,797 (3,115,788) (1,052,420) 210,827,321 23,685,912 7,530,520 156,504 7,687,024 31,372,936 368,998,381 0 368,998,381 $400,371,317 13,719,459 (1,124,425) 12,595,034 6,790,897 4,195,614 4,195,614 10,986,511 144,670,934 (4,169,656) 140,501,278 $151,487,789 C ompon e n t Un i t Georgia State Un i ve rs i ty Re s e arch Foundation, Inc. 1,343,645 1,343,645 1,859,714 0 1,859,714 16,383,581 0 16,383,581 $18,243,295 Georgia State University Annual Financial Report FY 2007 9 Statement of Cash Flows GEORGIA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 Ot her 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 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, 2007 $111,751,702 65,461,018 13,632,930 (159,524,653) (225,047,369) (18,468,351) (4,424,341) 4,642,290 15,604,894 723,515 143,522 5,008,837 8,016,584 3,999,974 6,184,020 (172,295,428) 200,710,980 (1,106,145) 6,811,443 3,395,365 209,811,643 7,530,520 3,329,051 (34,265,762) (2,692,888) (3,115,788) (29,214,867) 7,464,241 7,464,241 15,765,589 118,991,853 $134,757,442 Georgia State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued GEORGIA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 ment s recognized as a component of int erest income Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($187,141,409) 20,778,423 (12,294,495) (28,794) 18,295 217,949 828,354 4,787,879 (15,058) 553,428 ($172,295,428) $539,564 $4,556 ($156,504) Georgia State University Annual Financial Report FY 2007 11 GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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 2007 12 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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 2007 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 compensated absences 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 $10,412,996 as of July 1, 2006. For FY2007, $8,046,619 was earned in compensated absences and employees were paid $7,493,191, for a net increase of $553,428. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $10,966,424. 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 2007 15 Expendable Restricted Net Assets include the following: June 30, 2007 Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable $4,441,678 6,406,594 127,975 $10,976,247 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, 2007 $18,027,348 28,553,041 114,540 55,965,778 $102,660,707 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 2007 16 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. Certain discounts to tuition and fees are granted by the University in order to reflect revenue at the University's published rate structure. In prior year financial statements, these discounts were reported within the Scholarship Allowances line item. In fiscal 2007, it was determined that these types of discounts are more properly reported within the Tuition and Fees category, consistent with the NACUBO Advisory Report 2000-5: "Accounting and Reporting Scholarship Discounts and Allowances to Tuition and Other Fee Revenues by Public Institutions of Higher Education". Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change in revenue. Georgia State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $29,010,435 and the bank balance was $33,042,056. Of the University's deposits, $32,912,545 were uninsured and uncollateralized. B. Investments At June 30, 2007, the carrying value of the University's investments was $105,760,549, 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: Georgia State University Annual Financial Report FY 2007 18 Investment Pools Board of Regents T otal Return Fund Sub T otal Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal T otal Investment Pools $52,030 52,030 105,708,519 105,708,519 $105,760,549 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 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. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the University's total investment of $52,030 in the Total Return Fund, $14,771 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 does not have a formal policy for managing credit quality risk. The Georgia Fund 1 investment is rated AAA by Standard and Poor's. As previously stated, the BOR Total Return Fund investment is not rated. Georgia State University Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $4,477,218 1,319,725 4,458,105 948,527 5,095,568 13,573,708 29,872,851 4,284,169 $25,588,682 Note 4. Inventories Inventories consisted of the following at June 30, 2007: P hysical P lant Ot h er T otal June 30, 2007 $124,729 21,989 $146,718 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $295,471. Georgia State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $42,411,854 151,538 17,512,303 60,075,695 6,561,381 330,489,206 1,463,019 63,024,784 1,688,735 92,149,814 495,376,939 992,226 126,337,296 827,665 42,549,544 499,723 66,523,251 237,729,705 257,647,234 $317,722,929 Addi ti o n s $0 24,545 20,603,412 20,627,957 Re ductions $0 2,188,435 2,188,435 2,698,276 3,243,381 5,898,190 539,564 4,843,263 17,222,674 2,315,640 4,193,326 670,566 217,966 7,397,498 373,256 9,695,969 66,679 5,369,981 198,578 5,073,960 20,778,423 (3,555,749) $17,072,208 1 3,093,514 307,214 217,966 3,618,695 3,778,803 $5,967,238 En di n g B al a n ce 6/30/2007 $42,411,854 176,083 35,927,280 78,515,217 9,259,657 331,416,947 1,463,019 64,729,648 1,557,733 96,775,111 505,202,115 1,365,482 136,033,264 894,344 44,826,011 391,087 71,379,245 254,889,433 250,312,682 $328,827,899 Georgia State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Research Ot her Deferred Revenue T otals June 30, 2007 $21,344,284 4,932,342 3,741,468 $30,018,094 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Other Liabilities Compensated Absences T ot al Total Long Term Obligations Beginning Balance July 1, 2006 $42,166,789 Additions $4,432,874 Re du cti on s Ending Balance June 30, 2007 $2,692,888 $43,906,775 C u rre n t Portion $2,970,766 10,412,996 10,412,996 $52,579,785 8,046,619 8,046,619 $12,479,493 7,493,191 7,493,191 $10,186,079 10,966,424 10,966,424 $54,873,199 6,354,733 6,354,733 $9,325,499 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $24,875,771 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. In May 2007, Georgia State University entered into a lease agreement with Panther Place, LLC, for a complex of buildings collectively known as "25 Park Place". The lease agreement commences the day after the lease agreement between Panther Place, LLC, and SunTrust Bank has been terminated but no later than May 31, 2012. After the termination of the SunTrust lease and the University's lease has commenced, the University will have the exclusive right, privilege, and option of renewing or extending the agreement at the expiration of the initial one year term on a year-to-year basis for consecutive one-year periods until June 30, 2037. 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, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Georgia State University Annual Financial Report FY 2007 22 Capital Leases Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2022. Expenditures for fiscal year 2007 were $5.8 million of which $3.1 million represented interest. Total principal paid on capital leases was $2.7 million for the fiscal year ended June 30, 2007. Interest rates range up to 12 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Infrastructure Buildings Equipment Total Assets Held Under Capital Lease $3,000,058 44,419,936 1,166,646 $48,586,640 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 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 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, 2007 on these capital leases is $28,711,360 and $10,946,828 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 and software with an outstanding balance at June 30, 2007 in the amount of $4,248,587. Operating Leases Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2015. Certain operating leases provide for renewal options for periods from one to four 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. In addition to existing building office space leases from fiscal year 2006, in fiscal year 2007, Georgia State University entered into an operating lease agreement with Asian Realty Partners III, LP for Tower Place at 3348 Peachtree Road in Atlanta. Georgia State University Annual Financial Report FY 2007 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $6,064,927 6,021,421 6,531,301 6,507,554 6,102,989 30,463,016 25,058,910 86,750,118 42,843,343 $43,906,775 $5,509,443 4,283,588 3,658,153 3,639,010 3,554,010 2,745,632 $23,389,836 Georgia State University's FY2007 expense for rental of real property and equipment under operating leases was $9,321,001 for buildings and $107,949 for equipment. Georgia State University Annual Financial Report FY 2007 24 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $9,727,493 $9,434,148 $9,403,542 Employees' Retirement System of Georgia Plan Description Georgia State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 State University Annual Financial Report FY 2007 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, 2007, for employees covered by ERS was $943,051. The University's total payroll for all employees was $225,606,553. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $115,317, of which $100,794 was made by the University and $14,523 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, 2007 financial report, which may be obtained through ERS. Georgia State University Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $7,286,675 (9.66% or 8.13%) and $4,067,417 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Georgia State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 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 Georgia State University Annual Financial Report FY 2007 27 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 2007 amounted to $503,479 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. Georgia State University Annual Financial Report FY 2007 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 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, 2007. 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, 2007, there were 696 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia State University recognized as incurred $4,401,257 of expenditures, which was net of $1,697,964 of participant contributions. Georgia State University Annual Financial Report FY 2007 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 71,485,256 34,300,260 23,553,462 (1,000) 1,775,731 1,498,118 996,528 7,999,494 6,036,654 $ 13,137,089 25,409,878 4,911,680 1,000 1,043,039 949,059 155,154 15,354,512 3,450,010 $ 523,385 6,567,772 1,499,849 229,406 985,239 114,866 11,448,324 763,817 $ 441,124 27,160,055 6,656,373 582,884 5,298 10,405,537 2,325,671 $ 13,687 12,802,448 3,236,315 221,660 103,500 396,242 3,898,254 1,853,528 $ 29,957 19,852,128 6,293,035 15,044 213,315 513,033 227,862 18,177,085 577,308 $ 147,644,503 $ 64,411,421 $ 22,132,658 $ 47,576,942 $ 22,525,634 $ 45,898,767 Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises T ot al Expenses $0 10,145,298 2,830,922 35,893 6,675,332 11,002,692 3,635,844 $0 14,414,104 123,829 $ 1,050 3,737,166 696,211 31,428 1,351,366 18,051,297 2,135,591 $ 85,631,548 139,975,005 49,677,847 15,044 4,133,356 18,468,351 9,917,350 96,461,024 20,778,423 $ 34,325,981 $ 14,537,933 $ 26,004,109 $ 425,057,948 Georgia State University Annual Financial Report FY 2007 30 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 37-member board of the Foundation, of which 6 members are exofficio, is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources 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, 2007, the Foundation distributed $12,158,055 to the University. A copy of the annual audited 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. Prior Period Adjustment: Beginning Net Assets for fiscal 2007 were adjusted for a prior period adjustment of ($4,169,656), representing fiscal year 2006 interest earned on the proceeds from tax-exempt bonds. This amount was recorded as interest income; however, should have been netted against the capitalized interest expense in accordance with FASB Statement Number 62. The restatement resulted in the interest income, property and equipment, and net asset account balances for 2006 to be reduced by $4,169,656. Investments for Component Units: Georgia State University Foundation holds endowment and other investments in the amount of $130.7 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. Georgia State University Annual Financial Report FY 2007 31 Investments are comprised of the following amounts at June 30, 2007: Equity Securities Mutual Funds Venture Capital Real Estate Total Investments Cost $368,078 102,918,990 4,660,218 2,822,293 $110,769,579 Fair Value $368,078 122,180,766 2,921,154 5,207,340 $130,677,338 Capital Assets for Component Units: Georgia State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $10,090,265 125,700,200 135,790,465 109,386,131 109,386,131 21,545,126 87,841,005 $223,631,470 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Georgia State University Annual Financial Report FY 2007 32 Compensated Absences Liabilities under split interest agreement Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2006 $19,101 $249,819 $10,408,677 $194,186,673 $5,197,804 $210,062,074 Additions $14,419 11,173 58,385,000 614,590 $59,025,182 Reductions $0 686,221 1,896,963 $2,583,184 Ending Balance June 30, 2007 Amounts due within One Year $33,520 260,992 9,722,456 250,674,710 5,812,394 $266,504,072 $0 722,430 1,615,000 $2,337,430 Capital Lease Obligations 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 of the University. The liability of the Foundation is limited to the interest of the Foundation in the project and the rents, profits, issues, products and proceeds thereof. The City of Alpharetta is obligated to make 100% of the principal and interest payments on the bonds to the extent rental payments derived from the project are insufficient for such purposes. The lease liability at June 30, 2007 was $6,433,675. 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 Georgia State University Annual Financial Report FY 2007 33 Center, LLC, a single member LLC with the Foundation as the sole member, for the purpose of holding the related capital lease. The lease liability at June 30, 2007 was $3,288,781. Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 Total minimum lease payments Less: Interest Principal Outstanding 1 2 3 4 5 6-10 11-15 Capital Leases $1,215,523 1,214,618 1,212,585 1,209,232 1,208,651 5,178,977 1,424,043 12,663,629 2,941,173 $9,722,456 Revenue Bonds Payable: Student Recreation Center Bonds On October 15, 1998, $33,430,000 of revenue bonds were issued by the Atlanta Development Authority (ADA) with the proceeds to be loaned to the Foundation for the purpose of financing the acquisition, construction, improvement and equipping of a student recreation center for the benefit of the University. The bonds are special limited obligation bonds of the ADA payable from funds received from the Foundation pursuant to a promissory note between the ADA and the Foundation. The Foundation leases the facilities to the Board of Regents for the use of the University. The Foundation's liability on the note is limited to its interest in the project and the rents and revenues from the project, including amounts received pursuant to the rental agreement with the Board of Regents. Payment of principal and interest on the bonds are insured by 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%. The bond liability at June 30, 2007 was $24,975,000. 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 Georgia State University Annual Financial Report FY 2007 34 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 semi-annually through 2036 at a rate specified in the revenue bonds ranging from 3.875% to 5.0%. The principal outstanding on the bonds at June 30, 2007 was $161,330,000 and the unamortized bond premium balance was $5,984,710. Panther Place Bonds On May 31, 2007, $58,385,000 of revenue bonds (tax-exempt of $49,175,000 and taxable of $9,210,000) were issued by the Atlanta Development Authority (ADA) on behalf of the Foundation with the proceeds used to finance the costs of acquiring land, buildings, improvements, machinery, fixtures, furnishings, equipment, and other real and personal property to be used for office space. SunTrust Bank, as tenant may remain in the building for up to five years. Upon expiration of the lease or early termination by SunTrust Bank, the Foundation will lease the property to the Board of Regents of the University System of Georgia on an annually renewable basis. Interest to bond holders is paid monthly by AMBAC Financial Services, LLC (AFS) in accordance with the terms of the interest rate swap agreement. The Foundation is to begin making semi-annual interest payments on January 1, 2008 at a rate of 4.289% on taxexempt bonds and 5.409% on taxable bonds. The taxable bonds will be refinanced in the year 2012. Principal payments are to be made annually starting July 1, 2008 and ending July 2037. The bond liability at June 30, 2007 was $58,385,000. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $1,615,000 1,680,000 3,210,000 3,655,000 12,900,000 29,625,000 34,755,000 38,140,000 48,915,000 62,335,000 7,860,000 244,690,000 5,984,710 $250,674,710 Bonds Payable Interest $11,457,887 11,385,338 11,253,066 11,092,476 10,878,877 48,654,999 40,916,429 32,459,073 21,760,144 8,149,836 208,008,125 $208,008,125 Total $13,072,887 13,065,338 14,463,066 14,747,476 23,778,877 78,279,999 75,671,429 70,599,073 70,675,144 70,484,836 7,860,000 452,698,125 5,984,710 $458,682,835 Georgia State University Annual Financial Report FY 2007 35 Georgia State University Research Foundation, Inc. Georgia State University Research Foundation, Inc. (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 self-perpetuating 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, 2007, the Research Foundation paid to the University $50,337,959 in grant revenue and $586,622 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. 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 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. Georgia State University Annual Financial Report FY 2007 36 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, 2007, the Research Foundation's carrying amount of deposits was $7,942,259 and the bank balance was $8,585,047. Of the bank balance, $100,000 was covered by FDIC insurance, and $6,480,416 was collateralized by the State of Georgia pledging pool which thereby guarantees collateralization of any uninsured bank deposit balances. The remaining uncollateralized balance of $2,004,631 consists of cash equivalents held by investment custodians. Investments: The Research Foundation's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Fair Value Investment Maturity Less Than 1 Year 1-5 Years Investment type Debt Securities Mutual Bond Fund $657,022 $657,022 $0 $657,022 $0 $657,022 Other Investments Bond/Fixed Income Mutual Funds Equity Securities - Domestic Equity Securities - International Real Estate Investment Fund 720,614 1,892,427 965,715 227,363 $4,463,141 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 Research 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 the 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. Georgia State University Annual Financial Report FY 2007 37 Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Research Foundation's investment policies are consistent with the investment policies of Georgia State University Foundation, Inc. The Research Foundation does not have a formal policy related to credit quality risk of investments. The investments subject to credit quality risk are reflected below: Related Debt Investments Mutual Bond Fund Fair Value $657,022 $657,022 AAA $528,443 $528,443 AA $33,048 $33,048 A $50,591 $50,591 Baaa $44,940 $44,940 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 the possession of an outside party. The Research Foundation does not have a formal policy for managing custodial credit risk for investments. At June 30, 2007, $4,463,141 of the Research Foundation's applicable investments were uninsured and held by the Research Foundation's counterparty in the Research Foundation's name. 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 Research Foundation's policy for managing concentration of credit risk is divided amongst investment type as follows: Domestic equities 44% International equities 7% Bonds 16% Real estate 11% Alternative investments 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 Research Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy. Georgia State University Annual Financial Report FY 2007 38 Capital Assets for Component Units: Georgia State University Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2007: Capital Assets, Not Being Depreciated: Land (and other assets) 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 Infrastructure Buildings Facilities and Other improvements Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $1,643,991 1,643,991 3,894,651 359,744 4,254,395 490,577 291,303 781,880 3,472,515 $5,116,506 Additions $0 0 Reductions $1 1 Ending Balance 6/30/2007 $1,643,990 1,643,990 (52,559) 3,947,210 52,558 307,186 0 (1) 4,254,396 90,323 1,377 91,700 (91,700) ($91,700) (14,813) 14,813 0 (1) $0 0 595,713 277,867 873,580 3,380,816 $5,024,806 Georgia State University Annual Financial Report FY 2007 39 GORDON COLLEGE Financial Report For the Year Ended June 30, 2007 Gordon College Barnesville, Georgia Dr. Lawrence Weill President George J. Turner Vice President for Business Affairs GORDON COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 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......................................................................................................... 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 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 began as a military college and after several transformations joined the USG in 1972 as an associate level institution with a distinctive legacy of excellence in scholarship and service. Gordon College was considered a two-year residential college from 1972 until May 2006 when the Board of Regents approved a change in the College's mission to become a State College. With this change, Gordon College can now offer bachelor's degrees, the first of which is in Early Childhood Education and will begin Fall 2007. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 104 FY2006 99 FY2005 83 3,596 3,500 3,449 3,091 3,014 2,959 Overview of the Financial Statements and Financial Analysis Gordon College is proud to present its financial statements for fiscal year 2007. 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 2007 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. Gordon College Annual Financial Report FY 2007 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 Ass e ts June 30, 2007 $7,715,224 43,408,200 10,633 51,134,057 June 30, 2006 $6,778,294 29,561,576 10,633 36,350,503 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,448,774 15,690,172 18,138,946 2,084,084 60,012 2,144,096 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 27,408,894 13,053 5,573,164 $32,995,111 29,561,576 13,053 4,631,778 $34,206,407 The total assets of the institution increased by $14,783,554. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $13,846,624 in the category of Capital Assets, net. The balance of the increase is mainly in cash, receivables and prepaid categories. The total liabilities for the year increased by $15,994,850. The combination of the increase in total assets of $14,783,554 and the increase in total liabilities of $15,994,850 yields a decrease in total net assets of ($1,211,296). The decrease in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of ($2,152,682). Gordon College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $14,840,747 27,930,959 (13,090,212) 11,631,508 (1,458,704) 247,408 (1,211,296) 34,206,407 34,206,407 $32,995,111 $14,728,733 25,328,304 (10,599,571) 11,445,662 846,091 1,364,071 2,210,162 31,996,245 31,996,245 $34,206,407 The Statement of Revenues, Expenses, and Changes in Net Assets reflects the recognition of interest expense related to the capitalization of the Gordon Commons lease and the disposal of assets that were capitalized and did not meet the University System's policy for capitalization. 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest m ent Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $4,152,176 4,102,686 66,733 6,345,808 173,344 14,840,747 11,526,460 748,260 395,237 (256,223) 12,413,734 247,408 247,408 $27,501,889 June 30, 2006 $3,550,388 3,594,461 76,984 6,415,783 1,091,117 14,728,733 11,007,928 194,237 243,497 11,445,662 1,364,071 1,364,071 $27,538,466 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $8,495,527 1,436,009 1,798,718 4,222,745 3,688,393 2,292,990 5,216,865 779,712 27,930,959 782,226 $28,713,185 June 30, 2006 $8,466,898 1,606,255 1,663,592 2,932,958 2,672,931 1,685,419 5,351,491 948,760 25,328,304 $25,328,304 Operating revenues increased by $112,014 in fiscal 2007. Although Tuition & Fees included an 8% increase, revenues decreased in Auxiliary and Other categories. Gordon College Annual Financial Report FY 2007 4 The Auxiliary revenue decrease of ($69,975) is a result of the changing environment of residential life on the College's campus. During June 2007 Gordon College did not offer housing to students as had been offered in prior years. Nonoperating revenues and expenses increased by $185,846 for the year primarily due to an increase of $518,532 in State Appropriations. The compensation and employee benefits category increased by $1,139,464. The increase reflects the addition of staff and faculty, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($197,649) during the past year. The decrease was primarily associated with better negotiated utilities contracts with the City of Barnesville. Statement of Cash Flows The final statement presented by Gordon College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($11,168,580) 12,374,363 (1,058,372) 395,237 542,648 5,868,774 $6,411,422 June 30, 2006 ($9,271,695) 10,429,394 (1,310,414) 243,497 90,782 5,777,992 $5,868,774 Gordon College Annual Financial Report FY 2007 5 Capital Assets The College had an addition of a capital lease in fiscal year 2007 for the Gordon Commons. This was funded through the Gordon College Properties, LLC. Also in fiscal year 2007 Gordon College demolished Connell Hall which had been an old style dormitory as part of Gordon College's Master Plan. 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 $16,406,950 of which $716,778 was reflected as current liability at June 30, 2007. 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, Gordon College has included the financial statements and notes for all required component units for FY2007. Gordon College Foundation, Inc. had investments of $5.3 million as of December 31, 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. 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 Weill, President Gordon College Gordon College Annual Financial Report FY 2007 6 Statement of Net Assets GORDON COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Un i t Gordon C olle ge Gordon C olle ge Fou n dati on , In c. AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest m ent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Inventories (note 4) P repaid it ems T ot al Current Asset s Noncurre nt Asse ts Noncurrent Cash Invest m ent s (including Real Est at e) Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable 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) Com pensat ed Absences (current port ion) Revenue/Mort gage Bonds P ayable (current ) Liabilit ies under Split -Int erest Agreem ent s (current ) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Lease P urchase Obligat ions (noncurrent ) Com pensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreem ent s (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n da ble E x p e n da ble Unrest rict ed TO TAL NET AS S ETS $6,411,422 3,862 753,301 266,576 280,063 7,715,224 10,633 43,408,200 43,418,833 51,134,057 537,007 112,209 162,250 548,077 65,193 307,260 377,829 338,949 2,448,774 15,621,477 68,695 15,690,172 18,138,946 27,408,894 13,053 5,573,164 $32,995,111 $122,528 5,318,636 5,441,164 2,950,000 688,000 12,708,215 16,346,215 21,787,379 295,708 405,000 10,486 711,194 14,694,554 46,763 14,741,317 15,452,511 (445,204) 86,843 6,693,229 $6,334,868 Gordon College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets GORDON COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Gordon C olle ge C om pone nt Unit G o rdo n C olle ge Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal Sales and Services Rent s 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Dep r eciat io n Ot her Operat ing Expense P ayment s t o or on behalf of Gordon College T ot al Operat ing Expenses Operat ing Income (loss) $6,179,958 (2,027,782) 4,102,686 66,733 15,635 2,688,178 1,707,886 1,444,635 78,633 68,333 316,748 41,395 157,709 14,840,747 $0 874,391 649,354 1,523,745 6,050,442 5,323,150 3,091,156 44,756 154,452 2,415,238 1,400,151 7,031,602 2,420,012 27,930,959 (13,090,212) 239 21,403 373,137 30,850 53,520 479,149 1,044,596 Gordon College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued GORDON COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Gordon C olle ge C om pone nt Unit G o rdo n C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 11,526,460 748,260 395,237 (782,226) (256,223) 11,631,508 (1,458,704) 247,408 247,408 (1,211,296) 34,206,407 34,206,407 $32,995,111 647,899 (716,562) (68,663) 975,933 0 975,933 5,358,935 5,358,935 $6,334,868 Gordon College Annual Financial Report FY 2007 9 Statement of Cash Flows GORDON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships 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 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, 2007 $3,791,586 4,098,175 66,733 (10,820,803) (11,308,631) (2,114,606) 2,580,907 430,816 1,440,261 78,428 80,838 348,534 42,638 116,544 (11,168,580) 11,526,460 99,643 748,260 12,374,363 247,408 (135,547) (388,007) (782,226) (1,058,372) 395,237 395,237 542,648 5,868,774 $6,411,422 Gordon College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued GORDON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 June 30, 2007 ($13,090,212) 2,420,012 (114,427) (6,627) (273,227) (79,728) (55,661) (17,971) 49,260 ($11,168,580) $16,387,313 Gordon College Annual Financial Report FY 2007 11 GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Gordon College is reporting the activity for Gordon 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 Gordon College Annual Financial Report FY 2007 12 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 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies and Resale Inventories are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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 2007 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 compensated absences 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 $358,384 as of 7-1-2006. For FY2007, $396,148 was earned in compensated absences and employees were paid $346,888, for a net increase of $49,260. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $407,644. 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 2007 15 Expendable Restricted Net Assets include the following: Federal Loans T ot al Rest rict ed Expendable June 30, 2007 $13,053 $13,053 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $2,877,649 1,470,400 26,496 1,198,619 $5,573,164 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Gordon College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored Gordon College Annual Financial Report FY 2007 16 scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. 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, Gordon College Annual Financial Report FY 2007 17 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, 2007, the carrying value of deposits was $1,312,493 and the bank balance was $1,365,014. Of the College's deposits, $1,265,014 were uninsured. Of these uninsured deposits, $1,265,014 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, 2007, the carrying value of the College's investments was $5,096,680, 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 Short-T erm Fund $5,096,680 T otal Investment Pools $5,096,680 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/searchRpts.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 2.24 years. Of the College's total investment of $5,096,680 in the Short Term Fund, $5,077,312 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. Gordon College Annual Financial Report FY 2007 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $20,155 323,715 3,862 458,730 806,462 49,299 $757,163 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $250,491 16,085 $266,576 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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 does not have an allowance for uncollectible loans. Gordon College Annual Financial Report FY 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $408,874 1,083 317,127 727,084 2,699,056 35,003,845 1,362,168 3,912,932 0 2,597,961 45,575,962 1,474,311 9,657,497 894,974 2,558,651 0 2,156,037 16,741,470 28,834,492 $29,561,576 Addi ti o n s $0 11,390 11,390 Re ductions $0 1,083 317,127 318,210 129,526 216,540 16,387,313 95,218 16,828,597 1,278,178 565,012 625,487 290,671 764 2,760,112 60,271 818,673 31,520 239,272 1,147,112 123,164 2,420,012 14,408,585 $14,419,975 1,041,916 473,467 506,788 282,849 199,951 2,504,971 255,141 $573,351 En di n g B al a n ce 6/30/2007 $408,874 0 11,390 420,264 1,420,878 34,568,359 736,681 3,838,801 16,387,313 2,692,415 59,644,447 492,666 10,002,703 419,706 2,515,074 1,147,112 2,079,250 16,656,511 42,987,936 $43,408,200 Gordon College Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $530,930 17,147 $548,077 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $0 358,384 $358,384 Additions $16,387,313 396,148 $16,783,461 Re du cti on s Ending Balance June 30, 2007 $388,007 $15,999,306 346,888 407,644 $734,895 $16,406,950 Current Portion $377,829 338,949 $716,778 Note 9. Significant Commitments The College had no significant unearned, outstanding, construction or renovation contracts that are 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 2008 and 2031. Expenditures for fiscal year 2007 were $1,170,233 of which $782,226 represented interest. Total principal paid on capital leases was $388,007 for the fiscal year ended June 30, 2007 and includes prior year principal amounts from correction of the lease from operating to capital. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Total Assets Held Under Capital Lease $15,240,201 $15,240,201 Gordon College Annual Financial Report FY 2007 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. Gordon College had one capital lease with a related entity in the current fiscal year. In August 2005, Gordon College entered into a capital lease of $16,387,313 at 4.83 percent with the Gordon College Properties, LLC a discretely presented component unit, whereby the College leases a building for a twenty-five year period that began August 2005 and expires June 2031. The outstanding liability at June 30, 2007, for this capital lease was $15,999,306. OPERATING LEASES Gordon College had no operating leases as of June 30, 2007. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Real P roperty Capit al Leases $1,142,252 1,145,206 1,142,594 1,143,749 1,143,828 5,742,736 5,774,459 5,796,151 3,592,111 26,623,086 10,623,780 $15,999,306 Gordon College had no expense for rental of real property and equipment under operating leases in FY2007. Gordon College Annual Financial Report FY 2007 22 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $642,393 $543,411 $472,048 Employees' Retirement System of Georgia Plan Description Gordon College participates in the Employees' Retirement System of Georgia (ERS), a costsharing multiple-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 Gordon College Annual Financial Report FY 2007 23 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, 2007, for employees covered by ERS was $113,005. The College's total payroll for all employees was $11,373,592. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $13,532, of which $11,837 was made by the College and $1,695 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, 2007 financial report, which may be obtained through ERS. Gordon College Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $311,981 (9.66% or 8.13%) and $175,134 (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 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 Gordon College Annual Financial Report FY 2007 25 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 2007 amounted to $32,274 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gordon College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. Gordon College Annual Financial Report FY 2007 26 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although 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, 2007. 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, 2007, there were 33 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Gordon College recognized as incurred $133,452 of expenditures, which was net of $56,244 of participant contributions. Gordon College Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt 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 T otal Exp enses Inst ruct ion $ 6 ,05 0,44 2 34 5,52 4 1,5 91,46 2 3 6,98 0 4 2,80 3 30 9,90 2 118 ,414 $ 8 ,49 5,52 7 Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es $0 7 86 ,8 27 20 3,148 $0 1,06 3,9 8 5 28 3,3 0 4 13,6 91 4 ,15 9 42 8,184 3 9,5 9 6 250 2 2,8 4 2 38 4,9 0 9 3,8 3 2 $ 1,4 36 ,0 09 $ 1,79 8,718 Inst it ut ional Sup p o r t $0 1,63 6,35 4 5 78 ,48 1 4 4,00 6 4 5,57 2 4 4,77 6 1,70 2,30 0 171,25 6 $ 4 ,22 2,74 5 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises Unallocat ed Expenses $0 983,504 323,777 (195,819) 4,585 1,031,618 1,475,017 65,711 $0 2,292,990 $0 506,956 110,984 196,569 14,028 121,998 253,953 2,731,290 1,281,087 $0 779,712 $ 3,688,393 $ 2,292,990 $ 5,216,865 $ 779,712 T ot al Expenses $ 6,050,442 5,323,150 3,091,156 44,756 154,452 2,415,238 1,400,151 7,031,602 2,420,012 $ 27,930,959 Gordon College Annual Financial Report FY 2007 28 Note 16. Component Units Gordon College Foundation, Inc. (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 fortyfour 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, 2006, the Foundation distributed $53,520 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, Inc. holds non-real estate investments in the amount of $5.3 million. The Foundation also holds investments in real property valued at $688,000. Investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Government and Agency Securities Equity Securities Mutual Funds Real Estate $1,115,204 8,280 3,000,524 688,000 $1,138,314 8,280 4,172,042 688,000 Total Investments $4,812,008 $6,006,636 Gordon College Annual Financial Report FY 2007 29 Capital Assets for Component Units: The following represents Gordon College Foundation, Inc.'s Capital Assets as of December 31, 2006: De ce m be r 31, 2006 Capit al Asset s being Depreciat ed: Buildin gs and Im p ro v em ent s M achinery and Equip m en t T ot al Capit al Asset s being Depreciat ed Less T o t al Accum ulat ed Dep reciat ion T o t al Cap it al Asset s bein g Dep reciat ed, Net Capit al Asset s, Net $12,649,270 582,676 13,231,946 523,731 12,708,215 $12,708,215 Long-term Liabilities for Component Units: Long-term liability activity for the year ended December 31, 2006 was as follows: Beginning Balance 1/1/2006 Additions Reductions Ending Balance 12/31/2006 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable $0 357,904 16,135,000 $57,249 $0 357,904 1,035,446 $57,249 0 15,099,554 $10,486 405,000 Total Long Term Liabilities $16,492,904 $57,249 $1,393,350 $15,156,803 $415,486 On August 1, 2004, the Barnesville-Lamar County Industrial Development Authority (the "Authority") issued certain bonds totaling $16,135,000. Proceeds on the sale of the bonds were loaned to Gordon College Properties Foundations, LLC whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2004 Bonds were used by Gordon College Properties, LLC to finance or reimburse, in whole or in part, 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 (the Project) located on the campus of Gordon College, a unit of the University System of Georgia; fund capitalized interest on the Series 2004 Bonds; fund a debt service reserve fund for the Series 2004 bonds; and pay costs of issuance of the Series 2004 Bonds. The real property upon which the Project is located is owned by the Board of Regents of the University System and will be leased by the Board of Regents to the Properties, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties, LLC will rent the projects, on an annually renewable basis, to the Board of Regents for use by the College. The Board of Regents will make monthly fixed rental payments for the use and occupancy of the Project, in amounts that the Properties, LLC estimates will be sufficient to pay, among other things, debt service on the Series 2004 Bonds. Gordon College Annual Financial Report FY 2007 30 Interest rates on the bonds range from 3% - 5%. The balance owed on the bonds at December 31, 2006 was $15,099,554. Annual debt service requirements to maturity for Gordon Commons' Student Housing bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2031 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $405,000 415,000 430,000 440,000 455,000 2,550,000 3,140,000 3,965,000 3,945,000 15,745,000 (645,446) $15,099,554 Bonds Payable Interest $709,700 697,550 685,100 671,125 656,825 3,012,538 2,427,963 1,599,750 505,250 10,965,801 $10,965,801 Total $1,114,700 1,112,550 1,115,100 1,111,125 1,111,825 5,562,538 5,567,963 5,564,750 4,450,250 26,710,801 (645,446) $26,065,355 Gordon College Annual Financial Report FY 2007 31 GEORGIA SOUTHERN UNIVERSITY Financial Report For the Year Ended June 30, 2007 Dr. Bruce Grube President Georgia Southern University Statesboro, Georgia Mr. Joe Franklin Vice President for Business and Finance GEORGIA SOUTHERN UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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................................................................................................ 23 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............................................................................................... 28 Note 10. Lease Obligations......................................................................................................... 28 Note 11. Retirement Plans .......................................................................................................... 31 Note 12. Risk Management......................................................................................................... 34 Note 13. Contingencies................................................................................................................ 35 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 35 Note 15. Natural Classifications with Functional Classifications .............................................. 36 Note 16. Component Units .......................................................................................................... 37 GEORGIA SOUTHERN UNIVERSITY Management's Discussion and Analysis Introduction Georgia Southern University is the largest and most comprehensive center of higher education in the southern half of Georgia. A residential campus of more than 16,500 students, Georgia Southern is one of the top universities of choice in Georgia for new freshmen; 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. Students Students Faculty (Headcount) (FTE) FY2007 720 16,425 14,962 FY2006 709 16,646 15,183 FY2005 663 16,100 14,715 Overview of the Financial Statements and Financial Analysis Georgia Southern University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 As s e ts June 30, 2007 $49,327,838 329,451,662 5,426,013 384,205,513 June 30, 2006 $48,863,255 280,495,747 5,370,814 334,729,816 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 19,508,628 115,685,896 135,194,524 17,168,985 76,771,398 93,940,383 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 212,925,169 2,464,884 3,329,191 30,291,745 $249,010,989 203,618,389 2,465,814 3,286,534 31,418,696 $240,789,433 The total assets of the institution increased by $49,475,697. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $48,955,915 in the category of Capital Assets, net. The balance of the increase is mainly in cash and inventories. The total liabilities for the year increased by $41,254,141. The combination of the increase in total assets of $49,475,697 and the increase in total liabilities of $41,254,141 yields an increase in total net assets of $8,221,556. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $9,306,780. Georgia Southern University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $114,822,248 198,378,275 (83,556,027) 85,256,447 1,700,420 6,521,136 8,221,556 240,789,433 0 240,789,433 $249,010,989 $107,604,325 181,147,932 (73,543,607) 77,840,958 4,297,351 3,761,934 8,059,285 234,500,595 (1,770,447) 232,730,148 $240,789,433 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $46,491,392 19,899,194 2,421,972 44,572,971 1,436,719 114,822,248 85,881,056 1,305,679 2,759,922 838,715 90,785,372 5,082,680 1,438,456 6,521,136 $212,128,756 June 30, 2006 $43,869,787 18,343,148 2,471,413 42,016,302 903,675 107,604,325 79,089,553 1,078,505 1,611,060 (205,949) 81,573,169 2,898,224 863,710 3,761,934 $192,939,428 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $67,691,281 3,556,807 2,848,445 14,844,183 16,973,346 21,409,218 23,696,530 5,797,572 41,560,893 198,378,275 5,528,925 $203,907,200 June 30, 2006 $63,814,417 3,627,484 2,836,827 13,443,674 13,555,180 19,394,484 21,337,622 4,364,795 38,773,449 181,147,932 3,732,211 $184,880,143 Operating revenues increased by $7,217,923 in fiscal 2007. Tuition & Fees included a 6% increase, with additional revenue increases in Grants and Contracts, Auxiliary and Other categories. Georgia Southern University Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $2,556,669 is a result of the changing environment of residential and general student life on the University's campus. Analysis indicates that students who live on campus and/or become involved in the campus community perform better academically. Institution wide focus on enrollment management has resulted in more students living on campus as well as off-campus students spending more of their out of classroom time on campus. A direct result of these efforts has been increases in student retention rates. Additionally, a by-product of increased activity has resulted in increased sales at campus shops and food service facilities. Housing revenues increased due to the opening of a new 776 bed living-learning housing complex in the fall of 2006. The facility was constructed by the GSU Housing Foundation and is operated by the University under a capital lease agreement. Nonoperating revenues increased by $9,212,203 for the year primarily due to an increase of $6,791,503 in State Appropriations. The compensation and employee benefits category increased by $9,299,229 and primarily affected the Instruction, Academic Support and Student Services categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $873,062 during the past year. The increase was primarily associated with utility company rate increases due to increases in fuel costs. Utility cost increases affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by 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. Georgia Southern University Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($66,450,881) 87,038,270 (19,315,095) 2,181,840 3,454,134 28,440,406 $31,894,540 June 30, 2006 ($68,764,178) 80,179,421 (12,552,226) 521,417 (615,566) 29,055,972 $28,440,406 Capital Assets The University had a significant capital asset lease addition in fiscal year 2007. The GSU Housing Foundation, Inc. renovated the RAC (Recreation Activities Complex) and leased the facility to Georgia Southern University beginning August, 2006. Georgia Southern University had two major construction-in-progress capital additions for renovation of two former student residence halls. The residence halls are being converted to office space for new faculty members and to allow for conversion of space in academic buildings to student classroom and lab space. 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 Southern University had Long-Term Debt and Liabilities of $121,149,280 of which $5,463,384 was reflected as current liability at June 30, 2007. 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 FY2007. For additional information concerning Component Units, see Notes 1 and 16 in the Notes to the Financial Statements. Georgia Southern University Annual Financial Report FY 2007 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 minimal funding this year, the University was able to generate an increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Bruce Grube, President Georgia Southern University Georgia Southern University Annual Financial Report FY 2007 7 Statement of Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C om pon e n t Un i t Component Unit 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 Leases Receivable Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid items T otal Current Assets Ge orgi a S ou th e rn Un i ve rs i ty Ge orgi a S ou th e rn Un i ve rs i ty Foundation, Inc. Georgia Southern Un i ve rs i ty Housing Foundation, Inc. $31,894,540 3,353,692 786,029 6,171,174 1,471,666 2,033,315 3,617,422 49,327,838 $119,886 41,964,044 79,342 856,398 25,034 43,044,704 $2,006,665 10,000 438,955 8,130,071 47,444 10,633,135 Noncurrent Assets Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Leases Receivable Contributions Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 2,543,589 8,657 2,873,767 329,451,662 334,877,675 384,205,513 158,900 3,183,096 419,749 106,825 3,868,570 46,913,274 14,928,390 176,016,345 190,944,735 201,577,870 Georgia Southern University Annual Financial Report FY 2007 8 Statement of Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C om pon e n t Un i t Ge orgi a S ou th e rn Un i ve rs i ty Ge orgi a S ou th e rn Unive rsity Foundation, Inc. Component Unit Georgia Southern Un i ve rs i ty Housing Foundation, Inc. LIABILITIES Curre nt Liabilities Accounts Payable Salaries Payable Contracts Payable Deposit s Deferred Revenue (note 7) 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) T otal Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrest rict ed TO TAL NET ASSETS 1,190,025 584,912 1,576,318 555,300 9,356,878 756,630 2,754,792 2,628,054 25,181 80,538 19,508,628 111,483,065 1,994,733 2,208,098 115,685,896 135,194,524 212,925,169 2,464,884 3,329,191 30,291,745 $249,010,989 69,086 50,000 438,954 558,040 148,460 148,460 706,500 419,749 27,156,274 15,500,236 3,130,515 $46,206,774 3,462,436 630,000 5,558,366 2,685,000 12,335,802 75,007,737 109,765,827 184,773,564 197,109,366 4,695,777 (227,273) $4,468,504 Georgia Southern University Annual Financial Report FY 2007 9 Statement of Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 Component Unit Compone nt Unit 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 Due From Component Units Leases Receivable Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid items T otal Current Assets Noncurre nt Asse ts Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Leases Receivable Contributions Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS Southe rn Booste rs, Inc. (Ge orgia Southe rn Unive rsity) Georgia Southern Unive rsity Re se arch & Service Foundation, Inc. $1,055,124 $1,434,323 579,513 461,017 2,095,654 1,376,015 25,181 21,455 2,856,974 700,363 1,276,958 1,977,321 4,072,975 0 2,856,974 Georgia Southern University Annual Financial Report FY 2007 10 Statement of Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 Component Unit Compone nt Unit LIABILITIES Curre nt Liabilitie s Accounts Payable Salaries Payable Contracts Payable Dep o sit s Deferred Revenue (note 7) 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) T otal Current Liabilities Noncurre nt Liabilitie s Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES NET AS S ETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrest rict ed TO TAL NET ASSETS Southe rn Booste rs, Inc. (Ge orgia Southe rn Unive rsity) Georgia Southern Unive rsity Re se arch & Service Foundation, Inc. 73,967 12,000 76,113 783,260 207,719 1,471,666 25,391 175,471 2,474,645 553,411 553,411 728,882 910,148 2,225,265 208,680 $3,344,093 0 2,474,645 382,329 $382,329 Georgia Southern University Annual Financial Report FY 2007 11 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 REVENUES Georgia Southern University Component Unit Georgia Southern University 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 Bookstore Food Services P arking/T ransport at ion Health Services 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 Southern University Total Operating Expenses Operating Income (loss) $56,540,611 (10,049,219) 18,140,149 354,574 1,404,471 2,421,972 43,404 14,644,832 9,820,550 8,647,410 2,239,400 2,589,811 5,919,784 711,184 1,393,315 114,822,248 $0 1,933,715 5,197,288 167,872 177,208 7,476,083 42,153,609 55,099,469 26,687,945 463,118 1,956,136 8,225,368 7,726,849 43,213,730 12,852,051 198,378,275 (83,556,027) 136,206 564,619 1,667 3,347,366 4,049,858 3,426,225 Component Unit Georgia Southern University Housing Foundation, Inc. $0 6,549,416 122,500 6,671,916 1,487 59,686 61,173 6,610,743 Georgia Southern University Annual Financial Report FY 2007 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 Georgia Southern Un i ve rs i ty Component Unit Georgia S ou th e rn Un i ve rs i ty Foundation, Inc. Component Unit Georgia Southern University Housing 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 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 85,881,056 1,305,679 2,759,922 (5,528,925) 838,715 85,256,447 1,700,420 5,082,680 1,438,456 6,521,136 8,221,556 240,789,433 0 240,789,433 $249,010,989 1,128,576 1,128,576 4,554,801 1,235,623 1,235,623 5,790,424 40,416,350 0 40,416,350 $46,206,774 70,266 (3,268,723) 77,156 (3,121,301) 3,489,442 0 3,489,442 979,062 0 979,062 $4,468,504 Georgia Southern University Annual Financial Report FY 2007 13 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES C om pone nt Unit Southe rn B ooste rs, In c. (G e orgi a Southe rn Un i ve rsi ty) C om pon e nt Un it Ge orgia Southe rn Un i ve rsi ty Re s e arch & S e rvi ce Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Ot h er 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Georgia Sout hern Universit y T ot al Operat ing Expenses Operat ing Incom e (loss) $0 1,472,548 35,175 175,750 129,916 1,813,389 799,680 18,820 901,176 1,719,676 93,713 $0 4,928,689 77,630 560,253 5,566,572 68,299 5,469,335 5,537,634 28,938 Georgia Southern University Annual Financial Report FY 2007 14 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Southe rn B ooste rs, In c. (G e orgi a Southe rn Un i ve rsi ty) C om pon e nt Un it Ge orgia Southe rn Un i ve rsi ty Re s e arch & S e rvi ce Fou n dati on , In c. 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) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Addit ions t o perm anent endowm ent s 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 48,638 (49,755) (1,117) 92,596 0 92,596 3,251,497 0 3,251,497 $3,344,093 63,105 63,105 92,043 0 92,043 530,800 (240,514) 290,286 $382,329 Georgia Southern University Annual Financial Report FY 2007 15 Statement of Cash Flows GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 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 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, 2007 $47,532,855 20,037,483 2,421,972 (79,013,166) (96,751,044) (8,225,368) (645,974) 668,858 13,946,365 9,902,143 8,644,801 2,346,145 2,616,737 6,006,389 639,513 3,421,410 (66,450,881) 85,881,056 (168,647) 1,328,410 (2,549) 87,038,270 6,510,136 (19,571,450) (1,811,915) (4,441,866) (19,315,095) 2,759,922 (578,082) 2,181,840 3,454,134 28,440,406 $31,894,540 Georgia Southern University Annual Financial Report FY 2007 16 Statement of Cash Flows, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 accrued int erest payable affect ing int erest paid - Increase Liab on Lease Gift of capit al asset s reducing proceeds of capit al grant s and gift s -Capit al Gift s Ot her June 30, 2007 ($83,556,027) 12,852,051 2,288,516 (158,157) (474,969) 22,884 878,569 1,158,461 58,184 479,607 ($66,450,881) $40,373,991 $1,087,059 ($11,000) Georgia Southern University Annual Financial Report FY 2007 17 GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Georgia Southern University is reporting the activity for the Georgia Southern University Foundation, Inc., the Georgia Southern University Housing Foundation, Inc., Southern Boosters, Inc. and Georgia Southern University Research and Service Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Georgia Southern University Annual Financial Report FY 2007 18 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, Georgia Southern University is considered a special-purpose government engaged only in business-type activities. Accordingly, Georgia Southern 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. Georgia Southern University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. Georgia Southern 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 Georgia Southern 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 Southern University Annual Financial Report FY 2007 19 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 Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories for Food Services are valued at cost using the average-cost basis. Resale Inventories for Bookstore and other services are valued at cost using the first-in, first-out ("FIFO") basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in Georgia Southern University Annual Financial Report FY 2007 20 progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $11,000 to Georgia Southern University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a Georgia Southern 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 compensated absences 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 $4,143,180 as of 7-1-2006. For FY2007, $3,337,691 was earned in compensated absences and employees were paid $2,858,084, for a net increase of $479,607. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $4,622,787. 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 Georgia Southern University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents Georgia Southern 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 2007 21 Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $194,731 3,081,207 53,253 $3,329,191 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, 2007 $1,724,101 17,389,690 100,000 11,077,954 $30,291,745 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Georgia Southern University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored Georgia Southern University Annual Financial Report FY 2007 22 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 Georgia Southern 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, Georgia Southern 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 Georgia Southern University Annual Financial Report FY 2007 23 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, 2007, the carrying value of deposits was $37,440,387 and the bank balance was $40,072,958. Of the University's deposits, $39,472,958 were uninsured. Of these uninsured deposits, $4,997,281 were collateralized with securities held by the financial institution's trust department or agent in Georgia Southern University's name and $34,475,677 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. 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, 2007 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. All investments are presented by investment type and debt securities are presented by maturity. Other Investments Life Insurance Policy Cash Surrender Value $8,657 Georgia Southern University Annual Financial Report FY 2007 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $285,723 1,547,925 786,029 1,471,666 4,449,632 8,540,975 112,106 $8,428,869 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Food Services Cam pus Fuel Ot h er T otal $1,552,752 361,909 10,043 108,611 $2,033,315 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. Georgia Southern University Annual Financial Report FY 2007 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $4,243,945 4,764,329 9,008,274 Addi ti o n s $493,371 16,290,445 16,783,816 Re ductions $0 5,282,283 5,282,283 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 14,063,303 256,615,572 1,726,693 17,996,401 78,018,313 33,999,596 402,419,878 4,788,911 2,862,747 41,461,050 1,462,252 50,574,960 297,000 1,189,128 75,735 34,599 1,596,462 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 10,820,138 72,873,139 213,305 14,259,896 4,848,020 27,917,907 130,932,405 222,335 5,685,028 168,765 1,494,479 4,058,429 1,223,015 12,852,051 113,850 1,130,229 49,257 34,599 1,327,935 T ot al Capit al Asset s, Being Depreciat ed, Net 271,487,473 37,722,909 268,527 Capit al Asset s, net $280,495,747 $54,506,725 $5,550,810 En di n g B al a n ce 6 /3 0 /2 0 0 7 $4,737,316 15,772,491 20,509,807 14,063,303 261,107,483 1,726,693 19,670,020 119,403,628 35,427,249 451,398,376 11,042,473 78,444,317 382,070 14,624,146 8,857,192 29,106,323 142,456,521 308,941,855 $329,451,662 Georgia Southern University Annual Financial Report FY 2007 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $8,538,711 818,167 $9,356,878 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $74,512,439 Additions $41,461,050 Reductions Ending Balance June 30, 2007 $1,735,632 $114,237,857 Current Portion $2,754,792 Other Liabilities Compensated Absences Notes and Loans Total Total Long Term Obligations 4,143,180 2,364,919 6,508,099 $81,020,538 3,337,691 3,337,691 $44,798,741 2,858,084 76,283 2,934,367 4,622,787 2,288,636 6,911,423 $4,669,999 $121,149,280 2,628,054 80,538 2,708,592 $5,463,384 Included in the total long-term liabilities is a $3,000,000 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 Financing 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, 2007 is $2,288,636. Annual maturities are as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2025 T otal Year 1 2 3 4 5 6-10 11-15 16-18 P rincipal $80,538 85,028 89,769 94,774 100,058 590,462 774,479 473,528 $2,288,636 I n t erest $124,783 120,292 115,551 110,546 105,262 436,139 252,121 39,772 $1,304,466 T otal $205,321 205,320 205,320 205,320 205,320 1,026,601 1,026,600 513,300 $3,593,102 Georgia Southern University Annual Financial Report FY 2007 27 Note 9. Significant Commitments Georgia Southern University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $13,245,257 as of June 30, 2007. 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 2008 and 2031. Expenditures for fiscal year 2007 were $7,135,521 of which $4,312,830 represented interest payments and $1,087,059 capitalized interest. Total principal paid on capital leases was $1,735,632 for the fiscal year ended June 30, 2007. Interest rates range from 4.89 percent to 7.84 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Equipment Total Assets Held Under Capital Lease $110,253,156 317,538 $110,570,694 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 at 4.89 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, 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, 2007, for this capital lease was $39,298,099. 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 $2,230,350 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, 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, 2007, for this capital lease was $2,132,577. 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 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, whereby the University leases a facility (Athletic Training Georgia Southern University Annual Financial Report FY 2007 28 Center) for a twenty-four year period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2007, for this capital lease was $663,592. 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 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, 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, 2007 for this capital lease was $1,603,463. 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 at 4.94 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, 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, 2007, for this capital lease was $28,938,674. Georgia Southern University had a capital lease with related entities in the current fiscal year. In August 2006, Georgia Southern University entered into a capital lease of $40,264,056 at 4.73 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization discretely presented component unit, whereby the University leases Buildings (Recreational Activities Complex-RAC) for a twenty-five year period that began August 2006 and expires July 2031. The outstanding liability at June 30, 2007, for this capital lease was $41,351,115, which includes $1,087,059 in capitalized interest. Georgia Southern University also has various capital leases for equipment with an outstanding balance at June 30, 2007 in the amount of $250,337. OPERATING LEASES Georgia Southern University has certain operating leases which provide for renewal options for periods from one to five 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. The property under operating leases is for office space, copiers and other small business equipment. In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $9,232. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $110,784 in the current year. In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $767. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $9,200 in the current year. Georgia Southern University Annual Financial Report FY 2007 29 In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $2,500. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $30,000 in the current year. In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party, for office space for monthly rentals of $875. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $7,683 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. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $232,800 in the current year. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $8,238,067 8,304,731 8,241,369 8,197,905 8,187,878 40,819,371 41,032,381 40,548,690 27,750,914 191,321,306 77,083,449 $114,237,857 $393,284 $393,284 Georgia Southern University's FY2007 expense for rental of real property and equipment under operating leases was $528,751. Georgia Southern University Annual Financial Report FY 2007 30 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Georgia Southern University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Southern University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southern University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $ 4,074,725 $ 3,867,088 $ 3,907,198 Employees' Retirement System of Georgia Plan Description Georgia Southern University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 Southern University Annual Financial Report FY 2007 31 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, 2007, for employees covered by ERS was $245,721. The University's total payroll for all employees was $97,253,078. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $29,301, of which $25,615 was made by the University and $3,686 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, 2007 financial report, which may be obtained through ERS. Georgia Southern University Annual Financial Report FY 2007 32 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Southern University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Georgia Southern University and the covered employees made the required contributions of $3,518,691 (9.66% or 8.13%) and $1,980,091 (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 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 Georgia Southern University Annual Financial Report FY 2007 33 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 2007 amounted to $346,641 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Southern University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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 2007 34 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southern University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Southern University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 642 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Southern University recognized as incurred $2,702,395 of expenditures, which was net of $1,034,101 of participant contributions. Georgia Southern University Annual Financial Report FY 2007 35 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $ 40,208,387 8,910,910 11,885,153 1,596 651,516 162,713 365,603 4,917,022 588,381 $ 67,691,281 Research Functional Classification FY2007 Public Service Academic Support $ 751,773 762,995 155,338 164,548 29,034 6,873 1,650,664 35,582 $ 150,946 1,194,566 258,831 66,112 135,680 19,290 994,599 28,421 $ 1,037,464 7,982,424 2,159,926 794 324,913 92,800 105,030 1,816,314 1,324,518 $ 3,556,807 $ 2,848,445 $ 14,844,183 Student Services Institutional Support $ 5,039 9,029,225 2,189,557 4,027 216,241 3,000 216,334 5,184,339 125,584 $0 10,098,571 5,809,410 463,146 178,257 214,210 4,412,168 233,456 $ 16,973,346 $ 21,409,218 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises $0 6,850,277 2,248,629 (338,875) 36,584 4,743,012 3,898,552 6,258,351 $0 5,797,572 $0 10,270,501 1,981,101 332,430 317,965 2,004,569 2,056,497 20,340,072 4,257,758 $ 23,696,530 $ 5,797,572 $ 41,560,893 Total Expenses $ 42,153,609 55,099,469 26,687,945 463,118 1,956,136 8,225,368 7,726,849 43,213,730 12,852,051 $ 198,378,275 Georgia Southern University Annual Financial Report FY 2007 36 Note 16. 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 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, 2007, the Foundation distributed $3,347,366 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at P.O. Box 8040, Statesboro, GA 30460. Investments for Component Units: Georgia Southern University Foundation, Inc. holds endowment and other investments of approximately $42.1 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by donors. Georgia Southern University Foundation, Inc., 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. Investments are comprised of the following amounts at June 30, 2007: Cost Fair Value Money Market Accounts Certificates of Deposit Mutual Funds Real Estate Total Investments $552,679 58,314 37,461,321 158,900 $38,231,214 $552,679 58,314 41,353,051 158,900 $42,122,944 Georgia Southern University Annual Financial Report FY 2007 37 Capital Assets for Component Units Georgia Southern University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $395,860 395,860 50,000 50,000 26,111 23,889 $419,749 Long-Term Liabilities for Component Units Georgia Southern Foundation, Inc. had $148,460 in Liabilities Under Split-interest Agreements as of June 30, 2007. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Housing Foundation, Inc. and Subsidiaries (GSUHF) is a legally separate, tax-exempt component unit of Georgia Southern University (University). GSUHF acts primarily as an organization to issue bonds where the funds are utilized to construct student housing and other university facilities that are available to the University in support of its programs. The board of the GSUHF is self-perpetuating and consists of employees and friends of the University. Because this organization's purpose is for the benefit of the University, GSUHF is considered a component unit of the University and is discretely presented in the University's financial statements. GSUHF 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. GSUHF's fiscal year is July 1 through June 30. Complete financial statements for GSUHF can be obtained from Dabbs, Hickman, Hill and Cannon, LLP, P.O. Box 727, Statesboro, GA 30459. Georgia Southern University Annual Financial Report FY 2007 38 Long-Term Liabilities for Component Units Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30, 2007 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2006 $114,280,000 $114,280,000 Additions $0 $0 Reductions $1,829,173 $1,829,173 Ending Balance June 30, 2007 $112,450,827 $112,450,827 Amounts due within One Year $2,685,000 $2,685,000 Georgia Southern University Housing Foundation One, LLC has a bond obligation to Wachovia Bank for the construction of the student housing facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $38,180,000 of Student Housing Lease Revenue Bonds, Series 2002. The bonds were issued in $5,000 denominations, and consist of $22,930,000 Serial Bonds, maturing annually through 2022; $5,000,000 Term I Bonds, due August 1, 2028; and $10,250,000 Term II Bonds, due August 1, 2028. Principal payments are due annually and interest payments are due semi-annually on January 25 and July 25 in the amounts so as to enable Wachovia Bank to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of Wachovia Bank, as security for the payment of the bonds. Principal payments are due every July 25th, commencing in 2004. Interest payments are due every January and July 25th, commencing in 2003. Interest rates vary from 3% to 5% over the obligation term. The balance of the bond obligation was $35,990,000 as of June 30, 2007. Georgia Southern University Housing Foundation Two, LLC has a bond obligation to BB&T for the construction of the student housing facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $35,900,000 of Student Housing Lease Revenue Bonds, Series 2004. The bonds were issued in $5,000 denominations, and consist of $19,375,000 Serial Bonds, maturing annually through 2024; $4,035,000 Term I Bonds, due August 1, 2019; $5,885,000 Term II Bonds, due August 1, 2027; and $6,605,000 Term III Bonds, due August 1, 2030. Principal payments are due annually and interest payments are due semi-annually on February 1 and August 1 in the amounts so as to enable BB&T to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of BB&T, as security for the payment of the bonds. Principal payments are due every August 1st, commencing in 2005. Interest payments are due every February and August 1st commencing on August 1, 2004. Interest rates vary from 2.75% to 5.25% over the obligation term. The balance of the bond obligation was $34,925,000 as of June 30, 2007. Georgia Southern University Annual Financial Report FY 2007 39 Georgia Southern University Housing Foundation Three, LLC has a bond obligation to BB&T for the construction of the recreation facilities, funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $40,540,000 of Student Housing Lease Revenue Bonds, Series 2005A (tax-exempt) and 2005B (non-exempt). The bonds were issued in $5,000 denominations, and consist of $13,235,000 Serial 2005A Bonds, maturing annually through 2021; $9,800,000 Term I 2005A Bonds, due August 1, 2026; $7,135,000 Term II 2005A Bonds, due August 1, 2029; $5,360,000 Term III 2005A Bonds, due August 1, 2031; and $5,010,000 Serial 2005B Bonds, maturing annually through 2012. Principal payments are due annually and interest payments are due semi-annually, on February 1 and August 1 in the amounts so as to enable BB&T to pay on or before the dates due the debt service on the bonds and any amounts required to be deposited to the Debt Service Reserve Fund and the Replacement Fund, both created pursuant to the provisions of the Indenture. Pursuant to the loan agreement, the Foundation grants a pledge and assignment of and grants a lien upon and security interest in the loan agreement, the deed, and the development agreement in favor of BB&T, as security for the payment of the bonds. Principal payments are due every August 1st, commencing in 2008. Interest payments are due every February and August 1st, commencing on August 1, 2005. Interest rates vary from 3.5% to 5.25% over the obligation term. The balance of the bond obligation was $40,540,000 as of June 30, 2007. The Foundation will incur a bond obligation for the construction of student housing facilities. It is anticipated that the Development Authority of Bulloch County will issue approximately $62,725,000 of Student Housing Lease Revenue Bonds. The details of the bond issue and construction are currently in the planning stages as of the date of this report. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $2,685,000 2,840,000 3,000,000 3,170,000 3,275,000 18,460,000 22,870,000 29,060,000 26,095,000 111,455,000 995,827 $112,450,827 Bonds Payable Interest $5,191,104 5,116,823 5,014,733 4,899,705 4,771,489 21,716,921 17,231,571 10,962,079 2,872,500 77,776,925 $77,776,925 Total $7,876,104 7,956,823 8,014,733 8,069,705 8,046,489 40,176,921 40,101,571 40,022,079 28,967,500 189,231,925 995,827 $190,227,752 Southern Boosters, Inc. Southern Boosters, Inc. is a legally separate, tax-exempt component unit of Georgia Southern University (University). The fifty two-member board of Southern Boosters is self-perpetuating and consists of graduates and friends of the University. Although the University does not control Georgia Southern University Annual Financial Report FY 2007 40 the timing or amount of receipts from the Southern Boosters, the majority of resources or income thereon that Southern Boosters holds and invests is restricted to the athletic activities of the University by the donors. Because these restricted resources held by Southern Boosters 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, Southern Boosters is considered a component unit of the University and is discretely presented in the University's financial statements. Southern Boosters, 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. Southern Boosters, Inc. fiscal year is July 1 through June 30. During the year ended June 30, 2007, Southern Boosters, Inc. distributed $500,000 to the University for athletic scholarship support and approximately $401,176 for the support of other University programs. Complete financial statements for Southern Boosters, Inc. can be obtained from the Administrative Office at P.O. Box 811501, Statesboro, GA 30460. Capital Assets for Component Units Southern Boosters, Inc. has the following Capital Assets as of June 30, 2007: June 30, 2007 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 $80,301 897,738 978,039 324,687 95,585 420,272 121,353 298,919 $1,276,958 Long-Term Liabilities for Component Units Southern Boosters, Inc. has a Note Payable to Sea Island Bank, payable in annual installments of $35,220 including interest at a variable rate (8.25% at June 30, 2007), through September 14, 2013, unsecured. The original note amount was $279,000 and the principal balance outstanding Georgia Southern University Annual Financial Report FY 2007 41 on the note at June 30, 2007 was $211,992. 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, 2007) and the note matures on January 15, 2009. This debt is secured by the Golf Practice facility. The outstanding principal balance was $366,810 at June 30, 2007. Changes in long-term liabilities for Southern Boosters, Inc. for the fiscal year ended June 30, 2007 are shown below: Notes and Loans Payable Total Long Term Liabilities Beginning Balance July 1, 2006 Additions Reductions $630,304 $630,304 $0 $51,502 $0 $51,502 Ending Balance June 30, 2007 Amounts due within One Year $578,802 $578,802 $25,391 $25,391 Annual requirements to maturity for notes payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Total Notes and Loans Payable Notes and Loans Payable Principal Interest Total $25,391 378,550 20,794 22,510 24,367 107,190 $578,802 $47,829 32,073 14,426 12,710 10,853 11,080 $128,971 $73,220 410,623 35,220 35,220 35,220 118,270 $707,773 Georgia Southern University Research and Service Foundation, Inc. Georgia Southern University Research and 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 six-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. Georgia Southern University Annual Financial Report FY 2007 42 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 2007, the Research Foundation transferred approximately $5,469,335 in sponsored research to the University. Complete financial statements for the Research Foundation can be obtained from the Administrative Office at P.O. Box 8005, Statesboro, GA 30460. Georgia Southern University Annual Financial Report FY 2007 43 GEORGIA SOUTHWESTERN STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Georgia Southwestern State University Americus, Georgia Dr. Kendall A. Blanchard President W. Cody King Vice President for Business and Finance GEORGIA SOUTHWESTERN STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 20 Note 4. Inventories...................................................................................................................... 20 Note 5. Notes/Loans Receivable................................................................................................. 20 Note 6. Capital Assets................................................................................................................. 21 Note 7. Deferred Revenue........................................................................................................... 22 Note 8. Long-Term Liabilities .................................................................................................... 22 Note 9. Significant Commitments............................................................................................... 22 Note 10. Lease Obligations......................................................................................................... 22 Note 11. Retirement Plans .......................................................................................................... 23 Note 12. Risk Management......................................................................................................... 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 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. Students Students Faculty (Headcount) (FTE) FY2007 101 FY2006 103 FY2005 104 2,457 2,427 2,323 2,161 2,123 2,016 Overview of the Financial Statements and Financial Analysis Georgia Southwestern State University is proud to present its financial statements for fiscal year 2007. 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 2007 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. Georgia Southwestern State University Annual Financial Report FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $6,662,054 44,298,746 1,228,407 52,189,207 June 30, 2006 $6,679,961 41,811,361 1,192,884 49,684,206 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,116,865 329,713 4,446,578 3,344,084 268,091 3,612,175 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 44,298,746 398,221 1,252,025 1,793,637 $47,742,629 41,811,361 387,971 1,213,454 2,659,245 $46,072,031 The total assets of the institution increased by $2,505,001. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,487,385 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $834,403. The combination of the increase in total assets of $2,505,001 and the increase in total liabilities of $834,403 yields an increase in total net assets of $1,670,598. Georgia Southwestern State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $19,489,130 33,735,259 (14,246,129) 12,630,439 (1,615,690) 3,286,288 1,670,598 46,072,031 0 46,072,031 $47,742,629 $18,303,265 31,475,194 (13,171,929) 12,003,449 (1,168,480) 24,827,604 23,659,124 22,412,907 0 22,412,907 $46,072,031 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $5,540,292 6,522,603 2,098,894 5,079,978 247,363 19,489,130 12,227,642 76,178 336,269 (9,650) 12,630,439 3,286,288 0 3,286,288 $35,405,857 June 30, 2006 $4,973,104 6,625,853 1,699,018 4,839,734 165,556 18,303,265 12,158,474 0 237,772 (392,797) 12,003,449 24,827,604 0 24,827,604 $55,134,318 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $11,893,985 191,746 1,030,849 2,144,253 2,118,258 4,181,968 5,505,887 1,903,507 4,764,806 33,735,259 0 $33,735,259 June 30, 2006 $10,599,637 337,586 1,057,592 2,120,743 1,915,719 4,256,055 4,883,882 1,846,061 4,457,919 31,475,194 0 $31,475,194 Operating revenues increased by $1,185,865 in fiscal 2007. Tuition & Fees included an 11% increase, revenues slightly decreased in Grants and Contracts, and increased in both the Auxiliary and Other categories. Georgia Southwestern State University Annual Financial Report FY 2007 4 Nonoperating revenues increased by $626,990 for the year primarily due to increases in State Appropriations, Gifts, Investment Income and Other categories. The compensation and employee benefits category increased by $1,322,901 and primarily affected the Instruction and Public Service categories. The increase reflects the merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($34,769) during the past year. The decrease was primarily associated with a moderate winter in fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Georgia Southwestern State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($12,901,288) 12,306,147 (28,648) 274,787 (349,002) 5,092,335 $4,743,333 June 30, 2006 ($11,274,542) 12,112,847 (407,293) 247,528 678,540 4,413,795 $5,092,335 Capital Assets The University had one significant capital asset additions for facilities in fiscal year 2007. The Wheatley Hall renovation was completed in June of 2007. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Georgia Southwestern State University Annual Financial Report FY 2007 5 Long Term Debt and Liabilities Georgia Southwestern State University had Long-Term Debt and Liabilities of $749,642 of which $419,929 was reflected as current liability at June 30, 2007. 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 FY2007. The 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 Kendall A. Blanchard - President Georgia Southwestern State University Georgia Southwestern State University Annual Financial Report FY 2007 6 Statement of Net Assets GEORGIA SOUTHWESTERN STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C om pon e n t Un i t ASSETS 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 Inventories (note 4) Prepaid items Total Current Assets Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TO TAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposit s Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) Total Current Liabilities Noncurrent Liabilities Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Total Noncurrent Liabilities TO TAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrest rict ed TO TAL NET ASSETS Ge orgi a S ou th we s te rn State University Ge orgi a S ou th we s te rn Foundation, Inc. $4,743,333 140,535 1,147,454 97,962 393,276 139,494 6,662,054 632,294 596,113 44,298,746 45,527,153 52,189,207 85,745 61,082 10,031 750,435 131,750 2,585,941 24,663 47,289 419,929 4,116,865 329,713 329,713 4,446,578 44,298,746 398,221 1,252,025 1,793,637 $47,742,629 $2,409,502 1,421,133 73,237 287,030 6,724 4,197,626 2,324,768 24,606,380 430,691 23,615,507 769,694 51,747,040 55,944,666 10,323 610,840 97,962 250,000 969,125 26,983,914 26,983,914 27,953,039 (2,938,226) 8,597,523 5,651,170 16,681,160 $27,991,627 C om pon e n t Un i t Ge orgi a S ou th we s te rn Research and De ve l opm e n t C orporati on , Inc. 0 0 0 0 0 0 $0 Georgia Southwestern State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets REVENUES GEORGIA SOUTHWESTERN STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2007 Georgia Southwestern State University Component Unit Georgia Southwestern 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 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 Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of Georgia Southwestern State University Total Operating Expenses Operating Income (loss) $7,495,062 (1,954,770) 4,150,471 260,229 2,111,903 2,098,894 4,590 1,692,746 934,406 1,122,031 83,401 337,321 881,015 29,058 242,773 19,489,130 $0 640,114 2,346,323 330,552 499,626 32,138 3,848,753 5,729,117 8,231,073 4,281,674 111,454 301,514 2,392,412 1,552,934 9,582,402 1,552,679 33,735,259 (14,246,129) 148,779 34,069 3,271 781,737 591,022 102,012 1,464,621 3,125,511 723,242 Component Unit Georgia Southwestern Research and Development Corporation, Inc. $0 118,848 71,000 189,848 153,534 32,782 1,882 3,663 240,720 2,650 60,180 495,411 (305,563) Georgia Southwestern State University Annual Financial Report FY 2007 8 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, 2007 Georgia Southwestern State University Component Unit Georgia Southwestern Foundation, Inc. Component Unit Georgia Southwestern Research and Development Corporation, 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 12,227,642 76,178 336,269 (9,650) 12,630,439 (1,615,690) 3,286,288 3,286,288 1,670,598 46,072,031 46,072,031 $47,742,629 1,516,937 (783,557) (40,555) 692,825 1,416,067 297,133 297,133 1,713,200 25,721,746 556,681 26,278,427 $27,991,627 0 (305,563) 0 (305,563) 305,563 305,563 $0 Georgia Southwestern State University Annual Financial Report FY 2007 9 Statement of Cash Flows GEORGIA S OUTHWES TERN S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 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 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, 2007 $5,590,300 6,310,816 2,098,894 (15,844,955) (13,961,274) (2,392,412) 20,917 1,769,233 735,639 1,118,600 83,192 332,644 816,397 35,378 385,343 (12,901,288) 12,227,642 2,327 76,178 12,306,147 3,286,288 (3,314,936) (28,648) 2,717 272,070 274,787 (349,002) 5,092,335 $4,743,333 Georgia Southwestern State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued GEORGIA S OUTHWES TERN S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2007 ($14,246,129) 1,552,679 (253,209) (52,261) (20,219) 20,914 37,678 53,415 (7,318) 13,162 ($12,901,288) $64,199 Georgia Southwestern State University Annual Financial Report FY 2007 11 GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Georgia Southwestern State University is reporting the activity for the Georgia Southwestern Foundation, Inc. and the Georgia Southwestern Research and Development Corporation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Georgia Southwestern State University Annual Financial Report FY 2007 12 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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 Southwestern State University Annual Financial Report FY 2007 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 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 weighted average method. Resale inventories are valued at costing using the weighted average method Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred no capital additions to Georgia Southwestern State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Georgia Southwestern State University Annual Financial Report FY 2007 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 compensated absences 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 $736,480 as of 7-1-2006. For FY2007, $507,356 was earned in compensated absences and employees were paid $494,194, for a net increase of $13,162. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $749,642. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia Southwestern State University Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $196,404 795,353 260,268 $1,252,025 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, 2007 $844,460 895,927 36,500 16,750 $1,793,637 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. 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. Georgia Southwestern State University Annual Financial Report FY 2007 16 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. 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. Georgia Southwestern State University Annual Financial Report FY 2007 17 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, 2007, the carrying value of deposits was and the bank balance was. Of the University's deposits, were uninsured. Of these uninsured deposits, were collateralized with securities held by the financial institution's trust department or agent in the University's name. 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Maturity Fair Value 6-10 Years Investment type Debt Securities Mutual Bond Fund $260,886 $260,886 $260,886 $260,886 Ot her Investment s Equity Mut ual Funds Investment P ools Office of T reasury and Fiscal Services Georgia Fund 1 T ot al Invest ments 371,408 3,140,111 $3,772,405 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 15 days. Georgia Southwestern State University Annual Financial Report FY 2007 18 Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The university does not have a formal policy for managing interest rate risk. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The university does not have a formal policy for managing credit quality risk. Related Debt Investments Mutual Bond Fund Fair Value $260,886 $260,886 Unrat ed $260,886 $260,886 The Georgia Fund 1 investment pool is rated AAAm by Standard and Poor's. Georgia Southwestern State University Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $138,946 352,845 140,535 322,684 97,962 374,732 1,427,704 41,753 $1,385,951 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore Ot h er T otal June 30, 2007 $360,868 32,408 $393,276 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $26,932. Georgia Southwestern State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $529,207 2,994,197 3,523,404 51,579,083 1,267,167 2,940,502 6,188,398 61,975,150 15,113,404 1,129,988 2,415,465 5,028,336 23,687,193 38,287,957 $41,811,361 Addi ti o n s $0 981,648 981,648 Re ductions $0 2,915,253 2,915,253 5,585,325 191,898 201,137 5,978,360 159,779 4,938 164,717 1,239,463 164,945 148,271 1,552,679 4,425,681 $5,407,329 155,088 4,938 160,026 4,691 $2,919,944 En di n g B al a n ce 6 /3 0 /2 0 0 7 $529,207 1,060,592 1,589,799 57,164,408 1,267,167 2,972,621 6,384,597 67,788,793 16,352,867 1,129,988 2,425,322 5,171,669 25,079,846 42,708,947 $44,298,746 Georgia Southwestern State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $1,065,415 1,520,526 $2,585,941 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $736,480 $736,480 Additions $507,356 $507,356 Reductions Ending Balance June 30, 2007 $494,194 $494,194 $749,642 $749,642 Current Portion $419,929 $419,929 Note 9. Significant Commitments The University has no known significant commitments not reflected in accompanying basic financial statements. Note 10. Lease Obligations CAPITAL LEASES Georgia Southwestern has no Capital Leases as of June 30, 2007. OPERATING LEASES Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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. Georgia Southwestern State University Annual Financial Report FY 2007 22 Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 T ot al m inim um lease paym ent s Year 1 2 3 4 Real P ropert y and Equipm ent Operat ing Leases $16,938 14,801 12,763 5,078 $49,580 Georgia Southwestern State University's FY2007 expense for rental of real property and equipment under operating leases was $25,043 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $ 701,424 $ 672,470 $ 686,260 Georgia Southwestern State University Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $431,091 (9.66% or 8.13%) and $241,658 (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 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 Georgia Southwestern State University Annual Financial Report FY 2007 24 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 2007 amounted to $24,996 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Southwestern State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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. Georgia Southwestern State University Annual Financial Report FY 2007 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 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, 2007. 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, 2007, there were 164 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Southwestern State University recognized as incurred $645,981 of expenditures, which was net of $249,146 of participant contributions. Georgia Southwestern State University Annual Financial Report FY 2007 26 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 5,656,824 1,738,067 1,826,911 90,471 21,684 63,497 2,496,531 $ 24,951 86,160 39,811 4,350 789 31,522 4,163 $ 3,892 517,265 123,412 30,526 108,419 8,360 236,545 2,430 $ 2,500 1,368,760 365,675 25,855 6,555 202,112 172,796 $ 2,700 1,173,197 319,453 75,228 22,370 23,006 500,651 1,653 $0 2,075,503 1,201,649 99,857 53,205 755 27,218 663,155 60,626 $ 11,893,985 $ 191,746 $ 1,030,849 $ 2,144,253 $ 2,118,258 $ 4,181,968 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises T ot al Expenses $0 713,488 208,520 (202,842) 2,436 1,321,188 2,217,281 1,245,816 $0 59,885 1,843,445 177 $ 38,250 558,633 136,358 214,439 19,443 395,739 102,321 3,234,428 65,195 $ 5,729,117 8,231,073 4,281,674 111,454 301,514 2,392,412 1,552,934 9,582,402 1,552,679 $ 5,505,887 $ 1,903,507 $ 4,764,806 $ 33,735,259 Georgia Southwestern State University Annual Financial Report FY 2007 27 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, 2007, the Foundation distributed $1,464,621 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. Prior Year Adjustment: A prior year adjustment was necessary to correct the prior year's ending net assets amount $25,721,427. The prior year's numbers were not finalized as of the FY2006 Annual Financial Report date. The net effect of the change was to increase beginning net assets by $556,681. Investments for Component Units: Georgia Southwestern Foundation holds endowment and other investments in the amount of $26 million. The $8.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Georgia Southwestern Foundation, in conjunction with the donors, has established a spending plan whereby 6% of the earnings may be used for academic scholarships or other related academic purposes as outlined by the donor. The remaining of the earnings are set aside as a reserve. Georgia Southwestern State University Annual Financial Report FY 2007 28 Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $712,544 1,421,133 903,779 4,196,644 15,436,559 $22,670,659 Fair Value $712,544 1,421,133 847,536 4,034,641 19,011,659 $26,027,513 Capital Assets for Component Units: Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2007: 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 June 30, 2007 $941,953 25,159 967,112 22,277,181 1,073,100 23,350,281 701,886 22,648,395 $23,615,507 Long-term Liabilities for Component Units: The Americus-Sumter Payroll Department Authority ("PDA") issued $27,365,000 of its Revenue Bonds (GSW Foundation Housing, LLC Student Housing Project), Series 2005 ("the Bonds"). The proceeds of the sale of the Bonds have been loaned to the GSW Foundation Housing, LLC pursuant to the terms and provision of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated November 1, 2005, between the PDA and the Company. The proceeds are being used to construct 2 student housing buildings and parking facilities for use by the University. The bonds mature in the year 2037 and have interest rates ranging from 4% to 5.125%. Georgia Southwestern State University Annual Financial Report FY 2007 29 Long-term liability activity for the year ended June 30, 2007 is as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Revenue/Mortgage Bonds Payable $27,233,914 $0 $0 $27,233,914 Amounts due within One Year $250,000 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 Bond P rem ium /(Discount ) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 P rincipal $250,000 65,000 105,000 145,000 190,000 1,720,000 3,375,000 4,990,000 6,265,000 10,260,000 27,365,000 (131,086) $27,233,914 Bonds P ayable Int erest $1,284,108 1,274,108 1,271,508 1,267,307 1,261,507 6,147,237 5,641,719 4,723,669 3,455,037 1,731,744 28,057,944 $28,057,944 T otal $1,534,108 1,339,108 1,376,508 1,412,307 1,451,507 7,867,237 9,016,719 9,713,669 9,720,037 11,991,744 55,422,944 (131,086) $55,291,858 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 Georgia Southwestern State University Annual Financial Report FY 2007 30 presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is August 1 through July 31; however, it ceased operations on March 31, 2007. The financial statements presented in this report are as of March 31, 2007 and for the period August 1, 2006 through March 31, 2007. Complete financial statements for the Research Foundation can be obtained from the Georgia Southwestern State University at 800 Georgia Southwestern State University Drive, Americus, GA 31709. Georgia Southwestern State University Annual Financial Report FY 2007 31 GEORGIA GWINNETT COLLEGE Financial Report For the Year Ended June 30, 2007 Georgia Gwinnett College Lawrenceville, Georgia Dr. Daniel J. Kaufman President Mr. Edwin Beauchamp Vice President for Business and Finance GEORGIA GWINNETT COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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................................................................................................................. 17 Note 7. Deferred Revenue........................................................................................................... 18 Note 8. Long-Term Liabilities .................................................................................................... 18 Note 9. Significant Commitments............................................................................................... 18 Note 10. Lease Obligations......................................................................................................... 18 Note 11. Retirement Plans .......................................................................................................... 20 Note 12. Risk Management......................................................................................................... 22 Note 13. Contingencies............................................................................................................... 22 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 23 Note 15. Natural Classifications with Functional Classifications .............................................. 24 GEORGIA GWINNETT COLLEGE Management's Discussion and Analysis Introduction Georgia Gwinnett College is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Lawrenceville, Georgia, was founded in 2006 and has become known as the "Campus of Tomorrow" because of its unique mission emanating from the Board of Regents. Georgia Gwinnett College uses state-of-the-art instructional technology, advanced learning methodology, and online courses to matriculate students. Georgia Gwinnett College currently offers baccalaureate degrees in business administration, biology, psychology, and has numerous programs currently in development. The opportunity to be part of the first new college in the 21st century with a focus on the use of technology attracts a highly qualified faculty and a growing student body as indicated below: Students Students Faculty (Headcount) (FTE) FY2007 23 118 76 Overview of the Financial Statements and Financial Analysis Georgia Gwinnett College is proud to present its financial statements for fiscal year 2007. 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 2007 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 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Total As s e ts June 30, 2007 $3,251,859 44,060,961 47,312,820 June 30, 2006 $1,477,955 40,310,346 41,788,301 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,134,579 14,367,398 16,501,977 741,235 14,844,123 15,585,358 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 29,216,838 1,594,005 $30,810,843 24,892,453 1,310,490 $26,202,943 The total assets of the institution increased by $5,524,519. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,750,615 in the category of Capital Assets, Net. This increase is due to the Presidential Suite Renovation project, which increased the value of Building B by $793,402, and the construction in progress of a second phase of Academic Building C, which had fiscal year 2007 construction costs of approximately $2.8 million. The balance of the increase is mainly in accounts receivable and approximately $1.2 million in cash held by the College, which is reserved for the construction of a parking deck that is scheduled to open in fiscal year 2008. The total liabilities for the year increased by $916,619. This increase is primarily due to an increase in contracts and accounts payable attributed to construction projects in progress. The combination of the increase in total assets of $5,524,519 and the increase in total liabilities of $916,619 yields an increase in total net assets of $4,607,900. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $4,324,385. Georgia Gwinnett College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $2,376,587 11,262,658 (8,886,071) 10,554,018 1,667,947 2,939,953 4,607,900 26,202,943 0 26,202,943 $30,810,843 $224,743 6,347,949 (6,123,206) 7,208,867 1,085,661 25,117,282 26,202,943 0 0 0 $26,202,943 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 Gwinnett College Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operating Revenue T uition and Fees Sales and Services Auxiliary Ot her T otal Operating Revenue Nonoperating Revenue State Appropriations Gift s Investment Income Ot her T otal Nonoperating Revenue Capital Gifts and Grants St at e Special Item T otal Capital Gifts and Grants T otal Revenues June 30, 2007 $739,822 2,936 1,229,000 404,829 2,376,587 10,943,548 0 71,873 319,631 11,335,052 2,939,953 0 2,939,953 $16,651,592 June 30, 2006 $75,186 2,942 0 146,615 224,743 7,663,329 332,230 19,930 0 8,015,489 3,836,102 21,281,180 25,117,282 $33,357,514 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operating Expenses Inst ruct ion Academic Support Student Services Institutional Support Plant Operations and Maintenance Auxiliary Enterprises Unallocated Expenses T otal Operating Expenses Nonoperating Expenses Interest Expense (Capital Assets) T otal Expenses June 30, 2007 $2,606,689 2,090,785 609,100 4,443,240 1,511,235 1,307 302 11,262,658 781,034 $12,043,692 June 30, 2006 $1,160,452 1,495,626 148,059 3,369,877 174,011 0 (76) 6,347,949 806,622 $7,154,571 Operating revenues increased by $2,151,844 in fiscal 2007. During FY 2007, Georgia Gwinnett College welcomed its first students, which gives the college tuition and fee revenue for the first time and substantially increases the operating revenues of the college. The Auxiliary revenue increase of $1,229,000 is a result of the new parking fee charged to all students attending classes on campus. This includes not only Georgia Gwinnett College Georgia Gwinnett College Annual Financial Report FY 2007 4 students, but students attending Georgia Perimeter College and the University of Georgia classes held on Georgia Gwinnett College's campus. This fee will pay for a new parking deck that is currently being constructed on campus, which will open during fiscal year 2008. Nonoperating revenues increased by $3,319,563 for the year primarily due to an increase of $3,280,219 in State Appropriations. The compensation and employee benefits category increased by $3,994,209 and primarily affected the Instruction, Academic Support, and Institutional Support categories. The increase reflects the addition of the first faculty members hired by Georgia Gwinnett College, an increase in staff to support the institution, and an increase in the benefit costs due to an increase in the number of employees. Utilities increased by $320,849 during the past year. The increase was primarily associated with the addition of a new building and a general increase in utility costs that affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by the 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($7,416,483) 11,169,190 (2,462,467) 71,873 1,362,113 1,438,891 $2,801,004 June 30, 2006 ($5,013,655) 7,995,559 (1,562,943) 19,930 1,438,891 0 $1,438,891 Georgia Gwinnett College Annual Financial Report FY 2007 5 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2007. The Presidential Suite renovation was completed and placed into service during in fiscal year 2007. This $1 million project was funded partially by the institution and partially by the Georgia State Financing and Investment Commission (GSFIC) major repair and rehabilitation funding. Additionally, the institution is currently constructing an addition to Academic Building C, which will provide much needed classroom and office space for the campus. This addition is being funded by the Georgia State Financing and Investment Commission (GSFIC) and will be completed during Fiscal Year 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 Georgia Gwinnett College had Long-Term Debt and Liabilities of $15,117,092 of which $749,694 was reflected as current liability at June 30, 2007. 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 fiscal year 2007. The Georgia Gwinnett College Foundation does not meet the criteria to consider it significant for component unit reporting at this time. Economic Outlook In its second year operation, Georgia Gwinnett College will be engaged in a number of activities that will have substantial impact on both its short and long term financial outlook. Included in these activities will be the hiring of additional faculty to teach students at the sophomore level, initiation of the College's second year of classes including matriculating its charter freshmen class, integration of technology-related functions for enrollment, admission, and matriculation, and other routine components of administering an educational institution. Additionally, college administrators will continue development of the GGC Foundation that has already had one extremely successful year of fundraising and operation. Most importantly, GGC will continue working with the Southern Association of Colleges and Schools (SACS) on the accreditation process. This will consist of a thorough review of academic, administrative, and financial components of the college. College administrators recognize this process to be vital to future enrollment and success; therefore, substantial Georgia Gwinnett College Annual Financial Report FY 2007 6 resources and efforts will be dedicated toward achievement of the various milestones of accreditation. Also critical to the future of the institution is the construction of facilities to meet the needs of students, faculty, staff, and the community. This is also an important part of the SACS accreditation process. During the next year the College will begin construction of a state of the art $28.5 million Learning Resource Center, funded by the Georgia Legislature, and overseen by the Georgia State Financing and Investment Commission. This new library learning resource center is vital both for SACS accreditation and as a critical resource for Georgia Gwinnett College's student body. The College will complete construction of a parking deck financed through private funding and paid for by a new student parking fee. Additionally, the Board of Regents approved a $100 Student Center facility fee and increased the student recreation fee from $20 to $40 for fiscal year 2008. These new fees will be used to build a new Student Center and to provide approximately 30-50,000 square feet of student recreation space. 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 a 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 will not be able to acquire the personal and administrative resources necessary to meet the anticipated demand for student enrollment from the community. 2007-2008 will be an exciting time for Georgia Gwinnett College as it begins its second year of operations and the initiation of its charter freshmen 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. Dr. Daniel J. Kaufman, President Georgia Gwinnett College Georgia Gwinnett College Annual Financial Report FY 2007 7 Statement of Net Assets GEORGIA GWINNETT COLLEGE STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Receivables - Ot her P repaid Items T ot al Current Asset s Noncurre nt Asse ts Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabi li ti e s Account s P ayable Salaries P ayable Benefit s P ayable Cont ract s P ayable 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) T ot al Current Liabilit ies Non cu rre n t Liabi li ti e s Lease P urchase Obligat ions (noncurrent ) Compensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Unrest rict ed TO TAL NET AS S ETS June 30, 2007 $2,801,004 448,255 2,600 3,251,859 44,060,961 44,060,961 47,312,820 251,237 40,666 5,494 938,634 13,743 134,461 650 624,946 124,748 2,134,579 14,219,177 148,221 14,367,398 16,501,977 29,216,838 1,594,005 $30,810,843 Georgia Gwinnett College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA GWINNETT COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 REVENUES June 30, 2007 Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Sales and Services Rents and Royalties Auxiliary Enterprises Parking/T ransportation 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 Dep reciat io n T otal Operating Expenses Operating Income (loss) $739,822 2,936 42,522 1,228,990 10 362,307 2,376,587 844,033 4,110,832 1,077,134 110,730 557,241 3,327,429 1,235,259 11,262,658 (8,886,071) NO NO PERATING REVENUES (EXPENSES) State Appropriations 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 10,943,548 71,873 (781,034) 319,631 10,554,018 1,667,947 2,939,953 2,939,953 4,607,900 26,202,943 26,202,943 $30,810,843 Georgia Gwinnett College Annual Financial Report FY 2007 9 Statement of Cash Flows GEORGIA GWINNETT COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2007 C ASH FLO WS FRO M O PERATING ACTIVITIES T uition and Fees Sales and Services Payments to Suppliers Payments to Employees Auxiliary Enterprise Charges: Parking/T ransportation Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities C ASH FLO WS FRO M NO N-CAPITAL FINANC ING ACTIVITIES State Appropriations Agency Funds T ransactions Gifts and Grants Received for Other T han Capital Purposes Net Cash Flows Provided by Non-capital Financing Activities C ASH FLO WS FRO M CAPITAL AND RELATED FINANCING AC TIVITIES Capital Grants and Gifts Received 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 C ASH FLO WS FRO M INVESTING AC TIVITIES 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 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 Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities Georgia Gwinnett College Annual Financial Report FY 2007 10 June 30, 2007 $777,100 2,936 (4,771,590) (4,750,531) 1,228,795 10 96,797 (7,416,483) 10,943,548 650 224,992 11,169,190 2,939,953 (4,047,616) (573,770) (781,034) (2,462,467) 71,873 71,873 1,362,113 1,438,891 $2,801,004 ($8,886,071) 1,235,259 (314,176) (2,600) 251,755 13,743 126,289 159,318 ($7,416,483) GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 2007, 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 2007 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 grants 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 2007 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Georgia Gwinnett 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. 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 Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Gwinnett College had accrued liability for compensated absences in the amount of $113,651 as of 7-1-2006. For FY2007, $266,339 was earned in compensated absences and employees were paid $107,021, for a net increase of $159,318. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $272,969. 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. Georgia Gwinnett College Annual Financial Report FY 2007 13 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. Reserve for Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $1,364,350 229,655 $1,594,005 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 2007 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, 2007, the carrying value of deposits was $2,801,004 and the bank balance was $3,130,196. Of the College's deposits, $3,030,196 were uninsured and 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, 2007, the College had no investments. Georgia Gwinnett College Annual Financial Report FY 2007 15 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $8,400 195 442,111 450,706 2,451 $448,255 Note 4. Inventories Georgia Gwinnett College had no inventories as of June 30, 2007. Note 5. Notes/Loans Receivable Georgia Gwinnett College had no loans/notes receivable as of June 30, 2007. Georgia Gwinnett College Annual Financial Report FY 2007 16 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $0 27,009 27,009 Addi ti o n s $0 4,559,841 4,559,841 Re ductions $0 793,402 793,402 Capit al Asset s, Being Depreciat ed: Building and Building Improvement s E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 24,404,104 1,233,207 17,279,804 1,015,473 43,932,588 793,402 228,427 197,982 1,219,811 5,089 49,378 54,467 Less: Accumulat ed Depreciat ion Buildin gs E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 1,375,410 763,859 1,254,123 255,859 3,649,251 550,629 281,294 290,263 113,073 1,235,259 4,713 49,378 54,091 T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net 40,283,337 $40,310,346 (15,448) $4,544,393 376 $793,778 En di n g B al a n ce 6 /3 0 /2 0 0 7 $0 3,793,448 3,793,448 25,197,506 1,456,545 17,279,804 1,164,077 45,097,932 1,926,039 1,040,440 1,544,386 319,554 4,830,419 40,267,513 $44,060,961 Georgia Gwinnett College Annual Financial Report FY 2007 17 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P rep aid T uit io n and Fees T otals June 30, 2007 $13,743 $13,743 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $15,417,893 Additions $0 Reductions Ending Balance June 30, 2007 $573,770 $14,844,123 Current Portion $624,946 Other Liabilities Compensated Absences Total 113,651 113,651 266,339 266,339 107,021 107,021 272,969 272,969 124,748 124,748 Total Long Term Obligations $15,531,544 $266,339 $680,791 $15,117,092 $749,694 Note 9. Significant Commitments The College had a significant unearned, outstanding construction contract executed in the amount of $770,786 as of June 30, 2007. 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 2007 were $1,354,804, of which $781,034 represented interest expense. Principal paid on the capital lease was $573,770. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings $15,735,418 Georgia Gwinnett College Annual Financial Report FY 2007 18 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 T otal minimum lease payments Less: Interest Principal Outstanding Year 1 2 3 4 5 6-10 11-15 16-20 Real Property and Equipment Capital Leases $1,374,804 1,374,804 1,374,804 1,374,804 1,474,804 6,840,672 6,854,250 959,260 21,628,202 6,784,079 $14,844,123 Georgia Gwinnett College's had no fiscal year 2007 expense for rental of real property or equipment under operating leases. Georgia Gwinnett College Annual Financial Report FY 2007 19 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 2007, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding fiscal year are as follows: Fiscal Year Percentage Contributed Required Contribution 2007 2006 100% 100% $265,393 $64,331 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 2007, Georgia Gwinnett College Annual Financial Report FY 2007 20 the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Georgia Gwinnett College and the covered employees made the required contributions of $129,648 (9.66% or 8.13%) and $74,630 (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 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 2007 amounted to $24,883 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Georgia Gwinnett College Annual Financial Report FY 2007 21 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 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 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. Georgia Gwinnett College Annual Financial Report FY 2007 22 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, 2007. 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, 2007, there were no employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. Georgia Gwinnett College Annual Financial Report FY 2007 23 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt y St aff B enefit s T ravel U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion $ 84 4,0 3 3 18 9,2 0 4 2 ,612 7 9,69 1 515,7 0 0 97 5,4 4 9 $ 2,60 6,6 8 9 Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es $0 1,34 8 ,50 0 3 13 ,93 5 47 ,59 1 7 ,32 5 22 8 ,24 2 145 ,19 2 $0 4 32 ,2 60 10 2,182 9 ,110 65 ,5 48 $ 2 ,09 0 ,78 5 $ 6 0 9,100 Inst it ut ional Sup p o r t $0 2 ,27 0,95 8 45 5,89 8 5 1,4 17 60 ,02 1 1,65 3,04 6 (48 ,10 0) $ 4 ,44 3,24 0 Natural Classification F acu lt y St aff B en efit s T ravel U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses P lant Operat ions & Maintenance $0 5 9 ,114 15 ,9 15 410,2 0 4 8 6 3,5 8 6 16 2,416 $ 1,511,2 3 5 Functional Clas s ification FY2007 A ux ilia r y Ent erprises Unallocat ed E x p e n se s $0 $0 1,30 7 $ 1,30 7 302 $ 302 T otal E x p en se s $ 8 4 4,0 3 3 4 ,110,8 3 2 1,07 7,13 4 110,7 3 0 55 7,24 1 3,3 2 7,4 2 9 1,2 3 5,2 5 9 $ 11,2 6 2,6 5 8 Georgia Gwinnett College Annual Financial Report FY 2007 24 KENNESAW STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Kennesaw State University Kennesaw, Georgia Dr. Daniel S. Papp President Dr. Randy Hinds Chief Operating Officer KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 9 Statement of Cash Flows .............................................................................................................. 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 .......................................................................................................... 27 Note 12. Risk Management......................................................................................................... 30 Note 13. Contingencies............................................................................................................... 31 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 31 Note 15. Natural Classifications with Functional Classifications .............................................. 32 Note 16. Component Units ......................................................................................................... 33 KENNESAW STATE UNIVERSITY Management's Discussion and Analysis Introduction Kennesaw State University is one of the 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, masters and doctoral 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. Students Students Faculty (Headcount) (FTE) FY2007 670 19,854 17,183 FY2006 629 18,556 15,931 FY2005 505 17,961 15,191 Overview of the Financial Statements and Financial Analysis Kennesaw State University is proud to present its financial statements for fiscal year 2007. 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 2007 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. Kennesaw State University Annual Financial Report FY 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $46,138,698 171,488,933 4,734,442 222,362,073 June 30, 2006 $37,715,020 164,833,663 5,519,031 208,067,714 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 25,556,900 50,830,198 76,387,098 22,756,003 49,582,550 72,338,553 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 122,398,041 787,991 3,177,009 19,611,934 $145,974,975 116,527,568 739,889 3,512,788 14,948,916 $135,729,161 The total assets of the institution increased by $14,294,359. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $6,655,270 in the category of Capital Assets, net. The balance of the increase is mainly in cash and short term investments. The total liabilities for the year increased by $4,048,545. The combination of the increase in total assets of $14,294,359 and the increase in total liabilities of $4,048,545 yields an increase in total net assets of $10,245,814. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $5,870,473. Kennesaw State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $99,554,252 177,679,811 (78,125,559) 79,915,648 1,790,089 8,455,725 10,245,814 135,729,161 0 135,729,161 $145,974,975 $86,485,545 157,305,318 (70,819,773) 71,939,929 1,120,156 17,422,923 18,543,079 117,186,082 0 117,186,082 $135,729,161 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $58,464,228 13,301,802 4,538,012 22,027,156 1,223,054 99,554,252 75,030,494 2,870,424 2,952,946 1,945,268 (115,128) 82,684,004 8,136,105 319,620 8,455,725 $190,693,981 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $75,547,083 959,037 4,002,773 19,213,021 9,746,067 25,525,207 17,970,101 6,547,114 18,169,408 177,679,811 2,768,356 $180,448,167 June 30, 2006 $50,871,201 12,796,806 4,066,877 18,068,643 682,018 86,485,545 69,538,087 1,761,435 1,944,305 1,211,231 (18,515) 74,436,543 17,422,923 0 17,422,923 $178,345,011 June 30, 2006 $65,128,565 702,825 4,363,304 18,903,419 8,719,304 22,392,686 16,220,120 4,492,213 16,382,882 157,305,318 2,496,614 $159,801,932 Kennesaw State University Annual Financial Report FY 2007 4 Operating revenues increased by $13,068,707 in fiscal 2007, reflecting an increase in tuition and fees, and an increase in Auxiliary enterprises. The increase in tuition and fees was attributable to a 4% percent increase in tuition rates and a 7% increase in enrollment. The Auxiliary revenue increased by $3,958,513, with the largest dollar increase being in housing share revenue from the Kennesaw State University Foundation. Most Auxiliary enterprises realized double digit percentage increases in revenue. Nonoperating revenues increased by $8,247,461 for the year primarily due to an increase of $5,492,407 in State Appropriations. The compensation and employee benefits category increased by $14,035,378. The increase reflects additional staff and faculty, merit increases, and an increased cost of health insurance for the employees of the institution. Utilities increased by $323,783 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Kennesaw State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($68,757,661) 80,769,952 (7,726,646) 499,886 4,785,531 19,691,127 $24,476,658 June 30, 2006 ($71,955,794) 72,527,715 (6,588,203) 1,439,234 (4,577,048) 24,268,175 $19,691,127 Kennesaw State University Annual Financial Report FY 2007 5 Capital Assets Kennesaw State University had $14,530,164 in capital asset additions in fiscal year 2007, of which $8,136,105 was funded by the Georgia State Financing and Investment Commission (GSFIC), primarily for completion of the Social Science Building. The University also entered into three new capital leases with the Foundation. The leases added $2,130,843 to capital assets for additional space in Chastain Pointe and Town Point, as well as the Village Centre classroom. 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 Kennesaw State University had Long-Term Debt and Liabilities of $54,250,647 of which $3,420,449 was reflected as current liability at June 30, 2007. 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, Kennesaw State University has included the financial statements and notes for all required component units for FY2007. Kennesaw State University Foundation, Inc. had investments of $25.7 million as of June 30, 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 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 2007 6 Statement of Net Assets KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C ompone nt Un i t AS S ETS C urrent Asse ts Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Due From Component Units Leases Receivable Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets T otal Current Assets Ke nne saw State Unive rsity Ke nne saw State Unive rsity Foundation, Inc. $24,393,807 3,000,000 1,667,061 5,450,141 1,210,237 1,022,564 9,394,888 46,138,698 $2,365,529 184,563 4,117,899 614,778 158,060 576,246 288,867 275,692 8,581,634 Noncurre nt Asse ts Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Pledges Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 82,851 4,247,016 404,575 171,488,933 176,223,375 222,362,073 23,036,689 25,681,236 80,104,849 1,240,501 104,680,065 5,564,751 240,308,091 248,889,725 Kennesaw State University Annual Financial Report FY 2007 7 Statement of Net Assets, Continued KENNESAW STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C ompone nt Un i t Ke nne saw State Unive rsity Ke nnesaw State Unive rsity Foundation, Inc. LIABILITIES C urrent Liabilitie s Accounts Payable Salaries Payable Contracts Payable Deposit s Deferred Revenue (note 7) Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurre nt Liabilitie s Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (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 Un rest rict ed TO TAL NET ASSETS 4,087,787 399,032 175,148 14,995,271 2,321,153 1,348,194 2,072,255 158,060 25,556,900 47,742,698 3,087,500 50,830,198 76,387,098 122,398,041 787,991 3,177,009 19,611,934 $145,974,975 5,584,421 95,105 3,768,170 1,210,237 4,230,000 35,232 2,220,615 17,143,780 35,372,341 177,560,167 188,652 213,121,160 230,264,940 (4,875,297) 13,513,494 7,412,490 1,000,000 1,574,098 $18,624,785 Kennesaw State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets KENNES AW S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rent s and Royalt ies 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep r eciat io n P aym ent s t o or on behalf of Kennesaw St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) Ke n n e saw S tate Un i ve rs i ty Ke n n e saw S tate Un i ve rs i ty Fou n dati on , In c. $64,442,738 (5,978,510) 10,998,458 1,727,006 576,338 4,538,012 68,345 1,779,553 8,330,391 399,625 3,956,124 1,673,272 4,850,445 1,037,746 1,154,709 99,554,252 $0 4,352,065 899,947 97,000 20,388,395 25,737,407 48,899,611 45,674,688 22,165,447 369,467 2,003,118 8,285,146 3,622,613 38,899,955 7,759,766 177,679,811 (78,125,559) 1,726,356 1,789,757 4,575,411 4,088,857 4,125,711 16,306,092 9,431,315 Kennesaw State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued KENNES AW S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Ke n n e saw S tate Un i ve rs i ty Ke n n e saw S tate Un i ve rs i ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 75,030,494 1,488,026 12,668 1,369,730 2,952,946 1,945,268 (2,768,356) (115,128) 79,915,648 1,790,089 8,136,105 319,620 8,455,725 10,245,814 135,729,161 0 135,729,161 $145,974,975 2,694,940 (8,736,485) (6,041,545) 3,389,770 1,175,818 1,175,818 4,565,588 14,059,197 0 14,059,197 $18,624,785 Kennesaw State University Annual Financial Report FY 2007 10 Statement of Cash Flows KENNES AW S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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, 2007 $60,414,381 13,136,801 4,538,012 (67,825,673) (93,703,211) (8,285,146) (196,836) 215,284 1,159,681 8,400,795 399,197 4,082,222 1,655,440 5,107,435 1,077,940 1,066,017 (68,757,661) 75,030,494 (159,643) 5,899,101 80,769,952 7,510,905 (11,123,149) (1,346,046) (2,768,356) (7,726,646) 192,852 1,636,801 (1,329,767) 499,886 4,785,531 19,691,127 $24,476,658 Kennesaw State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued KENNES AW S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 ment s recognized as a component of int erest income Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($78,125,559) 7,759,766 (765,598) 112,007 (1,073,657) 18,448 189,190 2,423,856 (46,022) 749,908 ($68,757,661) $2,130,843 $308,467 ($944,820) Kennesaw State University Annual Financial Report FY 2007 12 KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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 Kennesaw State University Annual Financial Report FY 2007 13 Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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. Kennesaw State University Annual Financial Report FY 2007 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 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. Within fiscal 2007, a small auditorium project that had been reported as campusmanaged in the prior year, changed to a GSFIC managed project. In fiscal year 2007 GSFIC transferred $600,420 to the University in capital additions on a previously completed project. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. There were no deposits as of June 30, 2007. Kennesaw State University Annual Financial Report FY 2007 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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Kennesaw State University had accrued liability for compensated absences in the amount of $4,409,847 as of 7-1-2006. For FY2007, $3,521,522 was earned in compensated absences and employees were paid $2,771,614, for a net increase of $749,908. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $5,159,755. 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. Kennesaw State University Annual Financial Report FY 2007 16 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $153,200 370,149 131,331 2,522,329 $3,177,009 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, 2007 $1,265,317 7,575,289 10,771,328 $19,611,934 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. Kennesaw State University Annual Financial Report FY 2007 17 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. 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. Kennesaw State University Annual Financial Report FY 2007 18 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, 2007, the carrying value of deposits was $18,374,736 and the bank balance was $20,085,758. Of the University's deposits, $19,885,758 were uninsured. Of these uninsured deposits, $2,900,000 were collateralized with securities held by the financial institution's trust department or agent in the University's name, and $16,985,758 were uncollateralized. 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Treasuries Mutual Bond Fund Other Investments Equity Mutual Funds Investment Pools Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Total Investments Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years $118,659 994,776 $1,113,435 1,858,522 $69,585 7,058 $76,643 $49,074 493,859 $542,933 $0 493,859 $493,859 8,971,922 1,031,973 155,765 87,321 $13,218,938 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 Kennesaw State University Annual Financial Report FY 2007 19 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/searchRpts.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 2.24 years. Of the University's total investment of $8,971,922 in the Short Term Fund, $8,937,829 is invested in debt securities. The Weighted Average Maturity of the Legal Fund is 4.10 years. Of the University's total investment of $1,031,973 in the Legal Fund, $1,023,098 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the University's total investment of $155,765 in the Balanced Income Fund, $94,020 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the University's total investment of $87,321 in the Total Return Fund, $24,791 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/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, 2007, $118,659 of the 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. As previously stated, the BOR investment pool funds are not rated. The University does not have a formal policy for managing credit quality risk. The investments subject to credit quality risk are reflected below: Related Debt Investments Mut ual Bond Fund Fair Value $994,776 $994,776 AAA $493,859 $493,859 AA $493,859 $493,859 Unrated $7,058 $7,058 Kennesaw State University Annual Financial Report FY 2007 20 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, 2007 $409,197 or 3.1% 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $1,299,729 210,893 1,667,061 701,333 1,210,237 3,853,798 8,943,051 615,612 $8,327,439 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Healt h Clinic T otal $961,937 60,627 $1,022,564 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was $0. Kennesaw State University Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $5,334,656 2,219,511 18,513,346 26,067,513 Addi ti o n s $0 44,670 1,363,288 1,407,958 Re ductions $0 17,541,306 17,541,306 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed 2,028,332 109,525,521 4,240,142 12,357,100 49,977,661 18,751,596 616,400 197,496,752 25,086,698 2,348,593 2,130,843 801,378 296,000 30,663,512 216,493 1,883,293 4,695 2,104,481 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion 1,009,668 26,471,397 2,105,976 9,182,361 5,326,494 14,309,026 325,680 58,730,602 74,902 3,264,818 103,001 962,427 2,394,451 944,757 15,410 7,759,766 153,700 1,830,958 4,695 1,989,353 T ot al Capit al Asset s, Being Depreciat ed, Net 138,766,150 22,903,746 115,128 Capit al Asset s, net $164,833,663 $24,311,704 $17,656,434 En di n g B al a n ce 6/30/2007 $5,334,656 2,264,181 2,335,328 9,934,165 2,028,332 134,395,726 4,240,142 12,822,400 52,108,504 19,548,279 912,400 226,055,783 1,084,570 29,582,515 2,208,977 8,313,830 7,720,945 15,249,088 341,090 64,501,015 161,554,768 $171,488,933 Kennesaw State University Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $11,905,373 3,089,898 $14,995,271 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le ase s Lease Obligat ions Beginning B a l a n ce July 1, 2006 Addi ti o n s Re ductions En di n g B a l a n ce June 30, 2007 $48,306,095 $2,130,843 $1,346,046 $49,090,892 O th e r Liabil itie s Compensated Absences T otal 4,409,847 4,409,847 3,521,522 3,521,522 2,771,614 2,771,614 5,159,755 5,159,755 Total Lon g Te rm O bl igati on s $52,715,942 $5,652,365 $4,117,660 $54,250,647 C u rre n t Portion $1,348,194 2,072,255 2,072,255 $3,420,449 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,840,380 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Kennesaw State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2019 and 2030. Expenditures for fiscal year 2007 were $4,459,674 of which $2,768,356 represented interest and $345,272 represented executory costs. Total principal paid on capital leases was $1,346,046 for the fiscal year ended June 30, 2007. 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, 2007: Kennesaw State University Annual Financial Report FY 2007 23 Land Buildings Total Assets Held Under Capital Lease $1,814,402 44,387,559 $46,201,961 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 eight 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 $3,965,768 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, 2007 on this capital lease is $3,656,077. In August 2002, the University entered into a capital lease of $21,016,938 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. 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, 2007 on this capital lease is $20,944,602. In January 2004, the University entered into a capital lease of $2,718,028 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 5.5% for additional space in the complex, bringing the value of the lease to $3,378,929. In February 2007, the University substituted space and added additional space in a capital lease at 5.5% bringing the value of the lease to $4,326,537. The outstanding liability at June 30, 2007 on these capital leases is $4,050,922. In February 2004, the University entered into a capital lease of $200,000 at 2.0 percent whereby the University leases a house for a fifteen-year period that expires January 2019. The outstanding liability at June 30, 2007 on this capital lease is $159,567. In September 2004, the University entered into a capital lease of $14,323,134 at 5.79 percent whereby the University leases a parking deck for a twenty-five year period that 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 annually for a period of twenty-five years commencing in September 2004. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $13,471,967. Kennesaw State University Annual Financial Report FY 2007 24 In April 2006, the University entered into a capital lease of $4,015,944 at 8.22 percent whereby the University leases a portion of an office building for a twenty-four-year period that 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. In September 2006, the University entered into a capital lease at 8.22 percent for additional space in the complex, bringing the value of the lease to $4,157,971. The outstanding liability at June 30, 2007 on these capital leases is $4,063,171. In April 2006, the University entered into a capital lease of $1,814,402 at 5.07 percent whereby the University leases 7.242 acres of unimproved land for a twenty-four-year period that expires June 30, 2030. At the expiration of the lease, ownership of the land transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $1,765,607. In November 2006, the University entered into a capital lease of $1,041,207 at 5.38 percent whereby the University leases classroom space in a multi-purpose building. The building is constructed on land owned by the University and leased to Kennesaw State University Foundation, Inc. for $10 for a twenty-five year period commencing in June 2004. At the expiration of the ground lease, ownership of the building transfers to the University. The outstanding liability at June 30, 2007 on this capital lease is $978,979. In March 2006, the Board of Regents had approved a lease for an office/classroom building that would have been classified as a capital lease; however, the lease had not been executed as of the statement date. OPERATING LEASES Kennesaw State University's noncancellable operating lease was to have ended during fiscal Year 2006, but was extended on a month-to-month basis. Kennesaw State University Annual Financial Report FY 2007 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 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 Real P ropert y and Equipm ent Capit al Leases $4,461,493 4,461,252 4,455,316 4,451,975 4,447,826 22,145,272 21,936,288 20,134,941 5,512,450 92,006,813 35,329,783 7,586,138 $49,090,892 Kennesaw State University's FY2007 expense for rental of real property and equipment under operating leases was $1,416,390. Kennesaw State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $4,117,654 $3,772,319 $3,491,043 Employees' Retirement System of Georgia Plan Description Kennesaw State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 2007 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, 2007, for employees covered by ERS was $27,092. The University's total payroll for all employees was $94,574,299. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $3,226, of which $2,820 was made by the University and $406 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, 2007 financial report, which may be obtained through ERS. Kennesaw State University Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Kennesaw State University and the covered employees made the required contributions of $3,278,047 (9.66% or 8.13%) and $1,849,249 (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 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 Kennesaw State University Annual Financial Report FY 2007 29 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 2007 amounted to $455,636 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. 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 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. Kennesaw State University Annual Financial Report FY 2007 30 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Kennesaw State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Kennesaw State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 220 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Kennesaw State University recognized as incurred $1,101,125 of expenditures, which was net of $356,308 of participant contributions. Kennesaw State University Annual Financial Report FY 2007 31 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $ 45,157,902 8,351,227 11,377,579 977,626 314,594 307,787 8,872,105 188,263 $ 75,547,083 Research Functional Classification FY2007 Public Service Academic Support $ 278,695 335,267 81,176 $ 541,454 1,721,352 508,468 $ 2,488,517 8,300,173 2,365,610 22,211 2,000 660 238,444 584 113,739 19,630 32,948 1,054,978 10,204 287,367 150 105,711 4,377,816 1,287,677 $ 959,037 $ 4,002,773 $ 19,213,021 Student Services Institutional Support $ 3,543 5,958,570 1,335,661 131,900 1,826 84,115 2,013,753 216,699 $ 38,401 14,026,415 4,735,173 368,801 255,466 174,258 6,279,759 (353,066) $ 9,746,067 $ 25,525,207 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses P lan t Op erat io n s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erp rises $0 3,612,872 925,227 (89,576) 24,179 2,826,716 7,203,082 3,467,601 $0 6,547,114 $ 391,099 3,368,812 836,553 90,242 190,630 1,399,832 90,418 8,860,018 2,941,804 $ 17,970,101 $ 6,547,114 $ 18,169,408 T otal Expenses $ 48,899,611 45,674,688 22,165,447 369,467 2,003,118 8,285,146 3,622,613 38,899,955 7,759,766 $ 177,679,811 Kennesaw State University Annual Financial Report FY 2007 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, 2007, the Foundation distributed $4,125,711 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, Inc. holds endowment and other investments in the amount of $25.7 million. The $12.4 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, 2007: Mutual Funds Total Investments Cost $22,588,020 $22,588,020 Fair Value $25,681,236 $25,681,236 Kennesaw State University Annual Financial Report FY 2007 33 Capital Assets for Component Units: Kennesaw State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 $8,880,890 2,236,436 11,117,326 104,420,856 3,459,588 107,880,444 14,317,705 93,562,739 $104,680,065 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $243,896 133,157 185,644,104 $186,021,157 $0 2,220,615 $2,220,615 $20,012 133,157 3,853,937 $4,007,106 $223,884 2,220,615 181,790,167 $184,234,666 $35,232 2,220,615 4,230,000 $6,485,847 Notes and Loans Payable Notes Payable of $2,220,615 represents an unsecured line of credit with a financial institution to provide interim financing for new student housing construction. The line of credit bears interest at the 30 day LIBOR plus 1% (6.32% at June 30, 2007) and matures September 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $2,220,615 $2,220,615 $29,238 $29,238 Total $2,249,853 $2,249,853 Kennesaw State University Annual Financial Report FY 2007 34 Revenue Bonds Payable 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. University Facilities 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. Annual debt service requirements to maturity for Student Housing, Parking and Teaching and Administrative bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) Total Bonds Payable 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $4,230,000 4,400,000 4,585,000 4,765,000 4,945,000 27,620,000 30,550,000 35,740,000 30,515,000 30,495,000 177,845,000 3,945,167 $181,790,167 Bonds Payable Interest $7,823,319 7,686,589 7,537,474 7,392,476 7,250,866 33,652,454 27,594,022 19,624,125 11,123,731 3,872,276 133,557,332 $133,557,332 Total $12,053,319 12,086,589 12,122,474 12,157,476 12,195,866 61,272,454 58,144,022 55,364,125 41,638,731 34,367,276 311,402,332 3,945,167 $315,347,499 Kennesaw State University Annual Financial Report FY 2007 35 MACON STATE COLLEGE Financial Report For the Year Ended June 30, 2007 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 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 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 .............................................. 28 Note 16. Component Units ......................................................................................................... 29 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, as well as new baccalaureate degrees in Nursing, History and English which were approved during 2007. 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 its mission changed in 1996. Enrollment for Fall 2006 continued to increase with a total enrollment of 6,244 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. Students Students Faculty (Headcount) (FTE) FY2007 164 FY2006 160 FY2005 139 6,244 6,150 5,733 4,744 4,624 4,249 Overview of the Financial Statements and Financial Analysis Macon State College is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $9,386,208 47,782,073 348,637 57,516,918 June 30, 2006 $7,345,393 47,989,639 1,095,267 56,430,299 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,284,888 644,345 4,929,233 3,653,894 529,672 4,183,566 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Capital P roject s Unrest rict ed Total Ne t As s e ts 47,782,073 1,360,993 53,431 3,391,188 $52,587,685 47,989,639 715,620 53,431 3,488,043 $52,246,733 The total assets of the institution increased by $1,086,619 and the total liabilities for the year increased by $745,667. This yields an increase in total net assets of $340,952. Macon State College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $14,362,421 44,007,999 (29,645,578) 29,575,628 (69,950) 410,902 340,952 52,246,733 52,246,733 $52,587,685 $12,893,780 42,086,506 (29,192,726) 27,766,594 (1,426,132) 2,586,738 1,160,606 51,086,127 51,086,127 $52,246,733 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $9,440,469 667,623 439,702 3,535,184 279,443 14,362,421 19,801,038 8,950,091 329,975 500,024 (5,500) 29,575,628 260,902 150,000 410,902 $44,348,951 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $18,685,342 252,093 2,309,554 2,931,665 5,391,739 4,208,917 6,107,257 3,151,599 969,833 44,007,999 $44,007,999 June 30, 2006 $8,075,086 630,198 495,724 3,517,405 175,367 12,893,780 18,543,610 8,113,123 964,234 171,873 (26,246) 27,766,594 1,478,488 1,108,250 2,586,738 $43,247,112 June 30, 2006 $17,224,340 338,869 2,679,031 2,730,351 4,728,783 5,540,944 4,743,778 3,159,880 940,530 42,086,506 $42,086,506 Macon State College Annual Financial Report FY 2007 4 Total revenue increased by $1,101,839 in fiscal year 2007. Operating revenues increased by $1,468,641 which was due in large part to the 17% increase in tuition and fee revenue. Nonoperating revenues increased by $1,809,034 for the year primarily due to an increase of $1,257,428 in State Appropriations. Total expenses increased by $1,921,493, or approximately 4.5%. The increase was due to the hiring of new faculty in the Instruction function to meet the demands of the enrollment increase. The compensation and employee benefits category increased by $2,179,219 due to increased cost of health insurance for employees of the institution as well as new hires within the Instruction function. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($27,680,188) 29,209,544 (609,361) 1,237,182 2,157,177 4,918,280 $7,075,457 June 30, 2006 ($24,900,918) 27,278,410 (1,831,688) 179,411 725,215 4,193,065 $4,918,280 Macon State College Annual Financial Report FY 2007 5 Capital Assets Macon State College completed a renovation to the Nursing Annex Building in fiscal year 2007. This renovation converted the building to the home of the new Education Division. This project was funded by a combination of Major Repair and Renovation funds and internal revenue. 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 Liabilities of $1,132,911 of which $488,566 was reflected as current liability at June 30, 2007. 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 2007. The Macon State College Foundation, Inc. had endowment and other investments of $7,673,396 as of June 30, 2007. 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 2007 6 Statement of Net Assets MACON S TATE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Un i t AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Sh o rt -t erm In v est m ent s Acco un t s Receiv able, n et (no t e 3 ) Receiv ables - Federal Finan cial Assist an ce Receiv ables - Ot h er P ledges Receivable Inventories (note 4) P repaid it em s T ot al Current Asset s Macon State C olle ge Macon State C olle ge Fou n dati o n , In c. $7,075,457 105,116 69,586 1,547,934 441,513 146,602 9,386,208 $252,334 233,117 10,000 495,451 Noncurre nt Asse ts In v est m ent s (in cludin g Real Est at e) P ledges Receivable Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Acco un t s P ay able Salaries P ay able Con t ract s P ayable Deferred Revenue (not e 7) Ot h er Liabilit ies Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for No nex pen dable Ex pen dable Capital P rojects Unrest rict ed TO TAL NET AS S ETS 348,637 47,782,073 48,130,710 57,516,918 257,115 94,512 166,356 2,480,337 93,358 704,644 488,566 4,284,888 644,345 644,345 4,929,233 47,782,073 1,360,993 53,431 3,391,188 $52,587,685 7,673,396 317,550 7,990,946 8,486,397 78,667 78,667 0 78,667 7,066,742 775,224 565,764 $8,407,730 Macon State College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets MACON S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Macon State College C om pone nt Unit Macon State C olle ge Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Income (per spending plan) Grant s and Cont ract s Federal St at e Sales and Services Rent s and Royalt ies Auxiliary Ent erprises Bookst ore 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Dep r eciat io n P aym ent s t o or on behalf of Macon St at e College T ot al Operat ing Expenses Operat ing Income (loss) $12,845,219 (3,404,750) 92,486 575,137 439,702 15,000 3,501,465 33,719 264,443 14,362,421 12,955,126 7,961,011 5,605,271 170,470 298,962 6,107,257 1,207,485 8,308,232 1,394,185 44,007,999 (29,645,578) $0 390,212 256,772 2,140 649,124 99,225 512,879 612,104 37,020 Macon State College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued MACON S TATE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Macon State C olle ge C om pone nt Unit Macon State C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 19,801,038 8,614,255 55,516 280,320 329,975 500,024 (5,500) 29,575,628 (69,950) 260,902 150,000 410,902 340,952 52,246,733 52,246,733 $52,587,685 754,079 754,079 791,099 84,875 84,875 875,974 7,531,756 7,531,756 $8,407,730 Macon State College Annual Financial Report FY 2007 9 Statement of Cash Flows MACON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 Auxiliary Ent erprise Charges: Bookst ore Food Services 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 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, 2007 $9,530,928 950,354 439,702 (15,831,858) (20,742,424) (6,107,257) 4,356 2,952,625 (979) 689,934 434,431 (27,680,188) 19,801,038 128,441 9,280,065 29,209,544 410,902 (1,020,263) (609,361) 881,240 355,942 1,237,182 2,157,177 4,918,280 $7,075,457 Macon State College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued MACON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences Net Cash P rovided (used) by Operat ing Act ivit ies ** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS Change in fair value of invest ment s recognized as a component of int erest income June 30, 2007 ($29,645,578) 1,394,185 142,166 20,397 (43,048) (40,280) 299,067 47,609 145,294 ($27,680,188) $144,082 Macon State College Annual Financial Report FY 2007 11 MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 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 FY 2007, Macon State College is reporting the activity for the Macon State College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Macon State College Annual Financial Report FY 2007 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 Macon State College Annual Financial Report FY 2007 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 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. 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/or 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 College System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Macon State College. Macon State College Annual Financial Report FY 2007 14 Deposits Macon State College did not hold any student deposits at June 30, 2007. Deferred Revenues Deferred revenues include amounts received for tuition and fees prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences 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 $987,618 as of 7-1-2006. For FY2007, $622,234 was earned in compensated absences and employees were paid $476,941, for a net increase of $145,293. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,132,911. 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 - 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, 2007 Inst it ut ional Loans T erm Endowm ent s T ot al Rest rict ed Expendable $132,855 1,228,138 $1,360,993 Macon State College Annual Financial Report FY 2007 15 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, 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 Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $432,698 934,880 2,023,610 $3,391,188 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Macon State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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. Macon State College Annual Financial Report FY 2007 16 Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. 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. Macon State College Annual Financial Report FY 2007 17 At June 30, 2007, the carrying value of deposits was $6,254,149 and the bank balance was $6,994,615. Of the College's deposits, $6,694,615 was uninsured. Of these uninsured deposits, $5,913,375 was collateralized with securities held by the financial institution's trust department or agent in the College's name and $781,240 was uncollateralized. 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 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Treasuries Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years $348,637 $348,637 $168,960 $168,960 $50,188 $50,188 $129,489 $129,489 Investment Pools Board of Regents Short-Term Fund Total Investments 922,422 $1,271,059 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/searchRpts.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 2.24 years. Of the College's total investment of $922,422 in the Short Term Fund, $918,917 is invested in debt securities. Custodial Credit Risk Macon State College Annual Financial Report FY 2007 18 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, 2007, $348,637 of the College's applicable investments were uninsured and held by the investment's counterparty in the College's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation. 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, 2007: June 30, 2007 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 $385,619 223,480 69,586 1,069,976 1,748,661 131,141 $1,617,520 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore T otal June 30, 2007 $441,513 $441,513 Note 5. Notes/Loans Receivable Macon State College did not have any notes/loans receivable at June 30, 2007. Macon State College Annual Financial Report FY 2007 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $2,518,062 906,304 3,424,366 Addi ti o n s $0 245,334 245,334 Re ductions $0 0 Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed 52,689,496 2,625,940 2,141,899 3,506,972 60,964,307 464,383 120,974 180,252 175,676 941,285 293,426 3,189 296,615 Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion 10,967,366 756,674 1,617,475 3,057,519 16,399,034 1,052,023 81,296 135,296 125,570 1,394,185 293,426 3,189 296,615 T ot al Capit al Asset s, Being Depreciat ed, Net 44,565,273 (452,900) 0 Capit al Asset s, net $47,989,639 ($207,566) $0 En di n g B al a n ce 6 /3 0 /2 0 0 7 $2,518,062 1,151,638 3,669,700 53,153,879 2,746,914 2,028,725 3,679,459 61,608,977 12,019,389 837,970 1,459,345 3,179,900 17,496,604 44,112,373 $47,782,073 Macon State College Annual Financial Report FY 2007 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $2,318,721 161,616 $2,480,337 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $987,618 Additions $622,234 Reductions Ending Balance June 30, 2007 $476,941 $1,132,911 Current Portion $488,566 Total Long Term Obligations $987,618 $622,234 $476,941 $1,132,911 $488,566 Note 9. Significant Commitments Macon State College did not have any unrecorded significant commitments as of June 30, 2007. Note 10. Lease Obligations CAPITAL LEASES Macon State College had no capital leases or installment purchase agreements for the acquisition of real property or equipment during fiscal year 2007. OPERATING LEASES Macon State College's noncancelable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2009. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Future commitments for noncancelable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Macon State College Annual Financial Report FY 2007 21 Year Ending June 30: 2008 2009 T ot al m inim um lease paym ent s Year 1 2 Real P roperty and Equipm ent Operat ing Leases $28,418 13,000 $41,418 Macon State College's fiscal year 2007 expense for rental of real property and equipment under operating leases was $81,605. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,075,983 $1,020,941 $ 945,645 Macon State College Annual Financial Report FY 2007 22 Employees' Retirement System of Georgia Plan Description Macon State College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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, 2007, for employees covered by ERS was $167,009. The College's total payroll for all employees was $20,916,137. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Macon State College Annual Financial Report FY 2007 23 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $19,891, of which $17,386 was made by the College and $2,505 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, 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Macon State College and the covered employees made the required contributions of $622,156 (9.66% or 8.13%) and $347,105 (5%), respectively. 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 2007 24 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 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 2007 amounted to $59,337 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 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 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 2007 25 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, 2007. 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 2007 26 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, 2007, there were 91 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Macon State College recognized as incurred $457,228 of expenditures, which was net of $190,976 of participant contributions. Macon State College Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 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 Instruction Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 12,910,634 998,890 3,210,164 282 193,241 $ 13,800 54,558 14,867 1,325 $ 3,000 1,523,899 396,116 20,295 $ 27,692 1,674,146 465,435 34,140 $0 2,651,397 1,193,877 170,188 38,087 83,635 1,243,855 44,641 3,728 163,815 42,667 316,341 7,236 23,541 700,599 6,112 55,434 1,394,371 (111,615) $ 18,685,342 $ 252,093 $ 2,309,554 $ 2,931,665 $ 5,391,739 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses T ot al Expenses $0 734,256 251,314 4,004 994,255 1,754,458 470,630 $0 6,107,257 $0 323,865 73,498 7,870 4,225 2,734,793 7,348 $0 969,833 $ 12,955,126 7,961,011 5,605,271 170,470 298,962 6,107,257 1,207,485 8,308,232 1,394,185 $ 4,208,917 $ 6,107,257 $ 3,151,599 $ 969,833 $ 44,007,999 Macon State College Annual Financial Report FY 2007 28 Note 16. Component Units Component Unit Notes 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, 2007, the Foundation distributed $512,879 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development and Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206 or from the College's website at http://www.maconstate.edu/foundation/. Investments for Component Units: Macon State College Foundation, Inc. holds endowment and other investments in the amount of $7,673,396. The $7,066,742 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 intact. Investments are comprised of the following amounts at June 30, 2007: Co st Fair Value Sunt rust Diversified Fund $7,016,676 $7,673,396 T ot al Invest m ent s $7,016,676 $7,673,396 Macon State College Annual Financial Report FY 2007 29 MEDICAL COLLEGE OF GEORGIA Financial Report For the Year Ended June 30, 2007 Medical College of Georgia Augusta, Georgia Daniel W. Rahn, M.D. President Peter Munger, Interim Vice President for Finance/CFO MEDICAL COLLEGE OF GEORGIA ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets..................................................... 11 Statement of Cash Flows .............................................................................................................. 15 Note 1. Summary of Significant Accounting Policies ................................................................ 17 Note 2. Deposits and Investments................................................................................................ 23 Note 3. Accounts Receivable...................................................................................................... 26 Note 4. Inventories...................................................................................................................... 26 Note 5. Notes/Loans Receivable................................................................................................. 26 Note 6. Capital Assets................................................................................................................. 27 Note 7. Deferred Revenue........................................................................................................... 28 Note 8. Long-Term Liabilities .................................................................................................... 28 Note 9. Significant Commitments............................................................................................... 28 Note 10. Lease Obligations......................................................................................................... 28 Note 11. Retirement Plans .......................................................................................................... 31 Note 12. Risk Management......................................................................................................... 36 Note 13. Contingencies................................................................................................................ 37 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 37 Note 15. Natural Classifications with Functional Classifications .............................................. 38 Note 16. Component Units ......................................................................................................... 39 MEDICAL COLLEGE OF GEORGIA Management's Discussion and Analysis Introduction Medical College of Georgia (MCG), the oldest school of medicine in Georgia, was incorporated in 1828 as the Medical Academy of Georgia and is one of the 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. Students Students Faculty (Headcount) (FTE) FY2007 638 FY2006 612 FY2005 590 2,696 2,585 2,556 2,642 2,522 2,475 Overview of the Financial Statements and Financial Analysis Medical College of Georgia is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 Ass e ts June 30, 2007 $102,528,923 287,279,113 49,755,879 439,563,915 June 30, 2006 $89,481,806 252,298,971 45,692,755 387,473,532 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 87,504,201 41,997,809 129,502,010 73,979,852 39,890,121 113,869,973 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 As s e ts 257,535,916 1,756,794 65,285,087 387,687 (14,903,579) $310,061,905 223,465,189 1,649,072 58,886,168 437,594 (10,834,464) $273,603,559 The total assets of the institution increased by $52,090,383. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $34,980,142 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 $15,632,037. The primary cause for the increase was in current liabilities, primarily $11,129,359 in accounts payable. The combination of the increase in total assets of $52,090,383 and the increase in total liabilities of $15,632,037 yields an increase in total net assets of $36,458,346. The increase in total net assets is primarily in the category of invested in capital assets, net of debt, in the amount of $34,070,727. Medical College of Georgia Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $391,604,839 548,851,488 (157,246,649) 157,685,908 439,259 36,019,087 36,458,346 273,603,559 0 273,603,559 $310,061,905 $372,787,990 513,463,625 (140,675,635) 139,292,218 (1,383,417) 4,545,356 3,161,939 270,441,620 0 270,441,620 $273,603,559 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $21,614,072 354,482,232 7,934,939 6,670,880 902,716 391,604,839 141,914,536 9,937,205 3,494,387 4,660,985 (284,669) 159,722,444 35,231,667 787,420 36,019,087 $587,346,370 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises P atient Care (MCG only) T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $125,064,499 38,756,421 97,227,853 17,126,406 2,116,743 45,828,736 17,721,499 1,247,631 7,045,444 196,716,256 548,851,488 2,036,536 $550,888,024 June 30, 2006 $18,542,838 337,007,319 7,897,215 6,697,596 2,643,022 372,787,990 126,086,056 10,392,399 988,068 3,887,445 (1,043,140) 140,310,828 2,496,616 2,048,740 4,545,356 $517,644,174 June 30, 2006 $99,355,863 47,496,384 91,190,448 15,779,783 2,196,681 38,478,262 29,329,981 544,451 7,241,752 181,850,020 513,463,625 1,018,610 $514,482,235 Medical College of Georgia Annual Financial Report FY 2007 4 Operating revenues increased by $18,816,849 in fiscal 2007. Grants and contracts increased in the amount of $17,474,913. This is primarily a result of increases in health services contracts from the State of Georgia which are administered by the College. Although Tuition & Fees included a 9% increase, revenues decreased in Auxiliary and Other categories. Nonoperating revenues and expenses increased by $18,393,690 for the year primarily due to an increase of $15,828,480 in State Appropriations. The compensation and employee benefits category increased by $24,803,110 and primarily affected the Instruction, Institutional Support and Public Service categories. The increase reflects the addition of 19 faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $2,318,539 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. 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 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($121,104,566) 153,380,747 (17,596,765) 348,810 15,028,226 37,217,188 $52,245,414 June 30, 2006 ($132,801,159) 134,693,321 (15,035,540) 1,902,617 (11,240,761) 48,457,949 $37,217,188 Medical College of Georgia Annual Financial Report FY 2007 5 Capital Assets The College had capital asset additions for buildings and building improvements in fiscal year 2007. Numerous projects were completed during the fiscal year totaling $37,273,695. Medical College of Georgia also completed the Health Sciences Building in fiscal year 2007. A total of $34,699,120 for this project was funded by Georgia State Financing and Investment Commission (GSFIC). Other on-going projects funded by the GSFIC included $5,416,677. Projected funding by GSFIC for fiscal year 2008 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 $58,996,939 of which $16,999,130 was reflected as current liability at June 30, 2007. 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 FY2007. The 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. 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 2007 6 Statement of Net Assets MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Component Unit Component Unit AS S ETS 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 T otal Current Assets Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS Medical College of Georgia MCG Health, In c. Medical College of Georgia Foundation, Inc. $52,245,414 3,489,868 9,921,362 13,026,305 15,190,388 524,288 8,131,298 102,528,923 $41,448,111 30,181,019 63,354,846 78,138 193,474 7,626,746 803,299 143,685,633 $15,870,777 350,000 186,325 43,305 16,450,407 45,506,579 4,249,300 287,279,113 337,034,992 439,563,915 88,015,660 74,510,746 771,696 163,298,102 306,983,735 133,402,427 119,206 1,957,565 361,113 135,840,311 152,290,718 Medical College of Georgia Annual Financial Report FY 2007 7 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Compone nt Unit Component Unit LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Depo sit s Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Compensated Absences (current portion) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurre nt Liabilitie s Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Other Long-T erm Liabilities Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrest rict ed TO TAL NET ASSETS Medical Colle ge of Georgia MCG Health, In c. Medical College of Georgia Foundation, Inc. 42,292,589 2,677,967 960,955 22,728,853 1,526,669 1,162,150 15,836,980 318,038 87,504,201 28,581,047 13,416,762 41,997,809 129,502,010 16,200,967 4,308,583 202,511 2,324,000 17,751,953 3,058,375 11,190,803 320,674 55,357,866 8,614,579 6,974,000 15,588,579 70,946,445 257,535,916 1,756,794 65,285,087 387,687 (14,903,579) $310,061,905 62,837,792 173,199,498 $236,037,290 0 2,342,658 2,342,658 2,342,658 1,957,565 120,241,872 15,714,845 12,033,778 $149,948,060 Medical College of Georgia Annual Financial Report FY 2007 8 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Component Unit Component Unit Component Unit AS S ETS 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 T otal Current Assets Noncurrent Assets Noncurrent Cash Investments (including Real Estate) Notes Receivable, net Leases Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS Medical College of Georgia PPG Fou n dati o n Medical College of Georgia Research Institute, Inc. Medical College of Georgia De n tal Fou n dati on $19,604,686 26,708,294 $6,965,332 $90,396 326,155 320,674 2,175,624 117,863 49,253,296 558,885 17,308,336 59,874,379 6,199,020 1,280,391 85,221,011 134,474,307 3,601,054 6,701 10,573,087 16,728 16,728 10,589,815 18,952 419,416 102,303 631,067 538,707 2,789,427 3,328,134 3,959,201 Medical College of Georgia Annual Financial Report FY 2007 9 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 Component Unit Component Unit Component Unit Medical College of Georgia PPG Fou n dati o n Medical College of Georgia Research Institute, Inc. Medical College of Georgia De n tal Fou n dati on LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposit s Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Compensated Absences (current portion) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Other Long-T erm Liabilities Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrest rict ed TO TAL NET ASSETS 1,741,466 940,085 2,363,015 2,744,740 78,138 670,000 8,537,444 32,611,077 558,885 32,019,063 65,189,025 73,726,469 6,199,020 54,548,818 $60,747,838 109,909 10,000 77,659 4,615,057 581,404 3,187,418 4,812,625 3,768,822 0 4,812,625 16,728 136,025 5,624,437 $5,777,190 0 3,768,822 190,379 $190,379 Medical College of Georgia Annual Financial Report FY 2007 10 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, 2007 Compone nt Un i t Me dical College of Ge orgi a MCG Health, In c. 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 Book st 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 other Component Units Payments to or on behalf of Medical College of Georgia T otal Operating Expenses Operating Income (loss) $23,224,802 $0 (1,610,730) 46,221,385 173,374,355 134,886,492 7,934,939 393,918 847,058 1,348,191 6,338 1,406,170 634,034 2,429,089 4,431,135 687,968 340,867,183 508,798 391,604,839 345,986,286 112,725,097 176,440,789 78,033,260 94,808 2,998,296 1,517,702 9,087,057 149,862,822 18,091,657 154,528,150 42,277,612 33,225,247 729,066 4,106,398 115,842,331 16,929,890 548,851,488 (157,246,649) 367,638,694 (21,652,408) Component Unit Me dical College of Georgia Foundation, Inc. $0 4,151,505 869,252 848,880 (28,276) 1,920,004 101,792 7,863,157 477,802 225,327 120,911 207,960 7,755,156 8,787,156 (923,999) Medical College of Georgia Annual Financial Report FY 2007 11 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, 2007 C ompone nt Unit Medical College of Georgia MCG Health, Inc. NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts 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 141,914,536 15,843 9,921,362 3,494,387 4,660,985 (2,036,536) (284,669) 157,685,908 439,259 35,231,667 787,420 36,019,087 36,458,346 273,603,559 273,603,559 $310,061,905 32,272,644 1,144,056 3,767,797 8,472,852 (749,474) (9,921,362) (182,530) 34,803,983 13,151,575 0 13,151,575 222,885,715 222,885,715 $236,037,290 Component Unit Medical College of Georgia Foundation, Inc. 20,076,599 20,076,599 19,152,600 2,057,166 2,057,166 21,209,766 128,738,294 128,738,294 $149,948,060 Medical College of Georgia Annual Financial Report FY 2007 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 REVENUES C om pon e n t Un i t Me dical College of Georgia PPG Fo u n dati on Compone nt Unit Component Unit Medical College of Georgia Rese arch Institute, Inc. Me dical College of Georgia Dental Fou n da ti on Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Book st 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 other Component Units Payments to or on behalf of Medical College of Georgia T otal Operating Expenses Operating Income (loss) $0 2,170,994 88,596,411 90,767,405 10,018,388 12,290,439 1,324,192 374,460 54,221 7,556,246 690,427 4,592,488 53,938,061 90,838,922 (71,517) $0 44,246,970 9,990,955 66,336 341,634 54,645,895 3,054,176 5,735 51,160,531 54,220,442 425,453 $0 287,855 4,848,702 5,136,557 1,417,822 91,182 5,808 40,382 2,535,125 1,209,820 5,300,139 (163,582) Medical College of Georgia Annual Financial Report FY 2007 13 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, 2007 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Income Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts 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 Component Unit Me di cal College of Georgia PPG Foundation Component Unit Component Unit Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation 4,929,839 1,423,412 (1,475,325) 338 4,878,264 4,806,747 300,523 300,523 725,976 220,887 220,887 57,305 0 4,806,747 55,941,091 55,941,091 $60,747,838 0 725,976 5,051,214 5,051,214 $5,777,190 0 57,305 133,074 133,074 $190,379 Medical College of Georgia Annual Financial Report FY 2007 14 Statement of Cash Flows MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 Ot her 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 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, 2007 $22,316,110 356,762,453 7,672,424 (228,311,585) (285,255,981) (1,517,702) (844,027) 1,093,078 689,298 1,343,109 6,338 1,242,701 667,789 2,360,591 670,838 (121,104,566) 141,914,536 (981,902) 12,732,781 (284,668) 153,380,747 1,605,982 988,129 (16,662,005) (1,492,335) (2,036,536) (17,596,765) 348,810 348,810 15,028,226 37,217,188 $52,245,414 Medical College of Georgia Annual Financial Report FY 2007 15 Statement of Cash Flows, Continued MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 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 ment s recognized as a component of int erest income Gift reducing proceeds of Gift s and Grant s received for ot her t han capit al purposes Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($157,246,649) 18,091,657 2,798,261 (18,855) 336,116 249,051 12,795,147 (671,448) 2,562,154 ($121,104,566) $2,401,750 $4,312,175 ($1,040,065) ($34,413,105) Medical College of Georgia Annual Financial Report FY 2007 16 MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, 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. Medical College of Georgia Annual Financial Report FY 2007 17 See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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. Medical College of Georgia Annual Financial Report FY 2007 18 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $33,522,612 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 Medical College of Georgia Annual Financial Report FY 2007 19 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 Statements of Revenues, Expenses, and Changes in Net Assets. Medical College of Georgia had accrued liability for compensated absences in the amount of $26,691,587 as of 7-1-2006. For FY2007, $20,402,251 was earned in compensated absences and employees were paid $17,840,096, for a net increase of $2,562,155. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $29,253,742. 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. Medical College of Georgia Annual Financial Report FY 2007 20 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $52,289,436 5,263,253 1,794,428 5,937,970 $65,285,087 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 $387,687 in Restricted Net Assets Capital Projects. These funds are on deposit with GSFIC and will be used for additional expenses for the Health Sciences Building. 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, 2007 $988,130 7,582,312 119,814 (23,593,835) ($14,903,579) 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. Medical College of Georgia Annual Financial Report FY 2007 21 Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Medical College of Georgia Annual Financial Report FY 2007 22 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, 2007, the carrying value of deposits was $53,033,763 and the bank balance was $58,120,658. Of the College's deposits, $58,020,658 was uninsured. Of these uninsured deposits, $2,233,134 were collateralized with securities held by the financial institution's trust department or agent in the College's name and $55,787,524 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. 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 Medical College of Georgia Annual Financial Report FY 2007 23 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Invest ment t ype Debt Securit ies U.S. Agencies Explicit ly Guarant eed Implicit ly Guarant eed Mut ual Bond Fund Ot her Invest ment s Equit y Mut ual Funds Real Est at e Invest ment Fund Invest ment P ools Board of Regent s T ot al Ret urn Fund Office of T reasury and Fiscal Services Georgia Fund 1 T ot al Invest ment s Fair Value $531,799 10,527,307 11,398,301 $22,457,407 10,725,273 2,396,001 7,694,764 1,437,409 $44,710,854 Inves tment M aturity Les s Than 1 Year 1-5 Years $182,781 3,923,422 $4,106,203 $349,018 6,603,885 11,398,301 $18,351,204 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 days. Medical College of Georgia Annual Financial Report FY 2007 24 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. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the College's total investment of $7,694,764 in the Total Return Fund, $2,184,543 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. 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, 2007, $11,059,106 of the College's applicable investments were uninsured and held by the investment's counterparty's trust department or agent 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. All debt issues must be eligible investments under Georgia Code 50-17-63. Portfolios of debt security funds must also meet the eligible investment criteria under the same code section. The investments subject to credit quality risk are reflected below: Fair Value Unrated Related Debt Inves tments U. S. Agencies Mut ual Bond Fund $10,527,307 11,398,301 $10,527,307 11,398,301 $21,925,608 $21,925,608 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 investments are in the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These investments are 14.97% and 7.85% respectively of the College's total investments. Medical College of Georgia Annual Financial Report FY 2007 25 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance 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 $449,864 112,405 3,489,868 9,921,362 15,190,388 12,596,213 41,760,100 132,177 $41,627,923 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore Ot h er T otal June 30, 2007 $397,662 126,626 $524,288 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 no provision had been made for uncollectible loans. Medical College of Georgia Annual Financial Report FY 2007 26 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildings and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $9,206,282 8,079,070 17,285,352 282,144,804 2,339,679 59,466,496 31,682,359 15,660,397 391,293,735 103,712,947 1,517,008 38,204,530 2,440,903 10,404,728 156,280,116 235,013,619 $252,298,971 Addi ti o n s $0 7,587,784 7,587,784 Re ductions $153,026 4,177,337 4,330,363 En di n g B al a n ce 6 /3 0 /2 0 0 7 $9,053,256 11,489,517 20,542,773 38,147,225 8,252,004 2,401,750 1,224,506 50,025,485 10,737 4,050,368 196,180 77,047 4,334,332 320,281,292 2,339,679 63,668,132 33,887,929 16,807,856 436,984,888 7,801,412 88,748 7,259,917 2,059,159 882,421 18,091,657 31,933,828 $39,521,612 3,855,830 190,348 77,047 4,123,225 211,107 $4,541,470 111,514,359 1,605,756 41,608,617 4,309,714 11,210,102 170,248,548 266,736,340 $287,279,113 Medical College of Georgia Annual Financial Report FY 2007 27 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Research Ot her Deferred Revenue T otals June 30, 2007 $5,395,894 12,818,737 4,514,222 $22,728,853 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $28,833,782 Additions $2,401,750 Reductions Ending Balance June 30, 2007 $1,492,335 $29,743,197 Current Portion $1,162,150 Other Liabilities Compensated Absences Total 26,691,587 26,691,587 20,402,251 20,402,251 17,840,096 17,840,096 29,253,742 29,253,742 15,836,980 15,836,980 Total Long Term Obligations $55,525,369 $22,804,001 $19,332,431 $58,996,939 $16,999,130 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $6,681,065 as of June 30, 2007. 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 2008 and 2036. Expenditures for fiscal year 2007 were $3,528,871 of which $2,036,536 represented interest. Total principal paid on capital leases was $1,492,335 for the fiscal year ended June 30, 2007. Interest rates range from 1.64 percent to 34.93 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Medical College of Georgia Annual Financial Report FY 2007 28 Buildings Equipment Total Assets Held Under Capital Lease $26,212,431 3,365,785 $29,578,216 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 had one capital lease with a related entity in the current fiscal year. In November 2004, Medical College of Georgia entered into a capital lease of $27,659,678 at 6.85 percent with the MCG-PPG Cancer Research Center, LLC, a discretely presented component unit, whereby the College leases the third, fourth, and fifth floors of the Cancer Research Center for a thirty-year period that began January, 2006 and expires December, 2035. At the end of the lease, title to the building is transferred to the College. The outstanding liability at June 30, 2007, on this capital lease is $27,218,583. Medical College of Georgia also has various capital leases for equipment with an outstanding balance at June 30, 2007 in the amount of $2,524,614. OPERATING LEASES Medical College of Georgia's noncancelable operating leases having remaining terms of two years 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. Medical College of Georgia Annual Financial Report FY 2007 29 Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancelable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $3,154,260 2,800,017 2,756,577 2,745,571 2,276,547 10,878,120 10,878,120 10,878,120 10,878,120 7,614,684 64,860,136 35,116,939 $29,743,197 $4,266 3,812 $8,078 Medical College of Georgia's FY2007 expense for rental of real property under operating leases was $9,336. Medical College of Georgia Annual Financial Report FY 2007 30 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Medical College of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Medical College of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Medical College of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $13,884,229 $13,331,269 $12,643,828 Employees' Retirement System of Georgia Plan Description Medical College of Georgia participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 Medical College of Georgia Annual Financial Report FY 2007 31 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, 2007, for employees covered by ERS was $461,726. The College's total payroll for all employees was $289,165,886. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $55,129, of which $48,203 was made by the College and $6,926 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, 2007 financial report, which may be obtained through ERS. Medical College of Georgia Annual Financial Report FY 2007 32 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Medical College of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Medical College of Georgia and the covered employees made the required contributions of $7,547,556 (9.66% or 8.13%) and $4,270,202 (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 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 Medical College of Georgia Annual Financial Report FY 2007 33 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 2007 amounted to $368,213 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 2007 34 Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for fiscal year 2007 was as follows: Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contribution Total $12,936,540 (675,363) 1,102,314 MCG $7,014,564 (591,925) 971,264 Other Units $5,921,976 (83,438) 131,050 Annual Pension Cost $13,363,491 $7,393,903 $5,969,588 Contribution Made 12,936,540 7,014,564 5,921,976 Increase (Decrease) in Net Pension Obligation Net Pension Obligation Beginning of Year $426,951 (9,004,838) $379,339 (7,892,336) $47,612 (1,112,502) Net Pension Obligation End of Year $(8,577,887) $(7,512,997) $(1,064,890) Three-Year Trend Information FY 2007 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year Total $13,363,491 96.81% $(8,577,887) MCG $7,393,903 94.87% $(7,512,997) Other Units $5,969,588 99.20% $(1,064,890) FY 2006 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Total $12,874,094 100.24% $(9,004,838) MCG $7,095,216 95.78% $(7,892,336) Other Units $5,778,878 105.72% $(1,112,502) FY 2005 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Total $12,948,607 97.24% $(8,973,853) MCG $7,121,685 95.42% $(8,192,003) Other Units $5,826,922 99.47% $(781,850) Medical College of Georgia Annual Financial Report FY 2007 35 The Annual required contribution for the current year was determined as part of the July 13, 2006, actuarial valuation using the Entry Age Actuarial cost method. The remaining amortization period is 12 years utilizing the entry age, 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 3.50%, and (c) annual cost of living increase of 3.00%. 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 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 2007 36 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, 2007. 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, 2007, there were 2,072 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Medical College of Georgia recognized as incurred $6,758,927 of expenditures, which was net of $2,468,787 of participant contributions. Medical College of Georgia Annual Financial Report FY 2007 37 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 57,771,231 27,090,432 20,357,406 19,662 1,004,823 203,396 632,957 12,118,842 5,865,750 $ 9,585,105 12,158,841 4,630,575 228 445,075 4,458 21,087 11,010,777 900,275 $ 40,177,432 32,034,867 13,834,870 232 746,268 62,217 216,249 9,014,558 1,141,160 $ 2,669,793 7,911,801 4,522,179 995 156,830 107,306 528,948 1,228,554 $0 1,255,990 342,504 862 47,692 14,995 409,663 45,037 $ 94,498 18,364,477 13,268,889 72,220 252,638 192,764 5,969,951 7,613,299 $ 125,064,499 $ 38,756,421 $ 97,227,853 $ 17,126,406 $ 2,116,743 $ 45,828,736 Plant Operations & Maintenance Functional Classification FY2007 MCG only Scholarships Auxiliary Patient & Fellowships Enterprises Care T ot al Expenses $0 4,347,098 1,389,157 (470,947) 19,145 7,476,034 3,390,881 1,570,131 $0 1,247,631 $ 65,961 2,173,985 779,982 471,556 15,327 $ 2,361,077 71,103,298 18,907,698 310,498 65,889 3,745,293 (272,549) 359,776 103,673,909 $ 112,725,097 176,440,789 78,033,260 94,808 2,998,296 1,517,702 9,087,057 149,862,822 18,091,657 $ 17,721,499 $ 1,247,631 $ 7,045,444 $ 196,716,256 $ 548,851,488 Medical College of Georgia Annual Financial Report FY 2007 38 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, 2007, $42,721,729 of MCG Health, Inc.'s deposits were uninsured, uncollateralized, or collateralized by securities held by the pledging institution or by its trust department or agent in other than the Company's name. At June 30, 2007, 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 with 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 2007 39 A summary of investments follows: Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) Other Investments Equity Securities - Domestic Equity Securities - International Joint Venture Fair Value Less Than 1 Year $21,319,958 372,968 24,815,383 25,493,459 19,360,524 $91,362,292 25,103,846 762,537 968,004 $118,196,679 1,940,555 2,374,081 $4,314,636 Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $21,319,958 18,902,215 22,980,283 7,173,281 $70,375,737 366,067 139,095 2,865,087 $3,370,249 372,968 3,606,546 9,322,156 $13,301,670 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, 2007, 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 or Moody's. Medical College of Georgia Annual Financial Report FY 2007 40 The investments subject to credit quality risk at June 30, 2007 are rated as follows: Fair Value Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) $24,815,383 25,493,459 19,360,524 AAA $24,815,383 1,936,715 19,261,595 AA A 10,144,562 98,929 12,915,012 Unrated 497,170 $69,669,366 $46,013,693 $10,243,491 $12,915,012 $497,170 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. Except for U.S. Government and agency obligations, each fixed income investment manager's portfolio should contain no more than 5% of any single issue, at cost. Individual U.S. Treasury securities may represent up to 30% of the total investment portfolio, while the total allocation of U.S. Treasury notes and bonds may represent up to 100% of the Company's aggregate bond position. As of June 30, 2007, the following MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance: Federal National Mortgage Association 8% Federal Home Loan Mortgage 7% Federal Home Loan Bank 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 Company does not have a policy for managing exposure to foreign currency risk. MCG Health, Inc. holds investments totaling $762,537, or 0.6% 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 2007 41 Capital Assets for Component Units: MCG Health, Inc.'s capital asset activity for the year ending June 30, 2007 was as follows: 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 Capital Leases Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $4,744,278 7,538,283 12,282,561 Additions $2,394,276 15,710,806 18,105,082 Reductions $0 12,556,448 12,556,448 Ending Balance 6/30/2007 $7,138,554 10,692,641 17,831,195 3,637,147 16,085,995 117,932,694 13,741,700 151,397,536 758,787 5,090,969 11,437,985 4,188,664 21,476,405 459,812 29,355 5,280,593 5,769,760 3,936,122 21,147,609 124,090,086 17,930,364 167,104,181 197,822 4,892,687 90,494,736 2,976,519 98,561,764 52,835,772 $65,118,333 195,530 2,862,528 10,818,160 3,053,672 16,929,890 4,546,515 $22,651,597 2,348 5,064,676 5,067,024 702,736 $13,259,184 393,352 7,752,867 96,248,220 6,030,191 110,424,630 56,679,551 $74,510,746 Long-term Liabilities for Component Units: MCG Health, Inc. is the lessee of certain equipment under noncancelable leases expiring in various years through 2012. Interest rates range from 3.35% to 6.98%. Other Long-Term Liabilities represents 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, 2007 are shown below: Compensated Absences Capital Lease Obligations Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2006 $9,731,260 8,632,486 8,555,000 $26,918,746 Additions $16,373,352 5,823,145 1,065,111 $23,261,608 Reductions $14,913,809 2,782,677 322,111 $18,018,597 Ending Balance June 30, 2007 $11,190,803 11,672,954 9,298,000 $32,161,757 Amounts due within One Year $11,190,803 3,058,375 2,324,000 $16,573,178 Medical College of Georgia Annual Financial Report FY 2007 42 Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $3,625,829 3,510,877 3,179,482 1,787,403 880,491 12,984,082 1,311,128 $11,672,954 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 on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Under this basis, revenue and the related assets are recognized when collected rather than when earned and expenses are generally recognized when paid rather than when incurred. Consequently, contributions receivable from donors, investment income receivables, accounts payable to vendors and accrued expenses are not included in the consolidated financial statements. The modified cash basis 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, 2007, the Foundation distributed $7.8 million to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 919 15th Street, FI-1036, Augusta, GA 30912. Medical College of Georgia Annual Financial Report FY 2007 43 Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Cash held by invest m ent organizat ion Cert ificat es of Deposit Fixed Income Dom est ic Equit y Securit ies Int ernat ional Equit y Securit ies Real Est at e Alt ernat ive St rat egies T ot al Invest m ent s Co st $1,203,990 350,000 19,376,797 40,629,438 15,472,255 6,020,425 18,539,210 $101,592,115 Fair Value $1,203,990 350,000 18,832,585 54,534,342 24,717,794 6,598,729 27,514,987 $133,752,427 Capital Assets for Component Units: Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2007: June 30, 2007 Capit al Asset s not being Depreciat ed: Land and ot her Asset s T ot al Capit al Asset s not being Depreciat ed Capit al Asset s being Depreciat ed: Buildings and Im provem ent s Machinery and Equipm ent T ot al Capit al Asset s being Depreciat ed Less T ot al Accum ulat ed Depreciat ion T ot al Capit al Asset s being Depreciat ed, Net Capit al Asset s, Net $1,170,420 1,170,420 2,636,908 360,234 2,997,142 2,209,997 787,145 $1,957,565 Long-term Liabilities for Component Units: At June 30, 2007, Medical College of Georgia Foundation's long-term liabilities consisted of a $2,342,658 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 Medical College of Georgia Annual Financial Report FY 2007 44 rental properties. PPG Alternative Collections, LLC is a limited liability company formed in 2003 by PPG to bill and collect for anesthesia services provided to patients. Georgia Esoteric and Molecular Labs, LLC was formed in 2004 by PPG to operate a specialized pathology laboratory with genetic or molecular testing capabilities. MCG-PPG Cancer Research Center, LLC was formed in 2004 by PPG to construct, own and operate a portion of a building to house a cancer research center on the campus of MCG. PPG is the sole partner and has sole voting control of each LLC. Because 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, 2007, the PPG distributed $53.9 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 classified as current. Investment income or loss (including realized gains and losses, interest and dividends) is included in the nonoperating revenue section of the accompanying Statement of Revenues, Expenses and Changes in Net Assets. Medical College of Georgia Annual Financial Report FY 2007 45 Investments are comprised of the following amounts at June 30, 2007: Government and Agency Securities Corporate Bonds Mortgage Backed Securities Equity Securities Mutual Funds Joint Ventures/Partnerships Total Investments Cost $8,344,708 7,838,567 4,805,874 9,900,549 6,992,651 585,000 $38,467,349 Fair Value $8,188,780 7,647,138 4,765,934 14,853,755 7,976,023 585,000 $44,016,630 Capital Assets for Component Units: PPG held the following Capital Assets as of June 30, 2007: June 30, 2007 Capit al Asset s not being Depreciat ed: Land and ot her Asset s T ot al Capit al Asset s not being Depreciat ed Capit al Asset s being Depreciat ed: Buildings and Im provem ent s Machinery and Equipm ent T ot al Capit al Asset s being Depreciat ed Less T ot al Accum ulat ed Depreciat ion T ot al Capit al Asset s being Depreciat ed, Net Capit al Asset s, Net $3,198,307 3,198,307 2,324,603 6,015,472 8,340,075 5,339,362 3,000,713 $6,199,020 Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Notes and Loans Payable Other Long Term Liabilities Total Long Term Liabilities $33,349,307 505,990 $33,855,297 $0 52,895 $52,895 $660,244 $660,244 $32,689,063 558,885 $33,247,948 $670,000 $670,000 Medical College of Georgia Annual Financial Report FY 2007 46 Notes and Loans 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. The outstanding principal balance of the loan payable as of June 30, 2007 was $32,220,000. The loan is secured by certain personal property constituting a portion of the building recorded as Leases Receivable and Deferred Revenue in the Statement of Net Assets. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Notes and Loans Payable Principal Interest Total $670,000 685,000 705,000 725,000 745,000 4,095,000 4,920,000 6,160,000 7,825,000 5,690,000 32,220,000 469,063 $32,689,063 $1,400,184 1,384,150 1,365,798 1,344,953 1,321,829 6,187,715 5,284,473 4,023,968 2,356,725 421,511 25,091,306 $25,091,306 $2,070,184 2,069,150 2,070,798 2,069,953 2,066,829 10,282,715 10,204,473 10,183,968 10,181,725 6,111,511 57,311,306 469,063 $57,780,369 PPG administers a deferred compensation plan for various current and former MCG faculty members. Deferred Compensation is reported in Other Long Term Liabilities in the Statement of Net Assets and represents the accounts held on behalf of these members in the amount of $558,885 at June 30, 2007. 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 the special Medical College of Georgia Annual Financial Report FY 2007 47 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 30, 2007, the Institute sub-contracted approximately $51.2 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, 2007, $7,515,374 of the Institute's bank balance was exposed to custodial credit risk. Of that amount, $200,000 was insured by Federal depository insurance and $7,315,374 was uninsured and uncollateralized. The Institute had no investments as of June 30, 2007. Capital Assets for Component Units: The Institute's Capital Asset activity for the year ending June 30, 2007 was as follows: Capit al Asset s, Being Depreciat ed: E quip m en t T ot al Asset s Being Depreciat ed Beginning Balance s 7 /1 /2 0 0 6 $28,676 28,676 Addi ti o n s $0 0 Re du ction s $0 0 En di n g B al a n ce 6 /3 0 /2 0 0 7 $28,676 28,676 Less: Accumulat ed Depreciat ion E quip m en t T ot al Accumulat ed Depreciat ion 6,213 6,213 5,735 5,735 11,948 0 11,948 T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net 22,463 $22,463 (5,735) ($5,735) 0 16,728 $0 $16,728 Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of Medical College of Georgia (College). The 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 Medical College of Georgia Annual Financial Report FY 2007 48 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 is used in direct support of Medical College of Georgia. Because of this, the Foundation is considered to be a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is from March 1, 2006 through February 28, 2007. 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, 2007, 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: Investments are stated at fair value and are comprised of the following amounts at February 28, 2007: Co st Fair Value Unit Invest m ent T rust Annuit ies Closed End Funds Ot her Invest m ent s Governm ent Bonds Dom est ic Equit ies $50,522 200,000 100,000 220,000 57,030 1,928,982 $54,747 254,541 100,050 215,260 52,125 2,112,704 T ot al Invest m ent s $2,556,534 $2,789,427 Medical College of Georgia Annual Financial Report FY 2007 49 MIDDLE GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2007 Middle Georgia College Cochran, Georgia Richard J. Federinko President Lynn E. Hobbs Vice President for Fiscal Affairs MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2007 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 .......................................................................................................... 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 MIDDLE GEORGIA COLLEGE Management's Discussion and Analysis Introduction Middle Georgia College is one of the 35 institutions of higher education of 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. Its 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. Students Students Faculty (Headcount) (FTE) FY2007 87 3,051 2,576 FY2006 81 2,677 2,274 FY2005 82 2,627 2,189 Overview of the Financial Statements and Financial Analysis Middle Georgia College is proud to present its financial statements for fiscal year 2007. 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 2007 and FY 2006. Middle Georgia College Annual Financial Report FY 2007 1 Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Middle Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. 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 Ass e ts June 30, 2007 $6,397,232 57,097,523 1,228,619 64,723,374 June 30, 2006 $4,155,773 31,646,909 1,134,857 36,937,539 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,480,639 11,106,249 13,586,888 1,840,725 334,373 2,175,098 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 46,320,667 2,608 1,331,253 3,481,958 $51,136,486 31,644,525 2,483 1,198,118 1,917,315 $34,762,441 Middle Georgia College Annual Financial Report FY 2007 2 The total assets of the institution increased by $27,785,835. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $25,450,614 in the category of Capital Assets, net. The balance of the increase is mainly in cash. The total liabilities for the year increased by $11,411,790. The combination of the increase in total assets of $27,785,835 and the increase in total liabilities of $11,411,790 yields an increase in total net assets of $16,374,045. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $14,676,142. 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $14,865,467 25,634,682 (10,769,215) 12,098,473 1,329,258 15,044,787 16,374,045 34,762,441 0 34,762,441 $51,136,486 $12,316,073 23,561,317 (11,245,244) 11,962,606 717,362 2,914,376 3,631,738 31,130,703 0 31,130,703 $34,762,441 Middle Georgia College Annual Financial Report FY 2007 3 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $2,809,253 4,483,709 40,162 7,416,887 115,456 14,865,467 12,067,735 44,815 117,417 352,857 (15,021) 12,567,803 15,042,307 2,480 15,044,787 $42,478,057 June 30, 2006 $3,107,107 3,416,373 37,040 5,635,426 120,127 12,316,073 11,527,167 239,816 46,937 161,305 (12,370) 11,962,855 2,914,376 0 2,914,376 $27,193,304 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $7,445,839 1,833,350 2,361,101 2,504,497 2,539,200 1,690,240 7,265,546 (5,091) 25,634,682 469,330 $26,104,012 June 30, 2006 $5,359,280 1,836,618 2,108,030 2,333,315 3,661,730 3,360,494 4,901,850 0 23,561,317 249 $23,561,566 Middle Georgia College Annual Financial Report FY 2007 4 Operating revenues increased by $2,549,394 in fiscal 2007. Net Tuition & Fees included a 10% decrease while Grants and Contracts increased 31%. The Auxiliary revenue increase of $1,781,461 is a result of the increase in the residential student population. Nonoperating revenues and expenses increased by $135,867 for the year due to an increase of $540,568 in State Appropriations which was offset by an increase in interest expense for the newly constructed student residential facilities. The compensation and employee benefits category increased by $707,119. The increase reflects the merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $328,882 during the past year. The increase was associated with the increased electricity costs and affected the Plant Operations and Maintenance category. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($9,005,810) 12,520,981 (1,872,735) 233,344 1,875,780 2,794,246 $4,670,026 June 30, 2006 ($10,221,274) 11,674,913 (1,780,487) 243,229 (83,619) 2,877,865 $2,794,246 Middle Georgia College Annual Financial Report FY 2007 5 Capital Assets The College had two significant capital asset additions for facilities in fiscal year 2007. Gateway dormitory was opened in August 2006. This facility is a capital lease from the MGC Real Estate Foundation, LLC. Two additional facilities which were funded from the same bond issue will be brought on line in fiscal year 2008. Middle Georgia College also completed the new Chiller Plant, the installation of improved lighting and the related poles and portions of the campus utilities loop during the year. This is part of a $16.5 million Campus Utilities Loop project funded by the Georgia State Financing and Investment Commission (GSFIC). Due to the expected final completion of the Campus Utilities Loop, projected funding by GSFIC for FY2008 will be substantially less. 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 $11,416,121 of which $309,872 was reflected as current liability at June 30, 2007. 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 FY2007. Middle Georgia College Foundation, Inc. had investments of $1.2 million and long-term debt of $26.8 million in the form of bond issues as of June 30, 2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The College has acquired the assets and operations of the Georgia Aviation & Technical College effective July 1, 2007. This merger will improve the educational opportunities that the College can provide the state of Georgia and especially the middle Georgia region. The College expects it's enrollment to continue to grow in fiscal year 2008 with the addition of the Aviation Campus in Eastman and the offering of bachelor degree programs in aviation. The Georgia Academy for Mathematics, Engineering and Sciences is also expected to grow in enrollment due to the increased dormitory space made available with the opening of Anderson Hall for fall 2007. Richard J. Federinko, President Middle Georgia College Middle Georgia College Annual Financial Report FY 2007 6 Statement of Net Assets M ID D L E G EO R G IA C O L L EG E S TA TEM EN T O F N ET A S S ET S June 30, 2007 C om pon e n t Un it A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s Sh o r t - t e r m I n v e st m e n t s A cco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial A ssist an ce Receiv ables - O t h er D ue Fro m Co m p o n en t U n it s L eases Receiv able In v en t o ries (n o t e 4 ) P rep aid it em s O t h er A sset s T o t al Curren t A sset s Non cu rre n t Asse ts N o n curren t Cash In v est m en t s (in cludin g Real E st at e) N o t es Receiv able, n et L eases Receiv able Cap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la r ie s P a y a ble Co n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) O t h er L iabilit ies D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t Co m p en sat ed A bsen ces (curren t p o rt io n ) T o t al Curren t L iabilit ies Non cu rre n t Liabilitie s D ue t o P rim ary Go v ern m en t L ease P urch ase O bligat io n s (n o n curren t ) D eferred Rev en ue (n o n curren t ) Co m p en sat ed A bsen ces (n o n curren t ) Rev en ue/M o rt gage Bo n ds P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in Cap it al A sset s, n et o f relat ed debt Rest rict ed fo r N o n ex p en dable E x p en dable U n rest rict ed TO TA L N ET A S S ETS Middle G e orgia C ollege Middle G e orgia C ollege Fo u n da ti o n , In c. $ 4 ,6 6 8 ,4 2 6 3 5 8 ,3 0 4 6 9 3 ,7 3 1 1 8 ,9 5 9 6 2 5 ,0 1 4 1 3 ,6 4 7 1 9 ,1 5 1 6 ,3 9 7 ,2 3 2 1 ,6 0 0 1 ,0 9 7 ,0 6 9 1 2 9 ,9 5 0 5 7 ,0 9 7 ,5 2 3 5 8 ,3 2 6 ,1 4 2 6 4 ,7 2 3 ,3 7 4 2 5 3 ,3 7 7 7 6 ,7 2 8 4 0 0 ,4 4 2 2 0 9 ,8 0 7 8 1 5 ,1 2 5 1 ,0 4 5 4 1 4 ,2 4 3 3 0 9 ,8 7 2 2 ,4 8 0 ,6 3 9 1 0 ,7 7 6 ,8 5 6 3 2 9 ,3 9 3 1 1 ,1 0 6 ,2 4 9 1 3 ,5 8 6 ,8 8 8 4 6 ,3 2 0 ,6 6 7 2 ,6 0 8 1 ,3 3 1 ,2 5 3 3 ,4 8 1 ,9 5 8 $ 5 1 ,1 3 6 ,4 8 6 $ 5 4 ,3 5 8 3 5 0 ,0 0 0 1 0 ,4 7 1 2 6 6 ,8 6 0 6 8 1 ,6 8 9 5 ,7 1 8 ,4 1 5 8 4 8 ,3 9 6 2 1 ,7 0 3 ,5 3 1 1 1 ,0 2 3 ,5 7 5 6 4 0 ,7 7 1 3 9 ,9 3 4 ,6 8 8 4 0 ,6 1 6 ,3 7 7 2 ,1 9 1 ,5 2 3 1 8 ,9 5 9 2 ,2 1 0 ,4 8 2 1 1 ,1 9 3 ,5 3 5 2 6 ,8 5 0 ,0 0 0 3 8 ,0 4 3 ,5 3 5 4 0 ,2 5 4 ,0 1 7 1 ,3 0 9 ,6 1 7 8 0 2 ,9 2 8 4 7 1 ,2 5 0 (2 ,2 2 1 ,4 3 5 ) $ 3 6 2 ,3 6 0 Middle Georgia College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets MIDDLE GEORGIA COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e n t Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rents and Royalties Auxiliary Ent erprises Residence Halls Bookst ore Food Services 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P aym ent s t o or on behalf of Middle Georgia College T ot al Operat ing Expenses Operat ing Income (loss) Middle Ge orgia College Middle Ge orgia C olle ge Fou n dati on , In c. $5,730,415 (2,921,162) 4,448,512 27,209 7,988 40,162 5,668 2,699,695 1,713,414 2,258,050 50,773 433,245 261,710 109,788 14,865,467 4,780,340 5,392,077 3,152,555 49,594 195,381 1,805,059 1,440,015 6,662,190 2,157,471 25,634,682 (10,769,215) 158,736 96,336 521,103 776,175 163,705 44,518 208,223 567,952 Middle Georgia College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued MIDDLE GEORGIA COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e n t Unit Middle Ge orgia C olle ge Middle Ge orgia C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s St at e Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s Federal St at e Other Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 12,067,735 44,815 117,417 352,857 (469,330) (15,021) 12,098,473 1,329,258 15,042,307 2,480 15,044,787 16,374,045 34,762,441 34,762,441 $51,136,486 225,796 (560,203) (1,032,167) (1,366,574) (798,622) 15,200 15,200 (783,422) 1,145,782 1,145,782 $362,360 Middle Georgia College Annual Financial Report FY 2007 9 Statement of Cash Flows MIDDLE GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from Sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2007 $2,794,482 4,278,183 40,162 (11,426,861) (10,201,452) (1,805,059) 17,254 2,774,349 1,571,184 2,126,137 51,011 432,853 216,195 125,752 (9,005,810) 12,067,735 284,796 168,450 12,520,981 1,937,233 6,418 (3,771,604) (2,384) (42,398) (1,872,735) 1,224,536 239,183 (1,230,375) 233,344 1,875,780 2,794,246 $4,670,026 Middle Georgia College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued MIDDLE GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep r eciat io n Change in Asset s and Liabilit ies: Receivables, net Invent ories Ot her Asset s 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 ment s recognized as a component of int erest income Change in accrued int erest payable affect ing int erest paid Gift reducing proceeds of Gift s and Grant s received for ot her t han capit al purposes Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($10,769,215) 2,157,471 (283,254) (91,654) 11,711 (2,483) 17,560 22,189 (93,728) 726 24,867 ($9,005,810) $10,349,924 $113,674 ($426,932) ($7,424) ($13,107,554) Middle Georgia College Annual Financial Report FY 2007 11 MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 (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 Middle Georgia College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Middle Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Middle Georgia College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the College's report. For FY2007, Middle Georgia College is reporting the activity for the Middle Georgia College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the Middle Georgia College Annual Financial Report FY 2007 12 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 Middle Georgia College Annual Financial Report FY 2007 13 expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies and resale inventories are carried at the lower of cost or market on the firstin, 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $13,105,074 to Middle Georgia College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall and deposits held for students for use utilizing the campus card system. 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. Middle Georgia College Annual Financial Report FY 2007 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 compensated absences 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 $614,398 as of 7-1-2006. For FY2007, $382,576 was earned in compensated absences and employees were paid $357,709, for a net increase of $24,867. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $639,265. 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 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $56,596 171,275 4,913 707,607 390,862 $1,331,253 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, 2007 $1,408,599 3,093,174 8,988 (1,028,803) $3,481,958 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Middle Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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. Middle Georgia College Annual Financial Report FY 2007 16 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. In prior year financial statements, a portion of tuition and fee waivers granted by the College were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal year 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Auxiliary Residence Hall revenue of $2,699,695 is reported net of discounts and allowances of $168,244. Middle Georgia College Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $3,899,620 and the bank balance was $4,766,060. Of the College's deposits, $4,652,396 were uninsured. Of these uninsured deposits, $4,652,396 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. B. Investments Middle Georgia College maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws. Middle Georgia College Annual Financial Report FY 2007 18 The College's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Agencies Implicitly Guaranteed Other Investments Equity Mutual Funds Equity Securities - Domestic Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years $14,967 $14,967 178,341 752,224 $14,967 $0 $0 $14,967 Investment Pools Board of Regents Short-Term Fund Balanced Income Fund Total Investments 763,856 151,537 $1,860,925 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/searchRpts.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 2.24 years. Of the College's total investment of $763,856 in the Short Term Fund, $760,953 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 9.35 years. Of the College's total investment of $151,537 in the Balanced Income Fund, $91,468 is invested in debt securities. Middle Georgia College Annual Financial Report FY 2007 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 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, 2007, none of the College's investments were subject to Custodial Credit Risk disclosure. 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. The investments subject to credit quality risk are reflected below: Related Debt Investments U. S. Agencies Fair Value $14,967 $14,967 AAA $14,967 $14,967 As previously stated, the BOR investment pool funds are 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 College does not have a formal policy for managing concentration of credit risk. The College has 13.5% of its investments in Coca-Cola stock with a fair market value of $251,088. This stock is part of the Harris Endowment and was donated to the College in 1966. Middle Georgia College Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $7,157 286,520 358,304 131,695 18,959 303,196 1,105,831 34,837 $1,070,994 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore P hysical P lant T otal June 30, 2007 $614,496 10,518 $625,014 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007. Middle Georgia College Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $2,020,095 2,328,444 4,348,539 524,691 40,750,228 2,872,584 2,437,890 0 2,314,645 48,900,038 557,514 15,606,737 2,007,001 1,408,926 0 2,021,490 21,601,668 27,298,370 $31,646,909 Addi ti o n s $213,300 3,368,516 3,581,816 Re ductions $0 579,101 579,101 En di n g B al a n ce 6 /3 0 /2 0 0 7 $2,233,395 5,117,859 7,351,254 7,756,837 5,365,947 693,126 354,411 10,349,924 106,564 24,626,809 20,269 177,745 8,436 206,450 8,281,528 46,095,906 3,565,710 2,614,556 10,349,924 2,412,773 73,320,397 73,058 1,330,863 47,997 367,974 283,325 54,254 2,157,471 22,469,338 $26,051,154 167,792 20,270 (11,487) 8,436 185,011 21,439 $600,540 462,780 16,917,330 2,054,998 1,788,387 283,325 2,067,308 23,574,128 49,746,269 $57,097,523 Reclassification of Accumulated Depreciation in the amount of $167,792 was made between Infrastructure and Equipment categories within the `Reductions' column of this schedule. The reclassification had a $0 effect on the Capital Assets, net balance. Middle Georgia College Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $121,590 693,535 $815,125 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $2,384 Additions $10,776,856 Re du cti on s Ending Balance June 30, 2007 $2,384 $10,776,856 Current Portion $0 Other Liabilities Compensated Absences T ot al 614,398 614,398 382,576 382,576 357,709 357,709 639,265 639,265 309,872 309,872 Total Long Term Obligations $616,782 $11,159,432 $360,093 $11,416,121 $309,872 Note 9. Significant Commitments The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2007. Note 10. Lease Obligations Middle Georgia College is obligated under various operating leases for the use of equipment and also is obligated under a capital lease for the acquisition of real property. CAPITAL LEASES The College has a capital lease for student residential facilities which is payable in monthly installments and expires in 2036. Interest expense for fiscal year 2007 was $469,302 with accrued interest of $426,932 added to the lease principal and interest paid of $42,370. The interest rate is 4.856 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Middle Georgia College Annual Financial Report FY 2007 23 Facilities Improvements Buildings Equipment Total Assets Held Under Capital Lease $233,750 9,410,232 422,617 $10,066,599 The capital lease is with MGC Real Estate Foundation, LLC, which is a subsidiary included in the financial statements of a discretely presented component unit. The outstanding liability, including accrued interest, was $10,776,856 at June 30, 2007. A vehicle capital lease with a third party was paid in full during fiscal 2007. Total payments during the year on this lease were $2,412, with principal and interest paid of $2,384 and $28, respectively. OPERATING LEASES Middle Georgia College's noncancellable operating leases having remaining terms of more than one year expire in fiscal 2008. Certain operating leases provide for renewal options for periods from one to five years at their fair rental value at the time of renewal. All agreements are 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. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $266,860 532,883 549,236 565,305 582,820 3,175,866 3,683,369 4,275,415 4,632,696 3,705,941 21,970,391 11,193,535 $10,776,856 $13,860 $13,860 Middle Georgia College's FY2007 expense for rental of real property and equipment under operating leases was $6,864. Middle Georgia College Annual Financial Report FY 2007 24 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $655,271 $631,254 $644,235 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 2007 25 with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $169,158 (9.66% or 8.13%) and $95,506 (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 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 2007 amounted to $29,546 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 2007 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. 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 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 2007 27 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, 2007. 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, 2007, there were 122 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Middle Georgia College recognized as incurred $423,154 of expenditures, which was net of $167,555 of participant contributions. Middle Georgia College Annual Financial Report FY 2007 28 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 4,771,659 602,602 1,264,696 $0 $0 56,143 43,410 (822,377) 1,529,706 $ 4,000 939,422 302,265 37,307 8,602 431,353 110,401 $ 3,250 1,052,644 293,471 62,806 10,700 11,183 880,270 46,777 $ 1,000 1,231,710 800,907 49,594 28,374 16,077 360,235 16,600 $ 7,445,839 $0 $0 $ 1,833,350 $ 2,361,101 $ 2,504,497 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses Plant Operat ions & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Ent erprises Unallocat ed Expenses $0 1,151,061 388,236 (529,541) 2,334 1,115,842 382,998 28,270 $0 1,690,240 $ 431 414,638 102,980 529,541 8,417 104,119 244,901 5,429,711 430,808 $0 (5,091) $ 2,539,200 $ 1,690,240 $ 7,265,546 ($ 5,091) T otal Expenses $ 4,780,340 5,392,077 3,152,555 49,594 195,381 1,805,059 1,440,015 6,662,190 2,157,471 $ 25,634,682 Middle Georgia College Annual Financial Report FY 2007 29 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, 2007, the Foundation distributed $44,518 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Fiscal Affairs at 1100 Second Street, Cochran, GA 31014. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Certificates of Deposit Government and Agency Securities Equity Securities Mutual Funds Total Investments Cost $48,574 350,000 15,000 574,992 193,034 $1,181,600 Fair Value $48,574 350,000 14,967 599,349 185,506 $1,198,396 Middle Georgia College Annual Financial Report FY 2007 30 Capital Assets for Component Units: Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2007 as follows: June 30, 2007 Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net $79,482 10,944,093 11,023,575 $11,023,575 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. Final maturity is scheduled for July 1, 2036. Proceeds of the Series 2005 Bonds will be used by the MGC Real Estate Foundation, LLC to finance or reimburse, in whole or in part, the cost of construction and equipping of three new residence halls containing approximately 704 beds including related parking (the "Project") located on the campus of Middle Georgia College. The interest rates are as follows: Series 2005 A, 3.5-3.75%; Series 2005A, 5.0%; Series 2005A, 4.125-4.625%; Series 2005B, 5.25%. The balance of this obligation at 6/30/07 is $26,850,000. Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable $26,850,000 $0 $0 $26,850,000 $0 Total Long Term Liabilities $26,850,000 $0 $0 $26,850,000 $0 Middle Georgia College Annual Financial Report FY 2007 31 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: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Total 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 0 40,000 80,000 120,000 1,320,000 2,875,000 5,105,000 7,625,000 9,685,000 $26,850,000 Bonds Payable Interest $1,292,460 1,292,460 1,292,460 1,290,360 1,287,560 6,317,902 5,898,444 5,011,595 3,545,219 1,499,745 $28,728,205 Total $1,292,460 1,292,460 1,332,460 1,370,360 1,407,560 7,637,902 8,773,444 10,116,595 11,170,219 11,184,745 $55,578,205 Middle Georgia College Annual Financial Report FY 2007 32 NORTH GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 North Georgia College & State University Dahlonega, Georgia David L. Potter President Frank J. (Mac) McConnell Vice President for Business & Finance NORTH GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 20 Note 4. Inventories...................................................................................................................... 20 Note 5. Notes/Loans Receivable................................................................................................. 20 Note 6. Capital Assets................................................................................................................. 21 Note 7. Deferred Revenue........................................................................................................... 22 Note 8. Long-Term Liabilities .................................................................................................... 22 Note 9. Significant Commitments............................................................................................... 22 Note 10. Lease Obligations......................................................................................................... 22 Note 11. Retirement Plans .......................................................................................................... 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. Students Students Faculty (Headcount) (FTE) FY2007 186 FY2006 163 FY2005 147 4,922 4,765 4,552 4,414 4,222 4,060 Overview of the Financial Statements and Financial Analysis North Georgia College & State University is proud to present its financial statements for fiscal year 2007. 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 2007 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. North Georgia College & State University Annual Financial Report FY 2007 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 As s e ts June 30, 2007 $15,489,370 69,946,035 3,801,512 89,236,917 June 30, 2006 $12,586,241 51,240,346 3,678,706 67,505,293 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 5,734,013 18,608,204 24,342,217 4,430,866 707,542 5,138,408 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 51,915,569 2,762,864 1,583,753 8,632,514 $64,894,700 51,240,346 2,616,538 1,452,952 7,057,049 $62,366,885 The total assets of the institution increased by $21,731,624. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $18,705,689 in the category of Capital Assets, net. The total liabilities for the year increased by $19,203,809. The combination of the increase in total assets of $21,731,624 and the increase in total liabilities of $19,203,809 yields an increase in total net assets of $2,527,815. The increase in total net assets is a combination of increases in Invested in Capital Assets, net of debt, in the amount of $675,223 and Unrestricted Net Assets in the amount of $1,575,465. North Georgia College & State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $30,254,735 55,472,963 (25,218,228) 26,911,207 1,692,979 834,836 2,527,815 62,366,885 0 62,366,885 $64,894,700 $26,200,250 51,581,164 (25,380,914) 25,201,297 (179,617) 293,377 113,760 62,253,125 0 62,253,125 $62,366,885 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: North Georgia College & State University Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $14,021,978 2,121,376 689,610 12,840,531 581,240 30,254,735 23,069,023 2,594,234 561,339 877,428 5,672 27,107,696 749,836 85,000 834,836 $58,197,267 June 30, 2006 $12,107,083 2,076,610 715,894 11,035,550 265,113 26,200,250 22,329,412 2,010,538 243,475 607,596 10,276 25,201,297 293,377 0 293,377 $51,694,924 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $23,294,076 4,464,784 3,524,556 5,904,601 5,139,743 1,254,125 11,891,078 55,472,963 196,489 $55,669,452 June 30, 2006 $21,573,300 4,066,525 3,271,889 5,584,589 5,347,823 1,071,319 10,665,719 51,581,164 0 $51,581,164 Operating revenues increased by $4,054,485 in fiscal 2007. This is the result of a 4% average fee increase, 192 FTE gain, and revenue gains from 300 residence beds added through capital leases with the University's Foundation. North Georgia College & State University Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $1,804,981 is a primary result of the increased sales of food services, retail operations and residence hall additions. Nonoperating revenues increased by $1,906,399 for the year primarily due to an increase of $739,611 in State Appropriations and $901,560 in Grants, Contracts and Gifts. The compensation and employee benefits category increased by $2,869,100 and primarily affected the Instruction category. The increase reflects the addition of 23 faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($34,442) during the past year. The decrease was primarily associated with the decreased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by 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. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($21,942,583) 26,197,933 (2,280,476) 770,365 2,745,239 9,838,942 $12,584,181 June 30, 2006 ($22,674,223) 24,666,007 (814,303) 500,357 1,677,838 8,161,104 $9,838,942 North Georgia College & State University Annual Financial Report FY 2007 5 Capital Assets The University had four significant capital asset additions in fiscal year 2007: Land $ 815,443 Residence Hall $11,017,471 Infrastructure $ 3,890,255 Main Street Office Building $ 2,438,816 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 North Georgia College & State University had Long-Term Debt and Liabilities of $19,516,797 of which $908,593 was reflected as current liability at June 30, 2007. 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 FY2007. North Georgia College and State University Foundation, Inc. had investments of $26.9 million as of June 30, 2007 and long-term debt of $47.3 million, primarily in the form of two bond issues. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong and was able to generate a four percent 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 L. Potter, President North Georgia College and State University North Georgia College & State University Annual Financial Report FY 2007 6 Statement of Net Assets N O R T H G EO R G IA C O L L EG E & S T A T E U N IV ER S IT Y S T A T EM EN T O F N ET A S S ET S June 30, 2007 C om pon e n t Un it A S S ETS C u rre n t A sse ts C ash an d C ash E quiv alen t s Sh o rt -t e rm In v e st m e n t s A cco un t s R eceiv able, n et (n o t e 3 ) R eceiv ables - F ederal F in an cial A ssist an ce R eceiv ables - O t h er D ue F ro m C o m p o n en t U n it s L eases R eceiv able D ue F ro m P rim ary Go v ern m en t In v en t o ries (n o t e 4 ) P rep aid it em s T o t al C urren t A sset s N on cu rre n t A sse ts N o n curren t Cash In v est m en t s (in cludin g R eal E st at e) N o t es R eceiv able, n et L eases R eceiv able C o n t ribut io n s R eceiv able C ap it al A sset s, n et (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A cco un t s P ay able Sa la rie s P a y a ble C o n t ract s P ay able D ep o sit s D eferred Rev en ue (n o t e 7 ) D ep o sit s H eld fo r O t h er O rgan izat io n s D ue t o P rim ary Go v ern m en t L ease P urch ase O bligat io n s (curren t p o rt io n ) C o m p en sat ed A bsen ces (curren t p o rt io n ) R ev en ue/M o rt gage B o n ds P ay able (curren t ) L ia bilit ie s un de r Sp lit -In t e re st A gre e m e n t s (c urre n t ) D ue t o C o m p o n en t U n it s T o t al C urren t L iabilit ies N on cu rre n t Liabilitie s L ease P urch ase O bligat io n s (n o n curren t ) D eferred Rev en ue (n o n curren t) C o m p en sat ed A bsen ces (n o n curren t ) R ev en ue/M o rt gage B o n ds P ay able (n o n curren t ) L ia bilit ie s un de r Sp lit -In t e re st A gre e m e n t s (n o n c urre n t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al N o n curren t L iabilit ies TO TA L L IA B IL ITIES N ET A S S ETS In v est ed in C ap it al A sset s, n et o f relat ed debt R est rict ed fo r N o n ex p en dable E x p en dable U n rest rict ed TO TA L N ET A S S ETS N orth G e orgia C olle ge & S tate U n i ve rs i ty N orth G e orgia C olle ge an d S tate U n i ve rs i ty Fo u n da ti o n , In c. $ 1 1 ,6 2 4 ,4 4 5 5 0 ,2 8 1 7 5 ,4 7 0 1 ,2 1 7 ,0 5 3 2 4 3 ,6 8 1 1 ,3 5 6 ,8 3 5 9 2 1 ,6 0 5 1 5 ,4 8 9 ,3 7 0 9 5 9 ,7 3 6 1 ,7 5 2 ,8 4 7 1 ,0 8 8 ,9 2 9 6 9 ,9 4 6 ,0 3 5 7 3 ,7 4 7 ,5 4 7 8 9 ,2 3 6 ,9 1 7 $ 9 8 ,4 5 0 5 6 5 ,7 5 4 1 ,0 3 9 ,4 7 7 8 8 ,3 0 5 1 0 3 ,0 7 8 1 ,8 9 5 ,0 6 4 2 9 ,8 2 2 ,8 7 5 2 6 ,8 6 3 ,1 0 8 2 7 ,9 0 7 ,6 6 4 3 ,1 5 1 ,2 2 3 3 ,7 1 8 ,5 5 1 1 ,0 5 6 ,7 6 7 9 2 ,5 2 0 ,1 8 8 9 4 ,4 1 5 ,2 5 2 7 2 5 ,4 5 2 1 7 1 ,5 7 8 1 3 3 ,9 8 8 6 5 8 ,4 3 0 2 ,8 8 7 ,4 4 7 1 6 0 ,2 2 0 2 6 1 ,8 4 3 6 4 6 ,7 5 0 8 8 ,3 0 5 5 ,7 3 4 ,0 1 3 1 7 ,7 6 8 ,6 2 3 8 3 9 ,5 8 1 1 8 ,6 0 8 ,2 0 4 2 4 ,3 4 2 ,2 1 7 5 1 ,9 1 5 ,5 6 9 2 ,7 6 2 ,8 6 4 1 ,5 8 3 ,7 5 3 8 ,6 3 2 ,5 1 4 $ 6 4 ,8 9 4 ,7 0 0 9 8 9 ,1 2 8 7 7 7 ,6 3 4 2 4 3 ,6 8 1 5 5 5 ,0 0 0 2 ,5 0 0 2 ,5 6 7 ,9 4 3 1 8 ,0 0 9 ,1 5 0 4 6 ,4 2 4 ,7 6 1 2 0 ,1 6 5 3 0 0 ,8 7 3 6 4 ,7 5 4 ,9 4 9 6 7 ,3 2 2 ,8 9 2 (2 ,5 7 6 ,7 4 9 ) 2 2 ,1 3 1 ,2 4 7 6 ,2 0 6 ,4 7 5 1 ,3 3 1 ,3 8 7 $ 2 7 ,0 9 2 ,3 6 0 North Georgia College & State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets NORTH GEORGIA COLLEGE & STATE UNIVERSITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e nt Un it REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal Sales and Services Rent s 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Dep r eciat io n P ayment s t o or on behalf of Nort h Georgia College & St at e Univ. T ot al Operat ing Expenses Operat ing Income (loss) North Georgia C ollege & State Un i ve rsi ty North Ge orgia C ollege and State Un i ve rsi ty Fou n dati on , In c. $17,433,096 (3,411,118) 2,121,376 689,610 3,573,012 3,014,426 2,884,181 736,105 681,401 1,586,375 365,031 581,240 30,254,735 14,194,074 13,231,018 7,493,319 101,317 605,533 1,860,857 2,424,212 13,189,559 2,373,074 55,472,963 (25,218,228) $0 727,940 616,641 1,330,342 262,587 2,937,510 34,631 113,950 11,676 472,661 115,142 278,120 205,781 1,685,181 2,917,142 20,368 North Georgia College & State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued NORTH GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pon e nt Un it North Georgia C ollege & State Un i ve rsi ty North Ge orgia C ollege and State Un i ve rsi ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Loss on Bond Ret irement Addit ions t o permanent endowment s 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 23,069,023 928,516 93,253 1,572,465 561,339 877,428 (196,489) 5,672 26,911,207 1,692,979 749,836 85,000 834,836 2,527,815 62,366,885 0 62,366,885 $64,894,700 2,881,437 (1,470,472) 70,790 1,481,755 1,502,123 (541,686) 10,468,995 9,927,309 11,429,432 15,662,928 0 15,662,928 $27,092,360 North Georgia College & State University Annual Financial Report FY 2007 9 Statement of Cash Flows NORTH GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from Sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s 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, 2007 $13,905,119 2,073,200 689,610 (23,688,704) (27,247,661) (1,860,857) (43,035) 66,274 3,653,268 2,893,055 2,835,608 828,488 730,639 1,959,140 426,157 837,116 (21,942,583) 23,069,023 (26,662) 3,155,572 26,197,933 749,836 10,042 (2,712,346) (133,876) (194,132) (2,280,476) 38,982 731,383 770,365 2,745,239 9,838,942 $12,584,181 North Georgia College & State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued NORTH GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) BY O PERATING AC TIVITIES : Operating Income (loss) Adjust ment s t o Reconcile Net Income (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep reciat io n Change in Assets and Liabilities: Receivables, net Invent ories P repaid Items Not es Receivable, Net Account s P ayable Deferred Revenue Other Liabilit ies Compensated 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 ment s recognized as a component of int erest income Change in accrued int erest payable affect ing int erest paid Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($25,218,228) 2,373,074 (22,873) (53,231) (120,769) 23,239 284,747 526,175 88,305 176,978 ($21,942,583) $18,161,985 $146,045 $2,357 ($85,000) North Georgia College & State University Annual Financial Report FY 2007 11 NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations North Georgia College and 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 and 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 and 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 and State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, North Georgia College and 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 and 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 FY2007, North Georgia College and State University is reporting the activity for the North Georgia College and State University Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and North Georgia College & State University Annual Financial Report FY 2007 12 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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. North Georgia College & State University Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to North Georgia College and State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. North Georgia College & State University Annual Financial Report FY 2007 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 compensated absences 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 and State University had accrued liability for compensated absences in the amount of $1,309,353 as of 7-1-2006. For FY2007, $977,180 was earned in compensated absences and employees were paid $800,202, for a net increase of $176,978. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,486,331. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. North Georgia College & State University Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: June 30, 2007 Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable $75,980 680,876 826,897 $1,583,753 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, 2007 $7,336,968 1,777,613 40,572 (522,639) $8,632,514 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 and 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. North Georgia College & State University Annual Financial Report FY 2007 16 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. 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. North Georgia College & State University Annual Financial Report FY 2007 17 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, 2007, the carrying value of deposits was $12,014,186 and the bank balance was $12,708,113. Of the University's deposits, $12,557,832 were uninsured. Of these uninsured deposits, $12,557,832 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. B. Investments North Georgia College and 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Fair Value Investment type Debt Securities General Obligation Bonds $1,060,321 $1,060,321 Other Investments Equity Securities - Domestic Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 692,526 605,766 Total Investments $2,358,613 Less Than 1 Year $0 $0 Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $163,650 $163,650 $438,018 $438,018 $458,653 $458,653 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 North Georgia College & State University Annual Financial Report FY 2007 18 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 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. University does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments. At June 30, 2007, $1,752,847 of the University's applicable investments were uninsured and held by the investment's counterparty 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 investments subject to credit quality risk are reflected below: Related Debt Inves tments General Obligat ion Bonds Fair Value $1,060,321 $1,060,321 AAA $1,060,321 $1,060,321 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, 2007 North Georgia College & State University has six investments that are subject to concentration of credit risk as shown below: AT&T Equity Securities Citigroup Equity Securities PrimeVest (Dekalb City Bldg Auth) #24045RBH9 PrimeVest (Gwinnett City Water & Sewer Revenue) #403760EJ6 PrimeVest (Gwinnett Cnty Ga Water & Sewer Auth) #403760EH0 PrimeVest (Gilmer Cty Bldg Auth) #37586NAK9 $193,763 $178,489 $145,515 $140,091 $318,646 $146,814 North Georgia College & State University Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $400,010 117,952 75,470 243,681 912,315 1,749,428 213,224 $1,536,204 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore Ot h er T otal $1,312,358 44,477 $1,356,835 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $0. North Georgia College & State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $2,988,757 54,401 3,043,158 3,883,833 63,763,798 2,939,355 4,457,443 0 4,364,123 79,408,552 2,235,419 20,774,927 1,781,690 3,468,901 2,950,427 31,211,364 48,197,188 $51,240,346 Addi ti o n s $815,443 1,410,157 2,225,600 Re ductions $0 23,841 23,841 537,691 594,911 17,346,542 402,229 18,881,373 50,401 1,644,755 74,423 361,129 242,366 2,373,074 16,508,299 $18,733,899 218,062 262,474 74,555 555,091 218,062 258,105 74,555 550,722 4,369 $28,210 En di n g B al a n ce 6 /3 0 /2 0 0 7 $3,804,200 1,440,717 5,244,917 3,883,833 64,301,489 2,721,293 4,789,880 17,346,542 4,691,797 97,734,834 2,285,820 22,419,682 1,638,051 3,571,925 3,118,238 33,033,716 64,701,118 $69,946,035 North Georgia College & State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $2,254,540 632,907 $2,887,447 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $0 Additions $18,164,342 Reductions Ending Balance June 30, 2007 $133,876 $18,030,466 Other Liabilities Compensated Absences Total 1,309,353 1,309,353 977,180 977,180 800,202 800,202 1,486,331 1,486,331 Total Long Term Obligations $1,309,353 $19,141,522 $934,078 $19,516,797 Current Portion $261,843 646,750 646,750 $908,593 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $5,334,254 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations North Georgia College and 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 2028 and 2036. Expenditures for fiscal year 2007 were $328,008 of which $194,132 represented interest paid. Total principal paid on capital leases was $133,876 for the fiscal year ended June 30, 2007. Accrued but unpaid interest of $2,357 was added to the outstanding principal obligation for the year ended June 30, 2007. Interest rates range from 4.25 percent to 4.70 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: North Georgia College & State University Annual Financial Report FY 2007 22 Land Buildings - Owen Hall Buildings - 60 Main Street West Infrastructure - Radar Ridge Total $815,443 11,017,471 2,438,816 3,890,255 $18,161,985 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. North Georgia College and State University had two capital leases with the University's Foundation, a discretely presented component unit, in the current fiscal year. In March 2007, North Georgia College and State University entered into a capital lease of $3,254,259 whereby the University leases land and a building, Hwy 60 West Main Office for a 29.33 year period that began March 2007 and expires June 2036. In March 2007, the University entered into a capital lease of $14,907,726 whereby the University leases a residence hall building for a twenty-year period that began March 2007 and expires 2028. The outstanding liability at June 30, 2007 on these capital leases is $18,030,466. The University at its option may terminate the leases and purchase the Foundation's interest for the unamortized principal balance and the payment of $1. OPERATING LEASES North Georgia College and State University had no operating leases as of June 30, 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P roperty and Equipm ent Capit al Leases $1,039,477 1,078,258 1,105,073 1,132,706 1,188,894 6,611,323 6,928,458 7,933,356 1,035,628 893,968 28,947,141 10,916,675 $18,030,466 North Georgia College and State University had no expense for rental of real property and equipment under operating leases in FY2007. North Georgia College & State University Annual Financial Report FY 2007 23 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description North Georgia College and 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 and State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. North Georgia College and 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,392,527 $1,292,601 $1,244,901 Employees' Retirement System of Georgia Plan Description North Georgia College and State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 North Georgia College & State University Annual Financial Report FY 2007 24 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, 2007, for employees covered by ERS was $176,708. The University's total payroll for all employees was $27,425,092. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $21,143, of which $18,492 was made by the University and $2,651 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, 2007 financial report, which may be obtained through ERS. North Georgia College & State University Annual Financial Report FY 2007 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 and 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 and State University and the covered employees made the required contributions of $774,068 (9.66% or 8.13%) and $435,760 (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 and 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 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 North Georgia College & State University Annual Financial Report FY 2007 26 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 2007 amounted to $83,222 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 and 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 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 and State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. North Georgia College & State University Annual Financial Report FY 2007 27 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although North Georgia College and State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against North Georgia College and 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, 2007. 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, 2007, there were 217 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, North Georgia College and State University recognized as incurred $987,123 of expenditures, which was net of $321,473 of participant contributions. North Georgia College & State University Annual Financial Report FY 2007 28 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Dep reciat ion Total Expenses Inst ruct ion Functional Classification FY2007 Academic Support Student Services Inst it ut ional Support $ 13,741,212 2,672,315 3,599,620 293,239 219,168 133,057 2,489,250 146,215 $ 132,102 2,350,236 531,911 126,960 1,808 141,355 867,834 312,578 $ 43,794 1,959,990 511,503 35,655 41,679 914,277 17,658 $ 77,337 2,930,489 1,853,349 101,317 90,898 7,016 40,877 758,170 45,148 $ 23,294,076 $ 4,464,784 $ 3,524,556 $ 5,904,601 P lan t Op erat io n s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary En t erp rises T otal Expenses $0 1,890,736 652,657 (835,250) 4,554 1,810,611 315,643 1,300,792 $0 1,254,025 100 $ 199,629 1,427,252 344,279 835,250 54,227 378,840 256,633 7,844,285 550,683 $ 14,194,074 13,231,018 7,493,319 101,317 605,533 1,860,857 2,424,212 13,189,559 2,373,074 $ 5,139,743 $ 1,254,125 $ 11,891,078 $ 55,472,963 North Georgia College & State University Annual Financial Report FY 2007 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, 2007, the Foundation distributed $1,685,181 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the Foundation's website at www.ngcsu.edu. Investments for Component Units: North Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $26,863,108. The $22.1 million corpus of the endowment portion 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 which distributes 5% of the endowment fund balance each year for the operating purposes stated for each fund. Investments are comprised of the following amounts at June 30, 2007: Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate Total Investments Cost $683,128 4,155,001 2,266 17,192,980 1,640,027 $23,673,402 Fair Value $683,128 4,171,926 6,061 20,361,965 1,640,027 $26,863,108 North Georgia College & State University Annual Financial Report FY 2007 30 Capital Assets for Component Units: North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 Capital Assets not being Depreciated: Construction in Progress Total Capital Assets not being Depreciated Capital Assets, Net $3,718,551 3,718,551 $3,718,551 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the year ended June 30, 2007 are as follows: Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2006 $24,940 0 10,700,000 $10,724,940 Additions $0 300,873 46,979,761 $47,280,634 Reductions $2,275 10,700,000 $10,702,275 Ending Balance June 30, 2007 $22,665 300,873 46,979,761 $47,303,299 Amounts due within One Year $2,500 555,000 $557,500 Notes and Loans Payable: The $300,873 Notes and Loans Payable balance at June 30, 2007 represents the outstanding borrowings under a $1,200,000 line of credit with a financial institution to purchase real estate. The interest rate charge is the financial institution's prime rate (7.75% at June 30, 2007) less .50%. Payments of quarterly interest only are required through January 5, 2009, at which time the line of credit matures. Revenue Bonds Payable: In September 2001, the Downtown Development Authority of the City of Dahlonega (the Authority) issued $11.2 million in Revenue Bonds Series 2001A (the Bonds) to allow North Georgia Student Housing LLC, a subsidiary of the North Georgia College & State University Foundation, Inc., to construct Student Housing. On February 27, 2007, the Authority issued Bond Series 2007C in the amount of $16,215,000 allowing North Georgia Student Housing to retire the 2001A bonds, to pay off an existing debt of $1,158,000 on 110 acres of land it held for the future use of the University, to provide $3,000,000 to build a road, sidewalks, walking trails and other infrastructure necessary for future campus development and to lower its cost of capital. The new bonds were issued at an average interest rate of 4.4%. The Series 2007C bonds will mature in 2028. An interest swap termination fee of $508,000 was paid. The security for the Series 2007C bonds is a rental agreement with the University which will pass title to the University at the final maturity of the bonds. The balance on the bond liability on June 30, 2007 is $16,215,000. North Georgia College & State University Annual Financial Report FY 2007 31 Also on February 27, 2007 the Authority issued $29,330,000 in tax-exempt revenue bonds (Series 2007A) and $940,000 in taxable revenue bonds (Series 2007B) and entered into an agreement to loan the proceeds to North Georgia Parking & Recreation Center, LLC, a subsidiary of the North Georgia College & State University Foundation, Inc., to construct a new parking deck, a student recreation center and to purchase a 33,000 square foot office building adjacent to campus. The bonds are secured by rental agreements with the University and with BB&T for continuation of the banking business. The loan matures in 2037 and has an average maturity rate of 4.4% on the exempt bonds and 5.35% on the taxable. Upon the final maturity of the bonds, title of the property will transfer to the University. The bond liability at June 30, 2007 was $30,270,000. Annual debt service obligations to maturity for the revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 Bond Premium 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $555,000 500,000 545,000 625,000 705,000 4,680,000 7,220,000 10,915,000 9,800,000 8,835,000 2,105,000 46,485,000 494,761 $46,979,761 Bonds Payable Interest $880,673 2,098,415 2,078,915 2,057,415 2,035,130 9,536,441 8,198,462 6,477,724 3,818,825 1,771,794 109,575 39,063,369 $39,063,369 Total $1,435,673 2,598,415 2,623,915 2,682,415 2,740,130 14,216,441 15,418,462 17,392,724 13,618,825 10,606,794 2,214,575 85,548,369 494,761 $86,043,130 North Georgia College & State University Annual Financial Report FY 2007 32 SAVANNAH STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 Savannah State University Savannah, Georgia Dr. Julius S. Scott, Jr. Interim President Elaine Shavers Campbell, CPA Interim Vice President for Fiscal Affairs SAVANNAH STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2007 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 .......................................................................................................... 22 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 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 primarily an African American student population, enriched by a diversity of traditional and nontraditional students from other countries, cultures, and races. The educational goal is realized through program offerings in the College of Business Administration, the College of Liberal Arts and Social Sciences, and the College of Science and Technology, which leads to baccalaureate and master's degrees. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,000 students each year. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 134 FY2006 118 FY2005 123 3,241 3,091 2,800 3,065 2,853 2,564 Overview of the Financial Statements and Financial Analysis Savannah State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 As s e ts June 30, 2007 $8,584,873 52,722,785 3,417,316 64,724,974 June 30, 2006 $7,528,388 50,705,415 3,150,016 61,383,819 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,521,155 668,199 3,189,354 3,165,535 674,671 3,840,206 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 52,722,785 2,305,790 1,261,120 5,245,925 $61,535,620 50,705,415 1,034,603 1,184,490 4,619,105 $57,543,613 The total assets of the institution increased by $3,341,155. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,017,370 in the category of Capital Assets, net. The total liabilities for the year decreased by ($650,852). The combination of the increase in total assets of $3,341,155 and the decrease in total liabilities of ($650,852) yields an increase in total net assets of $3,992,007. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $2,017,370. Savannah State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $28,811,878 47,275,338 (18,463,460) 18,928,239 464,779 3,527,228 3,992,007 57,543,613 0 57,543,613 $61,535,620 $27,042,961 45,560,682 (18,517,721) 19,543,706 1,025,985 1,775,031 2,801,016 54,549,491 193,106 54,742,597 $57,543,613 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 of $3,992,007. This represents an increase of $1,190,991 over fiscal year 2006. 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest m ent Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $5,744,016 14,498,032 90,243 8,323,924 155,663 28,811,878 17,906,362 493,243 530,524 (1,890) 18,928,239 3,527,228 3,527,228 $51,267,345 June 30, 2006 $4,339,387 14,110,218 118,193 8,387,811 87,352 27,042,961 17,413,552 806,871 154,809 1,168,474 19,543,706 1,775,031 1,775,031 $48,361,698 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Expenses June 30, 2007 $13,817,068 1,221,386 2,131,159 4,710,079 2,887,394 7,721,673 4,279,048 1,945,002 7,479,364 1,083,165 $47,275,338 June 30, 2006 $12,807,464 1,454,994 2,182,564 4,680,972 2,815,833 6,648,195 5,344,945 933,898 5,704,494 2,987,323 $45,560,682 Operating revenues increased by $1,768,917 in fiscal year 2007. Although Tuition & Fees included a 7% increase, revenues decreased in Sales and Services and Auxiliary categories. The Auxiliary revenue decreased by ($63,887) in fiscal year 2007. This decrease is associated with a decrease in revenues earned in Residence Halls for fiscal year 2007. Savannah State University Annual Financial Report FY 2007 4 Nonoperating revenues decreased by ($615,467) in fiscal year 2007. Although State Appropriations included an increase of $492,810, revenues decreased in the Other category. The compensation and employee benefits category increased by $1,310,858. The increase reflects an increased cost of health insurance for the employees of the Institution. Utilities decreased by ($31,082) during the past year. The decrease was primarily associated with the efficiency in gas and water usage at the University during fiscal year 2007. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($16,666,913) 18,264,497 (365,474) 324,020 1,556,130 3,178,679 $4,734,809 June 30, 2006 ($15,662,225) 18,316,374 (980,525) 161,614 1,835,238 1,343,441 $3,178,679 Capital Assets The University capitalized building improvements for two facilities in fiscal year 2007. The Wiley Wilcox renovation was completed and the facility was reopened for use. Additionally the Drew Griffith Science Building expansion was completed and placed in service during the fiscal year. The costs of these projects were funded by the Georgia State Financing and Investment Commission (GSFIC). Projected funding by GSFIC for FY2008 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. Savannah State University Annual Financial Report FY 2007 5 Long Term Debt and Liabilities Savannah State University had Long-Term Debt and Liabilities of $1,213,388 of which $545,189 was reflected as current liability at June 30, 2007. 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 for reporting purposes as of June 30, 2007. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Julius S. Scott, Jr., Interim President Savannah State University Savannah State University Annual Financial Report FY 2007 6 Statement of Net Assets SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalents Short-term Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assistance Receivables - Ot her Invent ories (note 4) Prepaid Items T ot al Current Assets Noncurre nt Asse ts Noncurrent Cash Short-term Invest ment s Invest ments Notes Receivable, net Capital Assets, net (note 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabi li ti e s Account s Payable Salaries P ayable Dep o sit s Deferred Revenue (not e 7) Deposits Held for Other Organizations Compensated Absences (current portion) T ot al Current Liabilities Non cu rre n t Liabi li ti e s Compensated Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES NET AS S ETS Invest ed in Capital Asset s, net of related debt Restricted for Nonexpendable Expendable Unrest rict ed TO TAL NET AS S ETS June 30, 2007 $4,499,964 408,276 1,500,747 2,110,618 45,511 19,757 8,584,873 234,845 1,254,211 1,109,390 818,870 52,722,785 56,140,101 64,724,974 525,803 104,147 153,026 338,235 854,755 545,189 2,521,155 668,199 668,199 3,189,354 52,722,785 2,305,790 1,261,120 5,245,925 $61,535,620 Savannah State University Annual Financial Report FY 2007 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, 2007 REVENUES June 30, 2007 Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Utilit ies Supplies and Ot her Services Depreciat ion T ot al Operat ing Expenses Operat ing Income (loss) $11,210,313 (5,466,297) 13,757,058 170,067 570,907 90,243 20,878 2,294,867 111,260 3,286,383 15,128 431,838 2,151,211 33,237 134,785 28,811,878 8,061,985 12,373,132 6,008,024 289,508 591,528 3,526,391 2,710,378 11,296,406 2,417,986 47,275,338 (18,463,460) Savannah State University Annual Financial Report FY 2007 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, 2007 June 30, 2007 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 17,906,362 493,243 530,524 (1,890) 18,928,239 464,779 3,527,228 3,527,228 3,992,007 57,543,613 0 57,543,613 $61,535,620 Savannah State University Annual Financial Report FY 2007 9 Statement of Cash Flows S AVANNAH S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 Ot her 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 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 P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2007 $6,499,192 14,197,229 90,243 (21,397,877) (20,546,743) (3,526,391) (123,580) 102,436 1,586,564 110,453 3,937,372 15,328 429,731 2,375,842 49,902 (466,614) (16,666,913) 17,906,362 (133,218) 493,243 (1,890) 18,264,497 3,361,531 (3,727,005) (365,474) 388,396 530,524 (594,900) 324,020 1,556,130 3,178,679 $4,734,809 Savannah State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued S AVANNAH S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES : Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep r eciat io n Change in Asset s and Liabilit ies: Receivables, net Invent ories Ot her Asset s 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 Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($18,463,460) 2,417,986 320,673 (2,107) (310,033) 5,788 (6,726) (325,712) (80,379) (226,869) 3,926 ($16,666,913) ($165,697) Savannah State University Annual Financial Report FY 2007 11 SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations Savannah State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Savannah State University is one of thirty-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 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 FY2007, 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 2007 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 2007 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. 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $165,697 to Savannah State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Savannah State University Annual Financial Report FY 2007 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 compensated absences 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 $1,209,462 as of 7-1-2006. For FY2007, $851,936 was earned in compensated absences and employees were paid $848,010, for a net increase of $3,926. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,213,388. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Savannah State University Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $71,384 874,028 22,225 293,483 $1,261,120 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, 2007 $1,745,813 2,359,915 1,140,197 $5,245,925 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Savannah State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Savannah State University Annual Financial Report FY 2007 16 Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Savannah State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $6,395,919 and the bank balance was $7,401,519. Of the University's deposits, $6,987,331 were uninsured. Of these uninsured deposits, $1,068,972 were collateralized with securities held by the financial institution's trust department or agent in the University's name and $5,918,359 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. Savannah State University Annual Financial Report FY 2007 18 B. Investments At June 30, 2007, the carrying value of the University's investments was $1,109,390, 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 T otal Investment Pools $1,109,390 $1,109,390 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/searchRpts.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 Balanced Income Fund is 9.35 years. Of the University's total investment of $1,109,390 in the Balanced Income Fund, $669,628 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 does not have a formal policy for managing credit quality risk. As previously stated, the BOR Investment Pool is not rated. Savannah State University Annual Financial Report FY 2007 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $558,687 433,233 1,500,747 1,868,341 4,361,008 749,643 $3,611,365 Note 4. Inventories Inventories consisted of the following at June 30, 2007: P hysical P lant Ot h er T otal June 30, 2007 $45,088 423 $45,511 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $0. Savannah State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $575,975 0 575,975 65,675,569 2,520,259 7,206,873 6,762,706 55,285 82,220,691 20,929,618 1,269,924 4,721,353 5,163,337 7,020 32,091,251 50,129,440 $50,705,415 Addi ti o n s $0 444,189 444,189 Re ductions $0 0 En di n g B al a n ce 6 /3 0 /2 0 0 7 $575,975 444,189 1,020,164 3,301,152 633,324 246,923 4,181,399 99,915 190,670 290,585 68,976,721 2,520,259 7,740,282 6,818,959 55,285 86,111,505 1,495,259 98,919 621,545 200,881 1,382 2,417,986 1,763,413 $2,207,602 94,539 5,971 (157) 100,353 190,232 $190,232 22,424,877 1,368,843 5,248,359 5,358,247 8,559 34,408,884 51,702,621 $52,722,785 Savannah State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Ot her Deferred Revenue T otals June 30, 2007 $338,235 $338,235 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $1,209,462 $1,209,462 Additions $851,936 $851,936 Reductions Ending Balance June 30, 2007 $848,010 $848,010 $1,213,388 $1,213,388 C urre nt Portion $545,189 $545,189 Note 9. Significant Commitments The University did not have unearned, outstanding, construction or renovation contracts at June 30, 2007. Note 10. Lease Obligations Savannah State University had no expense for rental of real property and equipment under operating leases in FY2007. 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. Savannah State University Annual Financial Report FY 2007 22 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,244,360 $1,147,046 $1,138,813 Employees' Retirement System of Georgia Plan Description Savannah State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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. Savannah State University Annual Financial Report FY 2007 23 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, 2007, for employees covered by ERS was $32,500. The University's total payroll for all employees was $20,435,116. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $3,870, of which $3,383 was made by the University and $487 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, 2007 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. Savannah State University Annual Financial Report FY 2007 24 Funding Policy Savannah State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Savannah State University and the covered employees made the required contributions of $484,154 (9.66% or 8.13%) and $250,598 (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 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 2007 amounted to $37,323 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Savannah State University Annual Financial Report FY 2007 25 Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Savannah State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Savannah State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Savannah State University expects such amounts, if any, to be immaterial to its overall financial position. Savannah State University Annual Financial Report FY 2007 26 Litigation, claims and assessments filed against Savannah State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 181 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Savannah State University recognized as incurred $840,377 of expenditures, which was net of $350,454 of participant contributions. Savannah State University Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 7,796,459 1,700,820 2,323,659 72,892 465,124 76,363 1,279,667 102,084 $ 134,351 137,616 55,575 32,616 309,752 4,233 490,681 56,562 $ 86,264 1,028,354 221,013 31,191 166,750 19,869 575,144 2,574 $ 32,411 2,360,377 572,101 141,492 34,046 46,901 1,203,922 318,829 $ 12,500 1,569,116 424,898 71,590 28,945 28,862 739,326 12,157 $0 3,215,651 1,714,909 289,508 130,695 57,795 2,119,674 193,441 $ 13,817,068 $ 1,221,386 $ 2,131,159 $ 4,710,079 $ 2,887,394 $ 7,721,673 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Total Expenses $0 1,155,358 389,724 (245,327) 6,033 2,335,892 563,436 73,932 $0 1,945,002 $0 1,205,840 306,145 245,327 105,019 576,772 140,463 4,324,556 575,242 $0 1,083,165 $ 8,061,985 12,373,132 6,008,024 289,508 591,528 3,526,391 2,710,378 11,296,406 2,417,986 $ 4,279,048 $ 1,945,002 $ 7,479,364 $ 1,083,165 $ 47,275,338 Savannah State University Annual Financial Report FY 2007 28 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Financial Report For the Year Ended June 30, 2007 Skidaway Institute of Oceanography Savannah, Georgia Dr. James G. Sanders Director Marc Mascolo Assistant Director, Business Affairs SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2007 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 ................................................................................................................ 9 Note 1. Summary of Significant Accounting Policies ................................................................ 10 Note 2. Deposits and Investments................................................................................................ 14 Note 3. Accounts Receivable...................................................................................................... 15 Note 4. Inventories...................................................................................................................... 15 Note 5. Notes/Loans Receivable................................................................................................. 15 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 .......................................................................................................... 19 Note 12. Risk Management......................................................................................................... 20 Note 13. Contingencies................................................................................................................ 21 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 21 Note 15. Natural Classifications with Functional Classifications .............................................. 22 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 Skidaway Institute of Oceanography is proud to present its financial statements for fiscal year 2007. 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 2007 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 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 2007 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Total As s e ts June 30, 2007 $1,373,065 5,909,293 7,282,358 June 30, 2006 $1,157,916 5,782,840 6,940,756 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,002,761 218,682 1,221,443 908,019 184,065 1,092,084 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 5,827,152 233,763 $6,060,915 5,600,068 248,604 $5,848,672 The total assets of the institution increased by $341,602. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $367,131 in the category of Cash and Cash Equivalents. The increase was a result of the Institute's efforts to improve collections of accounts receivable and a result of several large purchases being encumbered in FY07 that will ultimately be paid in FY08. The corresponding decrease in accounts receivable was $158,504. An increase of $126,453 in the category of Capital Assets, net was due primarily to the construction of a new housing complex which was completed this year. The new 8 bed unit will serve visiting scientists, students and interns. The total liabilities for the year increased by $129,359. This was due to an increase of $100,999 in Accounts Payable, related to the June benefits payments being accrued but not paid until after June 30th, 2007. The other major contributing factor in the increase was the Institute's acquisition of a $150,000 note payable with Armstrong Atlantic State University. This note payable was recorded in Auxiliary funds and was used to assist in the final construction of the housing complex. The combination of the increase in total assets of $341,602 and the increase in total liabilities of $129,359 yields an increase in total net assets of $212,243. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $227,084. Skidaway Institute of Oceanography Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $5,179,869 7,793,320 (2,613,451) 2,763,073 149,622 62,621 212,243 5,848,672 0 5,848,672 $6,060,915 $5,521,546 8,108,863 (2,587,317) 2,529,280 (58,037) 693,431 635,394 5,213,278 0 5,213,278 $5,848,672 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: Skidaway Institute of Oceanography Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Income Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $4,455,718 32,575 49,063 642,513 5,179,869 2,639,862 104,162 82,920 (53,096) 2,773,848 62,621 62,621 $8,016,338 June 30, 2006 $4,898,913 49,645 61,469 511,519 5,521,546 2,149,045 389,818 20,564 (12,256) 2,547,171 693,431 693,431 $8,762,148 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research Academ ic Support Inst it ut ional Support P lant Operations and Maint enance Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $81,408 4,017,610 1,270,368 1,271,478 1,154,911 (2,455) 7,793,320 10,775 $7,804,095 June 30, 2006 $136,063 4,139,483 1,137,930 1,296,203 1,358,279 40,905 8,108,863 17,891 $8,126,754 Operating revenues decreased by ($341,677) in fiscal 2007. This was the result of a ($443,195) decrease in Grants and Contracts and a $199,010 increase in Rents and Royalties. The decrease in Grants and Contracts is a result of an increasingly competitive research grant environment primarily being driven by decreases in available funding opportunities at the State and Federal levels. The Institute has been impacted by the shrinking funding pool and growing numbers of applicants for these remaining funds. The increase in Rents and Royalties is a result of a strong year of operations for the Research Vessel Savannah. Ship days were 144 in fiscal 2007. Skidaway Institute of Oceanography Annual Financial Report FY 2007 4 Operating expenses decreased by ($315,543) as a result of the decreases in Grants and Contract Revenue. This decrease can be attributed to a decrease in Supplies and Other Services Expenses of ($312,517). The net effect on the Operating Loss was an increase in losses of $26,134. Nonoperating revenues and expenses increased by $233,793 for the year primarily due to an increase of $490,817 in State Appropriations. This increase was attributed to a one-time funding increase from the Board of Regents for startup expenses related to new faculty members. This increase was offset by a ($285,656) decrease in Gifts related to the one-time funding the Institute received in fiscal 2006 for emergency MR&R funds. Total Other Revenues also decreased by ($630,810) as a result of extraordinary one-item State Capital Grants and Gifts received in fiscal 2006 related to the completion of the ADA funded marsh boardwalk and replacement of the campus-wide electrical grid. The result for fiscal 2007 was an increase in Net Assets of $212,243. Statement of Cash Flows The final statement presented by Skidaway Institute of Oceanography is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($1,788,179) 2,882,986 (810,596) 82,920 367,131 435,368 $802,499 June 30, 2006 ($1,982,860) 2,963,589 (932,071) 20,564 69,222 366,146 $435,368 Skidaway Institute of Oceanography Annual Financial Report FY 2007 5 Capital Assets The Institute had one significant capital asset additions for facilities in fiscal year 2007. Construction of the "Commons", an eight bed housing complex, was completed and placed in service in February 2007. The cost of the project was $481,310 and funding was secured from several sources, including a grant from the National Science Foundation. 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 $588,949 of which $370,267 was reflected as current liability at June 30, 2007. 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 component unit that meets the criteria set forth in GASB Statement No. 39. 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 are not expected to increase in the coming year and competition for funds has increased dramatically. Therefore, the Institute must remain poised to take advantage of new and emerging opportunities. In summary, 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 G. Sanders Director, Skidaway Institute of Oceanography Skidaway Institute of Oceanography Annual Financial Report FY 2007 6 Statement of Net Assets S KIDAWAY INS TITUTE OF OCEANOGRAPHY S TATEMENT OF NET AS S ETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her P repaid Items T ot al Current Asset s June 30, 2007 $802,499 338,416 221,354 10,796 1,373,065 Noncurre nt Asse ts Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS 5,909,293 5,909,293 7,282,358 LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Deferred Revenue (not e 7) Lease P urchase Obligat ions (current port ion) Com pensat ed Absences (current port ion) Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) Not es and Loans P ayable (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES 220,382 412,112 82,141 277,625 10,501 1,002,761 84,118 134,564 218,682 1,221,443 NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Unrest rict ed TO TAL NET AS S ETS 5,827,152 233,763 $6,060,915 Skidaway Institute of Oceanography Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets S KIDAWAY INS TITUTE OF OCEANOGRAPHY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES June 30, 2007 Operat ing Revenues Grant s and Cont ract s Federal St at e Ot her Sales and Services Rent s and Royalt ies Auxiliary Ent erprises Residence Halls 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 Ut ilities Supplies and Ot her Services Depreciat ion T ot al Operat ing Expenses Operat ing Income (loss) NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s 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 $3,851,944 336,513 267,261 32,575 613,348 41,014 8,049 29,165 5,179,869 1,045,937 2,645,078 1,029,096 115,962 293,296 2,075,586 588,365 7,793,320 (2,613,451) 2,639,862 104,162 82,920 (10,775) (53,096) 2,763,073 149,622 62,621 62,621 212,243 5,848,672 5,848,672 $6,060,915 Skidaway Institute of Oceanography Annual Financial Report FY 2007 8 Statement of Cash Flows SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2007 C ASH FLO WS FRO M O PERATING ACTIVITIES Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Auxiliary Enterprise Charges: Residence Halls Other Organizations Other Receipts (payments) Net Cash Provided (used) by Operating Activities C ASH FLO WS FRO M NO N-CAPITAL FINANC ING ACTIVITIES State Appropriations Gifts and Grants Received for Other T han Capital Purposes Principal Paid on Installment Debt Interest Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities C ASH FLO WS FRO M CAPITAL AND RELATED FINANCING AC TIVITIES Capital Grants and Gifts Received 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 C ASH FLO WS FRO M INVESTING AC TIVITIES 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 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 Prepaid Items Accounts Payable Deferred Revenue Compensated Absences Net Cash Provided (used) by Operating Activities June 30, 2007 4,597,528 32,575 (3,412,942) (3,696,768) 41,014 8,049 642,365 (1,788,179) 2,639,862 104,162 (4,935) (6,103) 150,000 2,882,986 62,621 (761,811) (100,631) (10,775) (810,596) 82,920 82,920 367,131 435,368 $802,499 ($2,613,451) 588,365 158,503 (6,522) 100,999 (16,841) 768 ($1,788,179) Skidaway Institute of Oceanography Annual Financial Report FY 2007 9 SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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. Skidaway Institute of Oceanography does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Skidaway Institute of Oceanography is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Skidaway Institute of Oceanography) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. For FY2007, 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 2007 10 in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place. Basis of Accounting For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The Institute 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 Skidaway Institute of Oceanography Annual Financial Report FY 2007 11 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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institute when complete. For projects managed by the Institute, the Institute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Skidaway Institute of Oceanography. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Skidaway Institute of Oceanography Annual Financial Report FY 2007 12 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 Statements of Revenues, Expenses, and Changes in Net Assets. Skidaway Institute of Oceanography had accrued liability for compensated absences in the amount of $360,976 as of 7-1-2006. For FY2007, $274,690 was earned in compensated absences and employees were paid $273,923, for a net increase of $767. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $361,743. 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. 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. Reserve for Encum brances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $451,129 (217,366) $233,763 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. Skidaway Institute of Oceanography Annual Financial Report FY 2007 13 Income Taxes Skidaway Institute of Oceanography, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The Institute has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 Skidaway Institute of Oceanography Annual Financial Report FY 2007 14 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, 2007, the carrying value of deposits was $800,499 and the bank balance was $840,901. Of the Institute's deposits, $740,901 were uninsured and collateralized with securities held by the financial institution's trust department or agent in the Institute's name. B. Investments The Institute did not have any investments at June 30, 2007. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 Federal Financial Assist ance Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $338,416 221,354 559,770 0 $559,770 Note 4. Inventories The Institute did not have any inventories at June 30, 2007. Note 5. Notes/Loans Receivable The Institute did not have any notes/loans receivable at June 30, 2007. Skidaway Institute of Oceanography Annual Financial Report FY 2007 15 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $449,460 0 449,460 4,949,851 604,524 4,750,346 594,986 178,907 11,078,614 2,090,706 161,295 3,025,526 302,452 165,255 5,745,234 5,333,380 $5,782,840 Addi ti o n s $0 62,621 62,621 Re ductions $0 0 481,310 213,880 4,000 699,190 521,881 521,881 155,649 29,706 340,273 59,499 3,238 588,365 110,825 $173,446 474,888 474,888 46,993 $46,993 En di n g B al a n ce 6 /3 0 /2 0 0 7 $449,460 62,621 512,081 5,431,161 604,524 4,442,345 594,986 182,907 11,255,923 2,246,355 191,001 2,890,911 361,951 168,493 5,858,711 5,397,212 $5,909,293 Skidaway Institute of Oceanography Annual Financial Report FY 2007 16 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Research T otals June 30, 2007 $412,112 $412,112 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $182,772 Additions $0 Re du cti on s En di n g Bal an ce June 30, 2007 $100,631 $82,141 C u rre n t Porti on $82,141 Other Liabilities Compensated Absences Notes and Loans T ot al 360,976 0 360,976 274,690 150,000 424,690 273,923 4,935 278,858 361,743 145,065 506,808 277,625 10,501 288,126 Total Long Term O bligations $543,748 $424,690 $379,489 $588,949 $370,267 Note 9. Significant Commitments The Institute had no significant commitments at June 30, 2007. 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 2007 were $111,406 of which $10,775 represented interest. Total principal paid on the capital lease was $100,631 for the fiscal year ended June 30, 2007. 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, 2007: Equipment Total Assets Held Under Capital Lease $233,035 $233,035 Skidaway Institute of Oceanography Annual Financial Report FY 2007 17 OPERATING LEASES Skidaway Institute of Oceanography's noncancellable operating leases having remaining terms of more than one year expire in fiscal 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. 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, 2007, were as follows: Year Ending June 30: 2008 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $88,019 88,019 5,878 $82,141 $1,296 $1,296 Skidaway Institute of Oceanography's FY2007 expense for rental of real property and equipment under operating leases was $8,100. Skidaway Institute of Oceanography Annual Financial Report FY 2007 18 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Skidaway Institute of Oceanography participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Skidaway Institute of Oceanography who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Skidaway Institute of Oceanography makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $ 226,027 $ 228,046 $ 230,078 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Skidaway Institute of Oceanography makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Skidaway Institute of Oceanography Annual Financial Report FY 2007 19 Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Skidaway Institute of Oceanography and the covered employees made the required contributions of $88,203 (9.66% or 8.13%) and $49,838 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Skidaway Institute of Oceanography and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Skidaway Institute of Oceanography, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they Skidaway Institute of Oceanography Annual Financial Report FY 2007 20 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 Skidaway Institute of Oceanography expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Skidaway Institute of Oceanography (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, 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, 2007, Skidaway Institute of Oceanography recognized as incurred $113,954 of expenditures, which was net of $49,209 of participant contributions. Skidaway Institute of Oceanography Annual Financial Report FY 2007 21 Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2007 are shown below: Natural Classification Faculty Staff Benefits Travel Utilities Supplies and Others Services Depreciation Total Expenses Instruction $ 63,204 18,204 $ 81,408 Functional Classification FY2007 Research Academic Support Institutional Support $ 977,941 1,086,998 472,857 85,347 29,278 1,217,688 147,501 $ 4,792 548,302 126,878 6,937 10,736 488,549 84,174 $0 563,859 270,054 20,670 25 145,833 271,037 $ 4,017,610 $ 1,270,368 $ 1,271,478 Natural Classification Faculty Staff Benefits Travel Utilities Supplies and Others Services Dep reciat ion Total Expenses Functional Classification FY2007 Plant Operat ions Auxiliary T ot al & Maintenance Enterprises Expenses $0 444,063 140,642 3,008 244,620 245,133 77,445 $0 1,856 461 8,637 (21,617) 8,208 $ 1,045,937 2,645,078 1,029,096 115,962 293,296 2,075,586 588,365 $ 1,154,911 ($ 2,455) $ 7,793,320 Skidaway Institute of Oceanography Annual Financial Report FY 2007 22 SOUTH GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2007 Dr. Torri Lilly President South Georgia College Douglas, Georgia Wanda E. Lloyd Vice President for Fiscal Affairs SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 7 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 8 Statement of Cash Flows .............................................................................................................. 10 Note 1. Summary of Significant Accounting Policies ................................................................ 12 Note 2. Deposits and Investments............................................................................................... 17 Note 3. Accounts Receivable...................................................................................................... 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 .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 24 Note 13. Contingencies............................................................................................................... 25 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 25 Note 15. Natural Classifications with Functional Classifications .............................................. 27 Note 16. Component Units ......................................................................................................... 28 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 has grown as indicated by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY 2007 43 FY 2006 35 FY 2005 34 1,465 1,504 1,443 1,291 1,319 1,213 Overview of the Financial Statements and Financial Analysis South Georgia College is proud to present its financial statements for fiscal year 2007. 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 2007 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 South Georgia College Annual Financial Report FY 2007 1 fiscal snapshot of South Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $845,121 11,183,999 203,071 12,232,191 June 30, 2006 $953,956 9,535,680 203,070 10,692,706 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 476,158 93,753 569,911 350,538 48,609 399,147 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 11,183,999 153,798 103,892 220,591 $11,662,280 9,535,680 153,798 111,683 492,398 $10,293,559 The total assets of the institution increased by $1,539,485. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,648,319 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $170,764. The combination of the increase in total assets of $1,539,485 and the increase in total liabilities of $170,764 yields an increase in total net South Georgia College Annual Financial Report FY 2007 2 assets of $1,368,721. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,648,319. 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $6,286,659 14,115,966 (7,829,307) 6,813,348 (1,015,959) 2,384,680 1,368,721 10,293,559 0 10,293,559 $11,662,280 $5,431,987 14,062,052 (8,630,065) 6,893,457 (1,736,608) 81,486 (1,655,122) 13,000,789 (1,052,108) 11,948,681 $10,293,559 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: South Georgia College Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest m ent Income Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $1,334,621 2,641,588 225,519 1,962,922 122,009 6,286,659 6,426,140 427,501 30,496 (70,789) 6,813,348 2,384,680 2,384,680 $15,484,687 June 30, 2006 $1,120,425 2,303,551 214,915 1,715,876 77,220 5,431,987 5,834,756 968,558 28,561 61,582 6,893,457 81,486 81,486 $12,406,930 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $4,179,899 625,959 1,028,644 2,443,000 2,346,909 1,030,781 2,093,272 367,502 14,115,966 0 $14,115,966 June 30, 2006 $3,903,585 568,442 888,027 2,116,637 2,816,347 644,834 2,773,913 350,267 14,062,052 0 $14,062,052 Operating revenues increased by $854,672 in fiscal 2007. Revenue from Tuition & Fees increased 19% and included an 8% fees increase. Similar increases occurred in Grants and Contracts and Auxiliary. Grants and Contracts increases are directly related to the increase in assistance provided to support financial aid programs. South Georgia College Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $247,046 is a result of the changing environment of residential life on the College's campus. Beginning with Fall Semester, the meal plan program was changed from a declining balance account to a two-option meal plan program and a new health fee requirement for resident students was implemented. These changes coupled with a slight increase in the campus resident population generated a 14% increase in Auxiliary revenue. Nonoperating revenues and expenses decreased by ($80,109) for the year primarily due to a decrease in Other Nonoperating Revenues ($132,371). The compensation and employee benefits category increased by $848,331 and primarily affected all areas including Instruction, Academic Support, Institutional Support, and Student Support categories. The increase reflects the addition of 8 faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($48,479) 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. Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($6,758,451) 6,878,217 (18,760) 30,496 131,502 40,815 $172,317 June 30, 2006 ($6,989,339) 6,798,435 (10,191) (121,439) (322,534) 363,349 $40,815 South Georgia College Annual Financial Report FY 2007 5 Capital Assets The College had one significant capital asset addition for facilities in fiscal year 2007. The renovation of Stubbs Hall is progressing with completion expected in the early months of Fall Semester 2007. This renovation is funded by 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 South Georgia College had Long-Term Debt and Liabilities of $320,121 of which $226,368 was reflected as current liability at June 30, 2007. 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 FY2007. South Georgia College Foundation, Inc. had investments of over $2.8 million as of June 30, 2007. 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. Torri Lilly, President South Georgia College South Georgia College Annual Financial Report FY 2007 6 Statement of Net Assets S outh Georgia College S TATEMENT OF NET AS S ETS June 30, 2007 C om pone nt Un i t AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Inventories (note 4) P repaid it ems T ot al Current Asset s Noncurrent Asse ts Noncurrent Cash Short -t erm Invest m ent s Invest m ent s (including Real Est at e) Not es Receivable, net 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 Liabilitie s Account s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n e x p e n dable E x p e n dable Unrest rict ed TO TAL NET AS S ETS South Georgia College South Ge orgia C olle ge Fou n dati on , In c. $168,519 128,976 352,160 183,430 12,036 845,121 3,798 150,000 49,273 11,183,999 11,387,070 12,232,191 117,480 13,100 1,620 100 117,490 226,368 476,158 93,753 93,753 569,911 11,183,999 153,798 103,892 220,591 $11,662,280 $129,080 31,893 160,973 7,474,284 30,500 2,843,579 8,214,375 229,807 18,792,545 18,953,518 145,875 145,875 15,801,289 15,801,289 15,947,164 117,177 2,211,518 162,165 515,494 $3,006,354 South Georgia College Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets S outh Georgia College S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES South Georgia College C om pone nt Unit South Ge orgia C olle ge Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowment Income (per spending plan) Grant s and Cont ract s Federal Other Sales and Services Auxiliary Ent erprises Residence Halls Bookst ore Food 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion P aym ent s t o or on behalf of Sout h Georgia College T ot al Operat ing Expenses Operat ing Income (loss) $2,752,890 (1,418,269) 2,625,566 16,022 225,519 596,827 679,351 459,317 204,469 22,958 122,009 6,286,659 2,044,940 3,741,627 1,966,309 102,350 116,462 1,086,481 729,501 3,654,664 673,632 14,115,966 (7,829,307) $0 95,711 70,411 166,122 36,650 169,887 206,537 (40,415) South Georgia College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued S outh Georgia College S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 South Georgia C olle ge C om pone nt Unit South Ge orgia C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 6,426,140 427,501 30,496 (70,789) 6,813,348 (1,015,959) 2,384,680 2,384,680 1,368,721 10,293,559 10,293,559 $11,662,280 324,528 324,528 284,113 65,586 65,586 349,699 2,656,655 2,656,655 $3,006,354 South Georgia College Annual Financial Report FY 2007 9 Statement of Cash Flows S outh Georgia College S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food 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 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, 2007 $1,340,013 2,947,632 225,519 (6,539,463) (5,709,093) (1,086,481) 587,765 673,076 455,865 202,028 22,573 122,115 (6,758,451) 6,426,140 13,877 427,503 10,697 6,878,217 2,384,680 (2,403,440) (18,760) 30,496 30,496 131,502 40,815 $172,317 South Georgia College Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued S outh Georgia College S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 South Georgia College had no non-cas h trans actions for fis cal 2007. June 30, 2007 ($7,829,307) 673,632 261,952 (19,090) (2,525) 39,777 870 36,760 79,480 ($6,758,451) South Georgia College Annual Financial Report FY 2007 11 SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, South Georgia College is reporting the activity for South 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 South Georgia College Annual Financial Report FY 2007 12 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. South Georgia College Annual Financial Report FY 2007 13 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants 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/or 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 College System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to South Georgia College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. South Georgia College Annual Financial Report FY 2007 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 compensated absences 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 $240,640 as of 7-1-2006. For FY2007, $266,651 was earned in compensated absences and employees were paid $187,170, for a net increase of $79,481. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $320,121. 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 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $51,826 52,066 $103,892 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, College 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, 2007 $287,182 6,314 (72,905) $220,591 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes South Georgia College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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 South Georgia College Annual Financial Report FY 2007 16 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Note 2. Deposits and Investments A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus 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. South Georgia College Annual Financial Report FY 2007 17 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, 2007, the carrying value of deposits was $318,142 and the bank balance was $584,872. Of the College's deposits, $384,872 were uninsured. Of these uninsured deposits, $384,872 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, 2007. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $78,571 49,474 128,976 243,115 500,136 19,000 $481,136 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore T otal $183,430 $183,430 Note 5. Notes/Loans Receivable Institutional Loans comprise substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $0. South Georgia College Annual Financial Report FY 2007 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $197,146 197,146 1,293,392 20,887,418 1,239,613 1,060,488 1,264,446 25,745,357 320,517 13,064,450 920,975 906,156 1,194,725 16,406,823 9,338,534 $9,535,680 Addi ti o n s $0 2,380,031 2,380,031 Re ductions $0 0 4,650 18,759 23,409 46,562 564,376 23,288 25,711 13,695 673,632 (650,223) $1,729,808 81,489 73,463 154,952 73,463 73,463 81,489 $81,489 En di n g B al a n ce 6 /3 0 /2 0 0 7 $197,146 2,380,031 2,577,177 1,293,392 20,887,418 1,239,613 983,649 1,209,742 25,613,814 367,079 13,628,826 944,263 931,867 1,134,957 17,006,992 8,606,822 $11,183,999 South Georgia College Annual Financial Report FY 2007 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Research T otals June 30, 2007 $1,620 $1,620 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2006 $240,640 Additions $266,651 Reductions Ending Balance June 30, 2007 $187,170 $320,121 Total Long Term Obligations $240,640 $266,651 $187,170 $320,121 Current Portion $226,368 $226,368 Note 9. Significant Commitments The College did not have any significant unearned, outstanding, construction or renovation contracts as of June 30, 2007. Note 10. Lease Obligations CAPITAL LEASES South Georgia College holds no capital leases but is obligated under various operating leases for the use of equipment. OPERATING LEASES South Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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. South Georgia College Annual Financial Report FY 2007 20 Future commitments for non-cancelable operating leases having remaining terms in excess of one year as of June 30, 2007 are as follows: Year Ending June 30: 2008 2009 2010 2011 T ot al m inim um lease paym ent s Year 1 2 3 4 Real P ropert y and Equipm ent Operat ing Leases $71,258 70,550 36,306 9,686 $187,800 South Georgia College expense for rental of real property and equipment under operating leases was $71,198 in FY2007. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $363,798 $321,012 $308,137 South Georgia College Annual Financial Report FY 2007 21 Employees' Retirement System of Georgia Plan Description South Georgia College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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, 2007, for employees covered by ERS was $23,346. The College's total payroll for all employees was $5,786,567. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. South Georgia College Annual Financial Report FY 2007 22 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $2,780, of which $2,430 was made by the College and $350 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, 2007 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 College system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy South Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $104,190 (9.66% or 8.13%) and $58,782 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. South Georgia College Annual Financial Report FY 2007 23 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 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 2007 amounted to $8,296 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. 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 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 South Georgia College Annual Financial Report FY 2007 24 employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. South Georgia College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although South Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against South Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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 South Georgia College Annual Financial Report FY 2007 25 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, 2007, there were 82 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, South Georgia College recognized as incurred $320,750 of expenditures, which was net of $135,058 of participant contributions. South Georgia College Annual Financial Report FY 2007 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acu lt 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 T otal Exp enses Inst ruct ion $ 2 ,04 3,49 2 7 36 ,14 7 73 8,64 0 4 4,29 6 3 3,79 7 36 9,69 9 2 13,82 8 $ 4 ,17 9,89 9 Functional Clas s ification FY2007 Academ ic Sup p o r t St udent Se r v ic es $0 4 04 ,3 06 118 ,7 00 $0 63 3,7 9 6 18 4,5 3 5 3,5 7 1 2 5,9 6 5 5 ,0 48 80 ,6 39 13 ,6 95 10,9 9 2 17 0,7 0 4 2,6 5 2 $ 6 25 ,9 59 $ 1,02 8,6 4 4 Inst it ut ional Sup p o r t $0 1,0 21,63 2 60 5,84 6 10 2,35 0 3 4,32 5 3 0,70 0 64 7,36 0 787 $ 2 ,44 3,00 0 Natural Classification Faculty Staff Benefits Personal Services T ravel Scholarships and Fellowships Utilities Supplies and Others Services Dep reciat ion Total Expenses P lan t Op erat io n s & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary En t erp rises Un allo cat ed Expenses $0 854,222 298,444 (276,640) 3,154 638,254 823,076 6,399 $0 1,0 3 0 ,7 8 1 $ 1,448 9 1,5 2 4 2 0 ,14 4 2 7 6 ,6 4 0 5,151 55,700 10,710 1,5 6 3 ,18 6 68,769 $0 367,502 $ 2,346,909 $ 1,030,781 $ 2,093,272 $ 367,502 T otal Expenses $ 2,044,940 3,741,627 1,966,309 102,350 116,462 1,086,481 729,501 3,654,664 673,632 $ 14,115,966 South Georgia College Annual Financial Report FY 2007 27 Note 16. Component Units South Georgia College Foundation, Inc. is a chartered not for profit corporation. The Foundation was created for the express purpose of serving the interests of the College in carrying out its programs and activities including the solicitation, receipt and investment of gifts, donations, and grants. The Foundation is a legal entity separate from the College. On July 26, 2006, South Georgia College Foundation, Inc. formed its wholly owned subsidiary, SGC Real Estate Foundation, LLC. SGC Real Estate Foundation, LLC was created for a project that includes the design, construction and equipping of new student housing facilities and other improvements related thereto including parking and other amenities for the benefit of the students of South Georgia College. SGC Real Estate Foundation, LLC has borrowed the funds necessary to construct the project and was in the process of constructing the project at June 30, 2007. SGC Real Estate Foundation, LLC has also entered into a ground lease and rental agreement with the Board of Regents of the University System of Georgia for the rent and use of the premises. 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, 2007, the Foundation distributed $169,887 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the office of the Vice President for Business Affairs, South Georgia College, 100 West College Park Drive, Douglas, GA 31533. Investments for Component Units: South Georgia College Foundation, Inc. holds investments in the amount of $2.8 million. The $2.2 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. South Georgia College Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships. South Georgia College Annual Financial Report FY 2007 28 Investments are comprised of the following amounts at June 30, 2007: Cash held by investment organization Certificates of Deposit Equity Securities Mutual Funds Real Estate Investment Pools: BOR Balanced Income Fund Total Return Fund & Holding Fund Total Investments Cost $77,419 30,500 56,769 31,829 13,500 89,510 2,336,456 $2,635,983 Fair Value $77,419 30,500 61,945 37,272 13,500 88,541 2,564,902 $2,874,079 Capital Assets for Component Units: South Georgia College Foundation, Inc. holds the following capital assets as of June 30, 2007: Capital Assets not being Depreciated: Construction in Progress Capital Assets, Net June 30, 2007 $8,214,375 $8,214,375 Long-term Liabilities for Component Units: Long-term liability activity for the year ended June 30, 2007 was as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $15,801,289 $0 $15,801,289 $0 $15,801,289 $0 $0 $15,801,289 $0 On December 14, 2006, the Atkinson County - Coffee County Joint Development Authority (the "Authority") issued certain bonds totaling $15,395,000. Proceeds of the sale of the bonds will be loaned to SGC Real Estate Foundation, LLC whose sole member is South Georgia College Foundation, Inc. Proceeds of the Series 2006 Bonds will be used by SGC Real Estate Foundation, LLC to finance or reimburse, in whole or in part, the cost of construction and equipping of a new student housing complex containing approximately 252 beds including related parking and the acquisition and renovation of the property known as the "Clower Center" all located on the campus of South Georgia College, a unit of the University System of Georgia; fund capitalized South Georgia College Annual Financial Report FY 2007 29 interest on the Series 2006 Bonds; fund a debt service reserve fund for the Series 2006 Bonds; and pay costs of issuance of the Series 2006 Bonds. Interest rates on the bonds range from 4% to 6%. The real property upon which the Project is located is owned by the Board of Regents of the University System of Georgia and is leased by the Board of Regents to SGC Real Estate Foundation, LLC pursuant to a Ground Lease. Pursuant to the commencement of a Rental Agreement upon completion of the project, SGC Real Estate Foundation, LLC will rent the Project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents will make monthly fixed rental payments for the use and occupancy of the Project, in amounts that SGC Real Estate Foundation, LLC estimates will be sufficient to pay, among other things, the debt service on the Series 2006 Bonds. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 50,000 75,000 100,000 125,000 1,060,000 1,855,000 2,790,000 3,995,000 5,345,000 15,395,000 406,289 $15,801,289 Bonds Payable Interest $730,625 730,625 728,625 725,625 721,625 3,504,275 3,196,575 2,664,125 1,847,625 743,650 15,593,375 $15,593,375 Total $730,625 780,625 803,625 825,625 846,625 4,564,275 5,051,575 5,454,125 5,842,625 6,088,650 30,988,375 406,289 $31,394,664 South Georgia College Annual Financial Report FY 2007 30 SOUTHERN POLYTECHNIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 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 2007 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 .......................................................................................................... 24 Note 12. Risk Management......................................................................................................... 26 Note 13. Contingencies............................................................................................................... 27 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 27 Note 15. Natural Classifications with Functional Classifications .............................................. 28 Note 16. Component Units ......................................................................................................... 29 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 193 acres and contains 46 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. FY2007 FY2006 FY2005 Students Students Faculty (Headcount) (FTE) 159 4,207 3,523 143 3,807 3,184 120 3,803 3,157 Overview of the Financial Statements and Financial Analysis Southern Polytechnic State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 Southern Polytechnic State University Annual Financial Report FY 2007 1 fiscal snapshot of Southern Polytechnic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and noncurrent), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As s e ts June 30, 2007 $6,468,154 80,039,928 3,457,154 89,965,236 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 5,231,275 31,764,719 36,995,994 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 47,860,915 1,674,222 1,984,046 1,450,059 $52,969,242 June 30, 2006 $5,564,148 81,858,014 3,253,329 90,675,491 5,091,904 32,506,451 37,598,355 48,854,109 1,448,576 2,119,976 654,475 $53,077,136 The total assets of the institution decreased by ($710,255). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($1,818,086) in the category of Capital Assets, net. 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. Southern Polytechnic State University Annual Financial Report FY 2007 2 The total liabilities for the year decreased by ($602,361). The combination of the decrease in total assets of ($710,255) and the decrease in total liabilities of ($602,361) yields a decrease in total net assets of ($107,894). The decrease in total net assets is primarily a combination of a decrease in the category of Invested in Capital Assets, net of debt, in the amount of ($993,194) and an increase in Unrestricted Net Assets of $795,584. 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $25,074,127 45,527,864 (20,453,737) 19,662,408 (791,329) 683,435 (107,894) 53,077,136 0 53,077,136 $52,969,242 $21,808,121 42,586,381 (20,778,260) 18,858,541 (1,919,719) 3,279,160 1,359,441 51,717,695 0 51,717,695 $53,077,136 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: Southern Polytechnic State University Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $13,712,299 2,941,159 967,610 7,102,092 350,967 25,074,127 19,987,862 0 669,606 381,397 255,190 21,294,055 683,435 0 683,435 $47,051,617 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $19,365,144 228,354 (7,819) 3,441,709 3,501,590 6,417,848 4,758,754 2,065,254 5,232,099 524,931 45,527,864 1,631,647 $47,159,511 June 30, 2006 $11,561,954 2,537,120 913,174 6,411,786 384,087 21,808,121 19,819,607 102,335 503,332 106,609 (1,630) 20,530,253 1,512,233 1,766,927 3,279,160 $45,617,534 June 30, 2006 $20,053,344 141,367 307 2,991,563 3,268,581 6,270,643 5,494,313 1,351,408 3,014,855 0 42,586,381 1,671,712 $44,258,093 Southern Polytechnic State University Annual Financial Report FY 2007 4 Operating revenues increased by $3,266,006 in fiscal 2007. This is the result of an increase in tuition & fees coupled with an increase in enrollment. The Auxiliary revenue increase of $690,306 is a result of the continuing growth of residential life on the University's campus. Nonoperating revenues increased by $763,802 for the year primarily due to an increase of $168,255 in State Appropriations and investment income growth of $274,788. The compensation and employee benefits category increased by $1,929,037 and primarily affected the Instruction and Plant Operations and Maintenance categories. Statement of Cash Flows The final statement presented by Southern Polytechnic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($17,449,024) 20,892,153 (2,987,250) 381,397 837,276 2,618,400 $3,455,676 June 30, 2006 ($18,162,359) 19,876,003 (1,675,014) 106,650 145,280 2,473,120 $2,618,400 Southern Polytechnic State University Annual Financial Report FY 2007 5 Capital Assets Southern Polytechnic State University expended $1,214,146 in capital additions. $683,435 of these capital projects utilized funding from the Georgia State Financing 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 $33,307,216 of which $1,542,497 was reflected as current liability at June 30, 2007. 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 FY2007. The Southern Polytechnic State University Foundation, Inc. had endowment and other investments of $8 million as of June 30, 2007. 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. Lisa A. Rossbacher, President Southern Polytechnic State University Southern Polytechnic State University Annual Financial Report FY 2007 6 Statement of Net Assets SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2007 C ompone nt Unit AS S ETS C urrent Assets Cash and Cash Equivalents Accounts Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Leases Receivable P ledges Receivable P repaid items T otal Current Asset s Noncurre nt Assets Short -t erm Invest ment s Investments (including Real Est at e) Not es Receivable, net Leases Receivable P ledges Receivable Capit al Assets, net (not e 6) Ot her Assets T otal Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C urre n t Li abi li ti e s Accounts P ayable Salaries P ayable Deposit s Deferred Revenue (not e 7) Deposit s Held for Ot her Organizations Lease P urchase Obligat ions (current portion) Compensated Absences (current port ion) Revenue/Mort gage Bonds Payable (current) T otal Current Liabilit ies Non cu rre nt Li abi li ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mort gage Bonds Payable (noncurrent) Ot her Long-T erm Liabilit ies T otal Noncurrent Liabilit ies TO TAL LIABILITIES NET AS S ETS Invested in Capital Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Un rest rict ed TO TAL NET AS S ETS S ou th e rn Pol yte ch n i c S tate Un i ve rsi ty S ou th e rn Polytechnic State Un i ve rsi ty Fou n dation , In c. $3,455,676 139,249 2,013,978 859,251 6,468,154 3,118,943 338,211 80,039,928 83,497,082 89,965,236 $498,996 964,485 2,460,125 83,859 3,944 4,011,409 4,119,621 3,895,606 49,915,259 110,361 517,247 58,558,094 62,569,503 268,161 149,566 12,767 2,750,941 507,343 870,765 671,732 5,231,275 31,308,248 456,471 31,764,719 36,995,994 47,860,915 1,674,222 1,984,046 1,450,059 $52,969,242 623,843 1,683,490 900,000 3,207,333 20,034,483 33,457,823 551,896 54,044,202 57,251,535 2,008,952 1,547,762 1,761,254 $5,317,968 Southern Polytechnic State University Annual Financial Report FY 2007 7 Statement of Revenues, Expenses and Changes in Net Assets S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Ot h er Sales and Services Rent s and Royalt ies 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Dep reciat io n Ot her Operat ing Expense P aym ent s t o or on behalf of Sout hern P olyt echnic St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) S ou th e rn Polytechnic State Un i ve rs i ty S ou th e rn Polyte chnic State Un i ve rsi ty Fou n dati on , In c. $15,655,972 (1,943,673) 2,771,044 21,030 149,085 967,610 4,725,349 86,557 848,713 205,407 214,950 889,006 132,110 350,967 25,074,127 10,215,708 12,518,739 6,164,461 64,060 295,281 2,335,703 1,350,170 9,586,098 2,997,644 45,527,864 (20,453,737) $0 1,971,416 383,780 2,563,822 4,919,018 5,168 68,991 109,137 1,197,164 238,946 537,749 2,157,155 2,761,863 Southern Polytechnic State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit S ou th e rn Polytechnic State Un i ve rs i ty S ou th e rn Polyte chnic State Un i ve rsi ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 19,987,862 669,606 381,397 (1,631,647) 255,190 19,662,408 (791,329) 683,435 683,435 (107,894) 53,077,136 53,077,136 $52,969,242 196,490 (1,604,483) (1,407,993) 1,353,870 11,047 11,047 1,364,917 3,953,051 3,953,051 $5,317,968 Southern Polytechnic State University Annual Financial Report FY 2007 9 Statement of Cash Flows S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 Ot her 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 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, 2007 $14,097,620 3,128,276 967,610 (17,328,095) (22,584,230) (1,983,152) 55,933 3,676,907 52,013 841,793 206,346 452,486 883,374 107,823 (23,728) (17,449,024) 19,987,862 (34,435) 669,606 269,120 20,892,153 683,435 (1,214,146) (824,892) (1,631,647) (2,987,250) 922 380,475 381,397 837,276 2,618,400 $3,455,676 Southern Polytechnic State University Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2007 ($20,453,737) 2,997,644 54,455 (120,262) 55,933 (218,628) 270,556 (185,629) 150,644 ($17,449,024) $922 Southern Polytechnic State University Annual Financial Report FY 2007 11 Southern Polytechnic State University NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 compose the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Southern Polytechnic State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Southern Polytechnic State University) 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 FY2007, Southern Polytechnic State University is reporting the activity for the Southern Polytechnic State University Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Southern Polytechnic State University Annual Financial Report FY 2007 12 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. 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 Southern Polytechnic State University Annual Financial Report FY 2007 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. 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Southern Polytechnic State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Southern Polytechnic State University Annual Financial Report FY 2007 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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Southern Polytechnic State University had accrued liability for compensated absences in the amount of $977,559 as of 7-1-2006. For FY2007, $862,509 was earned in compensated absences and employees were paid $711,865, for a net increase of $150,644. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $1,128,203. 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. Southern Polytechnic State University Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $1,272,488 329,048 143,116 239,394 $1,984,046 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, 2007 $1,975,024 1,947,013 (2,471,978) $1,450,059 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. Southern Polytechnic State University Annual Financial Report FY 2007 16 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Southern Polytechnic State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $2,934,732 and the bank balance was $4,746,011. Of the University's deposits, $4,646,011 were uninsured. Of these uninsured deposits, $4,646,011 were uncollateralized. Southern Polytechnic State University Annual Financial Report FY 2007 18 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. In ve stm e n t type : Equit y Securit ies - Domest ic Invest ment P ools Board of Regent s Short -T erm Fund Balanced Income Fund T ot al Ret urn Fund T ot al Invest ment s Fair Value $3,404 449,031 499,627 2,615,912 $3,567,974 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/searchRpts.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 2.24 years. Of the University's total investment of $449,031 in the Short Term Fund, $447,325 is invested in debt securities. The Weighted Average Maturity the Balanced Income Fund is 9.35 years. Of the University's total investment of $499,627 in the Balanced Income Fund, $301,575 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 9.35 years. Of the University's total investment of $2,615,912 in the Total Return Fund, $742,657 is invested in debt securities. Southern Polytechnic State University Annual Financial Report FY 2007 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 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, 2007, $3,404 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $999,351 497,783 139,249 1,346,420 2,982,803 829,576 $2,153,227 Note 4. Inventories Southern Polytechnic State University had no inventories at June 30, 2007. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007, the University had no allowance for uncollectible loans. Southern Polytechnic State University Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $1,700,397 1,668,745 3,369,142 1,623,504 56,644,304 567,531 8,818,863 33,792,318 5,902,730 30,500 107,379,750 784,694 15,103,228 508,190 7,147,990 774,407 4,558,470 13,899 28,890,878 78,488,872 $81,858,014 Addi ti o n s $0 592,468 592,468 Re ductions $0 0 8,100 395,490 218,088 621,678 58,446 1,387,538 2,853 433,105 844,808 270,131 763 2,997,644 (2,375,966) ($1,783,498) 128,874 6,184 135,058 1 94,285 6,184 100,470 34,588 $34,588 En di n g B al a n ce 6/30/2007 $1,700,397 2,261,213 3,961,610 1,623,504 56,644,304 575,631 9,085,479 33,792,318 6,114,634 30,500 107,866,370 843,139 16,490,766 511,043 7,486,810 1,619,215 4,822,417 14,662 31,788,052 76,078,318 $80,039,928 Southern Polytechnic State University Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $2,203,854 547,087 $2,750,941 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Long Term Obligations Beginning Balance July 1, 2006 $33,003,905 977,559 $33,981,464 Additions $0 862,509 $862,509 Reductions Ending Balance June 30, 2007 $824,892 $32,179,013 711,865 1,128,203 $1,536,757 $33,307,216 Current Portion $870,765 671,732 $1,542,497 Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation contracts as of June 30, 2007. Note 10. Lease Obligations Southern Polytechnic State University is obligated under capital leases and installment purchase agreements for the acquisition of real property. Southern Polytechnic State University Annual Financial Report FY 2007 22 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2027 and 2029. Expenditures for fiscal year 2007 were $2,456,539 of which $1,631,647 represented interest. Total principal paid on capital leases was $824,892 for the fiscal year ended June 30, 2007 with interest rates of 5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Total Assets Held Under Capital Lease $32,173,103 $32,173,103 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. Southern Polytechnic State University had two capital leases with related entities in the current fiscal year. In July 2005, Southern Polytechnic State University entered into a capital lease of $11,643,862 at 5.0 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 $22,148,456 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, 2007 on these capital leases is $32,179,013. 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) having remaining terms in excess of one year as of June 30, 2007, were as follows: Southern Polytechnic State University Annual Financial Report FY 2007 23 Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Real P roperty and Equipm ent Capit al Leases $2,460,140 $2,460,140 $2,460,140 $2,460,140 $2,460,140 12,300,700 12,300,700 12,300,700 3,190,716 52,393,516 20,214,503 $32,179,013 Southern Polytechnic State University had no expense for rental of real property and equipment under operating leases in FY2007. 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,072,920 $1,016,840 $1,006,475 Southern Polytechnic State University Annual Financial Report FY 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $748,281(9.66% or 8.13%) and $421,500(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 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 Southern Polytechnic State University Annual Financial Report FY 2007 25 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 2007 amounted to $80,752 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. 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 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. Southern Polytechnic State University Annual Financial Report FY 2007 26 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Southern Polytechnic State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Southern Polytechnic State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 178 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Southern Polytechnic State University recognized as incurred $916,126 of expenditures, which was net of $352,034 of participant contributions. Southern Polytechnic State University Annual Financial Report FY 2007 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 10,155,799 3,011,729 2,951,511 (1,801) 105,571 42,770 1,961,498 1,138,067 $ 36,552 30,406 17,050 6,573 112,984 120 24,669 $0 (7,996) 177 $ 23,988 2,085,510 462,283 62,288 22,008 748,013 37,619 $0 1,822,873 431,766 49,502 12,873 1,175,630 8,946 ($ 631) 3,292,144 1,659,236 17,816 50,721 (7,883) 1,275,413 131,032 $ 19,365,144 $ 228,354 ($ 7,819) $ 3,441,709 $ 3,501,590 $ 6,417,848 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses T ot al Expenses $0 1,662,387 484,617 (407,931) 4,092 1,180,455 1,531,851 303,283 $0 20 48,045 2,017,189 $0 613,690 157,978 407,931 16,534 205,530 99,827 2,877,020 853,589 $0 524,931 $ 10,215,708 12,518,739 6,164,461 64,060 295,281 2,335,703 1,350,170 9,586,098 2,997,644 $ 4,758,754 $ 2,065,254 $ 5,232,099 $ 524,931 $ 45,527,864 Southern Polytechnic State University Annual Financial Report FY 2007 28 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, 2007, the Foundation distributed $537,749 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office, Southern Polytechnic State University, 1100 South Marietta Pkwy., Marietta, GA, 30060-2896. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment and other investments in the amount of $8 million. The $2 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, 2007: Cost Fair Value Corporate Bonds Equity Securities Mutual Funds $3,480,727 2,302,121 1,827,458 $3,608,274 2,579,495 1,827,458 Total Investments $7,610,306 $8,015,227 Southern Polytechnic State University Annual Financial Report FY 2007 29 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, 2007 are as follows: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $35,192,327 0 $35,192,327 $0 551,896 $551,896 $834,504 $834,504 $34,357,823 551,896 $34,909,719 $900,000 $900,000 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $900,000 970,000 1,000,000 1,030,000 1,065,000 5,980,000 7,615,000 9,780,000 5,690,000 34,030,000 327,823 $34,357,823 Bonds Payable Interest $1,599,420 1,576,020 1,546,920 1,515,920 1,481,415 6,748,275 5,111,675 2,945,094 543,750 23,068,489 $23,068,489 Total $2,499,420 2,546,020 2,546,920 2,545,920 2,546,415 12,728,275 12,726,675 12,725,094 6,233,750 57,098,489 327,823 $57,426,312 Southern Polytechnic State University Annual Financial Report FY 2007 30 GEORGIA INSTITUTE OF TECHNOLOGY Financial Report For the Year Ended June 30, 2007 Georgia Institute of Technology Atlanta, Georgia Dr. G. Wayne Clough President Mr. Robert K. Thompson Executive Vice President for Administration and Finance GEORIGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2007 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...................................................................................................... 27 Note 4. Inventories...................................................................................................................... 27 Note 5. Notes/Loans Receivable................................................................................................. 27 Note 6. Capital Assets................................................................................................................. 28 Note 7. Deferred Revenue........................................................................................................... 29 Note 8. Long-Term Liabilities .................................................................................................... 29 Note 9. Significant Commitments............................................................................................... 29 Note 10. Lease Obligations......................................................................................................... 29 Note 11. Retirement Plans .......................................................................................................... 34 Note 12. Risk Management......................................................................................................... 37 Note 13. Contingencies............................................................................................................... 38 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 39 Note 15. Natural Classifications with Functional Classifications .............................................. 40 Note 16. Component Units ......................................................................................................... 41 GEORGIA INSTITUTE OF TECHNOLOGY Management's Discussion and Analysis Introduction The Georgia Institute of Technology is one of the 35 institutions of higher education of the University System of Georgia. 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 for nearly 18,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked as one of the top ten public universities in the nation by U.S. News and World Report, with four schools in the College of Engineering listed among the country's top five. Georgia Tech's undergraduate engineering programs are ranked in the Top 10 and the graduate engineering program is consistently ranked in the Top 5. Georgia Tech offers degrees through the Colleges of Engineering, Architecture, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 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 institution 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 reflected by the faculty and student numbers below and other comparisons that follow. Students Students Faculty (Headcount) (FTE) FY2007 925 17,936 17,027 FY2006 878 17,135 16,299 FY2005 844 16,841 16,022 Overview of the Financial Statements and Financial Analysis The Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2007, which began July 1, 2006 and ended June 30, 2007. 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; Georgia Institute of Technology Annual Financial Report FY 2007 1 and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for FY 2006 and FY 2007. 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, 2007: Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $171,893,931 1,261,604,842 70,001,585 1,503,500,358 June 30, 2006 $141,652,175 1,149,606,811 63,439,284 1,354,698,270 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 102,305,597 417,817,152 520,122,749 82,815,063 348,919,406 431,734,469 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 As s e ts 851,635,161 53,098,742 30,748,494 49,599,664 (1,704,452) $983,377,609 814,640,088 47,535,014 26,607,480 15,941,134 18,240,085 $922,963,801 Georgia Institute of Technology Annual Financial Report FY 2007 2 The total assets of the institution increased by $148,802,088, due primarily to an increase of $111,998,031 in capital assets. The total liabilities for the year increased by $88,388,280. This was due primarily to an increase in noncurrent Lease Purchase Obligations of $66.5 million and accounts payable of $12.2 million. The combination of the increase in total assets of $148,802,088, and the increase in total liabilities of $88,388,280 yields an increase in total net assets of $60,413,808, with most of the net gain in capital assets. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $667,930,667 919,242,200 (251,311,533) 259,899,848 8,588,315 51,825,493 60,413,808 922,963,801 0 922,963,801 $983,377,609 $624,286,380 842,777,843 (218,491,463) 222,812,183 4,320,720 13,145,526 17,466,246 905,497,555 0 905,497,555 $922,963,801 Georgia Institute of Technology Annual Financial Report FY 2007 3 The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in both Operating and Nonoperating Revenues. Overall, revenue increased by $119.6 million across the board as illustrated in the graph below. Georgia Institute of Technology Revenue (dollars in millions) FY 2007 $996.8 FY 2006 $877.2 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 $439.3$422.6 $120.6 $106.1 Tuition and Fees Gifts, Grants and Contracts $51.8 $13.2 Capital Gifts and Grants $132.6$101.3 Sales, Services, and Other $252.6$234.0 State Appropriations The following graph shows year-to-date expenditure changes by object of expenditure: Total operating expenses for the year were approximately $919.2 million, an increase of $76.5 million, or 9.1% over the previous year. Significant increases in operating expenses from fiscal year 2006 to fiscal year 2007 include compensation and employee benefits, and Supplies and Other Services. The compensation and employee benefits category increased by $33.8 million primarily due to increased research expenditures. Travel, Supplies and Other Services expenses increased from $219.0 million in fiscal year 2006 to $253.1 million in fiscal year 2007. Georgia Institute of Technology Annual Financial Report FY 2007 4 Georgia Institute of Technology Operating Expenses by Object of Expenditure Class (dollars in millions) FY 2007 $919.2 FY 2006 $842.8 $566.1 $532.3 $253.1 $219.0 $61. 9 $56. 0 $24. 0 $25. 0 $14. 1 $10. 5 $600 $500 $400 $300 $200 $100 $0 Salaries and Travel, Depreciation Benefits Supplies and Other Utilities Scholarships and Fellowships Georgia Institute of Technology Expenses by Functional Classification (dollars in m illions) FY 2007 $919.2 FY 2006 $842.8 $598.0 $560.3 $700 $600 $500 $400 $300 $200 $100 $0 $55. 6 $49. 8 $14. 1 $10. 5 $65. 4 $54. 5 $108.4 $96. 6 $77. 7 $71. 1 Unallocated Depreciation Scholarships and Fellowships Auxiliary Enterprises Instruction, Research, and Public Service Academic, Student, and Institutional Support Operations and Maintenance of Plant Georgia Institute of Technology Annual Financial Report FY 2007 5 Statement of Cash Flows The final statement presented by the Georgia Institute of Technology 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Act ivit ies Non-capital Financing Act ivit ies Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($180,304,402) 274,039,837 (76,013,550) 7,841,204 25,563,089 75,390,257 $100,953,346 June 30, 2006 ($155,254,972) 240,243,152 (82,136,159) 14,740,214 17,592,235 57,798,022 $75,390,257 Capital Assets The Institute had three significant capital additions in fiscal year 2007. Two of the three additions were research buildings. The Molecular Science and Engineering Building was completed this year, resulting in an addition of $80.4 million. Also, the Klaus Advanced Computing Building was completed at a cost of $49.7 million, which includes a $9.8 million parking facility. The third significant capital addition in fiscal year 2007 was the $9.6 million addition of the museum collection at the Institute of Paper Science and Technology. 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 $441,446,745 of which $29,248,343 was reflected as current liability at June 30, 2007. Georgia Institute of Technology Annual Financial Report FY 2007 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, Georgia Institute of Technology has included the financial statements and notes for all required component units for FY2007. 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. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. 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 for state appropriations, the Institute was able to generate a modest increase in Net Assets. 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. G. Wayne Clough, President Georgia Institute of Technology Georgia Institute of Technology Annual Financial Report FY 2007 7 Statement of Net Assets GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C urrent Assets Cash and Cash Equivalent s Short -t erm Investment s Account s Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Ot her Due From Component Unit s Leases Receivable P ledges Receivable Cont ributions Receivable Inventories (note 4) Prepaid items Notes and Mort gages Receivable Ot her Assets T otal Current Asset s Ge orgi a In sti tu te of Te ch n ol ogy C ompone nt Unit Ge orgi a Te ch Fou n dation , In c. $100,953,346 135,224 2,000,694 22,654,726 33,683,053 292,680 12,174,208 171,893,931 $8,359,000 905,029 10,117 3,852,749 6,637,289 1,341,000 21,105,184 Noncurrent Assets Noncurrent Cash Due from Component Unit s Investment s (including Real Est at e) Notes Receivable, net Leases Receivable Cont ributions Receivable P ledges Receivable Capit al Assets, net (not e 6) Ot her Assets T otal Noncurrent Assets TO TAL AS S ETS 61,279,558 8,722,027 1,261,604,842 1,331,606,427 1,503,500,358 1,348,124,536 167,891,090 34,194,211 39,123,000 20,037,493 1,609,370,330 1,630,475,514 C om pon e nt Unit Ge orgi a Te ch Ath l e ti c Association $6,544,312 1,798,759 280 2,066,187 789,474 11,199,012 80,967,000 8,816,470 98,484,948 2,490,340 190,758,758 201,957,770 Georgia Institute of Technology Annual Financial Report FY 2007 8 Statement of Net Assets, Continued GEORGIA INS TITUTE OF TECHNOLOGY S TATEMENT OF NET AS S ETS June 30, 2007 LIABILITIES Curre nt Liabilitie s Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposit s 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurrent Liabilitie s Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Due to Component Units Notes and Loans Payable (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 Un rest rict ed TO TAL NET ASSETS Ge orgia In s ti tu te of Te ch n ol ogy C om pon e n t Unit G e orgi a Te ch Fou n dati on , In c. 19,456,196 937,851 168,616 877,164 23,435,169 14,212,988 3,659,190 10,310,080 12,199,221 17,049,122 102,305,597 397,770,460 5,618,750 14,427,942 417,817,152 520,122,749 6,998,307 2,206,210 250,000 245,178 4,605,000 1,357,838 429,687 43,725,993 59,818,213 42,616,317 207,330,000 9,116,999 90,332,000 20,000,000 369,395,316 429,213,529 851,635,161 592,820 53,098,742 30,748,494 49,599,664 (1,704,452) $983,377,609 353,617,657 417,988,082 11,386,657 417,676,769 $1,201,261,985 C om pone nt Unit G e orgi a Te ch Ath l e ti c Association 5,915,129 8,082,575 456,265 1,044,814 1,925,000 26,979 17,450,762 104,093,678 936,332 105,030,010 122,480,772 (5,103,357) 16,466,611 63,770,532 4,343,212 $79,476,998 Georgia Institute of Technology Annual Financial Report FY 2007 9 Statement of Net Assets, Continued GEORGIA INSTITUTEOFTECHNOLOGY STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Due From Component Units Leases Receivable Pledges Receivable Contributions Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Facilities, Inc. Component Unit Georgia Tech Alumni Association $42,799,436 $1,462,199 $4,343,000 $575,497 31,689,662 19,407 32,730,988 107,239,493 514,799 50,000 33,000 429,687 2,026,998 5,813,000 896,000 11,514,687 190,447 18,182 47,314 831,440 Noncurrent Assets Noncurrent Cash Due from Component Units Investments (including Real Estate) Notes Receivable, net Leases Receivable Contributions Receivable Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS 470,259 269,336 1,005,000 13,852,000 9,365,000 157,687,000 1,669,985 2,140,244 109,379,737 758,790 111,176,844 113,209,970 115,236,968 34,752,000 4,863,313 220,519,313 232,034,000 469,905 469,905 1,301,345 Georgia Institute of Technology Annual Financial Report FY 2007 10 Statement of Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2007 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposit s 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) Liabilities under Split-Interest Agreements (current) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Due to Component Units Notes and Loans Payable (noncurrent) T otal Noncurrent Liabilities TO TAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrest rict ed TO TAL NET ASSETS Component Unit Georgia Tech Research Corporation 1,699,877 33,215,545 33,389,771 68,305,193 0 68,305,193 1,669,985 39,404,559 $41,074,544 Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Facilities, Inc. Component Unit Georgia Tech Alumni Association 674,488 5,411,000 227,105 496,578 3,585,561 311,050 246,109 2,098,000 3,921,000 1,640,295 6,643,031 85,145,694 11,430,000 7,394,000 607,000 206,204,000 47,173 185,161 10,397 780,886 6,407,057 91,552,751 98,195,782 214,205,000 225,635,000 19,583,798 (10,286,000) 0 780,886 469,905 897,392 (3,440,004) $17,041,186 14,295,000 2,390,000 $6,399,000 50,554 $520,459 Georgia Institute of Technology Annual Financial Report FY 2007 11 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 C ompon e n t Un i t 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 St at e Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Health Services Other Organizations Interest and Dividend income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Facult y Staff Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat ion Other Operating Expense Payments to other Component Units Payments to or on behalf of Georgia Institute of Technology Total Operating Expenses Operating Income (loss) $150,861,562 (30,308,134) 271,377,083 14,458,823 145,131,747 19,984,311 1,328,641 40,453,291 1,207,997 16,549,781 12,327,842 5,607,789 7,708,794 11,241,140 667,930,667 $0 52,201,244 44,200,000 258,189 16,802,000 198,339 113,659,772 231,263,794 236,894,546 93,697,921 4,262,976 16,646,544 14,117,989 24,009,703 236,484,800 61,863,927 919,242,200 (251,311,533) 2,006,945 371,323 51,852 71,782 3,598 1,510,416 2,134,160 9,852,439 84,566,420 100,568,935 13,090,837 Component Unit Georgia Tech Ath l e ti c As s oci ati on $0 5,498,256 27,998,723 7,127,049 40,624,028 12,949,266 2,700,887 2,671,449 6,267,728 6,242,259 4,608,768 8,519,343 43,959,700 (3,335,672) Georgia Institute of Technology Annual Financial Report FY 2007 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, 2007 C ompon e n t Un i t Georgia Institute of Technology Georgia Tech Foundation, Inc. Component Unit Georgia Tech Ath l e ti c As s oci ati on 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 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 252,569,542 8,321,310 14,392,690 (17,133,263) 1,749,569 259,899,848 8,588,315 178,686,420 (15,419,272) 163,267,148 176,357,985 35,918,570 15,906,923 51,825,493 60,413,808 922,963,801 0 922,963,801 $983,377,609 27,948,000 27,948,000 204,305,985 996,956,000 0 996,956,000 $1,201,261,985 4,810,707 14,235,900 (6,160,868) 12,885,739 9,550,067 2,797,004 2,797,004 12,347,071 67,129,927 0 67,129,927 $79,476,998 Georgia Institute of Technology Annual Financial Report FY 2007 13 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, 2007 REVENUES Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Facilities, Inc. Component Unit Georgia Tech Alumni Association 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 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) $0 238,042,766 11,163,981 102,613,448 6,758,668 $0 127,621 34,647 360,887 8,919,094 88,842 358,667,705 728,320 10,170,569 56,965 5,191,222 516,883 348,934,399 354,699,469 3,968,236 46,811 14,379 415,766 5,361,477 1,892,310 237,946 7,968,689 2,201,880 $0 232,000 12,998,000 8,000 13,238,000 480,000 60,000 159,000 363,000 1,062,000 12,176,000 $0 4,112,305 1,078,624 810,380 83,971 194,742 6,280,022 3,090,420 774,702 312,273 62,405 1,364,741 126,232 797,602 6,528,375 (248,353) Georgia Institute of Technology Annual Financial Report FY 2007 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, 2007 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 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 Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Facilities, Inc. Component Unit Georgia Tech Alumni Association 1,453,172 1,453,172 5,421,408 59,014 (4,420,878) (4,361,864) (2,159,984) 1,585,000 (6,677,000) (5,092,000) 7,084,000 240,735 240,735 5,662,143 35,412,401 0 35,412,401 $41,074,544 0 (2,159,984) 18,379,648 821,522 19,201,170 $17,041,186 0 7,084,000 3,715,000 (4,400,000) (685,000) $6,399,000 0 (248,353) 0 (248,353) 768,812 768,812 $520,459 Georgia Institute of Technology Annual Financial Report FY 2007 15 Statement of Cash Flows GEORGIA INS TITUTE OF TECHNOLOGY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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 urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2007 $120,614,653 424,582,707 19,958,891 (368,136,973) (464,300,597) (14,117,989) (3,324,660) 2,792,599 40,528,835 1,221,747 16,552,314 12,344,382 5,605,106 7,673,394 17,701,189 (180,304,402) 252,569,542 7,560,716 8,321,310 5,588,269 274,039,837 8,888,962 (57,603,151) (10,192,611) (17,106,750) (76,013,550) 35,000 8,292,746 (486,542) 7,841,204 25,563,089 75,390,257 $100,953,346 Georgia Institute of Technology Annual Financial Report FY 2007 16 Statement of Cash Flows, Continued GEORGIA INS TITUTE OF TECHNOLOGY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) BY O PERATING AC TIVITIES : Operating Income (loss) Adjust ment s t o Reconcile Net Income (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep reciat io n Change in Assets and Liabilities: Receivables, net Invent ories P repaid Items Not es Receivable, Net Account s P ayable Deferred Revenue Other Liabilit ies Compensat 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 ment s recognized as a component of int erest income Change in accrued int erest payable affect ing int erest paid Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($251,311,533) 61,863,927 4,661,826 9,805 (8,206,888) (532,061) 15,792,909 (5,809,273) (353,802) 3,580,688 ($180,304,402) $78,926,800 $6,099,944 $26,513 ($42,936,531) Georgia Institute of Technology Annual Financial Report FY 2007 17 GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations 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 throughout 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 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 Institute's report. For FY2007, Georgia Institute of Technology is reporting the 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 2007 18 Georgia Tech Facilities, Inc. Georgia Tech Alumni Association See Note 16, Component Units, for more detail. 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 Georgia Institute of Technology Annual Financial Report FY 2007 19 reported as a component of investment income in the Statement of Revenues, Expenses, and 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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis Noncurrent Investments 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 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institution when complete. For projects managed by the Institution, the Institution retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $48,910,061 to Georgia Institute of Technology Georgia Institute of Technology Annual Financial Report FY 2007 20 Accounts Payable Accounts Payable are amounts due to trade vendors for goods and services received but not paid for as of the end of the fiscal year. In fiscal year 2007, the Institute added new controls to better identify outstanding obligations at year end, and as a result, accounts payable was adjusted by $6,247,697 for the year. Deposits Deposits consist of funds placed with the Institute to reserve housing assignments in an Institution 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 accounting period. 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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $27,896,377 as of July 1, 2006. For FY2007, $19,387,855 was earned in compensated absences and employees were paid $15,807,168, for a net increase of $3,580,687. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $31,477,064. 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 Georgia Institute of Technology Annual Financial Report FY 2007 21 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: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $5,420,828 6,507,339 4,516,473 14,303,854 $30,748,494 Restricted net assets expendable Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $12,571,771 26,860,115 319,089 (41,455,427) ($1,704,452) Georgia Institute of Technology Annual Financial Report FY 2007 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 2007 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, 2007, the carrying value of the Institute's deposits was $21,290,280 and the bank balance was $33,822,948. Of the Institute's deposits, $33,517,574 was uninsured. Of these uninsured deposits, $30,476,886 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name, and $3,040,688 were uncollateralized. 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 Georgia Institute of Technology Annual Financial Report FY 2007 24 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, 2007 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. T reasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt $4,675,972 24,701 4,076,840 2,959,235 $11,736,748 Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Investment Pools Board of Regents Short-T erm Fund Diversified Fund Office of T reasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool 472,846 311,842 1,176,216 1,458 4,937,571 47,580,447 74,675,564 135,224 T otal Investments $141,027,916 Less Than 1 Year Investment Maturity More Than 1-5 Years 6-10 Years 10 Years $386,822 $1,972,361 $2,231,492 660,056 1,051,538 $2,098,416 13,684 2,013,269 1,340,425 $5,339,739 600,506 561,779 $3,393,777 $85,297 11,017 803,009 5,493 $904,816 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 days. Georgia Institute of Technology Annual Financial Report FY 2007 25 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 $1.99 at June 30, 2007. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Effective Duration of the Fund is .91 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. The Weighted Average Maturity of the Short-Term Fund is 2.24 years. Of the Institute's total investment of $4,937,571 in the Short-Term Fund, $4,918,809 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 8.66 years. Of the Institute's total investment of $47,580,447 in the Diversified Fund, $12,175,836 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 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, 2007, $12,817,575 of the Institute's applicable investments were uninsured and held by the investment's counterparty in the Institute's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk is for investments is an integral part of it's 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. The investments subject to credit quality risk are reflected below: Related Debt Investments U. S. Agencies Corporate Debt Fair Value AAA AA A BAA Unrated $4,076,840 $4,076,840 2,959,235 347,936 $808,969 $1,078,786 $330,081 $393,463 $7,036,075 $4,424,776 $808,969 $1,078,786 $330,081 $393,463 Georgia Institute of Technology Annual Financial Report FY 2007 26 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Institute's investment in a single issuer. The Institute's policy for managing concentration of credit risk is an integral part of it's current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the US Treasury or other Federal Government agencies. 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 Institute's policy for managing foreign currency risk is to comply with Regents policy and applicable Federal and state laws in regards to all direct investments. Of the Institute's total investments, $144,622 (0.1% of all reported investments), is invested through an outside trust in an international equity mutual fund. The foreign currency risk associated with this investment is considered minimal. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $1,765,763 1,513,953 2,000,694 33,683,053 21,195,953 60,159,416 1,820,943 $58,338,473 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 P hysical P lant Other T otal 247,094 45,586 $292,680 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, 2007. 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 Georgia Institute of Technology Annual Financial Report FY 2007 27 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, 2007 the allowance for uncollectible loans was approximately $59,058. Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Infrast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrast ruct ure Buildings Facilities and Other improvements Equipment Library Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Bal an ce s 7/1/2006 $48,944,106 6,371,820 49,744,890 105,060,816 Addi ti on s $1,703,799 10,543,016 18,055,350 30,302,165 Re du cti on s 42,120,278 42,120,278 En di n g Bal an ce 6/30/2007 $50,647,905 16,914,836 25,679,962 93,242,703 50,773,872 1,063,441,456 14,388,357 318,183,707 85,308,870 1,532,096,262 4,373,344 155,240,716 426,981 24,784,668 4,570,404 189,396,113 4,471,892 18,969,969 1,242 23,443,103 55,147,216 1,214,210,280 14,815,338 323,998,406 89,878,032 1,698,049,272 9,675,312 210,395,002 6,767,147 201,419,954 59,292,852 487,550,267 1,044,545,995 $1,149,606,811 1,168,504 32,618,472 322,383 24,965,388 2,789,180 61,863,927 127,532,186 $157,834,351 680,817 19,045,002 1,242 19,727,061 3,716,042 $45,836,320 10,843,816 242,332,657 7,089,530 207,340,340 62,080,790 529,687,133 1,168,362,139 $1,261,604,842 Included in the Institute's building assets is the Burge Apartment Building. A request has been forwarded to the Board of Regents requesting permission to demolish this structure, but as of the reporting date, no action has been taken on the request. The original cost of the building was $2,443,385, with accumulated depreciation of $1,277,707 leaving a net book value of $1,165,678. Georgia Institute of Technology Annual Financial Report FY 2007 28 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Research Ot her Deferred Revenue T otals June 30, 2007 $11,066,231 2,064,854 1,081,903 $14,212,988 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le ase s Lease Obligations Beginning B a l a n ce July 1, 2006 Addi ti o n s Re ductions En di n g B a l a n ce June 30, 2007 C u rre n t Po rti o n $341,235,493 $78,926,800 $10,192,612 $409,969,681 $12,199,221 O the r Liabilitie s Compensated Absences T otal 27,896,377 27,896,377 19,387,855 19,387,855 15,807,168 15,807,168 31,477,064 31,477,064 17,049,122 17,049,122 Total Long Te rm O bligations $369,131,870 $98,314,655 $25,999,780 $441,446,745 $29,248,343 Note 9. Significant Commitments Georgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $13,625,865 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Georgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2036. Expenditures for fiscal year 2007 were $27,325,875 of which $17,133,263 represented interest. Total principal paid on capital leases was $10,192,612 for the fiscal year ended June 30, 2007. Interest rates range from 3.36 percent Georgia Institute of Technology Annual Financial Report FY 2007 29 to 11 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: La n d Bu ild in g s Eq u ip me n t Total A s s ets Held Under Capital Leas e $11,457,418 439,686,312 8,307,166 $459,450,896 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 six capital leases with related parties in fiscal year 2007. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $18,535,000 and the amount due (principal and interest) in the next fiscal year is $1,425,429. In August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200 with the Georgia Tech Foundation, Inc. for a complex of buildings collectively named "Technology Square". Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $131,660,360, and the amount due (principal and interest) in the next fiscal year is $9,941,680. In February 2001 Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $41,745,000, and the amount due (principal and interest) in the next fiscal year is $3,072,992. In May 2005 Georgia Institute of Technology entered into a capital lease of $70,320,000 with Georgia Tech Facilities, Inc., an affiliated organization, for two structures/buildings: (1) A complex of buildings collectively named "Married Family Housing", including an adjoining parking deck; and (2) The underground parking deck for the Klaus Advanced Computing Center. The lease terms are 25 years on the Housing complex and 20 years on the Klaus parking deck. The lease expires in June, 2030. At June 30, 2007 the remaining long-term debt obligation under the lease was $67,080,000 and the amount due (principal and interest) in the next fiscal year is $5,080,877. 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 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, 2007 the remaining long- Georgia Institute of Technology Annual Financial Report FY 2007 30 term debt obligation (principal) under the lease was $62,191,204 and the amount due (principal and interest) in the next fiscal year is $4,273,438. 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. In May 2004 Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June, 2036. At June 30, 2007 the remaining long-term debt obligation under the lease was $75,205,000 and the amount due (principal and interest) in the next fiscal year is $4,979,550. The Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2012. At June 30, 2007, the total obligation under these agreements was $13,553,117. The amount due (principal and interest) in the next fiscal year is $4,356,677. 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 2007 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, 2007 through June 30, 2008 for monthly fees of $17,224. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $206,694 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees of $105,055. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,669 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees of $125,870. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,510,440 in fiscal year 2008. Georgia Institute of Technology Annual Financial Report FY 2007 31 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, 2007 through June 30, 2008 for monthly fees of $16,346. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $196,155 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees of $3,988. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $47,856 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees of $72,032. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $864,384 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees ranging between $55,763 and $58,279. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc. a minimum of $681,743 in fiscal year 2008. 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, 2007 through June 30, 2008 for monthly fees of $23,673. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 2, Inc. $284,076 in fiscal year 2008. 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, 2007 through June 30, 2008 with monthly fees of $2,240. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $26,880 in fiscal year 2008. In 2007, 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, 2007 through June 30, 2008 for monthly fees of $131,611. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $1,579,332 in fiscal year 2008. Georgia Institute of Technology Annual Financial Report FY 2007 32 In 2007, 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, 2007 through June 30, 2008 for monthly fees of $34,140. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 3, Inc. $409,680 in fiscal year 2008. In 2007, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Quantico, Virginia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $5,093. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $61,116 in fiscal year 2008. Georgia Institute of Technology's FY2007 non-cancellable operating lease expenditures for real property were $9,558,054. 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, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $33,130,645 33,260,529 32,408,037 30,685,643 29,435,200 147,651,825 153,243,082 137,226,481 95,970,949 19,926,747 712,939,138 302,969,457 $409,969,681 $9,604,767 $9,604,767 Georgia Institute of Technology Annual Financial Report FY 2007 33 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 TRS offices or 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 2007, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year 2007 2006 2005 Percentage Contributed 100% 100% 100% Required Contribution $18,025,456 $17,233,661 $16,731,285 Employees' Retirement System of Georgia Plan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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. Georgia Institute of Technology Annual Financial Report FY 2007 34 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. 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, 2007, for employees covered by ERS was $548,801. The Institute's total payroll for all employees was $472,421,316. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7. 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 by employee. The Institute also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, the ERS employer contribution rate for the Institute 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 2007 amounted to $65,537, of which $57,305 was made by the Institute and $8,232 was made by employees. These contributions met the requirements of the plan. Georgia Institute of Technology Annual Financial Report FY 2007 35 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The Institute and its covered employees made required contributions (including some minor adjustments) of $15,775,893 (9.66% or 8.13%) and $8,880,566 (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 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. Georgia Institute of Technology Annual Financial Report FY 2007 36 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 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. Contributions Member contributions are 7.5% of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. Total contributions made by employees during fiscal year 2007 amounted to $806,499 which represents 7.5% of covered payroll (with minor adjustments included). 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 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 Georgia Institute of Technology Annual Financial Report FY 2007 37 property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2007. 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. At the request of Institute management, in March 2007, 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 tax-exempt obligations by the Development Authority of Fulton County for the purpose of financing the acquisition, renovation and construction of facilities for the use of the Institute to be known as the North Avenue Apartments project. The resolution was intended to Georgia Institute of Technology Annual Financial Report FY 2007 38 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, which was subsequently received. The ground lease of the project to Facilities and a rental agreement to the Board of Regents for use by Georgia Tech were executed effective July 1, 2007. 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, 2007, there were 1,216 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Institute of Technology recognized as incurred $6,118,067 of expenditures, which was net of $2,260,011 of participant contributions. Georgia Institute of Technology Annual Financial Report FY 2007 39 Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2007 are shown below: Natural Classification Inst ruct ion F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation $ 8 8,8 0 0,72 8 47 ,117 ,24 1 2 7,69 6 ,42 1 2,3 0 0,50 5 3,0 7 4,44 4 2 5 0,42 6 2 8,3 7 7,49 0 T otal Exp enses $ 19 7,617,25 5 Functional Clas s ification FY2007 Research P ublic Se r v ic e Academ ic Sup p o r t $ 129 ,7 90 ,3 17 8 7 ,5 49 ,2 05 3 8 ,6 98 ,5 67 3 7 1,145 10 ,9 64 ,6 8 1 $ 6 ,4 34 ,4 70 7 ,9 62 ,0 24 2 ,9 49 ,6 50 9 60 ,7 02 1,165 ,9 69 $ 5 ,4 69 ,0 85 18 ,150 ,8 45 5 ,4 17 ,6 89 130 ,7 59 5 69 ,7 54 13 4 ,3 02 8 9 ,0 67 ,0 70 84 ,3 62 24 ,2 52 ,7 28 10 ,0 17 ,3 06 $ 35 6 ,5 75 ,2 87 $ 43 ,8 09 ,9 0 5 $ 3 9 ,7 55 ,4 38 St udent Ser v ic es Inst it ut ional Sup p o r t $ 2 10 ,5 27 10 ,7 9 5,9 4 1 2 ,7 47 ,5 54 7 ,7 33 2 88 ,0 28 $ 4 74 ,2 56 28 ,4 3 1,5 78 7 ,6 98 ,6 00 2 80 ,7 8 8 3 25 ,5 4 9 8 ,9 15 ,6 35 11,9 5 6 8 ,4 38 ,6 57 $ 22 ,9 6 5,4 18 $ 45 ,6 6 1,3 8 4 Natural Classification F acu lt y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses P lant O p erat io n s & Maintenance Functional Clas s ification FY2007 Sc h o la r sh ip s & Fellowships A ux iliar y Ent erprises Unallocat ed E x p e n se s $ 84 ,4 11 21,73 4 ,8 17 5 ,16 5 ,18 0 2 11,34 4 91,4 10 17,89 7,00 2 3 2 ,56 2 ,8 51 $0 14,117 ,9 89 2 ,8 34 $0 15,15 2,8 9 5 3,3 2 4,2 6 0 16 6,7 0 9 5,63 1,6 5 5 3 4,8 5 0,2 2 9 6,2 9 0,2 5 5 $0 55 ,5 73 ,6 72 $ 7 7 ,74 7 ,015 $ 14 ,120 ,8 23 $ 6 5,416,0 0 3 $ 55 ,5 73 ,6 72 T otal E x p e n se s $ 23 1,2 6 3,7 9 4 2 36 ,8 9 4,5 4 6 9 3,69 7,92 1 4 ,2 6 2,9 7 6 16 ,6 4 6,5 4 4 14 ,117,9 8 9 2 4,0 0 9,7 0 3 2 36 ,4 8 4,8 0 0 6 1,8 6 3,9 2 7 $ 919 ,2 4 2,2 0 0 Georgia Institute of Technology Annual Financial Report FY 2007 40 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 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 2007, the Foundation distributed approximately $84.6 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, Inc. holds investments totaling $1.348 billion as of June 30, 2007, of which $353.6 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 values of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2007, the Foundation allocated 5.10% of that average. Georgia Institute of Technology Annual Financial Report FY 2007 41 Investments are comprised of the following amounts at June 30, 2007: Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Venture Capital Real Estate Diversifying Strategies Total Investments Cost $24,102,221 21,517,393 30,132,667 438,278,014 55,602,454 191,376,488 27,068,525 294,031,933 $1,082,109,695 Fair Value $24,102,221 20,849,807 29,752,474 593,816,539 56,373,609 257,975,006 30,633,358 334,621,522 $1,348,124,536 Capital Assets for Component Units: Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2007: June 30, 2007 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 2,553,000 38,051,000 7,145,000 45,196,000 8,626,000 36,570,000 $39,123,000 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $282,570 44,220,000 216,256,000 9,598,253 $270,356,823 $314,102 20,000,000 876,584 $21,190,686 $351,494 494,007 4,321,000 $5,166,501 $245,178 63,725,993 211,935,000 10,474,837 $286,381,008 $245,178 43,725,993 4,605,000 1,357,838 $49,934,009 Georgia Institute of Technology Annual Financial Report FY 2007 42 Notes and Loans Payable: The Foundation has two $30 million revolving lines of credit. At June 30, 2007, $44.925 million was the total aggregate outstanding on the lines of credit. Interest is calculated using the 30-day LIBOR rate plus 0.25%, which was 5.57% at June 30, 2007. One line of credit expires on June 30, 2008 and the other on December 31, 2008. The Foundation expects to renew both lines of credit upon expiration. The Foundation also has a $30 million line of credit for the purpose of funding the construction of the Nanotechnology Research Center Building on the Institute's campus. As of June 30, 2007, $18.801 million was outstanding on the line of credit. Interest is calculated using the 30day LIBOR rate plus 0.25%, which was 5.57% at June 30, 2007. The line of credit expires on June 30, 2008. The Foundation also has available one other line of credit in the amount of $20 million. As of June 30, 2007, no amounts have been drawn on this credit facility. This line of credit expires on June 30, 2008. Annual estimated debt service requirements to maturity for Notes and Loans Payable are as follows: Year Ending June Year 2008 1 2009 2 Notes and Loans Payable Principal Interest Total $43,725,993 20,000,000 $63,725,993 $3,549,538 557,000 $4,106,538 $47,275,531 20,557,000 $67,832,531 Revenue Bonds Payable: 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 range 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 2007 43 Annual debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 2018 through 2022 11-15 2023 through 2027 16-20 2028 through 2032 21-25 Bond Discount, net Principal $4,605,000 4,825,000 5,060,000 5,310,000 5,600,000 33,215,000 44,180,000 49,120,000 61,575,000 213,490,000 (1,555,000) $211,935,000 Bonds Payable Interest $11,662,200 11,437,491 11,203,637 10,945,586 10,653,002 48,054,824 37,082,836 24,126,187 8,603,942 173,769,705 $173,769,705 Total $16,267,200 16,262,491 16,263,637 16,255,586 16,253,002 81,269,824 81,262,836 73,246,187 70,178,942 387,259,705 (1,555,000) $385,704,705 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 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, 2007, the Athletic Association distributed approximately $8.5 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. Georgia Institute of Technology Annual Financial Report FY 2007 44 Deposits and Investments for Component Units: Deposits The Athletic Association does not have a policy that addresses custodial credit risk. As of June 30, 2007, $3,500,799 of the Athletic Association's bank balance of $3,600,799 was uncollateralized and exposed to custodial credit risk. Investments The Athletic Association's investments are held and reported by Georgia Tech Foundation, Inc. and are represented by a $80,967,000 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, 2007: 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 7/1/2006 $49,946 473,447 523,393 125,109,785 423,778 5,593,098 131,126,661 26,607,789 300,097 2,514,082 29,421,968 101,704,693 $102,228,086 Additions $0 459,393 459,393 Reductions $0 724,165 724,165 Ending Balance 6/30/2007 $49,946 208,675 258,621 985,401 29,300 115,701 1,130,402 126,095,186 453,078 5,708,799 0 132,257,063 3,990,216 47,497 571,055 4,608,768 (3,478,366) ($3,018,973) 0 0 $724,165 30,598,005 347,594 3,085,137 34,030,736 98,226,327 $98,484,948 Georgia Institute of Technology Annual Financial Report FY 2007 45 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $938,994 988,214 107,961,507 $109,888,715 $642,442 $642,442 $536,622 24,903 1,942,829 $2,504,354 $1,044,814 963,311 106,018,678 $108,026,803 $1,044,814 26,979 1,925,000 $2,996,793 Notes and Loans Payable: Notes Payable at June 30, 2007 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, 2007 is 4.92%. Annual debt service requirements to maturity for the Athletic Association's note payable are as follows: Notes and Loans Payable Principal Interest Total Year ending June 30: 2008 1 $26,979 $47,670 $74,649 2009 2 27,978 46,376 74,354 2010 3 29,477 44,998 74,475 2011 4 30,975 43,510 74,485 2012 5 32,474 41,917 74,391 2013 through 2017 6-10 190,848 180,300 371,148 2018 through 2022 11-15 240,309 131,456 371,765 2023 through 2027 16-20 311,252 59,743 370,995 2028 through 2032 21-25 73,019 1,811 74,830 $963,311 $597,781 $1,561,092 Revenue Bonds Payable: 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 Rate Swaption ("swaption"). The swaption represents an option to enter into an interest rate Georgia Institute of Technology Annual Financial Report FY 2007 46 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, 2007, the swaption had a fair value (representing a liability) of $5,110,882, 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: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Discount/Swaption Premium Principal Bonds Payable Interest $1,925,000 2,025,000 2,120,000 2,210,000 2,315,000 13,675,000 18,740,000 23,755,000 30,300,000 7,815,000 104,880,000 1,138,678 $106,018,678 $5,332,336 5,233,586 5,137,911 5,045,346 4,939,956 22,612,594 17,539,356 12,523,891 8,963,216 200,259 87,528,451 $175,056,902 Total $7,257,336 7,258,586 7,257,911 7,255,346 7,254,956 36,287,594 36,279,356 36,278,891 39,263,216 8,015,259 192,408,451 1,138,678 $193,547,129 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 GASB standards, in accordance with Statements of Governmental Accounting Standards Georgia Institute of Technology Annual Financial Report FY 2007 47 ("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 GTRC's assets, liabilities, net assets, revenues, expenses, and changes in net assets. The Georgia Tech Research Corporation's fiscal year is July 1 through June 30. During fiscal year 2007, GTRC distributed approximately $349 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. Deposits and Investments for Component Units: Deposits At June 30, 2007, the carrying value of deposits was $1,049,436 and the bank balance was $1,820,259. Of Georgia Tech Research Corporation's deposits, $1,620,259 were uninsured and uncollateralized. Investments Georgia Tech Research Corporation's investments at June 30, 2007 were as follows: Commercial Paper Equity Securities Total Investments Fair Value $41,750,000 470,259 $42,220,259 Capital Assets for Component Units: Georgia Tech Research Corporation had the following Capital Asset activity for the year ended June 30, 2007: Georgia Institute of Technology Annual Financial Report FY 2007 48 Capital Assets, Not Being Depreciated: Capitalized Collections Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Equipment Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $0 0 13,570 4,298,912 4,312,482 1,131 2,462,038 2,463,169 1,849,313 $1,849,313 Additions $240,735 240,735 Reductions $0 0 Ending Balance 6/30/2007 $240,735 240,735 7,563 89,257 96,820 890,067 890,067 21,133 3,498,102 3,519,235 1,925 514,958 516,883 (420,063) ($179,328) 890,067 890,067 0 $0 3,056 2,086,929 2,089,985 1,429,250 $1,669,985 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. During the year ended June 30, 2007, Georgia Advanced Technology Ventures, Inc. distributed $237,946 to the Institute for operating expenses. Complete financial statements for GATV can be requested at the following address: Georgia Advanced Technology Ventures, Inc., Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257, Attention: Joel Hercik. Prior Period Restatement: GATV understated the value of unconditional promises to give and unrestricted donations by $821,522 at June 30, 2006. This was the result of an unrecorded pledge, which was made in fiscal year 2006 from TUFF. Accordingly, the financial statements have been restated to properly record this activity. The effect of the correction of this prior period error was to increase unrestricted net assets by $821,522. Georgia Institute of Technology Annual Financial Report FY 2007 49 Investments for Component Units: Georgia Advanced Technology Ventures, Inc. holds investments in the amount of $1.005 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, 2007: June 30, 2007 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 $11,428,531 42,769 11,471,300 101,672,190 3,287,774 1,047,396 106,007,360 6,301,816 99,705,544 $111,176,844 Long-term Liabilities for Component Units: Changes in long-term liabilities for the GATV for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Capital Lease Obligations Notes and Loans Payable Total Long Term Liabilities $50,613,331 10,707,440 $61,320,771 $34,532,363 1,752,795 $36,285,158 $0 4,412,883 $4,412,883 $85,145,694 8,047,352 $93,193,046 $0 1,640,295 $1,640,295 Capital Lease Obligations: GATV is party to a lease agreement with TUFF ATDC LLC under which GATV leases space on the first through third floors of the Centergy One Building on Fifth Street in Atlanta. GATV subleases this space to organizations compatible with its mission. The lease extends for thirty years, after which GATV may purchase the property for a nominal charge. The leased space was occupied in August 2003. Georgia Institute of Technology Annual Financial Report FY 2007 50 GATV is also party to a lease agreement with TUFF GATV45 LLC under which GATV leases space on the fourth and fifth floors of the Centergy One Building, which it subleases to organizations compatible with its mission. This lease commenced April 1, 2005, and extends to December 2034, at which time GATV may purchase the property for a nominal charge. Additionally, GATV may purchase the property during the lease term at an amount determined by a formula accounting for interest rates and the total previous payments made. The properties under the above capital leases are recorded as assets in the accompanying financial statements at the value of certain pre-occupancy payments plus the present value of the future minimum lease payments. The obligations under the capital lease have been recorded at the present value of future minimum lease payments, discounted at an interest rate appropriate to GATV's estimated borrowing rate at the time of lease inception. Those interest rates are 6.25% for floors one through three and 7.75% for floors four and five. The capital lease obligation balance at June 30, 2007 includes $1,288,478 in accrued, but unpaid interest. GATV is party to a lease agreement with TUFF TEPB LLC under which GATV leases a building at Technology Enterprise Park. GATV subleases space in the building to organizations compatible with its mission. This lease commenced June 30, 2007 and extends to June 30, 2037, at which time GATV may purchase the property during the lease term at an amount determined by a formula accounting for interest rates and the total previous payments made. The property under the above capital lease is recorded as building, infrastructure and leasehold improvement assets in the accompanying financial statements. The obligations under the capital lease have been recorded at the value of the contractor's cost of construction plus capitalized interest during the construction period. The effective overall average interest rate on the purchase, given an escalating lease payment schedule over the life of the agreement, is 9.078%. Future minimum lease payments under the capital leases, and the net present value of future minimum lease payments are as follows at June 30, 2007: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 Thereafter 6-29 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $6,264,254 6,493,283 6,645,872 6,790,386 6,938,415 190,827,745 223,959,955 138,814,261 $85,145,694 Notes and Loans Payable: GATV has a line of credit arrangement with TUFF, with a limit of $1.9 million. Interest at prime plus 2% is payable each December 31; however, GATV currently chooses to make interest payments on a quarterly basis. Principal is payable within 30 days of demand by TUFF. No collateral is specified, but GATV is required to obtain the consent of TUFF before granting a Georgia Institute of Technology Annual Financial Report FY 2007 51 security interest in its general assets to any other entity. At June 30, 2007, advances under this line of credit total $1.6 million. GATV has a long-term note payable to TUFF with monthly payments of $4,164 through October 2015 at 6% interest. The outstanding principal balance of the loan at June 30, 2007 is $327,032. GATV has a long-term note payable to TUFF requiring monthly payments, with the principal maturing October 2033 at 6.55% interest. The loan is secured by Technology Enterprise Park land. The outstanding principal balance of the loan at June 30, 2007 is $6,120,320. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Notes and Loans Payable Interest $1,640,295 50,831 62,348 74,938 88,700 612,256 984,893 1,896,982 1,960,621 675,488 $8,047,352 $428,543 434,381 440,373 446,538 452,894 2,372,631 2,651,687 3,109,731 2,518,822 708,197 $13,563,797 Total $2,068,838 485,212 502,721 521,476 541,594 2,984,887 3,636,580 5,006,713 4,479,443 1,383,685 $21,611,149 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 $157,687,000 are included in the Facilities financial statements. The corresponding buildings and associated long-term debt are included in Georgia Institute of Technology Annual Financial Report FY 2007 52 the Institute's report. Note 10 of this financial report provides information on related party leases. During fiscal 2007, Facilities distributed $363,000 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. Prior Period Restatement: Georgia Tech Facilities, Inc. did not properly record capitalized interest for certain projects during relevant periods. In addition, Facilities did not appropriately account for direct financing leases with the Institute. Accordingly, the financial statements have been restated to properly capitalize interest and reflect Facilities' investment in direct financing leases, which are reported as Investments in Real Estate on the Statement of Net Assets. The effect of the correction on beginning net assets was a decrease of ($4,400,000). Investments for Component Units: Georgia Tech Facilities, Inc. holds investments in the amount of $157.7 million on its balance sheet which is composed of investments in Real Estate. Capital Assets for Component Units: Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2007: June 30, 2007 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 33,494,000 34,092,000 1,200,000 1,200,000 540,000 660,000 $34,752,000 Georgia Institute of Technology Annual Financial Report FY 2007 53 Long-term Liabilities for Component Units: Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Capital Lease Obligations Revenue/Mortgage Bonds Payable Total Long Term Liabilities $9,734,000 212,675,000 $222,409,000 $0 $242,000 0 2,550,000 $0 $2,792,000 $9,492,000 210,125,000 $219,617,000 $2,098,000 3,921,000 $6,019,000 Capital Lease Obligations: On February 17, 2006, Facilities entered into an installment sale agreement with the Institute for telecommunications equipment and installation. The agreement commences on the date the equipment is accepted and is renewable at the option of the Institute annually on July 1 for five successive one-year terms. At June 30, 2007, installation had not been completed, the equipment had not been accepted by the Institute and the agreement had not yet commenced. 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) in the amount of $9,734,000. The outstanding principal balance of the obligation as of June 30, 2007 is $9,492,000. Annual debt service requirements to maturity for capital lease obligations are as follows: Capital Leases Year ending June 30: 2008 1 $2,429,000 2009 2 2,430,000 2010 3 2,430,000 2011 4 2,430,000 2012 5 608,000 Total minimum lease payments 10,327,000 Less: Interest 835,000 Principal Outstanding $9,492,000 Revenue Bonds Payable: Georgia Tech Facilities, Inc. has five bond issues outstanding with balances totaling $210,125,000. The proceeds from the bond issues were used to acquire or construct (for the benefit of the Institute) 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 Electrical Substation bonds, Facilities has an interest rate swap agreement. Facilities retains an independent entity to provide periodic Georgia Institute of Technology Annual Financial Report FY 2007 54 valuation of the interest rate swap. At June 30, 2007, the value is $896,000 and is reported as Other Current Assets in the Statement of Net Assets. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $3,921,000 4,795,000 4,950,000 4,574,000 4,780,000 29,445,000 38,725,000 47,795,000 43,250,000 27,890,000 $210,125,000 $9,913,000 9,789,000 9,642,000 9,429,000 9,221,000 42,019,000 33,368,000 22,589,000 10,910,000 3,404,000 $160,284,000 Total $13,834,000 14,584,000 14,592,000 14,003,000 14,001,000 71,464,000 72,093,000 70,384,000 54,160,000 31,294,000 $370,409,000 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, 2007, the Alumni Association distributed $797,602 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. Georgia Institute of Technology Annual Financial Report FY 2007 55 Capital Assets for Component Units: Georgia Tech Alumni Association holds the following Capital Assets as of June 30, 2007: June 30, 2007 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated $717,814 694,051 1,411,865 Less Total Accumulated Depreciation 941,960 Total Capital Assets being Depreciated, Net 469,905 Capital Assets, Net $469,905 Georgia Institute of Technology Annual Financial Report FY 2007 56 THE UNIVERSITY OF GEORGIA Financial Report For the Year Ended June 30, 2007 Michael F. Adams President The University of Georgia Athens, Georgia Tim Burgess Senior Vice President for Finance & Administration THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT FY 2007 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 .......................................................................................................... 30 Note 12. Risk Management......................................................................................................... 33 Note 13. Contingencies................................................................................................................ 34 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 34 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. Faculty Students (Headcount) Students (FTE) FY2007 FY2006 FY2005 1,692 1,608 1,703 33,959 33,660 33,405 31,987 31,492 31,285 Overview of the Financial Statements and Financial Analysis The University of Georgia is proud to present its financial statements for fiscal year 2007. 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 2007 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 The University of Georgia. The Statement of Net Assets presents end-of-year University of Georgia Annual Financial Report FY 2007 1 data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $244,942,760 1,108,970,295 73,212,196 1,427,125,251 June 30, 2006 $213,904,717 1,061,065,947 81,431,163 1,356,401,827 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 122,049,947 178,728,038 300,777,985 116,807,660 176,775,983 293,583,643 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 As s e ts 947,231,389 47,281,351 63,543,343 863,501 67,427,682 $1,126,347,266 896,946,160 43,526,769 57,846,749 437,919 64,060,587 $1,062,818,184 The total assets of the institution increased by $70,723,424. A review of the Statement of Net Assets will reveal that the increase was primarily due to a $47,904,348 increase of capital assets, net of accumulated depreciation. The balance of the increase is due to higher balances in cash and accounts receivables between fiscal years of $38,516,739 and $3,649,053, respectively. These increases are a result of the maturity of significant investments at fiscal year end and increased activity with other State agencies. The total liabilities for the year increased by $7,194,342 due to increases in general accounts payable and construction contract payables. The University of Georgia Annual Financial Report FY 2007 2 combination of the increase in total assets of $70,723,424 and the increase in total liabilities of $7,194,342 yields an increase in total net assets of $63,529,082. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $50,285,229. 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $571,632,022 1,044,982,474 (473,350,452) 494,708,957 21,358,505 42,170,577 63,529,082 1,062,818,184 0 1,062,818,184 $1,126,347,266 $550,360,420 1,007,715,922 (457,355,502) 455,286,735 (2,068,767) 29,076,286 27,007,519 1,035,810,665 0 1,035,810,665 $1,062,818,184 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a $63,529,082 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and 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 ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Incom e Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $188,304,864 12,341,315 201,050,423 43,873,579 123,636,927 2,424,914 571,632,022 437,026,757 16,769,344 35,886,836 13,286,246 2,552,756 505,521,939 40,110,232 2,060,345 42,170,577 $1,119,324,538 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maintenance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $216,315,911 275,723,066 144,818,743 103,393,106 30,497,714 57,950,436 91,393,260 11,503,764 113,386,474 1,044,982,474 10,812,982 $1,055,795,456 June 30, 2006 $183,374,227 11,067,256 200,702,893 38,558,064 114,517,413 2,140,567 550,360,420 418,736,051 29,374,249 6,202,773 6,560,953 4,630,011 465,504,037 12,758,806 16,317,480 29,076,286 $1,044,940,743 June 30, 2006 $202,487,108 270,323,100 135,037,366 94,987,764 28,344,265 69,422,690 78,216,448 20,679,004 108,218,177 1,007,715,922 10,217,302 $1,017,933,224 University of Georgia Annual Financial Report FY 2007 4 Operating revenues increased by $21,271,602 in fiscal 2007, which included increases in all operating revenue categories with the largest being growth in sales and service and auxiliary revenues. Revenue from sales and service activities increased 13.7% from $38.5 million in fiscal year 2006 to $43.8 million in fiscal year 2007. Auxiliary revenues increased 7.9% from $114.5 million in fiscal year 2006 to $123.6 million in fiscal year 2007 primarily in the residence hall and food services enterprises. Increases in operating expenses from fiscal year 2006 to fiscal year 2007 include compensation, employee benefits, and depreciation expense. The compensation and employee benefits category increased by $32 million; $23.4 million of this increase represents annual faculty and staff increases and $8.6 million represents increases in employee benefit costs. Depreciation expense also increased from fiscal year 2006 to fiscal year 2007 by $10.6 million. This increase is a result of a full year of depreciation on facilities completed in fiscal year 2006, primarily the Paul D. Coverdell Center and the Tifton Campus Conference Center. Nonoperating revenues and expenses increased by $39,422,222 for the year which included an increase of $18,290,706 in State Appropriations. The increase in State Appropriations from fiscal year 2006 to fiscal year 2007 was 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 that was realized. Capital Gifts and Grants increased from fiscal year 2006 to fiscal year 2007 as a result of capital improvements funded by GSFIC which were completed and recognized by the University in fiscal year 2007. 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. University of Georgia Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Act ivit ies Non-capital Financing Act ivit ies Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($396,922,373) 498,264,722 (90,257,246) 27,431,636 38,516,739 146,675,753 $185,192,492 June 30, 2006 ($386,667,743) 452,013,978 (60,014,675) 11,915,612 17,247,172 129,428,581 $146,675,753 Capital Assets The University had a significant capital asset addition in fiscal year 2007. The Animal Health Research Center was completed, which is the only BSL-3-Ag (biosafety lab-level 3-agriculture) research facility located on a university campus. This project was funded by many sources including the Georgia State Financing and Investment Commission (GSFIC). In October 2006, the University celebrated the 200th birthday and most recent renovation of its most significant building, Old College. The renovation of the University's first permanent building included work that restored and preserved historic features while adding modern amenities. 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 $202,054,431 of which $26,826,393 was reflected as current liability at June 30, 2007. 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 FY2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University continued to monitor and use its resources wisely in fiscal year 2007 as the State of Georgia continued on a path of economic recovery. The University worked to balance the use of modest increases in operating revenues to provide additional support for the instruction, research and public service missions, with the need to provide funding for significant increases University of Georgia Annual Financial Report FY 2007 6 in energy and health care costs. In an effort to fiscally prepare for such expenditure increases, the University directed each of its academic and administrative units to set aside 2% of its operating budget to manage the risk of unknown additional increases in health care and utility costs. This tactic placed the University in a strong position to not only meet those current year expenditures, but provide for increases in faculty lines and instructional support to help meet the instructional needs of a growing enrollment and to fund new initiatives that include increased access to education at the University campus in Griffin, GA and the graduate center in Gwinnett County. Given the continued pressures of rising energy and health care costs, the University will once again take steps in fiscal year 2008 to maintain a strong financial stance and has directed each of its academic and administrative units to reserve 1% of their current operating budget. As the new fiscal year progresses, the University will monitor and assess the need for this 1% reserve and take appropriate action so to protect the University's ability to provide for existing and new operations. Michael F. Adams President The University of Georgia University of Georgia Annual Financial Report FY 2007 7 Statement of Net Assets THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C u rre n t Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Due From Component Unit s Cont ribut ions 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 Due from Component Unit s Due From P rimary Government Invest ment s (including Real Est at e) Not es Receivable, net Cont ribut ions 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 Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o P rimary Government Lease P urchase Obligat ions (current port ion) Compensat ed Absences (current port ion) Revenue/Mort gage Bonds P ayable (current ) Liabilit ies under Split -Int erest Agreement s (current ) Due t o Component Unit s 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 Due t o P rimary Government Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreement s (noncurrent ) Ot her Long-T erm Liabilit ies Due t o Component Unit 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 No n ex p en dable Ex p en dable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS Th e Un i ve rsi ty of Ge orgi a $173,548,442 14,652,077 27,710,018 19,060,657 4,723,013 5,248,553 244,942,760 11,644,050 2,003,034 48,620,661 10,944,451 1,108,970,295 1,182,182,491 1,427,125,251 15,728,838 5,065,051 8,101,108 3,093,641 47,391,781 966,433 14,385,163 2,491,707 24,334,686 491,539 122,049,947 159,247,199 15,980,839 3500000 178,728,038 300,777,985 947,231,389 47,281,351 63,543,343 863,501 67,427,682 $1,126,347,266 C om pon e n t Un i t Un i ve rsi ty of Ge orgi a Fou n dati on $11,052,551 39,897,092 2,502,648 6,175,994 17,378 173,658 2,110,293 61,929,614 13,509,424 599,781,509 67,505 13,787,452 179,778,304 6,026,467 812,950,661 874,880,275 2,463,928 1,265,398 837,591 905,752 29,495 3,485,000 539,149 3,025,134 10,628,504 23,179,951 172,182,798 11,147,013 10,063,029 193,392,840 216,572,791 284,918,541 341,558,451 31,830,492 $658,307,484 C om pon e n t Un i t Un i ve rsi ty of Ge orgi a Ath l e ti c Associ ati on , In c. $65,606,584 2,235,542 3,025,134 211,353 71,078,613 7,358,609 187,025,258 1,340,782 195,724,649 266,803,262 5,294,172 17,757,579 1,937,917 2,090,000 500,000 87,113 27,666,781 2,003,034 95,470,000 1,340,782 913,495 99,727,311 127,394,092 94,400,327 45,008,843 $139,409,170 University of Georgia Annual Financial Report FY 2007 8 Statement of Net Assets, Continued THE UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C u rre n t Ass e ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Due From Component Unit s Cont ribut ions 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 C om pon e n t Un i t Arch Fou n dati on for th e Un i ve rs i ty of Ge orgi a, In c. $19,562,384 474,046 500,000 18,453,341 38,989,771 Non cu rre n t As s e ts Noncurrent Cash Due from Component Unit s Due From P rimary Government Invest ment s (including Real Est at e) Not es Receivable, net Cont ribut ions 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 Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o P rimary Government Lease P urchase Obligat ions (current port ion) Compensat ed Absences (current port ion) Revenue/Mort gage Bonds P ayable (current ) Liabilit ies under Split -Int erest Agreement s (current ) Due t o Component Unit s 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 Due t o P rimary Government Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreement s (noncurrent ) Ot her Long-T erm Liabilit ies Due t o Component Unit 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 913,495 19,781,151 12,456,376 33,151,022 72,140,793 72,335 172,333 373,389 618,057 0 618,057 25,279,166 45,498,963 744,607 $71,522,736 C om pon e n t Un i t Un i ve rs i ty of Ge orgi a Re s e arch Fou n dati on , In c. $9,800,115 16,977,081 474,161 47,702 13,656,257 40,955,316 3,500,000 40,773,566 514,994 1,001,803 45,790,363 86,745,679 11,786,489 13,656,257 3,787,091 15,843,599 45,073,436 4,095,914 4,095,914 49,169,350 514,994 37,061,335 $37,576,329 University of Georgia Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets THEUNIVERSITYOF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 C ompon e n t Un i t The University of Ge orgi a University of Ge orgi a Foundation REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal St at e Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services P arking/T ransport at ion Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Facult y Staff Employee Benefits Other Personal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Depreciat ion Payments to other Component Units Payments to or on behalf of University of Georgia Total Operating Expenses Operating Income (loss) $255,971,712 (67,666,848) 12,341,315 104,891,453 33,206,138 62,952,832 43,873,579 315,754 36,274,031 3,975,092 32,755,222 14,680,993 15,959,926 16,787,508 3,204,155 2,109,160 571,632,022 $0 12,274,134 17,900,723 5,185,587 17,765,154 53,125,598 143,883,135 408,356,463 146,525,441 688,884 13,528,204 19,153,751 35,697,897 204,924,825 72,223,874 1,044,982,474 (473,350,452) 592,823 71,347 355,942 171,560 5,816,781 5,753,220 799,745 20,115,391 33,676,809 19,448,789 C om pon e n t Unit University of Ge orgi a Ath l e ti c As s oci ati on , Inc. $0 71,532,102 71,532,102 3,428,884 19,359,289 5,249,889 83,147 25,899,753 54,020,962 17,511,140 University of Georgia Annual Financial Report FY 2007 10 Statement of Revenues, Expenses and Changes in Net Assets, Continued THEUNIVERSITYOF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2007 C ompon e n t Un i t The University of Ge orgi a University of Ge orgi a Foundation C om pon e n t Unit University of Ge orgi a Ath l e ti c As s oci ati on , Inc. NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal 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 437,026,757 21,363 16,747,981 35,886,836 13,286,246 (10,812,982) 2,552,756 494,708,957 21,358,505 40,110,232 2,060,345 42,170,577 63,529,082 1,062,818,184 0 1,062,818,184 $1,126,347,266 85,598,712 (7,131,797) 78,466,915 97,915,704 15,402,622 15,402,622 113,318,326 544,989,158 0 544,989,158 $658,307,484 101,248 3,049,029 (3,698,892) (83,376) (631,991) 16,879,149 0 16,879,149 122,530,021 0 122,530,021 $139,409,170 University of Georgia Annual Financial Report FY 2007 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued THE UNIVERS ITY OF GEORGIA S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES C om pone nt Unit Arch Fou n dati on for the Un i ve rs i ty of Ge orgi a, In c. C om pone nt Unit Un i ve rs i ty of G e orgi a Re se arch Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilities Supplies and Ot her Services Depreciat ion P ayments to other Component Units P ayment s t o or on behalf of Universit y of Georgia T ot al Operat ing Expenses Operat ing Incom e (loss) $0 $0 20,965,309 952,065 4,258,404 118,557,298 318,185 16,232,119 26,175,778 1,070 135,108,672 43,215 1,092,449 3,708,541 4,844,205 21,331,573 10,857,008 46,082 119,723,520 130,626,610 4,482,062 University of Georgia Annual Financial Report FY 2007 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued THE UNIVERS ITY OF GEORGIA S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 C om pone nt Unit Arch Fou n dati on for the Un i ve rs i ty of G e orgi a, In c. C om pone nt Unit Un i ve rs i ty of G e orgi a Re se arch Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 1,449,725 1,449,725 22,781,298 4,611,236 4,611,236 9,093,298 7,218,476 7,218,476 29,999,774 41,522,962 0 41,522,962 $71,522,736 0 9,093,298 28,483,031 0 28,483,031 $37,576,329 University of Georgia Annual Financial Report FY 2007 13 Statement of Cash Flows THE UNIVERS ITY OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 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 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 ment s Int erest on Invest ment s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2007 $189,682,700 12,472,463 192,258,640 43,800,714 (395,517,374) (548,649,188) (19,153,752) (2,434,257) 2,081,218 36,278,781 3,854,649 32,744,997 14,603,512 15,798,513 16,695,559 3,208,200 5,352,252 (396,922,373) 437,026,757 5,125,827 52,654,872 3,457,266 498,264,722 16,701,245 117,966 (93,575,387) (2,688,088) (10,812,982) (90,257,246) 20,000,000 12,431,636 (5,000,000) 27,431,636 38,516,739 146,675,753 $185,192,492 University of Georgia Annual Financial Report FY 2007 14 Statement of Cash Flows, Continued THE UNIVERS ITY OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Income (loss) Adjust ment s t o Reconcile Net Income (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 ment s recognized as a component of int erest income Gift reducing proceeds of Gift s and Grant s received for ot her t han capit al purposes Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($473,350,452) 72,223,874 (5,652,103) (58,038) 9,137,937 (149,320) 2,974,437 (838,517) (3,142,184) 1,931,993 ($396,922,373) $307,207 $854,610 ($1,309) ($25,469,332) University of Georgia Annual Financial Report FY 2007 15 THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 FY2007, The University of Georgia is reporting the activity for the University of Georgia Foundation, the University of Georgia Athletic Association, Inc., the Arch Foundation for the University of Georgia, 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 University of Georgia Annual Financial Report FY 2007 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 University of Georgia Annual Financial Report FY 2007 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 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $38,487,990 to the University of Georgia and of this amount, $15,079,004 was funded by the University of Georgia. University of Georgia Annual Financial Report FY 2007 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 compensated absences 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. As of July 1, 2006, the University of Georgia's accrued liability for compensated absences was $38,383,532. For fiscal year 2007, $27,073,123 was earned in compensated absences and employees were paid $25,141,130, for a net increase of $1,931,993. The June 30, 2007 balance in accrued liability for compensated absences was $40,315,525. 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 Georgia Annual Financial Report FY 2007 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: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $43,073,946 10,344,636 10,124,761 $63,543,343 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, 2007 $10,929,517 42,202,720 1,487,000 12,808,445 $67,427,682 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 2007 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. Auxiliary Parking/Transportation and Health Services revenues of $14,680,993 and $15,959,926, respectively, are reported net of discounts and allowances of $635,176 and $1,417,152, respectively. University of Georgia Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $53,617,184 and the bank balance was $62,642,703. Of the University's deposits, $62,411,208 were uninsured. Of these uninsured deposits, $62,411,208 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. 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. University of Georgia Annual Financial Report FY 2007 22 The University's investments as of June 30, 2007 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 U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Investment Pools Board of Regents Legal Fund Office of Treasury and Fiscal Services Georgia Fund 1 $168,415 2,944,596 69,776,177 $72,889,188 7,382,310 18,936,903 1,080,180 240,469 4,616,614 70,233,602 $83,118 2,056,157 32,345,964 $34,485,239 $0 883,564 37,419,692 $38,303,256 $0 4,875 10,521 $15,396 $85,297 $85,297 Total Investments $175,379,266 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1 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 15 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. University of Georgia Annual Financial Report FY 2007 23 The Weighted Average Maturity of the Legal Fund is 4.1 years. Of the University's total investment of $4,616,614 in the Legal Fund, $4,576,911 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, 2007, $72,698,754 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $1,247,989 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. The investments subject to credit quality risk are reflected below: Related Debt Investments U. S. Agencies Fair Value AAA $69,776,177 $17,155,585 Unrat ed $52,620,592 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%. As of June 30, 2007, applicable investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 20% Federal Home Loan Mortgage Corporation 10% Federal Home Loan Bank 10% University of Georgia Annual Financial Report FY 2007 24 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, 2007: June 30, 2007 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 $3,274,091 2,817,477 14,652,077 9,416,014 19,060,657 12,604,113 61,824,429 401,677 $61,422,752 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Food Services P hysical P lant Other T otal June 30, 2007 $1,396,098 1,232,116 2,094,799 $4,723,013 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007 the allowance for uncollectible loans was approximately $676,538. University of Georgia Annual Financial Report FY 2007 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Beginning B al an ce s 7/1/2006 $25,186,886 10,992,015 20,930,895 57,109,796 Addi ti o n s $554,554 664,000 31,703,459 32,922,013 Re ductions $0 31,500 11,015,331 11,046,831 En di n g B al a n ce 6/30/2007 $25,741,440 11,624,515 41,619,023 78,984,978 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 40,864,113 1,054,037,586 145,458,683 300,544,563 1,395,538 202,698,683 1,744,999,166 2,080,399 54,834,924 3,694,585 29,777,836 307,207 12,366,232 103,061,183 5,170,472 16,965,060 735,813 106,061 22,977,406 42,944,512 1,103,702,038 149,153,268 313,357,339 966,932 214,958,854 1,825,082,943 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 14,219,100 319,897,273 31,193,704 232,785,063 454,854 142,493,021 741,043,015 1,315,936 25,840,868 3,632,947 26,007,136 127,241 15,299,746 72,223,874 2,401,296 15,542,358 119,548 106,061 18,169,263 15,535,036 343,336,845 34,826,651 243,249,841 462,547 157,686,706 795,097,626 T ot al Capit al Asset s, Being Depreciat ed, Net 1,003,956,151 30,837,309 4,808,143 1,029,985,317 Capit al Asset s, net $1,061,065,947 $63,759,322 $15,854,974 $1,108,970,295 Buildings include $168,017,834 of property held under capital leases with the University of Georgia Foundation. Accumulated depreciation for these properties is $11,604,082 and $3,509,336 in depreciation expense was recognized for these properties in FY2007. The University of Georgia Foundation considers these leases to be operating leases, and therefore also reports these properties as capital assets. University of Georgia Annual Financial Report FY 2007 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Research Ot her Deferred Revenue T otals June 30, 2007 $20,759,939 12,389,110 14,242,732 $47,391,781 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le ase s Lease Obligat ions O th e r Liabi li ti e s Compensat ed Absences T otal Total Lon g Te rm O bl i gation s Beginning B a l a n ce July 1, 2006 $164,119,787 Addi ti o n s Re du ction s En di n g B a l a n ce June 30, 2007 $307,207 $2,688,088 $161,738,906 C urrent Po rti o n $2,491,707 38,383,532 38,383,532 $202,503,319 27,073,123 27,073,123 $27,380,330 25,141,130 25,141,130 $27,829,218 40,315,525 40,315,525 $202,054,431 24,334,686 24,334,686 $26,826,393 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $16,950,500 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations The University of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES The University of Georgia occupies six real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2032, 2033, three expire in 2034, and one expires in 2036. The equipment capital leases expire between 2008 and 2011. Expenditures for fiscal year 2007 were $13,501,070, of which $10,812,982 represented interest and $2,688,088 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, 2007 were as follows: University of Georgia Annual Financial Report FY 2007 27 Buildings Equipment Total Assets Held Under Capital Lease $ 156,413,752 504,385 $ 156,918,137 All six of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), an entity that is wholly owned by the University of Georgia Foundation, a related entity. 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 the second 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 third capital lease with the UGAREF, whereby, the University leases the Complex Carbohydrate Research Center for a 30-year period that began on September 25, 2003 and expires September 30, 2033. The University of Georgia entered into the fourth and fifth 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 sixth 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, 2007 on these capital leases is $161,497,319. The University of Georgia Foundation considers these leases to be operating leases and includes the value of the related properties in their capital assets. The University also has various capital leases for equipment with an outstanding balance of $241,587 at June 30, 2007. OPERATING LEASES The University of Georgia is Lessee under a number of one-year operating leases, which generally provide for four (4) renewal option periods. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Properties are leased for a variety of functions, from farm acreage to office space to parking lots. 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, 2007, were as follows: University of Georgia Annual Financial Report FY 2007 28 Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 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 ropert y and Equipm ent Capit al Leases Operat ing Leases $13,647,369 13,477,080 13,474,246 13,456,265 13,450,271 67,126,355 67,126,355 67,126,355 66,443,022 23,885,422 359,212,740 183,864,834 13,609,000 $161,738,906 $4,346,366 $4,346,366 Noncancellable operating lease expenditures in 2007 were $6,332,318 for real property. No expenditures were made for equipment under noncancellable operating leases. University of Georgia Annual Financial Report FY 2007 29 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description The University of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of the University of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $30,182,072 $29,007,246 $28,398,641 Employees' Retirement System of Georgia Plan Description The University of Georgia participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 2007 30 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2007, for employees covered by ERS was $929,110. The University's total payroll for all employees was $552,239,598. For the year ended June 30, 2007 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $111,843, of which $98,268 was made by the University and $13,575 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, 2007 financial report, which may be obtained through ERS. University of Georgia Annual Financial Report FY 2007 31 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. The University of Georgia and the covered employees made the required contributions of $11,149,132 (9.66% or 8.13%) and $6,294,889 (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 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 University of Georgia Annual Financial Report FY 2007 32 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 2007 amounted to $1,817,944 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 of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University 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. University of Georgia Annual Financial Report FY 2007 33 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, 2007. 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, 2007, there were 3,844 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, The University of Georgia recognized as incurred $19,283,736 of expenditures, which was net of $6,745,842 of participant contributions. University of Georgia Annual Financial Report FY 2007 34 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acult y St aff Benefit 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 I n st r uct io n Research Functional Classification FY2007 P ublic Ser v ice A cadem ic Sup p o r t $ 84,490,948 6 0 ,6 4 0 ,7 8 8 3 2 ,5 7 8 ,14 2 7 5 ,7 2 9 2 ,6 5 7 ,7 7 0 4 ,2 0 9 ,9 2 6 1,4 4 4 ,0 8 7 17 ,4 7 6 ,5 13 12 ,7 4 2 ,0 0 8 $ 55,800,114 10 1,4 6 6 ,3 0 1 3 5 ,6 3 6 ,7 9 8 2 5 ,5 6 0 5 ,4 4 2 ,15 8 9 9 3 ,4 5 6 1,17 6 ,2 5 0 5 8 ,5 11,2 4 9 16 ,6 7 1,18 0 $ 2,508,210 7 7 ,0 0 4 ,5 2 5 2 5 ,5 8 1,0 5 9 1,8 0 0 3 ,5 7 7 ,3 19 10 5 ,5 0 4 1,10 8 ,6 7 3 3 1,0 5 0 ,4 8 2 3 ,8 8 1,17 1 $ 496,383 4 6 ,9 5 0 ,7 6 6 13 ,7 7 0 ,9 2 6 3 2 ,4 5 1 8 16 ,6 0 5 3 ,7 0 0 6 8 1,6 6 4 17 ,3 2 5 ,7 2 3 2 3 ,3 14 ,8 8 8 $ 216,315,911 $ 275,723,066 $ 144,818,743 $ 103,393,106 St udent Ser v ices Inst itutional Sup p o r t $ 488,978 13 ,5 3 6 ,16 1 4 ,12 9 ,5 9 4 6 ,2 6 0 2 5 0 ,2 7 7 1,8 4 8 ,18 6 2 12 ,5 2 1 9 ,3 4 2 ,3 15 6 8 3 ,4 2 2 $ 36,956 3 3 ,5 2 0 ,5 8 6 12 ,9 4 9 ,8 9 8 5 4 5 ,3 2 4 5 3 6 ,6 3 4 5 7 1,6 17 8 ,7 3 8 ,2 2 4 1,0 5 1,19 7 $ 30,497,714 $ 57,950,436 Natural Classification Faculty Staff Benefits Personal Services T ravel Scholarship s and Fellowship s Utilities Sup p lies and Others Services Dep reciation Total Exp enses P lant Op erat io n s & Maintenance Functional Classification FY2007 Sch o lar sh ip s & Fellowships Auxiliary Ent erprises $0 2 7 ,4 5 2 ,6 8 0 10 ,6 0 2 ,3 6 2 6 7 ,7 5 9 2 4 ,17 9 ,6 7 0 2 6 ,4 11,15 4 2 ,6 7 9 ,6 3 5 $0 11,5 0 3 ,7 6 4 $ 61,546 4 7 ,7 8 4 ,6 5 6 11,2 7 6 ,6 6 2 1,7 6 0 17 9 ,6 8 2 4 8 9 ,2 15 6 ,3 2 3 ,4 15 3 6 ,0 6 9 ,16 5 11,2 0 0 ,3 7 3 $ 91,393,260 $ 11,503,764 $ 113,386,474 T otal E x p en ses $ 143,883,135 4 0 8 ,3 5 6 ,4 6 3 14 6 ,5 2 5 ,4 4 1 6 8 8 ,8 8 4 13 ,5 2 8 ,2 0 4 19 ,15 3 ,7 5 1 3 5 ,6 9 7 ,8 9 7 2 0 4 ,9 2 4 ,8 2 5 7 2 ,2 2 3 ,8 7 4 $ 1,044,982,474 University of Georgia Annual Financial Report FY 2007 35 Note 16. Component Units The University of Georgia Foundation The University of Georgia Foundation (the "Foundation") is a legally separate, tax-exempt component unit of The University of Georgia (the "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 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, 2007, the Foundation distributed $20,115,391 to and on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 394 South Milledge Avenue, Athens, GA 30602 or from the Foundation's website at www.ugafoundation.org. Investments for Component Units: Investments -- Investments in trust funds and securities with an established market value are carried at market value. The market values for investments are estimated based on quoted market prices for those or similar investments where a market price is available or an amount determined by external investment managers if quoted market prices are not available. Investments in real estate and securities without an established market value are carried at the lower of estimated market value at the date of gift or current market value as estimated by management of the Foundation. Realized gains and losses are computed using the specific identification method. Temporary investments have an original maturity of greater than three months and represent operating funds in excess of immediate cash requirements. The Board of Trustees of the Real Estate Foundation has designated certain temporary investment balances to fund future obligations. As of June 30, 2007, the temporary investment amount included $1,276,600 reserved for debt service. As of June 30, 2007, the long-term investment pool consists of investments in domestic and international equities (72.6%), fixed income instruments (9.8%), private equity investments University of Georgia Annual Financial Report FY 2007 36 (4.9%), real estate funds (4.6%), hedge funds (7.2%), timber, gas & oil (0.5%), and deposits (0.4%) that are held by outside investment managers. Fair value for financial reporting purposes is based on quoted market prices or an amount determined by external investment managers if quoted market prices are not available. Management reviews and evaluates fair value provided by the external investment managers as well as the valuation methods and assessments used in determining the fair value of such investments. Such estimated fair values (amounting to $410,993,738 for investments with estimated fair values based on quoted market prices and $169,695,610 for investments with estimated fair values provided by external investment managers at June 30, 2007) may differ from the ultimate realizable value of the investments, and these differences may be material. Net realized and unrealized gain on investments include $64,702,427 for investments with estimated fair values based on quoted market prices and $26,483,392 for investments with estimated fair values provided by external investment managers at June 30, 2007. Investments are comprised of the following amounts at June 30, 2007: Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split-Interest Investments Real Estate Investment Pools Total Investments Cost $38,875,694 2,245,109 1,003,145 3,963,772 1,174,007 14,678,914 19,092,161 359,604,977 $440,637,779 Fair Value $38,875,694 2,224,690 979,788 4,666,421 1,359,535 17,149,724 19,092,161 555,330,588 $639,678,601 University of Georgia Annual Financial Report FY 2007 37 Capital Assets for Component Units: The University of Georgia Foundation holds the following Capital Assets as of June 30, 2007: 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 June 30, 2007 $21,492,929 307,415 21,800,344 176,180,268 1,023,245 177,203,513 19,225,553 157,977,960 $179,778,304 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Compensated Absences Liabilities under split-interest agreement Capital Lease Obligations Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $26,883 11,291,219 0 14,350,346 190,515,024 $216,183,472 $2,612 1,838,582 8,598,269 $10,439,463 $0 1,443,639 2,257,082 14,847,226 $18,547,947 $29,495 11,686,162 0 20,691,533 175,667,798 $208,074,988 $29,495 539,149 10,628,504 3,485,000 $14,682,148 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. The agreement expires on November 30, 2007. The revolving credit agreement provides for 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, 2007, amounts outstanding or issued under this agreement included borrowings of $10,499,210 and letters of credit and bank reserves of $8,373,507, resulting in $31,127,283 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's 30-day London InterBank University of Georgia Annual Financial Report FY 2007 38 Offered Rate ("LIBOR") plus 32.5 basis points (or 0.325%). At June 30, 2007, the rates applicable to the borrowings were 5.645%. On July 1, 2005, the cooperative organization agreement between the Foundation and the Board of Regents ended which constituted a termination event under the revolving credit agreement that provided the bank with certain rights after a 90-day forbearance period. 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 where the bank agreed not to call any borrowings or letters of credit and to continue to make loans under certain conditions. On July 1, 2007, effective with the transfer of sole membership of the Real Estate Foundation, the previous termination event was nullified rendering the forbearance agreement obsolete. All borrowings under this revolving credit agreement are subject to a guarantee requirement except for those borrowings for projects supported by a rental or license agreement with the Board of Regents or the University. As of June 30, 2007, the borrowings subject to this guarantee requirement were $34,995. The Foundation had guaranteed these obligations of the Real Estate Foundation through June 30, 2007. As of July 1, 2007, the Research Foundation has guaranteed these obligations under this revolving credit agreement. 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% 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, 2007 is $42,981 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $81,116 on the fair value of the derivative for the year ended June 30, 2007 as an adjustment to interest expense. $9,800,000 Credit Agreement During 2007, the Foundation established a $9.8 million revolving credit agreement with a bank. The agreement expires in August 2008. The revolving credit agreement provides for borrowings or letters of credit at the Foundation's option. Credit available under the revolving credit agreement is reduced by outstanding borrowings and outstanding letters of credit. As of June 30, 2007, the amount outstanding or issued under this agreement is $8,083,918, resulting in $1,716,082 available as borrowing capacity under this line. Borrowings under the revolving credit agreement bear interest at the bank's adjusted LIBOR rate plus 32.5 basis points (or 0.325%). At June 30, 2007, the rate applicable to the borrowings was 5.65%. $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, 2007, $1,090,250 was outstanding under this University of Georgia Annual Financial Report FY 2007 39 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, 2012. As of June 30, 2007, $1,018,155 was outstanding under this agreement. Interest is charged at the bank's 30 day LIBOR rate plus 45 basis points (or 0.45%), or 5.77% at June 30, 2007. Principal and interest are payable monthly. The Foundation has an outstanding interest rate swap agreement effectively changing the interest rate exposure on the $1,117,865 note payable from variable to a 5.75% fixed rate over the term of the note payable. As of June 30, 2007, the fair value of the termination benefit of the interest rate swap was $5,024 and was recorded as an asset in accordance with SFAS No. 133. The Foundation recorded a loss of $9,464 for the year ended June 30, 2007 as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 1 2 3 4 5 6-10 11-15 Principal Notes and Loans Payable Interest $10,628,504 8,219,361 138,185 141,088 919,145 445,000 200,250 $20,691,533 $831,755 200,149 114,938 105,688 92,531 154,677 17,847 $1,517,585 Total $11,460,259 8,419,510 253,123 246,776 1,011,676 599,677 218,097 $22,209,118 Revenue Bonds Payable $25,620,000 Bond Issue In 2001, the Development Authority of the Unified Government of Athens -- Clarke County, Georgia (the "Development Authority") issued Revenue Bonds (UGA Real Estate Foundation, Inc. Project), Series 2001 (the "2001 Bonds") and entered into an agreement (the "2001 Loan Agreement") to loan $25,620,000 to the Real Estate Foundation. The 2001 Bonds are secured by a letter of credit issued on behalf of the Real Estate Foundation in favor of the Development Authority under the Real Estate Foundation's $50 million credit agreement discussed above. 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 (3.74% at June 30, 2007). The loan matures in 2031, subject to certain early repayment provisions. During the year ended June 30, 2007, principal payments of $11,395,000 were made. At June 30, 2007, the balance of this obligation was $8,425,000. University of Georgia Annual Financial Report FY 2007 40 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, 2007 was $15,495, and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $87,011 on the fair value of the derivative for the year ended June 30, 2007 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, 2007, principal payments of $780,000 were made. At June 30, 2007, the balance of this obligation was $36,989,507. $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, 2007 principal payments of $1,875,000 were made. At June 30, 2007, the balance of this obligation was $97,558,764. $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 University of Georgia Annual Financial Report FY 2007 41 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, 2007, principal payments of $250,000 were made. At June 30, 2007, the balance of this obligation was $7,325,511. $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 year ended June 30, 2007, 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. During the year ended June 30, 2007, a principal payment of $460,000 was made to pay off the $425,000 Series 2004B bonds and reduce the outstanding Series 2004A bonds by $35,000. At June 30, 2007, the balance of this obligation was $25,369,016. University of Georgia Annual Financial Report FY 2007 42 Annual debt service requirements to maturity for Bonds Payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $3,485,000 3,595,000 3,695,000 3,825,000 3,970,000 22,160,000 27,970,000 35,985,000 51,735,000 17,830,000 174,250,000 1,417,798 $175,667,798 Bonds Payable Interest $8,051,316 7,990,243 7,870,527 7,735,415 7,591,118 35,373,004 29,405,582 21,503,293 11,416,115 964,951 137,901,564 $137,901,564 Total $11,536,316 11,585,243 11,565,527 11,560,415 11,561,118 57,533,004 57,375,582 57,488,293 63,151,115 18,794,951 312,151,564 1,417,798 $313,569,362 The bonds payable, credit agreements, and notes payable require the Foundation and Real Estate Foundation to meet certain covenants. At June 30, 2007 the Foundation and Real Estate Foundation were in compliance with all covenants. In 2008, the Real Estate Foundation plans to issue $59 million in bonds at a fixed rate to finance the expansion of a campus facility. During the year ended June 30, 2007, the Real Estate Foundation entered into an interest rate hedge agreement at no cost locking in the then current interest rate on this future borrowing. The fair value of the interest rate hedge as of June 30, 2007, was $2,046,793 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a gain of $2,046,793 on the fair value of the derivative for the year ended June 30, 2007, as an adjustment to interest expense. 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 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 Athletic Association is considered a component unit of the University and is discretely presented in the University's financial statements. For financial reporting purposes, the Athletic 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. University of Georgia Annual Financial Report FY 2007 43 During the year ended June 30, 2007, the Athletic 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 $25,899,753 and were recognized as expenses of the Athletic Association. Capital assets net of accumulated depreciation of $187 million are included in the financial statements of the Athletic Association. These capital assets, excluding moveable equipment and Construction work in progress, 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. At June 30, 2007, the book-carrying amount of the Athletic Association's deposits, including noncurrent cash and cash equivalents, was $72,965,193 and the bank balance was $73,819,887. The Athletic Association's bank balance is classified as follows at June 30, 2007: University of Georgia Annual Financial Report FY 2007 44 Amount insured by the FDIC and FSLIC Collateralized with securities held in the Athletic Association's name Uncollateralized $ 333,000 64,624,866 8,862,021 $73,819,887 Capital Assets for Component Units: The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2007: 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 7/1/2006 $0 8,955,870 8,955,870 176,253,763 19,283,369 7,303,241 202,840,373 31,840,446 5,538,900 3,938,540 41,317,886 161,522,487 $170,478,357 Additions $0 20,537,490 20,537,490 Reductions $0 0 Ending Balance 6/30/2007 $0 29,493,360 29,493,360 581,000 192,692 618,714 1,392,406 1,042,668 1,042,668 176,834,763 19,476,061 6,879,287 203,190,111 3,178,443 835,670 1,235,776 5,249,889 (3,857,483) $16,680,007 909,562 909,562 133,106 $133,106 35,018,889 6,374,570 4,264,754 45,658,213 157,531,898 $187,025,258 University of Georgia Annual Financial Report FY 2007 45 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2007 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2006 Additions Reductions June 30, 2007 One Year Notes and Loans Payable-Primary Government Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $2,650,400 167,401 99,515,000 3,250,438 $105,583,239 $0 $313,972 80,288 1,955,000 496,161 $0 $2,845,421 $2,336,428 87,113 97,560,000 2,754,277 $102,737,818 $333,394 87,113 2,090,000 500,000 $3,010,507 Notes Payable-Due to Primary Government Under an agreement with The University of Georgia, the Athletic Association assumed the responsibility for a portion of the funding for the construction of the Ramsey Student Center for Physical Activities. In fiscal 1996, the Athletic Association recorded as property approximately $7,800,000, representing the Athletic Association's share of the Ramsey Center based on estimated usage as defined in the agreement. The Athletic Association paid cash of $2,858,928, and subsequently recorded a liability of $4,941,072 at June 30, 1996, representing the remaining principal balance of the obligation. This balance is reported as the note payable to the University of Georgia above and has an outstanding principal balance at June 30, 2007 of $2,336,428. The principal balance due within one year, $333,394, is reflected in Due to Primary Government Current Liabilities. The Association made payments of principal and interest of $477,917 during the year June 30, 2007, and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%. Notes Payable At June 30, 2007, the Athletic Association had an $87,113 remaining liability for a vendor note payable. The 1998 note was payable over 10 years in annual payments of $94,518 through 2008. The implicit interest rate is 8.5% and the note is secured by a first priority purchase money security interest on equipment with a net book value of $1,011,626. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Notes and Loans Payable Principal Interest Total $420,507 354,016 375,915 399,167 423,858 450,078 $2,423,541 $151,928 123,901 102,002 78,750 54,059 27,839 $538,479 $572,435 477,917 477,917 477,917 477,917 477,917 $2,962,020 University of Georgia Annual Financial Report FY 2007 46 Revenue Bonds Payable On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Athletic 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, 2008, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.89% on June 30, 2007). The loan matures in 2031, subject to certain early repayment provisions. At June 30, 2007, the balance of this obligation was $33,100,000. 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 Athletic 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, 2007, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.90% on June 30, 2007). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the Association redeemed $16 million of these bonds. The remaining obligation at June 30, 2007 was $18,765,000. 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 Athletic 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, 2008 and must be renewed annually. Under the Loan Agreement, the Athletic 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 (5.32% on June 30, 2007). The loan matures in 2021 and requires yearly principal reductions. At June 30, 2007, the balance of this obligation was $16,195,000. 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 Athletic 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, 2007, and must be renewed annually. Under the Loan Agreement, the Athletic Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (3.90% on June 30, 2007). The loan matures in 2035, subject to certain early repayment provisions. The June 30, 2007 remaining obligation for these revenue bonds was $29,500,000. University of Georgia Annual Financial Report FY 2007 47 Interest Rate Swap Agreements The Athletic Association is a party to interest rate swap agreements that are not recorded in the financial statements. Following are disclosure of key aspects of the agreements. Objective and Terms - As a means of interest rate management, the Athletic Association entered into three separate interest rate swap transactions with Bank of America, N.A. (the "Counterparty") relating to its variable rate tax-exempt Series 2001 Bonds, tax-exempt Series 2003 Bonds, taxable Series 2005 Bonds and tax-exempt Series 2005B Bonds. Pursuant to an ISDA Master Agreement and Schedule to ISDA Master Agreement each dated as of January 27, 2005 between the Athletic Association and the Counterparty and three Confirmations, the Athletic Association has agreed to pay to the Counterparty a fixed rate of interest in an amount equal to: (1) 3.49% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2001 Bonds until September 2021; (2) 3.38% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2003 Bonds until August 2033; (3) 5.05% per annum multiplied by a notional amount which is equal to the principal amount of the Series 2005 Bonds until July 2021; and (4) 3.483% per annum multiplied by the notional amount which is equal to the principal amount of the Series 2005B Bonds until August 2033. In return, the Counterparty has agreed to pay to the Athletic Association a floating rate of interest in an amount equal to: (1) 67% of LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2001 Bonds until September 2021; (2) 67% of LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2003 Bonds until August 2033; (3) LIBOR multiplied by a notional amount which is equal to the principal amount of the Series 2005 Bonds until July 2021; and (4) 67% of LIBOR multiplied by the notional amount which is equal to the principal amount of the Series 2005B Bonds until July 2035. Fair Value The Athletic Association will be exposed to variable rates if the counterparty to a swap defaults or if a swap is terminated. A termination of the swap agreement may also result in the Athletic Association's making or receiving a termination payment As of June 30, 2007, the fair value of the interest rate swap agreement on the 2001 Series Bonds was $848,751, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2003 Series Bonds was $620,162, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2005A Series Bonds was $418,172, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. As of June 30, 2007, the fair value of the interest rate swap agreement on the 2005B series Bonds was $817,093, indicating the amount that the counterparty would be required to pay the Athletic Association to terminate the swap agreement. University of Georgia Annual Financial Report FY 2007 48 Swap Payments and Associated Debt As of June 30, 2007, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term were as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary. Year Variable Rate Bonds Interest Rate Ending Principal Interest Swaps, Net Total 2008 $ 2,090,000 $ 3,936,996 $ (389,629) $ 5,637,367 2009 2,140,000 3,840,259 (381,464) 5,598,795 2010 2,195,000 3,741,022 (373,099) 5,562,923 2011 2,245,000 3,639,551 (364,545) 5,520,006 2012 2,295,000 3,535,775 (355,814) 5,474,961 2013-2017 12,380,000 16,028,390 (1,640,024) 26,768,366 2018-2022 13,990,000 13,020,594 (1,386,855) 25,623,739 2023-2027 9,080,000 10,683,880 (1,154,744) 18,609,136 2028-2032 43,480,000 7,690,918 (818,470) 50,352,448 2033-2037 7,665,000 396,614 (43,617) 8,017,997 Total $ 97,560,000 $ 66,513,999 $ (6,908,261) $ 157,165,738 Credit Risk As of June 30, 2007, the fair value of the swaps represents the Athletic Association's credit exposure to the Counterparty. Should the Counterparty fail to perform in accordance with the terms of the swap agreements, the Athletic Association faces a possible loss equivalent to $6.9 million less the cumulative fair value of $2.7 million. As of June 30, 2007, the Counterparty was rated AAA by Moody's and AA+ by S&P. Basis Risk The swaps expose the Athletic Association to basis risk. The interest rate on the Series 2001 Bonds, the Series 2003 Bond and the Series 2005B Bonds is a tax-exempt interest rate while the LIBOR basis on the variable rate receipt on the interest rate swap agreements is taxable. Tax-exempt interest rates can change without a corresponding change in the 30 day LIBOR rate due to factors affecting the tax-exempt market which do not have a similar effect on the taxable market. The Athletic Association will be exposed to basis risk under the swaps to the extent that the interest rates on the tax-exempt bonds trades at greater than 67% of LIBOR for extended periods of time. The Athletic Association would also be exposed to tax risk stemming from changes in the marginal income tax rates or those caused by a reduction or elimination in the benefits of tax exemption for municipal bonds. Termination Risk The interest rate swap agreement uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Athletic Association or the Counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable rate bonds would no longer carry a synthetically fixed interest rate. Also, if at the time of termination, the swap has a negative fair value, then the Athletic Association would be liable to the Counterparty for a payment equal to the swap's fair value. The Arch Foundation for the University of Georgia, Inc. The Arch Foundation for the University of Georgia, Inc. (Arch Foundation) is a legally separate, tax-exempt component unit of The University of Georgia (University). The Arch Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University of Georgia Annual Financial Report FY 2007 49 University in support of its programs. The thirty-one member board of the Arch 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 Arch Foundation, the majority of resources or income thereon that the Arch Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Arch Foundation can only be used by, or for the benefit of the University, the Arch Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Arch 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 Arch Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2007, the Arch Foundation distributed $3,708,541 to or on behalf of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the External Affairs Office of Financial Services at 394 S. Milledge Avenue, Athens, GA 30602 or from the Foundation's website at www.uga.edu/archfoundation. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2007: Equity Securities Joint Ventures/Partnerships Investment Pools Total Investments Cost $34,554 630,000 17,864,126 $18,528,680 Fair Value $34,554 630,000 19,116,597 $19,781,151 University of Georgia Research Foundation, Inc. The University of Georgia Research Foundation, Inc. (the Research Foundation) is a legally separate, tax-exempt component unit of The University of Georgia (the University). The Research Foundation serves to enhance the research mission of the University by securing sponsored research funding and by providing funding of special research initiatives. All University intellectual property developed through these research programs are managed by the Research Foundation. The eighteen-member board of directors consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Research Foundation itself. Although the University does not control the timing or amount of receipts from the Research Foundation, all sponsored research awards are subcontracted to the University and other resources and related income are restricted to benefit the research mission University of Georgia Annual Financial Report FY 2007 50 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 2007, the Research Foundation transferred approximately $120 million in sponsored research to the University and shows a net payable to the University at June 30 related to this activity. 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 for Component Units: 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. The Research Foundation does not have a deposit policy for custodial credit risk. At June 30, 2007, the book value of the Research Foundation's deposits was $9,800,115. The bank and investment account balances at June 30, 2007 were $10,317,911 of which $10,217,911 was uninsured. Of these uninsured deposits, $10,217,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Research Foundation's name and $911 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, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. University of Georgia Annual Financial Report FY 2007 51 Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Certificates of Deposit Corporate Debt Mortgage Backed Securities (Commercial) Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Equity Securities - International Managed Futures/Hedge Funds Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $1,155,456 1,846,778 5,071,194 1,180,167 15,769,776 1,980,065 $27,003,436 $0 347,659 1,180,167 14,024,284 1,945,652 $17,497,762 $337,846 2,472,179 1,526,778 $4,336,803 $659,875 1,935,062 218,714 $2,813,651 $157,735 1,846,778 316,294 34,413 $2,355,220 4,357,875 5,861,132 1,581,459 1,969,664 $40,773,566 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 Research 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 Research Foundation does not have a formal policy for managing custodial credit risk for investments. At June 30, 2007, $34,446,027 of the Research Foundation's applicable investments were uninsured and held by the investment's counterparty in the Research 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 Research 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. The Research Foundation's investments as of June 30, 2007 are presented below. All investments are presented by investment type and fixed income securities are presented by credit quality ratings. University of Georgia Annual Financial Report FY 2007 52 Related Debt Investments Standard & Poor's Quality Ratings A+ A ABBB+ BBB BBBBB- Moody's Quality Ratings Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baaa3 Ba3 UNRATED Fair Value U.S. Agencies Implicitily Guaranteed Certificates of Deposit Corporate Debt 350,563 657,095 306,442 7,732,839 2,138,510 1,945,927 1,392,146 790,292 70,033 65,686 215,983 321,460 1,562,498 1,981,044 20,288 53,934 4,396,462 674,732 4,396,462 1,180,167 350,563 657,095 306,442 7,732,839 2,138,510 1,945,927 1,392,146 115,560 70,033 65,686 215,983 321,460 382,331 1,981,044 20,288 53,934 $24,001,202 $5,071,194 $1,180,167 $17,749,841 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 Research 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, 2007, investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 7% 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 Research Foundation's investments are not exposed to foreign currency risk as securities denominated in currencies other than the U.S. dollar are not permissible by the Research Foundation's investment policy. University of Georgia Annual Financial Report FY 2007 53 Capital Assets for Component Units: University of Georgia Research Foundation, Inc. had Capital Assets activity as follows for the year ended June 30, 2007: Capital Assets, Not Being Depreciated: Land (and other assets) Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2006 $110,000 110,000 1,142,307 1,142,307 691,231 691,231 451,076 $561,076 Additions $0 0 Reductions $0 0 Ending Balance 6/30/2007 $110,000 110,000 1,142,307 0 0 1,142,307 46,082 46,082 (46,082) ($46,082) 737,313 0 737,313 0 404,994 $0 $514,994 University of Georgia Annual Financial Report FY 2007 54 UNIVERSITY SYSTEM OFFICE Annual Financial Report For the Year Ended June 30, 2007 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 Vikki L. Williamson Executive Director for Business and Financial Affairs UNIVERSITY SYSTEM OFFICE ANNUAL FINANCIAL REPORT FY 2007 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.....................................................................................................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 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 nearly 260,000 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 2007. 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 2007 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 the University System Office. The Statement of Net Assets presents end-of-year data concerning assets (current and non-current), liabilities (current and non-current), and net assets (assets minus liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the University System Office. They also are 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 2007 1 University System Office'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 available only 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 e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $163,749,761 38,074,946 3,612,043 205,436,750 June 30, 2006 $177,749,330 33,352,309 3,612,043 214,713,682 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 149,109,263 25,022,843 174,132,106 166,946,479 23,484,463 190,430,942 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 9,016,623 3,612,043 10,554,442 8,121,536 $31,304,644 7,087,350 3,612,043 8,057,131 5,526,216 $24,282,740 The total assets of the University System Office decreased by ($9,276,932), which was primarily due to a decrease in cash and investments related to the Investment Pool. The Short Term Fund experienced a decrease of ($7,490,747) for the year, the Balanced Income Fund an increase of $158,171, the Legal Fund an increase of $49,804, the Total Return Fund a decrease of ($5,413,936) and the Diversified Fund a decrease of ($2,391,920). The fund decreases are primarily related to transfers to the Diversified Fund for Foundations. These decreases were partially offset by a $4,722,637 increase in capital assets, net of accumulated depreciation. The total liabilities for the year decreased by ($16,298,836). Current liabilities decreased ($17,837,216) (10.7%), primarily due to the reduction in the Investment Pool described above in the asset section and a $1,359,404 (38.3%) increase in the current portion of capital lease obligations. Non-current liabilities increased $1,538,380 (6.6%), primarily due to a $1,433,960 (6.3%) increase in the non-current portion of capital lease obligations. The combination of the decrease in total assets of ($9,276,932) and the decrease in total liabilities of ($16,298,836) yields an increase in total net assets of $7,021,904. The increase in net assets is primarily related to an increase in restricted, expendable net assets of $2,497,311, due to increased grant activity, an increase in unrestricted net assets of $2,595,320, and an increase in net assets invested in capital assets, net of debt of $1,929,273. University System Office Annual Financial Report FY 2007 2 Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the University System Office, both operating and non-operating, and the expenses paid by the University System Office, operating and nonoperating, and any other revenues, expenses, gains and losses generated or incurred by the University System Office. 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 incurred to acquire or produce the goods and services provided in return for the operating revenues, and to execute 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. Non-operating expense is comprised of items such as interest expense related to capital acquisitions. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Special It em s Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year June 30, 2007 $323,192,952 472,882,393 (149,689,441) 152,780,956 3,091,515 3,930,389 0 7,021,904 24,282,740 0 24,282,740 $31,304,644 June 30, 2006 $289,538,962 437,363,775 (147,824,813) 144,751,553 (3,073,260) 0 47,612 (3,025,648) 27,308,388 0 27,308,388 $24,282,740 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year, as demonstrated by an increase in the net assets of $7,021,904 at the end of the year. Highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are provided in the following sections. University System Office Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue Grant s and Cont ract s Sales and Services Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Invest m ent Income Ot h er T ot al Nonoperat ing Revenue Special It em s Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $17,487,147 23,670,772 282,035,033 323,192,952 151,241,538 1,314,311 1,539,582 14,230 154,109,661 0 3,930,389 3,930,389 $481,233,002 June 30, 2006 $12,111,050 21,304,813 256,123,099 289,538,962 141,686,202 2,829,039 708,239 668,299 145,891,779 47,612 0 0 $435,478,353 Total operating revenue increased $33,653,990 (11.6%) in fiscal year 2007. Grants and contracts revenue increased $5,376,097 (44.4%), primarily due to funding increases in the National Foundation on the Arts and Humanities, Partnership for Reform in Science and Mathematics (PRISM), US Department of Education (DOE), National Science Foundation (NSF) and National Aeronautics and Space Administration (NASA) grants. Sales and service revenues increased $2,365,959 (11.1%), primarily due to increased billings for Oracle ($1,156,019) and PeopleSoft ($1,759,281) related to increased product usage, and was partially offset by decreased billings for GALILEO ($642,668). Other operating revenues increased $25,911,934 (10.1%), primarily due to increased premiums for health insurance related to rising healthcare provider costs. Non-operating revenues increased $8,217,882 (5.6%), primarily due to a $9,555,336 (6.7%) increase in State Appropriations and an $831,343 (117.4%) increase in investment income, which were partially offset by a $1,514,728 (53.5%) decrease in Library grant non-operating revenue and a $654,069 (97.9%) decrease in other non-operating revenue that was due to a nonrecurring capital transaction that occurred in FY2006. University System Office Annual Financial Report FY 2007 4 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support Scholarships and Fellowships Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $3,970,782 385,005 99,536,846 20,697,178 280,625 347,780,221 231,736 0 472,882,393 1,328,705 $474,211,098 June 30, 2006 $1,264,753 138,251 90,871,953 18,977,612 279,542 324,974,952 164,410 692,302 437,363,775 1,140,226 $438,504,001 Operating expenses increased $35,518,618 (8.1%) in fiscal year 2007. Operating expense increases were primarily related to increased health insurance expense of $19,772,311, increased grant and contract non-salary expenses of $4,920,875, increased library material purchases of $3,002,103, increased repairs and maintenance expense for libraries of $2,404,206, increased compensation and employee benefits due to higher costs of health insurance and salary increases averaging 4% effective January 1, 2007 of $2,276,230, $1,384,281 increase for IT Consultants related to the planned PeopleSoft upgrade, $792,048 for eminent scholar support, increased depreciation expense of $567,725 and increased rent of $373,284. Non-operating expense increased $188,479 (16.5%), and is composed of interest expense related to capital leases. Statement of Cash Flows The final statement presented by the University System Office is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the University System Office during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the University System Office. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. University System Office Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($142,474,649) 142,507,019 (6,686,361) 393,594 (6,260,397) 72,479,021 $66,218,624 June 30, 2006 ($140,035,364) 129,165,845 (4,147,545) 5,296,660 (9,720,404) 82,199,425 $72,479,021 Capital Assets In fiscal year 2006, The Georgia Public Telecommunications Commission ("the Commission") transferred to the University System Office other property and equipment located at its tower sites throughout the State through an intergovernmental agreement to the University System Office. In fiscal year 2007, additional land and equipment was transferred to the University System Office under this arrangement. The value of the land and equipment transferred in fiscal year 2007 was $200,000 and $3,730,389, respectively. The total value of the land and equipment transferred is $25,027,755 and the accumulated depreciation is $21,079,602, for a net value of $3,948,153. 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 when the bonds are paid in full. 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 2007 is listed below. University System Office Annual Financial Report FY 2007 6 Health and Dental Beginning Net Asset s July 1, 2006 P lus Revenues FY 2007 P rem ium Receipt s Adjust m ent t o Fair M arket Value Less Expendit ures FY 2007 Claim P aym ents Change in Incurred But Not Report ed Ending Net Asset s June 30, 2007 $ (1,916,192) $ 280,071,658 295,034 (280,280,397) 836,182 280,366,692 (279,444,215) $ (993,715) 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 reduced premium collections in that year, and accounts for the negative net assets balance. Long Term Debt and Liabilities The University System Office had long-term debt and liabilities of $31,727,312, of which $6,704,469 was reflected as current liabilities at June 30, 2007. 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. Economic Outlook The University System Office is not aware of any currently known facts, decisions or conditions that are expected to have a significant effect on the financial position or results of operations during fiscal year 2007 beyond those unknown variations having a global effect on virtually all types of business operations. The University System Office's overall financial position is strong. Even with constrained funding, the University System Office was able to generate a modest increase in net assets. The University System Office expects that fiscal year 2008 will not vary significantly and will maintain a close watch over resources to maintain the University System Office's ability to react to internal and external issues that arise. William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office University System Office Annual Financial Report FY 2007 7 Statement of Net Assets UNIVERS ITY S YS TEM OFFICE STATEMENT OF NET ASSETS June 30, 2007 AS S ETS C urre nt Asse ts Cash and Cash Equivalent s Short -t erm Invest ment s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her T ot al Current Asset s Noncurre nt Asse ts Invest ment s Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabi li ti e s Account s P ayable Benefit s P ayable Deposit s Held for Ot her Organizat ions Lease P urchase Obligat ions (current port ion) Compensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabi li ti e s Lease P urchase Obligat ions (noncurrent ) Compensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n ex p en dable E x p en dable Unrest rict ed TO TAL NET AS S ETS June 30, 2007 $66,218,624 96,217,427 482,885 830,825 163,749,761 3,612,043 38,074,946 41,686,989 205,436,750 19,299 27,147,291 115,238,204 4,913,250 1,791,219 149,109,263 24,145,073 877,770 25,022,843 174,132,106 9,016,623 3,612,043 10,554,442 8,121,536 $31,304,644 University System Office Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets UNIVERS ITY S YS TEM OFFICE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES June 30, 2007 Operat ing Revenues Grant s and Cont ract s Federal Other Sales and Services Ot her Operat ing Revenues T ot al Operat ing Revenues EXPENS ES Operat ing Expenses Salaries: St aff Employee Benefits T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion T ot al Operat ing Expenses Operat ing Income (loss) $17,346,251 140,896 23,670,772 282,035,033 323,192,952 23,657,187 5,842,874 665,552 231,736 23,060,064 411,569,185 7,855,795 472,882,393 (149,689,441) NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal Other Invest m ent Incom e (endowment s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income 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 151,241,538 64,663 1,249,648 1,539,582 (1,328,705) 14,230 152,780,956 3,091,515 3,930,389 3,930,389 7,021,904 24,282,740 24,282,740 $31,304,644 University System Office Annual Financial Report FY 2007 9 Statement of Cash Flows UNIVERS ITY S YS TEM OFFICE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships 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 P roceeds from Sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s 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, 2007 $17,471,780 23,818,838 (442,046,884) (23,363,393) (231,736) 281,876,746 (142,474,649) 151,241,538 (10,066,035) 1,314,311 17,205 142,507,019 1,174,426 (1,452,524) (5,079,558) (1,328,705) (6,686,361) 244,212 149,382 393,594 (6,260,397) 72,479,021 $66,218,624 University System Office Annual Financial Report FY 2007 10 Statement of Cash Flows, Continued UNIVERS ITY S YS TEM OFFICE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 P repaid Items Account s P ayable Benefit s P ayable 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, 2007 ($149,689,441) 7,855,795 (25,588) 3,865 (870) (836,182) 217,772 ($142,474,649) $7,872,922 $1,390,200 ($3,930,389) University System Office Annual Financial Report FY 2007 11 UNIVERSITY SYSTEM OFFICE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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. The Board of Regents currently is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Chancellor is appointed by the Board of Regents as chief executive officer and serves at the pleasure of the Board. The Board oversees 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 nearly 260,000 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) Statesupported, 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 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. For fiscal year University System Office Annual Financial Report FY 2007 12 2007, 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 also was 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, and 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 entity 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 not to 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 2007 13 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 grants 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, 2007. 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 at 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 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 review the activities of the Georgia State Financing and Investment Commission (GSFIC), an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University System Office when complete. For projects managed by the University System Office, the University System Office retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred land and equipment for the Georgia Public Telecommunications Commission to the University System Office valued at $200,000 and $3,730,389, respectively. University System Office Annual Financial Report FY 2007 14 Deposits The University System Office had $115 million in Deposits Held for Other Organizations as of June 30, 2007. Deposits held for others consist of the external portion of the University System of Georgia's Pooled Investment Fund program and other funds held by the University System Office as an agent for various governments or individuals. Deferred Revenues The University System Office had no deferred revenues as of June 30, 2007. 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 Statements of Revenues, Expenses, and Changes in Net Assets. The University System Office had accrued liability for compensated absences in the amount of $2,451,217 as of July 1, 2006. For fiscal year 2007, $2,051,027 was earned in compensated absences and employees were paid $1,833,255, for a net increase of $217,771. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $2,668,989. Non-current Liabilities Non-current liabilities include liabilities that will not be paid within the next fiscal year; capital lease obligations with contractual maturities greater than one year; and other liabilities that, although payable within one year, are to be paid from funds that are classified as non-current assets. Net Assets The 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 wherein donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may be either 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 the Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources that the University System Office is legally or contractually obligated to utilize in accordance with restrictions imposed by external third parties. University System Office Annual Financial Report FY 2007 15 Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies June 30, 2007 $10,554,442 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 remitted by the University System Office to the Office of Treasury and Fiscal Services. Unrestricted Net Assets includes the following items that are quasi-restricted by management. Reserve for Encum brances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $5,534,218 2,587,318 $8,121,536 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System Office's policy is first to apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System Office, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University System Office has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) sales and services of educational departments, (2) most Federal, state and local grants and contracts, and (3) University System of Georgia's self insurance receipts. 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. University System Office Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $33,454,763 and the bank balance was $23,289,213. Of the University System Office's deposits, $23,189,213 were uninsured. Of these uninsured deposits, $19,346,109 were collateralized with securities held by the financial institution's trust department or agent in the University System Office's name, $3,702,911 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 $140,193 were uncollateralized. University System Office Annual Financial Report FY 2007 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 2007 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 2007 19 The University System Office's investments as of June 30, 2007 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 Other Investments Equity Mutual Funds Equity Securities - Domestic Real Estate Investment Fund Total Investments Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years $4,289,719 2,917,124 43,094,773 24,340,786 $74,642,402 43,159,697 10,233,816 4,557,415 $132,593,330 $0 1,080,365 21,364,656 $22,445,021 $2,423,128 1,836,759 21,536,471 22,270,347 $48,066,705 $1,866,591 193,646 2,070,439 $4,130,676 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 Board of Regent'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, except in the Diversified Fund, shall be limited to US government agency and corporate debt instruments that meet investment eligibility under Georgia Code 50-17-63. 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 2007 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/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 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, 2007, $60,535,432 of the University System Office's applicable investments were uninsured and held by the investment's counterparty 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 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 eligible investments under Georgia Code 50-17-63. Portfolios of debt security funds also must meet the eligible investment criteria under the same code section. 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 investments subject to credit quality risk are reflected below: Related Debt Inves tments U. S. Agencies Mut ual Bond Fund Fair Value $43,094,773 24,340,786 $67,435,559 AAA $598,878 $598,878 Unrated $42,495,895 24,340,786 $66,836,681 University System Office Annual Financial Report FY 2007 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. The following U.S. Agency investments exceeded 5% of the total reported investment amount as of June 30, 2007: Investment: Amount: % of Total: Federal National Mortgage Association $29,977,003 23% Federal Home Loan Mortgage Corporation $12,518,892 9% Condensed financial information for the investment pool is as follows: Assets Cas h Inves tments Interes t Receivable Statement of Net A s s ets - June 30, 2007 $ 3,586,128 126,295,038 226,590 $ 130,107,756 Net A s s ets Held in Trus t for Pool Participants Internal Portion External Portion $ 15,248,383 114,859,373 $ 130,107,756 Statement of Changes in Net A s s ets - June 30, 2007 Re v e n u e s Interes t Income Net Increas e (Decreas e) in Fair Value of Inves tments Total Revenues $ 4,720,065 8,799,549 13,519,614 Expens es Operating Expens es A dminis trative Expens es Net Increas e (Decreas e) in A s s ets Res ulting from Operations 358,794 13,160,820 Dis tribution to Participants Capital Trans actions Total Increas e (Decreas e) in Net A s s ets Net A s s ets July 1, 2006 Net A s s ets June 30, 2007 (41,532,793) 13,283,345 (15,088,628) 145,196,384 $ 130,107,756 University System Office Annual Financial Report FY 2007 22 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 Federal Financial Assist ance Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $482,885 870,542 1,353,427 39,717 $1,313,710 Note 4. Inventories The University System Office had no inventories at June 30, 2007. Note 5. Notes/Loans Receivable The University System Office had no Notes/Loans Receivable as of June 30, 2007. University System Office Annual Financial Report FY 2007 23 Note 6. Capital Assets Changes in capital assets for the year ended June 30, 2007 are as follows: Capital Assets, Not Being Depreciated: Land Capitalized Collections T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2006 $2,276,877 10,000 2,286,877 Addi ti o n s $200,000 200,000 Re ductions $0 0 Capital Assets, Being Depreciated: Building and Building Improvements Equipment Capital Leases T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Capital Leases T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net 728,406 48,964,174 35,605,269 85,297,849 49,167 45,107,865 9,075,385 54,232,417 31,065,432 $33,352,309 5,182,913 7,872,922 13,055,835 3,036 2,139,841 5,712,918 7,855,795 5,200,040 $5,400,040 728,406 1,652,813 2,381,219 52,203 1,651,613 1,703,816 677,403 $677,403 En di n g B al an ce 6/30/2007 $2,476,877 10,000 2,486,877 0 52,494,274 43,478,191 95,972,465 0 45,596,093 14,788,303 60,384,396 35,588,069 $38,074,946 In fiscal year 2006, The Georgia Public Telecommunications Commission ("the Commission") transferred to the University System Office other property and equipment located at its tower sites throughout the State through an intergovernmental agreement to the University System Office. In fiscal year 2007, additional land and equipment was transferred to the University System Office under this arrangement. The value of the land and equipment transferred in fiscal year 2007 was $200,000 and $3,730,389, respectively; in addition, $1,239,169 in equipment disposals also were recorded. The total value of the land and equipment transferred is $25,027,755 and the accumulated depreciation is $21,079,602, for a net value of $3,948,153. The transfer of assets is included on the Statement of Revenues, Expenses and Changes in Net Assets as Capital Grants and Gifts, State and on the Statement of Cash Flows as Non-Cash Investing, Non-Capital Financing, and Capital and Related Financing Transactions as Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts as $3,930,389. University System Office Annual Financial Report FY 2007 24 Note 7. Deferred Revenue The University System Office had no deferred revenue at June 30, 2007. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Beginning Balance July 1, 2006 $26,264,959 Additions $7,872,922 Reductions Ending Balance June 30, 2007 $5,079,558 $29,058,323 Other Liabilities Compensated Absences Total 2,451,217 2,451,217 2,051,027 2,051,027 1,833,255 1,833,255 2,668,989 2,668,989 Total Long Term Obligations $28,716,176 $9,923,949 $6,912,813 $31,727,312 Current Portion $4,913,250 1,791,219 1,791,219 $6,704,469 Note 9. Significant Commitments The University System Office had no significant unearned, outstanding construction or renovation contracts executed as of June 30, 2007. Note 10. Lease Obligations The University System Office is obligated under various operating leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES The University System Office has 16 capital leases payable in monthly installments with terms expiring in various years between 2010 and 2025. Expenditures for fiscal year 2007 were $6,408,263, of which $1,328,705 represented interest. Total principal paid on capital leases was $5,079,558 for the fiscal year ended June 30, 2007. Interest rates range from 3.8 percent to 4.88 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Equipment Total Assets Held Under Capital Lease $11,992,236 16,697,652 $28,689,888 University System Office Annual Financial Report FY 2007 25 Certain capital leases provide for renewal and/or purchase options. Generally, purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. The University System Office entered into eight new Capital Lease Obligations in the current year. In September 2006, the University System Office entered into a capital lease of $3,121,998 at 4.15 percent for technology software licenses and a capital lease of $1,713,003 at 4.15 percent for PeopleSoft software programs and licenses. In November 2006, December 2006, and February 2007, the University System Office entered into capital leases of $710,280 at 3.83 percent, $671,975 at 3.8 percent, and $213,659 at 3.82 percent, respectively for dark fiber. In January 2007, the University System Office entered into a capital lease of $606,991 at 3.89 percent for a generator. In April 2007, the University System Office entered into a capital lease of $276,197 at 3.97 percent for network fiber optic equipment. In June 2007, the University System Office entered into a capital lease of $558,819 at 3.86 percent for numerous items of equipment. In June 2007, the University System Office completed payments on lease obligation 273, which was for ExLibris software, licenses, implementation and services. Future commitments for capital leases, including other installment purchase agreements, are as follows: Year Endin g Jun e 3 0 : 2008 2009 2010 2011 2012 2 0 1 3 t h ro ugh 2 0 1 7 2 0 1 8 t h ro ugh 2 0 2 2 2 0 2 3 t h ro ugh 2 0 2 5 T ot al m in im um lease p ay m en t s Less: Int erest P rin cipal Out st andin g Year 1 2 3 4 5 6-10 11-15 16-20 Real P roperty and Equipm en t Capit al Leases $6,107,859 6,122,589 5,417,480 3,469,393 1,530,710 5,450,772 5,872,030 2,790,191 36,761,024 7,702,701 $29,058,323 The University System Office had no expense for rental of real property and equipment under operating leases in FY2007. University System Office Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $1,787,733 $1,657,223 $1,575,446 Employees' Retirement System of Georgia Plan Description The University System Office participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing, multiple-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 System Office Annual Financial Report FY 2007 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 System Office's payroll for the year ended June 30, 2007, for employees covered by ERS was $390,602. The University System Office's total payroll for all employees was $23,657,187. For the year ended June 30, 2007, under the old plan member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, the ERS employer contribution rate for the University System Office 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 2007 amounted to $46,699, of which $40,840 was made by the University System Office and $5,859 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, 2007 financial report, which may be obtained through ERS. University System Office Annual Financial Report FY 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The University System Office and the covered employees made the required contributions of $236,863 (9.66% or 8.13%) and $134,096 (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 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 University System Office Annual Financial Report FY 2007 29 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 2007 amounted to $16,724, 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 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 2007 30 A reconciliation of total estimated claims liabilities for the fiscal years ended June 30, 2007 and June 30, 2006 is shown below: Unpaid Claims and Claim A djus tments (Prior year IBNR) Incurred Claims and Claim A djus tments Expens es Provis ions for Ins ured Events of the Current Year Payments - Claims and Claim A djus tments A ttributable To Ins ured Events of the Current Year and Prior Years Unpaid Claims and Claim A djus tments (Current year IBNR) June 30, 2007 June 30, 2006 $ 27,983,473 $ 27,583,054 264,356,511 245,822,647 265,192,693 245,422,228 $ 27,147,291 $ 27,983,473 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. 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 University System Office Annual Financial Report FY 2007 31 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, 2007. 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, 2007, there were 76 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, the University System Office recognized as incurred $316,055 of expenditures, which was net of participant contributions of $140,291. University System Office Annual Financial Report FY 2007 32 Note 15. Natural Classifications with Functional Classifications The University System Office's operating expenses by functional classification for FY2007 are shown below: Functional Clas s ification FY2007 Natural Classification St aff B en efit s T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Op erating Exp enses Inst ruct ion $ 90 9,37 8 171,37 5 6 ,10 8 3 ,14 0 2 ,88 0 ,7 81 $ 3,97 0,78 2 Research $ 17 5,25 4 4 2 ,2 81 16 7,47 0 $ 38 5,00 5 P ublic Se r v ic e $ 2 ,0 11,39 5 47 5 ,35 7 7 4 ,38 9 17 ,80 6 ,76 7 7 8 ,96 8 ,47 0 20 0 ,46 8 $ 9 9 ,53 6 ,84 6 Academ ic Sup p o r t $ 1,75 6,64 1 4 3 2,7 8 4 8 0 ,411 138 ,3 7 9 17 ,5 7 8,3 3 8 710 ,6 2 5 $ 2 0,69 7,17 8 Natural Classification St aff B en efit s T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Op erating Exp enses Functional Clas s ification FY2007 St udent Ser v ic es Inst it ut ional Sup p o r t Sc h o lar sh ip s & Fellowships T otal Operating E x p e n se s $ 214,23 5 4 3,72 9 10,53 2 2,55 6 9,57 3 $ 18,5 9 0,28 4 4 ,6 7 7,34 8 4 94 ,112 5,10 9,22 2 311,9 6 4,55 3 6 ,9 4 4,70 2 $0 23 1,73 6 $ 23 ,6 5 7,187 5 ,8 42 ,8 74 6 65 ,5 52 2 3 1,7 36 2 3 ,0 60 ,0 64 411,5 6 9,185 7 ,8 55 ,7 95 $ 2 8 0,62 5 $ 3 4 7,78 0 ,22 1 $ 23 1,73 6 $ 47 2 ,8 82 ,3 9 3 University System Office Annual Financial Report FY 2007 33 VALDOSTA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2007 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 2007 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 Language Pathology, School Psychology and Teacher Education as well as baccalaureate and masters degrees in a wide variety of other subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 10,000 students each year. The institution continues to grow as shown by the comparison numbers that follow. Faculty 508 480 455 Students (Headcount) 10,888 10,503 10,400 Students (FTE) 9,842 9,431 9,295 Overview of the Financial Statements and Financial Analysis Valdosta State University is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 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 As s e ts June 30, 2007 $11,993,719 139,805,559 12,654,301 164,453,579 June 30, 2006 $10,761,953 125,244,166 11,672,665 147,678,784 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 8,891,409 40,594,613 49,486,022 7,631,216 27,293,019 34,924,235 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 99,992,255 2,902,355 3,923,829 8,149,118 $114,967,557 98,702,389 2,420,924 3,771,795 7,859,441 $112,754,549 The total assets of the institution increased by $16,774,795. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $14,561,393 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year increased by $14,561,787. The combination of the increase in total assets of $16,774,795 and the increase in total liabilities of $14,561,787 yields an increase in total net assets of $2,213,008. The increase in total net assets is primarily in the category of Invested in Capital Assets, Net of Debt in the amount of $1,289,866. Valdosta State University Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $71,924,349 121,417,516 (49,493,167) 51,507,641 2,014,474 198,534 2,213,008 112,754,549 0 112,754,549 $114,967,557 $63,241,403 110,721,584 (47,480,181) 48,440,016 959,835 819,060 1,778,895 110,975,654 0 110,975,654 $112,754,549 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 m ent Incom e 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 June 30, 2007 $30,705,224 12,379,035 711,261 27,616,273 512,556 71,924,349 49,500,769 1,326,181 1,269,225 1,913,839 21,886 54,031,900 130,874 67,660 198,534 $126,154,783 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $44,916,158 263,092 1,348,642 7,839,785 7,115,207 16,884,737 12,049,770 5,800,639 25,199,486 121,417,516 2,524,259 $123,941,775 June 30, 2006 $26,768,895 11,361,516 622,158 23,699,868 788,966 63,241,403 47,853,835 810,000 1,266,545 917,927 (642,526) 50,205,781 722,535 96,525 819,060 $114,266,244 June 30, 2006 $42,996,880 333,083 1,656,324 7,217,800 6,878,994 17,374,269 9,550,854 3,560,278 21,153,102 110,721,584 1,765,765 $112,487,349 Valdosta State University Annual Financial Report FY 2007 4 Operating revenues increased by $8,682,946 in fiscal 2007. Tuition increased approximately 5%, and University students approved a new Mandatory Fee for construction of a Multi-Use stadium. Other Mandatory fees increased as well with approval of University students. The Auxiliary revenue increase of $3,916,405 is a result of the changing environment of residential life and food services on the University's campus. During the year, Housing reopened 287 beds of renovated housing on campus in a construction and leasing relationship with VSU Foundation Real Estate II, LLC. The net effect to the campus is that the students actually have more on-campus housing availability. The University also privatized its food service operations during the year. The Contractor increased food choices for students and as a result, participation as well as costs increased. Non-operating revenues increased by $3,826,119 for the year primarily due to an increase of $1,646,934 in State Appropriations as well as significant increases in Investment Income. The compensation and employee benefits category increased by $3,293,018 and primarily affected the Instruction, Academic Support and Institutional Support categories. The increase reflects the addition of faculty and staff positions, merit increases and an increased cost of health insurance for the employees of the institution. Utilities moderately increased by $20,226 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by 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. Valdosta State University Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($40,002,618) 52,707,244 (13,159,600) 924,147 469,173 5,902,482 $6,371,655 June 30, 2006 ($39,903,468) 50,125,344 (9,007,116) 698,186 1,912,946 3,989,536 $5,902,482 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2007. The Patterson Hall renovation was completed and was reopened during fiscal year 2007. The University entered into a capital lease with the Valdosta State University Foundation Real Estate I, LLC. The lease value is approximately $10,399,786. 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 Valdosta State University had Long-Term Debt and Liabilities of $39,454,426 of which $2,133,170 was reflected as current liability at June 30, 2007. 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 FY2007. The Valdosta State University Foundation, Inc. Consolidated had investments of $19.6 million as of December 31, 2006. Further details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. In July 2007, the University's Division of Auxiliary Services established a separate Foundation for significant future campus construction that will be funded through bond issues as well as student fees. We expect that this Foundation will be reported as a component unit of the University in future fiscal years. Valdosta State University Annual Financial Report FY 2007 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 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 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 2007 7 Statement of Net Assets V A L D O S T A S T A T E U N IV ER S IT Y S T A T EM EN T O F N ET A S S ET S June 30, 2007 A S S ETS C u rre n t A sse ts C a sh an d C ash E quiv a le n t s A c c o un t s R e ce iv a ble, n et (n o t e 3 ) R e ce iv a bles - F e de ra l F in an c ia l A ssist an c e R e ce iv a bles - O t h e r D ue F ro m C o m p o n en t U n it s P ledges R e ce iv able In v e n t o rie s (n o t e 4 ) P rep a id it e m s N o t es a n d M o rt ga ge s R ec e iv able O t h er A sset s T o t al C urren t A sset s N on cu rre n t A sse ts N o n curren t C ash In v e st m e n t s (in c ludin g R ea l E st at e) N o t es R e ce iv a ble, n et P ledges R e ce iv able C a p it al A sse t s, n e t (n o t e 6 ) O t h er A sset s T o t al N o n curren t A sset s TO TA L A S S ETS L IA B IL ITIES C u rre n t Liabilitie s A c c o un t s P a y a ble Sa la rie s P a y a ble C o n t rac t s P a y able D e p o sit s D eferred Rev en ue (n o te 7 ) O t h er L ia bilit ies D e p o sit s H eld fo r O t h e r O rgan iz a t io n s D ue t o P rim ary Go v e rn m e n t L e a se P urc h a se O bliga t io n s (curre n t p o rt io n ) C o m p e n sat e d A bsen c es (curren t p o rt io n ) R e v en ue/M o rt ga ge B o n ds P a y able (curre n t ) N o t es a n d L o a n s P a y able (curre n t p o rt io n ) T o t a l C urre n t L ia bilit ies N o n cu rre n t Liabilitie s D ue t o P rim ary Go v e rn m e n t L e a se P urc h a se O bliga t io n s (n o n c urre n t ) D eferred Rev en ue (n o n curren t) C o m p en sat ed A bsen ces (n o n curren t ) R e v en ue/M o rt ga ge B o n ds P a y able (n o n c urre n t ) L ia bilit ie s un de r Sp lit - In t e r e st A gr e e m e n t s ( n o n c ur re n t ) O t h er L o n g-T erm L ia bilit ies N o t es a n d L o a n s P a y able (n o n c urre n t ) T o t a l N o n c urre n t L iabilit ie s TO TA L L IA B IL ITIES N ET A S S ETS In v e st e d in C a p it a l A sset s, n et o f re la t e d debt R est rict ed fo r N o n ex p en dable E x p e n da ble U n rest ric t e d TO TA L N ET A S S ETS V a ldo sta S ta te U n ive rs ity $ 6 ,3 4 3 ,6 3 2 1 ,1 2 8 ,6 2 1 2 ,8 4 6 ,0 2 6 2 0 6 ,4 6 4 1 ,3 7 7 ,8 2 2 9 1 ,1 5 4 1 1 ,9 9 3 ,7 1 9 2 8 ,0 2 3 1 2 ,5 7 7 ,9 0 1 4 8 ,3 7 7 1 3 9 ,8 0 5 ,5 5 9 1 5 2 ,4 5 9 ,8 6 0 1 6 4 ,4 5 3 ,5 7 9 2 ,3 2 1 ,9 3 1 1 ,1 1 4 ,2 1 9 6 7 8 ,5 1 0 6 3 2 ,5 0 0 4 0 8 ,9 0 6 2 6 ,9 4 8 1 ,5 7 5 ,2 2 5 4 6 7 ,3 6 8 1 ,6 2 7 ,9 0 8 3 7 ,8 9 4 8 ,8 9 1 ,4 0 9 3 5 ,9 2 7 ,2 4 8 3 ,2 7 3 ,3 5 7 1 ,2 8 6 ,5 6 9 1 0 7 ,4 3 9 4 0 ,5 9 4 ,6 1 3 4 9 ,4 8 6 ,0 2 2 9 9 ,9 9 2 ,2 5 5 2 ,9 0 2 ,3 5 5 3 ,9 2 3 ,8 2 9 8 ,1 4 9 ,1 1 8 $ 1 1 4 ,9 6 7 ,5 5 7 C om pon e n t Un it V aldosta S ta te U n ive rs ity Fo u n da ti o n , In c. $ 4 ,7 9 3 ,0 9 0 4 3 ,9 9 6 1 5 ,9 6 5 4 0 ,5 8 5 3 6 ,3 9 9 4 ,9 3 0 ,0 3 5 5 ,4 6 0 ,2 7 8 1 9 ,5 9 7 ,3 4 1 1 3 3 ,6 8 2 1 9 9 ,3 8 4 3 5 ,1 1 7 ,0 1 0 1 ,0 8 7 ,5 3 5 6 1 ,5 9 5 ,2 3 0 6 6 ,5 2 5 ,2 6 5 6 0 1 ,9 7 3 7 ,2 5 0 1 1 1 ,1 7 4 9 7 ,6 8 7 6 ,3 5 2 4 0 4 ,4 2 4 1 ,0 4 0 ,1 0 9 2 ,2 6 8 ,9 6 9 1 4 ,8 2 3 3 7 ,7 1 6 ,3 1 2 3 9 4 ,9 4 8 596 3 0 3 ,8 1 1 3 8 ,4 3 0 ,4 9 0 4 0 ,6 9 9 ,4 5 9 3 ,5 5 3 ,5 6 3 1 8 ,5 5 9 ,5 8 1 2 ,0 8 0 ,1 1 3 1 ,6 3 2 ,5 4 9 $ 2 5 ,8 2 5 ,8 0 6 Valdosta State University Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets VALDOS TA S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES Valdosta State Un i ve rsi ty C om pone nt Unit Valdosta State Un i ve rsi ty Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal St at e Ot h er 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P ayment s t o or on behalf of Valdost a St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) $38,331,341 (7,626,117) 9,975,956 1,708,146 694,933 711,261 7,974,939 5,710,797 7,060,911 1,144,838 1,726,986 3,285,831 711,971 512,556 71,924,349 $0 977,566 693,390 559,790 3,188,603 81,884 5,501,233 30,683,075 27,138,639 17,177,573 312,156 1,001,815 7,009,888 4,559,563 26,622,269 6,912,538 121,417,516 (49,493,167) 830,257 938,685 1,976,418 3,745,360 1,755,873 Valdosta State University Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued VALDOS TA S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 Valdosta State Un i ve rsi ty C om pone nt Unit Valdosta State Un i ve rsi ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s Federal St at e Other Gift s Invest m ent Incom e (endowm ent s, auxiliary and ot her) Int erest Expense (capit al asset s) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Incom e before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Other Addit ions t o perm anent endowm ent s 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 49,500,769 1,213,204 106,166 6,811 1,269,225 1,913,839 (2,524,259) 21,886 51,507,641 2,014,474 130,874 67,660 198,534 2,213,008 112,754,549 112,754,549 $114,967,557 1,501,725 (1,419,065) 82,660 1,838,533 764,813 764,813 2,603,346 23,222,460 23,222,460 $25,825,806 Valdosta State University Annual Financial Report FY 2007 10 Statement of Cash Flows VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayments to Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (paym ent s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Net Cash Flows P rovided by Non-capit al Financing Act ivit ies C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest ment s Int erest on Invest ment s P urchase of Invest m ent s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2007 $30,742,850 12,138,045 711,262 (50,096,868) (57,438,160) (7,009,888) (309,614) 316,912 7,922,262 5,781,354 10,865,361 1,151,976 1,732,711 3,202,544 635,805 (349,170) (40,002,618) 49,500,769 582,132 2,624,343 52,707,244 (10,227,389) (407,952) (2,524,259) (13,159,600) 220,271 1,434,902 (731,026) 924,147 469,173 5,902,482 $6,371,655 Valdosta State University Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 REC O NC ILIATIO N O F O PERATING LO S S TO NET C AS H PRO VIDED (US ED) B Y O PERATING AC TIVITIES : Operat ing Incom e (loss) Adjust m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies D ep reciat io n Change in Asset s and Liabilit ies: Receivables, net In v en t o ries 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, 2007 ($49,493,167) 6,912,538 (753,961) (13,718) 5,844 7,298 440,900 2,822,107 (154,197) 223,738 ($40,002,618) $10,406,124 $478,937 ($198,534) Valdosta State University Annual Financial Report FY 2007 12 VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 FY2007, Valdosta State University is reporting the activity for the Valdosta State University Foundation, Inc. Consolidated, which includes the activities of the Valdosta State University Foundation, the Valdosta State University Real Estate I, LLC, and the Valdosta State University Real Estate II, LLC. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 Valdosta State University Annual Financial Report FY 2007 13 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 Valdosta State University Annual Financial Report FY 2007 14 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 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 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $130,874 to Valdosta State University. Valdosta State University Annual Financial Report FY 2007 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 compensated absences 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 $2,690,739 as of 7-1-2006. For FY2007, $2,372,700 was earned in compensated absences and employees were paid $2,148,962, for a net increase of $223,738. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $2,914,477. Non-current Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed 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 2007 16 Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T erm Endowm ent s Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2007 $2,574,682 10,047 332,179 889,044 117,877 $3,923,829 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, 2007 $1,643,179 5,439,326 338,131 728,482 $8,149,118 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 2007 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. In prior financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of scholarship allowances. Because of this difference in reporting tuition and fee waivers in Fiscal year 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. Valdosta State University Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $6,339,380 and the bank balance was $8,701,309. Of the University's deposits, $8,600,660 were uninsured and uncollateralized. Valdosta State University Annual Financial Report FY 2007 19 B. Investments At June 30, 2007, the carrying value of the University's investments was $12,577,901, 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 Pools Board of Regents Diversified Fund Sub T otal $6,715,375 6,715,375 Office of T reasury and Fiscal Services Georgia Extended Asset Pool Sub T otal T otal Investment Pools 5,862,526 5,862,526 $12,577,901 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/searchRpts.html. 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 $1.99 at June 30, 2007. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Effective Duration of the fund is .91 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 University does not have a formal policy for managing interest rate risk. The Weighted Average Maturity of the Diversified Fund is 8.86 years. Of the University's total investment of $ 6,715,375 in the Diversified Fund, $ 1,709,165 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 does not have a formal policy for managing credit quality risk. Valdosta State University Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 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 $43,012 704,353 1,128,621 417,226 206,464 1,738,307 4,237,983 56,872 $4,181,111 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore P hysical P lant Other T otal June 30, 2007 $1,007,460 310,090 60,272 $1,377,822 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises approximately 20% of the loans receivable at June 30, 2007 (the remainder is made up of Institutional Loans). 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/or assigned to the U.S. Department of Education. At June 30, 2007, no provision has been made for uncollectible loans. Valdosta State University Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Capit alized Collect ions Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $2,489,754 26,817 3,225,224 5,741,795 118,080,203 6,060,815 14,674,715 27,666,836 19,414,549 185,897,118 35,961,779 2,882,072 10,743,354 1,762,271 15,045,271 66,394,747 119,502,371 $125,244,166 Addi ti o n s $196,902 6,785,099 6,982,001 Re ductions 3,225,224 3,225,224 En di n g B al a n ce 6 /3 0 /2 0 0 7 $2,686,656 26,817 6,785,099 9,498,572 1,859,666 3,026,824 1,168,188 10,406,124 1,292,978 17,753,780 355,352 78 31,126 386,556 119,939,869 9,087,639 15,487,551 38,072,882 20,676,401 203,264,342 2,995,546 270,315 1,173,448 1,493,262 979,967 6,912,538 10,841,242 $17,823,243 318,804 31,126 349,930 36,626 $3,261,850 38,957,325 3,152,387 11,597,998 3,255,533 15,994,112 72,957,355 130,306,987 $139,805,559 Valdosta State University Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: Prepaid Tuition and Fees Other Deferred Revenue T ot als June 30, 2007 $77,036 331,870 $408,906 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $26,351,778 Additions $10,406,124 Re du cti on s Ending Balance June 30, 2007 $363,286 $36,394,616 Other Liabilities Compensated Absences Notes and Loans T ot al 2,690,739 189,999 2,880,738 2,372,700 2,372,700 2,148,962 44,666 2,193,628 2,914,477 145,333 3,059,810 Total Long Term Obligations $29,232,516 $12,778,824 $2,556,914 $39,454,426 Current Portion $467,368 1,627,908 37,894 1,665,802 $2,133,170 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,020,501 as of June 30, 2007. 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 2008 and 2031. Expenditures for fiscal year 2007 were $2,887,545 of which $2,524,259 represented interest and $363,286 represented principal. Interest rates range from 4.25 percent to 10 percent. Valdosta State University Annual Financial Report FY 2007 23 The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Equipment Total Assets Held Under Capital Lease $34,742,380 74,969 $34,817,349 Certain capital leases provide for renewal and/or purchase options. Valdosta State University had four capital leases with related entities in the current fiscal year. In Fiscal year 2007, the University entered into a capital lease of $10,399,786 at a varying interest rate with Valdosta State University Foundation Real Estate I, LLC for Patterson Hall, a 300 bed housing unit located on main campus. This lease spans a twenty-five year period. In 2006, Valdosta State University leased Lowndes Hall for $7,116,694 at a varying interest rate with the Valdosta State University Foundation Real Estate I, LLC, for a 25 year period. In 2005, the University entered into a capital lease for a twenty-five year period at an amount of $19,285,471 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 at 6.25 percent with the Valdosta State University Foundation, also a related party, whereby the University leases a building for a sixyear period. The outstanding liability at June 30, 2007 on these capital leases is $10,364,017, $7,170,241, $18,171,546, and $623,712 respectively. Valdosta State University entered into a new equipment capital lease during fiscal 2007 in the amount of $6,338 and also has various other capital leases for equipment with an outstanding balance at June 30, 2007 in the amount of $65,100. All equipment leases are with third parties. OPERATING LEASES Valdosta State University's non-cancelable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 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 copiers and other small business equipment. Valdosta State University Annual Financial Report FY 2007 24 Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for non-cancelable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $3,028,243 3,097,432 3,163,927 3,016,904 3,093,468 15,886,512 16,260,576 16,709,424 11,565,740 75,822,226 39,427,610 $36,394,616 $191,822 188,216 187,440 187,440 187,440 496,080 $1,438,438 Valdosta State University's FY2007 expense for rental of real property and equipment under operating leases was $333,588. Valdosta State University Annual Financial Report FY 2007 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $2,947,248 $2,878,308 $2,805,356 Employees' Retirement System of Georgia Plan Description Valdosta State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 2007 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, 2007, for employees covered by ERS was $28,054. The University's total payroll for all employees was $57,821,714. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $3,341, of which $2,920 was made by the University and $421 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, 2007 financial report, which may be obtained through ERS. Valdosta State University Annual Financial Report FY 2007 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Valdosta State University and the covered employees made the required contributions of $1,795,981 (9.66% or 8.13%) and $1,013,542 (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 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 Valdosta State University Annual Financial Report FY 2007 28 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 2007 amounted to $79,021 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 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. Valdosta State University Annual Financial Report FY 2007 29 A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Valdosta State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Valdosta State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. 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, 2007, there were 376 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Valdosta State University recognized as incurred $1,792,769 of expenditures, which was net of $673,499 of participant contributions. Valdosta State University Annual Financial Report FY 2007 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 30,413,955 2,729,367 8,369,115 279,318 252,219 191,249 2,343,978 336,957 $ 40,890 57,743 2,423 14,629 7,114 98,587 41,706 $ 64,740 748,060 189,191 18,465 7,319 8,158 63,164 249,545 $ 5,743 4,296,814 1,030,940 366,439 45,969 768,189 1,325,691 $ 4,347 3,413,308 967,998 98,143 116,354 2,422,542 92,515 $ 52,967 7,670,720 3,963,802 312,155 135,751 160,151 4,216,996 372,195 $ 44,916,158 $ 263,092 $ 1,348,642 $ 7,839,785 $ 7,115,207 $ 16,884,737 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $ 31,076 3,264,736 1,162,395 (919,799) 3,471 3,625,931 2,216,170 2,665,790 $0 5,800,639 $ 69,357 4,957,891 1,491,709 919,800 85,599 942,597 411,751 14,492,643 1,828,139 $ 30,683,075 27,138,639 17,177,573 312,156 1,001,815 7,009,888 4,559,563 26,622,269 6,912,538 $ 12,049,770 $ 5,800,639 $ 25,199,486 $ 121,417,516 Valdosta State University Annual Financial Report FY 2007 31 Note 16. Component Units Valdosta State University Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The thirty-one member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Because the University's fiscal year end is June 30, the amounts reported as due to or due from the related entities do not agree. During the year ended December 31, 2006, the Foundation distributed $1,976,418 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 102 Georgia Avenue, Valdosta, Georgia 31698. Investments for Component Units: Valdosta State University Foundation, Inc. holds endowment and other investments in the amount of $19.6 million. The $18.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Valdosta State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 3% of the earnings may be used per the donor's stipulation. The remainder of the earnings are set aside as a reserve. Investments are comprised of the following amounts at December 31, 2006: Money Market Accounts Equity Securities Mutual Funds Split Interest Investments Total Investments Cost $392,247 2,595,234 11,410,120 682,898 $15,080,499 Fair Value $392,247 2,997,292 15,524,904 682,898 $19,597,341 Valdosta State University Annual Financial Report FY 2007 32 Capital Assets for Component Units: Valdosta State University Foundation, Inc. holds the following Capital Assets as of December 31, 2006: December 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 $3,166,925 3,166,925 34,680,154 25,939 34,706,093 2,756,008 31,950,085 $35,117,010 Long-term Liabilities for Component Units: Changes in long-term debt for Valdosta State Foundation, Inc. for the fiscal year ended December 31, 2006 are shown below: Beginning Balance January 1, 2006 Additions Reductions Ending Balance December 31, 2006 Amounts due within One Year Liabilities under split interest agreement Capital Lease Obligations Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $0 0 1,263,581 38,490,518 0 $39,754,099 $430,303 21,175 121,082 596 $573,156 $35,355 40,743 369,782 $445,880 $394,948 21,175 1,343,920 38,120,736 596 $39,881,375 $0 6,352 1,040,109 404,424 $1,450,885 Capital Lease Obligations During the year, the Foundation leased a vehicle from Ford Credit under a capital lease through April 11, 2010. The balance of this obligation as of December 31, 2006 is $21,175. Annual debt service requirements to maturity for capital lease obligations are as follows: Valdosta State University Annual Financial Report FY 2007 33 Year ending December 31: 2007 1 2008 2 2009 3 2010 4 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $7,014 7,012 7,012 2,779 23,817 2,642 $21,175 Notes and Loans Payable: The Foundation 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. The balance of this obligation was $165,581 as of December 31, 2006. In April 2005, the Foundation entered into a loan with a local financial institution to purchase property contiguous to the University. The interest rate is variable and is based on prime. The maturity date is March 2008 and the balance of the obligation at December 31, 2006 is $182,663. The Foundation has two lines of credit and a short-term note payable with a total outstanding principal balance of $995,676 as of December 31, 2006. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2007 1 2008 2 2009 3 2010 4 Total Notes and Loans Payable Principal Notes and Loans Payable Interest $1,040,109 220,863 43,565 39,383 $1,343,920 $14,634 6,504 2,583 687 $24,408 Total $1,054,743 227,367 46,148 40,070 $1,368,328 Revenue Bonds Payable: Valdosta State University Foundation, Inc. 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 balance of this obligation was $2,248,621 as of December 31, 2006. Valdosta State University Annual Financial Report FY 2007 34 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. The balance of the obligation at December 31, 2006 is $35,872,115. Annual debt service requirements to maturity for bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 Total Bonds Payable 1 2 3 4 5 6-10 11-16 17-21 22-26 27-31 Principal $404,424 1,022,783 1,126,917 1,151,074 1,115,055 6,273,367 9,327,344 10,196,120 7,481,120 22,532 $38,120,736 Bonds Payable Interest $1,716,230 1,716,230 1,694,905 1,668,455 1,640,805 7,545,963 6,085,335 3,964,675 9,716,120 $35,748,718 Total $2,120,654 2,739,013 2,821,822 2,819,529 2,755,860 13,819,330 15,412,679 14,160,795 17,197,240 22,532 $73,869,454 Valdosta State University Annual Financial Report FY 2007 35 WAYCROSS COLLEGE Financial Report For the Year Ended June 30, 2007 David A. Palmer President Waycross College Waycross, Georgia William E. Deason Vice President for Fiscal Affairs WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT FY 2007 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 8 Statement of Revenues, Expenses and Changes in Net Assets....................................................... 9 Statement of Cash Flows .............................................................................................................. 11 Note 1. Summary of Significant Accounting Policies ................................................................ 13 Note 2. Deposits and Investments............................................................................................... 18 Note 3. Accounts Receivable...................................................................................................... 20 Note 4. Inventories...................................................................................................................... 20 Note 5. Notes/Loans Receivable................................................................................................. 20 Note 6. Capital Assets................................................................................................................. 21 Note 7. Deferred Revenue........................................................................................................... 22 Note 8. Long-Term Liabilities .................................................................................................... 22 Note 9. Significant Commitments............................................................................................... 22 Note 10. Lease Obligations......................................................................................................... 22 Note 11. Retirement Plans .......................................................................................................... 23 Note 12. Risk Management......................................................................................................... 25 Note 13. Contingencies............................................................................................................... 25 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 26 Note 15. Natural Classifications with Functional Classifications .............................................. 27 Note 16. Component Units ......................................................................................................... 28 WAYCROSS COLLEGE Management's Discussion and Analysis Introduction Waycross College is one of the 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 approximately than 1,000 students each year. The institution has grown as indicated by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2007 16 1,018 714 FY2006 19 882 622 FY2005 19 1,005 663 Overview of the Financial Statements and Financial Analysis Waycross College is proud to present its financial statements for fiscal year 2007. 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 2007 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 2007 1 Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $1,333,042 8,428,970 289,453 10,051,465 June 30, 2006 $1,163,577 8,624,302 269,673 10,057,552 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 622,027 48,766 670,793 414,717 41,546 456,263 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 8,428,970 133,240 109,015 709,447 $9,380,672 8,624,302 131,240 91,535 754,212 $9,601,289 The total assets of the institution decreased by ($6,087). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($195,332) in the category of Capital Assets, net. The balance of the decrease is mainly in receivable categories. The decreases were offset by increases in Cash and Cash Equivalents, Inventories, and Investments. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $214,530. The combination of the decrease in total assets of ($6,087) and the increase in total liabilities of $214,530 yields a decrease in total net assets of ($220,617). The decrease in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of ($195,332). Waycross College Annual Financial Report FY 2007 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $2,616,501 6,683,183 (4,066,682) 3,846,065 (220,617) (220,617) 9,601,289 0 9,601,289 $9,380,672 $2,194,680 6,094,465 (3,899,785) 3,652,366 (247,419) 47,678 (199,741) 9,801,030 0 9,801,030 $9,601,289 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 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r 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 Incom e Ot h er T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2007 $950,570 1,124,786 12,692 519,760 8,693 2,616,501 3,447,203 84,491 242,016 75,217 (2,862) 3,846,065 0 $6,462,566 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $1,531,135 805,659 543,576 1,209,631 1,464,928 642,811 485,443 6,683,183 0 $6,683,183 June 30, 2006 $714,991 981,605 19,531 470,790 7,763 2,194,680 3,430,373 123,705 49,867 45,953 2,468 3,652,366 47,678 47,678 $5,894,724 June 30, 2006 $1,656,791 659,867 546,888 1,131,717 1,131,051 526,658 441,493 6,094,465 0 $6,094,465 Operating revenues increased by $421,821 in fiscal 2007. Most categories of operating revenues experienced an increase with Tuition & Fees showing the largest increase of $235,579. Revenues decreased in Sales and Services and Rents and Royalties. The Auxiliary revenue increase of $48,970 is a result of the increase in enrollment reflected in the growth in headcount, and FTE. Waycross College Annual Financial Report FY 2007 4 Non operating revenues and expenses increased by $193,699 for the year primarily due to an increase in gift revenue, investment income and a slight increase of $16,830 in State Appropriations. The compensation and employee benefits category increased by $67,739. The increase reflects, merit increases and an increased cost of health insurance for the employees of the institution. The decrease in faculty salaries is due to reducing the number of academic divisions from four to two. Utilities increased by $16,761 during the past year. The increase was primarily associated with the increased electricity costs that were experienced in the winter of fiscal year 2007 and affected the Plant Operations and Maintenance category. The increase in supplies and other services by $432,789 reflects several campus renovation projects, cost of a new phone system and replacement of instructional and computer lab equipment. 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, 2007 and 2006, Condensed Cash P rovided (used) By: Operating Activities Non-capital Financing Activities Capital and Relat ed Financing Activities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($3,529,879) 3,774,080 (37,803) 55,438 261,836 873,844 $1,135,680 June 30, 2006 ($3,374,016) 3,605,199 (122,213) 35,013 143,983 729,861 $873,844 Waycross College Annual Financial Report FY 2007 5 Capital Assets The College began several renovation projects in fiscal year 2007. An MRR Project, the Upgrade and Repair to HVAC Systems began in May and will be completed early in FY 2008. Renovations to the Administrative Building and the Dye Student Services Building will enlarge one classroom and add an outside entrance to a second making them both more accessible to students. Contracts were also awarded to add street lighting along a new access road completed early in the year and to upgrade and add lighting to our Tennis Courts. Waycross College received funding and has hired an architect to design an addition to the Administrative Building that will enlarge our library and add several needed classrooms. This project funded by the Georgia State Financing and Investment Commission (GSFIC) is still in the design phase. 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 Waycross College had Long-Term Debt and Liabilities of $177,998 of which $129,232 was reflected as current liability at June 30, 2007. 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 FY2007. Waycross College Foundation, Inc. had investments of $1.5 million and no long-term debt as of June 30, 2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Waycross College Annual Financial Report FY 2007 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 experienced excellent growth this year after experiencing several years of stagnant enrollment. With this increase came additional funding that made improvements possible. The College anticipates the current fiscal year will again enjoy enrollment growth and be much like last. We will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. David A. Palmer, President Waycross College Waycross College Annual Financial Report FY 2007 7 Statement of Net Assets WAYCROS S COLLEGE S TATEMENT OF NET AS S ETS June 30, 2007 C om pon e n t Unit AS S ETS C urrent Assets Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Ot her Due From Com ponent Unit s P ledges Receivable Inventories (not e 4) P repaid items Ot her Asset s T ot al Current Asset s W aycross C olle ge W aycross College Fou n dati on , In c. $1,135,680 83,559 4,498 109,305 1,333,042 $140,207 1,820 63 581 142,671 Noncurre nt Asse ts Invest m ent s (including Real Est at e) Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Cont ract s P ayable Deferred Revenue (not e 7) Ot her Liabilit ies Deposit s Held for Ot her Organizat ions Due t o P rim ary Governm ent Com pensat ed Absences (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Com pensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for N o n ex p en dable E x p e n da ble Unrest rict ed TO TAL NET AS S ETS 289,453 8,428,970 8,718,423 10,051,465 47,927 229,680 169,479 1,840 43,869 129,232 622,027 48,766 48,766 670,793 8,428,970 133,240 109,015 709,447 $9,380,672 1,508,728 1,508,728 1,651,399 3,070 4,498 7,568 0 0 7,568 1,394,394 112,451 136,986 $1,643,831 Waycross College Annual Financial Report FY 2007 8 Statement of Revenues, Expenses and Changes in Net Assets WAYCROS S COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 REVENUES W aycross C olle ge C om pon e n t Unit W aycross College Fou n dati on , In c. Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ribut ions Endowm ent Incom e (per spending plan) Grant s and Cont ract s Federal Sales and Services Rents and Royalties Auxiliary Ent erprises Bookst ore Food Services 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 Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Dep reciat io n P aym ent s t o or on behalf of W aycross College T ot al Operat ing Expenses Operat ing Incom e (loss) $1,507,078 (556,508) 1,124,786 12,692 2,665 451,681 40,818 27,261 6,028 2,616,501 1,006,943 1,871,725 900,688 41,730 51,660 644,436 205,753 1,500,209 460,039 6,683,183 (4,066,682) $0 40,898 53,019 93,917 1,114 637 3,056 85,555 90,362 3,555 Waycross College Annual Financial Report FY 2007 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued WAYCROS S COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2007 W aycross C olle ge C om pon e n t Unit W aycross C olle ge Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s St at e Other Gift s Invest ment Income (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Addit ions t o permanent endowment s 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 ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 3,447,203 21,180 63,311 242,016 75,217 (2,862) 3,846,065 (220,617) 0 (220,617) 9,601,289 9,601,289 $9,380,672 153,565 153,565 157,120 40,044 40,044 197,164 1,446,667 1,446,667 $1,643,831 Waycross College Annual Financial Report FY 2007 10 Statement of Cash Flows WAYCROS S COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers P ayment s t o Employees P ayment s for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food Services 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 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, 2007 $956,826 1,241,047 12,692 (2,702,096) (2,898,559) (644,436) 429,659 36,379 27,881 10,728 (3,529,879) 3,447,203 369 326,508 3,774,080 (37,803) (37,803) 12,663 42,775 55,438 261,836 873,844 $1,135,680 Waycross College Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued WAYCROS S COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Account s P ayable Deferred Revenue Ot her Liabilit ies Com pensat ed Absences Net Cash P rovided (used) by Operat ing Act ivit ies ** NON-CASH INVEST ING, NON-CAP IT AL FINANCING, AND CAP IT AL AND RELAT ED FINANCING T RANSACT IONS Change in fair value of invest m ent s recognized as a com ponent of int erest incom e June 30, 2007 ($4,066,682) 460,039 123,452 (31,168) 877 4,572 (6) (20,963) ($3,529,879) $32,442 Waycross College Annual Financial Report FY 2007 12 WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 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 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 FY2007, Waycross College is reporting the activity for 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 2007 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 2007 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 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 or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, 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 2007 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 compensated absences 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 $198,961 as of 7-1-2006. For FY2007, $147,166 was earned in compensated absences and employees were paid $168,129, for a net decrease of ($20,963). The ending balance as of 6-30-2007 in accrued liability for compensated absences was $177,998. 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 2007 16 Expendable Restricted Net Assets include the following: Restricted - E&G and Other Organized Activities Total Restricted Expendable June 30, 2007 $109,015 $109,015 Restricted net assets expendable Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2007 $196,194 598,338 11,888 (96,973) $709,447 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Waycross College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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. Waycross College Annual Financial Report FY 2007 17 Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Note 2. Deposits and Investments A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus 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. Waycross College Annual Financial Report FY 2007 18 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, 2007, the carrying value of deposits was $1,093,213 and the bank balance was $1,190,654. Of the College's deposits, $1,090,654 were uninsured. Of these uninsured deposits, $1,090,654 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, 2007, the carrying value of the College's investments was $330,730, 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 Legal Fund Diversified Fund Total Investment Pools $41,277 79,126 210,327 $330,730 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/searchRpts.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 2.24 years. Of the College's total investment of $41,277 in the Short Term Fund, $41,120 is invested in debt securities. The Weighted Average Maturity of the Legal Fund is 4.1 years. Of the College's total investment of $79,126 in the Legal Fund, $78,446 is invested in debt securities. Waycross College Annual Financial Report FY 2007 19 The Weighted Average Maturity of the Diversified Fund is 8.86 years. Of the College's total investment of $210,327 in the Diversified Fund, $53,823 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 since all investments are in the Board of Regents Investment Pool. As previously stated, the Board of Regents Investment Pool is not rated. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $4,424 19,428 4,498 60,726 89,076 1,019 $88,057 Note 4. Inventories Inventories consisted of the following at June 30, 2007: Bookst ore Food Services P hysical P lant Other T otal June 30, 2007 $90,402 8,334 10,358 211 $109,305 Note 5. Notes/Loans Receivable The College did not have Notes/Loans Receivable at June 30, 2007. Waycross College Annual Financial Report FY 2007 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Library Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Library Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $358,790 358,790 1,343,722 11,276,571 1,193,893 1,086,188 1,161,492 16,061,866 835,874 4,287,102 778,263 888,975 1,006,140 7,796,354 8,265,512 $8,624,302 Addi ti o n s $0 236,255 236,255 Re ductions $0 0 11,394 19,834 31,228 31,204 329,635 21,981 40,582 36,637 460,039 (428,811) ($192,556) 26,030 8,783 34,813 23,254 8,783 32,037 2,776 $2,776 En di n g B al a n ce 6 /3 0 /2 0 0 7 $358,790 236,255 595,045 1,343,722 11,276,571 1,193,893 1,071,552 1,172,543 16,058,281 867,078 4,616,737 800,244 906,303 1,033,994 8,224,356 7,833,925 $8,428,970 Waycross College Annual Financial Report FY 2007 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Ot her Deferred Revenue T otals June 30, 2007 $167,642 1,837 $169,479 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: O ther Liabilities Compensated Absences Beginning B al an ce July 1, 2006 $198,961 Addi ti o n s $147,166 Re du cti on s En di n g B al an ce June 30, 2007 $168,129 $177,998 C u rre n t Porti on $129,232 Total Long Term O bligations $198,961 $147,166 $168,129 $177,998 $129,232 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $517,445 as of June 30, 2007. Of this amount, $360,245 is reflected in the Reserve for Encumbrances in the Note for Unrestricted Net Assets in the accompanying basic financial statements. $157,200 is for architect fees for a GSFIC funded project and is not reflected in the accompanying basic financial statements as this fee was unearned as of June 30, 2007. 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. The College had no expense for rental of real property and equipment under operating leases in FY 2007. Waycross College Annual Financial Report FY 2007 22 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Waycross College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Waycross College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Waycross College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $169,460 $173,165 $165,278 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 2007 23 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months 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 $72,182 (9.66% or 8.13%) and $40,591 (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 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 2007 amounted to $4,149 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 2007 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. 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Waycross College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the 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 2007 25 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, 2007. 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, 2007, there were 24 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Waycross College recognized as incurred $110,981 of expenditures, which was net of $45,571 in participant contributions. Waycross College Annual Financial Report FY 2007 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2007 are shown below: Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion FY2007 Academ ic Sup p o r t St udent Se r v ic e s Inst it ut ional Sup p o r t $ 1,0 0 6,9 4 3 70 ,6 8 0 2 8 0,90 1 4 ,6 0 9 2 ,6 4 9 16 3,0 0 6 2 ,3 4 7 $0 4 4 0,48 3 12 5,54 7 12,50 0 4,96 8 18 1,25 7 4 0,90 4 $0 32 0 ,19 8 8 2,68 4 8 ,14 1 1,62 5 4,05 8 12 5 ,716 1,15 4 $0 7 0 1,5 65 3 03 ,2 83 41,7 30 25 ,2 66 3,9 14 12 9,2 12 4,6 6 1 $ 1,53 1,13 5 $ 8 0 5,65 9 $ 5 4 3,57 6 $ 1,2 0 9,6 3 1 Natural Classification F acult y St aff B en efit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses P lant Op erat io n s & Maintenance Functional Clas s ification FY2007 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 2 72 ,4 8 9 9 1,2 3 9 (3 ,2 0 7) 1,14 4 189 ,3 6 7 5 24 ,3 7 5 3 8 9,52 1 $0 64 2,811 $0 66 ,3 10 17 ,03 4 3 ,20 7 797 37 6 ,64 3 21,45 2 $ 1,4 64 ,9 2 8 $ 6 4 2,811 $ 48 5 ,44 3 T otal E x p en se s $ 1,0 06 ,9 43 1,8 7 1,7 25 9 00 ,6 8 8 4 1,7 3 0 5 1,6 6 0 6 44 ,4 3 6 2 05 ,7 5 3 1,5 00 ,2 09 4 60 ,0 3 9 $ 6 ,6 8 3,183 Waycross College Annual Financial Report FY 2007 27 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, 2007, the Foundation distributed $85,555 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation Office at 2001 South Georgia Parkway, Waycross, GA 31503. Investments for Component Units: Waycross College Foundation holds endowment and other investments in the amount of $1.5 million. The $1.4 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Waycross College Foundation, Inc., 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. Investments are comprised of the following amounts at June 30, 2007: Certificates of Deposit Investment Pools: BOR Short-Term Fund Total Diversified Fund Total Investments Cost $14,000 30,321 1,330,112 $1,374,433 Fair Value $14,000 29,789 1,464,939 $1,508,728 Waycross College Annual Financial Report FY 2007 28 Capital Assets for Component Units: Capital Assets are comprised of the following at June 30, 2007: June 30, 2007 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 $1,740 1,740 1,740 0 $0 Waycross College Annual Financial Report FY 2007 29 UNIVERSITY OF WEST GEORGIA Financial Report For the Year Ended June 30, 2007 University of West Georgia Carrollton, Georgia Dr. Thomas J. Hynes Interim-President Jerry Mock Interim-Vice President for Business and Finance UNIVERSITY OF WEST GEORGIA ANNUAL FINANCIAL REPORT FY 2007 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 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. University of 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 programs. 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. Students Students Faculty (Headcount) (FTE) FY2007 356 10,163 8,941 FY2006 287 10,154 8,907 FY2005 311 10,216 8,898 Overview of the Financial Statements and Financial Analysis University of West Georgia is proud to present its financial statements for fiscal year 2007. 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 2007 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 University of West Georgia. The Statement of Net Assets presents end-of-year University of West Georgia Annual Financial Report FY 2007 1 data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed As s e ts: Current Asset s Capit al Asset s, net Ot her Asset s Total Ass e ts June 30, 2007 $22,542,662 124,826,968 1,632,081 149,001,711 June 30, 2006 $17,809,521 65,382,177 1,643,786 84,835,484 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 12,927,518 64,786,405 77,713,923 10,600,338 3,129,184 13,729,522 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Unrest rict ed Total Ne t As s e ts 61,113,208 2,133,422 8,041,158 $71,287,788 64,247,389 2,152,332 4,706,241 $71,105,962 The total assets of the institution increased by $64,166,227. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $59,444,791 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents, which is being held for current liabilities due in the following period. The total liabilities for the year increased by $63,984,401, which is due primarily to the $62,769,769 increase in capital lease obligations attributable to two housing projects and the Campus Center project. The combination of the increase in total assets of $64,166,227 and the increase in total liabilities of $63,984,401 yields an increase in total net assets of $181,826. The University of West Georgia Annual Financial Report FY 2007 2 increase in total net assets is primarily due to a decrease in Invested in Capital Assets, net of debt, in the amount of ($3,134,181) and an increase in Unrestricted Net Assets of $3,334,917. 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, 2007 June 30, 2006 Operat ing Revenues Operat ing Expenses Operat ing Loss Nonoperat ing Revenues and Expenses Incom e (Loss) Before ot her revenues, expenses, gains or losses Ot her revenues, expenses, gains or losses Increase in Net Asset s Net Asset s at beginning of year, as originally report ed P rior Year Adjust m ent s Net Asset s at beginning of year, rest at ed Net Asset s at End of Year $60,330,978 106,795,775 (46,464,797) 44,326,501 (2,138,296) 2,320,122 181,826 71,105,962 0 71,105,962 $71,287,788 $54,392,015 101,334,991 (46,942,976) 44,254,420 (2,688,556) 1,808,352 (880,204) 71,986,166 0 71,986,166 $71,105,962 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: University of West Georgia Annual Financial Report FY 2007 3 Revenue by Source For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Ot h er T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Incom e 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 June 30, 2007 $26,712,385 9,880,241 482,595 22,658,313 597,444 60,330,978 44,646,940 841,643 1,281,941 303,113 47,073,637 1,896,068 424,054 2,320,122 $109,724,737 June 30, 2006 $24,241,851 9,129,480 348,534 20,062,348 609,802 54,392,015 42,542,759 741,293 800,068 222,250 44,306,370 1,808,352 0 1,808,352 $100,506,737 Expenses (By Functional Classification) For the Years Ended June 30, 2007 and June 30, 2006 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance Scholarships and Fellowships Auxiliary Ent erprises Unallocat ed Expenses T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2007 $38,219,089 939,055 171,503 13,437,438 6,789,898 11,064,473 7,257,647 4,239,086 22,658,245 2,019,341 106,795,775 2,747,136 $109,542,911 June 30, 2006 $36,819,682 877,894 152,421 11,998,157 7,182,238 10,435,637 8,915,444 2,815,895 19,904,226 2,233,397 101,334,991 51,950 $101,386,941 Operating revenues increased by $5,938,963 in fiscal 2007. Although Tuition & Fees included a small percentage increase, revenues increased in Grants and Contracts and Auxiliary categories. University of West Georgia Annual Financial Report FY 2007 4 The Auxiliary revenue increase of $2,595,965 was generated by an increase in Food Service revenue of $1,171,383 as a result of moving to a seven day meal plan; Residence Hall revenue increased $650,556 as a result of rate increases and a slight increase in housing contracts; Parking and Transportation revenue increased by $239,301 as a result of raising the transportation fee by $20 to build a new parking lot; Bookstore revenue increased $366,466 as a result of capturing more sales and increasing used book inventory; and all other auxiliary services generated another $168,259. Net non-operating revenues and expenses increased by $72,081 for the year primarily due to an increase of $2,104,181 in State Appropriations, an increase in Interest Expense (Capital Assets) of $2,695,186 and an increase in Investment Income, Gifts and other items of $663,086. The compensation and employee benefits category increased by $3,798,359 and primarily affected the Instruction, Academic Support and Institutional Support categories. The increase reflects the addition of faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Student Services decreased by ($392,340) due to the reclassification of the Campus Center lease from operating lease to capital lease. The decrease in Plant Operations and Maintenance is due to a one year increase (2006) in contracted services Unallocated Expenses is unallocated depreciation and will fluctuate from year to year. 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. University of West Georgia Annual Financial Report FY 2007 5 Cash Flows for the Years Ended June 30, 2007 and 2006, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activities Capit al and Related Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2007 ($36,213,975) 45,866,787 (6,148,225) 1,246,728 4,751,315 14,461,262 $19,212,577 June 30, 2006 ($40,679,626) 43,644,127 (2,656,320) 800,069 1,108,250 13,353,012 $14,461,262 Capital Assets During fiscal year 2007, the University recorded $3,072,882 in capital additions (excluding capital leases). The breakdown included $796,107 in library collections, $370,385 in facilities improvements (donated bridge and pathway), $578,088 in building improvements (Facility Storage - $287,370; Boyd roof replacement $290,718) and $1,328,302 in equipment additions. An additional $1,605,554 was booked as construction work in progress for projects mostly funded through GSFIC. Construction on the $5 million Callaway Building Addition begins in July 2007 and construction on the $32 million Health and Wellness Building will start in August 2007. Projected GSFIC funding for fiscal year 2008 MRR projects will remain the same. 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 University of West Georgia had Long-Term Debt and Liabilities of $66,334,118 of which $2,632,713 was reflected as current liability at June 30, 2007. 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 FY2007. The University of West Georgia Foundation, Inc. had investments of $20.6 million as of December 31, 2006, and longterm debt of $39.3 million. The UWG Real Estate Foundation, Inc. had long-term debt of $30.9 million in the form of one bond issue. The Campus Center was constructed and placed into service by the Real Estate Foundation in 2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. University of West Georgia Annual Financial Report FY 2007 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 which have a global effect on virtually all types of business operations. Dr. Thomas J. Hynes Interim President University of West Georgia University of West Georgia Annual Financial Report FY 2007 7 Statement of Net Assets University of West Georgia STATEMENT OF NET ASSETS June 30, 2007 ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Due From Component Units Leases Receivable Pledges Receivable Due From Primary Government Inventories (note 4) Prepaid items Total Current Assets Noncurrent Assets Investments (including Real Estate) Notes Receivable, net Leases Receivable Pledges 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) Compensated Absences (current portion) Revenue/Mortgage Bonds Payable (current) 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) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unrestricted TOTAL NET ASSETS University of West Georgia $19,212,577 675,445 172,790 1,116,047 50 918,698 447,055 22,542,662 1,632,081 124,826,968 126,459,049 149,001,711 2,043,605 319,751 82,324 790,725 5,845,356 195,010 1,008,485 1,398,960 1,233,753 9,549 12,927,518 62,314,800 1,085,000 1,386,605 64,786,405 77,713,923 61,113,208 2,133,422 8,041,158 $71,287,788 Component Unit University of West Georgia Foundation, Inc. $2,940,063 5,019,626 64,311 2,600,360 853,198 11,477,558 15,603,044 50,431,527 1,268,609 6,170,270 1,085,985 74,559,435 86,036,993 553,026 1,860,559 839,743 5,700,000 8,953,328 18,196,848 32,349,438 56,377 395,000 50,997,663 59,950,991 795,556 10,145,595 15,456,341 (311,490) $26,086,002 Component Unit UWG Real Estate Foundation, Inc. $4,105,470 23,521 1,760,000 9,549 1,981 5,900,521 54,810,000 758,838 55,568,838 61,469,359 582,741 1,559,051 50 367,476 2,509,318 26,738,400 30,555,424 57,293,824 59,803,142 249,246 1,416,971 $1,666,217 University of West Georgia Annual Financial Report FY 2007 8 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, 2007 REVENUES University of West Ge orgi a C om pon e n t Un i t University of West Georgia Fou n dati on , 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 St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Health Services Intercollegiate Athletics Other Organizations Interest and Dividend income Other Operating Revenues Total 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 Other Operating Expense Payments to or on behalf of University of West Georgia Total Operating Expenses Operating Income (loss) $32,822,754 (6,110,369) 7,923,223 837,027 1,119,991 482,595 18,329 8,414,597 3,859,317 4,872,358 1,121,618 1,535,868 2,540,549 314,006 579,115 60,330,978 $0 4,433,025 1,884,808 543,580 1,685,380 561,366 9,108,159 25,067,967 26,782,414 15,083,638 291,810 946,177 5,363,951 3,253,817 21,062,800 8,943,201 106,795,775 (46,464,797) 411,713 137,433 2,854 797,807 94,653 91,419 1,547,361 3,083,240 6,024,919 C om pon e n t Un i t UWG Real Estate Fou n dati on , Inc. $0 72,500 1,221,347 1,293,847 83,476 83,476 1,210,371 University of West Georgia Annual Financial Report FY 2007 9 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, 2007 University of West Ge orgi a C om pon e n t Un i t University of West Georgia Fou n dati on , Inc. C om pon e n t Un i t UWG 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 Ot her 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 44,646,940 841,643 1,281,941 (2,747,136) 303,113 44,326,501 (2,138,296) 1,896,068 424,054 2,320,122 181,826 71,105,962 71,105,962 $71,287,788 (1,816,961) (1,816,961) 4,207,958 715,612 715,612 4,923,570 15,936,073 5,226,359 21,162,432 $26,086,002 177,055 (1,411,271) 16,271 (1,217,945) (7,574) 0 (7,574) 1,673,791 1,673,791 $1,666,217 University of West Georgia Annual Financial Report FY 2007 10 Statement of Cash Flows Univers ity of Wes t Georgia S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grant s and Cont ract s (Exchange) Sales and Services 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 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, 2007 $27,227,039 9,810,728 482,595 (40,081,204) (51,552,890) (5,363,951) (613,930) 625,636 8,469,058 3,773,490 4,749,944 1,153,627 1,580,303 2,576,746 363,620 585,214 (36,213,975) 44,646,940 (88,313) 1,308,160 45,866,787 1,721,213 (3,499,031) (1,623,271) (2,747,136) (6,148,225) 640,232 1,281,941 (675,445) 1,246,728 4,751,315 14,461,262 $19,212,577 University of West Georgia Annual Financial Report FY 2007 11 Statement of Cash Flows, Continued Univers ity of Wes t Georgia S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2007 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 Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2007 ($46,464,797) 8,943,201 171,842 (148,473) 30,019 11,706 780,583 558,942 (316,840) 219,842 ($36,213,975) $64,393,040 ($598,909) University of West Georgia Annual Financial Report FY 2007 12 UNIVERSITY OF WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 Note 1. Summary of Significant Accounting Policies Nature of Operations University of West Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity University of West Georgia is one of thirty-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 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 FY2007, University of West Georgia is reporting the activity for the University of West Georgia Foundation, Inc. and the University of West Georgia Real Estate 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 University of West Georgia Annual Financial Report FY 2007 13 Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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 West Georgia Annual Financial Report FY 2007 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 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/or 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. For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred no capital additions to University of West Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. University of West Georgia Annual Financial Report FY 2007 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 compensated absences 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 $2,400,515 as of 7-1-2006. For FY2007, $1,831,452 was earned in compensated absences and employees were paid $1,611,609, for a net increase of $219,843. The ending balance as of 6-30-2007 in accrued liability for compensated absences was $2,620,358. 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 West Georgia Annual Financial Report FY 2007 16 Expendable Restricted Net Assets include the following: Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2007 $1,861,681 271,741 $2,133,422 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, 2007 $7,083,765 4,640,489 126,057 (3,809,153) $8,041,158 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes University of West Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. 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 University of West Georgia Annual Financial Report FY 2007 17 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. In prior year financial statements, a portion of tuition and fee waivers granted by the University were reported within the Tuition and Fees revenue line item instead of Scholarship Allowances. Because of this difference in reporting tuition and fee waivers in fiscal 2007, comparison with prior year financial statements at the Net Tuition and Fees level will result in a better gauge of the year over year change. University of West Georgia Annual Financial Report FY 2007 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, 2007, the carrying value of deposits was $5,849,465 and the bank balance was $7,447,841. Of the University's deposits, $7,147,741 were uninsured. Of these uninsured deposits, $7,147,741 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 2007 19 B. Investments At June 30, 2007, the carrying value of the University's investments was $14,019,507, 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 Pools Board of Regents Short-T erm Fund Sub T otal $144,759 144,759 Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal 13,874,748 13,874,748 T otal Investment Pools $14,019,507 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/searchRpts.html. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 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 2.24 years. Of the University's total investment of $ 144,759 in the Short Term Fund, $140,209 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 does not have a formal policy for managing credit quality risk. University of West Georgia Annual Financial Report FY 2007 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2007: June 30, 2007 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Ot h er Less Allowance for Doubt ful Account s Net Account s Receivable $590,209 307,770 172,790 50 594,567 1,665,386 376,499 $1,288,887 Note 4. Inventories Inventories consisted of the following at June 30, 2007: June 30, 2007 Bookst ore P hysical P lant T otal $790,011 128,687 $918,698 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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, 2007. University of West Georgia Annual Financial Report FY 2007 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2007: Capit al Asset s, Not Being Depreciat ed: Land Const ruct ion W ork-in-P rogress T ot al Capit al Asset s Not Being Depreciat ed Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Ot her Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Ot her improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion T ot al Capit al Asset s, Being Depreciat ed, Net Capit al Asset s, net Beginning B al an ce s 7/1/2006 $554,184 3,184,065 3,738,249 3,144,580 87,927,664 1,982,927 15,743,296 1,402,887 14,098,836 13,516 124,313,706 198,108 39,645,736 795,877 11,007,342 420,861 10,593,820 8,034 62,669,778 61,643,928 $65,382,177 Addi ti o n s $0 1,605,554 1,605,554 Re ductions $0 683,484 683,484 En di n g B al a n ce 6 /3 0 /2 0 0 7 $554,184 4,106,135 4,660,319 578,088 370,385 1,328,302 64,393,040 796,107 67,465,922 63,067 35,392 98,459 3,144,580 88,505,752 2,353,312 17,008,531 65,795,927 14,859,551 13,516 191,681,169 125,783 2,825,974 100,392 1,190,745 4,030,534 669,434 339 8,943,201 58,522,721 $60,128,275 63,067 35,392 98,459 0 $683,484 323,891 42,471,710 896,269 12,135,020 4,451,395 11,227,862 8,373 71,514,520 120,166,649 $124,826,968 University of West Georgia Annual Financial Report FY 2007 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2007: P repaid T uit ion and Fees Research Ot her Deferred Revenue T otals June 30, 2007 $3,547,350 581,875 1,716,131 $5,845,356 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2007 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2006 $943,991 Additions $64,393,040 Re du cti on s Ending Balance June 30, 2007 $1,623,271 $63,713,760 Current Portion $1,398,960 Other Liabilities Compensated Absences T ot al 2,400,515 2,400,515 1,831,452 1,831,452 1,611,609 1,611,609 2,620,358 2,620,358 1,233,753 1,233,753 Total Long Term Obligations $3,344,506 $66,224,492 $3,234,880 $66,334,118 $2,632,713 Note 9. Significant Commitments The University of West Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,154,810 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. Significant projects are the destruction of Roberts Hall (spent $191,808 and $345,584 to spend), Renovation of Callaway Building (UWG committed $397,645 to the project), UCC roof replacement and building controls of $270,182 and $141,399 for Education Center control systems. In addition, we have a $200,000 unexecuted agreement with the Foundation for a rental agreement for a parking lot. Note 10. Lease Obligations University of West Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. University of West Georgia Annual Financial Report FY 2007 23 CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2009 and 2035. Expenditures for fiscal year 2007 were $4,819,285 of which $2,747,136 million represented interest and $448,878 represented executory costs. Total principal paid on capital leases was $1,623,271 million for the fiscal year ended June 30, 2007, which includes $437,886 in corrections of prior year treatment of certain leases as operating. Interest rates range from 3.0 percent to 4.75 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: Buildings Equipment Total Assets Held Under Capital Lease $58,140,473 3,204,059 $61,344,532 Certain capital leases provide for renewal and/or transfer of ownership. Two separate capital leases for student residence halls are with the University of West Georgia Foundation, Inc., a discretely presented component unit in these financial statements. The University Suites lease began in August, 2004 and expires in August, 2029. Its outstanding principal balance at June 30, 2007 is $12,408,641. The Arbor View Apartments lease began in August, 2005 and expires in June, 2030. The outstanding principal balance is $20,223,471 as of June 30, 2007. Last year these two leases were considered operating leases and have been reclassified as capital leases for this and all future periods. The University Center is being leased from the University of West Georgia Real Estate Foundation, Inc., UWG Campus Center, LLC, also a discretely presented component unit in these financial statements. The lease began in September, 2006 and expires in June, 2035. The remaining balance on this lease as of June 30, 2007 is $30,413,308. University of West Georgia also has a capital lease for PBX equipment with a third party that has an outstanding principal balance at June 30, 2007 in the amount of $668,340. This lease expires in December, 2009. Refer to Note 16 Component units for additional information. OPERATING LEASES University of West Georgia's operating leases having remaining terms of more than one year expire in various fiscal years from 20082012. 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 two real property operating leases. The leases are with third-party lessors and include the lease for our bookstore and a rental agreement for use of a stadium. University of West Georgia Annual Financial Report FY 2007 24 Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Year Ending June 30: 2008 2009 2010 2011 2012 2013 t hrough 2017 2018 t hrough 2022 2023 t hrough 2027 2028 t hrough 2032 2033 t hrough 2037 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 ropert y and Equipm ent Capit al Leases Operat ing Leases $4,821,751 4,904,921 4,761,817 4,739,579 4,787,435 24,782,326 26,276,073 27,935,960 20,338,781 6,370,000 129,718,643 45,511,139 20,493,744 $63,713,760 $342,253 304,673 168,488 122,155 9,549 $947,118 University of West Georgia's FY2007 expense for rental of real property and equipment under operating leases was $381,007. University of West Georgia Annual Financial Report FY 2007 25 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 2007, the employer contribution rate was 9.28% 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 2007 2006 2005 100% 100% 100% $2,372,082 $2,242,017 $2,177,219 Employees' Retirement System of Georgia Plan Description University of West Georgia participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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 West Georgia Annual Financial Report FY 2007 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, 2007, for employees covered by ERS was $78,576. The University's total payroll for all employees was $51,850,380. For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2007, 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 2007 amounted to $9,408, of which $8,230 was made by the University and $1,178 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, 2007 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 West Georgia Annual Financial Report FY 2007 27 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 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. University of West Georgia and the covered employees made the required contributions of $1,895,333 (9.66% or 8.13%) and $1,059,890 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description University of West Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 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 University of West Georgia Annual Financial Report FY 2007 28 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 2007 amounted to $64,706 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 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. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. University of West Georgia Annual Financial Report FY 2007 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 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, 2007. 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, 2007, there were 351 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, University of West Georgia recognized as incurred $1,564,732 of expenditures, which was net of $497,376 of participant contributions. University of West Georgia Annual Financial Report FY 2007 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2007 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 Instruction Research Functional Classification FY2007 Public Service Academic Support Student Services Institutional Support $ 24,481,681 4,213,797 7,056,855 458,564 42,373 117,146 1,679,499 169,174 $ 222,456 271,144 83,211 35,347 20,800 381 220,604 85,112 $0 129,661 31,459 4,937 94 5,352 $ 290,533 6,131,646 1,633,825 160,884 50,535 3,999,109 1,170,906 $ 15,950 3,475,903 818,926 93,956 5,380 25,764 1,681,986 672,033 $ 46,724 5,036,437 3,191,664 289,583 97,869 122,051 37,275 2,225,641 17,229 $ 38,219,089 $ 939,055 $ 171,503 $ 13,437,438 $ 6,789,898 $ 11,064,473 Plant Operations & Maintenance Functional Classification FY2007 Scholarships & Fellowships Auxiliary Enterprises Unallocated Expenses Total Expenses $0 4,234,246 1,384,189 (2,303,558) 9,934 2,917,232 481,084 534,520 $0 4,239,086 $ 10,623 3,289,580 883,509 2,305,785 84,686 934,261 105,390 10,769,525 4,274,886 $0 2,019,341 $ 25,067,967 26,782,414 15,083,638 291,810 946,177 5,363,951 3,253,817 21,062,800 8,943,201 $ 7,257,647 $ 4,239,086 $ 22,658,245 $ 2,019,341 $ 106,795,775 University of West Georgia Annual Financial Report FY 2007 31 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, 2006 through December 31, 2006. Investments carried as leases receivable are valued at $53 million and the associated long-term debt of $33.2 million are included in the financial statements of the Foundation. The corresponding buildings and associated capital leases are included in the University's report. Note 10 of this financial report provides information on related party leases. During the year ended December 31, 2006, the Foundation distributed $1,547,361 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. Prior Year Adjustment: A prior year adjustment was necessary to correct an error in the accounting of a capital lease. In the prior year, the lease was accounted for as an operating lease when it should have been treated as a capital lease. The net effect of the change was to increase beginning net assets by $5,226,359. Investments for Component Units: University of West Georgia Foundation, Inc. holds endowment and other investments in the amount of $20.6 million. The corpus of the endowment portion 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. University of West Georgia Annual Financial Report FY 2007 32 The University of West Georgia Foundation, Inc. investments are comprised of the following amounts at December 31, 2006: Cost Fair Value Cash held by investment organization Money Market Accounts Stocks and Options Certificates of Deposit Fixed income securities Managed Futures Total Investments $615,982 4,033,600 9,316,352 370,044 4,076,270 251,669 $18,663,917 $615,982 4,033,600 11,210,950 370,044 4,137,272 254,822 $20,622,670 Capital Assets for Component Units: The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 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 December 31, 2006 $2,589,218 2,589,218 3,786,134 3,786,134 205,082 3,581,052 $6,170,270 Long-term Liabilities for Component Units: Long-term liability activity for the Foundation for the year ended December 31, 2006 was as follows: Beginning Ending Amounts due Balance Balance within January 1, 2006 Additions Reductions December 31, 2006 One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 5,700,000 33,563,924 $39,263,924 $56,377 395,000 $451,377 $0 374,743 $374,743 $56,377 6,095,000 33,189,181 $39,340,558 $0 5,700,000 839,743 $6,539,743 University of West Georgia Annual Financial Report FY 2007 33 Notes and Loans Payable: 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, 2006 the rate was 6.54%. Principal is due at September 29, 2007. In January 2006, the Foundation established a line of credit in order to purchase a piece of real estate which serves as collateral for the loan. The amount borrowed was $395,000 and has a maturity date of December 6, 2008. Interest is computed based on the LIBOR rate plus 1.2% annum. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2007 1 2008 2 Principal Notes and Loans Payable Interest $5,700,000 395,000 $6,095,000 $305,418 23,680 $329,098 Total $6,005,418 418,680 $6,424,098 Revenue Bonds Payable: Student Housing Revenue Bonds were issued by the University of West Georgia Foundation, Inc. to finance student housing on university property in the amount of $33,215,000. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia. The outstanding principal balance of the bonds at December 31, 2006 is $33,189,181, which includes unamortized bond premiums of $334,181. 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 rates 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% University of West Georgia Annual Financial Report FY 2007 34 Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 2007 2008 2009 2010 2011 2012 through 2016 2017 through 2021 2022 through 2026 2027 through 2029 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $839,743 884,743 924,743 1,014,743 1,054,743 5,863,715 7,193,715 8,978,715 6,434,321 $33,189,181 Bonds Payable Interest $1,418,689 1,391,369 1,363,344 1,328,819 1,294,569 5,831,011 4,542,694 2,759,406 597,839 $20,527,738 Total $2,258,432 2,276,112 2,288,087 2,343,562 2,349,312 11,694,726 11,736,409 11,738,121 7,032,160 $53,716,919 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 institution. 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 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 July 1 through June 30. Investments carried as leases receivable are valued at $56.6 million and the associated long-term debt of $30.9 million are included in the financial statements of the Foundation. The corresponding buildings and associated capital leases are included in the University's report. Note 10 of this financial report provides information on related party leases. Complete financial statements for the Foundation can be obtained from the Treasurer, Office of Business and Finance, 1601 Maple Street, Carrollton, Georgia 30118 Long-term Liabilities for Component Units: Resident Instruction Bonds are 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. University of West Georgia Annual Financial Report FY 2007 35 Changes in long-term liabilities for UWG Real Estate Foundation, Inc. for the fiscal year ended June 30, 2007 are shown below: Beginning Balance July 1, 2006 Additions Reductions Ending Balance June 30, 2007 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $30,930,376 $30,930,376 $0 $7,476 $30,922,900 $367,476 $0 $7,476 $30,922,900 $367,476 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $367,476 397,476 432,476 472,476 512,476 3,217,380 4,632,380 6,747,380 8,637,380 5,506,000 $30,922,900 $1,422,120 1,410,383 1,395,545 1,378,326 1,360,770 6,486,557 5,710,008 4,320,288 2,345,164 391,876 $26,221,037 Total $1,789,596 1,807,859 1,828,021 1,850,802 1,873,246 9,703,937 10,342,388 11,067,668 10,982,544 5,897,876 $57,143,937 University of West Georgia Annual Financial Report FY 2007 36 University System of Georgia Consolidated and Institution Statutory Reporting (Non-GAAP Basis) June 30, 2007 UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Grants Payable 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 Inventories Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $341,226,714.10 36,849,730.70 62,370,471.34 153,807,986.42 9,696,195.00 37,970,532.23 4,014,805.70 66,824.12 $646,003,259.61 $2,091,267.51 11,874.16 1,677.00 12,996,511.97 211,445,756.92 320,323.78 163,285,786.82 17,790,142.07 5,704,522.67 $413,647,862.90 $30,257,359.91 16,083,848.46 49,515,237.87 8,906,160.51 101,631,908.17 10,186,001.82 3,082,602.36 3,551,735.24 7,172,101.53 1,968,148.72 292.12 $232,355,396.71 $646,003,259.61 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, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $1,917,240,948 15,732,554 1,595,296,985 1,154,687,977 $4,682,958,464 $1,917,562,898 15,732,554 1,667,356,532 1,561,012,311 $5,161,664,295 $1,917,562,898.00 15,732,554.00 1,291,406,055.98 1,484,479,762.05 $4,709,181,270.03 $0.00 0.00 (375,950,476.02) (76,532,548.95) ($452,483,024.97) Advanced Technology Development Center/EDI Agricultural Experiment Station Athens Tifton Vet Labs Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute MCG Hospitals 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 Total Expenditures Excess of Funds Available over Expenditures $27,447,215 72,948,126 4,737,054 56,648,411 659,442 3,134,341 2,660,060 31,247,434 3,625,810 130,466,440 32,272,644 1,711,549 2,713,007 860,161 9,982,554 40,477,906 7,984,377 26,400,251 7,292,073 32,417,559 308,315 4,176,524,431 3,249,577 7,189,727 $4,682,958,464 $0 $28,697,215 78,258,188 6,237,054 65,445,620 1,121,275 6,261,341 2,660,060 31,247,434 3,625,810 138,720,640 32,272,644 1,759,290 3,865,007 860,161 9,982,554 46,409,673 8,100,801 26,925,251 7,292,073 32,417,559 308,315 4,613,946,753 3,249,577 12,000,000 $5,161,664,295 $0 $27,980,921.29 76,085,751.98 5,418,667.01 62,559,056.23 945,228.65 6,446,832.34 2,660,060.00 17,023,143.00 0.00 134,899,475.96 32,272,644.00 1,372,806.65 3,759,806.12 858,710.40 9,982,261.88 45,493,454.78 7,946,485.71 26,909,343.96 6,952,564.75 32,288,469.85 308,315.00 4,153,748,725.34 3,249,577.00 10,162,081.72 $4,669,324,383.62 $39,856,886.41 $716,293.71 2,172,436.02 818,386.99 2,886,563.77 176,046.35 (185,491.34) 0.00 14,224,291.00 3,625,810.00 3,821,164.04 0.00 386,483.35 105,200.88 1,450.60 292.12 916,218.22 154,315.29 15,907.04 339,508.25 129,089.15 0.00 460,198,027.66 0.00 1,837,918.28 $492,339,911.38 $39,856,886.41 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2005 Year Ended June 30, 2006 Mandatory Transfers Non-Mandatory Transfers Other Additions (Deletions) FUND BALANCE JUNE 30 184,724,593.39 1,482,141.24 1,887,318.82 (1,662,261.39) 33,212.31 (549,203.98) (580,151.09) (352,786.18) 8,215,785.30 1,368,519.36 (2,068,657.48) $232,355,396.71 UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery 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 $30,257,359.91 16,083,848.46 49,515,237.87 8,906,160.51 101,631,908.17 10,186,001.82 3,082,602.36 3,551,735.24 7,172,101.53 $230,386,955.87 1,968,440.84 $232,355,396.71 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. Abraham Baldwin Agricultural College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ABRAHAM BALDWIN AGRICULTURAL COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Indirect Cost Recoveries Uncollectible Accounts Receivable Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $1,654,659.09 20,494.06 1,154,797.15 13,696.98 $2,843,647.28 $276,895.62 2,239,874.44 34,669.49 $2,537,808.85 $75,137.01 218,669.96 8,210.01 3,821.45 $305,838.43 $2,843,647.28 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. ABRAHAM BALDWIN AGRICULTURAL COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $13,583,634 7,372,827 5,801,488 $26,757,949 $165,076 26,592,873 $26,757,949 $0 $13,589,030 7,372,827 7,470,042 $28,431,899 $13,589,030.00 5,956,845.20 7,693,813.29 $27,239,688.49 $165,076 28,266,823 $28,431,899 $0 $148,203.99 27,162,240.44 $27,310,444.43 ($70,755.94) VARIANCE $0.00 (1,415,981.80) 223,771.29 ($1,192,210.51) $16,872.01 1,104,582.56 $1,121,454.57 ($70,755.94) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 372,774.07 14,985.43 40,820.30 (37,000.00) (14,985.43) $305,838.43 75,137.01 218,669.96 8,210.01 $302,016.98 3,821.45 $305,838.43 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. Albany State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other ALBANY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Uncollectible Accounts Receivable Unreserved Total Fund Balances Total Liabilities and Fund Balances $2,453,580.10 1,423,177.11 117,924.60 $3,994,681.81 $206,837.92 2,373,013.87 367,786.48 $2,380,188.66 $94,069.01 806,961.61 535,587.77 177,874.76 $1,614,493.15 $3,994,681.81 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. ALBANY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $21,155,842 18,000,000 11,404,425 $50,560,267 $91,931 437,471 50,030,865 $50,560,267 $0 $21,202,765 27,750,340 13,123,485 $62,076,590 $21,202,765.00 19,015,207.16 12,943,539.48 $53,161,511.64 $91,931 437,471 61,547,188 $62,076,590 $0 $91,931.00 439,857.14 52,299,055.29 $52,830,843.43 $330,668.21 VARIANCE $0.00 (8,735,132.84) (179,945.52) ($8,915,078.36) $0.00 (2,386.14) 9,248,132.71 $9,245,746.57 $330,668.21 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 1,355,694.43 50.71 138,925.76 (210,795.25) (50.71) $1,614,493.15 $94,069.01 806,961.61 535,587.77 177,874.76 $1,614,493.15 0.00 $1,614,493.15 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. Armstrong Atlantic State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ARMSTRONG ATLANTIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Other Assets Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $800,334.66 13,534.62 1,789,310.58 811,483.07 66,449.12 $3,481,112.05 $8,360.34 2,464,723.05 478,504.88 $2,951,588.27 $103,454.67 172,442.45 175,129.62 73,765.93 4,731.11 $529,523.78 $3,481,112.05 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. ARMSTRONG ATLANTIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $31,226,592 6,483,733 19,754,173 $57,464,498 $549,705 293,785 56,621,008 $57,464,498 $0 $31,424,581 7,968,683 20,484,174 $59,877,438 $31,424,581.00 9,741,789.89 22,404,476.01 $63,570,846.90 $549,705 295,663 59,032,070 $59,877,438 $0 $549,705.00 295,663.00 63,144,542.00 $63,989,910.00 ($419,063.10) VARIANCE $0.00 1,773,106.89 1,920,302.01 $3,693,408.90 $0.00 0.00 (4,112,472.00) ($4,112,472.00) ($419,063.10) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 1,116,133.63 0.00 3,856.83 (171,403.58) $529,523.78 $103,454.67 172,442.45 175,129.62 73,765.93 $524,792.67 4,731.11 $529,523.78 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. Atlanta Metropolitan College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories ATLANTA METROPOLITAN COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Deferred Revenue 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 $1,718,079.69 222,619.55 643,763.70 27,301.78 53,699.70 $2,665,464.42 $249,895.62 1,955,746.22 129,061.73 3,631.14 $2,338,334.71 $170,816.20 12,404.42 17,283.50 53,923.79 72,701.80 $327,129.71 $2,665,464.42 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. ATLANTA METROPOLITAN COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $7,811,958 4,200,000 3,746,296 $15,758,254 $155,697 6,485 15,596,072 $15,758,254 $0 $7,816,222 4,254,823 4,011,335 $16,082,380 $7,816,222.00 4,024,961.40 4,437,894.67 $16,279,078.07 $155,697 6,485 15,920,198 $16,082,380 $0 $154,246.40 0.00 16,034,632.66 $16,188,879.06 $90,199.01 VARIANCE $0.00 (229,861.60) 426,559.67 $196,698.07 $1,450.60 6,485.00 (114,434.66) ($106,499.06) $90,199.01 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 226,261.09 58,428.23 10,669.61 (58,428.23) $327,129.71 $170,816.20 12,404.42 17,283.50 53,923.79 254,427.91 72,701.80 $327,129.71 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. Augusta State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Prepaid Expenditures Inventories AUGUSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $3,127,725.74 112,022.80 7,188,715.76 1,378,308.14 39,860.53 $11,846,632.97 $4,510,247.72 6,692,477.23 47,161.41 $11,249,886.36 $12,996.81 84,094.80 20,602.28 219,059.06 220,207.22 38,526.03 1,260.41 $596,746.61 $11,846,632.97 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. AUGUSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $26,462,567 8,628,876 16,594,884 $51,686,327 $153,218 213,257 51,319,852 $51,686,327 $0 $26,470,584 7,611,951 23,843,177 $57,925,712 $26,470,584.00 7,425,810.21 22,629,943.14 $56,526,337.35 $153,218 213,257 57,559,237 $57,925,712 $0 $153,218.00 213,138.56 56,107,997.64 $56,474,354.20 $51,983.15 VARIANCE $0.00 (186,140.79) (1,213,233.86) ($1,399,374.65) $0.00 118.44 1,451,239.36 $1,451,357.80 $51,983.15 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 544,758.25 4,573.45 7,816.40 (7,811.19) (4,573.45) $596,746.61 $12,996.81 84,094.80 20,602.28 219,059.06 220,207.22 38,526.03 $595,486.20 1,260.41 $596,746.61 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. Bainbridge College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories BAINBRIDGE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $2,150,424.46 331,763.69 1,239,216.98 5,392.88 8,599.43 $3,735,397.44 $76,496.14 2,403,243.76 951,292.92 $3,291,665.69 $94,430.45 201,066.68 27,131.04 41,046.85 21,099.30 58,957.43 $443,731.75 $3,735,397.44 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. BAINBRIDGE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $8,673,239 4,540,000 3,581,145 $16,794,384 $3,650 16,790,734 $16,794,384 $0 $8,677,707 7,760,304 4,876,341 $21,314,352 $8,677,707.00 8,087,366.60 4,916,232.04 $21,681,305.64 $3,650 21,310,702 $21,314,352 $0 $2,895.32 21,589,680.36 $21,592,575.68 $88,729.96 VARIANCE $0.00 327,062.60 39,891.04 $366,953.64 $754.68 (278,978.36) ($278,223.68) $88,729.96 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2005 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 296,044.36 89,254.72 61,194.81 (2,237.38) (89,254.72) $443,731.75 $94,430.45 201,066.68 27,131.04 41,046.85 21,099.30 $384,774.32 58,957.43 $443,731.75 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. Clayton State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures CLAYTON STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $2,505,254.28 286,386.06 628,770.15 60,859.95 $3,481,270.44 $756.12 1,808,171.19 1,210,089.88 14,893.50 $3,033,910.69 $24,474.87 178,491.07 65,118.45 156,803.57 22,471.79 $447,359.75 $3,481,270.44 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. CLAYTON STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $23,031,392 9,879,412 20,804,339 $53,715,143 $28,319 53,686,824 $53,715,143 $0 $23,038,790 10,914,238 21,161,134 $55,114,162 $23,038,790.00 10,407,108.94 20,401,153.93 $53,847,052.87 $28,319 55,085,843 $55,114,162 $0 $28,314.41 53,498,776.05 $53,527,090.46 $319,962.41 VARIANCE $0.00 (507,129.06) (759,980.07) ($1,267,109.13) $4.59 1,587,066.95 $1,587,071.54 $319,962.41 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 267,927.39 0.00 22,471.76 (163,001.81) $447,359.75 $24,474.87 178,491.07 65,118.45 156,803.57 $424,887.96 22,471.79 $447,359.75 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. Coastal Georgia Community College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 COASTAL GEORGIA COMMUNITY COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 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 $556,283.97 27,829.74 141,649.70 169,369.74 4,104.30 29,637.74 $928,875.19 $291,354.54 425,022.64 35,522.80 $746,472.99 $37,638.68 46,177.35 41,911.52 32,671.65 21,000.00 3,003.00 $182,402.20 $928,875.19 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. COASTAL GEORGIA COMMUNITY COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $10,043,596 6,100,000 4,886,603 $21,030,199 $192,927 20,837,272 $21,030,199 $0 $10,048,300 6,400,000 7,984,344 $24,432,644 $10,048,300.00 5,994,509.43 7,234,762.70 $23,277,572.13 $192,927 24,239,717 $24,432,644 $0 $192,927.00 23,086,816.21 $23,279,743.21 ($2,171.08) VARIANCE $0.00 (405,490.57) (749,581.30) ($1,155,071.87) $0.00 1,152,900.79 $1,152,900.79 ($2,171.08) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 190,403.28 103.12 3,003.00 (8,833.00) (103.12) $182,402.20 $37,638.68 46,177.35 41,911.52 32,671.65 $179,399.20 3,003.00 $182,402.20 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. Columbus State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures COLUMBUS STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Restricted/Sponsored Funds Uncollectible Accounts Receivable Unreserved Total Fund Balances Total Liabilities and Fund Balances $7,919,112.91 835,616.55 243,702.49 864,640.70 307,343.20 $10,170,415.85 $203,895.67 4,905,638.08 3,183,172.98 47,423.86 $8,340,130.59 $621,881.49 184,560.94 994,607.60 34,509.09 $1,830,285.26 $10,170,415.85 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. COLUMBUS STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $34,680,062 33,000,000 21,945,226 $89,625,288 $23,479 89,601,809 $89,625,288 $0 $34,689,790 15,355,197 23,842,076 $73,887,063 $34,689,790.00 12,991,016.60 23,482,345.40 $71,163,152.00 $23,479 73,863,584 $73,887,063 $0 $23,479.00 71,024,488.31 $71,047,967.31 $115,184.69 VARIANCE $0.00 (2,364,180.40) (359,730.60) ($2,723,911.00) $0.00 2,839,095.69 $2,839,095.69 $115,184.69 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 1,724,290.10 93,004.10 (9,174.53) (15.00) (93,004.10) $1,830,285.26 $621,881.49 184,560.94 (5,273.86) 994,607.60 34,509.09 $1,830,285.26 0.00 $1,830,285.26 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. Dalton State College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories DALTON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $0.00 768,814.16 1,021,430.53 2,872.00 10,959.98 $1,804,076.67 $272,160.68 431,552.30 834,650.35 28,863.30 3,565.96 $1,570,792.59 $88.00 10,314.96 1,542.94 107,888.02 10,585.27 102,864.89 $233,284.08 $1,804,076.67 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. DALTON STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $12,723,126 7,750,000 6,777,798 $27,250,924 $117,657 27,133,267 $27,250,924 $0 $12,679,964 7,963,950 8,375,592 $29,019,506 $12,679,964.00 7,828,915.63 8,295,478.86 $28,804,358.49 $69,261 28,950,245 $29,019,506 $0 $29,050.96 28,655,902.43 $28,684,953.39 $119,405.10 VARIANCE $0.00 (135,034.37) (80,113.14) ($215,147.51) $40,210.04 294,342.57 $334,552.61 $119,405.10 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2005 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 176,936.19 19,885.40 13,813.46 (76,870.67) (19,885.40) $233,284.08 $88.00 10,314.96 1,542.94 107,888.02 10,585.27 $130,419.19 102,864.89 $233,284.08 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. Darton College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Inventories DARTON COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable Funds Held for Others Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $2,381,893.93 212,597.70 42,011.00 $2,613,725.75 $1,885,215.42 21,674.25 $1,849,610.41 $13,958.55 132,467.98 255,279.63 312,898.36 46,140.00 7,311.20 $764,115.34 $2,613,725.75 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. DARTON COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $14,904,441 6,000,000 7,347,993 $28,252,434 $238,593 28,013,841 $28,252,434 $0 $15,181,317 8,825,000 12,643,694 $36,650,011 $15,181,317.00 8,017,650.54 11,443,545.69 $34,642,513.23 $209,802 36,440,209 $36,650,011 $0 $209,802.00 34,181,888.38 $34,391,690.38 $250,822.85 VARIANCE $0.00 (807,349.46) (1,200,148.31) ($2,007,497.77) $0.00 2,258,320.62 $2,258,320.62 $250,822.85 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 505,981.29 0.00 14,159.63 (6,848.43) $764,115.34 $13,958.55 132,467.98 255,279.63 (3,940.38) 312,898.36 46,140.00 $756,804.14 7,311.20 $764,115.34 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. East Georgia College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories EAST GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $799,387.93 29,584.64 9,341.58 253,687.90 158,899.12 967.57 $1,251,868.74 $26,883.54 750,464.25 334,954.40 62,625.89 $1,174,928.08 $26,440.17 4,423.53 14,271.03 18,513.01 2,484.73 720.00 10,088.19 $76,940.66 $1,251,868.74 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. EAST GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $5,515,117 2,500,000 2,634,811 $10,649,928 $737,042 9,912,886 $10,649,928 $0 $5,518,807 3,324,366 6,806,232 $15,649,405 $5,518,807.00 2,813,437.08 6,013,102.70 $14,345,346.78 $737,042 14,912,363 $15,649,405 $0 $733,077.26 13,579,879.96 $14,312,957.22 $32,389.56 VARIANCE $0.00 (510,928.92) (793,129.30) ($1,304,058.22) $3,964.74 1,332,483.04 $1,336,447.78 $32,389.56 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 42,715.01 29,750.09 2,119.62 (283.53) (29,750.09) $76,940.66 $26,440.17 4,423.53 14,271.03 18,513.01 2,484.73 720.00 $66,852.47 10,088.19 $76,940.66 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. Fort Valley State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other FORT VALLEY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Unreserved Total Fund Balances Total Liabilities and Fund Balances ($1,235,622.00) 1,802,858.00 817,233.99 $1,384,469.99 $1,905,854.00 2,867.00 $1,908,721.00 $20,419.00 818.00 111,270.99 86,180.00 ($524,251.01) $1,384,469.99 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. FORT VALLEY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $21,764,904 22,000,000 10,694,830 $54,459,734 $1,888,588 52,571,146 $54,459,734 $0 $21,791,177 27,746,702 10,862,659 $60,400,538 $21,791,177.00 19,503,750.00 8,558,274.00 $49,853,201.00 $1,808,088 58,592,450 $60,400,538 $0 $1,788,663.00 47,907,953.17 $49,696,616.17 $156,584.83 VARIANCE $0.00 (8,242,952.00) (2,304,385.00) ($10,547,337.00) $19,425.00 10,684,496.83 $10,703,921.83 $156,584.83 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance (501,548.84) (1,179,828.31) 113,033.00 (292,320.00) 1,179,828.31 ($524,251.01) $20,419.00 818.00 111,270.99 (742,939.00) 86,180.00 ($524,251.01) 0.00 ($524,251.01) 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. Georgia College and State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures GEORGIA COLLEGE & STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $6,034,959.83 92,379.88 125,119.86 4,676,642.81 165,765.90 $11,094,868.28 $240,171.85 6,269,906.74 3,041,305.32 296,021.77 $9,847,405.68 $41,597.66 568,877.78 78,179.81 31,706.65 455,094.30 61,875.58 10,130.82 $1,247,462.60 $11,094,868.28 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. GEORGIA COLLEGE & STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $29,836,650 5,044,737 23,098,740 $57,980,127 $1,365,884 56,614,243 $57,980,127 $0 $29,879,142 6,504,028 26,358,849 $62,742,019 $29,879,142.00 4,110,154.66 27,853,405.83 $61,842,702.49 $1,365,884 61,376,135 $62,742,019 $0 $1,365,790.33 61,329,327.23 $62,695,117.56 ($852,415.07) VARIANCE $0.00 (2,393,873.34) 1,494,556.83 ($899,316.51) $93.67 46,807.77 $46,901.44 ($852,415.07) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 2,103,492.98 45,504.51 12,347.14 (15,962.45) (45,504.51) $1,247,462.60 $41,597.66 568,877.78 78,179.81 31,706.65 455,094.30 61,875.58 $1,237,331.78 10,130.82 $1,247,462.60 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. Georgia Highlands College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures GEORGIA HIGHLANDS COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Total Fund Balances Total Liabilities and Fund Balances ($441,255.00) 101,115.00 3,506,135.00 473,201.00 $3,639,196.00 $97,294.00 1,009,536.00 2,377,311.00 $3,484,116.00 $20,572.00 7,740.00 45,975.73 46,842.10 33,950.17 $155,080.00 $3,639,196.00 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. GEORGIA HIGHLANDS COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $13,060,107 3,763,454 6,375,854 $23,199,415 $194,431 23,004,984 $23,199,415 $0 $13,065,414 3,598,728 9,136,572 $25,800,714 $13,065,414.00 3,244,898.00 11,318,316.00 $27,628,628.00 $194,431 25,606,283 $25,800,714 $0 $194,430.00 27,475,247.60 $27,669,677.60 ($41,049.60) VARIANCE $0.00 (353,830.00) 2,181,744.00 $1,827,914.00 $1.00 (1,868,964.60) ($1,868,963.60) ($41,049.60) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Increase (Decrease) in Inventories FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 196,169.09 0.00 (39.49) $155,080.00 $20,572.00 7,740.00 45,975.73 46,842.10 33,950.17 $155,080.00 0.00 $155,080.00 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. Gainesville State College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures GAINESVILLE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $3,804,135.92 3,966.13 588,858.64 222,104.44 $4,619,065.13 $2,989,054.45 1,393,895.30 9,491.59 $4,392,441.34 $128,711.64 9,738.57 88,150.67 22.91 $226,623.79 $4,619,065.13 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. GAINESVILLE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET $17,866,983 1,620,903 11,361,426 $30,849,312 $9,614 30,839,698 $30,849,312 $0 FINAL BUDGET ACTUAL $17,873,267 4,025,547 13,963,151 $35,861,965 $17,873,267.00 3,830,588.80 12,869,558.55 $34,573,414.35 $9,614 35,852,351 $35,861,965 $0 $9,614.00 34,525,051.38 $34,534,665.38 $38,748.97 VARIANCE $0.00 (194,958.20) (1,093,592.45) ($1,288,550.65) $0.00 1,327,299.62 $1,327,299.62 $38,748.97 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Total Reserved Unreserved Surplus Total Fund Balance 187,874.82 0.00 $226,623.79 $128,711.64 9,738.57 88,150.67 $226,600.88 22.91 $226,623.79 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. Georgia Perimeter College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories GEORGIA PERIMETER COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities 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 Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $7,681,867.46 7,069.29 3,296,548.45 5,443,169.50 1,640.00 170,372.42 $16,600,667.12 $588,621.66 7,485,596.80 3,635,635.71 63,348.52 184,542.81 $11,957,745.50 $786,870.36 149,242.25 198,408.61 1,636,316.36 1,402,909.94 175,368.73 369,306.65 $4,642,921.62 $16,600,667.12 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. GEORGIA PERIMETER COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET $59,449,381 18,911,550 47,586,567 $125,947,498 $57,319 125,890,179 $125,947,498 $0 FINAL BUDGET ACTUAL $59,863,989 19,311,550 45,686,567 $124,862,106 $59,863,989.00 22,478,901.57 49,232,192.99 $131,575,083.56 $57,319 124,804,787 $124,862,106 $0 $35,753.99 131,261,181.46 $131,296,935.45 $278,148.11 VARIANCE $0.00 3,167,351.57 3,545,625.99 $6,712,977.56 $21,565.01 (6,456,394.46) ($6,434,829.45) $278,148.11 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Year Ended June 30, 2005 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 3,995,466.86 387,310.76 369,306.65 (387,310.76) $4,642,921.62 $786,870.36 149,242.25 198,408.61 1,636,316.36 (75,501.28) 1,402,909.94 175,368.73 $4,273,614.97 369,306.65 $4,642,921.62 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. Georgia State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Prepaid Expenditures Inventories GEORGIA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Benefits 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 Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $76,276,802.28 2,072.78 17,802,709.42 2,999,061.68 124,728.52 $97,205,374.68 $551,933.44 29,622,398.01 310,293.23 24,165,222.04 235,475.56 $54,885,322.28 $132,595.65 6,586,562.07 19,583,189.19 2,246,649.95 8,455,368.62 3,583,736.63 89,732.15 1,200,000.00 441,926.02 292.12 $42,320,052.40 $97,205,374.68 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. GEORGIA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Payments to Georgia Cancer Coalition Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $194,494,597 9,982,554 120,000,000 170,492,243 $494,969,394 $191,787,448 9,982,554 120,000,000 204,375,540 $526,145,542 $191,787,448.00 9,982,554.00 83,524,349.20 166,142,029.15 $451,436,380.35 $9,982,554 5,041,583 136,456 479,808,801 $494,969,394 $0 $9,982,554 933,706 136,456 515,092,826 $526,145,542 $0 $9,982,261.88 931,025.39 120,059.60 429,141,496.43 $440,174,843.30 $11,261,537.05 VARIANCE $0.00 0.00 (36,475,650.80) (38,233,510.85) ($74,709,161.65) $292.12 2,680.61 16,396.40 85,951,329.57 $85,970,698.70 $11,261,537.05 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Total Reserved Unreserved Surplus Total Fund Balance 31,201,747.17 1,059,022.32 182,643.76 (325,875.57) (1,059,022.33) $42,320,052.40 $132,595.65 6,586,562.07 19,583,189.19 2,246,649.95 8,455,368.62 3,583,736.63 89,732.15 1,200,000.00 $41,877,834.26 442,218.14 $42,320,052.40 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. Gordon College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Other Prepaid Expenditures Inventories GORDON COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities 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 $1,642,113.87 439,860.62 276,518.67 16,084.86 $2,374,578.02 $103,464.92 1,621,254.90 477,888.26 64,638.93 $2,267,247.01 $8,368.78 47,869.12 15,509.20 25,683.80 9,900.11 $107,331.01 $2,374,578.02 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. GORDON COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $11,551,871 3,200,000 5,364,415 $20,116,286 $263,923 19,852,363 $20,116,286 $0 $11,556,842 4,106,600 6,871,845 $22,535,287 $11,556,842.00 4,102,685.63 6,831,349.18 $22,490,876.81 $263,923 22,271,364 $22,535,287 $0 $263,802.13 22,377,843.48 $22,641,645.61 ($150,768.80) VARIANCE $0.00 (3,914.37) (40,495.82) ($44,410.19) $120.87 (106,479.48) ($106,358.61) ($150,768.80) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 Non-Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Technology Fees Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 59,944.20 30,381.79 11,192.61 (2,104.00) (30,381.79) 189,067.00 $107,331.01 $8,368.78 47,869.12 15,509.20 25,683.80 $97,430.90 9,900.11 $107,331.01 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. Georgia Southern University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories GEORGIA SOUTHERN UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $14,174,758.37 1,541,348.94 1,884,797.19 6,946,973.46 3,410,526.75 57,851.73 $28,016,256.44 $497,890.09 17,866,346.31 7,325,751.58 $25,689,987.98 $482,637.25 919,367.50 530,784.27 173,362.00 83,320.21 100,000.00 36,797.23 $2,326,268.46 $28,016,256.44 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. GEORGIA SOUTHERN UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $85,937,305 25,000,000 51,553,206 $162,490,511 $85,956,889 21,000,000 65,424,976 $172,381,865 $85,956,889.00 19,576,035.06 61,861,328.87 $167,394,252.93 $401,197 827,825 161,261,489 $162,490,511 $0 $401,197 827,825 171,152,843 $172,381,865 $0 $401,197.00 827,825.00 166,918,823.11 $168,147,845.11 ($753,592.18) VARIANCE $0.00 (1,423,964.94) (3,563,647.13) ($4,987,612.07) $0.00 0.00 4,234,019.89 $4,234,019.89 ($753,592.18) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Year Ended June 30, 2005 Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 2,043,472.08 75,832.69 21,579.56 (75,832.69) 1,014,809.00 $2,326,268.46 $482,637.25 919,367.50 530,784.27 173,362.00 83,320.21 100,000.00 $2,289,471.23 36,797.23 $2,326,268.46 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. Georgia Southwestern State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 GEORGIA SOUTHWESTERN STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable 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 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 $2,033,758.76 233,713.70 38,196.07 138,335.81 32,407.61 $2,476,411.95 $61,081.87 910,830.42 10,030.55 1,091,734.67 10,775.00 $2,084,452.51 $503.64 106,079.30 17,004.57 196,043.56 34,014.98 36,500.00 1,813.39 $391,959.44 $2,476,411.95 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. GEORGIA SOUTHWESTERN STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $12,222,665 4,064,378 7,799,298 $24,086,341 $139,675 23,946,666 $24,086,341 $0 $12,227,880 4,064,378 13,595,630 $29,887,888 $12,227,880.00 6,183,617.47 13,725,291.09 $32,136,788.56 $139,675 29,748,213 $29,887,888 $0 $139,675.00 31,997,066.35 $32,136,741.35 $47.21 VARIANCE $0.00 2,119,239.47 129,661.09 $2,248,900.56 $0.00 (2,248,853.35) ($2,248,853.35) $47.21 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Other Additions (Deletions) FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 376,088.39 237.57 9,040.45 (8,392.00) (237.57) 15,175.39 $391,959.44 $503.64 106,079.30 17,004.57 196,043.56 34,014.98 36,500.00 $390,146.05 1,813.39 $391,959.44 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. Georgia Gwinnett College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Other Prepaid Expenditures GEORGIA GWINNETT COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities Fund Balances Reserved Technology Fees Unreserved Surplus Total Liabilities Total Fund Balances Total Liabilities and Fund Balances $1,493,581.75 492,130.37 2,600.00 $1,988,312.12 $40,665.55 1,483,838.00 12,539.17 134,461.31 $1,671,504.03 $314,178.93 2,629.16 $316,808.09 $1,988,312.12 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. GEORGIA GWINNETT COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET $10,368,675 567,500 $10,936,175 $1,000,000 9,936,175 $10,936,175 $0 FINAL BUDGET ACTUAL $10,945,548 4,189,673 $15,135,221 $10,945,548.00 4,517,267.11 $15,462,815.11 $1,000,000 14,135,221 $15,135,221 $0 $1,003,709.53 14,193,313.75 $15,197,023.28 $265,791.83 VARIANCE $0.00 327,594.11 $327,594.11 ($3,709.53) (58,092.75) ($61,802.28) $265,791.83 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Technology Fees Total Reserved Unreserved Surplus Total Fund Balance 50,000.00 2,000.00 1,016.26 (2,000.00) $316,808.09 $314,178.93 $314,178.93 2,629.16 $316,808.09 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. Kennesaw State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures KENNESAW STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $10,503,927.44 3,000,000.00 1,328,749.90 16,519,611.77 3,345,361.67 $34,697,650.78 $364,020.76 7,401,405.46 24,250,008.81 $32,015,435.03 $241,318.77 1,255,223.68 505,315.35 164,777.51 514,635.49 944.95 $2,682,215.75 $34,697,650.78 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. KENNESAW STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds ORIGINAL BUDGET FINAL BUDGET ACTUAL $74,934,854 10,163,355 59,244,218 $75,030,494 19,772,909 69,972,722 $75,030,494.00 15,681,067.00 77,153,466.00 Total Revenue EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures $144,342,427 $164,776,125 $167,865,027.00 $249,038 452,792 143,640,597 $144,342,427 $0 $249,038 452,792 164,074,295 $164,776,125 $0 $249,038.00 452,792.00 167,637,928.04 $168,339,758.04 ($474,731.04) VARIANCE $0.00 (4,091,842.00) 7,180,744.00 $3,088,902.00 $0.00 0.00 (3,563,633.04) ($3,563,633.04) ($474,731.04) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers Other Additions (Deletions) FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 2,122,994.95 0.00 944.70 (33,219.90) 1,066,226.00 1.04 $2,682,215.75 $241,318.77 1,255,223.68 505,315.35 164,777.51 514,635.49 $2,681,270.80 944.95 $2,682,215.75 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. Macon State College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures MACON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $3,256,592.85 521,841.41 69,586.39 2,871,727.57 146,602.45 $6,866,350.67 $91,236.64 953,342.49 4,829,277.01 96,968.56 $5,970,824.70 $53,430.60 221,503.37 106,788.42 60,029.73 350,470.23 81,086.91 22,216.71 $895,525.97 $6,866,350.67 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. MACON STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $19,766,520 7,435,221 11,577,231 $38,778,972 $399,396 38,379,576 $38,778,972 $0 $19,808,906 10,247,174 12,759,098 $42,815,178 $19,808,906.00 9,536,078.45 13,097,265.50 $42,442,249.95 $435,196 42,379,982 $42,815,178 $0 $435,196.00 41,441,676.03 $41,876,872.03 $565,377.92 VARIANCE $0.00 (711,095.55) 338,167.50 ($372,928.05) $0.00 938,305.97 $938,305.97 $565,377.92 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2005 Non-Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 647,227.06 7,867.52 19,975.18 (54.19) (7,867.52) (337,000.00) $895,525.97 $53,430.60 221,503.37 106,788.42 60,029.73 350,470.23 81,086.91 $873,309.26 22,216.71 $895,525.97 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. Medical College of Georgia Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories MEDICAL COLLEGE OF GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Early Retirement Program Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $37,051,430.64 8,977,673.90 3,211,029.43 10,442,455.10 9,696,195.00 7,790,403.38 126,626.06 $77,295,813.51 $2,627,493.60 17,243,304.27 5,563,138.58 550.00 $25,434,486.45 $734,002.33 1,157,658.89 6,844,282.25 226,167.69 35,395,186.46 131,965.19 119,814.32 7,172,101.53 80,148.40 $51,861,327.06 $77,295,813.51 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. MEDICAL COLLEGE OF GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Georgia Radiation Therapy Center Research Consortium Special Funding Initiative Student Education Enrichment Program Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $136,915,616 5,000,000 342,134,927 53,508,412 $537,558,955 $137,034,346 5,000,000 386,479,298 60,476,340 $588,989,984 $137,034,346.00 5,000,000.00 356,545,883.69 49,121,756.49 $547,701,986.18 $3,625,810 0 10,897,268 308,315 522,727,562 $537,558,955 $0 $3,625,810 90,000 10,897,268 308,315 574,068,591 $588,989,984 $0 $0.00 90,000.00 10,897,268.00 308,315.00 532,593,628.68 $543,889,211.68 $3,812,774.50 VARIANCE $0.00 0.00 (29,933,414.31) (11,354,583.51) ($41,287,997.82) $3,625,810.00 0.00 0.00 0.00 41,474,962.32 $45,100,772.32 $3,812,774.50 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Early Retirement Program Total Reserved Unreserved Surplus Total Fund Balance 47,935,152.36 119,810.18 111,632.58 (31,484.18) 33,251.80 (119,810.18) $51,861,327.06 $734,002.33 1,157,658.89 6,844,282.25 226,167.69 35,395,186.46 131,965.19 119,814.32 7,172,101.53 $51,781,178.66 80,148.40 $51,861,327.06 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. Middle Georgia College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Other Assets MIDDLE GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $1,822,801.07 349,127.56 1,376,095.30 13,647.32 10,518.08 375.00 $3,572,564.33 $76,727.82 3,038,326.77 151,485.00 1,045.20 $3,267,584.79 $1,382.36 15,381.03 164,461.27 56,595.06 24,962.82 8,987.60 33,209.40 $304,979.54 $3,572,564.33 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. MIDDLE GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $12,092,191 3,461,052 5,698,254 $21,251,497 $509,183 20,742,314 $21,251,497 $0 $12,097,221 3,536,007 6,600,156 $22,233,384 $12,097,221.00 4,542,582.04 21,532,023.98 $38,171,827.02 $509,183 21,724,201 $22,233,384 $0 $507,241.03 37,570,691.05 $38,077,932.08 $93,894.94 VARIANCE $0.00 1,006,575.04 14,931,867.98 $15,938,443.02 $1,941.97 (15,846,490.05) ($15,844,548.08) $93,894.94 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 209,323.89 29,486.03 16,361.86 (14,601.15) (29,486.03) 304,979.54 1,382.36 15,381.03 164,461.27 56,595.06 24,962.82 8,987.60 271,770.14 33,209.40 304,979.54 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. North Georgia College and State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 NORTH GEORGIA COLLEGE & STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 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 $2,481,643.84 75,252.26 915,120.19 882,956.21 44,477.68 $4,399,450.18 $149,791.04 1,546,958.26 2,036,979.00 $3,733,728.30 $152,802.69 108,944.95 124,107.04 75,980.01 157,548.05 40,572.34 5,766.80 $665,721.88 $4,399,450.18 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. NORTH GEORGIA COLLEGE & STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $23,051,453 2,941,628 15,722,176 $41,715,257 $838,489 40,876,768 $41,715,257 $0 $23,077,294 5,453,558 16,556,112 $45,086,964 $23,077,294.00 4,728,732.86 15,949,956.03 $43,755,982.89 $857,089 44,229,875 $45,086,964 $0 $856,638.66 42,730,362.97 $43,587,001.63 $168,981.26 VARIANCE $0.00 (724,825.14) (606,155.97) ($1,330,981.11) $450.34 1,499,512.03 $1,499,962.37 $168,981.26 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 531,285.87 8,270.90 2,122.08 (3,566.01) (8,270.90) (33,101.32) $665,721.88 $152,802.69 108,944.95 124,107.04 75,980.01 157,548.05 40,572.34 $659,955.08 5,766.80 $665,721.88 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. Savannah State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories SAVANNAH STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable 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 $934,388.88 1,476,056.85 2,113,677.53 19,535.69 45,510.66 $4,589,169.61 $2,647,685.27 $2,470,359.51 $16,442.98 818,702.41 346,953.67 71,383.72 495,762.68 369,564.64 $2,118,810.10 $4,589,169.61 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. SAVANNAH STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $17,795,512 10,081,179 9,935,110 $37,811,801 $457,768 37,354,033 $37,811,801 $0 $17,906,362 13,193,132 12,401,569 $43,501,063 $17,906,362.00 14,197,982.32 15,788,914.11 $47,893,258.43 $457,768 43,043,295 $43,501,063 $0 $457,451.06 46,809,292.06 $47,266,743.12 $626,515.31 VARIANCE $0.00 1,004,850.32 3,387,345.11 $4,392,195.43 $316.94 (3,765,997.06) ($3,765,680.12) $626,515.31 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 1,227,043.40 0.00 346,428.41 (81,177.02) $2,118,810.10 $16,442.98 818,702.41 346,953.67 71,383.72 495,762.68 $1,749,245.46 369,564.64 $2,118,810.10 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. Skidaway Institute of Oceanography Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 SKIDAWAY INSTITUTE OF OCEANOGRAPHY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable Fund Balances Reserved Indirect Cost Recoveries Unreserved Surplus Total Liabilities Total Fund Balances Total Liabilities and Fund Balances $589,092.20 173,563.71 92,073.60 10,795.50 $865,525.01 $461,279.71 $461,279.71 $404,244.31 0.99 $404,245.30 $865,525.01 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. SKIDAWAY INSTITUTE OF OCEANOGRAPHY-A BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Skidaway Institute of Oceanography Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET $2,239,862 4,113,000 1,545,000 $7,897,862 $7,292,073 605,789 $7,897,862 $0 FINAL BUDGET $2,639,862 4,113,000 1,727,136 $8,479,998 $7,292,073 1,187,925 $8,479,998 $0 ACTUAL $2,639,862.00 3,734,578.24 1,723,905.33 $8,098,345.57 $6,952,564.75 1,250,545.01 $8,203,109.76 ($104,764.19) VARIANCE $0.00 (378,421.76) (3,230.67) ($381,652.43) $339,508.25 (62,620.01) $276,888.24 ($104,764.19) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Indirect Cost Recovery Total Reserved Unreserved Surplus Total Fund Balance 509,009.49 0.99 (0.99) $404,245.30 $404,244.31 $404,244.31 0.99 $404,245.30 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. South Georgia College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures SOUTH GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Deferred Revenue Other Liabilities 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 $0.00 128,976.27 173,623.65 12,036.11 $314,636.03 $254,874.42 11,874.16 1,620.00 13,598.96 $224,719.21 $4,053.04 51,826.40 19,000.00 15,037.38 $89,916.82 $314,636.03 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. SOUTH GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET $6,431,936 3,034,255 2,803,217 $12,269,408 $3,778 12,265,630 $12,269,408 $0 FINAL BUDGET ACTUAL $6,435,956 2,773,297 3,474,385 $12,683,638 $6,435,956.00 2,641,639.80 5,732,910.91 $14,810,506.71 $3,778 12,679,860 $12,683,638 $0 $3,778.00 14,801,570.35 $14,805,348.35 $5,158.36 VARIANCE $0.00 (131,657.20) 2,258,525.91 $2,126,868.71 $0.00 (2,121,710.35) ($2,121,710.35) $5,158.36 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 83,205.18 9,816.39 1,553.28 (9,816.39) $89,916.82 $4,053.04 51,826.40 19,000.00 $74,879.44 15,037.38 $89,916.82 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. Southern Polytechnic State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 SOUTHERN POLYTECHNIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $2,575,957.26 1,221,738.88 139,248.76 1,866,563.82 743,817.78 $6,547,326.50 $142,282.25 2,018,312.30 2,335,785.58 $4,496,380.13 $28,425.38 133,420.00 13,334.61 1,250,435.41 615,757.53 9,573.44 $2,050,946.37 $6,547,326.50 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. SOUTHERN POLYTECHNIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $20,046,541 3,000,000 13,422,604 $36,469,145.00 $20,085,226 3,300,000 17,243,333 $40,628,559.00 $20,085,226.00 3,006,503.65 16,550,270.49 $39,642,000.14 $99,952 10,613 36,358,580 $36,469,145 $0 $131,852 10,613 40,486,094 $40,628,559 $0 $131,852.55 10,613.00 39,262,309.47 $39,404,775.02 $237,225.12 VARIANCE $0.00 (293,496.35) (693,062.51) ($986,558.86) ($0.55) 0.00 1,223,784.53 $1,223,783.98 $237,225.12 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance 1,804,954.59 97,363.91 19,904.16 (11,137.50) (97,363.91) $2,050,946.37 $28,425.38 133,420.00 13,334.61 1,250,435.41 615,757.53 $2,041,372.93 9,573.44 $2,050,946.37 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. Georgia Institute of Technology Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Unreserved Total Fund Balances Total Liabilities and Fund Balances $27,971,806.50 28,724,982.86 22,259,167.15 11,405,254.93 247,094.32 $90,608,305.76 $25,755,495.01 15,870,717.39 17,705,141.80 3,885,636.09 $63,216,990.29 $26,835,109.55 516,989.25 955,382.69 273,503.32 $27,391,315.47 $90,608,305.76 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. GEORGIA INSTITUTE OF TECHNOLOGY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES ORIGINAL BUDGET FINAL BUDGET ACTUAL $244,255,834 0 384,344,736 293,067,085 $921,667,655 $251,819,542 750,000 384,844,736 327,592,602 $965,006,880 $251,819,542.00 750,000.00 327,734,908.12 318,674,244.10 $898,978,694.22 VARIANCE $0.00 0.00 (57,109,827.88) (8,918,357.90) ($66,028,185.78) Advanced Technology Development Center/EDI Georgia Tech Research Institute Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures $27,447,215 130,466,440 10,056,642 570,031 753,127,327 $921,667,655 $0 $28,697,215 138,720,640 17,652,564 1,039,086 778,897,375 $965,006,880 $0 $27,980,921.29 134,899,475.96 17,639,337.02 1,039,086.00 706,782,937.25 $888,341,757.52 $10,636,936.70 $716,293.71 3,821,164.04 13,226.98 0.00 72,114,437.75 $76,665,122.48 $10,636,936.70 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Mandatory Transfers Other Additions (Deletions) FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Total Reserved Unreserved Surplus Total Fund Balance 11,614,106.93 0.00 117,214.67 (127,186.54) 7,234,077.62 (2,083,833.91) $27,391,315.47 $26,835,109.55 516,989.25 955,382.69 273,503.32 (1,189,669.34) $27,391,315.47 0.00 $27,391,315.47 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 of Georgia Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories UNIVERSITY OF GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $101,696,239.10 12,870,346.51 36,377,699.71 3,461,073.42 2,420,949.34 $156,826,308.08 $4,269,572.73 39,425,581.62 45,581,173.02 924,690.85 $90,201,018.22 $1,673,753.76 2,299,723.18 15,920,758.97 1,022,410.61 43,936,472.28 268,548.95 1,487,000.00 16,622.11 $66,625,289.86 $156,826,308.08 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 OF GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Agricultural Experiment Station Athens Tifton Vet Labs 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 Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $434,650,501 440,641,995 335,596,190 $1,210,888,686 $437,321,620 454,291,995 363,217,823 $1,254,831,438 $437,321,620.00 235,796,424.18 339,967,815.13 $1,013,085,859.31 $72,948,126 4,737,054 56,648,411 659,442 3,134,341 1,711,549 2,713,007 459,315 1,337,664 724,607 1,055,375,866 3,249,577 7,189,727 $1,210,888,686 $0 $78,258,188 6,237,054 65,445,620 1,121,275 6,261,341 1,759,290 3,865,007 459,315 4,417,189 769,037 1,070,988,545 3,249,577 12,000,000 $1,254,831,438 $0 $76,085,751.98 5,418,667.01 62,559,056.23 945,228.65 6,446,832.34 1,372,806.65 3,759,806.12 459,315.00 4,417,189.00 778,179.24 827,389,401.26 3,249,577.00 10,162,081.72 $1,003,043,892.20 $10,041,967.11 VARIANCE $0.00 (218,495,570.82) (23,250,007.87) ($241,745,578.69) $2,172,436.02 818,386.99 2,886,563.77 176,046.35 (185,491.34) 386,483.35 105,200.88 0.00 0.00 (9,142.24) 243,599,143.74 0.00 1,837,918.28 $251,787,545.80 $10,041,967.11 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 56,551,291.45 294,862.65 44,486.30 (12,455.00) (294,862.65) $66,625,289.86 $1,673,753.76 2,299,723.18 15,920,758.97 1,022,410.61 43,936,472.28 268,548.95 1,487,000.00 $66,608,667.75 16,622.11 $66,625,289.86 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 Office Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other UNIVERSITY SYSTEM OFFICE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 $12,958,995.54 5,570,455.43 482,885.21 859,832.62 $19,872,168.80 $5,551,093.41 $5,551,093.41 $2,665,551.93 678,361.87 7,185,425.80 39,716.59 3,541,404.58 210,614.62 $14,321,075.39 $19,872,168.80 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 OFFICE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue 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 ORIGINAL BUDGET $148,519,770 750,000 12,109,208 35,948,602 $197,327,580 $2,660,060 31,247,434 32,272,644 40,477,906 7,984,377 3,250,000 7,644,905 71,790,254 $197,327,580 $0 FINAL BUDGET ACTUAL VARIANCE $151,275,848 0 23,543,022 45,251,286 $220,070,156 $151,275,848.00 0.00 19,712,963.50 27,089,502.91 $198,078,314.41 $0.00 0.00 (3,830,058.50) (18,161,783.09) ($21,991,841.59) $2,660,060 31,247,434 32,272,644 46,409,673 8,100,801 2,500,000 8,658,547 88,220,997 $220,070,156 $0 $2,660,060.00 17,023,143.00 32,272,644.00 45,493,454.78 7,946,485.71 2,500,000.00 8,657,849.03 77,971,687.08 $194,525,323.60 $3,552,990.81 $0.00 14,224,291.00 0.00 916,218.22 154,315.29 0.00 697.97 10,249,309.92 $25,544,832.40 $3,552,990.81 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Restricted/Sponsored Funds Uncollectible Accounts Receivable Carry-Over "Per State Accounting Office" Total Reserved Unreserved Surplus Total Fund Balance 10,672,071.10 34,310.13 116,013.48 (20,000.00) (1,482,141.25) 1,447,831.12 $14,321,075.39 $2,665,551.93 678,361.87 7,185,425.80 39,716.59 3,541,404.58 $14,110,460.77 210,614.62 $14,321,075.39 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. Valdosta State University Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories VALDOSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Accounts 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 $0.00 8,486,429.19 546,882.22 1,415,210.00 84,501.62 392,846.93 $10,925,869.96 $1,564,232.41 1,045,304.44 5,064,047.94 $7,673,584.79 $99,140.72 183,184.28 49,182.36 2,491,854.43 46,516.33 338,131.23 44,275.82 $3,252,285.17 $10,925,869.96 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. VALDOSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $49,614,471 9,904,787 29,864,251 $89,383,509 $49,650,283 16,870,682 34,608,622 $101,129,587 $49,650,283.00 13,713,022.78 33,783,047.07 $97,146,352.85 $29,380 89,354,129 $89,383,509 $0 $52,630 101,076,957 $101,129,587 $0 $37,725.96 98,056,951.82 $98,094,677.78 ($948,324.93) VARIANCE $0.00 (3,157,659.22) (825,574.93) ($3,983,234.15) $14,904.04 3,020,005.18 $3,034,909.22 ($948,324.93) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Year Ended June 30, 2006 Non-Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 3,441,244.03 149,513.91 33,864.02 618.05 (149,513.91) 724,884.00 $3,252,285.17 $99,140.72 183,184.28 49,182.36 2,491,854.43 46,516.33 338,131.23 $3,208,009.35 44,275.82 $3,252,285.17 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. Waycross College Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Inventories WAYCROSS COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 Total Assets LIABILITIES AND FUND EQUITY Liabilities Grants Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $544,095.01 73,112.32 318,548.46 10,914.21 $946,670.00 $1,677.00 601,661.42 190,339.56 $793,677.98 $27,614.47 5,571.60 2,582.83 104,974.07 11,888.21 360.84 $152,992.02 $946,670.00 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. WAYCROSS COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $3,444,123 1,200,000 1,348,518 $5,992,641 $7,182 5,985,459 $5,992,641 $0 $3,447,545 1,240,153 1,978,063 $6,665,761 $3,447,545.00 1,199,983.31 1,769,426.43 $6,416,954.74 $7,182 6,658,579 $6,665,761 $0 $7,182.00 6,427,167.82 $6,434,349.82 ($17,395.08) VARIANCE $0.00 (40,169.69) (208,636.57) ($248,806.26) $0.00 231,411.18 $231,411.18 ($17,395.08) FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Year Ended June 30, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Inventories Total Reserved Unreserved Surplus Total Fund Balance 169,593.62 342.05 793.48 (342.05) $152,992.02 $27,614.47 5,571.60 2,582.83 104,974.07 11,888.21 $152,631.18 360.84 $152,992.02 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 of West Georgia Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) June 30, 2007 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories UNIVERSITY OF WEST GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2007 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 Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $1,307,905.77 6,103,306.63 129,522.10 1,383,646.67 406,013.55 128,687.33 $9,459,082.05 $284,391.84 4,530,247.41 3,521,365.56 146,434.35 $8,482,439.16 $135,405.24 318,728.35 166,159.40 246,614.50 109,660.34 75.06 $976,642.89 $9,459,082.05 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 OF WEST GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2007 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL $44,632,019 7,317,928 31,478,636 $83,428,583 $81,743 83,346,840 $83,428,583 $0 $44,646,940 11,838,357 32,065,976 $88,551,273 $44,646,940.00 9,774,106.97 31,739,956.89 $86,161,003.86 $81,743 88,469,530 $88,551,273 $0 $81,738.65 85,529,372.76 $85,611,111.41 $549,892.45 VARIANCE $0.00 (2,064,250.03) (326,019.11) ($2,390,269.14) $4.35 2,940,157.24 $2,940,161.59 $549,892.45 FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance 673,463.63 0.00 26,188.54 1,755.91 (274,657.64) $976,642.89 $135,405.24 318,728.35 166,159.40 246,614.50 109,660.34 $976,567.83 75.06 $976,642.89 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.