ANNUAL FINANCIAL REPORTS Offices of Fiscal Affairs and Internal Audit For the Year Ended: June 30, 2008 Welcome to the CD version of the Fiscal Year 2008 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 2008 Board of Regents of the University System of Georgia ANNUAL FINANCIAL REPORT (GAAP Basis) UNIVERSITY SYSTEM OF GEORGIA For the Year Ended: June 30, 2008 [ 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, 2008 [ 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, 2008 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, 2008 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 Statement of Fiduciary Net Assets.................................................................................... 56 Statement of Changes in Fiduciary Net Assets................................................................. 57 Notes to the Financial Statements Note 1 Summary of Significant Accounting Policies .................................................. 58 Note 2 Deposits and Investments................................................................................. 67 Note 3 Accounts Receivable........................................................................................ 74 Note 4 Inventories........................................................................................................ 74 Note 5 Notes/Loans Receivable................................................................................... 74 Note 6 Capital Assets................................................................................................... 75 Note 7 Deferred Revenue............................................................................................. 76 Note 8 Long Term Liabilities ...................................................................................... 76 Note 9 Significant Commitments................................................................................ 76 Note 10 Lease Obligations............................................................................................. 77 Note 11 Retirement Plans .............................................................................................. 79 Note 12 Risk Management............................................................................................. 82 Note 13 Contingencies................................................................................................... 84 Note 14 Post Employment Benefits Other Than Pension Benefits................................ 84 Note 15 Natural Classifications with Functional Classifications .................................. 88 Note 16 Component Units ............................................................................................. 89 Required Supplementary Information...............................................................................227 Financial Statements (Statutory Basis) Balance Sheet (Non-GAAP Basis) ...................................................................................228 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) ...........................229 Program Revenues and Expenditures by Funding Source (Non-GAAP Basis) ...............231 BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA June 30, 2008 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 Kessel D. Stelling, Jr. .................Alpharetta Sixth District Term Expires January 1, 2015 Richard L. Tucker......................Suwanee 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, 2015 William H. NeSmith, Jr. .................Athens Tenth District Term Expires January 1, 2015 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 Usha Ramachandran ................... Treasurer J. Burns Newsome ....Secretary to the Board Annual Financial Report FY 2008 1 OFFICE OF BUSINESS AND FISCAL AFFAIRS OFFICE OF INTERNAL AUDIT 270 WASHINGTON STREET, S.W. ATLANTA, GEORGIA 30334 December 16, 2008 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, 2008. 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, ____________________________ Usha Ramachandran 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 FY 2008 2 UNIVERSITY SYSTEM OF GEORGIA Annual Financial Report FY 2008 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 FY 2008 4 STATE RESOURCES The General Appropriations Act of 2008, as amended, provided a total of $2,121,723,333 to the University System of Georgia. In addition, House Bill 95 provided $20,337,799 from Tobacco funds. The amounts were as follows: STATE APPROPRIATIONS AVAILABLE General Appropriations Act of 2008 House Bill 95 General State Funds Tobacco funds House Bill 989 General State Funds TOTAL STATE APPROPRIATIONS AVAILABLE $2,115,477,060 20,337,799 6,246,273 $2,142,061,132 ALLOCATIONS BY BOARD OF REGENTS Educational and General Teaching Non-Teaching Tobacco funds Other Activities Regents Central Office Information Technology Southern Regional Education Board Rental Payments - Georgia Military College Georgia Public Telecommunications Commission Public Libraries Research Consortium Total Other Activities Special Initiative Funding Total Educational and General $15,893,146 39,919,044 1,126,700 3,062,152 18,069,614 40,329,496 35,995,015 TOTAL ALLOCATIONS BY BOARD OF REGENTS $1,778,128,874 148,342,948 20,337,799 154,395,167 40,856,344 2,142,061,132 $2,142,061,132 Annual Financial Report FY 2008 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, 2008. The University System continues to thrive as shown by the following statistics: FY2008 FY2007 FY2006 Students- StudentsFaculty Headcount FTE 11,422 11,082 9,721 270,022 235,186 259,945 225,197 253,552 218,617 Overview of the Financial Statements and Financial Analysis The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2008. These 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 consolidated 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 2008 and 2007. 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 FY 2008 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, 2008 $1,334,933,811 5,920,017,303 176,728,715 7,431,679,829 June 30, 2007 $1,157,762,551 5,150,217,912 179,777,799 6,487,758,262 Liabilities: Current Liabilities Noncurrent Liabilities Total Liabilities 655,536,059 1,987,806,542 2,643,342,601 579,979,308 1,253,090,173 1,833,069,481 Net Assets: Invested in Capital Assets, net of debt Restricted - nonexpendable Restricted - expendable Capital Projects Unrestricted Total Net Assets 4,126,684,597 125,317,526 219,074,523 74,083,927 243,176,655 $4,788,337,228 3,948,707,929 127,857,042 215,423,585 53,667,781 309,032,444 $4,654,688,781 The total assets of the University System of Georgia increased by approximately $944 million. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $770 million in Capital Assets, net of accumulated depreciation and an increase of $177 million in Current Assets. The increase in Current Assets is primarily in the categories of cash and cash equivalents, receivables and prepaid items. Annual Financial Report FY 2008 7 The total liabilities for the year increased by approximately $810 million. The primary components of this increase were increases of $594 million in lease purchase obligations and $158 million in the net other post-employment benefit (OPEB) obligation for fiscal 2008. The combination of the increase in total assets of $944 million and the increase in total liabilities of $810 million yielded a net increase in total net assets of $134 million, or 2.9%. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of related debt in the amount of $178 million, which was partially offset by a decrease of ($66) million in the category of Unrestricted Net Assets. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the 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, 2008 June 30, 2007 Operating Revenues Operating Exp enses Operating Loss $3,049,941,627 5,389,669,907 (2,339,728,280) $2,852,965,328 4,871,469,225 (2,018,503,897) Nonop erating Revenues and Exp enses Income (Loss) Before other revenues, expenses, gains or losses, and special items 2,230,646,042 (109,082,238) 2,069,761,573 51,257,676 Other revenues, expenses, gains, losses, and special items Increase in Net Assets 233,818,068 124,735,830 222,159,611 273,417,287 Net Assets at beginning of y ear, as originally rep orted Prior Year Adjustments Net Assets at beginning of y ear, restated 4,654,688,781 8,912,617 4,663,601,398 4,376,286,986 4,984,508 4,381,271,494 Net Assets at End of Year $4,788,337,228 $4,654,688,781 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Annual Financial Report FY 2008 8 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other Total Operating Revenue June 30, 2008 $934,375,216 20,772,007 1,368,747,533 119,229,193 561,069,162 45,748,516 3,049,941,627 Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other Total Nonoperating Revenue Capital Gifts and Grants State Other Capital Gifts and Grants Total Capital Gifts and Grants 2,140,048,441 66,525,949 71,774,059 41,187,570 (1,650,061) 2,317,885,958 168,145,437 66,873,578 235,019,015 Special Items (1,200,947) Total Revenues $5,601,645,653 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and M aintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses Patient Care (M CG only) Total Operating Expenses Nonoperating Expenses Interest Expense (Capital Assets) June 30, 2008 $1,428,225,880 835,214,351 435,850,379 415,271,645 216,284,840 736,655,685 455,072,435 159,317,945 497,977,552 0 209,799,195 5,389,669,907 87,239,916 Total Expenses $5,476,909,823 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 2,124,082,444 197,794,495 24,316,821 222,111,316 48,295 $5,199,207,383 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 Annual Financial Report FY 2008 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, 2008 and 2007, Condensed Cash Provided (used) By: Operating Activities Non-capital Financing Activities Capital and Related Financing Activities Investing Activities Net Change in Cash Cash, Beginning of Year June 30, 2008 ($1,911,843,784) 2,314,808,836 (398,439,117) 34,913,342 39,439,277 725,211,273 June 30, 2007 ($1,711,860,614) 2,091,570,178 (304,343,901) 56,701,786 132,067,449 593,143,824 Cash, End of Year $764,650,550 $725,211,273 Capital Assets The University System of Georgia had many significant capital asset additions and renovations during fiscal 2008 including the following: Georgia Institute of Technology: The Institute had two significant capital additions in fiscal year 2008. The Electrical Sub Station was completed this year, resulting in an addition of $39.7 million. Also, the Institute acquired a complex of buildings collectively called "North Avenue Apartments" from Georgia State University for $74.5 million, which includes an adjacent parking facility. Georgia State University: The University's capital additions during fiscal 2008 included a $161.3 million dormitory complex, University Commons, which was acquired by capital lease, and $12.1 million for the Citizens Trust Building. University of Georgia: The University had a significant capital asset addition in fiscal year 2008 provided by the University of Georgia Athletic Association, Inc. The new Coliseum Practice Facility was completed and placed into service early in fiscal year 2008 at a value of $29.5 million. This 120,000 square foot facility will provide substantial expansion of facilities for the men's and women's basketball teams and the women's gymnastics team. In addition, Annual Financial Report FY 2008 10 $25.3 million in capital assets were added in the category of Construction Work in Progress for the Lamar Dodd School of Art facility. Columbus State University: The University's capital additions during fiscal 2008 included a $12.2 million gift of the Corn Center for the Visual Arts. In addition, capital assets of $50.7 million for student housing, $9.2 million for a parking facility, and $5.9 million for office space were acquired through capital lease. Fort Valley State University: The University added Wildcat Commons residential housing in fiscal 2008 at $43.3 million. This capital asset was acquired through capital lease. Kennesaw State University: The University had $36.0 million in capital asset additions in fiscal year 2008, of which $7.5 million was funded by the Georgia State Financing and Investment Commission (GSFIC), primarily for completion of the Performance Hall. The University also entered into three new capital leases with the Foundation. The leases added $17.2 million to capital assets for KSU Center and additional space in Chastain Pointe and Town Point. Savannah State University: The University entered into a capital lease for University Village housing in the amount of $29.2 million in fiscal 2008. Abraham Baldwin Agricultural College: The College added $52.2 million in capital assets for ABAC Place and Lakeside student housing complexes acquired through capital lease in fiscal 2008. Georgia Gwinnett College: The College added $13.7 million in capital assets in fiscal 2008 for a parking deck that was funded through a capital lease. Middle Georgia College: The addition of the Georgia Aviation & Technical College provided an increase in net capital assets of $17.1 million. The College also added $14.9 million in capital leases for two dormitories. South Georgia College: The College acquired two buildings totaling $16.3 million during fiscal 2008 through capital leases: Tiger Village, which is a residence hall, and Clower Center, which is a Student Activities center. Long-Term Debt and Liabilities The University System of Georgia had Long-Term Debt and Liabilities of $2,123,725,903, excluding related party liabilities and deferred revenue, of which $145,622,461 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt, see notes 1, 8 and 10 in the Notes to the Financial Statements. Annual Financial Report FY 2008 11 Retiree Health Benefit Fund In fiscal 2008, the University System Office became custodian of the Board of Regents Retiree Health Benefit Fund. This fund was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance benefits. As a result, two fiduciary fund statements are presented immediately after the consolidated statements that were described above: the Statement of Fiduciary Net Assets and the Statement of Changes in Fiduciary Net Assets. For additional information concerning the Retiree Health Benefit Fund, see notes 1 and 14 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 2008. System-wide, 58 component units are discretely reported in this consolidated Annual Financial Report, representing 33 of the colleges and universities. Fourteen of the component 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 2008. The 58 component units had combined total assets of $7.1 billion and total liabilities of $3.8 billion at June 30, 2008. The assets included $3.0 billion in investments and $1.3 billion in capital assets. The liabilities included $3.2 billion in long-term liabilities. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Annual Financial Report FY 2008 12 Economic Outlook The University System of Georgia has had significant increases in state appropriations during the last three years, owing to enrollment growth, the recent creation of Georgia Gwinnett College as the 35th institution in the system, and the initiative to expand physician education in Georgia. For Fiscal year 2009 the state appropriated $2.3 billion for the institutions and other organized activities of the University System of Georgia. This represented an increase of 7.7% over fiscal year 2008 state appropriations. Additionally, the University System of Georgia received $296 million in general obligation bond funding for capital facilities for the University System institutions and related activities. The recent growth in enrollment has strengthened tuition revenues as well. 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. 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 sound. However, the recent downturn in the economy has affected state revenues, and consequently, the funding for the University System has been reduced by 6% and is expected to increase to 8%. Institutions are making every effort to protect the core mission of teaching, research and service, make cuts strategically, and further the goal of creating a more educated Georgia. ___________________________ Usha Ramachandran Vice Chancellor for Fiscal Affairs University System of Georgia Annual Financial Report FY 2008 13 Statement of Net Assets UNIVERSITY S YSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 AS S ETS Current As s ets Cas h and Cas h Equivalents Short-term Inves tments Accounts Receivable, net (note 3) Receivables - Federal Financial As sis tance Margin Allocation Funds Receivables - Other Due from Component Units Inventories (note 4) Prepaid Items Other Ass ets Total Current As sets Noncurrent As sets Noncurrent Cas h Short-Term Investments (noncurrent portion) Due from Component Units Inves tments (including real es tate) Notes Receivable, net Capital Ass ets , net (note 6) Total Noncurrent Ass ets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Depos its Deferred Revenue (note 7) Other Liabilities Depos its Held for Other Organizations Leas e Purchas e Obligations (current portion) Compens ated Abs ences (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 Leas e Purchas e Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compens ated Abs ences (noncurrent) Net OPEB Obligation (noncurrent) (note 14) US DOE Settlement (noncurrent) Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Inves ted in Capital As s ets , net of related debt Res tricted for Nonexpendable Expendable Capital Projects Unres tricted TOTAL NET ASSETS Annual Financial Report FY 2008 14 Univers ity Sys tem of Georgia (Primary Government) $755,603,168 125,963,370 63,173,734 7,231,443 148,451,748 119,315,672 22,961,093 92,179,039 54,544 1,334,933,811 9,047,382 4,150,007 1,649,017 113,861,528 48,020,781 5,920,017,303 6,096,746,018 7,431,679,829 113,107,046 20,433,945 24,368,874 14,403,231 26,854,846 215,595,548 6,730,899 84,486,875 51,234,831 94,032,405 216,830 3,932,334 138,395 655,536,059 1,743,470,557 7,747,202 73,554,472 158,241,008 529,296 1,955,898 2,308,109 1,987,806,542 2,643,342,601 4,126,684,597 125,317,526 219,074,523 74,083,927 243,176,655 $4,788,337,228 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia Tech Foundation, Inc. Component Units Georgia Tech Athletic As s ociation AS S ETS Current Assets Cash and Cash Equivalents Accounts Receivable, net Receivables - Other Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Prepaid Items Notes and Mortgages Receivable Other Assets Total Current Assets $7,442,000 3,033,880 4,030,989 21,898,288 1,234,948 37,640,105 $6,216,725 1,993,168 5,467,185 604,767 14,281,845 Noncurrent Assets Due from Component Units Investments (including real estate) Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 1,334,683,679 163,860,101 44,368,897 37,667,491 27,559,637 1,608,139,805 1,645,779,910 80,058,950 8,074,285 95,504,970 2,111,114 185,749,319 200,031,164 LIABILITIES Current Liabilities Accounts Payable Depo s its Deferred Revenue Other Liabilities 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 Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 9,499,237 2,417,845 663,197 264,073 4,825,000 1,953,062 437,000 61,536,874 81,596,288 40,894,155 202,569,624 13,095,498 10,939,238 89,143,950 356,642,465 438,238,753 3,668,533 7,780,000 405,861 1,080,357 2,025,000 27,978 14,987,729 101,955,849 2,414,872 907,778 105,278,499 120,266,228 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Un res tricted TOTAL NET ASSETS (245,733) 385,631,562 418,704,165 12,605,024 390,846,139 $1,207,541,157 (6,129,775) 24,098,941 64,886,682 (3,090,912) $79,764,936 Georgia Tech Res earch Corporation $57,657,833 30,615,886 43,231 41,340,568 129,657,518 331,674 1,618,331 1,950,005 131,607,523 2,302,375 36,584,010 44,567,685 83,454,070 0 83,454,070 1,618,331 46,535,122 $48,153,453 Annual Financial Report FY 2008 15 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia Advanced Technology Ventures, Inc. Component Units Georgia Tech Alumni As s ociation Georgia Tech Facilities, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Pledges Receivable Inventories Prepaid Items Total Current Assets $1,573,271 526,993 50,000 12,322 2,162,586 $184,643 302,380 7,948 54,406 549,377 $3,120,000 6,792,000 31,000 437,000 12,691,000 5,674,000 28,745,000 Noncurrent Assets Noncurrent Cash Due from Component Units Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 370,933 957,061 745,443 114,277,597 116,351,034 118,513,620 448,621 448,621 997,998 35,722,000 9,085,000 248,061,000 2,617,000 8,415,000 303,900,000 332,645,000 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Dep os its Deferred Revenue Other Liabilities Due to Primary Government Lease Purchase Obligations (current portion) Compensated Absences (current portion) Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 649,840 641,225 3,420,567 217,773 1,678,898 6,608,303 90,371,687 8,716,241 99,087,928 105,696,231 183,995 310,000 25,584 207,461 727,040 0 727,040 4,269,000 669,000 800,000 2,422,000 28,011,000 2,179,000 5,723,000 44,073,000 5,215,000 559,000 289,084,000 294,858,000 338,931,000 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Expendable Un res tricted TOTAL NET ASSETS 15,110,771 2,222,998 (4,516,380) $12,817,389 448,621 (177,663) $270,958 5,305,000 9,522,000 (21,113,000) ($6,286,000) Annual Financial Report FY 2008 16 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia State Univers ity Foundation, Inc. Component Units Georgia State Univers ity Res earch Foundation, Inc. AS S ETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Inventories Prepaid Items Total Current Assets $707,639 228,251 8,667 2,912,018 4,692,227 87,050 94,861 8,730,713 $96,241,998 4,362,101 617,605 5,933,858 107,155,562 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 338,026 29,826,142 136,542,949 164,731,097 2,134,797 60,769,373 7,264,119 401,606,503 410,337,216 1,928,092 4,099,891 9,072,492 1,189,033 16,289,508 123,445,070 LIABILITIES Current Liabilities Accounts Payable Salaries Payable 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 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 Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES 4,669,063 4,533,379 735,724 945,374 759,993 11,515,000 37,769 23,196,302 8,240,033 957,767 37,738 237,197,747 214,591 246,647,876 269,844,178 2,696,580 5,933,858 4,623,769 8,667 13,262,874 91,090,710 91,090,710 104,353,584 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Un res tricted TOTAL NET ASSETS 6,293,093 74,178,687 45,185,029 14,836,229 $140,493,038 8,585,212 2,000,000 890,010 7,616,264 $19,091,486 MCG Health, Inc. $59,207,286 28,515,148 66,839,323 77,991 327,412 8,100,474 2,132,578 165,200,212 488,374 105,104,372 94,108,364 85,541,577 2,102,540 287,345,227 452,545,439 29,861,946 3,955,191 167,868 2,248,015 15,841,149 11,872,637 270,108 64,216,914 135,000,000 6,744,043 141,744,043 205,960,957 55,366,882 20,000 468,374 190,729,226 $246,584,482 Annual Financial Report FY 2008 17 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Medical College of Georgia Foundation, Inc. Component Units Medical College of Georgia PPG Foundation Medical College of Georgia Res earch Institute, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Due From Primary Government Prepaid Items Notes and Mortgages Receivable Other Assets Total Current Assets $14,999,787 1,107,082 4,779 190,431 19,864 16,321,943 $27,478,631 24,908,399 546,827 270,108 344,393 153,341 53,701,699 $6,341,506 4,358,499 10,700,005 Noncurrent Assets Noncurrent Cash Investments (including real estate) Notes Receivable, net Net Investment in Capital Leases Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 129,016,200 122,724 1,624,036 362,838 131,125,798 147,447,741 452,539 17,829,823 26,597,213 5,943,517 1,253,712 52,076,804 105,778,503 10,993 10,993 10,710,998 LIABILITIES Current Liabilities Accounts Payable Dep os its Deferred Revenue Other Liabilities Due to Primary Government Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Liabilities under Split Interest Agreements Other Long-Term Liabilities Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 0 2,268,972 2,268,972 2,268,972 1,999,546 1,198,900 2,731,585 77,991 685,000 6,693,022 452,539 31,320,854 31,773,393 38,466,415 7,500 14,263 4,652,056 4,673,819 0 4,673,819 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 1,624,036 114,174,486 17,513,255 11,866,992 $145,178,769 5,943,517 61,368,571 $67,312,088 10,993 106,278 5,919,908 $6,037,179 Annual Financial Report FY 2008 18 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 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 Inves tments Accounts Receivable, net Receivables - Other Due from Component Units Contributions Receivable Due From Primary Government Prepaid Items Total Current Assets Noncurrent Assets Noncurrent Cash Short-Term Inves tments (noncurrent portion) Investments (including real estate) Notes Receivable, net Contributions Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Deferred Revenue Other Liabilities Deposits Held for Other Organizations Due to Primary Government Revenue/Mortgage Bonds payable (current) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Due to Primary Government Revenue/Mortgage Bonds payable (noncurrent) 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 Unres tricted TOTAL NET ASSETS $141,298 18,952 957,138 175,108 1,292,496 503,569 2,965,744 3,469,313 4,761,809 $1,406,499 39,664,777 2,988,077 7,206,817 78,417 51,344,587 566,387,353 57,115 12,970,206 13,999,293 1,688,239 595,102,206 646,446,793 $86,132,121 1,225,830 2,839,534 203,670 90,401,155 3,114,876 185,280,206 1,265,215 189,660,297 280,061,452 8,558 458,040 3,934,182 4,400,780 0 4,400,780 88,225 272,804 $361,029 836,070 686,085 785,774 847,156 2,839,534 126,617 6,121,236 12,341,775 6,996,749 19,338,524 25,459,760 6,875,927 294,075,724 293,560,214 26,475,168 $620,987,033 6,043,391 18,513,850 1,946,359 2,140,000 500,000 29,143,600 1,649,017 93,330,000 1,265,215 470,588 96,714,820 125,858,420 90,922,049 63,280,983 $154,203,032 Annual Financial Report FY 2008 19 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Arch Foundation for the University of Georgia, Inc. Component Units University of Georgia Res earch Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Prepaid Items Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Due from Component Units Due from Primary Government Investments (including real estate) Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Contracts Payable Depo s its Deferred Revenue Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) Revenue/Mortgage Bonds payable (current) Due to Component Units Total Current Liabilities Noncurrent Liabilities Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS $25,694,119 1,428,776 500,000 11,357,558 38,980,453 470,588 30,296,001 11,057,819 41,824,408 80,804,861 1,086,727 345,560 333,666 1,765,953 0 1,765,953 31,108,337 46,529,570 1,401,001 $79,038,908 $22,371,760 19,811,476 2,239,791 554,694 518,162 12,377,600 57,873,483 46,127,862 1,955,898 52,301,523 154,377,287 52,636,173 5,995,912 313,394,655 371,268,138 18,138,668 5,049,038 12,305,725 5,209,442 17,517,774 28,264 3,595,000 61,843,911 1,699,635 224,582,541 18,226,887 244,509,063 306,352,974 8,351,397 2,411,877 54,151,890 $64,915,164 Georgia Southern Univers ity Foundation, Inc. $153,630 39,796,167 34,378 1,138,733 41,122,908 1,314,719 3,282,305 418,082 117,821 5,132,927 46,255,835 58,041 50,000 20,586 418,368 546,995 140,764 140,764 687,759 418,082 28,944,692 13,496,937 2,708,365 $45,568,076 Annual Financial Report FY 2008 20 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia Southern University Housing Foundation, Inc. Component Units (Georgia Southern University) Southern Boosters, Inc. Georgia Southern University Research and Service Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Contributions Receivable Due From Primary Government Prepaid Items Total Current Assets $2,256,088 12,842 418,368 2,865,009 443,116 5,995,423 $1,111,527 509,836 38,000 590,665 2,250,028 $1,645,699 1,011,426 44,457 131,453 2,833,035 Noncurrent Assets Noncurrent Cash Net Investment in Capital Leases Receivables Other Contributions Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 66,397,407 99,973,406 100,000 17,917,378 296,253 184,684,444 190,679,867 431,070 1,649,282 2,080,352 4,330,380 0 2,833,035 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Deferred Revenue Deposits Held for Other Organizations Due to Primary Government Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 3,045,152 826,061 80,468 42,120 2,800,000 6,793,801 1,776,985 176,896,654 178,673,639 185,467,440 46,735 93,350 383,102 523,187 170,871 170,871 694,058 7,373 1,121,876 276,357 957,741 2,363,347 0 2,363,347 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Expendable Un res tricted TOTAL NET ASSETS 7,752,799 5,820,075 (8,360,447) $5,212,427 1,289,825 2,098,094 248,403 $3,636,322 469,688 $469,688 Annual Financial Report FY 2008 21 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Valdosta State Univers ity Foundation, Inc. Component Units VSU Auxiliary Services Real Estate Foundation, Inc. Albany State Univers ity Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Pledges Receivable Due From Primary Government Prepaid Items Total Current Assets $2,493,437 12,438 366 95,328 9,216 24,859 2,635,644 $0 166,286 166,286 $7,373 21,676 29,049 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Investments (including real estate) Notes Receivable, net Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 14,000,186 21,132,309 124,923 34,084,765 1,185,332 70,527,515 73,163,159 74,894,200 9,607,301 1,848,556 86,350,057 86,516,343 639,398 5,158,082 2,330,691 35,408,443 1,114,075 44,650,689 44,679,738 LIABILITIES Current Liabilities Accounts Payable Other Liabilities Deposits Held for Other Organizations Due to Primary Government Lease Purchase Obligations (current portion) Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Other Long-Term Liabilities Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 649,866 220,776 111,565 104,848 5,472 1,049,705 787,816 2,930,048 8,008 42,485,736 389,011 6,891 82,485 42,972,131 45,902,179 2,086,627 856,044 2,086,627 84,429,716 84,429,716 86,516,343 225,000 2,222,835 3,303,879 34,706,747 435,025 35,141,772 38,445,651 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unres tricted TOTAL NET ASSETS 5,531,367 19,171,160 662,857 1,842,993 52,603 $27,260,980 1,920,341 (1,920,341) $0 (417,409) 2,451,152 4,200,344 $6,234,087 Annual Financial Report FY 2008 22 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Arms trong Atlantic State Univers ity Foundation, Inc. Component Units AASU Educational Properties Foundation, Inc. Augusta State Univers ity Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Net Investment in Capital Leases Pledges Receivable Contributions Receivable Prepaid Items Notes and Mortgages Receivable Total Current Assets $1,130,892 17,288 57,399 1,205,579 $617,310 37,077 3,032 657,419 $2,036,618 987,332 154,647 277,643 2,077,276 426,000 5,959,516 Noncurrent Assets Noncurrent Cash Investments (including real estate) Notes Receivable, net Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 6,581,648 6,581,648 7,787,227 5,210,909 33,768,769 1,433,588 40,413,266 41,070,685 4,849,252 16,059,124 1,118,695 31,896,704 1,228,622 840,722 55,993,119 61,952,635 LIABILITIES Current Liabilities Accounts Payable Dep os its Deferred Revenue Due to Primary Government Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Revenue/Mortgage Bonds payable (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 15,000 15,000 0 15,000 944,935 15,278 328,906 970,000 26,778 2,285,897 40,894,177 564,364 41,458,541 43,744,438 670,572 3,485 1,649 260,000 142,000 1,077,706 30,237,677 1,117,883 31,355,560 32,433,266 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 4,449,936 3,086,659 235,632 $7,772,227 (2,118,040) (555,713) ($2,673,753) 19,418,749 6,723,453 3,377,167 $29,519,369 Annual Financial Report FY 2008 23 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Augusta State Univers ity Athletic As s ociation Component Units (Clayton State Univers i ty) Walter & Emilie Spivey Foundation Clayton State Univers ity Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Pledges Receivable Prepaid Items Total Current Assets Noncurrent Assets Noncurrent Cash Investments (including real estate) Notes Receivable, net Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue Lease Purchase Obligations (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Revenue/Mortgage Bonds payable (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 Unres tricted TOTAL NET ASSETS $353,192 7,693 4,245 365,130 1,791,647 1,791,647 2,156,777 211,547 8,772 18,257 18,249 435,918 692,743 21,862 1,121,187 1,143,049 1,835,792 194,431 50,799 75,755 $320,985 $117,729 117,729 7,596,971 15,405 144,497 7,756,873 7,874,602 0 0 0 144,497 7,730,105 $7,874,602 $507,540 178,574 57,928 1,714 745,756 14,337,790 4,548,572 27,638,585 2,221,453 48,746,400 49,492,156 129,085 1,521,940 1,651,025 42,650,230 42,650,230 44,301,255 1,527,889 1,727,627 3,404,990 (1,469,605) $5,190,901 Annual Financial Report FY 2008 24 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Columbus State Univers ity Foundation, Inc. Component Units (Columbus State Univers ity) Foundation Properties, Inc. Columbus State Univers ity Athletic Fund, Inc. ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, net Receivables - Other Due from Component Units Pledges Receivable Due From Primary Government Inventories Prepaid Items Other Assets Total Current Assets $0 13,748 761,236 5,285,805 41,571 150,931 6,253,291 $734,833 429,798 56,682 303,250 2,119 1,526,682 $134,959 90,344 100 23,867 2,500 2,130 3,350 257,250 Noncurrent Assets Noncurrent Cash Due from Component Units Investments (including real estate) Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 7,570,603 288,849 35,385,669 9,484,025 52,729,146 58,982,437 1,667,691 4,065,602 2,194,353 120,895,490 1,793,421 130,616,557 132,143,239 314,344 1,380,902 22,327 1,717,573 1,974,823 LIABILITIES Current Liabilities Accounts Payable Dep os its Deferred Revenue Other Liabilities Due to Primary Government 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 Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Other Long-Term Liabilities Due to Component Units Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 485,644 1,021 333,000 279,175 116,317 41,485 1,256,642 1,239,023 303,099 4,065,602 5,607,724 6,864,366 1,883,148 116,187 2,190,878 29,835,936 1,469,916 695,922 3,974,296 40,166,283 74,985,084 242,874 75,227,958 115,394,241 60,206 27,419 243,021 121,996 452,642 288,849 288,849 741,491 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Un res tricted TOTAL NET ASSETS 26,029,589 22,317,198 3,771,284 $52,118,071 46,839,128 (30,090,130) $16,748,998 1,338,572 394,094 (499,334) $1,233,332 Annual Financial Report FY 2008 25 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Columbus State University Alumni Association, Inc. Component Units Fort Valley State Univers ity Foundation, Inc. Georgia College & State University Alumni Association, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net Receivables - Other Due from Component Units Net Investment in Capital Leases Pledges Receivable Contributions Receivable Inventories Prepaid Items Notes and Mortgages Receivable Total Current Assets $45,475 8,484 564 41,385 595 96,503 $1,159,103 892,193 1,825,855 66,551 169,733 4,113,435 $282,185 50 8,111 1,748 292,094 Noncurrent Assets Noncurrent Cash Investments (including real estate) Notes Receivable, net Net Investment in Capital Leases Contributions Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 47,582 132,219 2,484 182,285 278,788 21,520,371 4,670,143 388,375 34,241,535 168,979 3,299,063 2,048,243 66,336,709 70,450,144 5,554,822 82,013 4,500 5,641,335 5,933,429 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Due to Primary Government Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 7,320 654 7,974 4,940 4,940 12,914 193,591 924,664 46,212 70,000 181,876 1,416,343 61,420,930 1,360,374 62,781,304 64,197,647 679 23,803 24,482 0 24,482 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 2,484 64,723 198,667 $265,874 1,269,043 3,051,293 2,503,744 (571,583) $6,252,497 82,013 4,301,680 1,496,038 29,216 $5,908,947 Annual Financial Report FY 2008 26 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia College & State Univers ity Foundation, Inc. Component Units Georgia S outhwes tern Foundation, Inc. Kennesaw State Univers ity Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Other Net Investment in Capital Leases Pledges Receivable Due From Primary Government Prepaid Items Other Assets Total Current Assets $1,640,970 23,950 2,883,001 277,968 107,582 12,765 4,946,236 $1,438,141 2,045,953 3,795 338,380 3,826,269 $2,612,444 661,227 6,019,575 777,528 217,288 958,831 270,430 11,517,323 Noncurrent Assets Noncurrent Cash Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS 14,680,313 14,799,068 75,741,290 6,095,260 2,349,799 113,665,730 118,611,966 2,547,016 22,577,517 253,658 21,579,342 737,764 47,695,297 51,521,566 51,218,068 25,506,264 99,666,222 1,437,637 153,939,088 8,953,066 340,720,345 352,237,668 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Depo s its Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Revenue/Mortgage Bonds payable (current) Liabilities under Split-Interest Agreements (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 1,874,866 6,615,540 10,808 455,000 8,956,214 108,731,177 40,910 2,666,282 111,438,369 120,394,583 106,176 17,370 13,967 65,000 202,513 26,914,894 26,914,894 27,117,407 7,262,970 5,311,626 62,686 4,838,910 548,548 1,094,179 4,400,000 20,012 561,294 24,100,225 41,821,741 265,999,213 183,860 308,004,814 332,105,039 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS (10,150,484) 10,244,861 2,671,542 (4,548,536) ($1,782,617) (2,196,027) 10,003,178 4,420,620 12,176,388 $24,404,159 2,886,803 17,675,053 6,041,295 (6,470,522) $20,132,629 Annual Financial Report FY 2008 27 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 North Georgia College & State Univers ity Foundation, Inc. Component Units Savannah State Univers ity Foundation, Inc. Southern Polytechnic State Univers ity Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Prepaid Items Total Current Assets $80,328 83,004 312,268 103,755 28,269 607,624 $375,634 157,567 164,012 1,478,371 40,000 152,473 2,368,057 $628,725 1,259,000 92,633 934,818 3,705 2,918,881 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Investments (including real estate) Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 16,430,389 29,168,600 17,456,356 157,035 20,894,497 997,882 85,104,759 85,712,383 8,103,823 27,677,084 40,000 16,672,472 1,186,153 53,679,532 56,047,589 4,227,567 3,831,343 28,621,786 132,280 465,203 37,278,179 40,197,060 LIABILITIES Current Liabilities Accounts Payable Deferred Revenue Other Liabilities Due to Primary Government Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Other Long-Term Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES 3,804,130 765,986 567,064 590,000 338,769 6,065,949 6,977,216 45,995,003 25,212 52,997,431 59,063,380 1,658,494 3,853,970 110,000 5,622,464 49,110,000 49,110,000 54,732,464 479,673 970,000 1,449,673 32,463,128 542,110 33,005,238 34,454,911 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 9,445,969 23,570,370 4,627,000 (10,994,336) $26,649,003 5,897,903 (4,582,778) $1,315,125 2,164,844 1,813,524 1,763,781 $5,742,149 Annual Financial Report FY 2008 28 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 University of West Georgia Foundation, Inc. Component Units UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Net Investment in Capital Leases Pledges Receivable Due From Primary Government Prepaid Items Total Current Assets $2,990,199 5,740,457 75,340 827,991 1,370,930 14,078 11,018,995 $4,093,756 12,819 320,513 4,427,088 $2,548,994 147,713 414,499 857 3,271 3,115,334 Noncurrent Assets Noncurrent Cash Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 17,110,496 31,406,687 1,333,836 6,411,074 1,052,986 57,315,079 68,334,074 29,785,575 17,700 731,653 30,534,928 34,962,016 7,277,248 9,127,123 426,803 40,978,068 2,088,066 59,897,308 63,012,642 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Deferred Revenue Due to Primary Government Revenue/Mortgage Bonds payable (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Deferred Revenue (noncurrent) Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 509,549 220,908 870,000 5,303,552 6,904,009 31,479,438 64,419 1,180,031 32,723,888 39,627,897 584,432 390,000 974,432 2,119,134 30,165,424 32,284,558 33,258,990 817,834 6,135 152,109 925,000 141,908 2,042,986 46,483,517 1,032,081 47,515,598 49,558,584 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 709,656 10,350,061 17,847,544 (201,084) $28,706,177 300,017 1,403,009 $1,703,026 1,806,376 7,511,572 2,285,102 1,851,008 $13,454,058 Annual Financial Report FY 2008 29 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Dalton State College Foundation, Inc. Component Units Gainesville State College Foundation, Inc. Gordon College Foundation, Inc. AS S ETS Current Assets Cash and Cash Equivalents Accounts Receivable, net Receivables - Other Pledges Receivable Prepaid Items Total Current Assets $1,040,606 12,724 1,687,533 196,141 2,937,004 $0 12,185 31,976 44,161 $242,805 242,805 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Investments (including real estate) Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 14,556,340 9,947,051 4,802,630 30,217 29,336,238 32,273,242 1,138,598 11,488,191 228,377 8,400 12,863,566 12,907,727 13,816,183 5,505,394 2,753,609 20,620,191 1,213,922 43,909,299 44,152,104 LIABILITIES Current Liabilities Accounts Payable Depo s its Due to Primary Government Revenue/Mortgage Bonds payable (current) Liabilities under Split-Interest Agreements (current) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Revenue/Mortgage Bonds payable (noncurrent) Liabilities under Split Interest Agreements Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 60,423 17,012 8,533 17,190 50,833 153,991 146,411 2,326,395 2,472,806 2,626,797 86,440 86,440 0 86,440 319,355 415,000 7,987 193,642 935,984 33,815,190 41,688 1,853,300 35,710,178 36,646,162 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 2,425,402 9,339,531 2,194,325 15,687,187 $29,646,445 8,400 3,385,860 7,720,098 1,706,929 $12,821,287 (1,665,988) 1,971,598 204,398 6,995,934 $7,505,942 Annual Financial Report FY 2008 30 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Macon State College Foundation, Inc. Component Units Middle Georgia College Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Pledges Receivable Total Current Assets $496,453 2,159 106,198 604,810 $210,580 300,000 16,150 526,730 Noncurrent Assets Noncurrent Cash Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 285,734 7,124,443 81,774 32,054 7,524,005 8,128,815 32,337,408 857,518 26,258,632 9,548,829 1,829,318 70,831,705 71,358,435 LIABILITIES Current Liabilities Accounts Payable Due to Primary Government Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Revenue/Mortgage Bonds payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES 121,097 226,061 347,158 0 347,158 3,381,700 20,420 3,402,120 63,190,000 63,190,000 66,592,120 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 6,294,127 915,221 572,309 $7,781,657 6,784,187 799,955 569,042 (3,386,869) $4,766,315 Bainbridge College Foundation $123,671 109,733 233,404 0 233,404 44,231 44,231 0 44,231 109,733 79,440 $189,173 Annual Financial Report FY 2008 31 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Coastal Georgia Community College Foundation, Inc. Component Units Darton College Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Short-term Inves tments Accounts Receivable, net Receivables - Other Pledges Receivable Contributions Receivable Prepaid Items Total Current Assets $1,295,625 7,487,181 177,585 8,960,391 $269,459 250,031 18,506 168,579 491 707,066 Noncurrent Assets Short-Term Inves tments (noncurrent portion) Investments (including real estate) Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 0 8,960,391 136,982 990,096 61,988 796,010 1,985,076 2,692,142 LIABILITIES Current Liabilities Due to Primary Government Total Current Liabilities Noncurrent Liabilities Total Noncurrent Liabilities TOTAL LIABILITIES 0 0 0 0 0 0 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unres tricted TOTAL NET ASSETS 4,284,665 1,396,360 894,819 2,384,547 $8,960,391 796,010 991,802 610,669 230,667 62,994 $2,692,142 East Georgia College Foundation, Inc. $129,725 727 28,150 158,602 943,936 175,965 123,957 1,243,858 1,402,460 1,688 1,688 0 1,688 175,965 1,059,658 165,149 $1,400,772 Annual Financial Report FY 2008 32 Statement of Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Georgia Highlands College Foundation, Inc. Component Units Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycros s College Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, net Receivables - Other Net Investment in Capital Leases Pledges Receivable Prepaid Items Total Current Assets $651,614 5,155 656,769 $189,285 7,991 197,276 $75,072 195,020 328,577 598,669 $118,587 480 498 210 119,775 Noncurrent Assets Noncurrent Cash Short-Term Investments (noncurrent portion) Investments (including real estate) Net Investment in Capital Leases Pledges Receivable Capital Assets, net Other Assets Total Noncurrent Assets TOTAL ASSETS 606,661 731,225 1,337,886 1,994,655 2,737,477 1,318,647 54,438,040 1,913,714 60,407,878 60,605,154 2,803,075 30,500 2,577,068 12,276,966 221,945 17,909,554 18,508,223 14,000 1,389,047 1,403,047 1,522,822 LIABILITIES Current Liabilities Accounts Payable Contracts Payable Due to Primary Government Revenue/Mortgage Bonds payable Total Current Liabilities Noncurrent Liabilities Revenue/Mortgage Bonds payable Total Noncurrent Liabilities TOTAL LIABILITIES 35,911 242,742 278,653 0 278,653 3,512,921 1,539,980 430,000 5,482,901 47,825,000 47,825,000 53,307,901 169,215 50,000 219,215 15,737,708 15,737,708 15,956,923 2,100 210 2,310 0 2,310 NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Unres tricted TOTAL NET ASSETS 1,017,358 699,071 (427) $1,716,002 10,830,231 6,194,182 378,192 (10,105,352) $7,297,253 2,240,852 159,152 151,296 $2,551,300 1,273,635 122,736 124,141 $1,520,512 Annual Financial Report FY 2008 33 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts ) Les s: Scholars hip Allowances Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterpris es Res idence Halls Books tore Food Services Parking/Trans portation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENS ES Operating Expens es Salaries : Faculty Staff Employee Benefits Other Pers onal Services Travel Scholars hips and Fellows hips Utilities Supplies and Other Services Depreciation Total Operating Expens es Operating Income (los s) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Inves tment Income (endowments , auxiliary and other) Interes t Expens e (capital ass ets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses , Gains , Loss es and Special Items Capital Grants and Gifts State Other Special Items Total Other Revenues , Expens es, Gains, Los s es and Special Items Increas e in Net Ass ets NET ASSETS Net As sets -Beginning of Year, as originally reported Prior Year Adjustments Net As sets -Beginning of Year, Res tated Net As sets -End of Year Univers ity Sys tem of Georgia (Primary Government) $1,184,093,147 (249,717,931) 20,772,007 723,038,779 270,019,885 375,688,869 119,229,193 3,410,767 196,006,172 79,362,172 100,575,384 52,479,349 38,641,339 68,461,966 25,542,780 42,337,749 3,049,941,627 1,061,794,577 1,500,414,171 817,966,549 8,198,561 56,060,916 190,512,967 178,290,183 1,299,490,392 276,941,591 5,389,669,907 (2,339,728,280) 2,140,048,441 18,975,101 3,018,613 44,532,235 71,774,059 41,187,570 (87,239,916) (1,650,061) 2,230,646,042 (109,082,238) 168,145,437 66,873,578 (1,200,947) 233,818,068 124,735,830 4,654,688,781 8,912,617 4,663,601,398 $4,788,337,228 Annual Financial Report FY 2008 34 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Federal State Other Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries : Staff Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Georgia Tech Foundation, Inc. Component Units Georgia Tech Athletic As s ociation Georgia Tech Research Corporation $59,881,465 4,879,994 411,395 18,224,413 83,397,267 $7,764,881 32,167,614 9,266,962 49,199,457 $0 301,812,234 16,659,334 62,748,887 7,363,605 2,215 388,586,275 2,208,712 395,506 1,306,176 80,206 32,832 1,708,169 2,070,268 7,050,366 69,285,346 84,137,581 (740,314) 12,901,921 3,004,969 3,602,578 7,008,363 8,987,612 4,732,730 12,389,256 52,627,429 (3,427,972) 138,262 5,174,733 411,744 377,569,043 383,293,782 5,292,493 NONOPERATING REVENUES (EXPENSES) Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts Other 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 (1,921,334) (14,540,537) (10,939,238) (27,401,109) (28,141,423) 34,420,595 34,420,595 6,279,172 1,201,261,985 0 1,201,261,985 $1,207,541,157 1,339,275 498,856 (5,754,551) (3,916,420) (7,344,392) 7,632,330 7,632,330 287,938 79,476,998 0 79,476,998 $79,764,936 1,723,482 (17,066) 1,706,416 6,998,909 80,000 80,000 7,078,909 41,074,544 0 41,074,544 $48,153,453 Annual Financial Report FY 2008 35 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 Georgia Advanced Technology Ventures, Inc. Component Units Georgia Tech Alumni As s ociation Georgia Tech Facilities, Inc. REVENUES Operating Revenues Gifts and Contributions Grants and Contracts State Sales and Services Rents and Royalties Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) $232,299 1,325,606 327,409 12,057,297 33,940 13,976,551 $4,333,393 1,048,977 814,904 37,599 315,893 6,550,766 $0 152,000 11,368,000 1,000 11,521,000 66,792 21,208 1,009,023 6,524,638 2,967,203 9,688 295,569 10,894,121 3,082,430 3,274,435 794,000 360,239 66,722 1,442,920 126,852 735,099 6,800,267 (249,501) 1,544,000 60,000 6,227,000 7,831,000 3,690,000 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 58,774 (7,365,001) (7,306,227) (4,223,797) 0 (249,501) 2,162,000 (15,323,000) (13,161,000) (9,471,000) Loss on Bond Retirement 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 (4,223,797) 17,041,186 0 17,041,186 $12,817,389 0 (249,501) 520,459 0 520,459 $270,958 (3,214,000) (3,214,000) (12,685,000) 6,399,000 0 6,399,000 ($6,286,000) Annual Financial Report FY 2008 36 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Net Patient Service Revenue 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 Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 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 Georgia State Univers ity Foundation, Inc. Component Units Georgia State University Research Foundation, Inc. MCG Health, Inc. $8,123,113 3,703,391 18,919,692 30,746,196 $0 36,183,144 2,710,164 9,820,216 48,713,524 $0 4,633,056 453,495 358,643,151 363,729,702 2,530,602 576,878 1,385,903 550,483 2,405,733 69,361 9,567,410 2,461,587 509,754 20,057,711 10,688,485 (6,359,645) (16,734,039) (23,093,684) (12,405,199) 1,532,421 1,532,421 (10,872,778) 151,487,789 (121,973) 151,365,816 $140,493,038 1,865 1,256,720 171,763 48,315 46,847,040 48,325,703 387,821 (29,628) 489,998 460,370 848,191 0 848,191 18,243,295 0 18,243,295 $19,091,486 167,100,775 47,536,457 35,828,053 667,092 4,485,713 117,743,225 18,063,013 391,424,328 (27,694,626) 33,181,112 1,075,966 7,396,007 369,070 940,780 4,538,270 (1,090,714) (7,231,443) (957,230) 38,221,818 10,527,192 20,000 20,000 10,547,192 236,037,290 0 236,037,290 $246,584,482 Annual Financial Report FY 2008 37 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal Other Sales and Services Rents and Royalties Net Patient Service Revenue Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Component Units Medical College of Georgia Foundation, Inc. Medical College of Georgia PPG Foundation Medical College of Georgia Research Institute, Inc. $4,398,340 $0 4,527 134,773 455,540 (5,351) 692,237 140,789 5,820,855 2,023,836 92,958,031 94,981,867 $0 43,822,274 12,368,513 70,101 394,674 56,655,562 584,799 182,934 296,938 122,706 7,679,522 8,866,899 (3,046,044) 9,658,072 11,794,636 1,301,586 214,760 55,856 8,640,655 658,624 3,564,981 51,765,783 87,654,953 7,326,914 3,408,888 5,735 53,226,334 56,640,957 14,605 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses (3,776,349) 187,154 (3,589,195) (6,635,239) 636,822 (1,399,486) (762,664) 6,564,250 245,384 245,384 259,989 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 1,865,948 1,865,948 (4,769,291) 149,948,060 0 149,948,060 $145,178,769 0 6,564,250 60,747,838 0 60,747,838 $67,312,088 0 259,989 5,777,190 0 5,777,190 $6,037,179 Annual Financial Report FY 2008 38 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 Component Units Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Association, Inc. REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Other Sales and Services Rents and Royalties Auxiliary Enterprises Intercollegiate Athletics Clinical and Patient Fees Total Operating Revenues EXPENSES Operating Expenses Salaries : Staff Employee Benefits Other Personal Services Travel Utilities Supplies and Other Services Depreciation Payments to Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) $0 246,732 $11,842,554 9,945,379 3,511,796 1,326,840 7,284,461 7,531,193 26,626,569 $0 81,059,333 81,059,333 1,381,170 87,208 7,450 38,551 3,959,137 1,909,672 7,383,188 148,005 262,890 13,850 506,617 82,233 2,661,802 371,372 1,529,051 22,252,188 27,680,003 (1,053,434) 6,111,168 256,995 610,910 6,378,721 13,822,929 5,570,426 1,784,216 29,766,110 64,301,475 16,757,858 NONOPERATING REVENUES (EXPENSES) Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses Additions to permanent endowments Special Item Transfers 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 22,645 22,645 170,650 0 170,650 190,379 0 190,379 $361,029 (37,424,044) (1,144,009) (389,132) (38,957,185) (40,010,619) 9,329,003 (6,638,835) 2,690,168 (37,320,451) 658,307,484 0 658,307,484 $620,987,033 124,777 1,518,393 (3,581,552) (25,614) (1,963,996) 14,793,862 0 14,793,862 139,409,170 0 139,409,170 $154,203,032 Annual Financial Report FY 2008 39 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Travel Supplies and Other Services Depreciation Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Component Units Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. $9,313,811 1,276,531 $0 $3,562,759 1,368,571 2,306,201 12,896,543 115,294,840 29,853 38,357,221 383,240 154,065,154 225,783 210,688 147,941 5,515,742 1,734,004 7,353,573 9,087,577 3,808,966 223,167 52,710 17,359,927 169,481 117,799,198 135,604,483 18,460,671 138,338 1,910,717 1,667 2,544,332 4,595,054 920,688 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses (1,516,223) (1,516,223) 2,292,743 2,167,253 (8,344,937) (3,357,891) (9,535,575) 8,925,096 (3,347,804) (3,347,804) (2,427,116) Additions to permanent endowments Special Item Transfers 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 5,223,429 5,223,429 7,516,172 71,522,736 0 71,522,736 $79,038,908 6,638,835 6,638,835 15,563,931 37,576,329 11,774,904 49,351,233 $64,915,164 1,788,418 1,788,418 (638,698) 46,206,774 0 46,206,774 $45,568,076 Annual Financial Report FY 2008 40 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Grants and Contracts Federal State Other Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Other Personal Services Supplies and Other Services Depreciation Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Georgia Southern University Housing Foundation, Inc. Component Units (Georgia Southern University) Southern Boosters, Inc. Georgia Southern University Research and Service Foundation, Inc. $0 $1,744,776 5,697,312 60,000 5,757,312 38,915 505,513 544,428 5,212,884 43,025 176,400 303,962 2,268,163 1,077,402 20,079 909,111 2,006,592 261,571 $0 4,012,695 566,846 377,014 4,956,555 121,129 4,854,603 4,975,732 (19,177) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 553,638 (5,103,067) 80,468 (4,468,961) 743,923 69,607 (38,949) 30,658 292,229 57,336 57,336 38,159 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 0 743,923 4,468,504 0 4,468,504 $5,212,427 0 292,229 3,344,093 0 3,344,093 $3,636,322 0 38,159 382,329 49,200 431,529 $469,688 Annual Financial Report FY 2008 41 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Valdosta State University Foundation, Inc. Component Units VSU Auxiliary Services Real Estate Foundation, Inc. Albany State Univers ity Foundation, Inc. $1,386,487 460,696 3,443,243 410,055 5,700,481 7,818 110,875 141 1,112,144 1,064,941 9,042 1,575,933 3,880,894 1,819,587 $0 $381,400 2,171,848 0 2,553,248 302,470 359,240 978,380 0 1,640,090 0 913,158 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 1,715,709 (2,180,010) (57,994) (522,295) 1,297,292 441,132 (1,822,786) 32,292 0 (1,349,362) 0 (436,204) 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 137,882 137,882 1,435,174 25,825,806 0 25,825,806 $27,260,980 0 0 0 (436,204) 0 7,239,040 0 (568,749) 0 6,670,291 $0 $6,234,087 Annual Financial Report FY 2008 42 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Rents and Royalties Realized/Unrealized Gains (Losses) Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries : Staff Travel Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Armstrong Atlantic State University Foundation, Inc. Component Units AASU Educational Properties Foundation, Inc. Augusta State Univers ity Foundation, Inc. $1,401,062 437,270 1,838,332 $0 4,519,532 23 4,519,555 $869,942 661,071 1,709,197 (2,440,645) 413,298 6,399 1,219,262 351,049 688,261 501,087 1,540,397 297,935 123,047 138 920,733 1,732,892 153,271 2,930,081 1,589,474 902,538 767,507 1,670,045 (450,783) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 107,337 107,337 405,272 231,533 (1,872,158) (1,640,625) (51,151) 246,410 (1,572,790) (1,326,380) (1,777,163) 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 410,189 410,189 815,461 6,956,766 0 6,956,766 $7,772,227 0 (51,151) (2,622,602) 0 (2,622,602) ($2,673,753) 3,425,215 3,425,215 1,648,052 27,871,317 0 27,871,317 $29,519,369 Annual Financial Report FY 2008 43 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries : Staff Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Augusta State Univers ity Athletic As s ociation Component Units (Clayton State Univers ity) Walter & Emilie Spivey Foundation Clayton State Univers ity Foundation, Inc. $25,000 928,460 13,691 50,000 1,017,151 $0 $895,778 89,240 0 985,018 400,417 64,503 359,873 147,735 20,041 992,569 24,582 22,215 425,941 448,156 (448,156) 284,418 214,904 458,366 957,688 27,330 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 8,704 (80,507) (71,803) (47,221) 504,378 504,378 56,222 (230,812) (230,812) (203,482) 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 (47,221) 368,206 0 368,206 $320,985 0 56,222 7,818,380 0 7,818,380 $7,874,602 259,819 259,819 56,337 5,134,564 0 5,134,564 $5,190,901 Annual Financial Report FY 2008 44 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to Other Component Units Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Columbus State University Foundation, Inc. Component Units (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. $4,321,112 2,278,073 244,193 15,154 6,858,532 $1,341,505 6,218,952 344,390 7,904,847 $147,983 237,283 10,800 208 396,274 974,805 116,050 376,475 5,653,497 281,590 983,187 8,385,604 (1,527,072) 414,861 54,839 331,884 1,908,963 2,327,808 199,137 482,076 5,719,568 2,185,279 217,133 910,845 343,944 1,471,922 (1,075,648) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 1,139,414 1,139,414 (387,658) 462,105 (3,278,762) (2,816,657) (631,378) 207,051 207,051 (868,597) 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 516,830 516,830 129,172 51,988,899 0 51,988,899 $52,118,071 0 (631,378) 17,380,376 0 17,380,376 $16,748,998 3,200 3,200 (865,397) 2,098,729 0 2,098,729 $1,233,332 Annual Financial Report FY 2008 45 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Realized/Unrealized Gains (Losses) Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Travel 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) Columbus State Univers ity Alumni Association, Inc. Component Units Fort Valley State University Foundation, Inc. Georgia College & State University Alumni Association, Inc. $88,412 47,503 1,569 137,484 $726,882 997,642 (344,224) 1,380,300 $2,917 246,006 121,717 370,640 33,566 3,714 41,216 660 16,875 11,659 107,690 29,794 534,403 26,607 31,804 896,245 1,489,059 (108,759) 12,169 6,551 116,911 4,851 31,456 199,379 371,317 (677) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts Federal 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 14,311 14,311 44,105 0 44,105 221,769 0 221,769 $265,874 783,616 (1,855,821) (1,072,205) (1,180,964) 118,451 478,458 596,909 (584,055) 6,836,552 0 6,836,552 $6,252,497 (359,591) (359,591) (360,268) 93,313 93,313 (266,955) 6,175,902 0 6,175,902 $5,908,947 Annual Financial Report FY 2008 46 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: 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 College/University Total Operating Expenses Operating Income (loss) Georgia College & State University Foundation, Inc. Component Units Georgia Southwestern Foundation, Inc. Kennesaw State University Foundation, Inc. $2,306,569 474,632 358,593 3,273,169 1,014,801 7,427,764 $563,700 1,221,333 (283,264) 1,501,769 $3,538,262 125,902 97,000 19,647,185 23,408,349 163,977 363,403 323,725 473,697 89,333 1,122,874 92,044 217,464 2,846,517 4,581,247 143,353 34,789 16,029 912,269 185,038 1,653,246 2,944,724 (1,442,955) 1,962,795 57,384 1,737,093 4,756,855 3,171,627 4,662,283 16,348,037 7,060,312 NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses (457,390) (11,285,175) (11,742,565) (7,161,318) (837,958) (1,279,254) (1,372,980) (3,490,192) (4,933,147) (8,604,837) (8,604,837) (1,544,525) 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 1,333,260 1,333,260 (5,828,058) 5,871,742 (1,826,301) 4,045,441 ($1,782,617) 1,345,679 1,345,679 (3,587,468) 27,991,627 0 27,991,627 $24,404,159 3,052,369 3,052,369 1,507,844 18,624,785 0 18,624,785 $20,132,629 Annual Financial Report FY 2008 47 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 North Georgia College & State University Foundation, Inc. Component Units Savannah State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 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 $1,269,644 30,037 2,238,172 1,376 229,452 3,768,681 65,200 103,872 76,537 1,873 914,403 27,000 1,414,745 2,603,630 1,165,051 (1,435,612) (1,593,366) (3,028,978) (1,863,927) 1,420,570 1,420,570 (443,357) 27,092,360 0 27,092,360 $26,649,003 $9,497 1,040,139 24,134 1,073,770 19,260 1,161,759 124,662 23,588 1,329,269 (255,499) 41,940 (4,866,536) 6,112,593 1,287,997 1,032,498 0 1,032,498 282,627 0 282,627 $1,315,125 $2,416,028 82,176 2,837,478 5,335,682 311,850 53,645 176,754 1,690,722 210,072 1,088,250 3,531,293 1,804,389 128,742 (1,608,244) (1,479,502) 324,887 99,294 99,294 424,181 5,317,968 0 5,317,968 $5,742,149 Annual Financial Report FY 2008 48 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 University of West Georgia Foundation, Inc. Component Units UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Rents and Royalties Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Other Personal Services Travel Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 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 $3,554,729 810,951 523,522 1,702,410 475,091 7,066,703 508,572 131,396 5,129 844,755 94,653 1,727,291 3,311,796 3,754,907 457,931 (1,791,389) (1,333,458) 2,421,449 198,726 198,726 2,620,175 26,086,002 0 26,086,002 $28,706,177 $0 90,000 1,536,510 1,626,510 133,328 71,000 204,328 1,422,182 30,963 (1,416,336) (1,385,373) 36,809 0 36,809 1,666,217 0 1,666,217 $1,703,026 $1,795,479 5,570,187 7,365,666 78,778 20,875 2,586,214 1,999,461 384,327 5,069,655 2,296,011 434,123 (1,945,156) (1,511,033) 784,978 311,805 311,805 1,096,783 12,357,275 0 12,357,275 $13,454,058 Annual Financial Report FY 2008 49 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 Dalton State College Foundation, Inc. Component Units Gaines ville State College Foundation, Inc. Gordon College Foundation, Inc. REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Rents and Royalties Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Employee Benefits Other Personal Services Travel Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 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 $3,810,468 124,629 759,484 4,694,581 133,486 13,896 73,332 130 72,947 379,630 82,100 5,218 663,627 1,424,366 3,270,215 (504,958) (135,378) (640,336) 2,629,879 1,788,685 1,788,685 4,418,564 25,227,881 0 25,227,881 $29,646,445 $707,599 344,624 105,744 1,157,967 241,200 777,645 1,018,845 139,122 369,371 369,371 508,493 136,641 136,641 645,134 12,176,153 0 12,176,153 $12,821,287 $117,371 1,068,468 1,185,839 5,995 47,257 374,499 58,263 37,409 523,423 662,416 1,122,675 (733,346) 389,329 1,051,745 119,329 119,329 1,171,074 6,334,868 0 6,334,868 $7,505,942 Annual Financial Report FY 2008 50 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 Component Units Macon State College Foundation, Inc. Middle Georgia College Foundation, Inc. Bainbridge College Foundation REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Other Sales and Services Rents and Royalties Total Operating Revenues EXPENSES Operating Expenses Supplies and Other Services Depreciation Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses Additions to permanent endowments Special Item Transfers 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 $498,331 1,750 500,081 86,151 567,728 653,879 (153,798) (537,834) (3,177) (541,011) (694,809) 68,736 68,736 (626,073) 8,407,730 0 8,407,730 $7,781,657 $117,772 62,100 13,057 1,385,548 1,578,477 138,068 51,975 45,909 235,952 1,342,525 (20,430) (1,289,548) 3,357,132 2,047,154 3,389,679 1,907 1,012,369 1,014,276 4,403,955 362,360 0 362,360 $4,766,315 $20,229 20,229 7,147 12,180 19,327 902 1,086 1,086 1,988 40,000 40,000 41,988 147,185 0 147,185 $189,173 Annual Financial Report FY 2008 51 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 Coastal Georgia Community College Foundation, Inc. Component Units Darton College Foundation, Inc. East Georgia College Foundation, Inc. REVENUES Operating Revenues Gifts and Contributions Endowment Income (per spending plan) Sales and Services Rents and Royalties Total Operating Revenues EXPENSES Operating Expenses Other Personal Services Scholarships and Fellowships Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains, or Losses 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 $701,628 287,988 989,616 19,247 47,801 18,139 733,315 818,502 171,114 169,341 169,341 340,455 0 340,455 8,619,936 0 8,619,936 $8,960,391 $314,577 28,600 343,177 222,338 3,757 152,430 378,525 (35,348) (42,728) (42,728) (78,076) 0 (78,076) 2,770,218 0 2,770,218 $2,692,142 $252,896 10,720 263,616 200 96,943 40,969 138,112 125,504 (71,162) (71,162) 54,342 0 54,342 1,346,430 0 1,346,430 $1,400,772 Annual Financial Report FY 2008 52 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Year Ended June 30, 2008 REVENUES Operating Revenues Gifts and Contributions Sales and Services Rents and Royalties Interest and Dividend Income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Staff Travel Scholarships and Fellowships Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of College/University Total Operating Expenses Operating Income (loss) Georgia Highlands College Foundation, Inc. Component Units Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. $469,460 30,800 500,260 $950,405 950,405 $105,430 330,746 89,182 525,358 $34,924 30,320 65,244 265,775 5,100 174,748 9,100 125,525 580,248 (79,988) 517,420 377,607 49,782 247,093 1,191,902 (241,497) 44,222 189,067 233,289 292,069 41,630 6,144 18,629 66,403 (1,159) NONOPERATING REVENUES (EXPENSES) Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Net Nonoperating Revenues Income before Other Revenues, Expenses, Gains/(Losses) (55,238) (55,238) (135,226) 400,199 (520,959) (120,760) (362,257) (87,257) (669,740) (756,997) (464,928) (132,689) (132,689) (133,848) 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 546,314 546,314 411,088 1,304,914 0 1,304,914 $1,716,002 36,983 36,983 (325,274) 4,941,202 2,681,325 7,622,527 $7,297,253 9,874 9,874 (455,054) 3,006,354 0 3,006,354 $2,551,300 10,529 10,529 (123,319) 1,643,831 0 1,643,831 $1,520,512 Annual Financial Report FY 2008 53 Statement of Cash Flows UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 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 Books tore Food Services Parking/Trans portation 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 Special Item Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Capital Debt Proceeds from s ale of Capital As s ets 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 Annual Financial Report FY 2008 54 June 30, 2008 $943,666,366 19,503,243 1,368,749,830 119,424,623 (2,171,659,388) (2,556,995,520) (192,103,139) (16,758,478) 14,874,390 198,636,541 79,499,030 102,203,935 53,523,865 38,653,775 69,025,274 25,655,194 (7,743,325) (1,911,843,784) 2,140,048,441 24,265,628 142,368,295 (414,435) (197,915) 8,314,053 424,769 2,314,808,836 149,128,804 217,000 6,303,432 (418,433,108) (53,535,370) (82,119,875) (398,439,117) 24,304,020 49,968,281 (39,358,959) 34,913,342 39,439,277 725,211,273 $764,650,550 Statement of Cash Flows, Continued UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net OPEB Obligation Net Cash Provided (used) by Operating Activities June 30, 2008 ($2,339,728,280) 276,941,591 (53,796,299) (2,501,611) 520,002 (472,539) (2,038,882) 21,231,721 27,387,025 (6,439,994) 8,812,474 158,241,008 ($1,911,843,784) ** 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 fair value of investments recognized as a component of interest income Special Items Change in accrued interest payable affecting interest paid Interest on capital debt paid by State Agency on behalf of University Gift reducing proceeds of Gifts and Grants received for other than capital purposes Gift of capital assets reducing proceeds of capital grants and gifts Loss on disposal of buildings not fully depreciated Cancellation of capital lease obligation $557,381,720 $899,497 ($8,780,710) ($1,625,716) ($4,203,416) $320,865 ($101,317) ($76,597,948) $3,968,154 ($157,093) Annual Financial Report FY 2008 55 Statement of Fiduciary Net Assets STATEMENT OF FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND June 30, 2008 ASSETS June 30, 2008 Cash and Cash Equivalents Receivables Employer Total Receivables $4,374,041 2,618,873 2,618,873 Investments, at fair value TOTAL ASSETS 0 6,992,914 LIABILITIES Benefits payable TOTAL LIABILITIES 6,702,660 6,702,660 NET ASSETS Net assets held in trust for other postemployment benefits TOTAL NET ASSETS 290,254 $290,254 Annual Financial Report FY 2008 56 Statement of Changes in Fiduciary Net Assets STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND for the Year Ended June 30, 2008 ADDITIONS Contributions Employer Plan member Total Contributions Investment Income Interest/dividends Less: Investment expense Net Investment Income Total Additions DEDUCTIONS Benefits Life Insurance Premium Expense Administrative expense Total Deductions NET INCREASE/(DECREASE) NET ASSETS HELD IN TRUST FOR OTHER POSTEMPLOYMENT BENEFITS Beginning of year End of year June 30, 2008 $66,717,298 21,091,336 87,808,634 19,245 19,245 0 19,245 87,827,879 79,995,991 4,096,012 3,445,622 87,537,625 290,254 0 $290,254 Annual Financial Report FY 2008 57 UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 University System Office also is the custodian of a newly created Fiduciary Fund for retiree health and life insurance benefits. The accompanying financial statements reflect the operations of the University System Office as a separate reporting entity and as custodian of the Board of Regents Retiree Health Benefit Fund. 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 58 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 Annual Financial Report FY 2008 58 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University System was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been 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. As a result of creating the Board of Regents Retiree Health Benefit Fund, the Board of Regents implemented the provisions of GASB Statement Nos. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions in fiscal 2008. The financial statements for the plan are presented directly after the University System of Georgia Enterprise Fund financial statements and include a Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. See Note 14 - Post Employment Benefits Other Than Pension Benefits for additional information regarding this fund. 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, most institutions of the University System of Georgia 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 and fiduciary 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. Annual Financial Report FY 2008 59 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. 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 Annual Financial Report FY 2008 60 University System of Georgia when complete. For the year ended June 30, 2008, GSFIC transferred capital additions valued at approximately $18,600,000 to the University System of Georgia. This includes projects completed during fiscal 2008 and additional expenditures for projects completed in prior years. This resulted in a cumulative total of capital additions transferred by GSFIC to the University System of approximately $2,454,900,000 as of June 30, 2008. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University System residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. 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 $158,694,786 as of July 1, 2006. For fiscal 2008, $113,791,374 was earned in compensated absences and employees were paid $104,899,283 for a net increase of $8,892,091. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $167,586,877. 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 Annual Financial Report FY 2008 61 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. Expendable Restricted Net Assets include the following: June 30, 2008 Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Total Restricted Expendable $126,618,553 44,588,433 22,027,604 4,909,828 20,930,105 $219,074,523 Restricted net assets expendable Capital Projects: This represents resources for which the University System is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets include the following items which are quasi-restricted by management: June 30, 2008 R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets $94,811,999 227,534,708 3,227,067 (82,397,119) $243,176,655 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. Annual Financial Report FY 2008 62 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: 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 $4,030,220 allowances. Annual Financial Report FY 2008 63 Special Items Special Items reported in fiscal 2008: Special Items: Georgia Institute of Technology - Capital Asset Transfer Georgia State University - Capital Asset Transfer Georgia State University - Bond Defeasance Georgia Middle College - Georgia Aviation Technical College Transfer Bainbridge College - Capital Asset Transfer University System Office - Note Receivable Transfer University System Office - Authority Dissolution Total $7,916,649 (7,916,649) (24,710,494) 17,399,426 3,396,716 2,288,636 424,769 ($1,200,947) Georgia Institute of Technology Georgia State University, a University System of Georgia institution, transferred its University Village Student Housing Complex to Georgia Institute of Technology effective July 1, 2007. The complex contains approximately 2,000 student housing beds, 790 parking spaces, and site amenities and was renamed the North Avenue Apartments by the Institute. Georgia Institute of Technology provided consideration for the complex totaling $45,455,494. The net book value of the capital asset transfer to Georgia Institute of Technology at July 1, 2007 was $53,372,143. The difference of $7,916,649 is reported as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Georgia State University Georgia State University transferred its University Village Student Housing Complex to Georgia Institute of Technology, a University System of Georgia institution, effective July 1, 2007. The complex contained approximately 2,000 student housing beds, 790 parking spaces, and site amenities. Georgia Institute of Technology provided consideration for the complex totaling $45,455,494. The net book value of the capital asset transfer to Georgia Institute of Technology at July 1, 2007 was $53,372,143. The difference of ($7,916,649) is reported as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. As a result of the capital asset transfer, Georgia State University was required to defease the associated bonds that were issued by GSFIC to construct the housing complex. To accomplish this requirement, a portion of the consideration reflected above was paid directly to GSFIC at the time of the asset transfer in the amount of $24,710,494. The bond defeasance is reported as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Georgia Middle College As of July 1, 2007, Georgia Aviation Technical College (GAVTC) merged with Middle Georgia College. It is now the Georgia Aviation campus of Middle Georgia College. As a result of this Annual Financial Report FY 2008 64 merger, GAVTC assets and liabilities as of July 1, 2007 transferred to Middle Georgia College. The net transfer of $17,399,426 is reported as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Bainbridge College Bainbridge College absorbed the Early County Site of the Albany Technical College during fiscal year 2007. Per the transfer agreement, the Equipment assets for the Early County Campus were transferred in fiscal 2007 and the Land and Building assets were transferred to Bainbridge College as of July 1, 2007. The Land was transferred at its historical cost of $351,362 and the Building was transferred at its historical cost of $3,704,000 with an accumulated depreciation balance of $658,646 as of July 1, 2007. The net transfer to Bainbridge College was $3,396,716 in fiscal 2008. This amount is reported as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. University System Office Georgia Education Authority (University), (GEA(U)), an entity outside of the Board of Regents of the University System of Georgia reporting entity, is authorized to acquire, construct and operate housing accommodations for students of any institution under the control of the Board of Regents. In July 2007, GEA(U) met and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities. As a result of that decision, a Note Receivable that is payable from Georgia Southern University was transferred by Resolution from GEA(U) to the University System Office (USO) in the amount of $2,288,636. This amount is reported as a Note Receivable in the Statement of Net Assets and as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Payments on the note receivable will be made by Georgia Southern University to the USO according to the original amortization schedule, which matures in 2025. After funding a start-up amount to the Georgia Higher Education Facilities Authority, the balance of GEA(U)'s remaining assets were transferred to the USO in the form of a payment of $424,769. This amount is reported as Cash and Cash Equivalents in the Statement of Net Assets and as a Special Item on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Annual Financial Report FY 2008 65 Restatement of Prior Year Balances The following institutions had restatements of prior year balances in fiscal 2008: Prior Year Adjustments: Effect on Beginning Net Assets Georgia Institute of Technology Georgia State University Armstrong Atlantic State University Georgia College & State University Georgia Highlands College South Georgia College $8,552,401 (3,394,948) (2,155,734) 1,826,301 2,922,516 1,162,081 Total $8,912,617 Georgia Institute of Technology Georgia Institute of Technology has a restatement of prior year net assets increasing beginning net assets by $8,552,401. During fiscal year 2008, the Institute conducted a comprehensive review of building and infrastructure historical costs and the associated depreciation and accumulated depreciation for these assets. As a result of this review, it was determined that depreciation expense had been overstated in prior years by a net amount of $8,552,401, with buildings being overburdened by $9,540,330 and infrastructure being under burdened by $987,929. Georgia State University Georgia State University has a restatement of prior year net assets decreasing beginning net assets by ($3,394,948). In fiscal 2008, the University determined that the University Lofts rental agreement with the Georgia State University Foundation met the criteria for capital lease treatment. This agreement commenced in fiscal 2005 and was accounted for as an operating lease through fiscal 2007. The lease treatment correction resulted in an increase to Capital Assets, net of $36,353,918, an increase to Lease Purchase Obligations liability of $39,748,866, resulting in a net decrease to Net Assets of ($3,394,948) as of July 1, 2007. Armstrong Atlantic State University Armstrong Atlantic State University has a restatement of prior year net assets decreasing beginning net assets by ($2,155,734). This is due to the reclassification of five leases from operating to capital lease treatment, ($1,861,397); an adjustment in Accumulated Depreciation for Library Collections, ($291,440); a correction to reflect capital improvements and amortization of a Food Service contract, ($8,197) and the cancellation of outstanding checks that were related to prior years, $5,300. Georgia College & State University Georgia College and State University has a restatement of prior year net assets, increasing beginning net assets by $1,826,301. This is due to endowments funds that were transferred from the Georgia College & State University Foundation, Inc. to Georgia College & State University. Annual Financial Report FY 2008 66 Georgia Highlands College Georgia Highlands College has a restatement of prior year net assets, increasing beginning net assets by $2,922,516. This restatement was the result of a comprehensive review of capital asset useful lives and represents a depreciation expense correction on several assets. South Georgia College South Georgia College has a restatement of prior year net assets, increasing beginning net assets by $1,162,081. This is due to an overstatement of depreciation expense in prior years. 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, 2008, the carrying values of deposits were $341,444,805 and the bank balances were $417,669,831. Of the University System's deposits, $413,544,508 were uninsured. Of these uninsured deposits, $101,204,024 were collateralized with securities held by the financial institution's trust department or agent in the University System's name, $250,444,476 were Annual Financial Report FY 2008 67 collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name and $61,896,008 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. The University System's investments as of June 30, 2008 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 Obligation Mutual Bond Fund Fair Value Less Than 1 Year Investment Maturity More Than 1-5 Years 6-10 Years 10 Years $12,322,286 3,133,389 186,322,111 7,285,688 1,053,147 5,000 39,454,085 249,575,706 $300,843 1,259,471 75,064,268 171,777 5,000 $76,801,359 $7,661,253 1,861,705 109,581,922 1,279,026 149,112 36,885,616 $157,418,634 $4,179,346 2,953 1,040,051 830,210 613,059 2,568,469 $9,234,088 $180,844 9,260 635,870 5,004,675 290,976 $6,121,625 Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Real Estate Investment Fund Cash Surrender Value Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool 16,944,365 73,373,195 17,734,274 241,927 4,419,271 8,927 296,846,696 6,382,663 $665,527,024 Annual Financial Report FY 2008 68 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 40 days at June 30, 2008. 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 $2.02 at June 30, 2008. 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, 2008 was .81 years. The University System Office serves as fiscal agent for various units of the University System of Georgia and cooperative organizations. The University System Office pools the monies of these organizations with the University System Office's monies for investment purposes. The University System Office cannot allocate pool investments between the internal (University System) and external (cooperative organizations) investment pool portions. The investment pool is not registered with the SEC as an investment company. The fair value of the investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. The University System 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 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. The Regents' Investment Pool funds are described below. Investment fund balances within the University System (the Primary Government) have been eliminated in this report, with the underlying investment instruments of the pools reported instead. Short Term Fund The Short Term fund provides a current return and stability of principal while affording a means of overnight liquidity for projected cash needs. The investment maturities of the fund will range between daily and two years. Legal Fund The Legal fund provides an opportunity for greater income and modest principal growth to the extent possible with the securities allowed under Georgia Code 50-17-59 and 50-17-63. The average maturity of this fund will typically range between five and ten years, with a maximum of Annual Financial Report FY 2008 69 thirty years for any individual investment. The overall character of the portfolio should be one of treasury and agency quality, possessing virtually no degree of financial risk. Balanced Income Fund The Balanced Income fund is designed to be a vehicle to invest funds that are not subject to the state regulations concerning investing in equities. This fund is comprised of fixed income, equity and cash equivalent instruments. The equity allocation range shall be between 30% and 40%, with a target of 35% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 60% and 70%, with a target of 65% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality, short term instruments. Total Return Fund The Total Return fund is another pool designed to be a vehicle to invest funds that are not subject to state regulations concerning investing in equities. This pool offers the greatest percentage of overall equity exposure, with well over half of the funds typically invested in equities. The equity allocation range shall be between 60% and 70%, with a target of 65% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 30% and 40%, with a target of 35% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality, short term instruments. Diversified Fund The Diversified fund is designed to gain further diversification and increase exposures to assets that have lower correlation to equity and bond markets by utilizing alternative asset classes. In addition, this fund is constructed to build an optimal portfolio where return is increased and risk is reduced. The equity allocation range shall be between 50% and 75% of the portfolio. The fixed income (bond) portion of the portfolio shall be between 20% and 40%. The portfolio may also consist of Hedge Funds, Real Estate and Venture Capital/Private Equity/Post Venture Capital. Hedge Funds The investment approach to this asset class is to use a multi-strategy, multimanager fund of hedge funds. The Board of Regents believes that a fund of fund strategy will provide the best access to a highly diversified pool of hedge fund strategies and managers. Real Estate The Board of Regents' approach to investing in this asset class is to use real estate investment trusts (REITs). REITs are more liquid than owning commercial real estate and diversification can be achieved by purchasing a mutual fund. Venture Capital/Private Equity/Post Venture Capital This asset class is the riskiest and most volatile permitted investment opportunity. This asset should be considered as an additional diversification investment strategy due to the low correlation with stock and bonds. Annual Financial Report FY 2008 70 Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality, institutional money market mutual funds or other high quality, short term instruments. Condensed financial information for the investment pool follows: Regents Investment Pool Statement of Net Assets June 30, 2008 Regents Investment Pool Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2008 Assets Investments $ Accrued Interest/Receivables Net Assets $ 198,521,222 399,525 198,920,747 Distribution of Net Assets External Participant Account Balance $ Internal Participant Account Balance $ 29,373,637 169,547,110 198,920,747 Additions Pool Participant Deposits $ Investment Income Interest Fair Value Decreases Less: Investment Expense Total Additions $ 89,029,662 5,749,548 (8,396,833) (377,394) 86,004,983 Deductions Pool Participant Withdrawals $ (17,191,992) Net Increase $ 68,812,991 Net Assets July 1, 2007 $ 130,107,756 June 30, 2008 $ 198,920,747 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 Board of Regents policy for managing interest rate risk is contained in the investment policy guidelines for the various pooled funds: 1. In the Short Term fund, the average maturity of the fixed income portfolio shall not exceed three years. Annual Financial Report FY 2008 71 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 of Georgia will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System of Georgia'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, 2008, $206,778,512 of the University System of Georgia's applicable investments were uninsured and held by the investment's counterparty in the University System's name, and $15,347,415 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University System's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University System of Georgia'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. Annual Financial Report FY 2008 72 3. The portfolio 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 M unicipal Obligation Mutual Bond Fund Fair Value AAA AA A BAA Unrated $186,322,111 7,285,688 1,053,147 5,000 39,454,085 $4,839,755 5,367,939 1,053,147 5,000 $29,934 672,645 $884,552 $344,494 $181,452,422 16,058 39,454,085 $234,120,031 $11,265,841 $702,579 $884,552 $344,494 $220,922,565 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 of Georgia'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, 2008: Investment: Amount: % of Total: Federal National Mortgage Association Federal Home Loan Mortgage Corporation $127,578,612 19% $ 45,712,964 7% Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The 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. At June 30, 2008, $5,074,371, or less than 1% of total investments, was invested in international equity mutual funds. Annual Financial Report FY 2008 73 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission M argin Allocation Funds Due from Component Units Other Sub Total Less Allowance for Doubtful Accounts Net Accounts Receivable $29,772,482 27,830,037 63,173,734 11,916,046 7,231,443 119,315,672 95,167,960 354,407,374 16,234,777 $338,172,597 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookstore Food Services Physical Plant Other Total $15,467,494 1,726,511 3,130,064 2,637,024 $22,961,093 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, 2008. 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, 2008 the allowance for uncollectible loans was approximately $2,500,000. Annual Financial Report FY 2008 74 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Restated Beg. Bal. July 1, 2007 Special Item Transfer Additions Reductions End. Bal. June 30, 2008 Cap ital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated $191,399,383 31,091,438 189,573,073 412,063,894 $377,356 377,356 $5,191,251 3,178,152 222,865,347 231,234,750 $3,142 727,903 110,178,776 110,909,821 $196,964,848 33,541,687 302,259,644 532,766,179 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equip ment Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated 170,003,510 4,918,050,624 235,436,706 1,012,534,062 666,844,895 628,258,644 1,357,776 7,632,486,217 279,920 21,440,331 4,507,279 26,227,530 53,081,858 366,456,457 10,038,823 117,894,588 264,221,282 33,917,384 110,000 845,720,392 20,581 37,243,651 1,014,101 58,586,194 2,807,845 1,932,408 101,604,780 223,344,707 5,268,703,761 244,461,428 1,076,349,735 928,258,332 660,243,620 1,467,776 8,402,829,359 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equip ment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net 54,622,895 1,419,336,500 80,187,508 719,161,687 54,645,966 471,235,836 444,223 2,799,634,615 279,920 2,810,371 3,008,084 6,098,375 4,832,851,602 20,129,155 5,628,053 124,026,315 6,858,543 77,587,009 35,660,924 27,150,430 30,317 276,941,591 568,778,801 315,994 15,303,578 698,986 48,199,556 681,549 1,896,683 67,096,346 34,508,434 60,214,874 1,530,869,608 86,347,065 751,557,224 89,625,341 496,489,583 474,540 3,015,578,235 5,387,251,124 Capital Assets, net $5,244,915,496 $20,506,511 $800,013,551 $145,418,255 $5,920,017,303 Annual Financial Report FY 2008 75 Note 7. Deferred Revenue Deferred revenue (current) consisted of the following at June 30, 2008: June 30, 2008 Prepaid Tuition and Fees Research Other Deferred Revenue Totals $128,987,131 39,086,356 47,522,061 $215,595,548 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Restated Beg. Bal. July 1, 2007 Additions Reductions End. Bal. June 30, 2008 Leases Lease Obligations Other Liabilities Compensated Absences Net OPEB Obligation US DOE Settlement Notes & Loans Total Total Long Term Obligations $1,287,965,243 158,694,786 0 952,403 2,579,034 162,226,223 $1,450,191,466 $560,398,599 113,791,374 158,241,008 272,032,382 $832,430,981 $53,658,454 104,899,283 206,277 132,530 105,238,090 $158,896,544 $1,794,705,388 167,586,877 158,241,008 746,126 2,446,504 329,020,515 $2,123,725,903 Current Portion $51,234,831 94,032,405 216,830 138,395 94,387,630 $145,622,461 Note 9. Significant Commitments The University System of Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of approximately $96,800,000 as of June 30, 2008. In addition, Clayton State University, North Georgia College & State University, Savannah State University, Georgia Gwinnett College, Gordon College, and Middle Georgia College executed rental agreements for student housing and/or other facilities during fiscal 2008; however, these agreements will not commence until fiscal 2009 or later. The rental agreements are long-term in nature, with annually renewable lease terms. The present value of the minimum lease payments over the life of the rental agreements is approximately $142,800,000. These amounts are not reflected in the accompanying basic financial statements. Annual Financial Report FY 2008 76 Note 10. Lease Obligations The University System of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES The University System of Georgia is obligated under approximately $1,794,700,000 in capital lease liability as of June 30, 2008. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between fiscal 2009 and 2039. Expenditures for fiscal year 2008 were approximately $140,900,000 of which $87,200,000 represented interest. Total principal paid on capital leases was approximately $53,700,000 for the fiscal year ended June 30, 2008. Of the $87,200,000 in interest expenditures, approximately $4,200,000 was added to outstanding principal during fiscal 2008. Interest rates range from 1.64 percent to 15.4 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Land Infrastructure Buildings Facilities Equipment Total Assets Held Under Capital Lease $14,460,922 47,145,853 1,699,344,019 399,790 47,779,098 $1,809,129,682 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 additions during fiscal 2008 are listed below: Georgia Institute of Technology In July 2007, Georgia Institute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named "North Avenue Apartments", including an adjoining parking deck. The lease term is for 25 years and expires in June, 2032. At June 30, 2008 the remaining long-term debt obligation under the lease was $76,720,452. In January 2008, Georgia Institute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for an Electrical Sub Station. The lease term is for 30 years and expires in December 2037. At June 30, 2008 the remaining longterm debt obligation under the lease was $39,485,146. Georgia State University In August 2007, Georgia State University entered into a capital lease valued at $161,330,000 for a new dormitory complex with an effective interest rate of 5.50% with the Georgia State Annual Financial Report FY 2008 77 University Foundation. The University leases the University Commons for a 30 year period. The outstanding principal liability at June 30, 2008 was $158,596,107. Columbus State University During fiscal 2008, Columbus State University entered into a capital lease of $50,706,749 whereby the University leases student housing for one year with the option to renew on a yearto-year basis for twenty-five consecutive one-year periods expiring on June 30, 2031. At the expiration of the lease, ownership transfers to the University. The outstanding liability at June 30, 2008 on this capital lease was $49,233,849. Fort Valley State University In August 2007, Fort Valley State University entered into a capital lease of $43,334,897 at 4.544 percent with the Fort Valley State University Foundation Properties, LLC whereby the University leases a building for a thirty year period that began August 2007 and expires July 2037. The outstanding liability at June 30, 2008 on this capital lease was $44,075,713. Savannah State University In February 2008, Savannah State University entered into a capital lease of $29,229,205 at 4.486 percent with the LLC, which is included in the discrete presentation of Savannah State University Foundation, Inc. The University leases a 660-bed housing facility, University Village, for a twenty-five year period that began February 2008 and expires June 2032. The outstanding liability at June 30, 2008 on this capital lease was $29,155,455. Abraham Baldwin Agricultural College In July 2007, Abraham Baldwin Agricultural College recorded a capital lease of $33,247,420 at 4.459 percent with First ABAC, LLC, which is included in the discrete presentation of Abraham Baldwin Agricultural College Foundation, Inc., whereby the College leases a building for a twenty-three year period that expires August 2029. In August 2007, the College entered into a capital lease of $18,935,452 at 4.641 percent with Second ABAC, LLC, which is included in the discrete presentation of Abraham Baldwin Agricultural College Foundation, Inc., whereby the College leases a building for a thirty-year period that expires July 2037. The outstanding liability at June 30, 2008 on these capital leases was $32,300,945 and $19,249,229, respectively. 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 2009 through 2033. 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 2008 was approximately $29,500,000. System-wide future operating lease commitments total approximately $107,900,000. Annual Financial Report FY 2008 78 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, 2008, are as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 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 31-35 Total Capital Leases $142,645,254 142,603,769 139,570,172 134,390,772 133,716,445 672,721,495 673,720,701 630,477,989 474,056,962 163,517,691 12,785,396 3,320,206,646 1,471,490,574 54,010,684 $1,794,705,388 Total Operating Leases $29,433,286 11,295,837 10,091,554 8,706,747 7,892,989 13,902,648 12,303,868 10,683,585 3,627,313 $107,937,827 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 2008, 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: Annual Financial Report FY 2008 79 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $122,832,156 $115,443,652 $109,977,005 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. 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, 2008 for employees covered Annual Financial Report FY 2008 80 by ERS was $5,732,353. The University System of Georgia's total payroll for all employees was $2,562,208,748. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $602,995 $485,973 $365,620 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 Annual Financial Report FY 2008 81 year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $66,494,066 (8.13% or 8.15%) and $40,760,869 (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. 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 2008 amounted to $7,125,252 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 Annual Financial Report FY 2008 82 premiums to either of the self-insured healthcare plan options to access benefits coverage. 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. Express Scripts is the administrator of the Board of Regents' prescription drug plan. Pharmacy drug claims will be processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Express Scripts for verification, processing and payment. Express Scripts maintains an eligibility file based on information furnished by Blue Cross Blue Shield on behalf of the various organizational units of the University System of Georgia. A reconciliation of total estimated claims liabilities for employees and retirees for the fiscal years ended June 30, 2008 and June 30, 2007 is shown below: Emp loy ees: Unpaid Claims and Claim Adjustments (Prior Year IBNR) 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 Prior Years Unpaid Claims and Claim Adjustments (Current Year IBNR) Retirees: Unpaid Claims and Claim Adjustments (Prior Year IBNR) 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 Prior Years Unpaid Claims and Claim Adjustments (Current Year IBNR) June 30, 2008 $ 27,147,291 June 30, 2007 $ 27,983,473 204,892,976 264,356,511 207,991,411 $ 24,048,856 $ 265,192,693 27,147,291 $ 0$ 0 90,144,273 0 83,441,613 0 $ 6,702,660 $ 0 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 Annual Financial Report FY 2008 83 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 is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University System of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University System of Georgia, if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. Note 14. Post-Employment Benefits Other Than Pension Benefits Plan Description The Board of Regents Retiree Health Benefit Fund (the "Plan") is a single-employer, defined benefit, healthcare plan administered by the University System Office. The plan was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance 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 who 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. Annual Financial Report FY 2008 84 Membership of the plan consisted of the following at June 30, 2008: June 30, 2008 Retirees and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members 18,909 0 33,794 Total 52,703 Summary of Significant Accounting Policies The financial statements of the Plan are prepared using the accrual basis of accounting. Employer contributions are recognized in the period in which they are due. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Funding Policy The contribution requirements of plan members and the University System of Georgia, as employer, are established and may be amended by the Board of Regents. The Plan is substantially funded on a "pay-as-you-go" basis; however, amounts above the pay-as-you-go basis may be contributed annually, either by specific appropriation or by Board designation. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for eligible retirees. The employer portion of health insurance for its eligible retirees is based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2008 plan year, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. 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 retiree. For fiscal year 2008, the University System of Georgia contributed $66,717,298 to the plan, including $66,446,289 for current premiums or claims and an additional $271,009 to pre-fund benefits. Plan members receiving benefits contributed $21,091,336 for current premiums or claims. Annual OPEB Cost and Net OPEB Obligation The University System of Georgia's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. Annual Financial Report FY 2008 85 The following table shows the components of the University System's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the University System's net OPEB obligation to the Retiree Health Benefit Fund (dollar amounts in millions): Annual required contribution Interest on net OP EB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Less: Contributions made Increase in net OP EB obligation Net OP EB obligation - beginning of year Net OP EB obligation - end of year $224.9 0.0 0.0 224.9 (66.7) 158.2 0.0 $158.2 The University System's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2008, which is the transition year for the Retiree Health Benefit Plan, were as follows (dollar amounts in millions): Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB O bliga tion 2008 $224.9 29.7% $158.2 Funded Status and Funding Progress Actuarial Valuation Date 7/1/2007 Actuarial Value of Assets (a) $0 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $1,985,200,000 Unfunded AAL (UAAL) (b-a) $1,985,200,000 Funded Ratio (a/b) 0.0% Covered Payroll (c) $2,201,804,465 UAAL as a Percentage of Covered Payroll ((b-a)/c) 90.2% Note: The allocation and transfer of assets to the plan took place subsequent to the actuarial valuation date. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Annual Financial Report FY 2008 86 Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method Amortization method Asset Valuation method Remaining amortization period Actuarial assumptions: Investment rate of return* Healthcare cost trend rate* Ultimate trend rate Year of Ultimate trend rate *Includes an inflation assumption of 2.5% July 1, 2007 Projected Unit Credit Level Dollar, Closed, 30-year Market Value of Assets 30 years 6.00% 8.50% 5.50% 2012 Annual Financial Report FY 2008 87 Note 15. Natural Classifications with Functional Classifications The University System's operating expenses by functional classification for fiscal 2008 are shown below: Functional Classification FY2008 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Instruction $730,626,574 256,842,845 290,201,517 426,300 15,442,733 9,397,345 7,910,331 68,373,974 49,004,261 Research $244,049,824 233,893,114 124,086,079 45,207 18,963,823 2,896,190 3,285,453 163,584,408 44,410,253 Public Service $63,695,048 133,425,447 63,414,961 444,472 6,334,695 903,075 21,389,548 141,041,340 5,201,793 Academic Support $16,339,188 196,690,781 69,684,686 97,999 5,480,793 167,347 3,567,130 84,764,416 38,479,305 Student Services Institutional Support $1,152,903 116,763,072 37,212,951 128,876 2,809,005 2,728,427 1,822,078 49,121,064 4,546,464 $2,303,225 247,152,259 124,083,485 6,591,706 4,312,922 481,903 8,789,816 314,365,853 28,574,516 Total Expenses $1,428,225,880 $835,214,351 $435,850,379 $415,271,645 $216,284,840 $736,655,685 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Plant Operations & Maintenance $295,148 125,495,429 48,332,153 (9,147,041) 450,208 104,960,360 129,294,769 55,391,409 Scholarships & Fellowships $2,912 44,842 72,942 326,803 158,744,833 125,613 Functional Classification FY2008 Auxiliary Enterprises Unallocated Expenses $1,072,826 116,992,130 36,012,453 9,284,239 1,940,860 15,193,847 26,238,044 240,274,283 50,968,870 $0 (364,720) 364,720 MCG only Patient Care Total Expenses $2,256,929 73,114,252 24,865,322 325,877 327,423 108,909,392 $1,061,794,577 1,500,414,171 817,966,549 8,198,561 56,060,916 190,512,967 178,290,183 1,299,490,392 276,941,591 Total Expenses $455,072,435 $159,317,945 $497,977,552 $0 $209,799,195 $5,389,669,907 Annual Financial Report FY 2008 88 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 is restricted for support of the Institute. Because the resources held by the Foundation are used by, or for the benefit of, the Institute, the Foundation is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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 2008, the Foundation distributed approximately $69.3 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 $1.335 billion as of June 30, 2008, of which $376.96 million is the corpus of the endowment (permanently restricted). The corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with the Foundation's spending policy. The Foundation has established a spending policy in which up to 6% of the twelve (12) quarter average market value of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2008, the Foundation allocated 5% of that average. Investments are comprised of the following amounts at June 30, 2008: Annual Financial Report FY 2008 89 Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities M utual Funds Venture Capital Real Estate Diversify ing Strategies Total Investments Cost $47,287,914 18,657,446 29,808,809 349,557,663 58,430,310 222,785,550 47,451,789 317,668,284 $1,091,647,765 Fair Value $47,287,914 18,802,404 27,639,374 472,381,398 59,020,515 298,147,904 50,417,484 360,986,686 $1,334,683,679 Capital Assets for Component Units: Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery 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 7,530,000 45,581,000 10,466,509 35,114,491 $37,667,491 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance June 30, 2007 Compensated Absences Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities $245,178 10,474,837 63,725,993 211,935,000 0 Additions $197,272 6,391,975 52,202,000 10,939,238 Reductions $178,377 1,818,252 54,391,119 4,540,376 Ending Balance June 30, 2008 $264,073 15,048,560 61,536,874 207,394,624 10,939,238 Amounts due within One Year $264,073 1,953,062 61,536,874 4,825,000 Total Long Term Liabilities $286,381,008 $69,730,485 $60,928,124 $295,183,369 $68,579,009 Annual Financial Report FY 2008 90 Notes and Loans Payable: The Foundation has two $30 million revolving lines of credit. At June 30, 2008, $45.955 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 2.73% at June 30, 2008. Both lines of credit expire on June 30, 2009. The Foundation expects to renew both lines of credit upon expiration. The Foundation also has a $20 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, 2008, $15.582 million was outstanding on the line of credit. Interest is calculated using the 30day LIBOR rate plus 0.25%, which was 2.73% at June 30, 2008. The line of credit expires on June 30, 2009. The Foundation also has available one other line of credit in the amount of $20 million. As of June 30, 2008, no amounts have been drawn on this credit facility. This line of credit expires on June 30, 2009. Annual estimated debt service requirements to maturity for Notes and Loans Payable are as follows: Year Ending June 30: Year 2009 1 Princip al Notes and Loans Payable Interest $61,536,874 $1,680,000 Total $63,216,874 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 4.30% to 5.75% until maturity in November 2030. The outstanding principal on the bonds was $40.845 million at June 30, 2008. 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 4.0% to 6.60% through maturity in November 2031. The outstanding principal on the bonds was $168.04 million at June 30, 2008. Annual debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows: Annual Financial Report FY 2008 91 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 Bond Discount, net Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Princip al $4,825,000 5,060,000 5,310,000 5,600,000 5,915,000 35,170,000 45,085,000 51,900,000 50,020,000 208,885,000 (1,490,376) $207,394,624 Bonds Payable Interest $11,437,491 11,203,637 10,945,586 10,653,001 10,339,689 46,097,954 34,575,148 21,345,317 5,509,682 162,107,505 $162,107,505 Total $16,262,491 16,263,637 16,255,586 16,253,001 16,254,689 81,267,954 79,660,148 73,245,317 55,529,682 370,992,505 (1,490,376) $369,502,129 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 in accordance with the accounting principles generally accepted in the United States as prescribed by the Governmental Accounting Standards Board (GASB). The financial statements are prepared in accordance with Statements of Governmental Accounting Standards (SGAS) No. 35, Basic Financial Statementsand 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 Athletic Association's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Athletic Association distributed approximately $12.4 million to the Institute for athletic scholarship support and other payments that were either expense reimbursements or support for Institute programs. Complete financial statements for the Athletic Association can be obtained from the Georgia Tech Athletic Association, Attention: Mollie Simmons Mayfield, Assistant Director of Athletics, 150 Bobby Dodd Way, NW, Atlanta, GA 30332-0455. Annual Financial Report FY 2008 92 Deposits and Investments for Component Units: Deposits: The Athletic Association does not have a policy that addresses custodial credit risk. As of June 30, 2008, $6,135,596 of the Athletic Association's bank balance of $6,235,596 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 an $80,058,950 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, 2008: Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2007 $49,946 208,675 258,621 Additions $0 0 Reductions $42,946 208,675 251,621 Ending Balance 6/30/2008 $7,000 0 7,000 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equip ment Total Assets Being Depreciated 126,095,186 453,078 5,708,799 132,257,063 1,272,979 542,928 188,466 2,004,373 127,368,165 996,006 5,897,265 0 134,261,436 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equip ment Total Accumulated Depreciation 30,598,005 347,594 3,085,137 34,030,736 4,044,705 83,705 604,320 4,732,730 34,642,710 431,299 3,689,457 0 38,763,466 Total Capital Assets, Being Depreciated, Net 98,226,327 (2,728,357) 0 95,497,970 Capital Assets, net $98,484,948 ($2,728,357) $251,621 $95,504,970 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Annual Financial Report FY 2008 93 Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $1,044,814 963,311 106,018,678 0 $0 3,495,229 $108,026,803 $3,495,229 $1,044,814 27,555 2,037,829 $3,110,198 $0 935,756 103,980,849 3,495,229 $108,411,834 $0 27,978 2,025,000 1,080,357 $3,133,335 Notes and Loans Payable: Notes Payable at June 30, 2008 represents the Athletic Association's obligation to Georgia Tech Foundation, Inc. with respect to the William C. Wardlaw Center. The effective interest rate at June 30, 2008 is 4.92%. Annual debt service requirements to maturity for the Athletic Association's note payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 1 2 3 4 5 6-10 11-15 16-20 Notes and Loans Payable Princip al Interest Total $27,978 29,476 30,975 32,474 33,973 198,343 255,297 327,240 $935,756 $46,376 44,998 43,510 41,917 40,249 173,091 116,455 43,516 $550,112 $74,354 74,474 74,485 74,391 74,222 371,434 371,752 370,756 $1,485,868 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 Annual Financial Report FY 2008 94 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, 2008, the swaption had a fair value (representing a liability) of $8,442,390, 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: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 1 2 3 4 5 6-10 11-15 16-20 21-25 Bond Discount/Swaption Premium Princip al $2,025,000 2,120,000 2,210,000 2,315,000 2,445,000 14,445,000 18,775,000 24,240,000 34,380,000 102,955,000 1,025,849 $103,980,849 Bonds Payable Interest $5,233,586 5,137,911 5,045,346 4,939,956 4,814,844 21,839,294 17,503,303 12,042,725 4,639,150 81,196,115 $81,196,115 Total $7,258,586 7,257,911 7,255,346 7,254,956 7,259,844 36,284,294 36,278,303 36,282,725 39,019,150 184,151,115 1,025,849 $185,176,964 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 Annual Financial Report FY 2008 95 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 2008, GTRC distributed approximately $377.6 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, 2008, the carrying value of deposits was $10,057,833 and the bank balance was $10,424,177. Of Georgia Tech Research Corporation's deposits, $10,224,177 were uninsured and collateralized with securities held by the Office of Treasury and Fiscal Services, but not in GTRC's name. Investments: Georgia Tech Research Corporation's investments at June 30, 2008 were as follows: Fair Value Commercial Paper Equity Securities $47,600,000 331,674 Total Investments $47,931,674 Interest Rate Risk Interest rate risk is the risk that changes of interest rates of debt investments will adversely affect the fair value of an investment. GTRC does not have a formal policy for managing interest rate risk. The investment in Commercial Paper matures in less than one year. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, GTRC will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. GTRC does not have a formal policy for managing custodial credit risk. At June 30, 2008, $47,600,000 of GTRC's applicable investments were held by the investment's counterparty in GTRC'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. GTRC does not have a formal policy for managing credit quality risk. Annual Financial Report FY 2008 96 The Commercial Paper investment is rated A-1+ by Standard and Poor's. 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. GTRC does not have a formal policy for managing concentration of credit risk. Of GTRC's total investments of $47,931,674, $47,600,000, or 99%, are invested in Federal Home Loan Bank discount notes. Capital Assets for Component Units: Georgia Tech Research Corporation had the following Capital Asset activity for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Capitalized Collections Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2007 $240,735 0 240,735 Addi ti o n s $0 32,098 32,098 Re du cti on s $0 0 En di n g B al an ce 6/30/2008 $240,735 32,098 272,833 Capital Assets, Being Depreciated: Building and Building Improvements Equipment T otal Assets Being Depreciated 21,133 3,498,102 3,519,235 74,100 270,957 345,057 206,762 206,762 95,233 3,562,297 3,657,530 Less: Accumulated Depreciation Buildings Equipment T otal Accumulated Depreciation 3,056 2,086,929 2,089,985 3,348 408,396 411,744 189,697 189,697 6,404 2,305,628 2,312,032 T otal Capital Assets, Being Depreciated, Net 1,429,250 (66,687) 17,065 1,345,498 Capital Assets, net $1,669,985 ($34,589) $17,065 $1,618,331 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 FY 2008 97 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, 2008, Georgia Advanced Technology Ventures, Inc. distributed $295,569 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 - Attention: Joel Hercik, Lyman Hall, Room 315, Atlanta, GA 30332-0257. Investments for Component Units: Georgia Advanced Technology Ventures, Inc. holds investments in the amount of $957,061. 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, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements Infrastructure M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $11,428,530 11,428,530 107,659,415 3,411,274 1,047,396 112,118,085 9,269,018 102,849,067 $114,277,597 Long-term Liabilities for Component Units: Changes in long-term liabilities for the GATV for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Capital Lease Obligations Notes and Loans Payable $85,145,694 8,047,352 $6,371,037 3,883,669 $1,145,044 1,535,882 $90,371,687 10,395,139 $0 1,678,898 Total Long Term Liabilities $93,193,046 $10,254,706 $2,680,926 $100,766,826 $1,678,898 Annual Financial Report FY 2008 98 Capital Lease Obligations: Georgia Advanced Technology Ventures, Inc. has three long-term capital leases. The leases are for Centergy One Building, Floors 1-3 with an interest rate of 6.25%, Centergy One Building, Floors 4-5 with an interest rate of 7.75%, and Technology Enterprise Park with an interest rate of 8.224%. The balances for these leases total $90,371,687 at June 30, 2008, which includes $1,593,351 in capitalized interest payable. Future minimum lease payments under the capital leases and the net present value of future minimum lease payments are as follows at June 30, 2008: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 2019 through 2023 11-15 2024 through 2028 16-20 2029 through 2033 21-25 2034 through 2038 26-30 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $6,811,817 6,958,532 7,103,045 7,251,074 7,398,582 38,467,746 38,153,078 42,220,348 46,924,028 19,254,482 220,542,732 130,171,045 $90,371,687 Notes and Loans Payable: Georgia Advanced Technology Ventures, Inc. has four notes payable and a line of credit arrangement with The University Financing Foundation, Inc. (TUFF). Three of the notes payable are secured by Technology Enterprise Park land and the fourth is unsecured. Interest rates on the notes payable range from 6.00% to 7.53%. The notes payable balances at June 30, 2008 total $8,795,139, which includes $91,795 in capitalized interest payable. The credit arrangement with TUFF includes advances at June 30, 2008 of $1,600,000, out of a total credit limit of $1,900,000. Principal is payable within 30 days of demand by TUFF. Interest on the credit line is prime plus 2%. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Annual Financial Report FY 2008 99 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Princip al Notes and Loans Payable Interest $1,678,898 229,092 270,110 299,086 330,531 2,009,506 1,299,453 2,001,348 2,053,070 224,045 $10,395,139 $434,381 440,374 446,538 452,894 459,465 2,416,843 2,724,484 3,084,971 2,481,836 193,469 $13,135,255 Total $2,113,279 669,466 716,648 751,980 789,996 4,426,349 4,023,937 5,086,319 4,534,906 417,514 $23,530,394 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, 2008, the Alumni Association distributed $735,099 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, 2008: Annual Financial Report FY 2008 100 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment T otal Capital Assets being Depreciated Less T otal Accumulated Depreciation T otal Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2008 $718,980 788,253 1,507,233 1,058,612 448,621 $448,621 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 the Institute. 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. During the year ended June 30, 2008, the Foundation distributed $6,227,000 to the University for both restricted and unrestricted purposes. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc., Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257, Attention: Joel Hercik. Investments for Component Units: Georgia Tech Facilities, Inc.'s investments at June 30, 2008 were as follows: Government and Agency Securities Corporate Bonds Cost $4,500,000 2,500,000 Fair Value $4,346,880 2,445,120 Total Investments $7,000,000 $6,792,000 Annual Financial Report FY 2008 101 Capital Assets for Component Units: Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 1,419,000 2,017,000 1,200,000 1,200,000 600,000 600,000 $2,617,000 Long-term Liabilities for Component Units: Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Capital Lease Obligations Revenue/Mortgage Bonds Payable $9,492,000 210,125,000 $0 199,990,000 $2,098,000 115,308,000 $7,394,000 294,807,000 $2,179,000 5,723,000 Total Long Term Liabilities $219,617,000 $199,990,000 $117,406,000 $302,201,000 $7,902,000 Capital Lease Obligations: Effective April 15, 2007, Facilities entered into an installment sale agreement with the Institute for telecommunications equipment and installation. The agreement commences on the date the equipment was accepted and is renewable at the option of the Institute annually on July 1 for five successive one-year terms. The total extended term of the agreement will be approximately 63 months, to July 15, 2011. 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, 2008 is $7,394,000. Annual debt service requirements to maturity for capital lease obligations are as follows: Annual Financial Report FY 2008 102 Year ending June 30: 2009 1 2010 2 2011 3 2012 4 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $2,430,000 2,430,000 2,430,000 607,000 7,897,000 503,000 $7,394,000 Revenue Bonds Payable: Georgia Tech Facilities, Inc. has nine bond issues outstanding with balances totaling $285,405,000. The proceeds from the bond issues were used to acquire or construct (for the benefit of Georgia Institute of Technology) the Habersham Building, which houses the Ivan Allen College, Bioengineering and Biosciences Building, Family Housing Complex, Klaus Parking Deck, the Molecular Science and Engineering Building, the Electrical Substation, and the North Avenue Apartments. Interest rates on the bonds range from 2.625% to 5.25%. Facilities also has some variable rate demand bonds. For 2008A and 2008C Bonds, Facilities has interest rate swap agreements. Facilities retains an independent entity to provide periodic valuations of the interest rate swaps. At June 30, 2008, the value of the swaps total is ($2,422,000) and is reported as an Other Liability (current) on the Statement of Net Assets. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond/Swaption Premiums Princip al Bonds Payable Interest $5,723,000 6,880,000 7,217,000 7,536,000 7,880,000 45,174,000 58,568,000 69,295,000 54,913,040 22,218,960 285,405,000 9,402,000 $294,807,000 $12,217,660 12,484,332 12,218,336 11,921,126 11,587,541 52,349,919 40,808,158 26,329,350 11,541,969 2,154,425 193,612,816 $193,612,816 Total $17,940,660 19,364,332 19,435,336 19,457,126 19,467,541 97,523,919 99,376,158 95,624,350 66,455,009 24,373,385 479,017,816 9,402,000 $488,419,816 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 ex- Annual Financial Report FY 2008 103 officio, 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. As such, certain 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, 2008, the Foundation distributed $509,754 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation's Office at One Park Place South, Suite 533, Atlanta, GA 30303 or from the Foundation's website at www.gsu.edu. Prior Period Adjustment: During the year ended June 30, 2008 the Foundation determined that it had incorrectly classified two properties leased to the University as property and equipment instead of as direct financing leases. The 2007 consolidated financial statements have therefore been restated to properly present these assets as Net Investments in Capital Leases. The effect of the restatement was a decrease in unrestricted net assets as of June 30, 2007 of $121,973, a decrease in property and equipment of $35,697,615, and an increase in net investment in capital leases of $35,575,642. Investments for Component Units: Georgia State University Foundation, Inc. holds endowment and other investments in the amount of $166.4 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, 2008: Annual Financial Report FY 2008 104 Money Market Accounts Equity Securities Mutual Funds Real Estate Total Investments Cost $53,537,924 64,349,345 37,191,485 3,744,498 $158,823,252 Fair Value $53,537,924 70,825,752 36,644,994 5,360,421 $166,369,091 Capital Assets for Component Units: Georgia State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 $7,227,900 7,227,900 71,321,399 981,351 72,302,750 18,761,277 53,541,473 $60,769,373 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Liabilities under split interest agreement Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities $33,520 260,992 9,722,456 250,674,710 5,812,394 $4,218 $0 8,632 722,430 1,961,963 5,812,394 $37,738 252,360 9,000,026 248,712,747 0 $0 37,769 759,993 11,515,000 Total Long Term Liabilities $266,504,072 $4,218 $8,505,419 $258,002,871 $12,312,762 Annual Financial Report FY 2008 105 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 "Development Authority") for the purpose of financing the costs of acquiring, constructing and installing educational facilities which are 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 Development Authority. The Foundation in turn subleased the facilities to the Board of Regents of the University System of Georgia (the "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 Foundation has entered into a lease with the University on this property. As the lease is classified as a capital lease by the University, the Foundation has recorded the asset as a net investment in capital leases on the Statement of Net Assets. Rialto Center Facilities Capital Lease During 1994, the Foundation purchased and has since renovated facilities currently occupied by the University's School of Music. The project included the purchase and renovation of two existing office buildings. The Foundation also entered into a long term land lease for the renovation and use of an existing performing arts theater, the Rialto Theater. The project was financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (the "Authority"), the proceeds of which were loaned to The University Financing Foundation ("TUFF"). The Foundation has entered into long term lease commitments with TUFF to provide for the debt service payments on the bonds and other bond financing related expenses. The Foundation then leases the facilities to the University through a series of one year renewable lease agreements. At the end of the lease period or the retirement of the bonds, whichever occurs first, the title to the two office buildings will pass to the Foundation. Therefore, the Foundation has classified this lease as a capital lease and has recorded it as an asset under property and equipment in the consolidated statements of financial position. 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 the extension of the term of the lease through November 1, 2015. Annual debt service requirements to maturity for capital lease obligations are as follows: Annual Financial Report FY 2008 106 Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 2019 through 2023 11-15 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $1,214,618 1,212,585 1,209,232 1,208,651 1,210,863 4,700,743 691,415 11,448,107 2,448,081 $9,000,026 Interest expense related to the capital lease obligation for Alpharetta for the year ending June 30, 2008 totaled $281,064. Interest expense related to the TUFF lease obligation for Rialto for the year ending June 30, 2008 totaled $212,029. Rialto Ground Lease Pursuant to the lease agreement between the Foundation and TUFF, the lease payments include the cost of an underlying ground lease on the Rialto Theater property. At the end of the lease term, TUFF will transfer all interests in the ground lease to the Foundation. The Foundation has the option to renew the ground lease with the owner through December 31, 2045, once the Authority bond obligations are satisfied. Future minimum lease payments under the ground lease as of June 30, 2008 are as follows: Ground Lease Year ending June 30: 2009 1 $69,410 2010 2 69,410 2011 3 69,410 2012 4 69,410 2013 5 69,410 2014 through 2016 6-8 167,741 Total $514,791 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 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 until October 1, 2018. Interest is paid semi-annually through 2018 at a rate specified in the revenue bonds Annual Financial Report FY 2008 107 ranging from 3.60% to 4.60%. Interest expense for the year ended June 30, 2008 totaled $1,085,059. Piedmont Ellis Bonds On September 8, 2005, a total of $161,330,000 revenue bonds (tax-exempt $158,410,000 and taxable $2,920,000) were issued by the ADA on behalf of the Foundation with the proceeds 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 1,994 beds, including community activity facilities, site amenities and parking for 786 vehicles. There was a 22 month construction schedule for the project which was completed and opened for occupancy for 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. After construction was completed, the Foundation leased the facility to the Board of Regents on an annually renewable basis for a term of 33 years for the use and benefit of the University. Moody's Investors Services Inc. has assigned the series 2005 Bonds the rating of "Aaa" based upon the issuance of the policy by the Bond Insurer. 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%. Interest expense for the year ended June 30, 2008 totaled $7,762,468. Panther Place Bonds On May 31, 2007, $58,385,000 of revenue bonds (tax-exempt $49,175,000 and taxable $9,210,000) were issued by the 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 Banks, Inc. as the seller and the current tenant may remain in the building for up to five years. Upon expiration of the lease or early termination by SunTrust Banks, Inc. the Foundation will lease the property to the Board of Regents on an annually renewable basis. The Foundation began making semi-annual interest payments on January 1, 2008 at a rate of 4.289% on tax-exempt bonds and 5.409% on taxable bonds. Interest expense for the year ended June 30, 2008 totaled $3,186,562. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $11,515,000 13,045,000 13,375,000 13,805,000 22,865,000 28,585,000 27,515,000 31,680,000 40,440,000 40,250,000 243,075,000 5,637,747 $248,712,747 Bonds Payable Interest $11,385,338 11,253,067 11,092,477 10,878,877 10,252,053 47,235,109 39,310,737 30,526,309 19,285,184 5,331,090 196,550,241 $196,550,241 Total $22,900,338 24,298,067 24,467,477 24,683,877 33,117,053 75,820,109 66,825,737 62,206,309 59,725,184 45,581,090 439,625,241 5,637,747 $445,262,988 Annual Financial Report FY 2008 108 Interest Rate Swap Agreement: On May 29, 2007, the Foundation entered into an interest rate swap agreement related to the Panther Place revenue bond issue utilized to purchase the SunTrust building. The Foundation has accounted for the interest rate swap agreement in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. By using a derivative financial instrument to hedge exposure to a change in interest rates, the financing is exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the additional funds, which creates repayment risk for the financing. The financing policy also requires that all derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The bond financing was constructed with an interest rate swap contract to convert the variable rate bonds into a synthetic fixed rate debt at the time the debt was offered, with the intent to reduce borrowing costs. Interest rate swaps used with the issuance of tax-exempt debt must be recorded as assets or liabilities in the statements of financial position, depending on whether the swap is in a gain or a loss position, at fair value. Unrealized gains or losses for a given period must be reflected in the earnings for that period. In volatile environments, this can result in large differences from one period to the next. The swap provider, Ambac Financial Services, calculated the fair value in accordance with generally accepted accounting principles in the United States of America using a proprietary valuation model, which they developed and had tested by external auditors. The model calculates future cash flows by projecting forward rates, and then discounts those cash flows at their present value. All rates used in valuation are mid-market levels (mid-way between bid and ask) or are model based mid-market levels when mid-market levels are not available. The fair value provided takes certain factors into consideration, including the liquidity of the swap market and the uniqueness of the deal structure. The fair value of the interest rate swap agreement is recognized in the accompanying Statement of Net Assets at $4,533,379 and is reported as "Other Liabilities" at June 30, 2008 and as "Interest Expense" in the Statement of Revenues, Expenses and Changes in Net Assets for the year ended June 30, 2008. 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 Research Foundation's results for fiscal 2008 include Science Park, LLC (the "Company"), a component unit of the Research Foundation, which was organized as a not-for-profit limited liability company on August 9, 2006 with its sole member the Research Foundation. The Company was created to develop a 248,806 square foot science research facility (the "Project"). Upon completion of the Project, the Company will lease the facility to the Board of Regents of Annual Financial Report FY 2008 109 the University System of Georgia for the use and benefit of Georgia State University. No financial activity occurred prior to July 1, 2007. 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, 2008, the Research Foundation paid to the University $45,828,253 in grant revenue and $1,018,787 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 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. At June 30, 2008, the Research Foundation's carrying amount of deposits was $7,566,660, and the bank balance was $7,952,968. Of the bank balance, $100,000 was covered by FDIC insurance at June 30, 2008, and $5,920,793 was collateralized by the State of Georgia pledging Annual Financial Report FY 2008 110 pool which thereby guarantees collateralization of any uninsured bank deposit balances. The remaining uncollateralized balance of $1,932,175 consists of cash equivalents held by investment custodians. Investments: The Research Foundation's investments at June 30, 2008 are presented below. All investments are presented by investment type. Fair Value Investment Maturity 1-5 Years Investment type Debt Securities Mutual Bond Fund $907,151 $907,151 $907,151 $907,151 Other Investments Bond/Fixed Income Mutual Funds Equity Securities - Domestic Equity Securities - International Real Estate Investment Fund Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 535,162 1,495,167 934,011 228,400 90,603,430 $94,703,321 The above investments are included in the Statement of Net Assets as follows: Cash and Cash Equivalents Investments unrestricted Investments restricted expendable Total investments $90,603,430 3,484,293 615,598 $94,703,321 All investments with the exception of equity securities of $28,665 and investment pools of $90,603,430 at June 30, 2008, are held by the Georgia State University Foundation on behalf of the Research Foundation and are held by outside investment managers. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The 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. Annual Financial Report FY 2008 111 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. The Research Foundation does not have a formal policy related to credit quality risk of investments. The Research Foundation's investments as of June 30, 2008 are presented below. All investments are presented by investment type and fixed income securities are presented by credit quality ratings. Related Debt Investments Mutual Bond Fund Fair Value AAA $907,151 $907,151 $541,160 $541,160 AA A BBB BB B Unrated $35,712 $35,712 $57,760 $57,760 $61,152 $61,152 $64,332 $64,332 $146,670 $146,670 $365 $365 The Georgia Fund 1 investment is rated AAAm by Standard & Poor's. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the 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, 2008, $4,099,891 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 types as follows for the year ended June 30, 2008: Domestic equities 44% Alternative investments 22% Bonds 16% Real estate 11% International equities 7% Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The 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 FY 2008 112 Capital Assets for Component Units: Georgia State University Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2008: 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 Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Total Accumulated Depreciation Beginning Balances 7/1/2007 $1,643,990 1,643,990 3,947,210 307,186 4,254,396 595,713 277,867 873,580 Additions $0 1,592,461 1,592,461 Reductions $0 0 Ending Balance 6/30/2008 $1,643,990 1,592,461 3,236,451 2,626,988 2,626,988 6,574,198 307,186 0 6,881,384 170,386 1,377 171,763 766,099 279,244 0 1,045,343 Total Capital Assets, Being Depreciated, Net Capital Assets, net 3,380,816 $5,024,806 2,455,225 $4,047,686 0 5,836,041 $0 $9,072,492 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Research Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/M ortgage Bonds Payable $0 $91,090,710 $0 $91,090,710 $0 Total Long Term Liabilities $0 $91,090,710 $0 $91,090,710 $0 $90,205,000 Bond Issue -- The Series 2007 Bonds are being issued pursuant to a Trust Indenture and Security Agreement dated as of December 1, 2007 (the "Indenture"), between the Atlanta Development Authority (the "Authority") and Branch Banking and Trust Company, Wilson, North Carolina as trustee (the "Trustee"). The Authority will loan proceeds of the sale of the Series 2007 Bonds to the Company, pursuant to the terms and provisions of a Loan Agreement dated as of December 1, 2007 (the "Loan Agreement"), between the Authority and the Company. The Company's obligations under the Loan Agreement will be evidenced by a Promissory Note dated as of December 1, 2007 (the "Promissory Note"). Annual Financial Report FY 2008 113 The Company will use proceeds of the Series 2007 Bonds to (i) finance or refinance, in whole or in part, the cost of the acquisition, construction and equipping of approximately 248,806 square foot research facility (the "Project") to be located in a new Georgia State University Science Park on the campus of the University; (ii) fund a debt service reserve fund for the Series 2007 Bonds; (iii) fund capitalized interest for the Series 2007 Bonds; and (iv) pay costs of issuance of the Series 2007 Bonds. Term bonds under the Loan Agreement bear interest payable semiannually on January 1 and July 1 at fixed rates ranging from 4.75% to 5.25% depending on the schedule of bond maturities. Serial bonds under the loan agreement bear interest payable semi-annually on January 1 and July at the rate of 4.50% until July 1, 2014 when the interest rates increases to 5.00%. Principal payments are due on July 1 beginning in 2011 and continuing until 2039. The following is a summary as of June 30, 2008, of principal and interest payments due under all borrowings during each of the next five years ending June 30 and five-year increments thereafter: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31 Principal $0 0 1,470,000 1,535,000 1,605,000 9,270,000 11,830,000 15,075,000 19,210,000 24,540,000 5,670,000 90,205,000 885,710 $91,090,710 Bonds Payable Interest $4,482,350 4,482,350 4,482,350 4,416,200 4,347,125 20,492,500 17,931,500 14,685,562 10,533,125 5,218,250 283,500 91,354,812 $91,354,812 Total $4,482,350 4,482,350 5,952,350 5,951,200 5,952,125 29,762,500 29,761,500 29,760,562 29,743,125 29,758,250 5,953,500 181,559,812 885,710 $182,445,522 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 Hospital and Clinics (Hospital). The Hospital, which is owned by the Board of Regents of the University System of Georgia (Regents), consists of 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. Annual Financial Report FY 2008 114 The Company utilized 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 20912. Deposits and Investments Deposits: At June 30, 2008, $63,631,153 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, 2008, 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: Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) Municipal Obligation $15,799,141 $0 $15,799,141 308,415 62,257,572 23,508,290 19,213,833 3,058,662 $124,145,913 6,481,177 3,456,527 719,589 $10,657,293 51,744,862 20,051,763 6,372,495 1,770,332 $95,738,593 $0 $0 251,084 308,415 3,780,449 1,159,759 $1,410,843 10,961,990 1,288,330 $16,339,184 Other Investments Money Market Funds Equity Securities - Domestic Equity Securities - International Joint Venture 79,659,511 22,703,501 355,464 863,495 $227,727,884 Annual Financial Report FY 2008 115 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, 2008, $147.2 million of the Company's applicable investments are held by the investment managers in the Company'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 Company's policy for managing credit quality risk is as follows: The Company's assets may be invested only in investment grade bonds rated AA (or equivalent) or better. The Company's assets may be invested only in commercial paper rated A1 (or equivalent) or better. Fixed income maturity restrictions are as follows: Maximum maturity for any single security is five years, and weighted average portfolio maturity may not exceed 3 years. Securities comprising money market funds must be rated investment grade by Standard and Poor's and/or Moody's. The investments subject to credit quality risk at June 30, 2008 are rated as follows: Fair Value AAA AA A BAA Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt M ortgage Backed Securities (Commercial) M unicipal Obligation $62,257,572 23,508,290 19,213,833 3,058,662 $62,257,572 2,304,173 18,165,282 631,242 $0 9,128,334 675,346 2,427,420 $0 11,353,162 373,205 $0 722,621 $108,038,357 $83,358,269 $12,231,100 $11,726,367 $722,621 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, 2008, the following MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance: Federal Home Loan Bank 14.8%, Federal National Mortgage Association 6.2%, and Federal Home Loan Mortgage Corporation 5.5%. Annual Financial Report FY 2008 116 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 $355,464 or 0.2% 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, 2008 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 Beginning Balances 7/1/2007 $7,138,554 10,692,641 17,831,195 Additions $581,676 24,415,032 24,996,708 Reductions $0 18,579,924 18,579,924 Ending Balance 6/30/2008 $7,720,230 16,527,749 24,247,979 3,936,122 21,147,609 124,090,086 17,930,364 167,104,181 279,541 6,055,847 34,409,205 40,744,593 3,917,908 17,930,364 21,848,272 4,215,663 27,203,456 154,581,383 0 186,000,502 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Total Accumulated Depreciation 393,352 7,752,867 96,248,220 6,030,191 110,424,630 178,480 3,309,006 10,677,017 3,898,510 18,063,013 (6,147,962) 9,928,701 3,780,739 571,832 11,061,873 113,073,199 0 124,706,904 Total Capital Assets, Being Depreciated, Net Capital Assets, net 56,679,551 $74,510,746 22,681,580 $47,678,288 18,067,533 $36,647,457 61,293,598 $85,541,577 Long-term Liabilities for Component Units: On April 1, 2008, the Company issued a total of $135,000,000 of Development Authority of Richmond County Revenue Bonds, Series 2008A and 2008B (the Bonds). Proceeds from the Bonds are to be used to fund certain construction and renovation projects and to purchase new and replacement equipment. The proceeds were also used to refund outstanding capital lease obligations and to pay certain costs associated with the issuance of the Bonds. Prior to the issuance of the Bonds on April 1, 2008, the Company's long-term debt consisted primarily of capital lease obligations. Other Long-Term Liabilities represents the self-insured Annual Financial Report FY 2008 117 portion of professional liability risks. Accrued professional liability costs are determined actuarially. Changes in long-term liabilities for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $11,190,803 11,672,954 0 9,298,000 $32,161,757 $2,775,205 3,954,764 135,000,000 68,699 $141,798,668 $2,093,371 15,627,718 374,641 $18,095,730 $11,872,637 0 135,000,000 8,992,058 $155,864,695 $11,872,637 2,248,015 $14,120,652 The Bonds initially bear interest at weekly rates determined by the remarketing agent as the lowest rate of interest which, in the judgment of the remarketing agent, would cause the Bonds to have a market value as of the date of determination equal to the principal amount thereof, taking into account prevailing market conditions. In the event that the remarketing agent fails to determine an applicable interest rate, the interest rate to be used shall equal 100% of the S&P Weekly Index plus twenty-five basis points or 100% of the One Month London Interbank Offered Rate (LIBOR) plus twenty-five basis points, depending on the income tax treatment of the resulting interest in the gross income of the beneficial owner of the Bonds. In no event, the interest rate on the Bonds will exceed the lesser of 15% per annum and the maximum rate permitted by law. The Company may, under certain conditions, elect to convert all of the Bonds of a Series from a weekly rate to a daily rate or other variable rate described in the Bond indenture. For the period from April 1, 2008 to June 30, 2008, the annual effective variable interest rate incurred on the Bonds was 1.872%. Each Bond Series is secured by irrevocable letters of credit. All principal and interest payments are drawn from the letter of credit and are reimbursed by the Company under the terms of separate reimbursement agreements with the issuers of the letters of credit. Each letter of credit is currently set to expire on March 31, 2011, unless extended. The bond indenture and letter of credit reimbursement agreements contain certain terms and restrictive covenants typical of such agreements, including maintenance of certain debt service levels, limitations on indebtedness, maintenance of certain days' cash on hand, and maintenance of a certain ratio of debt service coverage. With respect to the 2008 capital lease refunding, funds were deposited in an irrevocable trust to provide for the debt service of the lease payable, and, therefore, all related amounts have been removed from the Company's balance sheet. The deposits into the trust have been or will be used to pay all scheduled principal and interest payments on the leases through 2013. The refunding transaction resulted in an accounting loss totaling approximately $849,000 which is reported as a nonoperating item in the accompanying statement of revenues, expenses, and changes in net assets. Annual Financial Report FY 2008 118 Concurrent with the issuance of the Bonds, the Company entered into a variable-to-fixed interest rate swap (the Swap). The intention of the Swap is to effectively convert the Company's variable interest rate on the Bonds into a synthetic fixed rate of 3.302%. The Bonds and the Swap mature on July 1, 2037. The initial notional amount of the Swap is $135,000,000. The notional value of the Swap declines in conjunction with payments of Bond principal such that the outstanding balance of the Series 2008A and 2008B Bonds and the notional amount of the Swap remain equal at all times. Under the Swap, the Company pays the counterparty interest at a fixed rate of 3.302% and receives interest payments at a variable rate computed at 68% of LIBOR. As of June 30, 2008, the Swap had a fair value of $81,085 (favorable to the Company), as computed using the zero-coupon method. As of June 30, 2008, the Company was exposed to credit risk in the amount of the fair value of the Swap. The Swap counterparty was rated AA by Fitch Ratings and Standard & Poor's and Aaa by Moody's Investors Service as of June 30, 2008. To mitigate the potential for credit risk, various levels of collateralization by the counterparty may be required should the counterparty's credit rating be downgraded and the fair value of the Swap be in a position due to the Company at a level above certain thresholds specified in the Swap agreement. Collateral would be posted with a third party custodian. The Swap exposes the Company to basis risk should the relationship between LIBOR and prevailing market rates change significantly, changing the synthetic rate on the Bonds from the intended synthetic rate of 3.302%. As of June 30, 2008, the prevailing market rate was an aggregate 1.706%, whereas 68% of LIBOR was 1.688%. The Company or the counterparty may terminate the Swap if the other party fails to perform under the terms of the agreement. If the Swap is terminated, the variable rate Bonds would no longer carry a synthetic fixed interest rate. Also, if at the time of termination the Swap has a negative fair value (unfavorable to the Company), the Company would be liable to the counterparty for a payment equal to the Swap's fair value. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 0 3,225,000 3,335,000 3,450,000 19,050,000 22,475,000 26,510,000 31,270,000 25,685,000 $135,000,000 Bonds Payable Interest $4,481,362 4,481,400 4,401,019 4,291,266 4,177,625 19,047,976 15,580,617 11,491,328 6,666,955 1,367,146 $75,986,694 Total $4,481,362 4,481,400 7,626,019 7,626,266 7,627,625 38,097,976 38,055,617 38,001,328 37,936,955 27,052,146 $210,986,694 Annual Financial Report FY 2008 119 Medical College of Georgia Foundation, Inc. Medical College of Georgia Foundation, Inc. (the "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, 2008, the Foundation distributed $7.7 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, Georgia 30912 or from the Foundation's website at www.mcgfoundation.org. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2008: Cost Fair Value Cash held by investment organization Certificates of Deposit Fixed Income Equity Securities Real Estate Alternative Strategies $601,027 1,107,082 21,968,337 53,006,141 6,052,808 24,881,753 $601,027 1,107,082 21,417,184 62,669,078 6,683,254 37,645,657 Total Investments $107,617,148 $130,123,282 Capital Assets for Component Units: Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2008: Annual Financial Report FY 2008 120 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 June 30, 2008 $1,510,594 1,510,594 271,318 271,318 157,876 113,442 $1,624,036 Long-term Liabilities for Component Units: At June 30, 2008, Medical College of Georgia Foundation's long-term liabilities consisted of a $2,268,972 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 Medical College of Georgia 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 the College. 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. Annual Financial Report FY 2008 121 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, 2008, PPG distributed $51.8 million to the College for salaries and departmental support. Complete financial statements for the PPG can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901. Investments for Component Units: PPG invests in mutual funds, equity securities, and debt securities which are measured at fair value. For investments other than common stock and mutual funds, classification between current and non-current is determined based upon individual investment maturity dates. Investments in common stock and mutual funds are actively traded and are classified as current. Investment income or loss (including realized gains and losses, interest, and dividends) is included in the nonoperating revenue section of the accompanying Statement of Revenues, Expenses, and Changes in Net Assets. Investments are comprised of the following amounts at June 30, 2008: Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Ventures/Partnerships Total Investments Cost $8,925,480 10,455,931 13,676,616 7,882,842 585,000 $41,525,869 Fair Value $8,966,200 10,131,452 15,529,745 7,525,825 585,000 $42,738,222 Capital Assets for Component Units: PPG held the following Capital Assets as of June 30, 2008: Annual Financial Report FY 2008 122 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 June 30, 2008 $3,269,355 3,269,355 2,422,416 6,249,455 8,671,871 5,997,709 2,674,162 $5,943,517 Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Notes and Loans Payable Other Long Term Liabilities Total Long Term Liabilities 32,689,063 558,885 $33,247,948 683,209 106,346 32,005,854 452,539 685,000 $0 $789,555 $32,458,393 $685,000 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 premium is amortized semi-annually over the term of the loan. 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, 2008 was $31,550,000. The loan is secured by certain personal property constituting a portion of the building recorded as net investment in capital lease in the Statement of Net Assets. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Annual Financial Report FY 2008 123 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Notes and Loans Payable Interest $685,000 705,000 725,000 745,000 765,000 4,240,000 5,125,000 6,465,000 8,210,000 3,885,000 31,550,000 455,854 $32,005,854 $1,384,150 1,365,798 1,344,953 1,321,829 1,296,600 6,029,418 5,064,346 3,723,904 1,969,857 190,267 23,691,122 $23,691,122 Total $2,069,150 2,070,798 2,069,953 2,066,829 2,061,600 10,269,418 10,189,346 10,188,904 10,179,857 4,075,267 55,241,122 455,854 $55,696,976 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 $452,539 at June 30, 2008. 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 education, research, and service functions of the College in obtaining contracts from individuals, industrial or other private organizations, government or other public agencies for the performance of sponsored research, development or other programs by the various departments or other units of the College. All research contracts awarded to the Institute are sub-contracted to the College, which is responsible for the fiscal administration of the research projects. Although the College does not control the timing or amount of activity, all grant awards are sub-contracted and managed by the College. Because of this special relationship, the Institute is considered a component unit of the College and is discretely presented in the College's financial statements. The Institute's financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board ("GASB"), in order to be consistent with the accounting principles followed by its primary government, Medical College of Georgia. The Institute's fiscal year is July 1 through June 30. During the year ended June 2008, the Institute sub-contracted approximately $53.2 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. Annual Financial Report FY 2008 124 Deposits and Investments Deposits: As of June 30, 2008, $7,033,741 of the Institute's bank balance was exposed to custodial credit risk. Of that amount, $200,000 was insured by Federal depository insurance and $6,833,741 was uncollateralized. The Institute had no investments as of June 30, 2008. Capital Assets for Component Units: The Institute's Capital Asset activity for the year ending June 30, 2008 was as follows: Capital Assets, Being Depreciated: Equipment Total Assets Being Depreciated Beginning Balances 7/1/2007 $28,676 28,676 Additions $0 0 Reductions $0 0 Ending Balance 6/30/2008 $28,676 28,676 Less: Accumulated Depreciation Equipment Total Accumulated Depreciation 11,948 11,948 5,735 5,735 17,683 0 17,683 Total Capital Assets, Being Depreciated, Net Capital Assets, net 16,728 $16,728 (5,735) ($5,735) 0 10,993 $0 $10,993 Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The objectives and purposes of the Dental Foundation are to acquire and administer funds and property which are derived from fees charged for services rendered in the practice of dentistry at the School of Dentistry at the Medical College of Georgia by members of the faculty, residents, and hygienists of the School of Dentistry. Dental Foundation funds are used to maintain and improve the high standard of instruction at the Medical College of Georgia Dental School for advanced study by members of the School's student body and faculty and for research in the dental health field. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income 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 No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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 March 1, 2007 through February 29, 2008. Because the Foundation's Annual Financial Report FY 2008 125 fiscal year 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 29, 2008, the Foundation distributed $1.9 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 29, 2008: Certificates of Deposit Unit Investment Trust Government Bonds Preferred Stocks Domestic Equities Total Investments Cost $1,069,000 130,869 57,030 24,979 2,219,826 $3,501,704 Fair Value $1,081,292 128,970 53,265 23,830 2,181,956 $3,469,313 University of Georgia The University of Georgia Foundation The University of Georgia Foundation (Foundation) is a legally separate, tax-exempt component unit of the University of 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 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, 2008, the Foundation distributed $22,252,188 to 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. Annual Financial Report FY 2008 126 Special Item Transfer: In 2006, the Board of Trustees of the Foundation agreed to transfer its sole membership of the UGA Real Estate Foundation (Real Estate Foundation) to the University of Georgia Research Foundation, Inc. The transfer was contingent upon a private letter ruling from the Internal Revenue Service accepting the transfer with no negative impact on the tax-exempt status of the Real Estate Foundation's outstanding bond debt. In 2007, the private letter ruling favorable to the transfer was received, and the transfer of sole membership became effective July 1, 2007. The transfer of the Real Estate Foundation's Assets and Liabilities as of July 1, 2007 resulted in a Net Asset transfer of ($6,638,835), which is reported as a Special Item Transfer on the Statement of Revenues, Expenses and Changes in Net Assets. Investments for Component Units: The University of Georgia Foundation holds investments in the amount of $606 million at June 30, 2008. Investments consist of the following: Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split Interest Investments Real Estate Diversifying Strategies Investment Pools Total Investments Cost $39,793,183 231,943 304,827 2,668,042 1,920,332 15,232,070 16,155,937 599,994 392,105,046 $469,011,374 Fair Value $39,793,183 234,316 301,002 2,693,996 1,828,504 16,727,272 16,155,937 613,950 527,703,970 $606,052,130 Capital Assets for Component Units: The University of Georgia Foundation holds the following Capital Assets as of June 30, 2008: 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, 2008 $4,810,092 44,187 4,854,279 9,414,449 1,071,428 10,485,877 1,340,863 9,145,014 $13,999,293 Annual Financial Report FY 2008 127 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Transfer of Real Estate Foundation Adjusted Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $29,495 11,686,162 20,691,533 175,667,798 0 $208,074,988 ($29,495) (10,499,210) (175,667,798) ($186,196,503) $0 11,686,162 10,192,323 0 0 $21,878,485 $0 655,613 5,014,961 $0 8,083,918 686,085 $6,356,659 $8,083,918 $0 12,341,775 7,123,366 0 686,085 $20,151,226 $0 126,617 686,085 $812,702 Notes and Loans 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, 2008, $974,091 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 45 basis points (or 0.45%), or 2.91% at June 30, 2008. Principal and interest are payable monthly. During 2007, the Foundation signed a $6,200,000 promissory loan agreement with a bank, which expires on November 1, 2017. As of June 30, 2008, $6,149,275 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 32.5 basis points (or 0.325%), or 2.78% at June 30, 2008. Principal and interest are payable monthly. Interest Rate Caps: The Foundation has two outstanding interest rate cap agreements effectively limiting the interest rate exposure on the $1,117,865 note payable to a 5.75% fixed rate over the term of the note payable and limiting the interest rate exposure on the $6,200,000 note payable from variable to a 5.95% fixed rate over the term of the note payable. As of June 30, 2008, the fair value of these interest rate caps was a liability of $686,085 and is reported in the Other Liabilities (current) line on the Statement of Net Assets. The Foundation recorded a charge of $691,109 in fiscal 2008 as a result of these caps as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 Notes and Loans Payable Principal Interest Total 1 $126,617 $418,741 $545,358 2 134,261 411,110 545,371 3 142,367 403,018 545,385 4 921,202 390,742 1,311,944 5 101,376 342,301 443,677 6-10 5,697,543 1,406,626 7,104,169 $7,123,366 $3,372,538 $10,495,904 Annual Financial Report FY 2008 128 The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (the Association) is a legally separate, taxexempt component unit of the University of Georgia (the "University"). The Association was organized in 1938 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of directors consists of faculty, staff, students, and alumni of the University. Although the University does not control the timing or amount of receipts from the Association, the majority of resources or income thereon that the Association holds and invests are restricted to the athletic activities of the University. Because these restricted resources held by the Association can only be used by or for the benefit of the University and their management role is significant to the accomplishment of the University's mission, the Association is considered a component unit of the University and is discretely presented in the University's financial statements. For financial reporting purposes, the Association is considered a special purpose government agency engaged only in business type activities, as defined by GASB Statement 34. The Association's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Association made payments to the University for services such as food services, parking services, health services, tuition, gas, electricity, security, and golf course maintenance. These payments totaled $29,766,110 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $185 million are included in the financial statements of the 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, Annual Financial Report FY 2008 129 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, 2008, the book-carrying amount of the Athletic Association's deposits, including noncurrent cash and cash equivalents, was $89,246,997 and the bank balance was $92,433,058. The Athletic Association's bank balance is classified as follows at June 30, 2008: Amount insured by the FDIC and FSLIC Collateralized with securities held in the Athletic Association's name Uncollateralized $ 333,000 80,613,869 11,486,189 $92,433,058 Capital Assets for Component Units: The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2008: Beginning Ending Balances Balance 7/1/2007 Additions Reductions 6/30/2008 Capital Assets, Not Being Depreciated: Construction Work-in-Progress $29,493,360 $466,936 $29,354,321 $605,975 Total Capital Assets Not Being Depreciated 29,493,360 466,936 29,354,321 605,975 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Total Assets Being Depreciated 176,834,763 19,476,061 6,879,287 203,190,111 31,971,945 145,581 622,646 32,740,172 173,528 173,528 208,806,708 19,621,642 7,328,405 235,756,755 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 35,018,890 6,374,570 4,264,753 45,658,213 157,531,898 $187,025,258 3,549,328 842,110 1,178,988 5,570,426 27,169,746 $27,636,682 146,115 146,115 27,413 $29,381,734 38,568,218 7,216,680 5,297,626 51,082,524 184,674,231 $185,280,206 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Annual Financial Report FY 2008 130 Notes and Loans Payable-Primary Government Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2007 $2,336,428 87,113 97,560,000 2,754,277 $102,737,818 Additions $0 $0 Reductions $333,395 87,113 2,090,000 518,474 $3,028,982 Ending Balance June 30, 2008 Amounts due within One Year $2,003,033 0 95,470,000 2,235,803 $99,708,836 $354,016 2,140,000 500,000 $2,994,016 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. The note has an outstanding principal balance at June 30, 2008 of $2,003,033. The principal balance due within one year, $354,016, is reflected within the Due to Primary Government - Current Liabilities balance on the Statement of Net Assets. The Association made payments of principal and interest of $477,917 during the year ended June 30, 2008, and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 Total Principal Notes and Loans Payable Interest $354,016 375,915 399,167 423,858 450,077 $2,003,033 $123,901 102,002 78,750 54,059 27,840 $386,552 Total $477,917 477,917 477,917 477,917 477,917 $2,389,585 Revenue Bonds Payable: On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Association. The Bonds are secured by a letter of credit issued by SunTrust Bank in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). The loan matures in 2031, subject to certain early repayment provisions. At June 30, 2008, the balance of this obligation was $33,100,000. Annual Financial Report FY 2008 131 On August 28, 2003, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $36 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2003 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $36 million to the Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). 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, 2008 was $18,195,000. 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 Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.10% on June 30, 2008). The loan matures in 2021 and requires yearly principal reductions. At June 30, 2008, the balance of this obligation was $15,280,000. 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 Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). The loan matures in 2035, subject to certain early repayment provisions. The June 30, 2008 remaining obligation for these revenue bonds was $28,895,000. Interest Rate Swap Agreements: The 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 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 Association and the Counterparty and three Confirmations, the 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 Annual Financial Report FY 2008 132 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 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 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 Association's making or receiving a termination payment As of June 30, 2008, the fair value of the interest rate swap agreement on the 2001 Series Bonds was ($1,224,921), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2003 Series Bonds was ($439,283), indicating the amount that the Association counterparty would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2005A Series Bonds was ($585,624), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2005B series Bonds was ($998,313), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. Swap Payments and Associated Debt As of June 30, 2008, 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. Annual Financial Report FY 2008 133 Year Ending 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 2029-2033 2034-2036 Total Variable Rate Bonds Principal Interest $2,140,000 $2,275,870 2,195,000 2,224,835 2,245,000 2,172,630 2,295,000 2,119,275 2,355,000 2,064,500 12,685,000 9,451,250 13,050,000 7,888,970 9,330,000 6,626,000 43,760,000 3,844,917 5,415,000 118,865 $ 95,470,000 $ 38,787,112 Interest Rate Swaps, Net $1,182,926 1,143,088 1,102,376 1,060,686 1,018,030 4,412,533 3,217,542 2,582,177 1,505,379 46,525 $ 17,271,262 Total $5,598,796 5,562,923 5,520,006 5,474,961 5,437,530 26,548,783 24,156,512 18,538,177 49,110,296 5,580,390 $ 151,528,374 Credit Risk As of June 30, 2008, the fair value of the swaps represents the Association's credit exposure to the Counterparty. Should the Counterparty fail to perform in accordance with the terms of the swap agreements, the Association could see a possible gain equivalent of $17.3 million less the cumulative fair value of $3.2 million. As of June 30, 2008, the Counterparty was rated Aaa by Moody's and AA+ by S&P. Basis Risk The swaps expose the 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. Taxexempt 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 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 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 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 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. (the "Foundation") is a not-for-profit foundation that was chartered in 2005 to receive and administer contributions for the support of the University of Georgia (the "University"). The University is governed by the Board of Regents of the University System of Georgia (the "Board of Regents"). The mission and purpose of the Foundation is to provide support to the teaching, research, public service and outreach programs of the University by means of volunteer leadership and assistance in development and fundraising activities, fiduciary care for the assets of the Foundation for the long-term benefit and enhancement of the University, and the provision of broad advice, consultation and support Annual Financial Report FY 2008 134 to the President of the University. The Foundation operates as a Cooperative Organization in accordance with policies of the Board of Regents. 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, 2008, the Foundation distributed $7,353,573 to 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: The Arch Foundation for the University of Georgia, Inc. holds investments in the amount of $30.3 million. Investments consist of marketable securities, bonds, real property, and an investment in a limited partnership as follows: Cost Fair Value Equity Securities Split Interest Investments Joint Ventures/Partnerships Real Estate Investment Pools $39,025 28,077 630,000 2,624,000 27,190,416 $39,025 28,077 630,000 2,624,000 26,974,899 Total Investments $30,511,518 $30,296,001 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 (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 twenty 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. Annual Financial Report FY 2008 135 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. The Research Foundation financial statements include two blended component units: the UGA Real Estate Foundation, Inc. and UGARF Media Holdings, LLC. During fiscal year 2008, the Research Foundation transferred approximately $118 million in sponsored research and other support funds 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. Special Item Transfer: Effective July 1, 2007, the Research Foundation became the sole member of the UGA Real Estate Foundation, Inc. (Real Estate Foundation). The Real Estate Foundation had previously been the sole member of the University of Georgia Foundation. The transfer at July 1, 2007 of the assets and liabilities of the Real Estate Foundation to the Research Foundation resulted in a Net Asset addition of $6,638,835. This transfer is reported as a Special Item Transfer in the Statement of Revenues, Expenses and Changes in Net Assets. Prior Period Adjustment: The UGA Real Estate Foundation, as the lessor of several leases wherein the ownership of the leased property is converted to the Board of Regents at the end of the lease term, changed its method of accounting for these leases from operating leases to capital lease treatment. The amount recognized as a prior period increase to net assets as of June 30, 2007 is $11,774,904. This increase in net assets is due to the difference between the previously recorded net of rental income less depreciation and the amount that would be recorded as net income using capital lease interest amortization. Capital Assets as of June 30, 2007 were restated as a result of the change in lease treatment, from $165,199,306 to $18,271,896 and were replaced by Net Investment in Capital Leases of $158,702,315 on the Statement of Net Assets. 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, 2008, the book value of the Research Foundation's deposits was $68,499,622. The bank and investment account balances at June 30, 2008 were $68,810,956 of which $67,769,750 was uninsured. Of these uninsured deposits, $11,281,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Research Foundation's name and $56,488,750 were uncollateralized. Annual Financial Report FY 2008 136 Investments: The University of Georgia Research Foundation, Inc. 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Municipal Obligation Other Investments 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 $3,480,885 1,557,910 10,060,298 21,147,955 50,967 $36,298,015 5,443,301 3,827,681 2,228,145 4,504,381 $52,301,523 $2,156,323 660,058 18,305,443 $21,121,824 $396,311 6,209,089 2,206,599 $8,811,999 $564,416 2,891,818 635,913 $4,092,147 $363,835 1,557,910 299,333 50,967 $2,272,045 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. The Real Estate Foundation's policy for managing interest rate risk is to invest only in short-term United State treasury obligations with a maximum maturity of one year. 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, 2008, $40,197,518 of the Research Foundation's applicable investments were uninsured and held by the investment counterparty's trust department or agent in the Research Foundation's name and $2,156,323 of the Real Estate Foundation's applicable investments were uninsured and held by the investment counterparty's trust department or agent, but not in the Research Foundation's name. Annual Financial Report FY 2008 137 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, 2008 are presented below. All investments are presented by investment type, and fixed income securities are presented by credit quality ratings. Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt Municipal Obligation Fair Value $10,060,298 21,147,955 50,967 $31,259,220 Aaa $1,033,795 81,815 $1,115,610 Aa A Baa Ba Unrated $0 2,953,906 50,967 $3,004,873 $0 4,563,349 $0 13,138,163 $4,563,349 $13,138,163 $0 410,722 $410,722 $9,026,503 $9,026,503 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, 2008, investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 10% Federal Home Loan Mortgage Corporation 9% 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. The Real Estate Foundation's investments increased by $64,010 due to foreign currency fluctuations between the Euro and the dollar on cash balances held in banks. Amounts held in foreign currency denominations are valued at $267,788 as of June 30, 2008. Annual Financial Report FY 2008 138 Capital Assets for Component Units: The University of Georgia Research Foundation, Inc. had Capital Assets activity as follows for the year ended June 30, 2008: 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 Equipment Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balance 7/1/2007 $110,000 0 110,000 Restated Real Estate Fdn Transfer $15,722,163 224,900 15,947,063 Adjusted Beg. Balance 7/1/2007 $15,832,163 224,900 16,057,063 Additions Reductions $4,702,061 34,149,651 38,851,712 $0 5,110,857 5,110,857 Ending Balance 6/30/2008 $20,534,224 29,263,694 49,797,918 1,142,307 0 1,142,307 2,535,466 184,134 2,719,600 3,677,773 184,134 3,861,907 5,385,599 3,167 5,388,766 5,110,857 5,110,857 3,952,515 187,301 4,139,816 737,313 737,313 404,994 $514,994 260,539 134,228 394,767 2,324,833 $18,271,896 997,852 134,228 1,132,080 2,729,827 $18,786,890 143,008 26,473 169,481 0 5,219,285 5,110,857 $44,070,997 $10,221,714 1,140,860 160,701 1,301,561 2,838,255 $52,636,173 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Research Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Transfer of Real Estate Foundation Adjusted Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $29,495 0 10,499,210 0 175,667,798 $0 $186,196,503 $29,495 10,499,210 175,667,798 $186,196,503 $0 20,688,117 56,359,497 $77,047,614 $1,231 12,960,440 3,849,754 $16,811,425 $28,264 18,226,887 228,177,541 $246,432,692 $28,264 3,595,000 $3,623,264 Notes and Loans Payable: During 2008, the Real Estate Foundation renewed a $50 million revolving credit agreement with a bank. The agreement expires on November 30, 2010. 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, 2008, amounts outstanding or issued under this agreement included borrowings of $18,226,887 and unused letters of credit and bank reserves of $8,159,715, resulting in $23,613,398 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, 2008, the rate applicable to the borrowings was 2.79563%. Annual Financial Report FY 2008 139 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, 2008, the borrowings subject to this guarantee requirement were $7,797,561. Effective July 1, 2007, the Real Estate Foundation's $50 million revolving credit agreement was amended and a new guarantee was executed to reflect the Research Foundation as guarantor. 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, 2008 is $25,665 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $17,316 on the fair value of the derivative for the year ended June 30, 2008 as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 Notes and Loans Payable Principal Interest Total $0 0 18,226,887 $18,226,887 $509,556 509,556 212,315 $1,231,427 $509,556 509,556 18,439,202 $19,458,314 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 (1.53% at June 30, 2008). The loan matures in 2031, subject to certain early repayment provisions. During the year ended June 30, 2008, principal payments of $410,000 were made. At June 30, 2008, the balance of this obligation was $8,015,000. During 2005, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on 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 Real Estate Foundation recorded a loss of $15,495 on the fair value of the derivative for the year ended June 30, 2008. During 2008, 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 4.0% fixed rate until Annual Financial Report FY 2008 140 December 3, 2012. The Real Estate Foundation paid a premium of $75,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2008 was $74,033 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $967 on the fair value of this derivative for the year ended June 30, 2008. $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, 2008, principal payments of $800,000 were made. At June 30, 2008, the balance of this obligation was $36,075,000. $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 "Bonds") and entered into an agreement (the "Loan Agreement") to loan $99,860,000 to the Real Estate Foundation. Payment of principal and interest under the Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facilities and by the Real Estate Foundation's interest in certain rents and leases derived from the facilities. The Real Estate Foundation used the proceeds of this loan to fund construction of certain real estate projects which were completed in July 2004. Borrowings under the Loan Agreement bear interest payable semiannually 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, 2008, principal payments of $1,935,000 were made. At June 30, 2008, the balance of this obligation was $94,100,000. $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. Annual Financial Report FY 2008 141 Borrowings under the Gainesville Campus Loan Agreement bear interest payable semiannually 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, 2008, principal payments of $250,000 were made. At June 30, 2008, the balance of this obligation was $7,155,000. $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. The Coverdell Entity used the proceeds of this loan to fund construction of a portion of the facility, which was completed in 2007. Borrowings under the Coverdell Loan Agreement bear interest payable semiannually 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, 2008, a principal payment of $500,000 was made on the outstanding Series 2004A bonds. At June 30, 2008, the balance of this obligation was $25,010,000. $62,475,000 Bond Issue: In 2008, the Development Authority issued $35,055,000 of Educational Facilities Current Interest Revenue Bonds (UGAREF Central Precinct, LLC Project), and $27,420,000 of Educational Facilities Convertible Revenue Bonds (UGAREF Central Precinct, LLC Project) (collectively, the "Central Precinct Bonds"). The Development Authority entered into an agreement (the "Central Precinct Loan Agreement") to loan $62,475,000 to UGAREF Central Precinct, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Central Precinct Entity"). Payment of principal and interest under the Central Precinct Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting a parking deck and building addition, and by the Central Precinct Entity's interest in certain rents and leases derived from these facilities. The Central Precinct Entity is using the proceeds of this loan to fund construction of the facilities. The building addition is reported as construction in progress at June 30, 2008. Subsequent to the issuance of these financial statements, the parking deck was placed in service on August 6, 2008. Borrowings under the Central Precinct Loan Agreement bear interest payable semiannually at fixed rates ranging from 2% to 5% depending on the schedule of bond maturities. Principal payments are due on June 15 starting in 2010 and continuing through 2038. The total balance of the obligation at June 30, 2008 is $62,475,000. During 2007, the Real Estate Foundation entered into an interest rate hedge agreement at no cost to lock in the then current interest rate on this future borrowing. This forward swap agreement expired during the year ended June 30, 2008 and the Real Estate Foundation paid a termination fee in the amount of $1,277,320. The Real Estate Foundation recorded a loss of $3,324,113 on the fair value of the derivative for the year ended June 30, 2008. Annual Financial Report FY 2008 142 Annual debt service requirements to maturity for Bonds Payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $3,595,000 4,080,000 4,225,000 4,385,000 4,540,000 31,280,000 39,435,000 49,690,000 66,780,000 24,820,000 232,830,000 (4,652,459) $228,177,541 $9,368,150 9,248,435 9,097,922 8,937,625 8,767,050 47,025,033 38,466,504 27,572,570 13,862,117 2,467,476 174,812,882 $174,812,882 Total $12,963,150 13,328,435 13,322,922 13,322,625 13,307,050 78,305,033 77,901,504 77,262,570 80,642,117 27,287,476 407,642,882 (4,652,459) $402,990,423 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, 2008, the Foundation distributed $2,544,332 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 $41 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by donors. Georgia Southern Annual Financial Report FY 2008 143 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, 2008: Cost Fair Value Money Market Accounts Mutual Funds Real Estate Total Investments $235,552 39,219,701 1,314,719 $40,769,972 $235,552 39,560,615 1,314,719 $41,110,886 Capital Assets for Component Units: Georgia Southern University Foundation, Inc. had the following Capital Assets at June 30, 2008: June 30, 2008 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 27,778 22,222 $418,082 Long-Term Liabilities for Component Units Georgia Southern Foundation, Inc. had $140,764 in Liabilities Under Split-interest Agreements as of June 30, 2008. 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. Annual Financial Report FY 2008 144 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. Capital Assets for Component Units Georgia Southern University Housing Foundation, Inc. had $ 17,917,378 in Construction Work in Progress at June 30, 2008. Long-Term Liabilities for Component Units Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $112,450,827 $112,450,827 $69,000,000 $69,000,000 $1,754,173 $1,754,173 $179,696,654 $2,800,000 $179,696,654 $2,800,000 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. 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 $35,035,000 as of June 30, 2008. 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. Pursuant to the loan agreement, the Foundation grants a pledge and Annual Financial Report FY 2008 145 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 $34,170,000 as of June 30, 2008. 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. 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, 2008. Georgia Southern University Housing Foundation Four, LLC has a bond obligation to BB&T for the acquisition and renovation of 472 beds of student housing, and the construction of four new buildings which will house 1,000 new beds of student housing. This project also includes the design, development and construction of approximately 8,700 square feet of retail space. The student housing and the retail space will be funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $69,000,000 of Student Housing Revenue Bonds, Series 2008. The bonds were issued in $5,000 denominations, and consist of $69,000,000 Serial Bonds, maturing annually through 2039. 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 July 1st, commencing in 2009. Interest payments are due every January and July 1st, commencing on July 1, 2008. Interest rates vary from 3% to 5% over the obligation term. The balance of the bond obligation was $69,000,000 as of June 30, 2008. Annual debt service requirements to maturity for revenue bonds payable are as follows: Annual Financial Report FY 2008 146 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Bond Premium/(Discount) Principal Bonds Payable Interest $2,800,000 3,850,000 3,915,000 4,255,000 4,395,000 25,650,000 32,710,000 41,480,000 36,615,000 19,125,000 3,950,000 178,745,000 951,654 $179,696,654 $6,249,103 8,559,264 8,444,236 8,289,020 8,125,201 37,770,723 31,080,775 22,007,349 9,742,000 6,143,919 1,308,275 147,719,865 $147,719,865 Total $9,049,103 12,409,264 12,359,236 12,544,020 12,520,201 63,420,723 63,790,775 63,487,349 46,357,000 25,268,919 5,258,275 326,464,865 951,654 $327,416,519 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 Booster's fiscal year is July 1 through June 30. During the year ended June 30, 2008, Southern Boosters, Inc. distributed $550,000 to the University for athletic scholarship support and approximately $359,111 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. Investments for Component Units: Southern Boosters, Inc. holds the following investments as of June 30, 2008: Annual Financial Report FY 2008 147 Certificates of Deposit Total Investments Cost $509,836 $509,836 Fair Value $509,836 $509,836 Capital Assets for Component Units: Southern Boosters, Inc. has the following Capital Assets as of June 30, 2008: June 30, 2008 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 $80,301 80,301 1,614,828 95,585 1,710,413 141,432 1,568,981 $1,649,282 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 (5.0% at June 30, 2008), through September 14, 2013, unsecured. The original note amount was $279,000 and the principal balance outstanding on the note at June 30, 2008 was $194,516. 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 (5.0% at June 30, 2008) and the note matures on January 15, 2009. This debt is secured by the Golf Practice facility. The outstanding principal balance was $359,457 at June 30, 2008. Changes in long-term liabilities for Southern Boosters, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Notes and Loans Payable Total Long Term Liabilities $578,802 $578,802 $0 $24,829 $0 $24,829 $553,973 $553,973 $383,102 $383,102 Annual requirements to maturity for notes payable are as follows: Annual Financial Report FY 2008 148 Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 Notes and Loans Payable Principal Interest Total 383,102 24,968 26,466 28,054 29,737 61,646 $553,973 $29,548 10,252 8,754 7,166 5,483 3,082 $64,285 $412,650 35,220 35,220 35,220 35,220 64,728 $618,258 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 Research Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Research Foundation's fiscal year is July 1 through June 30. During fiscal year 2008, the Research Foundation transferred $4,854,603 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. Restatement of Prior Year Net Assets: During the year ended June 30, 2008, a correction was made to prior year grants receivable. The effect of the error increased Beginning Net Assets by $49,200. Annual Financial Report FY 2008 149 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. During the year ended December 31, 2007, the Foundation distributed $1,575,933 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, GA 31698. Investments for Component Units: Valdosta State University Foundation, Inc. holds endowment and other investments in the amount of $21.1 million. The $19.2 million corpus of the endowment portion 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, 2007: M oney M arket Accounts Equity Securities M utual Funds Split Interest Investments Cost $188,254 3,184,589 12,996,017 765,801 Fair Value $188,254 3,271,607 16,892,840 792,046 Total Investments $17,134,661 $21,144,747 Annual Financial Report FY 2008 150 Capital Assets for Component Units: Valdosta State University Foundation, Inc. had the following capital assets as of December 31, 2007: December 31, 2007 Cap ital Assets not being Dep reciated: Land and other Assets Construction in Progress Total Cap ital Assets not being Dep reciated Cap ital Assets being Dep reciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Cap ital Assets being Dep reciated, Net Capital Assets, Net $2,928,106 516,913 3,445,019 34,342,521 52,966 34,395,487 3,755,741 30,639,746 $34,084,765 Long-term Liabilities for Component Units: Changes in long-term debt for Valdosta State Foundation, Inc. for the fiscal year ended December 31, 2007 are shown below: Beginning Balance January 1, 2007 Additions Reductions Ending Balance December 31, 2007 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 $394,948 21,175 1,343,920 38,120,736 596 $0 5,800,000 227,667 $5,937 7,695 473,619 385,295 596 $389,011 13,480 870,301 43,535,441 227,667 $0 5,472 787,816 1,049,705 220,776 Total Long Term Liabilities $39,881,375 $6,027,667 $873,142 $45,035,900 $2,063,769 Capital Lease Obligations: 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, 2007 is $13,480. Annual debt service requirements to maturity for capital lease obligations are as follows: Annual Financial Report FY 2008 151 Year ending December 31: 2008 1 2009 2 2010 3 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $5,472 6,597 2,753 14,822 1,342 $13,480 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 $124,922 as of December 31, 2007. The Foundation has two lines of credit and a short-term note payable with a total outstanding principal balance of $745,379 as of December 31, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 Princip al Notes and Loans Payable Interest $787,816 44,276 38,209 $870,301 $39,300 2,650 746 $42,696 Total $827,116 46,926 38,955 $912,997 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 bonds are a floating tax-exempt rate, currently 4.89%, and an associated collar with a floor of 3.25% and a ceiling of 5.75%. 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 $1,879,550 as of December 31, 2007. 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, 2007 is $35,855,891. In November 2007, The Development Authority of Lowndes County issued $5,800,000 of Series 2007 First Mortgage Revenue Bond. The Authority then loaned the proceeds to VSU Foundation, Inc. The bonds are secured by a lien upon certain leasehold deeds to secure debt Annual Financial Report FY 2008 152 and certain pledged revenues and assignment of rents and leases. The bonds bear interest at a variable rate equal to the sum of (i) 61.1% of LIBOR plus (ii) 115 basis points. Interest is due monthly on December 31, 2007, and principal is due monthly beginning November 1, 2008. The balance of the obligation at December 31, 2007 is $5,800,000. Annual debt service requirements to maturity for bonds payable are as follows: Year ending December 31: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2030 1 2 3 4 5 6-11 12-15 16-20 21-25 Bond Premium Princip al $1,049,705 1,278,009 1,351,556 1,315,093 1,448,733 7,740,827 9,446,230 11,986,281 7,653,116 43,269,550 265,891 $43,535,441 Bonds Payable Interest $2,055,495 2,011,264 1,958,675 1,909,321 1,852,630 8,299,349 6,395,659 3,746,063 765,563 28,994,019 $28,994,019 Total $3,105,200 3,289,273 3,310,231 3,224,414 3,301,363 16,040,176 15,841,889 15,732,344 8,418,679 72,263,569 265,891 $72,529,460 VSU Auxiliary Services Real Estate Foundation, Inc. VSU Auxiliary Services Real Estate Foundation (Real Estate Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Real Estate Foundation constructs auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The seven-member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Real Estate Foundation, the majority of resources or income thereon that the Real Estate Foundation holds and invests is restricted to the real estate activities of the University. Because these restricted resources held by the Real Estate Foundation can only be used by, or for the benefit of, the University, the Real Estate 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. Complete financial statements for the Foundation can be obtained from the Administrative Office at 102 Georgia Avenue, Valdosta, GA 31698. Annual Financial Report FY 2008 153 Capital Assets for Component Units: VSU Auxiliary Services Real Estate Foundation, Inc. had $9,607,301 in Construction Work in Progress as of December 31, 2007. Long-term Liabilities for Component Units: Changes in long-term debt for VSU Auxiliary Services Real Estate Foundation, Inc. for the fiscal year ended December 31, 2007 are shown below: Beginning Balance January 1, 2007 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year Revenue/M ortgage Bonds Payable $0 $84,429,716 $0 $84,429,716 $0 Revenue Bonds were issued on October 18, 2007 by the Valdosta Housing Authority. The Authority loaned the proceeds to the VSU Auxiliary Services Real Estate Foundation to finance the construction of student housing on university property. The bonds are secured by 1) the trust estate, 2) the Debt Service Reserve Fund, 3) the loan agreement, 4) project real estate and personal property set forth in the deeds and documents relating to construction and management of the project, and 5) any and all rents and leases for use of the project property. The interest rate ranges from 4% to 5%. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending December 31: 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 2033 through 2037 26-30 2038 through 2042 31-35 Bond Discount Princip al Bonds Payable Interest $0 0 0 645,000 750,000 5,275,000 8,790,000 13,325,000 18,480,000 25,615,000 12,680,000 85,560,000 (1,130,284) $84,429,716 $660,659 3,906,839 3,906,840 3,893,940 3,866,041 18,793,990 17,308,240 14,748,716 11,189,950 6,145,165 600,628 85,021,008 $85,021,008 Total $660,659 3,906,839 3,906,840 4,538,940 4,616,041 24,068,990 26,098,240 28,073,716 29,669,950 31,760,165 13,280,628 170,581,008 (1,130,284) $169,450,724 Annual Financial Report FY 2008 154 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 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 No.38, Certain Financial Statement Note Disclosures. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 300 College Drive, Albany, GA 30000. Prior Period Adjustment: A prior period adjustment in the amount of ($568,749) was made to restate the prior year's Agency Funds payable. The adjustment had the effect of reducing Beginning Net Assets for the fiscal year that ended June 30, 2008. Deposits and Investments for Component Units: Deposits: As of June 30, 2008, the carrying amount of the Foundation's bank deposits was $1,938,159 and the respective bank balances totaled $2,075,933. Of the total bank balance, $211,346 was insured through the Federal Depository Insurance Corporation (FDIC). The remaining $1,864,587 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, 2008 are summarized as follows: Annual Financial Report FY 2008 155 Investment type Certificates of Deposit General Obligation Bonds M oney M arket M utual Fund Repurchase Agreements Fair Value Investment Maturity Less Than 1 Year 1-5 Years $1,030,577 781,177 518,937 5,158,082 $7,488,773 781,177 518,937 5,158,082 $6,458,196 $1,030,577 $1,030,577 Capital Assets for Component Units: Albany State University Foundation Inc. had the following Capital Asset activity for the year ended June 30, 2008: Capital Assets, Being Depreciated: Facilities and Other Improvements Equipment Total Assets Being Depreciated Beginning Balances 7/1/2007 $37,078,604 24,340 37,102,944 Additions $41,344 63,474 104,818 Reductions $0 0 Ending Balance 6/30/2008 $37,119,948 87,814 37,207,762 Less: Accumulated Depreciation Facilities and Other improvements Equipment Total Accumulated Depreciation 812,196 8,743 820,939 968,535 9,845 978,380 1,780,731 18,588 0 1,799,319 Total Capital Assets, Being Depreciated, Net Capital Assets, net 36,282,005 $36,282,005 (873,562) ($873,562) 0 35,408,443 $0 $35,408,443 Long-term Liabilities for Component Units: The Foundation had the following activity in long-term liabilities for the year ended June 30, 2008: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $2,310,077 34,955,276 $37,265,353 $0 $87,242 $2,222,835 $2,222,835 0 23,529 34,931,747 225,000 $0 $110,771 $37,154,582 $2,447,835 Annual Financial Report FY 2008 156 Notes and Loans Payable: On May 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 outstanding loan balance as of June 30, 2008 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 original term loan was for $332,092, with interest payments at a rate of 4.130% per annum with the final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2008 is $40,946. Annual debt service requirements to maturity for Albany Municipal Coliseum installment loans with SunTrust Bank are as follows: Year ending June 30: 2009 1 Principal Notes and Loans Payable Interest $2,222,835 $162,097 Total $2,384,932 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: Year ending June 30: 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2034 Bond Premium 1 2 3 4 5-9 10-14 15-19 20-24 27-29 Princip al $225,000 230,000 240,000 250,000 3,025,000 5,335,000 7,815,000 9,975,000 7,225,000 34,320,000 611,747 $34,931,747 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 63,976,638 611,747 $64,588,385 Annual Financial Report FY 2008 157 Armstrong Atlantic State University Armstrong Atlantic State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. (Foundation) is a legally separate, taxexempt component unit of Armstrong Atlantic State University (University). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the University in support of its programs. The seven-member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is January 1 through December 31. During the year ended December 31, 2007, the Foundation distributed $501,087 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 investments in the amount of $6.6 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Armstrong Atlantic State University Foundation holds no investments in real property. Investments are comprised of the following amounts at December 31, 2007: Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $922,724 $1,525,733 383,971 2,344,517 14,922 $5,191,867 Fair Value $922,724 $1,561,235 385,261 3,698,581 13,847 $6,581,648 Annual Financial Report FY 2008 158 Armstrong Atlantic State University Educational Properties Foundation, Inc. Armstrong Atlantic State University Educational Properties Foundation, Inc. (Educational Properties) is a legally separate, tax-exempt component unit of Armstrong Atlantic State University (University). Educational Properties purchases buildings and leases them to the University for housing, recreation, etc. The five-member board of Educational Properties is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from Educational Properties, the majority of resources or income thereon that Educational Properties holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by Educational Properties can only be used by, or for the benefit of the University, Educational Properties is considered a component unit of the University and is discretely presented in the University's financial statements. Educational Properties is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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. Educational Properties' fiscal year is January 1 through December 31. Educational Properties 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 Educational Properties may be obtained from the Administrative Office at Armstrong Atlantic State University, 11935 Abercorn Street, Savannah, GA 31419. Capital Assets for Component Units: Educational Properties held the following Capital Assets as of December 31, 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 $475,561 87,372 562,933 36,534,387 2,730,336 39,264,723 6,058,887 33,205,836 $33,768,769 Annual Financial Report FY 2008 159 Long-term Liabilities for Component Units: Changes in long-term liabilities for Educational Properties for the fiscal year ended December 31, 2007 are shown below: Beginning Balance January 1, 2007 Additions Reductions Ending Balance Amounts due within December 31, 2007 One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable $618,000 42,821,797 $0 $26,858 957,620 $591,142 41,864,177 $26,778 970,000 Total Long Term Liabilities $43,439,797 $0 $984,478 $42,455,319 $996,778 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, 2007 was $591,142. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 2011 4 2012 5 Thereafter 6-14 Notes and Loans Payable Principal Interest Total $26,778 28,924 31,107 33,456 35,882 434,995 $591,142 $42,663 40,517 38,333 35,985 33,559 151,467 $342,524 $69,441 69,441 69,440 69,441 69,441 586,462 $933,666 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 rates are 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 rates are between 3.25% and 5.00%. Annual Financial Report FY 2008 160 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 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 2034 through 2038 26-30 Bond Premium/(Discount) Principal Bonds Payable Interest $970,000 980,000 1,015,000 1,050,000 1,090,000 6,065,000 7,365,000 9,125,000 10,770,000 2,775,000 41,205,000 659,177 $41,864,177 $1,824,214 1,788,914 1,757,065 1,720,802 1,682,089 7,761,445 6,438,939 4,616,790 2,079,689 235,750 29,905,697 $29,905,697 Total $2,794,214 2,768,914 2,772,065 2,770,802 2,772,089 13,826,445 13,803,939 13,741,790 12,849,689 3,010,750 71,110,697 659,177 $71,769,874 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 consolidated financial statements of the Foundation have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. 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. 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, 2008, the Foundation distributed $767,507 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 2500 Walton Way, Augusta, GA 30904. Annual Financial Report FY 2008 161 Investments for Component Units: Augusta State University Foundation holds endowment and other investments in the amount of $17 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, 2008: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Investment Pools Total Investments Cost $889,012 1,269,530 1,597,984 10,901,585 2,346,606 1,084,050 $18,088,767 Fair Value $889,012 1,299,465 1,579,577 10,485,676 1,805,394 987,332 $17,046,456 Long-term Liabilities for Component Units: Changes in long-term liabilities for Augusta State University Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $1,401,883 30,767,518 $32,169,401 $0 $142,000 $1,259,883 $142,000 269,841 30,497,677 260,000 $0 $411,841 $31,757,560 $402,000 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 $1,259,883 at June 30, 2008. The loan was for real estate improvements at the Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association. This note carries a variable interest rate of LIBOR plus 1.20% but not less than 4.41% (4.41% at June 30, 2008). 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 $4,335,779 at June 30, 2008. Annual debt service requirements to maturity for the construction loan are as follows: Annual Financial Report FY 2008 162 Year ending June 30: 2009 1 2010 2 2011 3 Principal Notes and Loans Payable Interest $142,000 142,000 975,883 $1,259,883 $53,248 46,986 40,724 $140,958 Total $195,248 188,986 1,016,607 $1,400,841 Revenue Bonds Payable: ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2008: $19,515,000 ASU Jaguar Student Housing I, LLC, Revenue Bonds, Series 2004, dated August 1, 2004, due in annual installments of $90,000 to $1,445,000, due through February 1, 2035, interest at 4.375% to 5.375%. Interest expense on the bonds totaled $988,260 during the year ending June 30, 2008. 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, 2008 is $19,345,000. ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2008: $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, 2008 totaled $497,148. Amortization of the bond premium began July 1, 2007 using the effective interest method which reduced interest expense for the year ended July 30, 2008 by $14,841. The bonds are secured by a deed on the Student Center and repayment responsibility of the bonds lies solely with the ASU Jaguar Student Center, LLC. The outstanding principal amount of the bonds as of June 30, 2008, including unamortized bond premium is $11,152,677. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $260,000 330,000 395,000 465,000 515,000 3,375,000 5,050,000 6,905,000 8,825,000 4,200,000 30,320,000 177,677 $30,497,677 Bonds Payable Interest $1,500,987 1,489,487 1,476,049 1,459,549 1,441,174 6,820,088 5,840,599 4,460,548 2,498,575 328,163 27,315,219 $27,315,219 Total $1,760,987 1,819,487 1,871,049 1,924,549 1,956,174 10,195,088 10,890,599 11,365,548 11,323,575 4,528,163 57,635,219 177,677 $57,812,896 Annual Financial Report FY 2008 163 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 is a nonprofit organization that 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 Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the AGA) to manage, operate and maintain Forest Hills Golf Club. The income of the Association is solely derived from the revenues of the Golf Club and interest income. Because 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, 2008, the Athletic Association distributed $20,041 for the support of other University programs. Complete financial statements for the Athletic Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, GA 30904-2200. Capital Assets for Component Units: Augusta State University Athletic Association held the following Capital Assets as of June 30, 2008: June 30, 2008 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 $3,432,988 943,926 4,376,914 2,585,267 1,791,647 $1,791,647 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Annual Financial Report FY 2008 164 Capital Lease Obligations Notes and Loans Payable Total Long Term Liabilities Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year $47,753 1,566,267 $1,614,020 $13,122 $13,122 $20,764 9,162 $29,926 $40,111 1,557,105 $1,597,216 $18,249 435,918 $454,167 Capital Lease Obligations: The Athletic Association leases course equipment under capital leases that expire in February 2010, April 2010, and June 2010. The terms of the leases require monthly payments totaling $2,011. Future minimum lease payments are: Year ending June 30: 2009 1 2010 2 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $24,128 19,921 44,049 3,938 $40,111 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 $12,410 as of June 30, 2008. 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, 2008. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 Notes and Loans Payable Principal Interest Total $435,918 144,492 976,695 $1,557,105 $54,883 47,019 41,000 $142,902 $490,801 191,511 1,017,695 $1,700,007 Annual Financial Report FY 2008 165 Clayton State University The Walter & Emilie Spivey Foundation The Walter & Emily 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 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, 2007, the Foundation distributed $425,941 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 $7.6 million. Investments consist of marketable securities and real property. Investments are comprised of the following amounts at December 31, 2007: Cost Fair Value Real Estate Investment Pools Suntrust Investment Pool $137,518 7,459,453 $137,518 7,459,453 Total Investments $7,596,971 $7,596,971 Capital Assets for Component Units: The Walter & Emilie Spivey Foundation held the following Capital Assets as of December 31, 2007: Annual Financial Report FY 2008 166 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 December 31, 2007 $139,882 139,882 15,384 15,384 10,769 4,615 $144,497 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 seven-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $458,366 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, Student Center Building, 2000 Clayton State Blvd, Morrow, Georgia, 30260. Investments for Component Units: Clayton State University Foundation holds endowment and other investments in the amount of $4.7 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2008: Annual Financial Report FY 2008 167 Certificates of Deposit Real Estate Investment Pools BOR Short Term Fund Total Return Fund Total Investments Cost $202,252 1,836,464 177,290 2,723,315 $4,939,321 Fair Value $202,252 1,836,464 178,574 2,509,856 $4,727,146 Capital Assets for Component Units: Clayton State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Construction in Progress Capital Assets, Net $27,638,585 $27,638,585 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Revenue/Mortgage Bonds Payable $0 $42,650,230 $0 $42,650,230 $0 Total Long Term Liabilities $0 $42,650,230 $0 $42,650,230 $0 Revenue Bonds Payable: On August 15, 2007, the Foundation through its subsidiary CSU Foundation Real Estate I LLC the "Company" issued Series 2007 revenue bonds in the face value amount of $42,450,000. The proceeds of the Series 2007 Bonds will be applied to (a) finance or refinance the costs of the acquisition, construction and equipping of student housing comprised of approximately 451 beds and related amenities and a student activity center (collectively, the "Project") located on the campus of Clayton State University ("CSU"); (ii) fund capitalized interest on the Series 2007 Bonds, (iii) pay the premium for a debt service reserve surety bond to be issued by XL Capital Assurance Inc. (the "Bond Insurer"); and (iv) pay costs of issuance of the Series 2007 Bonds, including a municipal bond insurance policy to be issued by the Bond Insurer. Annual debt service requirements to maturity for revenue bonds payable are as follows: Annual Financial Report FY 2008 168 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $0 600,000 85,000 135,000 175,000 1,745,000 3,730,000 6,440,000 10,200,000 15,465,000 3,875,000 42,450,000 200,230 $42,650,230 Bonds Payable Interest $1,852,874 2,021,318 1,997,318 1,993,918 1,988,518 9,776,952 9,232,108 8,193,815 6,371,715 3,372,439 193,750 46,994,725 $46,994,725 Total $1,852,874 2,621,318 2,082,318 2,128,918 2,163,518 11,521,952 12,962,108 14,633,815 16,571,715 18,837,439 4,068,750 89,444,725 200,230 $89,644,955 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 fiscal year of the Foundation is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2007. The amount due to Columbus State University, $279,175 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, 2008. During the year ended July 31, 2007, the Foundation distributed $983,187 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. Annual Financial Report FY 2008 169 Subsequent Event: Columbia State University Foundation, Inc. holds equity securities in the amount of $3,000,000 in Bill Heard Enterprises stock. During 2008, Bill Heard Enterprises ceased business operations and filed for chapter 11 bankruptcy. Investments for Component Units: Columbus State University Foundation, Inc. holds endowment and other investments in the amount of $35,385,669. 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, 2007: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split Interest Investments Total Investments Cost $27,006 2,844,006 1,654,062 25,968,257 776,945 1,848,188 $33,118,464 Fair Value $27,631 2,818,479 1,641,802 28,271,024 778,545 1,848,188 $35,385,669 Long-term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended July 31, 2007 are shown below: Beginning Balance August 1, 2006 Additions Reductions Ending Balance July 31, 2007 Amounts due within One Year Liabilities under split interest agreement Other Long Term Liabilities Total Long Term Liabilities $1,292,153 $1,292,153 $185,115 636,099 $821,214 $121,928 $121,928 $1,355,340 636,099 $1,991,439 $116,317 333,000 $449,317 Annual Financial Report FY 2008 170 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, 2007. The amount due to Columbus State University, $29,835,936, 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. During the year ended July 31, 2007, Foundation Properties, Inc. distributed $482,076 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 in the amount of $2,194,353 as of July 31, 2007. Investments consist of marketable securities and bonds as follows: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities $202,338 138,870 1,654,637 $200,196 135,870 1,858,287 Total Investments $1,995,845 $2,194,353 Capital Assets for Component Units: Foundation Properties, Inc. held the following Capital Assets as of July 31, 2007: Annual Financial Report FY 2008 171 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 $12,052,473 41,938,633 53,991,106 73,895,156 1,656,816 75,551,972 8,647,588 66,904,384 $120,895,490 Long-term Liabilities for Component Units: Notes and Loans Payable include an unsecured line of credit with a local bank with a maximum availability of $4,200,000. The line of credit bears interest at the prime rate, payable monthly, and expires on October 13, 2007, at which time it is expected to be renewed on substantially similar terms. The amount outstanding under the line of credit totaled $3,960,000 at July 31, 2007. There is also a note payable in the amount of $257,170 that is payable to a bank in monthly installments of $2,915, including interest at the prime rate, through November 2009. This loan is collateralized by property with a cost of $478,792. 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 Foundation Properties, Inc. for the fiscal year ended July 31, 2007 are shown below: Beginning Balance Augsut 1, 2006 Additions Reductions Ending Balance July 31, 2007 Amounts due within One Year Notes and Loans Payable Revenue/M ortgage Bonds Payable $0 70,771,806 $3,960,000 6,700,000 ($257,170) 1,016,806 $4,217,170 76,455,000 $3,974,296 1,469,916 Total Long Term Liabilities $70,771,806 $10,660,000 $759,636 $80,672,170 $5,444,212 Annual Financial Report FY 2008 172 Debt Service Obligations: Annual requirements to maturity for Notes Payable are as follows: Year ending July 31: 2008 1 2009 2 2010 3 Notes and Loans Payable Princip al Interest Total $3,974,296 15,521 227,353 $4,217,170 $88,684 19,459 6,196 $114,339 $4,062,980 34,980 233,549 $4,331,509 Annual debt service requirements to maturity for Student Housing, Educational Programming and Parking Facility revenue bonds payable are as follows: Year ending July 31: 2008 2009 2010 2011 2012 2013 through 2017 1 2 3 4 5 6-10 Princip al Bonds Payable Interest $1,469,916 12,849,909 1,420,175 36,171,000 16,549,000 7,995,000 76,455,000 $2,522,342 2,472,772 2,422,197 2,368,584 896,249 331,709 11,013,853 Total $3,992,258 15,322,681 3,842,372 38,539,584 17,445,249 8,326,709 87,468,853 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 month ended July 31, 2007. Annual Financial Report FY 2008 173 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 $243,021 and due from Columbus State University of $2,500 are not reflected on the University's Statement of Net Assets. During the year ended July 31, 2007 the Athletic Fund distributed $343,944 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. Investments for Component Units: Columbus State University Athletic Fund, Inc. holds endowment and other investments in the amount of $1,380,902. 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 July 31, 2007: Cost Fair Value Equity Securities Total Investments $1,182,841 $1,182,841 $1,380,902 $1,380,902 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 Association's fiscal year is August 1 through July 31. This financial statement represents activity for the month ended July 31, 2007. Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due to Columbus State University of $654 is not reflected on the University's Statement of Net Assets. Annual Financial Report FY 2008 174 During the year ended July 31, 2007, the Association distributed $11,659 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 $140,703. 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 July 31, 2007: Certificates of Deposit Equity M utual Funds Total Investments Cost $85,993 70,813 $156,806 Fair Value $85,993 54,710 $140,703 Capital Assets for Component Units: Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2007 as follows: Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net July 31, 2007 $9,900 400 10,300 7,816 2,484 $2,484 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 Annual Financial Report FY 2008 175 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, 2008, the Foundation distributed $896,245 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 $5.6 million, excluding investments limited to use (bond proceeds). The $3.1 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, 2008: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments Cost $923,540 892,193 203,473 160,602 683,340 2,767,193 92,000 $5,722,341 Fair Value $923,540 892,193 202,529 157,107 644,207 2,650,760 92,000 $5,562,336 Capital Assets for Component Units: Fort Valley State University Foundation, Inc. holds the following capital asset amounts at June 30, 2008: Annual Financial Report FY 2008 176 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, 2008 $298,607 1,931,926 2,230,533 1,280,326 52,600 1,332,926 264,396 1,068,530 $3,299,063 Long-term Liabilities for Component Units: Changes in long-term liabilities for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/M ortgage Bonds Payable Total Long Term Liabilities $1,477,315 43,254,894 $44,732,209 $131,653 18,236,036 $18,367,689 $66,718 $66,718 $1,542,250 61,490,930 $63,033,180 $181,876 70,000 $251,876 Notes and Loans Payable: The Foundation has two notes payable to the Department of Agriculture, Rural Business Cooperative Services through 2031 which bear interest at 1%. The notes are collateralized by real and personal property including mortgage loans. The notes payable balances at June 30, 2008 were $1,160,702. The Foundation has two banks loans due in 2009 at 5% which were for the purchase of a building and for Foundation operations. The loan balances at June 30, 2008 were $381,548. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Annual Financial Report FY 2008 177 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal Notes and Loans Payable Interest $181,876 300,622 51,237 51,752 52,272 269,344 283,149 297,958 54,040 $1,542,250 $27,660 23,156 10,647 10,131 9,612 40,074 26,272 11,336 1,025 $159,913 Total $209,536 323,778 61,884 61,883 61,884 309,418 309,421 309,294 55,065 $1,702,163 Revenue Bonds Payable: In June 2006, the Development Authority of Peach County (the Authority) issued $44 million in Revenue Bonds Series 2006 (the Bonds) and entered into an agreement to loan $44 million to the Foundation for Student Housing construction. The bonds are payable solely from the Trust Estate, as defined in the Indenture. Interest rates vary from 4.0% - 5.0%. The bond liability at June 30, 2008 was $43,289,857, net of bond discount of $770,143. In June 2008, the Authority issued $18 million in Revenue Bonds Series 2008 (the Bonds) and entered into an agreement to loan $18 million to the Foundation for additional Student Housing construction. The bonds are secured by a letter of credit issued by Wachovia Bank in favor of the Authority. The letter of credit must be renewed annually. Effective July 1, 2008, the Foundation entered into an interest rate Swap Agreement to mitigate the risk of future rate fluctuations of the variable rates on the Series 2008 Bonds. Pursuant to the Swap Agreement, the Foundation will pay a fixed rate of 4.75% to the Swap Provider in exchange for the Swap Provider's payment of a floating rate. The Swap Agreement is in the notional amount of $18,265,000. The bond liability at June 30, 2008 was $18,201,073, net of bond discount of $63,927. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $70,000 130,000 195,000 290,000 345,000 3,175,000 6,590,000 9,485,000 15,935,000 26,110,000 62,325,000 (834,070) $61,490,930 Bonds Payable Interest $2,811,113 2,870,447 2,865,247 2,859,071 2,843,970 13,938,661 12,971,466 11,112,236 8,094,179 3,328,711 63,695,101 $63,695,101 Total $2,881,113 3,000,447 3,060,247 3,149,071 3,188,970 17,113,661 19,561,466 20,597,236 24,029,179 29,438,711 126,020,101 (834,070) $125,186,031 Annual Financial Report FY 2008 178 Georgia College & State University 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, 2008, the Alumni Association distributed $199,379 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, 2008: Cost Fair Value M oney M arket Accounts Corporate Bonds Equity Securities M utual Funds Real Estate $255,758 1,342,565 3,007,282 554,998 3,500 $255,758 1,363,987 3,333,208 598,369 3,500 Total Investments $5,164,103 $5,554,822 Capital Assets for Component Units: Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2008: Annual Financial Report FY 2008 179 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2008 $24,000 24,000 227,692 110,600 338,292 280,279 58,013 $82,013 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-five 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, 2008, the Foundation distributed $217,464 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: Effective January 1, 2007, the University transferred ownership of certain endowment assets to the Foundation. During the year ended June 30, 2008, it was determined by the Board of Regents that ownership of these assets should not have transferred; rather the Foundation should hold the assets and invest them with the other endowment assets of the Foundation. The effect on Net Assets from transferring the endowment investments back to the University is a decrease in Beginning Net Assets of ($1,826,301). Annual Financial Report FY 2008 180 Investments for Component Units: Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $14.8 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 may 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, 2008: Money Market Accounts Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments Cost $3,663,279 2,598,662 6,748,149 1,025,000 380,000 $14,415,090 Fair Value $3,663,279 2,647,560 7,003,133 1,105,096 380,000 $14,799,068 Capital Assets for Component Units: Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: 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 M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2008 $372,188 $1,889,906 2,262,094 3,892,722 49,139 3,941,861 108,695 3,833,166 $6,095,260 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, 2008 are shown below: Annual Financial Report FY 2008 181 Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $46,652 2,670,957 109,448,601 $112,166,210 $0 161,992 $161,992 $5,742 166,667 262,424 $434,833 $40,910 2,666,282 109,186,177 $111,893,369 $0 455,000 $455,000 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 + 1.88% (4.3375% at June 30, 2008). 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, 2008 was $2,666,282. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 Princip al Notes and Loans Payable Interest $0 2,666,282 $2,666,282 $115,650 33,731 $149,381 Total $115,650 2,700,013 $2,815,663 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 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, 2008 was $7,034,916, net of unamortized premium of $9,916. 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 Annual Financial Report FY 2008 182 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, 2008 was $102,151,261, net of unamortized discount of $318,739. 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. Interest expense and an increase in liability from interest rate swap transactions of $5,970,968 have been recorded as of June 30, 2008. 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: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Premium/(Discount) Princip al $455,000 590,000 760,000 945,000 1,140,000 9,200,000 16,675,000 25,840,000 37,655,000 16,235,000 109,495,000 (308,823) $109,186,177 Bonds Payable Interest $5,099,056 5,075,961 5,045,008 5,006,253 4,957,346 23,699,463 20,684,888 15,585,686 8,122,261 195,040 93,470,962 $93,470,962 Total $5,554,056 5,665,961 5,805,008 5,951,253 6,097,346 32,899,463 37,359,888 41,425,686 45,777,261 16,430,040 202,965,962 (308,823) $202,657,139 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 Annual Financial Report FY 2008 183 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, 2008, the Foundation distributed $1,653,246 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Georgia Southwestern State University Business Office, 800 Georgia Southwestern State University Drive, Americus, GA 31709. Investments for Component Units: Georgia Southwestern Foundation holds endowment and other investments in the amount of $24.6 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Cost Fair Value M oney M arket Accounts Certificates of Deposit Corporate Bonds & Fixed Income Funds Equity Securities & Funds $1,066,144 2,045,953 2,023,991 18,636,412 $1,066,144 2,045,953 2,010,197 19,501,176 Total Investments $23,772,500 $24,623,470 Capital Assets for Component Units: Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 $131,199 224,384 355,583 21,766,967 987,111 22,754,078 1,530,319 21,223,759 $21,579,342 Annual Financial Report FY 2008 184 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%. Longterm liability activity for the year ended June 30, 2008 is as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable $27,233,914 $0 $254,020 $26,979,894 $65,000 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $65,000 105,000 145,000 190,000 235,000 2,010,000 3,760,000 5,220,000 6,570,000 8,815,000 27,115,000 (135,106) $26,979,894 Bonds Payable Interest $1,274,108 1,271,508 1,267,308 1,261,507 1,253,907 6,073,617 5,492,738 4,495,212 3,151,881 1,232,050 26,773,836 $26,773,836 Total $1,339,108 1,376,508 1,412,308 1,451,507 1,488,907 8,083,617 9,252,738 9,715,212 9,721,881 10,047,050 53,888,836 (135,106) $53,753,730 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 Annual Financial Report FY 2008 185 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, 2008, the Foundation distributed $4,662,283 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 $25.5 million. The $14.1 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Kennesaw State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 4% of the 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, 2008: Cost Fair Value Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Ventures/Partnerships $1,037,701 5,993,073 2,546,066 15,892,885 2,735,816 20,304 $1,037,701 5,373,354 2,537,368 13,682,852 2,863,007 11,982 Total Investments $28,225,845 $25,506,264 Capital Assets for Component Units: Kennesaw State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: Annual Financial Report FY 2008 186 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 M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2008 $6,006,139 68,492,095 74,498,234 90,546,722 3,654,007 94,200,729 14,759,875 79,440,854 $153,939,088 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2007 $223,884 2,220,615 181,790,167 0 $184,234,666 Additions $0 561,294 93,123,701 548,548 $94,233,543 Reductions $20,012 2,220,615 4,514,655 $6,755,282 Ending Balance June 30, 2008 $203,872 561,294 270,399,213 548,548 $271,712,927 Amounts due within One Year $20,012 561,294 4,400,000 548,548 $5,529,854 Notes and Loans Payable: During the year ending June 30, 2008, the Foundation entered into an unsecured line of credit of $5,000,000 with a financial institution to provide interim financing for new dining hall construction. The line of credit bears interest at the 30 day LIBOR plus 1.5% (3.96% at June 30, 2008) and matures April 2009. The line of credit balance was $561,294 at June 30, 2008. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 Principal Notes and Loans Payable Interest $561,294 $561,294 $18,000 $18,000 Total $579,294 $579,294 Revenue Bonds Payable: During the year ending June 30, 2004, the Foundation assumed Educational Facilities Revenue Bonds, Series 1998, issued by the Development Authority of Cobb County. The Series 1998 bonds were issued to finance the acquisition of an existing facility. The Foundation assumed the Annual Financial Report FY 2008 187 bonds in conjunction with acquiring the property that the bonds originally financed. The obligations of the Foundation under the bond documents are nonrecourse obligations. The bonds were issued in the aggregate amount of $15,990,000 and will mature in August 2031, subject to mandatory and optional redemption provisions. The bonds bear interest payable on the first business day of each month at a variable interest rate determined weekly. Interest accrues at the weekly rate until converted to another variable rate or the fixed rate in accordance with the terms of the Indenture. The outstanding principal obligation on the Series 1998 bond issue was $10,865,000 at June 30, 2008. When the Foundation assumed the 1998 Series bonds, they also assumed an interest-rate swap transaction that was entered into originally to convert a portion of its variable-rate bond obligations to fixed rates. A liability from interest-rate swap transactions of $548,548 has been recorded as of June 30, 2008 and is reported in Other Liabilities on the Statement of Net Assets. When the Foundation assumed the 1998 Series bonds, they also assumed a forward purchase agreement that was entered into originally to produce a guaranteed yield to the trustee. A receivable from forward purchase agreement transactions of $270,430 has been recorded as of June 30, 2008 and is reported in Other Assets on the Statement of Net Assets. During the year ended June 30, 2005, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2004 bonds were issued in the aggregate principal amount of $155,060,000. The bonds consist of six series and were issued to finance the cost of construction of 132 beds of new student housing, purchase and renovate the property known as "Chastain Pointe", refund the 2003A and 2003B bond series, including payment of swap termination fees, and finance or refinance certain parking facilities. The bonds bear interest payable semiannually at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. The outstanding principal obligations on the Series 2004 bond issues were $148,065,000 at June 30, 2008. During the year ended June 30, 2007, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2006A and B bonds were issued to repay an interim loan incurred to finance the acquisition of an office building on approximately 6.3 acres, Town Point, the acquisition of approximately 7.2 acres of unimproved land for future development, to pay the cost of issuance of the 2006 bonds and to pay a portion of the premium for a surety bond. The bonds were issued in the aggregate principal amount of $15,055,000. The Series 2006A bonds will mature in July 2031, subject to mandatory and optional redemption provisions. The Series 2006B bonds will mature in July 2013, subject to mandatory and optional redemption provisions. The bonds bear interest payable semiannually at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008, the applicable interest rates range from 4% to 5.34%. The outstanding principal obligations on the Series 2006 bond issues were $14,685,000 at June 30, 2008. During the year ended June 30, 2008, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2007 bonds were issued to finance the costs of acquisition, construction and equipping of a parking deck containing approximately 2,500 parking spaces on land leased by KSU Central Parking Deck Real Estate Annual Financial Report FY 2008 188 Foundation, LLC, and to fund capitalized interest, debt service reserve, and pay a portion of the costs of issuance of the Series 2007 Parking Facilities Bonds. The bonds were issued in the aggregate amount of $38,550,000 and will mature in July 2038, subject to mandatory and optional redemption provisions. The bonds bear interest, payable semiannually, at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008, the applicable interest rates ranged from 4% to 4.75%. The outstanding principal obligation on the Series 2007 bond issue was $38,550,000 at June 30, 2008. During the year ended June 30, 2008, the Development Authority of Cobb County issued student housing revenue bonds and loaned the proceeds to the Foundation. The Series 2007A, B and C bonds were issued in the aggregate principal amount of $53,320,000 to finance the acquisition, construction, renovation, furnishing and equipping of student housing to be located on the campus of Kennesaw State University on land leased by Village II Real Estate Foundation, LLC, fund a debt service reserve, fund capitalized interest on the Series 2007 bonds, and pay all or a portion of the costs of issuing the Series 2007 bonds. The Series 2007 bonds will mature in July 2038, subject to mandatory and optional redemption provisions. The bonds bear interest, payable semiannually, at a fixed interest rate set at issuance. Interest accrues at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008 the applicable interest rates ranged from 3.5% to 5.25%. The outstanding principal obligations on the Series 2007A, B and C bond issues were $53,320,000 at June 30, 2008. Annual debt service requirements to maturity for the bond issues detailed above are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $4,400,000 6,105,000 6,340,000 6,585,000 6,830,000 38,380,000 42,575,000 50,505,000 48,755,000 49,365,000 5,645,000 265,485,000 4,914,213 $270,399,213 Bonds Payable Interest $12,097,845 11,918,914 11,712,508 11,506,406 11,284,434 52,474,361 43,682,816 32,177,650 18,405,094 8,496,495 141,131 213,897,654 $213,897,654 Total $16,497,845 18,023,914 18,052,508 18,091,406 18,114,434 90,854,361 86,257,816 82,682,650 67,160,094 57,861,495 5,786,131 479,382,654 4,914,213 $484,296,867 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 Annual Financial Report FY 2008 189 available to the University in support of its programs. The seven member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year ends on June 30th each year. During the year ended June 30, 2008, the Foundation distributed $1,414,745 to or for the benefit of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation may be obtained from their Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the University's website at www.ngcsu.edu and click on "Alumni & Friends" to go to the Foundation's page. Investments for Component Units: North Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $29.2 million. The $23.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. North Georgia College & State University Foundation, in conjunction with the donors, has established a spending plan whereby 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve. Investments are comprised of the following amounts at June 30, 2008: Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate Total Investments Cost $743,208 200,000 1,004,030 25,267,777 1,648,677 $28,863,692 Fair Value $743,208 201,938 717,180 25,857,597 1,648,677 $29,168,600 Capital Assets for Component Units: North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: Annual Financial Report FY 2008 190 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, 2008 $39,005 20,280,552 20,319,557 585,065 16,875 601,940 27,000 574,940 $20,894,497 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the year ended June 30, 2008 are as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $22,665 300,873 46,979,761 $47,303,299 $2,547 37,896 $40,443 $0 394,758 $394,758 $25,212 338,769 46,585,003 $46,948,984 $0 338,769 590,000 $928,769 Notes and Loans Payable: The $338,769 Notes and Loans Payable balance at June 30, 2008 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 less .50% (4.5% at June 30, 2008). Payments of quarterly interest only are required through January 5, 2009, at which time the line of credit matures. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 Notes and Loans Payable Principal Interest Total 1 $338,769 $8,000 $346,769 Annual Financial Report FY 2008 191 Revenue Bonds Payable: In August 2001, the Downtown Development Authority of the City of Dahlonega (the Authority) issued $10.8 million in Revenue Bonds Series 2001 (the Bonds) and entered into an agreement to loan $10.8 million to the Foundation for Student Housing construction. The bonds were secured by a letter of credit issued by a financial institution in favor of the Authority. The letter of credit must be renewed annually. Borrowings under the agreement were subject to an annual fee of .25% of the letter of credit amount. The loan was paid off in February, 2007 with proceeds of the Series 2007 Bond Issue. In February 2007, the Student Housing financed the retirement of the Series 2001A Bonds and debt associated with the purchase of real estate held for investment with the Downtown Development Authority of the City of Dahlonega 2007 Series C Revenue Bonds (the C Bonds) totaling $16,215,000. The C Bonds carried interest ranging from 3.63% to 5.00%, payable semiannually on January 1 and July 1 of each year beginning July 1, 2007. In February 2007,the Park & Recreation Center financed the acquisition and renovation of an existing office building and the construction of a Recreation Center and Parking Deck for the North Georgia College & State University with the Downtown Development Authority of the City of Dahlonega 2007 Series A & B Revenue Bonds (the A & B Bonds) totaling $30,270,000. The Series A & B Bonds carry interest ranging from 3.63% to 5.00%, payable semi-annually on January 1 and July 1 of each year beginning July 1, 2007. Annual debt service obligations to maturity for the revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) Principal Bonds Payable Interest Total 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 $590,000 525,000 585,000 670,000 835,000 4,905,000 7,530,000 11,340,000 8,430,000 10,695,000 46,105,000 480,003 $46,585,003 $2,090,515 2,069,015 2,047,455 2,023,410 1,993,052 9,293,069 7,887,385 5,693,688 2,981,675 940,319 37,019,583 $37,019,583 $2,680,515 2,594,015 2,632,455 2,693,410 2,828,052 14,198,069 15,417,385 17,033,688 11,411,675 11,635,319 83,124,583 480,003 $83,604,586 Savannah State University Savannah State University Foundation, Inc. Savannah State University Foundation, Inc., a Georgia non-profit corporation (the "Foundation") adopted resolutions authorizing the organization of SSU Foundation Real Estate Ventures, LLC (the "LLC"), a Georgia limited liability company of which the Foundation is the sole member, for the purpose of acquiring, renovating, equipping and leasing to the Board of Regents for the Annual Financial Report FY 2008 192 benefit of the University. Although the University does not control transactions of the Foundation, all activity of the Foundation is restricted for the benefit of the University. As such, the Foundation (including the LLC) is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation (including the LLC) is a private, nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from Savannah State University, Office of Fiscal Affairs, Colston Administration Building, P. O. Box 20419, Savannah, Georgia, 31404. Investments for Components Units: Savannah State University Foundation, Inc. held the following investments at June 30, 2008: Fair Value M oney M arket Accounts Equity Securities M utual Funds $7,549 11,296 138,722 Total Investments $157,567 Capital Assets for Component Units: Savannah State University Foundation, Inc. held the following capital assets at June 30, 2008: June 30, 2008 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 $1,712,590 5,641,394 7,353,984 9,443,150 9,443,150 124,662 9,318,488 $16,672,472 Annual Financial Report FY 2008 193 Long-term Liabilities for Component Units: Changes in long-term debt for Savannah State University Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $49,220,000 $0 $49,220,000 $0 $49,220,000 $0 $49,220,000 $110,000 $110,000 The Savannah Economic Development Authority offered Series 2008 bonds in February 2008 in the form of two issues for $26,245,000 (2008A) and $22,975,000 (2008B). The proceeds of the bond issues were used to construct and equip a dining/recreational facility, acquire and enhance an existing apartment complex and convert it to a student housing facility, fund capitalized interest on the bonds, and pay the costs of issuance of the bonds. In order to mitigate interest rate risk associated with the Series 2008A and 2008B bonds, the Foundation entered into two interest rate swap agreements with Wachovia Bank, N.A. Pursuant to the agreements, the Foundation pays a fixed rate of 4.3862% on the Series 2008A bonds and a fixed rate of 4.5550% on the Series 2008B bonds based on the outstanding principal of the respective bond issues. At June 30, 2008, the Foundation recorded an unrealized loss on the fair value of the interest rate swap agreements of $3,853,970. This loss is reported as Other Liabilities (current) on the Statement of Net Assets and as a component of Interest Expense on the Statement of Revenues, Expenses and Changes in Net Assets. Annual debt service requirements to maturity for Bonds Payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 1 2 3 4 5 6-10 11-15 16-20 21-25 Princip al $110,000 245,000 335,000 435,000 545,000 4,655,000 8,785,000 14,520,000 19,590,000 $49,220,000 Bonds Payable Interest $2,197,267 2,191,938 2,180,713 2,165,436 2,145,660 10,246,997 8,850,311 6,389,782 2,474,963 $38,843,067 Total $2,307,267 2,436,938 2,515,713 2,600,436 2,690,660 14,901,997 17,635,311 20,909,782 22,064,963 $88,063,067 Annual Financial Report FY 2008 194 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 seven member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $1,088,250 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office at 1100 S. Marietta Parkway, Marietta GA 30060 or from the Foundation's website at www.spsu.edu. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment and other investments in the amount of $8.1 million. The $1.8 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Southern Polytechnic State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the average of the past 3 years earnings may be used for the endowments designated purpose. Investments are comprised of the following amounts at June 30, 2008: Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $5,268,640 2,285,126 2,029,254 $9,583,020 Fair Value $3,687,291 2,342,465 2,029,154 $8,058,910 Annual Financial Report FY 2008 195 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, 2008 are as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Other Long Term Liabilities $34,357,823 551,896 $0 $924,695 $33,433,128 $970,000 9,786 542,110 Total Long Term Liabilities $34,909,719 $0 $934,481 $33,975,238 $970,000 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $970,000 1,000,000 1,030,000 1,065,000 1,100,000 6,250,000 8,010,000 10,275,000 3,430,000 33,130,000 303,128 $33,433,128 Bonds Payable Interest 1,576,020 1,546,920 1,515,920 1,481,415 1,443,075 6,478,912 4,715,988 2,451,569 259,250 21,469,069 $21,469,069 Total $2,546,020 2,546,920 2,545,920 2,546,415 2,543,075 12,728,912 12,725,988 12,726,569 3,689,250 54,599,069 303,128 $54,902,197 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 Annual Financial Report FY 2008 196 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, 2007 through December 31, 2007. The due from amount on the Foundation's Statement of Net Assets does not agree with the University's statement due to the difference in fiscal year ends. Investments carried as Net Investment in Capital Leases and valued at $32.2 million and the associated bond debt of $32.3 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, 2007, the Foundation distributed $1,727,291 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Development and Alumni Services at 1901 Maple Street, Carrollton Georgia 30118. Investments for Component Units: University of West Georgia Foundation, Inc. holds endowment investments in the amount of $22.9 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 accounts. The University of West Georgia Foundation, Inc. investments was comprised of the following amounts at December 31, 2007: Cash held by investment organization Certificates of Deposit Government and Agency Securities Equity Securities and Options M utual Funds Cost $4,828,077 1,325,581 4,489,325 10,597,237 286,490 Fair Value $4,828,077 1,325,581 4,590,574 11,818,517 288,204 Total Investments $21,526,710 $22,850,953 Annual Financial Report FY 2008 197 Capital Assets for Component Units: The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 2007: Dec. 31, 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 $2,320,036 604,639 2,924,675 3,786,134 3,786,134 299,735 3,486,399 $6,411,074 Long-term Liabilities for Component Units: Long-term liability activity for the Foundation for the year ended December 31, 2007 was as follows: Beginning Balance Jan. 1, 2007 Additions Reductions Ending Balance Dec. 31, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/M ortgage Bonds Payable Total Long Term Liabilities $56,377 6,095,000 33,189,181 $39,340,558 $17,976 1,488,583 $1,506,559 $9,934 1,100,000 839,743 $1,949,677 $64,419 6,483,583 32,349,438 $38,897,440 $0 5,303,552 870,000 $6,173,552 Notes and Loans Payable: During 2007, the Foundation renewed its mortgage collateralized by an apartment complex purchased by the Foundation after making a principal payment of $1,100,000. The principal amount of the loan was $4,600,000. The mortgage note payable is payable in monthly installments of interest computed at the London Interbank Rate (LIBOR) plus 1.20% per annum adjusted monthly as of the first business day of each month. At December 31, 2007 the rate was 6.42%. Principal is due at September 29, 2008. In October 2007, The Foundation obtained a mortgage collateralized by real estate in order to construct a parking lot. The principal balance at December 31, 2007 was $1,488,583. The mortgage note payable is payable in six monthly installments of interest and fifty four payments of principal and interest based upon a twenty year amortization schedule. The final payment shall include all principal and interest due. Interest is computed at the rate of London Annual Financial Report FY 2008 198 Interbank rate (LIBOR) plus 1.00% per annum adjusted monthly as of the first business day of each month. At December 31, 2007 the rate was 6.22%. Principal is due October 19, 2012. The debt payment schedule below reflects an accelerated payment schedule by the Foundation. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 2011 4 Principal Notes and Loans Payable Interest $5,303,552 482,975 509,833 187,223 $6,483,583 $288,816 52,115 25,258 2,245 $368,434 Total $5,592,368 535,090 535,091 189,468 $6,852,017 Revenue Bonds Payable: Student Housing Bonds are issued by the University of West Georgia Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia. Series 2004A bonds were issued on October 1, 2004 in the amount of $19,175,000 to fund the Construction of Phase II. The bonds bear interest rates ranging from 3.0% to 5.0%. The balance of the obligation as of 12/31/2007 is $18,900,000. 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 rate of 3.4%. The balance of the obligation as of 12/31/2007 is $0. 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%. The balance of the obligation as of 12/31/2007 is $13,130,000. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 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 Princip al $870,000 910,000 1,000,000 1,040,000 1,075,000 6,025,000 7,430,000 9,320,000 4,360,000 32,030,000 319,438 $32,349,438 Bonds Payable Interest $1,391,369 1,363,344 1,328,819 1,294,569 1,253,494 5,598,937 4,232,731 2,342,683 303,107 19,109,050 $19,109,050 Total $2,261,369 2,273,344 2,328,819 2,334,569 2,328,494 11,623,937 11,662,731 11,662,683 4,663,107 51,139,050 319,438 $51,458,488 Annual Financial Report FY 2008 199 UWG Real Estate Foundation, Inc. UWG Real Estate Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of 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 Net Investment in Capital Leases and valued at $30.1 million and the associated long-term bond debt of $30.6 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. Capital Assets for Component Units: The UWG Real Estate Foundation, Inc. holds $17,700 in Construction in Progress as of June 30, 2008. 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. Series 2004 bonds were issued on December 20, 2004 in the amount of $30,720,000 to fund the construction of Campus Center. The bonds bear interest rates ranging from 3.0% to 5.25%. The balance of the obligation as of 06/30/2008 is $30,360,000. Changes in long-term liabilities for UWG Real Estate Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Annual Financial Report FY 2008 200 Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $30,922,900 $30,922,900 $0 $367,476 $0 $367,476 $30,555,424 $30,555,424 Debt Service Obligations: Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Premium/(Discount) Principal Bonds Payable Interest $390,000 425,000 465,000 505,000 545,000 3,425,000 4,955,000 7,210,000 8,765,000 3,675,000 30,360,000 195,424 $30,555,424 $1,410,383 1,395,545 1,378,326 1,360,770 1,342,395 6,360,389 5,493,388 3,954,888 1,928,620 174,207 24,798,911 $24,798,911 Total $1,800,383 1,820,545 1,843,326 1,865,770 1,887,395 9,785,389 10,448,388 11,164,888 10,693,620 3,849,207 55,158,911 195,424 $55,354,335 $390,000 $390,000 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 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 Annual Financial Report FY 2008 201 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, 2008, the Foundation distributed $384,327 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, 2008: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities M utual Funds $2,058,184 373,354 4,613,670 2,122,807 $2,079,878 364,589 4,530,894 2,151,762 Total Investments $9,168,015 $9,127,123 Capital Assets for Component Units: Abraham Baldwin Agricultural College Foundation, Inc. held the following capital assets as of June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $2,816,569 2,816,569 41,176,195 2,469,278 43,645,473 5,483,974 38,161,499 $40,978,068 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Annual Financial Report FY 2008 202 Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2007 $785,075 48,235,847 $49,020,922 Additions $474,370 $474,370 Reductions $85,456 827,330 $912,786 Ending Balance June 30, 2008 $1,173,989 47,408,517 $48,582,506 Amounts due within One Year $141,908 925,000 $1,066,908 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 the note totaled $654,119 at June 30, 2008. The Foundation has a note payable to First Community Bank of Tifton dated October 15, 2007 for $474,370 payable in nine equal and consecutive annual installments of $70,265 each and a final installment of unpaid principal and accrued interest on October 15, 2017. The interest rate is a variable rate at 0% above the Wall Street Journal Prime Rate. Security for the note is real estate. The note balance at June 30, 2008 is $474,370. The Foundation has a credit line of $75,000 with South Georgia Banking Company which matures on January 9, 2009 and is renewable at maturity. The interest rate is variable based on the Wall Street Journal Prime Rate. Interest is payable at maturity. This credit line has an outstanding balance of $45,500 at June 30, 2008. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 Princip al Notes and Loans Payable Interest Total 1 $141,908 2 102,401 3 108,780 4 115,948 5 124,815 6-10 580,137 $1,173,989 $75,057 67,864 61,485 54,317 45,450 88,729 $392,902 $216,965 170,265 170,265 170,265 170,265 668,866 $1,566,891 Revenue Bonds Payable: First ABAC, LLC 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 Annual Financial Report FY 2008 203 Corporation. The principal balance of these bonds at June 30, 2008 totals $29,420,000. 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 $200,566. Second ABAC, LLC 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, 2008 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 $3,509. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Princip al $925,000 980,000 990,000 1,040,000 1,110,000 6,530,000 8,865,000 12,035,000 8,425,000 5,595,000 46,495,000 913,517 $47,408,517 Bonds Payable Interest $2,035,993 2,010,043 1,982,081 1,947,293 1,907,387 8,915,534 7,230,840 4,708,728 2,096,713 727,625 33,562,237 $33,562,237 Total $2,960,993 2,990,043 2,972,081 2,987,293 3,017,387 15,445,534 16,095,840 16,743,728 10,521,713 6,322,625 80,057,237 913,517 $80,970,754 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 forty member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain Annual Financial Report FY 2008 204 revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is April 1 through March 31. Amounts reported due to or due from the College do not agree because of the different fiscal year ends. During the year ended March 31, 2008, the Foundation distributed $663,627 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, Inc. holds endowment and other investments in the amount of $14.6 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at March 31, 2008: Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Total Investments Cost $274,991 418,771 2,730,921 11,610,022 $15,034,704 Fair Value $274,991 418,771 2,653,877 11,208,701 $14,556,340 Capital Assets for Component Units: Capital Assets at March 31, 2008 were as follows: 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 March 31, 2008 $2,037,963 2,037,963 2,950,796 5,527 2,956,323 191,656 2,764,667 $4,802,630 Long-term Liabilities for Component Units: Long-term liability activity for the year ended March 31, 2008 was as follows: Annual Financial Report FY 2008 205 Liabilities under split interest agreement Notes and Loans Payable Total Long Term Liabilities Beginning Balance April 1, 2007 Additions $0 2,424,945 $2,424,945 $163,601 $163,601 Reductions Ending Balance March 31, 2008 Amounts due within One Year $0 47,717 $47,717 $163,601 2,377,228 $2,540,829 $17,190 50,833 $68,023 In September 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 in March 2006, principle and interest became payable in monthly installments of $15,258. The note matures in March 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: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2015 6-7 Principal Notes and Loans Payable Interest $50,833 53,763 56,862 59,807 63,586 2,092,377 $2,377,228 $132,263 129,333 126,234 123,289 119,510 243,070 $873,699 Total $183,096 183,096 183,096 183,096 183,096 2,335,447 $3,250,927 The Liabilities under Split Interest Agreement represents a charitable remainder annuity trust that was established during the fiscal year by a local family naming the Foundation as trustee and ultimate beneficiary of the trust. Under the terms of the trust, the grantor is paid an annuity amount equal to nine percent (9%) of the net fair market value of the assets of the trust as of the date of the Trust in equal quarterly installments from trust income and, to the extent income is not sufficient, from principal for the lifetime of the last surviving grantor. 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 Annual Financial Report FY 2008 206 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, 2007, the Foundation distributed $777,645 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 $11.5 million. Gainesville State College Foundation, Inc., 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 December 31, 2007: Cash held by investment organization Money Market Accounts Certificates of Deposit Equity Securities Mutual Funds Total Investments Cost $944,800 339,458 564,000 1,372,742 7,041,811 $10,262,811 Fair Value $1,577,112 339,458 564,000 1,631,085 7,376,536 $11,488,191 Capital Assets for Component Units: Gainesville State College Foundation, Inc. holds the following Capital Assets as of December 31, 2007: Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets, Net $8,400 8,400 $8,400 Annual Financial Report FY 2008 207 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 University. 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, 2007, the Foundation distributed $37,409 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 $5.5 million. The Foundation also holds investments in real property valued at $2.8 million. Investments are comprised of the following amounts at December 31, 2007: M utual Funds Venture Capital Real Estate Cost $2,917,893 130 2,753,609 Fair Value $5,505,264 130 2,753,609 Total Investments $5,671,632 $8,259,003 Capital Assets for Component Units: The following represents Gordon College Foundation, Inc.'s Capital Assets as of December 31, 2007: Annual Financial Report FY 2008 208 Capital Assets not being Depreciated: Construction in Progress Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net December 31, 2007 $8,286,475 8,286,475 12,649,270 582,676 13,231,946 898,230 12,333,716 $20,620,191 Long-term Liabilities for Component Units: Long-term liability activity for the year ended December 31, 2007 was as follows: Beginning Balance January 1, 2007 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $57,249 0 15,099,554 $15,156,803 $0 2,046,942 18,890,190 $20,937,132 $7,574 (240,446) ($232,872) $49,675 2,046,942 34,230,190 $36,326,807 $7,987 193,642 415,000 $616,629 Notes and Loans Payable: In July 2007, Gordon College Properties Foundation, LLC purchased real estate located on Georgia Avenue in Barnesville Georgia. Two properties were purchased and each was financed with a one-year note payable to First National Bank of Barnesville with interest due at maturity at 8.25%. The notes in the amount of $142,592 and $51,050 are due on June 30, 2008. In October 2007, Gordon College Properties Foundation, LLC acquired 70 acres of vacant land on Collier Road in Barnesville, Georgia. To purchase the land, the LLC received proceeds from a note payable in the amount of $1,853,300 from United Bank. Interest of 6.88% is due annually with the total principal due in October 2009. These real estate purchases were made with the intent that Gordon College would purchase the properties from the Foundation at such time that funds are available. The associated real estate is reported as Investments on the Statement of Net Assets. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Annual Financial Report FY 2008 209 Year ending December 31 2008 1 2009 2 Princip al Notes and Loans Payable Interest Total $193,642 1,853,300 $2,046,942 $143,482 127,507 $270,989 $337,124 1,980,807 $2,317,931 Bonds Payable: Series 2004 Bonds On August 1, 2004, the Barnesville-Lamar County Industrial Development Authority issued certain bonds totaling $16,135,000. Proceeds of the sale of the Bonds were loaned to Gordon College Properties Foundation, LLC (Properties, LLC) whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2004 Bonds were used by 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; 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 of Georgia and is leased by the Board of Regents to the Properties, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties, LLC rents the project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents makes 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 Series 2004 bonds range from 3% to 5%. The balance owed on the bonds at December 31, 2007 was $15,340,000. Series 2006 Bonds On December 14, 2006, the Barnesville-Lamar County Industrial Development Authority issued certain bonds totaling $19,285,000. Proceeds of the sale of the Bonds were loaned to Gordon College Properties Foundation II, LLC (Properties II, LLC) whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2006 Bonds were used by Properties II, 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 405 beds and related amenities (the Project) located on the campus of Gordon College; fund capitalized interest on the Series 2006 Bonds; pay the premium for a debt reserve surety bond and pay costs of issuance of the Series 2006 Bonds. 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 the Properties II, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties II, 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 the Properties II, LLC estimates will be sufficient to pay, among other things, debt service on the Series 2006 Bonds. Interest rates on the Series 2006 bonds range from 3.5% to 4.5%. The balance owed on the bonds at December 31, 2007 was $18,890,190, which is net of ($394,810) bond discount. Annual debt service requirements to maturity for Student Housing bonds payable are as follows: Annual Financial Report FY 2008 210 Year ending December 31 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Bond Premium/(Discount) Princip al Bonds Payable Interest $415,000 430,000 460,000 490,000 530,000 3,435,000 4,940,000 7,150,000 7,805,000 7,180,000 1,790,000 34,625,000 (394,810) $34,230,190 $1,522,163 1,509,713 1,495,388 1,480,125 1,462,538 6,950,240 6,069,865 4,706,734 2,790,501 1,207,267 38,615 29,233,149 $29,233,149 Total $1,937,163 1,939,713 1,955,388 1,970,125 1,992,538 10,385,240 11,009,865 11,856,734 10,595,501 8,387,267 1,828,615 63,858,149 (394,810) $63,463,339 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. During the year ended June 30, 2008, the Foundation distributed $567,728 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development & Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206. Investments for Component Units: Macon State College Foundation, Inc. holds endowment and other investments in the amount of $7,124,443. The endowment is nonexpendable, but the earnings on the investment may be Annual Financial Report FY 2008 211 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, 2008: Equity Securities Real Estate SunTrust Pooled Investments Total Investments Cost $6 304,554 7,156,585 $7,461,145 Fair Value $6 304,554 6,819,883 $7,124,443 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Notes and Loans Payable Total Long Term Liabilities $0 $226,061 $0 $226,061 $0 $226,061 $226,061 $0 $226,061 $226,061 Notes and Loans Payable: The Foundation has a note payable with BB&T in the amount of $226,061 as of June 30, 2008. This note has a variable interest rate at .375% less than prime and is payable in consecutive monthly installments of principal and interest of $25,705 with the final payment due during the year ending June 30, 2009. This note is secured by real estate. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year end ing June 30: 2009 1 Total Notes and Loans Payable Pr inc ip al No tes and Loans Payab le Interest $ 226 ,0 61 $ 226 ,0 61 $ 7,363 $ 7,363 T ota l $233 ,424 $233 ,424 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 University in support of its programs. The sixty-two 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 Annual Financial Report FY 2008 212 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, 2008, the Foundation distributed $ 45,909 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Middle Georgia College Foundation, Inc. at 1100 Second St., SE, Cochran, GA 31014. Special Item Transfer: Georgia Aviation and Technical College Foundation, Inc. merged with and into Middle Georgia College Foundation, Inc. with an effective date of December 19, 2007. Middle Georgia College Foundation, Inc. is the surviving Corporation of the merger. All the assets and liabilities of Georgia Aviation and Technical College Foundation became those of Middle Georgia College Foundation, Inc. and resulted in a Net Asset transfer of $1,012,369. This transfer is reported as a Special Item in the Statement of Revenues, Expenses and Changes in Net Assets. Investments for Component Units: Middle Georgia College Foundation, Inc. holds endowment and other investments in the amount of $1,157,518. The $799,955 corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Middle Georgia College Foundation, Inc. has established a spending plan whereby 100% of the realized earnings may be used for current and future expenditures except where restricted by donors. Investments are comprised of the following amounts at June 30, 2008: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $100,039 300,000 5,053 30,000 562,357 278,118 $1,275,567 Fair Value $100,039 300,000 5,039 29,151 480,039 243,250 $1,157,518 Capital Assets for Component Units: Annual Financial Report FY 2008 213 Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2008 as follows: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Construction in Progress 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 $79,482 8,699,823 8,779,305 820,500 820,500 50,976 769,524 $9,548,829 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $26,850,000 $26,850,000 $36,340,000 $36,340,000 $0 $63,190,000 $0 $0 $63,190,000 $0 On November 1, 2005, the Bleckley-Cochran Development Authority issued certain bonds totaling $26,850,000. Proceeds of the sale of the bond were loaned to MGC Real Estate Foundation, LLC. The proceeds of the Series 2005 Bonds are being used to (i) finance or reimburse, in whole or in part, the cost of construction and equipping of three residence halls containing approximately 704 beds including related parking located on the campus of Middle Georgia College, a unit of the University System of Georgia; (ii) fund capitalized interest on the Series 2005 Bonds; (iii) fund a debt service reserve fund for the Series 2005 Bonds; and (iv) pay costs of issuance of the Series 2005 Bonds. The Series 2005 bonds have interest rates ranging from 3.5% to 5.25% and the final maturity is July 1, 2036. On July 1, 2007, the Joint Development Authority of Bleckley County and Dodge County issued certain bonds totaling $36,340,000. Proceeds of the sale of the bonds were loaned to MGC Real Estate Foundation II, LLC. The proceeds of the Series 2008 Bonds are being used to (i) finance or refinance the costs of acquisition, construction, and equipping of student housing containing approximately 699 beds and related amenities located on two campuses of Middle Georgia College, a unit of the University System of Georgia; (ii) fund capitalized interest on the Series 2008 Bonds; (iii) fund a debt service reserve fund and (iv) pay costs of issuance of the Series 2008 Bonds. The project consists of one residence hall with approximately 143 beds and related amenities on the Eastman campus and two residences halls with approximately 278 beds each on Annual Financial Report FY 2008 214 the Cochran campus. The Series 2008 bonds have interest rates ranging from 3% to 5.25% and the final maturity is July 1, 2038. The outstanding balance of these obligations at June 30, 2008 is $63,190,000. Debt Service Obligations: Annual debt service requirements to maturity for Student Housing bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $0 40,000 80,000 175,000 275,000 2,860,000 6,215,000 10,985,000 16,650,000 20,890,000 5,020,000 $63,190,000 Bonds Payable Interest $1,953,234 3,108,326 3,106,226 3,103,426 3,097,396 15,127,749 14,091,255 11,912,175 8,417,538 3,131,900 263,550 $67,312,775 Total $1,953,234 3,148,326 3,186,226 3,278,426 3,372,396 17,987,749 20,306,255 22,897,175 25,067,538 24,021,900 5,283,550 $130,502,775 Bainbridge College Bainbridge College Foundation Bainbridge College Foundation is a legally separate, tax-exempt component unit of Bainbridge College. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The seven member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Amounts reported due to or due from the College do not necessarily agree because of the different fiscal year ends. During the year ended October 31, 2007, the Foundation distributed $12,180 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation Annual Financial Report FY 2008 215 can be obtained from the Administrative Office at 2500 E. Shotwell Street, Bainbridge, GA 39819. Investments for Component Units: Bainbridge College Foundation holds endowments and other investments in the amount of $109,733. The corpus of the endowment portion 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, 2007: Cost Fair Value Certificates of Deposit $109,733 $109,733 Total Investments $109,733 $109,733 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, 2007, the Foundation distributed $733,315 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Business Affairs Office at 3700 Altama Avenue, Brunswick, GA 31520. Investments for Component Units: Annual Financial Report FY 2008 216 Coastal Georgia Community College Foundation, Inc. holds endowments and other investments in the amount of $7.5 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Coastal Georgia Community College Foundation, Inc. investments are comprised of the following amounts at December 31, 2007: Cost Fair Value Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities M utual Funds $2,144,962 1,421,167 201,005 7,840 3,542,866 $2,152,756 1,427,782 216,205 5,875 3,684,563 Total Investments $7,317,840 $7,487,181 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, 2008, the Foundation distributed $152,430 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: Investments are comprised of the following amounts at June 30, 2008: Annual Financial Report FY 2008 217 Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Total Investments Cost $12,111 374,902 608,063 424,023 $1,419,099 Fair Value $12,111 374,902 590,964 399,132 $1,377,109 Capital Assets for Component Units: Darton College Foundation, Inc. holds the following Capital Assets as of June 30, 2008: 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, 2008 $308,826 374,818 683,644 123,324 123,324 10,958 112,366 $796,010 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 FY 2008 218 During the year ended June 30, 2008, the Foundation distributed $40,969 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the Vice President for Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College Foundation, Inc. holds investments in the amount of $943,936 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 purpose specified by the donor. Investments are comprised of the following amounts at June 30, 2008: Cash held by investment organization Equity Securities Investment Pools: BOR Short Term Fund BOR Balanced Income Fund SunTrust Diversified Fund Total Investments Cost $6,904 23,653 41,398 238,787 732,462 $1,043,204 Fair Value $6,904 23,653 41,236 198,056 674,087 $943,936 Capital Assets for Component Units: East Georgia College Foundation, Inc. has capital assets of $175,965 at June 30, 2008 in the form of Land. 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. 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-five 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 Annual Financial Report FY 2008 219 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, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Hwy Rome, GA 30161. Investments for Component Units: Georgia Highlands College Foundation, Inc. holds endowment and other investments in the amount of $606,661. Georgia Highlands College Foundation, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships. Investments are comprised of the following amounts at June 30, 2008: Government and Agency Securities Equity Securities Mutual Funds Total Investments Cost $143,954 281,263 128,451 $553,668 Fair Value $157,789 307,852 141,020 $606,661 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. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the Annual Financial Report FY 2008 220 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, 2007, the Foundation distributed $247,093 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. Prior Period Adjustment: In the year ending December 31, 2006, the Foundation received the proceeds of a bond issuance and reported the proceeds and bond liability in its financial statements. It was subsequently discovered that Newton County was obligated for the debt and therefore, a gift to the Foundation of $2,550,000 should have been recognized instead of the bond liability. This error correction in 2007 includes bond principal and accrued interest for 2006. The beginning net assets of the Foundation were increased by $2,681,325 as a result of the correction. Investments for Component Units: Georgia Perimeter College Foundation, Inc. holds endowment and other investments in the amount of $1,318,647. Investments are comprised of the following amounts at December 31, 2007: Cost Fair Value Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities $154,209 721,000 15,000 75,000 395,166 $154,209 725,184 15,000 75,000 349,254 Total Investments $1,360,375 $1,318,647 Capital Assets for Component Units: Georgia Perimeter College Foundation, Inc. holds the following Capital Assets as of December 31, 2007: December 31, 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 $3,000,000 26,689,930 29,689,930 24,192,829 932,888 25,125,717 377,607 24,748,110 $54,438,040 Annual Financial Report FY 2008 221 Long-term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended December 31, 2007 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance January 1, 2007 $25,245,000 $25,245,000 Prior Year Adjustment Adjusted Beginning Bal. January 1, 2007 (2,550,000) 22,695,000 ($2,550,000) $22,695,000 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year $25,560,000 $0 $48,255,000 $430,000 $25,560,000 $0 $48,255,000 $430,000 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 a building project. 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. The outstanding principal obligation on the Series 2005 bonds was $22,695,000 at December 31, 2007. In addition, two additional bond issuances were effected during 2007 that are accounted for on the Foundation's books. Georgia Gwinnett College Real Estate Parking I, LLC Project Incremental Draw Revenue Bonds Series 2007A - These funds will be used to construct a parking facility and a student center on the Georgia Gwinnett College campus. 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 will be due in annual principal installments ranging from $55,000 to $2,105,000 through 2032 at a variable interest rate (4.15% as of December 31, 2007). GGC Real Estate Parking I, LLC's indebtedness under the 2007A Series bonds is $15,315,000 at December 31, 2007. Georgia Perimeter College Real Estate Student Support I, LLC Project Incremental Draw Revenue Bonds Series 2007A These funds will be used to construct several facilities on four campuses of Georgia Perimeter College. Rental payments from the Board of Regents of the University System of Georgia will be used to amortize this bond indebtedness. The repayment of this debt will be due in annual principal installments ranging from $450,000 to $4,725,000 through 2035 at a variable interest rate (4.19% as of December 31, 2007). Georgia Perimeter College Real Estate Student Support I, LLC's indebtedness under the 2007A Series bonds is $10,245,000 at December 31, 2007. Annual debt service requirements to maturity for revenue bonds payable are as follows: Annual Financial Report FY 2008 222 Year ending December 31: 2008 2009 2010 2011 2012 2013 through 2019 2020 through 2024 2025 through 2029 1 2 3 4 5 6-10 11-15 16-20 Principal $430,000 970,000 1,100,000 1,645,000 1,705,000 11,010,000 16,730,000 14,665,000 $48,255,000 Bonds Payable Interest $5,828,601 4,293,763 4,612,051 4,569,770 5,255,236 2,551,325 18,647,966 14,330,576 $60,089,288 Total $6,258,601 5,263,763 5,712,051 6,214,770 6,960,236 13,561,325 35,377,966 28,995,576 $108,344,288 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. 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, 2008, the Foundation distributed $189,067 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 $2.6 million. The 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, 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, 2008: Annual Financial Report FY 2008 223 Cash held by investment organization Certificates of Deposit Equity Securities M utual Funds Real Estate Investment Pools BOR Balanced Income Fund Total Return & Holding Fund Total Investments Cost $37,935 30,500 83,789 47,234 13,500 85,462 2,430,949 $2,729,369 Fair Value $37,935 30,500 86,473 46,611 13,500 76,183 2,316,366 $2,607,568 Long-term Liabilities for Component Units: Long-term liability activity for the year ended June 30, 2008 was as follows: Beginning Ending Balance Balance July 1, 2007 Additions Reductions June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $15,801,289 $15,801,289 $0 $13,581 $15,787,708 $50,000 $0 $13,581 $15,787,708 $50,000 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 were loaned to SGC Real Estate Foundation, LLC whose sole member is South Georgia College Foundation, Inc. Proceeds of the Series 2006 Bonds are being 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 a Rental Agreement, SGC Real Estate Foundation, LLC leases the Project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents makes 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: Annual Financial Report FY 2008 224 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Premium/(Discount) Princip al $50,000 75,000 100,000 125,000 150,000 1,215,000 2,020,000 3,025,000 4,240,000 4,395,000 15,395,000 392,708 $15,787,708 Bonds Payable Interest $730,625 728,625 725,625 721,625 716,625 3,457,325 3,110,975 2,524,625 1,647,875 498,825 14,862,750 $14,862,750 Total $780,625 803,625 825,625 846,625 866,625 4,672,325 5,130,975 5,549,625 5,887,875 4,893,825 30,257,750 392,708 $30,650,458 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, 2008, the Foundation distributed $18,629 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 $1.4 million. The $1.3 million corpus of the endowment 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 cash Annual Financial Report FY 2008 225 earnings may be used for academic scholarships. The realized gains on investments are set aside as a reserve. Investments are comprised of the following amounts at June 30, 2008: Certificates of Deposit BOR Short Term Fund SunTrust Diversified Fund Cost $14,000 30,087 1,427,474 Fair Value $14,000 29,789 1,359,258 Total Investments $1,471,561 $1,403,047 Annual Financial Report FY 2008 226 Required Supplementary Information BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND SCHEDULEOF FUNDING PROGRESS Actuarial Valuation Date 7/1/2007 Actuarial Value of Assets (a) $0 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $1,985,200,000 Unfunded AAL (UAAL) (b-a) $1,985,200,000 Funded Ratio (a/b) 0.0% Covered Payroll (c) $2,201,804,465 UAAL as a Percentage of Covered Payroll ((b-a)/c) 90.2% Note: The allocation and transfer of assets to the plan took place subsequent to the actuarial valuation date. B OARD OF REGENTS RETIREE HEALTH B ENEFIT FUND S CHEDULE OF EMPLOYER CONTRIBUTIONS Year Ended June 30 2008 Annual Required Contribution $224,900,000 P e r c e ntag e Contributed 29.7% Annual Financial Report FY 2008 227 Balance Sheet (Non-GAAP Basis) UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets Total Assets $371,725,029.47 56,626,714.11 75,573,639.97 204,888,180.62 7,247,639.00 41,170,614.76 4,733,542.00 5,543,577.60 $767,508,937.53 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Accrued Payroll Encumbrance Payable 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 Tuition Carry-Forward Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $22,748,782.74 2,906,076.67 14,689,046.68 147,608,441.54 105,694,003.82 96,015.58 209,459,209.56 15,295,037.90 12,234,773.67 $530,731,388.16 $6,694,149.08 21,979,729.29 51,154,871.97 12,539,684.95 105,792,974.28 11,287,655.86 3,173,177.35 10,664,996.97 3,549,074.23 7,365,016.53 2,575,910.43 308.43 $236,777,549.37 $767,508,937.53 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 FY 2008 228 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, 2008 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available ORIGINAL BUDGET FINAL BUDGET $2,115,477,060.00 20,337,799.00 1,417,322,782.00 1,514,587,141.00 $5,067,724,782.00 $5,067,724,782.00 $2,121,723,333.00 20,337,799.00 1,525,579,153.00 1,776,169,789.00 $5,443,810,074.00 $5,443,810,074.00 ACTUAL VARIANCE $2,121,723,333.00 20,337,799.00 1,368,958,572.97 1,677,654,977.10 $5,188,674,682.07 209,946,250.18 $5,398,620,932.25 $0.00 0.00 (156,620,580.03) (98,514,811.90) ($255,135,391.93) 209,946,250.18 ($45,189,141.75) EXPENDITURES Advanced Technology Development Center/EDI Agricultural Experiment Station Athens Tifton Vet Labs Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Eminent Scholar Endowment Trust Fund 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 $27,974,712.00 75,377,483.00 4,882,330.00 58,486,061.00 987,793.00 5,826,331.00 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 130,786,385.00 33,181,112.00 1,731,994.00 2,761,521.00 884,273.00 14,587,799.00 45,537,501.00 7,683,800.00 36,745,015.00 7,370,710.00 46,081,344.00 314,737.00 4,530,679,466.00 3,384,254.00 7,202,585.00 $5,067,724,782.00 $0.00 $29,574,712.00 86,015,877.00 6,268,386.00 68,438,718.00 1,170,484.00 7,706,916.00 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 154,736,385.00 33,181,112.00 1,786,536.00 4,316,521.00 884,273.00 14,587,799.00 44,851,896.00 7,762,975.00 36,745,015.00 6,470,710.00 45,856,344.00 314,737.00 4,852,246,263.00 3,384,254.00 12,252,585.00 $5,443,810,074.00 $0.00 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 M andatory Transfers M andatory Transfers - Restricted Non-M andatory Transfers Other Additions (Deletions) Prior Year Reserved Fund Balance Included in Funds Available $27,175,514.08 80,354,212.99 5,908,662.02 65,093,392.11 1,008,149.45 7,645,793.68 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 149,869,704.44 33,181,112.00 1,420,923.86 3,684,272.67 883,081.61 14,587,490.57 44,657,879.92 8,442,787.75 36,735,472.49 6,443,433.25 45,762,009.90 314,737.00 4,629,055,370.60 3,384,254.00 10,068,145.59 $5,200,933,975.98 $197,686,956.27 230,386,955.87 1,968,440.84 4,680,279.06 (3,344,349.25) 13,617.57 (1,968,440.84) 1,066,226.00 (3,838.16) 16,037,024.72 200,927.47 (209,946,250.18) $2,399,197.92 5,661,664.01 359,723.98 3,345,325.89 162,334.55 61,122.32 0.00 0.00 0.00 0.00 4,866,680.56 0.00 365,612.14 632,248.33 1,191.39 308.43 194,016.08 (679,812.75) 9,542.51 27,276.75 94,334.10 0.00 223,190,892.40 0.00 2,184,439.41 $242,876,098.02 $197,686,956.27 FUND BALANCE JUNE 30 $236,777,549.37 Annual Financial Report FY 2008 229 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis), Continued UNIVERS ITY S YS TEM OF GEORGIA CONS OLIDATED BUDGET COMPARIS ON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS ) BUDGET FUND Year Ended June 30, 2008 S UMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Early Retirement Program Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Forward Property Reserves Total Reserved Unreserved Surp lus Total Fund Balance $6,694,149.08 21,979,729.29 7,365,016.53 51,154,871.97 3,173,177.35 12,539,684.95 105,792,974.28 11,287,655.86 10,664,996.97 3,549,074.23 $234,201,330.51 2,576,218.86 $236,777,549.37 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 p rincip les. Annual Financial Report FY 2008 230 UNIVERSITYSYSTEMOF GEORGIA STATEMENT OF PROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 AdvancedTechnology Development Center State Appropriation State General Funds Other Funds Total Advanced Technology Development Center Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 15,099,712.00 $ 15,099,712.00 $ 15,099,712.00 $ 12,875,000.00 14,475,000.00 12,042,668.25 $ 27,974,712.00 $ 29,574,712.00 $ 27,142,380.25 $ 0.00 $ 15,099,712.00 $ 0.00 0.00 12,042,668.25 (2,432,331.75) 0.00 $ 27,142,380.25 $ (2,432,331.75) Agricultural Experiment Station State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Agricultural Experiment Station Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 42,936,221.00 $ 42,936,221.00 $ 42,936,221.00 $ 0.00 $ 42,936,221.00 $ 0.00 22,000,000.00 10,441,262.00 25,000,000.00 18,079,656.00 23,791,106.14 14,305,679.24 7,974,091.98 709,197.47 31,765,198.12 15,014,876.71 6,765,198.12 (3,064,779.29) $ 75,377,483.00 $ 86,015,877.00 $ 81,033,006.38 $ 8,683,289.45 $ 89,716,295.83 $ 3,700,418.83 Athens andTifton Veterinary Laboratories State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Athens and Tifton Veterinary Lab Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 62,192.00 $ 62,192.00 $ 62,192.00 $ 0.00 $ 62,192.00 $ 0.00 4,820,138.00 0.00 6,120,138.00 86,056.00 5,771,956.96 73,161.01 2,293,261.29 35,099.40 8,065,218.25 108,260.41 1,945,080.25 22,204.41 $ 4,882,330.00 $ 6,268,386.00 $ 5,907,309.97 $ 2,328,360.69 $ 8,235,670.66 $ 1,967,284.66 Cooperative Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Cooperative Extension Service Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 35,391,924.00 $ 35,391,924.00 $ 35,391,924.00 $ 0.00 $ 35,391,924.00 $ 0.00 13,000,000.00 10,094,137.00 19,000,000.00 14,046,794.00 18,567,741.73 11,571,359.19 1,914,732.87 240,190.33 20,482,474.60 11,811,549.52 1,482,474.60 (2,235,244.48) $ 58,486,061.00 $ 68,438,718.00 $ 65,531,024.92 $ 2,154,923.20 $ 67,685,948.12 $ (752,769.88) Annual Financial Report FY 2008 231 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program FundBalances Transfers Program FundBalances Reserve Surplus Total 15,099,712.26 $ (0.26) $ 12,075,801.82 2,399,198.18 (0.26) $ (33,133.57) 16,806.44 $ 8,410.50 0.26 $ 46,268.01 16,806.44 $ 21,544.94 0.00 $ 0.00 $ 16,806.44 $ 16,806.44 0.00 13,134.44 8,410.50 21,544.94 27,175,514.08 $ 2,399,197.92 $ (33,133.83) $ 25,216.94 $ 46,268.27 $ 38,351.38 $ 0.00 $ 13,134.44 $ 25,216.94 $ 38,351.38 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program FundBalances Transfers Program FundBalances Reserve Surplus Total 42,936,221.00 $ 0.00 $ 0.00 $ 72,724.38 $ 0.00 $ 72,724.38 $ 0.00 $ 0.00 $ 72,724.38 $ 72,724.38 23,249,351.41 14,168,640.58 1,750,648.59 3,911,015.42 8,515,846.71 846,236.13 80,354,212.99 $ 5,661,664.01 $ 9,362,082.84 $ 0.00 6,830.63 79,555.01 $ 0.00 8,515,846.71 363.40 853,430.16 363.40 $ 9,442,001.25 $ 0.00 8,515,846.71 0.00 853,430.16 0.00 8,515,846.71 0.00 853,430.16 0.00 $ 9,369,276.87 $ 72,724.38 $ 9,442,001.25 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program FundBalances Transfers Program FundBalances Reserve Surplus Total 61,862.00 $ 330.00 $ 330.00 $ (330.00) $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 5,776,490.08 70,309.94 343,647.92 15,746.06 2,288,728.17 37,950.47 0.00 0.00 2,288,728.17 330.00 (330.00) 37,950.47 0.00 2,288,728.17 0.00 37,950.47 0.00 2,288,728.17 0.00 37,950.47 5,908,662.02 $ 359,723.98 $ 2,327,008.64 $ 0.00 $ (330.00) $ 2,326,678.64 $ 0.00 $ 2,326,678.64 $ 0.00 $ 2,326,678.64 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program FundBalances Transfers Program FundBalances Reserve Surplus Total 35,391,924.00 $ 0.00 $ 0.00 $ 18,014,357.14 11,687,110.97 985,642.86 2,359,683.03 2,468,117.46 124,438.55 65,093,392.11 $ 3,345,325.89 $ 2,592,556.01 $ 26,629.73 $ 0.00 8,349.92 34,979.65 $ 0.00 $ 26,629.73 $ 0.00 2,468,117.46 (828.00) 131,960.47 (828.00) $ 2,626,707.66 $ 0.00 $ 0.00 $ 26,629.73 $ 26,629.73 0.00 2,468,117.46 0.00 131,960.47 0.00 2,468,117.46 0.00 131,960.47 0.00 $ 2,600,077.93 $ 26,629.73 $ 2,626,707.66 Annual Financial Report FY 2008 232 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OFPROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET, CONTINUED (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 Forestry Cooperative Extension State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Cooperative Extension Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 687,388.00 $ 687,388.00 $ 687,388.00 $ 0.00 $ 687,388.00 $ 200,000.00 100,405.00 350,000.00 133,096.00 317,731.81 16,477.69 29,896.06 38,801.37 347,627.87 55,279.06 $ 987,793.00 $ 1,170,484.00 $ 1,021,597.50 $ 68,697.43 $ 1,090,294.93 $ 0.00 (2,372.13) (77,816.94) (80,189.07) Forestry Research State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Research Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 3,276,331.00 $ 3,276,331.00 $ 3,276,331.00 $ 0.00 $ 3,276,331.00 $ 0.00 2,000,000.00 550,000.00 3,500,000.00 930,585.00 3,553,178.63 1,070,782.29 673,544.71 358,490.09 4,226,723.34 1,429,272.38 726,723.34 498,687.38 $ 5,826,331.00 $ 7,706,916.00 $ 7,900,291.92 $ 1,032,034.80 $ 8,932,326.72 $ 1,225,410.72 Georgia Eminent Scholars Endowment Trust Fund State Appropriation State General Funds Other Funds Total Georgia Eminent Scholars Endowment Trust Fund Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 500,000.00 $ 500,000.00 $ 500,000.00 $ 0.00 $ 500,000.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 500,000.00 $ 500,000.00 $ 500,000.00 $ 0.00 $ 500,000.00 $ 0.00 Georgia Radiation Therapy Center State Appropriation State General Funds Other Funds Total Georgia Radiation Therapy Center Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 3,625,810.00 3,625,810.00 3,625,810.00 0.00 3,625,810.00 0.00 $ 3,625,810.00 $ 3,625,810.00 $ 3,625,810.00 $ 0.00 $ 3,625,810.00 $ 0.00 Annual Financial Report FY 2008 233 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 687,388.00 $ 0.00 $ 0.00 $ 145.68 $ 0.00 $ 145.68 $ 0.00 $ 0.00 $ 145.68 $ 145.68 287,675.19 62,324.81 59,952.68 0.00 33,086.26 100,009.74 22,192.80 300.00 0.00 59,952.68 0.00 22,492.80 0.00 59,952.68 0.00 22,492.80 0.00 59,952.68 0.00 22,492.80 1,008,149.45 $ 162,334.55 $ 82,145.48 $ 445.68 $ 0.00 $ 82,591.16 $ 0.00 $ 82,445.48 $ 145.68 $ 82,591.16 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 3,276,331.00 $ 3,438,216.89 931,245.79 0.00 $ 0.00 $ 61,783.11 (660.79) 788,506.45 498,026.59 8,848.57 $ 0.00 2,163.69 0.00 $ 8,848.57 $ 0.00 788,506.45 0.00 500,190.28 0.00 $ 0.00 $ 8,848.57 $ 8,848.57 0.00 788,506.45 0.00 500,190.28 0.00 788,506.45 0.00 500,190.28 7,645,793.68 $ 61,122.32 $ 1,286,533.04 $ 11,012.26 $ 0.00 $ 1,297,545.30 $ 0.00 $ 1,288,696.73 $ 8,848.57 $ 1,297,545.30 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 500,000.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 500,000.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 0.00 $ 3,625,810.00 3,625,810.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Annual Financial Report FY 2008 234 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OFPROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET, CONTINUED (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 Georgia Tech Research Institute State Appropriation State General Funds Other Funds Total Georgia Tech Research Institute Marine Institute State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Institute Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 7,868,427.00 $ 7,868,427.00 $ 7,868,427.00 $ 122,917,958.00 146,867,958.00 142,001,279.33 $ 130,786,385.00 $ 154,736,385.00 $ 149,869,706.33 $ 0.00 $ 7,868,427.00 $ 0.00 0.00 142,001,279.33 (4,866,678.67) 0.00 $ 149,869,706.33 $ (4,866,678.67) Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 964,361.00 $ 964,361.00 $ 964,361.00 $ 0.00 $ 964,361.00 $ 700,000.00 67,633.00 700,000.00 122,175.00 372,941.32 48,194.24 11,273.94 54,542.13 384,215.26 102,736.37 $ 1,731,994.00 $ 1,786,536.00 $ 1,385,496.56 $ 65,816.07 $ 1,451,312.63 $ 0.00 (315,784.74) (19,438.63) (335,223.37) Marine Resources Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Resources Extension Service Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 1,576,721.00 $ 1,576,721.00 $ 1,576,721.00 $ 0.00 $ 1,576,721.00 $ 0.00 600,000.00 584,800.00 2,000,000.00 739,800.00 1,400,996.35 702,918.25 185,949.68 0.00 1,586,946.03 702,918.25 (413,053.97) (36,881.75) $ 2,761,521.00 $ 4,316,521.00 $ 3,680,635.60 $ 185,949.68 $ 3,866,585.28 $ (449,935.72) Medical College of Georgia Hospital andClinics State Appropriation State General Funds Other Funds Total Medical College of Georgia Hospital and Clinics Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 33,181,112.00 $ 33,181,112.00 $ 33,181,112.00 $ 0.00 $ 33,181,112.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 33,181,112.00 $ 33,181,112.00 $ 33,181,112.00 $ 0.00 $ 33,181,112.00 $ 0.00 Annual Financial Report FY 2008 235 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program FundBalances Reserve Surplus Total 7,868,427.00 $ 0.00 $ 142,001,277.44 4,866,680.56 0.00 $ 1,294.50 $ 0.00 $ 1,294.50 $ 1.89 73,237.59 115,397.67 188,637.15 0.00 $ 0.00 $ 1,294.50 $ 1,294.50 0.00 115,399.56 73,237.59 188,637.15 149,869,704.44 $ 4,866,680.56 $ 1.89 $ 74,532.09 $ 115,397.67 $ 189,931.65 $ 0.00 $ 115,399.56 $ 74,532.09 $ 189,931.65 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program FundBalances Reserve Surplus Total 964,361.00 $ 0.00 $ 369,274.87 87,287.99 330,725.13 34,887.01 0.00 $ 14,940.39 15,448.38 800.00 $ 0.00 0.00 0.00 $ 800.00 $ 0.00 14,940.39 0.00 15,448.38 0.00 $ 0.00 $ 0.00 14,940.39 0.00 15,448.38 800.00 $ 800.00 0.00 14,940.39 0.00 15,448.38 1,420,923.86 $ 365,612.14 $ 30,388.77 $ 800.00 $ 0.00 $ 31,188.77 $ 0.00 $ 30,388.77 $ 800.00 $ 31,188.77 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program FundBalances Reserve Surplus Total 1,576,721.00 $ 0.00 $ 0.00 $ 814.45 $ 0.00 $ 814.45 $ 0.00 $ 0.00 $ 814.45 $ 814.45 1,404,633.42 595,366.58 182,312.61 0.00 0.00 182,312.61 0.00 182,312.61 0.00 182,312.61 702,918.25 36,881.75 0.00 65.82 0.00 65.82 0.00 65.82 0.00 65.82 3,684,272.67 $ 632,248.33 $ 182,312.61 $ 880.27 $ 0.00 $ 183,192.88 $ 0.00 $ 182,378.43 $ 814.45 $ 183,192.88 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program FundBalances Reserve Surplus Total 33,181,112.00 $ 0.00 33,181,112.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 $ 0.00 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 0.00 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 Annual Financial Report FY 2008 236 UNIVERSITYSYSTEMOF GEORGIA STATEMENT OF PROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET, CONTINUED (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 Office of Minority Business Enterprise State Appropriation State General Funds Other Funds Total Office of Minority Business Enterprise Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 884,273.00 $ 884,273.00 $ 884,273.00 $ 0.00 $ 884,273.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 884,273.00 $ 884,273.00 $ 884,273.00 $ 0.00 $ 884,273.00 $ 0.00 Georgia Cancer Coalition State Appropriation Tobacco Funds Other Funds Total Georgia Cancer Coalition Public Libraries State Appropriation State General Funds Other Funds Total Public Libraries Regents Central Office State Appropriation State General Funds Other Funds Total Regents Central Office Research Consortium State Appropriation State General Funds Tobacco Funds Other Funds Total Research Consortium Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 14,587,799.00 $ 14,587,799.00 $ 14,587,799.00 $ 0.00 $ 14,587,799.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 14,587,799.00 $ 14,587,799.00 $ 14,587,799.00 $ 0.00 $ 14,587,799.00 $ 0.00 Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 41,015,101.00 $ 40,329,496.00 $ 40,329,496.00 $ 4,522,400.00 4,522,400.00 4,395,430.71 0.00 $ 40,329,496.00 $ 22,773.34 4,418,204.05 $ 45,537,501.00 $ 44,851,896.00 $ 44,724,926.71 $ 22,773.34 $ 44,747,700.05 $ 0.00 (104,195.95) (104,195.95) Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 7,683,800.00 $ 0.00 $ 7,683,800.00 $ 7,683,800.00 $ 7,683,800.00 $ 0.00 $ 7,683,800.00 $ 79,175.00 73,319.24 5,696,782.64 5,770,101.88 7,762,975.00 $ 7,757,119.24 $ 5,696,782.64 $ 13,453,901.88 $ 0.00 5,690,926.88 5,690,926.88 Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 35,995,015.00 $ 35,995,015.00 $ 35,995,015.00 $ 0.00 $ 35,995,015.00 $ 0.00 750,000.00 750,000.00 750,000.00 750,000.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 36,745,015.00 $ 36,745,015.00 $ 36,745,015.00 $ 0.00 $ 36,745,015.00 $ 0.00 Annual Financial Report FY 2008 237 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 883,081.61 $ 0.00 883,081.61 $ 1,191.39 $ 0.00 1,191.39 $ 1,191.39 $ 0.00 1,191.39 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 0.00 $ 1,191.39 $ 0.00 1,191.39 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 1,191.39 $ 0.00 0.00 $ 1,191.39 $ 1,191.39 0.00 1,191.39 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 14,587,490.57 $ 308.43 $ 308.43 $ 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 308.43 $ 0.00 0.00 $ 0.00 0.00 $ 308.43 $ 308.43 0.00 0.00 0.00 14,587,490.57 $ 308.43 $ 308.43 $ 0.00 0.00 $ 308.43 $ 0.00 $ 0.00 $ 308.43 $ 308.43 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 40,298,425.87 $ 4,359,454.05 31,070.13 $ 162,945.95 31,070.13 $ 133,382.40 $ 58,750.00 0.00 0.00 $ 164,452.53 $ 0.00 58,750.00 0.00 $ 0.00 $ 164,452.53 $ 164,452.53 0.00 58,750.00 0.00 58,750.00 44,657,879.92 $ 194,016.08 $ 89,820.13 $ 133,382.40 $ 0.00 $ 223,202.53 $ 0.00 $ 58,750.00 $ 164,452.53 $ 223,202.53 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 7,641,783.99 $ 801,003.76 42,016.01 $ 42,016.01 $ (721,828.76) 4,969,098.12 0.00 $ 0.00 0.00 $ 42,016.01 $ 0.00 4,969,098.12 0.00 $ 0.00 $ 42,016.01 $ 42,016.01 0.00 4,969,098.12 0.00 4,969,098.12 8,442,787.75 $ (679,812.75) $ 5,011,114.13 $ 0.00 $ 0.00 $ 5,011,114.13 $ 0.00 $ 4,969,098.12 $ 42,016.01 $ 5,011,114.13 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 35,985,472.49 $ 750,000.00 0.00 36,735,472.49 $ 9,542.51 $ 0.00 0.00 9,542.51 $ 9,542.51 $ 0.00 0.00 (959,064.72) $ 0.00 0.00 9,542.51 $ (959,064.72) $ 0.00 $ 0.00 0.00 (949,522.21) $ 0.00 0.00 820,085.30 $ 0.00 0.00 0.00 $ (949,522.21) $ 820,085.30 $ Annual Financial Report FY 2008 238 0.00 $ (129,436.91) $ 0.00 0.00 0.00 0.00 (129,436.91) 0.00 0.00 0.00 $ (129,436.91) $ (129,436.91) UNIVERSITY SYSTEM OF GEORGIA STATEMENT OFPROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET, CONTINUED (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 Skidaway Institute of Oceanography State Appropriation State General Funds Other Funds Total Skidaway Institute of Oceanography Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 1,712,710.00 $ 1,712,710.00 $ 1,712,710.00 $ 5,658,000.00 4,758,000.00 4,847,044.74 $ 7,370,710.00 $ 6,470,710.00 $ 6,559,754.74 $ 0.00 $ 1,712,710.00 $ 0.00 4,847,044.74 0.00 $ 6,559,754.74 $ 0.00 89,044.74 89,044.74 Special Funding Initiative State Appropriation State General Funds Tobacco Funds Total Special Funding Initiative Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 41,081,344.00 $ 40,856,344.00 $ 40,856,344.00 $ 0.00 $ 40,856,344.00 $ 0.00 5,000,000.00 5,000,000.00 5,000,000.00 0.00 5,000,000.00 0.00 $ 46,081,344.00 $ 45,856,344.00 $ 45,856,344.00 $ 0.00 $ 45,856,344.00 $ 0.00 Student Education Enrichment Program State Appropriation State General Funds Other Funds Total Student Education Enrichment Program Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 314,737.00 $ 314,737.00 $ 314,737.00 $ 0.00 $ 314,737.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 314,737.00 $ 314,737.00 $ 314,737.00 $ 0.00 $ 314,737.00 $ 0.00 Teaching State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Teaching Funds Available Comparedto Budget Original Final Current Year Prior Year Total Variance Appropriation Budget Revenues Carry-Over Funds Available Positive (Negative) $ 1,820,227,086.00 $ 1,827,383,964.00 $ 1,827,383,964.00 $ 0.00 $ 1,827,383,964.00 $ 0.00 275,402,955.00 278,829,892.00 205,197,233.86 30,853,721.75 236,050,955.61 2,435,049,425.00 2,746,032,407.00 2,582,823,549.19 157,750,624.92 2,740,574,174.11 (42,778,936.39) (5,458,232.89) $ 4,530,679,466.00 $ 4,852,246,263.00 $ 4,615,404,747.05 $ 188,604,346.67 $ 4,804,009,093.72 $ (48,237,169.28) Annual Financial Report FY 2008 239 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 1,712,710.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 4,730,723.25 27,276.75 116,321.49 0.00 0.00 116,321.49 0.00 116,321.49 0.00 116,321.49 6,443,433.25 $ 27,276.75 $ 116,321.49 $ 0.00 $ 0.00 $ 116,321.49 $ 0.00 $ 116,321.49 $ 0.00 $ 116,321.49 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 40,762,009.90 $ 5,000,000.00 94,334.10 $ 0.00 94,334.10 $ 0.00 88,274.86 $ 0.00 0.00 $ 182,608.96 $ (53,380.24) $ 0.00 0.00 0.00 0.00 $ 129,228.72 $ 129,228.72 0.00 0.00 0.00 45,762,009.90 $ 94,334.10 $ 94,334.10 $ 88,274.86 $ 0.00 $ 182,608.96 $ (53,380.24) $ 0.00 $ 129,228.72 $ 129,228.72 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 314,737.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 314,737.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program FundBalances Reserve Surplus Total 1,827,835,849.00 $ (451,885.00) $ (451,885.00) $ 997,748.12 $ 357,161.70 $ 903,024.82 $ 748,718.58 $ 0.00 $ 1,651,743.41 $ 1,651,743.41 202,958,089.41 75,871,802.59 33,092,866.20 2,598,261,432.19 147,770,974.81 142,312,741.92 0.00 0.00 33,092,866.20 0.00 33,092,866.20 833,126.80 15,428,773.87 158,574,642.59 (1,515,423.64) 156,553,790.75 0.00 33,092,866.20 505,428.19 157,059,218.94 4,629,055,370.60 $ 223,190,892.40 $ 174,953,723.12 $ 1,830,874.92 $ 15,785,935.57 $ 192,570,533.61 $ (766,705.06) $ 189,646,656.95 $ 2,157,171.60 $ 191,803,828.55 Annual Financial Report FY 2008 240 UNIVERSITYSYSTEMOF GEORGIA STATEMENT OF PROGRAMREVENUES AND EXPENDITURES BYFUNDINGSOURCECOMPARED TO BUDGET, CONTINUED (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE30, 2008 Veterinary Medicine Experiment Station State Appropriation State General Funds Other Funds Total Veterinary Medicine Experiment Station Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 3,384,254.00 $ 3,384,254.00 $ 3,384,254.00 $ 0.00 $ 3,384,254.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 3,384,254.00 $ 3,384,254.00 $ 3,384,254.00 $ 0.00 $ 3,384,254.00 $ 0.00 Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds Total Veterinary Medicine Teaching Hospital Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 502,585.00 $ 502,585.00 $ 502,585.00 $ 0.00 $ 502,585.00 $ 6,700,000.00 11,750,000.00 10,042,989.90 1,103,276.21 11,146,266.11 $ 7,202,585.00 $ 12,252,585.00 $ 10,545,574.90 $ 1,103,276.21 $ 11,648,851.11 $ 0.00 (603,733.89) (603,733.89) Payments to Georgia Military College State Appropriation State General Funds Other Funds Total Payments to Georgia Military College Original Appropriation Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) $ 3,062,152.00 $ 3,062,152.00 $ 3,062,152.00 $ 0.00 $ 3,062,152.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 3,062,152.00 $ 3,062,152.00 $ 3,062,152.00 $ 0.00 $ 3,062,152.00 $ 0.00 Payments to Georgia Public Telecommunications Commission State Appropriation State General Funds Other Funds Original Appropriation $ 18,069,614.00 $ 0.00 Final Budget Current Year Revenues Funds Available Comparedto Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) 18,069,614.00 $ 18,069,614.00 $ 0.00 $ 18,069,614.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 Total Payments to Georgia Public Telecommunications Commission $ 18,069,614.00 $ 18,069,614.00 $ 18,069,614.00 $ 0.00 $ 18,069,614.00 $ 0.00 Total University System of Georgia $ 5,067,724,782.00 $ 5,443,810,074.00 $ 5,188,674,682.07 $ 209,946,250.18 $ 5,398,620,932.25 $ (45,189,141.75) Annual Financial Report FY 2008 241 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 3,384,254.00 $ 0.00 3,384,254.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 1,575.25 $ 0.00 1,575.25 $ 0.00 $ 0.00 0.00 $ 1,575.25 $ 0.00 1,575.25 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 1,575.25 $ 0.00 0.00 $ 1,575.25 $ 1,575.25 0.00 1,575.25 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 502,585.00 $ 0.00 $ 0.00 $ 9,565,560.59 2,184,439.41 1,580,705.52 0.00 13,465.19 0.00 $ 0.00 $ (17,993.35) 1,576,177.36 0.00 $ 0.00 $ 0.00 1,576,177.36 0.00 $ 0.00 0.00 1,576,177.36 10,068,145.59 $ 2,184,439.41 $ 1,580,705.52 $ 13,465.19 (17,993.35) $ 1,576,177.36 $ 0.00 $ 1,576,177.36 $ 0.00 $ 1,576,177.36 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 3,062,152.00 $ 0.00 0.00 $ 0.00 0.00 $ 0.00 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,062,152.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Comparedto Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Total Program Adjustments FundBalances Transfers Program Fund Balances Reserve Surplus Total 18,069,614.00 $ 0.00 18,069,614.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 5,200,933,975.98 $ 242,876,098.02 $ 197,686,956.27 $ 1,335,929.80 $ 15,928,813.56 $ 214,951,699.63 $ 0.00 $ 212,375,480.77 $ 2,576,218.86 $ 214,951,699.63 Unexpendable Reserves Uncollectible Accounts Receivable Inventories Early Retirement Program 11,287,655.86 3,173,177.35 7,365,016.53 Total Fund Balance 236,777,549.37 Annual Financial Report FY 2008 242 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, 2008 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 2008 Table of Contents Management's Discussion and Analysis ............................................................................ 1 Statement of Net Assets ...................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets........................................... 9 Statement of Cash Flows .................................................................................................. 11 Note 1. Summary of Significant Accounting Policies .................................................... 13 Note 2. Deposits and Investments................................................................................... 18 Note 3. Accounts Receivable.......................................................................................... 19 Note 4. Inventories.......................................................................................................... 19 Note 5. Notes/Loans Receivable..................................................................................... 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 ............................... 28 Note 15. Natural Classifications with Functional Classifications .................................. 29 Note 16. Component Units ............................................................................................. 30 ABRAHAM BALDWIN AGRICULTURAL COLLEGE Management's Discussion and Analysis Introduction Abraham Baldwin Agricultural College is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Tifton, Georgia, was founded in 1908 and has become known for its state-of-the-art technology and technology-related programs. The College offers associate and baccalaureate degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,600 students. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 121 FY2007 125 FY2006 114 3,665 3,574 3,423 3,214 3,114 2,929 Overview of the Financial Statements and Financial Analysis Abraham Baldwin Agricultural College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $5,777,020 78,476,535 362,608 84,616,163 June 30, 2007 $5,158,429 30,108,793 398,884 35,666,106 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,006,415 50,814,931 54,821,346 2,302,493 330,228 2,632,721 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 26,919,250 666,011 2,209,556 $29,794,817 30,108,793 646,704 2,277,888 $33,033,385 The total assets of the institution increased by $48,950,057. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $48,367,742 in the category of Capital Assets, net. The balance of the increase is mainly in the cash and cash equivalents category. The total liabilities for the year increased by $52,188,625. The combination of the increase in total assets of $48,950,057 and the increase in total liabilities of $52,188,625 yields a decrease in total net assets of ($3,238,568). The decrease in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of ($3,189,543). This is the result of the College's effort to expand its mission by increasing capital facilities through capital leases. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and non- Abraham Baldwin Agricultural College Annual Financial Report FY 2008 2 operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2008 June 30, 2007 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 $22,094,624 38,333,167 (16,238,543) 12,999,975 (3,238,568) 0 (3,238,568) 33,033,385 0 33,033,385 $29,794,817 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a year of investment with a decrease in the net assets at the end of the year through the use of capital lease options. Future revenue flow from the investment in expanded dormitories will eventually result in a net gain for the College. 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $4,033,492 6,667,417 231,975 10,927,522 234,218 22,094,624 15,801,603 478,460 57,786 (1,025,255) 15,312,594 0 0 0 $37,407,218 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $11,061,120 958,543 2,612,472 2,449,368 5,042,890 5,102,802 1,734,698 9,371,274 38,333,167 2,312,619 $40,645,786 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 29,609,948 0 $29,609,948 Operating revenues increased by $6,919,436 in fiscal 2008. Tuition & Fees included a 4% increase, but Auxiliary revenues accounted for most of the increase due to the addition of new dormitories. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $6,225,061 is a result of the changing environment of residential life on the College's campus. During the year, residential life increased some food service options and at the same time, Second ABAC, LLC, a related party, constructed over 489 beds of new housing on the campus. The net effect to the campus is that the students actually have more on-campus residential life availability. The College has entered into capital lease agreements on two dorms which results in an increased liability. Non-operating revenues increased by $1,242,102 for the year primarily due to an increase of $2,227,558 in State Appropriations. The compensation and employee benefits category increased by $1,959,136 and primarily affected the Instruction, Student Services, Institutional Support and Auxiliary categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $546,730 during the past year. The increase was primarily associated with the addition of two dormitories. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($12,289,030) 16,357,569 (3,182,850) 57,786 943,475 1,710,789 $2,654,264 June 30, 2007 ($12,966,755) 14,052,951 (1,196,982) 33,712 (77,074) 1,787,863 $1,710,789 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 5 Capital Assets The College had three significant capital asset additions for facilities in fiscal year 2008, which consisted of: the assumption of the ABAC Place Dormitories, the completion of the new Lakeside Dormitories and completion of the ABAC Athletic Fields. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements. Long Term Debt and Liabilities Abraham Baldwin Agricultural College had Long-Term Debt and Liabilities of $52,369,680 of which $1,554,749 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1, 8 and 10 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 FY2008. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 6 Economic Outlook The College is acutely aware of the state's economic downturn that became more apparent in early 2008 and seems to be continuing into calendar year 2009. State appropriations for FY 2009 are expected to be reduced and stringent restrictions are being imposed on spending. On the other hand, enrollment seems to be remaining steady and slightly increasing. As long as enrollment continues to remain vibrant, the College's overall financial position will remain strong. However, there are a number of factors that could adversely affect the College's financial stability. For one, the rising cost of energy will result in major challenges in the coming year. If these costs can not be held in check, the College's budget will need to be redirected to offset these increases. Secondly, budget reductions imposed by the state could curtail campus maintenance needs to the point deferred maintenance continues to mount and buildings continue to deteriorate. Other than the concerns listed above, the College is not aware of any other 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 tough and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Dr. David C. Bridges, President Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College Annual Financial Report FY 2008 7 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 TEM EN T O F N ET A S S ETS June 30, 2008 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 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 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 r ie s P a y a ble D eferred Rev en ue (n o te 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 ) 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 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 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 $2 ,6 5 4,2 6 4 1 14 ,0 5 5 9 63 ,9 6 7 1 ,2 0 0,7 9 2 1 52 ,1 0 9 6 74 ,6 4 0 17 ,1 9 3 5 ,7 7 7,0 2 0 3 62 ,6 0 8 78 ,4 7 6,5 3 5 78 ,8 3 9,1 4 3 84 ,6 1 6,1 6 3 1 ,2 1 0,9 8 6 3 61 ,1 7 4 4 67 ,4 4 0 4 11 ,2 0 9 1 ,0 7 4,6 5 8 4 80 ,0 9 1 857 4 ,0 0 6,4 1 5 50 ,4 8 2,6 2 7 3 32 ,3 0 4 50 ,8 1 4,9 3 1 54 ,8 2 1,3 4 6 26 ,9 1 9,2 5 0 6 66 ,0 1 1 2 ,2 0 9,5 5 6 $2 9 ,7 94 ,8 1 7 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 ,5 4 8 ,9 9 4 1 4 7 ,7 1 3 4 1 4 ,4 9 9 857 3 ,2 7 1 3 ,1 1 5 ,3 3 4 7 ,2 7 7 ,2 4 8 9 ,1 2 7 ,1 2 3 4 2 6 ,8 0 3 4 0 ,9 7 8 ,0 6 8 2 ,0 8 8 ,0 6 6 5 9 ,8 9 7 ,3 0 8 6 3 ,0 1 2 ,6 4 2 8 1 7 ,8 3 4 6 ,1 3 5 1 5 2 ,1 0 9 9 2 5 ,0 0 0 1 4 1 ,9 0 8 2 ,0 4 2 ,9 8 6 4 6 ,4 8 3 ,5 1 7 1 ,0 3 2 ,0 8 1 4 7 ,5 1 5 ,5 9 8 4 9 ,5 5 8 ,5 8 4 1 ,8 0 6 ,3 7 6 7 ,5 1 1 ,5 7 2 2 ,2 8 5 ,1 0 2 1 ,8 5 1 ,0 0 8 $ 1 3 ,4 5 4 ,0 5 8 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 8 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, 2008 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 Other Sales and Services Rents 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 Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Abraham Baldwin Agricult ural College T ot al Operat ing Expenses Operat ing Income (loss) Abraham Baldwin Agri cu l tu ral C olle ge C om pone nt Unit Abraham Baldwin Agri cu l tu ral College Fou n dati on , In c. $7,135,952 (3,102,460) 6,450,818 57,918 158,681 231,975 101,536 5,220,137 2,421,729 1,913,072 1,413 501,955 508,963 360,253 132,682 22,094,624 6,239,238 6,945,912 4,526,929 149,193 278,619 2,218,164 1,330,354 13,231,383 3,413,375 38,333,167 (16,238,543) $0 1,795,479 5,570,187 7,365,666 78,778 20,875 2,586,214 1,999,461 384,327 5,069,655 2,296,011 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 9 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, 2008 Abraham Baldwin Agri cu l tu ral C olle ge C om pone nt Unit Abraham Baldwin Agri cu l tu ral College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s 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 Addit ions t o perm anent 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 15,801,603 478,460 57,786 (2,312,619) (1,025,255) 12,999,975 (3,238,568) 0 (3,238,568) 33,033,385 0 33,033,385 $29,794,817 434,123 (1,945,156) (1,511,033) 784,978 311,805 311,805 1,096,783 12,357,275 0 12,357,275 $13,454,058 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 10 Statement of Cash Flows ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 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 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, 2008 $4,118,353 6,945,990 231,976 (19,616,817) (13,077,523) (2,218,164) (7,865) 44,141 4,914,652 2,207,435 1,941,114 936 505,209 513,593 359,706 848,234 (12,289,030) 15,801,603 77,506 478,460 16,357,569 (645,166) (948,265) (1,589,419) (3,182,850) 57,786 57,786 943,475 1,710,789 $2,654,264 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued ABRAHAM BALDWIN AGRICULTURAL COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 accrued int erest payable affect ing int erest paid June 30, 2008 ($16,238,543) 3,413,375 564,564 (232,258) (3,496) 16,899 28,630 140,274 (29,618) 51,143 ($12,289,030) $52,191,772 ($313,778) Abraham Baldwin Agricultural College Annual Financial Report FY 2008 12 ABRAHAM BALDWIN AGRICULTURAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 13 Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the 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 2008 14 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 the year ended June 30, 2008, GSFIC did not transfer any capital additions to Abraham Baldwin Agricultural College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College's residence halls. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as 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 $761,251 as of 7-1-2007. For FY2008, $576,785 was earned in compensated absences and employees were paid $525,641, for a net increase of $51,144. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $812,395. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 15 Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: Rest rict ed - E& G and Ot her Organized Act ivit ies Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable June 30, 2008 $3,586 633,949 28,476 $666,011 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. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 16 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, 2008 $816,005 640,826 752,725 $2,209,556 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 2008 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, 2008, the carrying value of deposits was $2,761,002 and the bank balance was $3,140,557. Of the College's deposits, $2,886,442 were uninsured. Of these uninsured deposits, $2,886,442 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, 2008. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $104,948 322,054 963,967 152,109 809,327 2,352,405 35,537 $2,316,868 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore T otal $674,640 $674,640 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was $0. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Asset s, Not Being Depreciat ed: Land Const ruct ion Work-in-P rogress T ot al Capital Asset s Not Being Depreciated Beginning Balance s 7/1/2007 $67,441 1,018,881 1,086,322 Addi ti o n s $0 236,250 236,250 Re ductions $0 1,018,881 1,018,881 Capital Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Ot her Improvements Equipment Capit al Leases Library Collections Capit alized Collections T ot al Assets Being Depreciated 39,645,844 607,439 3,562,699 0 2,709,398 156,200 46,681,580 1,061,542 276,397 52,191,772 43,833 53,573,544 1,024,000 66,858 119,341 1,210,199 Less: Accumulated Depreciation Buildings Facilities and Ot her improvements Equipment Capit al Leases Library Collections Capit alized Collections T ot al Accumulat ed Depreciat ion 12,334,890 546,695 2,392,653 0 2,362,225 22,646 17,659,109 915,634 44,231 310,198 2,064,365 77,570 1,377 3,413,375 81,062 119,341 200,403 T ot al Capital Asset s, Being Depreciated, Net 29,022,471 50,160,169 1,009,796 Capital Asset s, net $30,108,793 $50,396,419 $2,028,677 En di n g B al an ce 6/30/2008 $67,441 236,250 303,691 38,621,844 1,668,981 3,772,238 52,191,772 2,633,890 156,200 99,044,925 13,250,524 590,926 2,621,789 2,064,365 2,320,454 24,023 20,872,081 78,172,844 $78,476,535 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $127,420 340,020 $467,440 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Total Long Term Obligations Beginning Balance July 1, 2007 $0 Additions $52,505,550 Reductions Ending Balance June 30, 2008 $948,265 $51,557,285 761,251 761,251 $761,251 576,785 576,785 $53,082,335 525,641 525,641 $1,473,906 812,395 812,395 $52,369,680 Current Portion $1,074,658 480,091 480,091 $1,554,749 Note 9. Significant Commitments The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2008. Note 10. Lease Obligations Abraham Baldwin Agricultural College 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 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 fiscal 2009 and 2038. Interest rates range from 4.459 percent to 8.399 percent. Expenditures for fiscal year 2008 were $3,260,884 of which $2,312,619 represented interest and $948,265 represented principal. Unpaid interest of $313,778 was added to the capital lease principal balance during fiscal 2008, which was consistent with the payment amortization schedule. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Abraham Baldwin Agricultural College Annual Financial Report FY 2008 21 Buildings Equipment Total Assets Held Under Capital Lease $50,119,694 7,713 $50,127,407 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. Abraham Baldwin Agricultural College had two capital leases with related entities in the current fiscal year. On July 1, 2007, Abraham Baldwin Agricultural College entered into a capital lease of $33,247,420 at 4.459 percent with First ABAC, LLC), a discretely presented component unit, whereby the College leases a building for a twenty-three year period that expires August 2029. On August 1, 2007 the College entered into a capital lease of $18,935,452 at 4.641 percent with the Second ABAC, LLC, a discretely presented component unit, whereby the College leases a building for a thirty year period that expires July 2037. The outstanding liability at June 30, 2008 on these capital leases were $32,300,945 and $19,249,229, respectively. The College at its option may terminate the lease and purchase First and Second ABAC, LLC's interest for the unamortized principal balance and the payment of $1. Abraham Baldwin Agricultural College also has a capital lease for equipment with a third party with an outstanding balance at June 30, 2008 in the amount of $7,111. OPERATING LEASES Abraham Baldwin Agricultural College has a non-cancellable operating lease having a remaining term of more than one year that will expire in fiscal 2011. This agreement has no renewal option and is cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. This lease is payable on a monthly basis and is for maintenance equipment. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for non-cancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Abraham Baldwin Agricultural College Annual Financial Report FY 2008 22 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $3,387,821 3,406,456 3,382,536 3,399,418 3,421,222 17,416,679 18,022,794 18,571,308 9,385,441 6,882,041 87,275,716 35,718,431 $51,557,285 $4,296 4,296 1,432 $10,024 Abraham Baldwin Agricultural College's FY2008 expense for rental of equipment under operating leases was $3,014. 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 2008, 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 2008 2007 2006 100% 100% 100% $825,382 $748,785 $731,016 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 23 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. 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, 2008, for employees covered by ERS was $118,513. The College's total payroll for all employees was $13,185,150. For the year ended June 30, 2008 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. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 24 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $12,337 $4,721 $8,027 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 25 Abraham Baldwin Agricultural College and the covered employees made the required contributions of $241,163 (8.13% or 8.15%) and $144,134 (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 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 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 2008 amounted to $30,356 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 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 26 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Abraham Baldwin Agricultural College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. 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, 2008. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 27 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 151 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Abraham Baldwin Agricultural College recognized as incurred $695,144 of expenditures, which was net of $272,124 of participant contributions. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 28 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $6,227,407 1,317,906 2,046,403 118,322 163,194 11,029 773,615 403,244 $11,061,120 Functional Classification FY2008 Public Service Academic Support St udent Services $4,660 352,575 100,212 $0 1,187,842 357,199 $954 1,407,071 388,137 9,623 34,140 (8) 456,237 1,104 26,039 6,152 808,127 227,113 62,987 30,742 5,303 545,467 8,707 $958,543 $2,612,472 $2,449,368 Inst it ut ional Support $6,217 1,942,097 1,400,105 149,193 44,013 180 43,043 884,046 573,996 $5,042,890 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 FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 $0 $0 738,421 234,873 750,720 4,333,092 18,990 1,734,698 17,635 255,210 514,115 5,430,799 2,180,221 $5,102,802 $1,734,698 $9,371,274 T ot al Expenses $6,239,238 6,945,912 4,526,929 149,193 278,619 2,218,164 1,330,354 13,231,383 3,413,375 $38,333,167 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 29 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, 2008, the Foundation distributed $384,327 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, 2008: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities M utual Funds $2,058,184 373,354 4,613,670 2,122,807 $2,079,878 364,589 4,530,894 2,151,762 Total Investments $9,168,015 $9,127,123 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 30 Capital Assets for Component Units: Abraham Baldwin Agricultural College Foundation, Inc. held the following capital assets as of June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $2,816,569 2,816,569 41,176,195 2,469,278 43,645,473 5,483,974 38,161,499 $40,978,068 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable $785,075 48,235,847 $474,370 $85,456 827,330 $1,173,989 47,408,517 $141,908 925,000 Total Long Term Liabilities $49,020,922 $474,370 $912,786 $48,582,506 $1,066,908 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 the note totaled $654,119 at June 30, 2008. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 31 The Foundation has a note payable to First Community Bank of Tifton dated October 15, 2007 for $474,370 payable in nine equal and consecutive annual installments of $70,265 each and a final installment of unpaid principal and accrued interest on October 15, 2017. The interest rate is a variable rate at 0% above the Wall Street Journal Prime Rate. Security for the note is real estate. The note balance at June 30, 2008 is $474,370. The Foundation has a credit line of $75,000 with South Georgia Banking Company which matures on January 9, 2009 and is renewable at maturity. The interest rate is variable based on the Wall Street Journal Prime Rate. Interest is payable at maturity. This credit line has an outstanding balance of $45,500 at June 30, 2008. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 1 2 3 4 5 6-10 Princip al Notes and Loans Payable Interest $141,908 102,401 108,780 115,948 124,815 580,137 $1,173,989 $75,057 67,864 61,485 54,317 45,450 88,729 $392,902 Total $216,965 170,265 170,265 170,265 170,265 668,866 $1,566,891 Revenue Bonds Payable: First ABAC, LLC 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, 2008 totals $29,420,000. 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 $200,566. Second ABAC, LLC 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, 2008 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 $3,509. Abraham Baldwin Agricultural College Annual Financial Report FY 2008 32 Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Princip al $925,000 980,000 990,000 1,040,000 1,110,000 6,530,000 8,865,000 12,035,000 8,425,000 5,595,000 46,495,000 913,517 $47,408,517 Bonds Payable Interest $2,035,993 2,010,043 1,982,081 1,947,293 1,907,387 8,915,534 7,230,840 4,708,728 2,096,713 727,625 33,562,237 $33,562,237 Total $2,960,993 2,990,043 2,972,081 2,987,293 3,017,387 15,445,534 16,095,840 16,743,728 10,521,713 6,322,625 80,057,237 913,517 $80,970,754 Abraham Baldwin Agricultural College Annual Financial Report FY 2008 33 ALBANY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Albany State University Albany, Georgia Dr. Everette Freeman President Larry Wakefield Vice President for Fiscal Affairs ALBANY STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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................................................................................... 16 Note 3. Accounts Receivable.......................................................................................... 17 Note 4. Inventories.......................................................................................................... 17 Note 5. Notes/Loans Receivable..................................................................................... 17 Note 6. Capital Assets..................................................................................................... 18 Note 7. Deferred Revenue............................................................................................... 19 Note 8. Long-Term Liabilities ........................................................................................ 19 Note 9. Significant Commitments................................................................................... 19 Note 10. Lease Obligations............................................................................................. 19 Note 11. Retirement Plans .............................................................................................. 21 Note 12. Risk Management............................................................................................. 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 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 highly qualified faculty and a student body of more than 4,000 students. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 180 FY2007 167 FY2006 137 4,033 3,927 3,649 3,716 3,594 3,302 Overview of the Financial Statements and Financial Analysis Albany State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $8,563,239 128,256,555 290,638 137,110,432 June 30, 2007 $8,692,602 131,686,366 276,026 140,654,994 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,954,884 34,007,758 36,962,642 4,594,914 33,981,785 38,576,699 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 94,137,393 374,520 5,635,877 $100,147,790 97,366,366 364,493 4,347,436 $102,078,295 The total assets of the institution decreased by ($3,544,562). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($3,429,811) in the category of Capital Assets, net. The decrease is primarily due to a significant increase in depreciation resulting from the new housing recorded last year. The total liabilities for the year decreased by ($1,614,057). The combination of the decrease in total assets of ($3,544,562) and the decrease in total liabilities of ($1,614,057) yields a decrease in total net assets of ($1,930,505). The decrease in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of ($3,228,973). Albany State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $39,590,834 63,716,142 (24,125,308) 22,144,103 (1,981,205) 50,700 (1,930,505) 102,078,295 0 102,078,295 $100,147,790 $38,532,944 57,633,061 (19,100,117) 21,324,644 2,224,527 0 2,224,527 99,853,768 0 99,853,768 $102,078,295 The Statement of Revenues, Expenses, and Changes in Net Assets reflect a negative year with a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Albany State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s 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, 2008 $8,301,559 19,455,599 529,176 11,245,463 59,037 39,590,834 23,105,463 344,675 250,867 (4,326) 23,696,679 50,700 50,700 $63,338,213 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 0 0 $60,058,180 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $23,570,589 2,146,136 348,149 4,059,452 3,216,018 10,149,475 4,139,604 4,678,596 11,408,123 63,716,142 1,552,576 $65,268,718 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 Operating revenues increased by $1,057,890 in fiscal 2008. While revenues decreased in Grants and Contracts, it increased in Sales and Services, Auxiliary and Other categories. Albany State University Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $630,472 is primarily the result of a successful Food Services operation and one time gain due to sale of inventory as part of contracting the management of the Bookstore. Nonoperating revenues increased by $2,171,443 for the year primarily due to an increase of $1,902,749 in State Appropriations. The compensation and employee benefits category increased by $2,369,923 and primarily affected the Instruction, Public Service, Student Services and Institutional Support categories. Utilities increased by $282,436 during the past year. The increase was primarily associated with the increased natural gas costs that was experienced in the winter of fiscal year 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($18,568,368) 23,024,001 (3,189,685) 250,868 1,516,816 3,910,971 $5,427,787 June 30, 2007 ($16,514,184) 21,319,938 (2,737,944) 295,948 2,363,758 1,547,213 $3,910,971 Albany State University Annual Financial Report FY 2008 5 Capital Assets For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements. Long Term Debt and Liabilities Albany State University had Long-Term Debt and Liabilities of $35,787,794 of which $1,780,036 was reflected as current liability at June 30, 2008. 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 FY2008. For additional information, see Notes 1 and 16 in the Notes to the Financial Statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year to be challenging with state appropriation reductions, however, the University will maintain a close watch and continue to be good stewards over our 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 2008 6 Statement of Net Assets A LB A NY S TA TE UNIVERS ITY S TATEMEN T O F N ET A S S ETS June 30, 2008 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 Assist an ce Receiv ables - Ot h er P rep aid it em s T o t al Curren t Asset s Noncurre nt Assets N o n curren t Cash Sh o r t -t erm I n v est m en t s In v est m en t s (in cludin g Real E st at e) No 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 No n curren t Asset s TO TA L A S S ETS LIA B ILITIES C u rre n t Liabilitie s A cco un t s P ay able Salaries P ay able Dep o sit s Deferred Rev en ue (n o t e 7 ) Ot 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 urchase Obligat ion s (curren t po rt io n ) Co m p en sat ed Absen 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 Absen ces (n o n curren t ) Rev en ue/M o rt gage Bon ds P ay able (n o n curren t ) Ot h er L on g-T erm L iabilit ies T o t al No n curren t L iabilit ies TO TA L LIA B ILITIES N ET A S S ETS In v est ed in Cap it al Asset s, n et o f relat ed debt Rest rict ed fo r E x p en dable Un rest rict ed TO TA L N ET A S S ETS Alban y S tate Un i ve rs i ty $ 5 ,4 2 7 ,7 8 7 1 ,8 9 0 ,0 5 6 1 ,2 3 5 ,5 7 8 9 ,8 1 8 8 ,5 6 3 ,2 3 9 2 9 0 ,6 3 8 1 2 8 ,2 5 6 ,5 5 5 1 2 8 ,5 4 7 ,1 9 3 1 3 7 ,1 1 0 ,4 3 2 1 7 1 ,9 2 3 1 7 4 ,1 1 2 2 2 5 ,0 0 0 6 8 3 ,8 2 3 1 1 ,4 1 5 (9 1 ,4 2 5 ) 1 ,1 8 3 ,4 4 8 5 9 6 ,5 8 8 2 ,9 5 4 ,8 8 4 3 2 ,9 3 5 ,7 1 4 1 ,0 7 2 ,0 4 4 3 4 ,0 0 7 ,7 5 8 3 6 ,9 6 2 ,6 4 2 9 4 ,1 3 7 ,3 9 3 3 7 4 ,5 2 0 5 ,6 3 5 ,8 7 7 $ 1 0 0 ,1 4 7 ,7 9 0 C om pon e n t Un it Alban y S tate U n i ve rs i ty Fo u n da ti o n , In c. $7,373 21,676 29,049 639,398 5 ,1 5 8 ,0 8 2 2 ,3 3 0 ,6 9 1 3 5 ,4 0 8 ,4 4 3 1 ,1 1 4 ,0 7 5 4 4 ,6 5 0 ,6 8 9 4 4 ,6 7 9 ,7 3 8 856,044 225,000 2 ,2 2 2 ,8 3 5 3 ,3 0 3 ,8 7 9 3 4 ,7 0 6 ,7 4 7 435,025 3 5 ,1 4 1 ,7 7 2 3 8 ,4 4 5 ,6 5 1 (417,409) 2 ,4 5 1 ,1 5 2 4 ,2 0 0 ,3 4 4 $ 6 ,2 3 4 ,0 8 7 Albany State University Annual Financial Report FY 2008 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, 2008 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 Other Sales and Services Rents 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 Benefits Ot her P ersonal Services 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) Albany State Un i ve rsi ty C om pone nt Unit Albany State Un i ve rsi ty Fou n dati on , In c. $12,841,354 (4,539,795) 17,265,209 1,774,967 415,423 529,176 23,996 4,556,424 1,362,634 2,751,503 141,482 427,419 1,800,557 205,444 35,041 39,590,834 11,379,366 16,121,895 8,184,651 378,174 422,591 5,554,310 2,633,223 14,129,476 4,912,456 63,716,142 (24,125,308) $0 381,400 2,171,848 2,553,248 302,470 359,240 978,380 1,640,090 913,158 Albany State University Annual Financial Report FY 2008 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, 2008 Albany State Un i ve rsi ty C om pone nt Unit Albany 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 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 Ot h er T ot al Ot her Revenues Increase in Net Asset s NET AS S ETS Net Asset s-beginning of year, as originally report ed P rior Year Adjust ment s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 23,105,463 344,675 250,867 (1,552,576) (4,326) 22,144,103 (1,981,205) 50,700 50,700 (1,930,505) 102,078,295 0 102,078,295 $100,147,790 441,132 (1,822,786) 32,292 (1,349,362) (436,204) 0 (436,204) 7,239,040 (568,749) 6,670,291 $6,234,087 Albany State University Annual Financial Report FY 2008 9 Statement of Cash Flows A LB A N Y S TA TE UN IV ER S IT Y 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 8 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 L o a n s I ssue d t o St ude n t s a n d E m p lo y e e s A ux iliary E n t erp rise Ch arges: Residen ce H alls Bo o k st o re F o o d Se r v ic e s P ark in g/T ran sp o rt at io n H e a lt h Se r v ic e s In t erco llegiat e A t h let ics 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 Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al A sset s P rin cip al P aid o n Cap it al D ebt an d L eases In t erest P aid o n Cap it al D ebt an d L eases 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 N o t es Receiv able, N et 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 Albany State University Annual Financial Report FY 2008 10 June 30, 2008 $ 8 ,4 8 0 ,6 0 6 1 8 ,4 5 0 ,9 4 1 5 2 9 ,1 7 4 (2 5 ,7 3 1 ,3 1 6 ) (2 7 ,3 0 2 ,7 6 3 ) (5 ,5 5 4 ,3 1 0 ) (1 4 ,6 1 2 ) 4 ,6 3 3 ,3 8 4 1 ,8 8 0 ,2 6 3 2 ,5 3 5 ,3 8 7 1 4 1 ,4 8 2 4 4 4 ,9 3 4 1 ,7 9 8 ,8 5 5 2 0 6 ,9 5 7 9 3 2 ,6 5 0 (1 8 ,5 6 8 ,3 6 8 ) 2 3 ,1 0 5 ,4 6 3 (4 2 6 ,1 3 7 ) 3 4 4 ,6 7 5 2 3 ,0 2 4 ,0 0 1 5 0 ,7 0 0 (1 ,4 8 6 ,9 7 1 ) (2 0 0 ,8 3 8 ) (1 ,5 5 2 ,5 7 6 ) (3 ,1 8 9 ,6 8 5 ) 2 5 0 ,8 6 8 2 5 0 ,8 6 8 1 ,5 1 6 ,8 1 6 3 ,9 1 0 ,9 7 1 $ 5 ,4 2 7 ,7 8 7 ($ 2 4 ,1 2 5 ,3 0 8 ) 4 ,9 1 2 ,4 5 6 (1 8 8 ,5 6 4 ) 4 5 7 ,1 5 3 (9 ,8 1 8 ) (1 4 ,6 1 2 ) (1 2 4 ,3 3 7 ) 2 8 5 ,7 4 0 1 3 ,4 6 0 2 2 5 ,4 6 2 ($ 1 8 ,5 6 8 ,3 6 8 ) ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 Note 1. Summary of Significant Accounting Policies Nature of Operations Albany State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Albany State University is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Albany State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Albany State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Albany State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Albany State University) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 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 FY2008, Albany State University is reporting the activity for the Albany 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 Albany State University Annual Financial Report FY 2008 11 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. 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. 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. Albany State University Annual Financial Report FY 2008 12 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, 2008, GSFIC did not transfer any capital additions to Albany State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. 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 $1,443,169 as of 7-1-2007. For FY2008, $1,053,941 was earned in compensated absences and employees were paid $828,478, for a net increase of $225,463. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,668,632. 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 Albany State University Annual Financial Report FY 2008 13 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 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, 2008 Federal Loans Inst it ut ional Loans T ot al Rest rict ed Expendable $372,581 1,939 $374,520 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, 2008 $240,480 4,010,487 1,384,910 $5,635,877 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: Albany State University Annual Financial Report FY 2008 14 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or non-operating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Albany State University Annual Financial Report FY 2008 15 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, 2008, the carrying value of deposits was $5,415,647 and the bank balance was $6,359,578. Of the University's deposits, $6,159,578 were uninsured. Of these uninsured deposits, $6,159,578 were 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 had no investments as of June 30, 2008. Albany State University Annual Financial Report FY 2008 16 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $1,030,968 709,483 1,890,056 490,900 4,121,407 995,773 $3,125,634 Note 4. Inventories Albany State had no inventory balance at June 30, 2008. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was $0. Albany State University Annual Financial Report FY 2008 17 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $2,922,366 1,743,593 4,665,959 12,621,336 115,643,413 3,976,745 4,836,134 34,320,000 5,807,389 177,205,017 2,529,364 36,669,686 2,941,170 2,831,246 0 5,211,477 1,667 50,184,610 127,020,407 $131,686,366 Addi ti o n s $0 277,408 277,408 Re du cti on s $0 2,021,001 2,021,001 En di n g B al an ce 6/30/2008 $2,922,366 0 2,922,366 2,021,000 340,896 780,589 38,079 50,000 3,230,564 219,365 34,230 253,595 12,621,336 117,664,413 4,317,641 5,397,358 34,320,000 5,811,238 50,000 180,181,986 238,225 2,671,575 66,510 356,561 1,415,700 165,793 (1,908) 4,912,456 (1,681,892) ($1,404,484) 298,029 45,156 (129,178) 1,032 34,230 249,269 4,326 $2,025,327 2,469,560 39,296,105 3,136,858 3,186,775 1,415,700 5,343,040 (241) 54,847,797 125,334,189 $128,256,555 Albany State University Annual Financial Report FY 2008 18 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $93,004 590,819 $683,823 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $34,320,000 Additions $0 Reductions Ending Balance June 30, 2008 $200,838 $34,119,162 Other Liabilities Compensated Absences Total 1,443,169 1,443,169 1,053,941 1,053,941 828,478 828,478 1,668,632 1,668,632 Total Long Term Obligations $35,763,169 $1,053,941 $1,029,316 $35,787,794 Current Portion $1,183,448 596,588 596,588 $1,780,036 Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2008. 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, and also is obligated under a capital lease for the acquisition of real property. CAPITAL LEASES Albany State University has one capital lease that is payable in monthly installments and expires in 2035. Expenditures for fiscal year 2008 were $1,753,414, made up of $1,552,576 interest expense and $200,838 in principal payments. Interest rates range from 3.25 percent to 5.50 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Albany State University Annual Financial Report FY 2008 19 Buildings Total Assets Held Under Capital Lease $32,904,300 $32,904,300 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 5.50 percent with the Albany State University Foundation, whereby the University leases a building for a twenty-nine year period that began August 2006 and expires July 2035. The outstanding principal balance as of June 30, 2008 is $34,119,162. OPERATING LEASES Albany State University's non-cancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2012. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $1,875,108 1,881,373 1,887,393 2,088,175 2,147,297 11,738,648 13,528,065 14,181,713 14,440,484 3,184,817 66,953,073 32,833,911 $34,119,162 $7,954 5,632 3,310 2,207 $19,103 Albany State University's FY2008 expense for rental of real property and equipment under operating leases was $7,954. Albany State University Annual Financial Report FY 2008 20 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 2008, 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 2008 2007 2006 100% 100% 100% $1,564,492 $1,505,814 $1,397,830 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 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Albany State University Annual Financial Report FY 2008 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 University's payroll for the year ended June 30, 2008, for employees covered by ERS was $0. The University's total payroll for all employees was $27,501,261. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $0 $1,001 $3,002 Albany State University Annual Financial Report FY 2008 22 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Albany State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $557,530 (8.13% or 8.15%) and $345,566 (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 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. Albany State University Annual Financial Report FY 2008 23 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 2008 amounted to $40,518 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' Albany State University Annual Financial Report FY 2008 24 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Albany State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Albany State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Albany State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. 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. Albany State University Annual Financial Report FY 2008 25 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial Statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 174 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Albany State University recognized as incurred $745,517 of expenditures, which was net of $256,324 of participant contributions. Albany State University Annual Financial Report FY 2008 26 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $11,130,007 3,794,705 3,664,927 134,588 409,226 118,402 908,630 3,410,104 $23,570,589 Research $112,235 349,134 87,617 23,067 3,074 1,537,953 33,056 $2,146,136 Functional Classification FY2008 Public Service Academic Support $3,500 157,226 14,476 $21,850 1,763,135 489,197 3,031 47,491 3,215 166,701 48,852 1,509,976 178,951 $348,149 $4,059,452 Student Services $65,000 1,736,966 527,624 53,157 60,277 54,520 715,657 2,817 $3,216,018 Institutional Support $46,774 5,218,571 2,506,413 95,373 104,433 2,200 148,338 1,942,120 85,253 $10,149,475 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 1,883,811 590,266 (708,922) 4,010 1,761,599 536,020 72,820 $0 282,801 4,395,795 $0 1,218,347 304,131 708,922 52,814 686,812 495,223 6,812,419 1,129,455 $4,139,604 $4,678,596 $11,408,123 Total Expenses $11,379,366 16,121,895 8,184,651 378,174 422,591 5,554,310 2,633,223 14,129,476 4,912,456 $63,716,142 Albany State University Annual Financial Report FY 2008 27 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 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 No.38, Certain Financial Statement Note Disclosures. The foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 300 College Drive, Albany, GA 30000. Prior Period Adjustment: A prior period adjustment in the amount of ($568,749) was made to restate the prior year's Agency Funds payable. The adjustment had the effect of reducing Beginning Net Assets for the fiscal year that ended June 30, 2008. Deposits and Investments for Component Units: Deposits: As of June 30, 2008, the carrying amount of the Foundation's bank deposits was $1,938,159 and the respective bank balances totaled $2,075,933. Of the total bank balance, $211,346 was insured through the Federal Depository Insurance Corporation (FDIC). The remaining $1,864,587 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, 2008 are summarized as follows: Albany State University Annual Financial Report FY 2008 28 Investment type Certificates of Deposit General Obligation Bonds M oney M arket M utual Fund Repurchase Agreements Fair Value Investment Maturity Less Than 1 Year 1-5 Years $1,030,577 781,177 518,937 5,158,082 $7,488,773 781,177 518,937 5,158,082 $6,458,196 $1,030,577 $1,030,577 Capital Assets for Component Units: Albany State University Foundation Inc. had the following Capital Asset activity for the year ended June 30, 2008: Capital Assets, Being Depreciated: Facilities and Other Improvements Equipment Total Assets Being Depreciated Beginning Balances 7/1/2007 $37,078,604 24,340 37,102,944 Additions $41,344 63,474 104,818 Reductions $0 0 Ending Balance 6/30/2008 $37,119,948 87,814 37,207,762 Less: Accumulated Depreciation Facilities and Other improvements Equipment Total Accumulated Depreciation 812,196 8,743 820,939 968,535 9,845 978,380 1,780,731 18,588 0 1,799,319 Total Capital Assets, Being Depreciated, Net Capital Assets, net 36,282,005 $36,282,005 (873,562) ($873,562) 0 35,408,443 $0 $35,408,443 Long-term Liabilities for Component Units: The Foundation had the following activity in long-term liabilities for the year ended June 30, 2008: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $2,310,077 34,955,276 $37,265,353 $0 $87,242 $2,222,835 $2,222,835 0 23,529 34,931,747 225,000 $0 $110,771 $37,154,582 $2,447,835 Albany State University Annual Financial Report FY 2008 29 Notes and Loans Payable On May 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 outstanding loan balance as of June 30, 2008 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 original term loan was for $332,092, with interest payments at a rate of 4.130% per annum with the final payment due on November 1, 2008. The outstanding loan balance as of June 30, 2008 is $40,946. Annual debt service requirements to maturity for Albany Municipal Coliseum installment loans with SunTrust Bank are as follows: Year ending June 30: 2009 1 Principal Notes and Loans Payable Interest $2,222,835 $162,097 Total $2,384,932 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: Year ending June 30: 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2034 Bond Premium 1 2 3 4 5-9 10-14 15-19 20-24 27-29 Princip al $225,000 230,000 240,000 250,000 3,025,000 5,335,000 7,815,000 9,975,000 7,225,000 34,320,000 611,747 $34,931,747 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 63,976,638 611,747 $64,588,385 Albany State University Annual Financial Report FY 2008 30 ARMSTRONG ATLANTIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Armstrong Atlantic State University Atlanta, Georgia Thomas Z. Jones President William N. Gauthier Interim Vice President for Business and Finance ARMSTRONG ATLANTIC STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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 .............................................. 31 Note 16. Component Units ......................................................................................................... 32 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 coastlines. Since its founding over 70 years ago by the city of Savannah, Armstrong Atlantic has become a vibrant 250-acre, urban campus of 6,800 students serving a wider community of nearly 340,000 residents. The university offers programs at two other centers in the coastal Georgia area. It is the lead institution at the Liberty Center in Hinesville, an education consortium with Waycross College, and is a cooperative partner at the Brunswick Center, located at Coastal Georgia Community College. Founded in 1935 as Armstrong Junior College, the institution became a two-year unit of the University System of Georgia in 1959 and a four-year college in 1966. It became Armstrong Atlantic State University in 1996. The University has become known for its state-of-the-art technology-related, health professions, and education programs. The institution continues to grow as shown by the comparison numbers that follow. The student body is 30-70% male-female and a mix of 20-80% non-traditional/traditional students. The average student age is 26. Students Students Faculty (Headcount) (FTE) FY2008 296 FY2007 290 FY2006 276 6,848 6,728 6,710 5,767 5,565 5,502 Overview of the Financial Statements and Financial Analysis Armstrong Atlantic State University is proud to present its financial statements for fiscal year 2008. 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 2008. 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 Armstrong Atlantic State University Annual Financial Report FY 2008 1 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $11,972,314 103,572,168 2,599,729 118,144,211 June 30, 2007 $13,867,474 56,489,121 2,814,887 73,171,482 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 11,272,935 47,567,364 58,840,299 12,085,868 1,821,488 13,907,356 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 55,730,602 2,425,533 191,876 955,901 $59,303,912 55,672,639 2,518,930 217,417 855,140 $59,264,126 The total assets of the institution increased by $44,972,729. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $47,083,047 in the category of Capital Assets, net. This was due mainly to the capitalization of capital leases. The total liabilities for the year increased by $44,932,943. The combination of the increase in total assets of $44,972,729 and the increase in total liabilities of $44,932,943 yields an increase in total net assets of $39,786. The increase in total net assets of $39,786 affected all net asset categories by minor amounts. Armstrong Atlantic State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $41,622,255 75,241,825 (33,619,570) 32,787,515 (832,055) 3,027,575 2,195,520 59,264,126 (2,155,734) 57,108,392 $59,303,912 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Armstrong Atlantic State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $18,627,850 10,860,387 1,827,416 9,981,271 325,331 41,622,255 34,533,440 137,512 (86,999) 370,729 34,954,682 2,813,812 213,763 3,027,575 $79,604,512 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $31,241,179 709,539 7,748,575 4,505,564 8,646,964 7,724,776 5,141,804 9,523,424 0 75,241,825 2,167,167 $77,408,992 June 30, 2007 $30,885,962 868,338 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 Operating revenues increased by $1,814,012 in fiscal 2008. Tuition & fees included a 7% increase, while grants and contracts increased 8%. Armstrong Atlantic State University Annual Financial Report FY 2008 4 Nonoperating revenues increased by $2,819,951 for the year primarily due to an increase of $3,108,859 in State Appropriations. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($31,454,920) 35,542,483 (5,843,024) 428,159 (1,327,302) 3,569,951 $2,242,649 June 30, 2007 ($33,441,204) 31,344,954 (1,089,138) 431,646 (2,753,742) 6,323,693 $3,569,951 Capital Assets Capital assets increased $47,083,047 due primarily to the capitalization of capital leases. For additional information concerning Capital Assets, see notes 1, 6, 8, and 10 in the Notes to the Financial Statements. Long Term Debt and Liabilities Armstrong Atlantic State University had Long-Term Debt and Liabilities of $49,934,756 of which $2,448,524 was reflected as current liability at June 30, 2008. 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 2008 5 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 FY2008. The Armstrong Atlantic State University Foundation, Inc. had investments of $6.6 million as of December 31, 2007. The Armstrong Atlantic State University Educational Properties Foundation, Inc. had long-term debt of $42.5 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 2008 6 Statement of Net Assets ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 A S S ETS C urrent Assets Cash an d Cash Equivalent s Sh o rt -t erm In v est m en t s Acco unt s Receiv able, net (no t e 3) Receiv ables - Federal Fin ancial Assist an ce Receiv ables - Ot her Con t ribut io ns Receivable Invent ories (note 4) P repaid it em s T o t al Curren t Asset s Arm strong Atlantic State Un i ve rs i ty C om pone nt Unit Arm strong Atlantic State Un i ve rs i ty Fo u n da ti o n , In c. $2,107,883 250,000 1,681,454 6,984,489 942,657 5,831 11,972,314 $1,130,892 17,288 57,399 1,205,579 Noncurrent Assets No ncurrent Cash Inv est m ent s (including Real Est at e) No t es Receivable, n et Capit al Asset s, n et (no t e 6 ) Ot her Asset s T o t al No ncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Acco unt s P ayable Salaries P ay able Deposit s Deferred Reven ue (no t e 7) Dep osit s Held fo r Ot her Organ izat ion s Lease P urchase Obligat ion s (current p ort ion ) Com p ensat ed Absences (curren t po rt io n) Revenue/M o rt gage Bon ds P ay able (current ) No t es an d Lo ans P ayable (curren t port ion ) T o t al Curren t Liabilit ies Non cu rre n t Liabilitie s Lease P urchase Obligat ion s (n on curren t ) Deferred Reven ue (no ncurrent ) Com p ensat ed Absences (no ncurrent ) Revenue/M o rt gage Bon ds P ay able (n on curren t ) No t es an d Lo ans P ayable (no ncurrent ) T o t al No ncurrent Liabilit ies TO TAL LIAB ILITIES NET AS S ETS Inv est ed in Cap it al Asset s, net of relat ed debt Rest rict ed for Non exp endable Exp endable Un rest rict ed TO TAL NET AS S ETS 134,766 2,453,309 11,654 103,572,168 106,171,897 118,144,211 671,314 264,795 4,825,410 3,062,892 1,438,960 1,009,564 11,272,935 46,771,475 81,132 714,757 47,567,364 58,840,299 55,730,602 2,425,533 191,876 955,901 $59,303,912 6,581,648 6,581,648 7,787,227 15,000 15,000 0 15,000 4,449,936 3,086,659 235,632 $7,772,227 C om pon e n t Un it Arm strong Atlantic S ta te U n i ve rs i ty EP Fo u n da ti o n , In c. $617,310 37,077 3,032 657,419 5,210,909 33,768,769 1,433,588 40,413,266 41,070,685 944,935 15,278 328,906 970,000 26,778 2,285,897 40,894,177 564,364 41,458,541 43,744,438 (2,118,040) (555,713) ($2,673,753) Armstrong Atlantic State University Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets ARMSTRONGATLANTIC STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 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 Armstrong Atlantic State University Total Operating Expenses Operating Income (loss) Armstrong Atlantic State University Component Unit Armstrong Atlantic State University Foundation, Inc. Component Unit Armstrong Atlantic State University EP Foundation, Inc. $26,263,875 (7,636,025) 9,145,293 273,114 1,441,980 1,827,416 905 4,127,746 2,980,128 344,295 174,537 182,284 2,107,943 64,338 324,426 41,622,255 17,680,456 17,395,861 9,442,181 138,961 640,962 6,374,349 4,137,330 14,923,493 4,508,232 75,241,825 (33,619,570) 1,401,062 437,270 1,838,332 351,049 688,261 501,087 1,540,397 297,935 $0 4,519,532 23 4,519,555 123,047 138 920,733 1,732,892 153,271 2,930,081 1,589,474 Armstrong Atlantic State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued ARMSTRONGATLANTIC STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts 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 Armstrong Atlantic State University Component Unit Armstrong Atlantic State University Foundation, Inc. Component Unit Armstrong Atlantic State University EP Foundation, Inc. 34,533,440 137,512 (86,999) (2,167,167) 370,729 32,787,515 (832,055) 2,813,812 213,763 3,027,575 2,195,520 59,264,126 (2,155,734) 57,108,392 $59,303,912 107,337 107,337 405,272 410,189 410,189 815,461 6,956,766 0 6,956,766 $7,772,227 231,533 (1,872,158) (1,640,625) (51,151) 0 (51,151) (2,622,602) 0 (2,622,602) ($2,673,753) Armstrong Atlantic State University Annual Financial Report FY 2008 9 Statement of Cash Flows ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 m ent s Int erest on 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, 2008 $18,902,919 12,924,213 1,827,416 (29,499,594) (34,835,529) (6,374,349) 4,254,963 2,995,300 628,969 177,373 216,919 2,062,544 145,470 (4,881,534) (31,454,920) 34,533,440 629,385 507,512 (109,637) (18,217) 35,542,483 3,027,575 (5,411,829) (1,309,820) (2,148,950) (5,843,024) 275,000 153,159 428,159 (1,327,302) 3,569,951 $2,242,649 Armstrong Atlantic State University Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued ARMS TRONG ATLANTIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 In v en t o ries 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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2008 ($33,619,570) 4,508,232 426,237 (152,548) (5,831) 21,326 (2,615,903) 10,048 (26,911) ($31,454,920) $602,782 ($240,158) Armstrong Atlantic State University Annual Financial Report FY 2008 11 ARMSTRONG ATLANTIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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 Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund and the Board of Regents Diversified Fund are included under Investments. Armstrong Atlantic State University Annual Financial Report FY 2008 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. 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 2008 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. Armstrong Atlantic State University had accrued liability for compensated absences in the amount of $1,751,231 as of 7-1-2007. For FY2008, $1,324,964 was earned in compensated absences and employees were paid $1,351,874, for a net decrease of ($26,910). The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,724,321. 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 2008 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, 2008 $146,659 10,702 34,515 $191,876 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, 2008 $1,743,573 383,288 76,054 (1,247,014) $955,901 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 2008 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. Restatement of Prior Year Balances Armstrong Atlantic State University has a restatement of prior year net assets decreasing beginning net assets by ($2,155,734). During fiscal 2008, the University's leases were reviewed for capital lease treatment. Five leases that had been classified as operating leases in prior years were determined to be capital leases. The correction of the accounting for these five leases resulted in a decrease to Beginning Net Assets of ($1,861,397) and represents the excess of Depreciation and Interest Expense over prior years' reported Rent Expense for the respective leases. During fiscal 2008, Accumulated Depreciation for Library Collections was adjusted resulting in an additional $291,440 in Depreciation Expense related to prior years and a decrease to Beginning Net Assets of ($291,440). During fiscal 2008, the accounting for a fiscal 2001 Food Services contract was corrected to reflect capital improvements that were funded by the food services vendor and the amortization of those improvements over the life of the related contract. The effect on Beginning Net Assets due to this correction was a decrease of ($8,197). During fiscal 2008, $5,300 in outstanding checks related to prior years were canceled, resulting in an increase to Beginning Net Assets. The July 1, 2007 Beginning Balance for Capital Leases in Note 6 - Capital Assets was restated to include an increase of $45,706,668 for the capital asset effect of the prior year adjustments detailed above. The July 1, 2007 Beginning Balance for Lease Obligations in Note 8 - LongTerm Liabilities was restated to reflect an addition of $47,622,486 in capital lease debt resulting from the change in lease treatment described above. Armstrong Atlantic State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $2,492,109 and the bank balance was $4,443,107. Of the University's deposits, $4,193,107 were uninsured. Of these uninsured deposits, $4,193,107 were collateralized with securities held by the financial institution's trust department or agent in the University's name. Armstrong Atlantic State University Annual Financial Report FY 2008 18 B. Investments At June 30, 2008, the carrying value of the University's investments were $2,453,309, 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-T erm Fund Legal Fund Diversified Fund $25,159 256,356 2,171,794 T otal Investment Pools $2,453,309 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 1.99 years. Of the University's total investment of $25,159 in the Short Term Fund, $25,058 is invested in debt securities. The Weighted Average Maturity of the Legal Fund is 3.84 years. Of the University's total investment of $256,356 in the Legal Fund, $254,049 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the University's total investment of $2,171,794 in the Diversified Fund, $675,428 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. Armstrong Atlantic State University Annual Financial Report FY 2008 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $338,481 700,239 1,681,454 6,458,662 9,178,836 512,893 $8,665,943 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore Other T otal June 30, 2008 $874,512 68,145 $942,657 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0. Armstrong Atlantic State University Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 7/1/2007 $4,678,254 522,800 5,201,054 Addition s $0 3,864,183 3,864,183 Re ductions $0 1,661,931 1,661,931 Capit al Asset s, Being Depreciat ed: Infrast ruct ure Building and Building Improvement s Facilities and Other Improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Asset s Being Depreciat ed 2,597,715 61,495,493 3,246,634 4,509,939 50,032,473 9,552,366 16,575 131,451,195 1,938,013 609,846 602,782 661,718 3,812,359 400,000 66,899 66,480 533,379 Less: Accumulat ed Depreciat ion Infrast ruct ure Buildin gs Facilities and Other improvements E quip m en t Capit al Leases Library Collect ions Capit alized Collect ions T ot al Accumulat ed Depreciat ion 663,077 18,471,576 1,306,044 3,655,018 3,213,833 7,143,622 3,290 34,456,460 86,418 1,781,151 90,572 263,442 1,775,384 510,851 414 4,508,232 270,000 66,899 66,480 403,379 T ot al Capit al Asset s, Being Depreciat ed, Net 96,994,735 (695,873) 130,000 Capit al Asset s, net $102,195,789 $3,168,310 $1,791,931 En di n g B al an ce 6/30/2008 $4,678,254 2,725,052 7,403,306 2,597,715 63,033,506 3,246,634 5,052,886 50,635,255 10,147,604 16,575 134,730,175 749,495 19,982,727 1,396,616 3,851,561 4,989,217 7,587,993 3,704 38,561,313 96,168,862 $103,572,168 Armstrong Atlantic State University Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $2,719,302 2,106,108 $4,825,410 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Total Long Term Obligations (Restated) Beginning Balance July 1, 2007 $48,917,473 Additions $602,782 Reductions Ending Balance June 30, 2008 $1,309,820 $48,210,435 1,751,231 1,751,231 $50,668,704 1,324,964 1,324,964 $1,927,746 1,351,874 1,351,874 $2,661,694 1,724,321 1,724,321 $49,934,756 Note 9. Significant Commitments Current Portion $1,438,960 1,009,564 1,009,564 $2,448,524 The University had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2008 that are not reflected in the accompanying basic financial statements. 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 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 2009 and 2034. Expenditures for fiscal year 2008 were $3,476,987 of which $2,167,167 represented interest. Total principal paid on capital leases was Armstrong Atlantic State University Annual Financial Report FY 2008 22 $1,309,820 for fiscal year 2008. Interest rates range from 3.75% to 7.2%. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Equipment Infrastructure Buildings Total Assets Held Under Capital Lease $784,252 579,340 44,282,446 $45,646,038 In fiscal 2005, Armstrong Atlantic State University entered into a capital lease with AASU Educational Properties Foundation, Inc., a related party, in the amount of $17,066,427 for Armstrong Center. The lease term expires in fiscal 2034. The outstanding principal balance at June 30, 2008 was $16,807,782. In fiscal 2006, Armstrong Atlantic State University entered into a capital lease with AASU Educational Properties Foundation, Inc., a related party, in the amount of $20,842,373 for Compass Pointe Apartments. The lease term expires in fiscal 2030. The outstanding principal balance at June 30, 2008 was $19,409,572. Also in fiscal 2006, Armstrong Atlantic State University entered into a capital lease with AASU Educational Properties Foundation, Inc., a related party, in the amount of $5,511,581 for the University Crossing Apartments. The lease term expires in fiscal 2030. The outstanding principal balance at June 30, 2008 was $5,132,692. In fiscal 2007, Armstrong Atlantic State University entered into a capital lease with AASU Educational Properties Foundation, Inc., a related party, in the amount of $4,955,220 for a Student Recreation Center. The lease term expires in fiscal 2032. The outstanding principal balance at June 30, 2008 was $4,743,995. Also in fiscal 2007, Armstrong Atlantic State University entered into a capital lease with AASU Educational Properties Foundation, Inc., a related party, in the amount of $746,125 for a Women's Fieldhouse. The lease term expires in fiscal 2021. The outstanding principal balance at June 30, 2008 was $714,693. Armstrong Atlantic State University has various capital leases with third party vendors for equipment with an outstanding balance at June 30, 2008 in the amount of $1,401,701. OPERATING LEASES For fiscal year 2008, Armstrong Atlantic State University had four operating leases. One lease is with Michael Porton, Inc. to rent offices and classroom space in Hinesville, Georgia for the Liberty Center. The monthly rental amount is $8,750 and the rental term may be extended on an annual basis until June 30, 2016. A second 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. Armstrong Atlantic State University Annual Financial Report FY 2008 23 A third lease is with Savannah Teachers Properties, Inc. to rent classroom space in the Savannah Mall. Monthly base rent in fiscal 2008 was $24,307. The rental term may be extended on an annual basis until May 30, 2026. The fourth lease is with University Terrace, LLC to rent the University Terrace Apartments at a monthly fixed base rental of $24,000. The rental term may be extended on an annual basis until June 30, 2022. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $3,571,880 3,585,700 3,606,070 3,390,461 3,252,110 16,152,613 16,401,965 16,451,779 10,576,783 572,069 77,561,430 29,350,995 $48,210,435 $1,011,700 1,029,101 1,050,198 1,094,650 1,114,123 5,159,372 3,291,930 528,331 $14,279,405 Armstrong Atlantic State University's FY2008 expense for rental of real property and equipment under operating leases was $1,122,253. Armstrong Atlantic State University Annual Financial Report FY 2008 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 2008, 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 2008 2007 2006 100% 100% 100% $1,523,872 $1,472,188 $1,376,453 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 2008 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, 2008, for employees covered by ERS was $89,267. The University's total payroll for all employees was $35,076,317. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $9,348 $8,997 $8,787 Armstrong Atlantic State University Annual Financial Report FY 2008 26 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $1,126,589 (8.13% or 8.15%) and $692,059 (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. Armstrong Atlantic State University Annual Financial Report FY 2008 27 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 2008 amounted to $124,765 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' Armstrong Atlantic State University Annual Financial Report FY 2008 28 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Armstrong Atlantic State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the Armstrong Atlantic State University Annual Financial Report FY 2008 29 publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 177 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Armstrong Atlantic State University recognized as incurred $727,396 of expenditures, which was net of $311,431 of participant contributions. Armstrong Atlantic State University Annual Financial Report FY 2008 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 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 Inst ruct ion $17,504,920 3,746,976 4,934,858 312,791 261,037 86,588 3,732,702 661,307 $31,241,179 Functional Classification FY2008 Public Service Academic Support St udent Services $12,500 417,502 88,272 13,722 1,911 172,083 3,549 $150,212 4,089,215 1,071,459 (53,643) 118,301 77,865 1,721,405 573,761 $4,125 2,475,951 643,035 (11,221) 56,088 29,558 30,208 1,071,947 205,873 $709,539 $7,748,575 $4,505,564 Inst it ut ional Support $0 4,588,530 2,139,072 203,825 136,878 70,467 1,375,846 132,346 $8,646,964 Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 800,447 272,465 $0 $8,699 1,277,240 293,020 2,011 3,063,656 1,808,837 1,777,360 5,141,804 1,171 941,950 806,635 5,040,673 1,154,036 $7,724,776 $5,141,804 $9,523,424 T ot al Expenses $17,680,456 17,395,861 9,442,181 138,961 640,962 6,374,349 4,137,330 14,923,493 4,508,232 $75,241,825 Armstrong Atlantic State University Annual Financial Report FY 2008 31 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, 2007, the Foundation distributed $501,087 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 investments in the amount of $6.6 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Armstrong Atlantic State University Foundation holds no investments in real property. Investments are comprised of the following amounts at December 31, 2007: Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $922,724 $1,525,733 383,971 2,344,517 14,922 $5,191,867 Fair Value $922,724 $1,561,235 385,261 3,698,581 13,847 $6,581,648 Armstrong Atlantic State University Annual Financial Report FY 2008 32 Armstrong Atlantic State University Educational Properties Foundation, Inc. Armstrong Atlantic State University Educational Properties Foundation, Inc. (Educational Properties) is a legally separate, tax-exempt component unit of Armstrong Atlantic State University (University). Educational Properties purchases buildings and leases them to the University for housing, recreation, etc. The five-member board of Educational Properties is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from Educational Properties, the majority of resources or income thereon that Educational Properties holds and invests is restricted to the real estate activities of the University by the donors. Because these restricted resources held by Educational Properties can only be used by, or for the benefit of the University, Educational Properties is considered a component unit of the University and is discretely presented in the University's financial statements. Educational Properties is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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. Educational Properties' fiscal year is January 1 through December 31. Educational Properties 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 Educational Properties may be obtained from the Administrative Office at Armstrong Atlantic State University, 11935 Abercorn Street, Savannah, GA 31419. Capital Assets for Component Units: Educational Properties held the following Capital Assets as of December 31, 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 $475,561 87,372 562,933 36,534,387 2,730,336 39,264,723 6,058,887 33,205,836 $33,768,769 Armstrong Atlantic State University Annual Financial Report FY 2008 33 Long-term Liabilities for Component Units: Changes in long-term liabilities for Educational Properties for the fiscal year ended December 31, 2007 are shown below: Beginning Balance January 1, 2007 Additions Reductions Ending Balance Amounts due within December 31, 2007 One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $618,000 42,821,797 $43,439,797 $0 $26,858 957,620 $0 $984,478 $591,142 41,864,177 $42,455,319 $26,778 970,000 $996,778 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, 2007 was $591,142. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 2011 4 2012 5 Thereafter 6-14 Notes and Loans Payable Principal Interest Total $26,778 28,924 31,107 33,456 35,882 434,995 $591,142 $42,663 40,517 38,333 35,985 33,559 151,467 $342,524 $69,441 69,441 69,440 69,441 69,441 586,462 $933,666 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 rates are between 3.00% and 5.00%. Armstrong Atlantic State University Annual Financial Report FY 2008 34 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 rates are between 3.25% and 5.00%. Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 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 2034 through 2038 26-30 Bond Premium/(Discount) Principal Bonds Payable Interest $970,000 980,000 1,015,000 1,050,000 1,090,000 6,065,000 7,365,000 9,125,000 10,770,000 2,775,000 41,205,000 659,177 $41,864,177 $1,824,214 1,788,914 1,757,065 1,720,802 1,682,089 7,761,445 6,438,939 4,616,790 2,079,689 235,750 29,905,697 $29,905,697 Total $2,794,214 2,768,914 2,772,065 2,770,802 2,772,089 13,826,445 13,803,939 13,741,790 12,849,689 3,010,750 71,110,697 659,177 $71,769,874 Armstrong Atlantic State University Annual Financial Report FY 2008 35 ATLANTA METROPOLITAN COLLEGE Financial Report For the Year Ended June 30, 2008 Atlanta Metropolitan College Atlanta, Georgia Dr. Gary A. McGaha President Tracey Cook-Robinson Vice President for Fiscal Affairs ATLANTA METROPOLITAN COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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 .......................................................................................................... 19 Note 12. Risk Management......................................................................................................... 21 Note 13. Contingencies................................................................................................................ 21 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 22 Note 15. Natural Classifications with Functional Classifications .............................................. 23 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 1,800 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) FY2008 62 1,882 1,510 FY2007 56 1,683 1,299 FY2006 51 1,748 1,351 Overview of the Financial Statements and Financial Analysis Atlanta Metropolitan College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $4,648,586 12,566,668 17,215,254 June 30, 2007 $3,039,451 12,951,015 15,990,466 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,615,279 315,292 1,930,571 1,435,158 242,928 1,678,086 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 12,566,668 2,718,015 $15,284,683 12,951,015 1,361,365 $14,312,380 The total assets of the institution increased by $1,224,788. A review of the Statement of Net Assets will reveal that the increase was primarily due to increases in cash and cash equivalents, accounts receivables and inventories. The increase in cash and cash equivalents was primarily due to MRR funding received in the current year for projects not yet paid. The funds were received as cash rather than on a reimbursement basis as in prior years. The increase in accounts receivable was primarily due to an increase in the receivable from Georgia State Financing and Investment Commission (GSFIC) of approximately $260,000 for 2007 projects completed during the year. Finally, the increase in inventory was due to an increase in the inventory for the campus bookstore operation. The College secured new shelving and storage space for the bookstore, which allowed for more items to be stocked. The bookstore was able to take advantage of quantity discounts and reduce shipping costs. The total liabilities for the year increased by $252,485. The increase in accounts payable of $161,173 was mainly due to summer activities sponsored by federal programs and capital project Atlanta Metropolitan College Annual Financial Report FY 2008 2 expenses. The combination of the increase in total assets of $1,224,788 and the increase in total liabilities of $252,485 yields an increase in total net assets of $972,303. 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, 2008 June 30, 2007 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 $8,301,747 18,046,403 (9,744,656) 10,446,195 701,539 270,764 972,303 14,312,380 0 14,312,380 $15,284,683 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $2,848,575 3,862,148 19,794 1,481,423 89,807 8,301,747 8,829,347 1,347,518 246,431 101,546 (78,647) 10,446,195 269,738 1,026 270,764 $19,018,706 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 0 9,077,036 641,315 3,175 644,490 $16,211,681 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $4,901,352 1,430,405 1,348,747 1,749,649 3,025,767 2,296,177 1,965,280 1,329,026 18,046,403 0 $18,046,403 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 Operating revenues increased by $1,811,592 in fiscal 2008. Tuition and fees increased by approximately 23%. The increase was primarily a result of a 12% increase in enrollment, which directly resulted from the College's ongoing initiative to expand mini-mester, evening, weekend Atlanta Metropolitan College Annual Financial Report FY 2008 4 and online course offerings. The tuition and fee rates were also increased for the year as approved by the Board of Regents. The College realized an increase of $858,028 in grants and contracts. This was mainly due to an increase of $813,000 in the amount of Pell awards granted during the fiscal year. The Auxiliary revenue increase of $386,973 is due to an increase in bookstore and cafeteria sales which is a direct result of the increase in enrollment. The athletic program was also reinstated during the year. Nonoperating revenues increased by $1,369,159 for the year primarily due to an increase of $1,071,553 in State Appropriations. The compensation and employee benefits category increased by $1,072,862 and primarily affected the Instruction and Academic Support categories. The increase in instruction was the result of the decision to increase the number of full-time faculty members thereby enhancing the quality of instruction. Academic support was also enhanced by increasing the number of tutors and extending the hours of operation for both the Library and the Academic Support Center. The increase also reflects overall merit increases and an increased cost of health insurance for the employees of the College. The increase in supplies and other services mainly occurred in the areas of Academic Support and Auxiliary Enterprises. The College focused on making needed upgrades and improvements to the Library to improve the learning environment. As a result, Library utilization increased during the year. The increase in Auxiliary Enterprises was directly related to the increase in sales. The increase in scholarships and fellowships is a direct result of the increase in enrollment and more specifically the amount of Pell grants awarded during the year. Statement of Cash Flows The final statement presented by 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 2008 5 Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($9,577,287) 10,371,798 (27,848) 101,546 868,209 2,125,185 $2,993,394 June 30, 2007 ($8,524,488) 8,990,860 (193,740) 113,713 386,345 1,738,840 $2,125,185 Capital Assets Atlanta Metropolitan College continued work on the Campus Entry and Roadway Improvement Project. GSFIC has provided funding of approximately $1.37 million for the project to date, which includes approximately $18,000 in the current fiscal year. It is anticipated that the project will be completed in FY2009. The Harmon House renovation project was completed during the year. The total cost of the project was approximately $182,000. The College made major improvements to the main quad entranceway to include paving and landscaping. The total cost of the project was approximately $101,000. As the College continued to provide updated technology for students in the computer labs throughout the campus, the Office of Management Information Systems completed phases I and II of equipment surplus. The obsolete equipment was transferred to the Georgia Department of Administrative Services. 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 Atlanta Metropolitan College had Long-Term Debt and Liabilities of $601,538 of which $286,246 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Atlanta Metropolitan College Annual Financial Report FY 2008 6 Component Units Atlanta Metropolitan College does not have a component unit that meets the criteria set forth in GASB Statement No. 39. Economic Outlook The College, like all state agencies, has been instructed to cut budgets by 6% for fiscal year 2009. With the uncertainty of state revenues and the rising cost of health care and utility cost, the College will approach the coming year cautiously. The College will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. The College's overall financial position is stable. The College was able to generate a modest increase in Net Assets. The College will continue in its efforts to improve enrollment growth through a combination of intensive recruiting and the implementation of a strategic retention plan. Any enrollment growth will translate into additional tuition revenue dollars. Dr. Gary A. McGaha, President Atlanta Metropolitan College Atlanta Metropolitan College Annual Financial Report FY 2008 7 Statement of Net Assets ATLANTA METROPOLITAN COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Inventories (not e 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 Lease P urchase Obligat ions (current port ion) 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, 2008 $2,993,394 315,655 566,930 680,171 92,436 4,648,586 12,566,668 12,566,668 17,215,254 614,597 341,537 103,552 1,609 267,738 0 286,246 1,615,279 315,292 315,292 1,930,571 12,566,668 2,718,015 $15,284,683 Atlanta Metropolitan College Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets ATLANTA METRO P O LITAN CO LLEGE S TATEMENT of REVENUES , EXP ENS ES , and CHANGES in NET AS S ETS for the Year Ended J une 3 0 , 2 0 0 8 R EV EN U ES June 30, 2008 O p erat in g Rev en ues St uden t T uit io n an d Fees (n et o f allo wan ce fo r do ubt ful acco un t s) L ess: Sch o larsh ip A llo wan ces Gran t s an d Co n t ract s Federal St at e Other Sales an d Serv ices Ren t s an d Ro y alt ies Aux iliary E n t erp rises Bo o k st o re Fo o d Serv ices In t erco llegiat e At h let ics O t h er O rgan izat io n s Ot h er O p erat in g Rev en ues T o t al O p erat in g Rev en ues EXP EN S ES Operat in g Expenses Sa la r i e s: Facult y St aff Em ployee Benefits O t h er P erso n al Serv ices T ravel Sch o larsh ip s an d Fello wsh ip s Ut ilit ies Sup p lies an d O t h er Serv ices Dep reciat io n T ot al Operat ing Expenses O p erat in g In co m e (lo ss) $ 4 ,6 3 9 ,5 8 7 (1 ,7 9 1 ,0 1 2 ) 3 ,8 2 9 ,9 3 4 1 2 ,2 2 5 1 9 ,9 8 9 1 9 ,7 9 4 1 8 ,2 0 7 8 9 5 ,5 9 3 3 1 1 ,9 6 8 2 6 1 ,5 3 2 1 2 ,3 3 0 7 1 ,6 0 0 8 ,3 0 1 ,7 4 7 3 ,4 2 9 ,6 3 2 5 ,1 7 1 ,9 9 0 2 ,2 6 7 ,1 7 7 9 2 ,2 1 5 1 0 4 ,6 9 3 2 ,1 4 3 ,6 7 7 5 0 6 ,2 2 4 3 ,7 2 6 ,4 8 3 6 0 4 ,3 1 2 1 8 ,0 4 6 ,4 0 3 (9 ,7 4 4 ,6 5 6 ) N O N O P ER A TIN G R EV EN U ES (EXP EN S ES ) St at e A p p ro p riat io n s Gran t s an d Co n t ract s Federal Gift s In v est m en t In co m e (en do wm en t s, aux iliary an d o t h er) O t h er N o n o p erat in g Rev en ues Net No n o perat ing Rev en ues In co m e befo re o t her reven ues, ex p en ses, gain s, o r loss Cap it al Gran t s an d Gift s St at e Other T o t al O t h er Rev en ues In crease in Net Asset s N ET A S S ETS N et A sset s-begin n in g o f y ear, as o rigin ally rep o rt ed P rio r Y ear A djust m en t s N et A sset s-begin n in g o f y ear, rest at ed N et A sset s-E n d o f Year 8 ,8 2 9 ,3 4 7 1 ,3 4 7 ,5 1 8 2 4 6 ,4 3 1 1 0 1 ,5 4 6 (7 8 ,6 4 7 ) 1 0 ,4 4 6 ,1 9 5 7 0 1 ,5 3 9 2 6 9 ,7 3 8 1 ,0 2 6 2 7 0 ,7 6 4 9 7 2 ,3 0 3 1 4 ,3 1 2 ,3 8 0 0 1 4 ,3 1 2 ,3 8 0 $ 1 5 ,2 8 4 ,6 8 3 Atlanta Metropolitan College Annual Financial Report FY 2008 9 Statement of Cash Flows A T L A N T A M ET R O P O L IT A N C O L L EGE 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 8 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 In t erco llegiat e A t h let ics 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 Cap it al Gran t s an d Gift s Receiv ed 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 Gift o f cap it al asset s reducin g p ro ceeds o f cap it al gran t s an d gift s June 30, 2008 $ 2 ,8 1 8 ,5 3 4 3 ,5 0 9 ,6 3 6 1 9 ,7 9 4 (6 ,6 4 7 ,7 9 0 ) (8 ,4 3 3 ,3 8 8 ) (2 ,1 4 3 ,6 7 7 ) 6 6 3 ,0 4 3 3 3 0 ,0 6 5 2 4 2 ,1 1 7 1 3 ,3 6 4 5 1 ,0 1 5 (9 ,5 7 7 ,2 8 7 ) 8 ,8 2 9 ,3 4 7 (5 1 ,4 9 8 ) 1 ,5 9 3 ,9 4 9 1 0 ,3 7 1 ,7 9 8 2 6 9 ,7 3 8 (2 9 7 ,5 8 6 ) (2 7 ,8 4 8 ) 1 0 1 ,5 4 6 1 0 1 ,5 4 6 8 6 8 ,2 0 9 2 ,1 2 5 ,1 8 5 $ 2 ,9 9 3 ,3 9 4 ($ 9 ,7 4 4 ,6 5 6 ) 6 0 4 ,3 1 2 (3 4 3 ,8 8 8 ) (3 3 4 ,4 2 8 ) (6 2 ,6 1 0 ) 2 4 7 ,2 3 3 (2 5 ,5 1 0 ) (1 ,3 2 0 ) 8 3 ,5 8 0 ($ 9 ,5 7 7 ,2 8 7 ) ($ 1 ,0 2 6 ) Atlanta Metropolitan College Annual Financial Report FY 2008 10 ATLANTA METROPOLITAN COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Atlanta Metropolitan College does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared Atlanta Metropolitan College Annual Financial Report FY 2008 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-University transactions have been eliminated. The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash and demand. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's 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 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 Atlanta Metropolitan College Annual Financial Report FY 2008 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, 2008, 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 $517,958 as of 7-1-2007. For FY2008, $377,421 was earned in compensated absences and employees were paid $293,841, for a net increase of $83,580. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $601,538. Noncurrent Liabilities Noncurrent liabilities include liabilities that will not be paid within the next fiscal year. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general Atlanta Metropolitan College Annual Financial Report FY 2008 13 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, 2008 $2,552,845 53,474 111,696 $2,718,015 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Atlanta Metropolitan College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 Atlanta Metropolitan College Annual Financial Report FY 2008 14 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, 2008, the carrying value of deposits was $2,990,185 and the bank balance was $3,313,580. Of the College's deposits, $3,313,580 were uninsured. Of these uninsured deposits, $3,313,580 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. Atlanta Metropolitan College Annual Financial Report FY 2008 15 B. Investments The College did not have any investments at June 30, 2008. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $98,659 13,787 315,655 298,915 180,578 907,594 25,009 $882,585 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Food Services Other T otal $619,013 7,892 53,266 $680,171 Note 5. Notes/Loans Receivable The College did not have any notes/loans receivable at June 30, 2008. Atlanta Metropolitan College Annual Financial Report FY 2008 16 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $17,694 17,694 Re du cti on s $0 130,368 130,368 182,412 101,561 116,037 11,276 411,286 486,445 1,416 487,861 399,655 17,493 148,076 39,088 604,312 (193,026) ($175,332) 407,798 1,416 409,214 78,647 $209,015 En di n g B al an ce 6/30/2008 $3,025,433 0 3,025,433 15,959,703 965,108 2,513,388 1,937,358 21,375,557 7,459,919 639,670 1,881,122 1,853,611 11,834,322 9,541,235 $12,566,668 Atlanta Metropolitan College Annual Financial Report FY 2008 17 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $103,552 $103,552 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $517,958 Additions $377,421 Reductions Ending Balance June 30, 2008 $293,841 $601,538 Total Long Term Obligations $517,958 $377,421 $293,841 $601,538 Current Portion $286,246 $286,246 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $355,399 as of June 30, 2008. 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, 2008. OPERATING LEASES The College did not have any operating leases at June 30, 2008. The College had no operating lease expense in fiscal 2008. Atlanta Metropolitan College Annual Financial Report FY 2008 18 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 2008, 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 2008 2007 2006 100% 100% 100% $579,459 $540,884 $546,315 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Atlanta Metropolitan College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in Atlanta Metropolitan College Annual Financial Report FY 2008 19 accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $74,131 (8.13% or 8.15%) and $45,532 (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 2008 amounted to $50,744 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. Atlanta Metropolitan College Annual Financial Report FY 2008 20 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Atlanta Metropolitan College expects such amounts, if any, to be immaterial to its overall financial position. Atlanta Metropolitan College Annual Financial Report FY 2008 21 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 54 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Atlanta Metropolitan College recognized as incurred $255,003 of expenditures, which was net of $89,962 of participant contributions. Atlanta Metropolitan College Annual Financial Report FY 2008 22 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $3,382,632 436,557 807,917 19,279 2,200 22,616 207,936 22,215 $4,901,352 Functional Classification FY2008 Public Service Academic Support Student Services $0 757,068 165,934 $47,000 601,660 160,049 $0 1,177,125 296,206 24,598 62,172 6,538 414,095 13,240 20,430 4,150 452,513 49,705 24,310 4,570 13,989 228,360 5,089 $1,430,405 $1,348,747 $1,749,649 Institutional Support $0 1,311,200 615,894 92,215 21,565 30,742 887,135 67,016 $3,025,767 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Op erat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 645,690 180,318 $0 $0 242,690 40,859 642 423,324 587,171 459,032 1,965,280 1,059 89,025 4,865 949,273 1,255 $2,296,177 $1,965,280 $1,329,026 T ot al Expenses $3,429,632 5,171,990 2,267,177 92,215 104,693 2,143,677 506,224 3,726,483 604,312 $18,046,403 Atlanta Metropolitan College Annual Financial Report FY 2008 23 AUGUSTA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 Table of Contents Management's Discussion and Analysis ............................................................................ 1 Statement of Net Assets ...................................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Assets........................................... 9 Statement of Cash Flows .................................................................................................. 11 Note 1. Summary of Significant Accounting Policies .................................................... 13 Note 2. Deposits and Investments................................................................................... 19 Note 3. Accounts Receivable.......................................................................................... 21 Note 4. Inventories.......................................................................................................... 21 Note 5. Notes/Loans Receivable..................................................................................... 21 Note 6. Capital Assets..................................................................................................... 22 Note 7. Deferred Revenue............................................................................................... 23 Note 8. Long-Term Liabilities ........................................................................................ 23 Note 9. Significant Commitments................................................................................... 23 Note 10. Lease Obligations............................................................................................. 23 Note 11. Retirement Plans .............................................................................................. 25 Note 12. Risk Management............................................................................................. 27 Note 13. Contingencies................................................................................................... 28 Note 14. Post-Employment Benefits Other Than Pension Benefits ............................... 28 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 the 35 institutions of higher education of the University System of Georgia. Augusta State is the primary public institution of higher learning in the state's second largest city. While it shares the technological and innovative resources of the University System, Augusta State University maintains its historical roots that make the learning experience as unique as the campus itself. The University is well known for its dedication to expanding educational opportunities for people of all ages and backgrounds, with a specific emphasis on service to Georgians in the Central Savannah River Area. Students Students Faculty (Headcount) (FTE) FY2008 270 FY2007 254 FY2006 202 6,588 6,573 6,333 5,668 5,571 5,361 Overview of the Financial Statements and Financial Analysis Augusta State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $11,033,382 105,889,171 918,861 117,841,414 June 30, 2007 $11,470,039 104,331,602 975,303 116,776,944 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 6,603,128 32,672,823 39,275,951 6,261,062 32,825,349 39,086,411 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 73,717,823 14,000 1,825,831 3,007,809 $78,565,463 71,753,459 333,470 1,375,785 4,227,819 $77,690,533 The total assets of the institution increased by $1,064,470. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,557,569 in the category of Capital Assets, net. The major assets added included the D. Douglas Barnard Amphitheatre, as well as renovations to the Washington Hall, the Fine Arts Center and the Maxwell Performing Arts Theatre. The total liabilities for the year increased by $189,540. The combination of the increase in total assets of $1,064,470 and the increase in total liabilities of $189,540 yields an increase in total net assets of $874,930. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,964,364. Augusta State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $33,709,095 65,305,669 (31,596,574) 29,017,949 (2,578,625) 3,453,555 874,930 77,690,533 0 77,690,533 $78,565,463 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflect a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Augusta State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $18,143,906 6,949,703 531,265 7,644,583 439,638 33,709,095 28,846,604 1,145,648 246,500 414,154 (6,634) 30,646,272 3,420,529 33,026 3,453,555 $67,808,922 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 Operating Revenues increased $2,021,105 in fiscal year 2008. Tuition and Fee revenue was up $1,414,493 or 8.5 percent and resulted mainly from tuition increases ranging from 6 to 12 percent, since enrollment was flat. Auxiliary revenue grew by $513,614 or 7.2 percent and is mainly attributed to increased bookstore sales. Nonoperating revenue increased by $2,435,659, or 8.6 percent, due to increased State Appropriations. State Appropriations revenue rose by $2,380,593 or 9.0 percent due to enrollment growth in previous years. Overall, Capital Gifts and Grants decreased by 10.6 percent as FY 2007 included one-time outside contributions for the J. Fleming Norvell Golf House. However, State Capital Gifts increased by 26.4 percent or $714,148 and covered a range of projects. Augusta State University Annual Financial Report FY 2008 4 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $23,984,074 87,115 386,579 7,390,548 3,666,959 7,216,159 9,419,487 6,010,493 7,144,255 65,305,669 1,628,323 $66,933,992 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 The University's Total Expenses, as shown above, increased 6.9 percent versus last year. Excluding Scholarships and Auxiliary Enterprises, core University operating expenses rose by 6.7 percent versus FY 2007. The year-to-year increase came in part from higher compensation expenses, up $3.2 million or 8.8 percent. Merit increases, additional faculty positions, as well as increases in benefits, summer faculty and part time faculty expenditures were the factors in the growth in compensation expense. Expenses relating to employee benefits increased 11.6 percent from the previous year. Operating and equipment expenditures however decreased by $448,345 or 6 percent versus last fiscal year. By function, Instruction expenses rose by 8.5 percent versus FY 2007 due to merit increases, additional faculty positions and increased summer and part time faculty expenditures. Academic Support expenses were up 22.8 percent mainly due to a reclassification of Instructional Technology Support (ITS) costs as well as increases in Student Technology Fee spending. In the past ITS costs were spread across the Academic Support function and the Institutional Support function; however, this year the costs for both personal services and non personal services were split proportionally across the two functions. Institutional Support costs rose modestly by 4.3 percent over FY 2007 and were primarily due to merit increases and higher health care costs. Plant Operations expenses overall, as reported above, were down 3.2 percent due to decreased project spending. Utilities included in the Plant Operations figures above, increased $264,828 or 14.4 percent due to higher electricity and natural gas rates. Excluding utilities, ongoing Plant Operations were up 4.8 percent compared to FY 2007. The large increase shown in Scholarships and Fellowships, 8.7 percent, is due almost entirely to an increase in Pell Grants. Auxiliary Enterprises expenses grew primarily due to Bookstore cost of goods sold as Bookstore sales increased by 12.5 percent in FY 2008. Augusta State University Annual Financial Report FY 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($27,181,283) 29,932,622 (3,585,544) 449,525 (384,680) 8,371,411 $7,986,731 June 30, 2007 ($24,974,071) 27,892,609 (2,828,883) 470,916 560,571 7,810,840 $8,371,411 Capital Assets The University's Capital Assets increased by $1,557,569, or 1.5 percent during FY 2008. The largest addition was the D. Douglas Barnard Amphitheatre which was 23 percent privately funded. Other asset additions included renovations to Washington Hall, the Fine Arts Center and the Maxwell Performing Arts Theatre. 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 $33,746,584 of which $1,073,761 was reflected as current liability at June 30, 2008. 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 2008 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 FY2008. 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 Due to the State's uncertain economic conditions, the University has been asked to prepare for possible budget reductions in the upcoming year. If implemented, these budget reductions will adversely impact our ability to hire the quality and caliber of faculty planned in our original budget and that are needed to move the University forward. Augusta State University's operating expenses are already lean and the budget reductions would impact our ability to maintain and update our facilities and equipment. William A. Bloodworth, Jr., President Augusta State University Augusta State University Annual Financial Report FY 2008 7 Statement of Net Assets A UG US T A 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, 2008 C om pon e n t Un it Au gu sta S tate U n i ve rs i ty Au gu sta S tate U n i ve rs i ty Fo u n da ti o n , In c. 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 In 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 N et In v est m en t in Cap it al L eases P ledges Receiv 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 Receiv able T o t al Curren t A sset s $ 7 ,9 7 2 ,7 3 1 1 5 ,9 4 2 1 ,0 3 2 ,3 3 7 1 ,6 4 9 5 0 1 ,2 8 4 1 ,5 0 9 ,4 3 9 1 1 ,0 3 3 ,3 8 2 $ 2 ,0 3 6 ,6 1 8 9 8 7 ,3 3 2 1 5 4 ,6 4 7 2 7 7 ,6 4 3 2 ,0 7 7 ,2 7 6 4 2 6 ,0 0 0 5 ,9 5 9 ,5 1 6 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 N et In v est m en t in Cap it al L eases 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 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 ) 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 ) 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 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 1 4 ,0 0 0 3 9 6 ,1 2 1 5 0 8 ,7 4 0 1 0 5 ,8 8 9 ,1 7 1 1 0 6 ,8 0 8 ,0 3 2 1 1 7 ,8 4 1 ,4 1 4 1 ,0 0 4 ,0 2 3 2 1 ,0 1 2 3 6 0 ,4 2 8 2 ,3 7 3 3 ,6 9 9 ,1 4 0 4 4 2 ,3 9 1 2 7 4 ,6 4 4 7 9 9 ,1 1 7 6 ,6 0 3 ,1 2 8 3 1 ,8 9 6 ,7 0 4 7 7 6 ,1 1 9 3 2 ,6 7 2 ,8 2 3 3 9 ,2 7 5 ,9 5 1 7 3 ,7 1 7 ,8 2 3 1 4 ,0 0 0 1 ,8 2 5 ,8 3 1 3 ,0 0 7 ,8 0 9 $ 7 8 ,5 6 5 ,4 6 3 4 ,8 4 9 ,2 5 2 1 6 ,0 5 9 ,1 2 4 1 ,1 1 8 ,6 9 5 3 1 ,8 9 6 ,7 0 4 1 ,2 2 8 ,6 2 2 8 4 0 ,7 2 2 5 5 ,9 9 3 ,1 1 9 6 1 ,9 5 2 ,6 3 5 6 7 0 ,5 7 2 3 ,4 8 5 1 ,6 4 9 2 6 0 ,0 0 0 1 4 2 ,0 0 0 1 ,0 7 7 ,7 0 6 3 0 ,2 3 7 ,6 7 7 1 ,1 1 7 ,8 8 3 3 1 ,3 5 5 ,5 6 0 3 2 ,4 3 3 ,2 6 6 1 9 ,4 1 8 ,7 4 9 6 ,7 2 3 ,4 5 3 3 ,3 7 7 ,1 6 7 $ 2 9 ,5 1 9 ,3 6 9 C om pon e n t Un it Au gu sta S tate U n i ve rs i ty Ath le tic A s s o ci a ti o n $ 3 5 3 ,1 9 2 7 ,6 9 3 4 ,2 4 5 3 6 5 ,1 3 0 1 ,7 9 1 ,6 4 7 1 ,7 9 1 ,6 4 7 2 ,1 5 6 ,7 7 7 2 1 1 ,5 4 7 8 ,7 7 2 1 8 ,2 5 7 1 8 ,2 4 9 4 3 5 ,9 1 8 6 9 2 ,7 4 3 2 1 ,8 6 2 1 ,1 2 1 ,1 8 7 1 ,1 4 3 ,0 4 9 1 ,8 3 5 ,7 9 2 1 9 4 ,4 3 1 5 0 ,7 9 9 7 5 ,7 5 5 $ 3 2 0 ,9 8 5 Augusta State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets AUGUSTA STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Parking/Transportation Intercollegiate Athletics Other Organizations 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 Payments to or on behalf of Augusta State University Total Operating Expenses Operating Income (loss) Augusta State University Component Unit Augusta State University Foundation, Inc. Component Unit Augusta State University Athletic Association $23,926,669 (5,782,763) 6,900,085 294 49,324 531,265 174,375 2,009,752 3,290,334 232,584 2,036,594 75,319 265,263 33,709,095 $0 869,942 661,071 1,709,197 (2,440,645) 413,298 6,399 1,219,262 16,571,203 15,333,004 8,787,718 278,759 438,215 6,680,840 2,363,818 11,047,349 3,804,763 65,305,669 (31,596,574) 902,538 767,507 1,670,045 (450,783) $0 25,000 928,460 13,691 50,000 1,017,151 400,417 64,503 359,873 147,735 20,041 992,569 24,582 Augusta State University Annual Financial Report FY 2008 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued AUGUSTA STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 Augusta State University Component Unit Augusta State University Foundation, Inc. Component Unit Augusta State University Athletic Association NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 28,846,604 44,146 102,620 998,882 246,500 414,154 (1,628,323) (6,634) 29,017,949 (2,578,625) 3,420,529 33,026 3,453,555 874,930 77,690,533 0 77,690,533 $78,565,463 246,410 (1,572,790) (1,326,380) (1,777,163) 3,425,215 3,425,215 1,648,052 27,871,317 0 27,871,317 $29,519,369 8,704 (80,507) (71,803) (47,221) 0 (47,221) 368,206 0 368,206 $320,985 Augusta State University Annual Financial Report FY 2008 10 Statement of Cash Flows AUGUS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 $18,367,652 6,960,821 531,265 (22,857,433) (31,723,755) (6,680,840) (313,706) 334,776 2,016,110 3,249,463 235 233,989 2,069,705 75,634 554,801 (27,181,283) 28,846,604 (306,130) 1,392,148 29,932,622 3,420,529 (5,141,896) (235,854) (1,628,323) (3,585,544) 449,525 449,525 (384,680) 8,371,411 $7,986,731 Augusta State University Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued AUGUS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 Depreciat ion 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 Change in fair value of invest m ent s recognized as a component of int erest incom e Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2008 ($31,596,574) 3,804,763 213,557 (57,877) (108,259) 21,070 187,064 250,727 (62,111) 166,357 ($27,181,283) ($35,371) ($33,026) Augusta State University Annual Financial Report FY 2008 12 AUGUSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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 2008 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, 2008, GSFIC did not transfer any capital additions to Augusta State University. Augusta State University Annual Financial Report FY 2008 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. Augusta State University had accrued liability for compensated absences in the amount of $1,408,878 as of 7-1-2007. For FY2008, $1,096,648 was earned in compensated absences and employees were paid $930,290, for a net increase of $166,358. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,575,236. 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. Augusta State University Annual Financial Report FY 2008 16 Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2008 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 $470,459 811,184 250,316 293,872 $1,825,831 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, 2008 $101,987 4,306,825 40,532 (1,441,535) $3,007,809 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Augusta State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Augusta State University Annual Financial Report FY 2008 17 Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Augusta State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $2,121,356 and the bank balance was $2,696,337. Of the University's deposits, $2,696,337 were uninsured. Of these uninsured deposits, $2,696,337 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, 2008, the carrying value of the University's investments was $6,242,696, 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 2008 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 $5,749,591 396,121 6,145,712 96,984 96,984 $6,242,696 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 40 days. Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk. The Weighted Average Maturity of the Short Term Fund is 1.99 years. Of the University total investment of $5,749,591 in the Short Term Fund, $5,726,593 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the University total investment of $396,121 in the Total Return Fund, $125,175 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 2008 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $522,084 176,825 15,942 1,649 646,507 1,363,007 313,079 $1,049,928 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore P hysical P lant Other T otal June 30, 2008 $456,480 25,670 19,134 $501,284 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $134,907. Augusta State University Annual Financial Report FY 2008 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 2,959,484 2,959,484 Re ductions $0 1,153,330 1,153,330 En di n g B a l a n ce 6/30/2008 $5,558,065 75,006 5,039,738 10,672,809 1,984,129 1,096,785 362,941 114,400 3,558,255 483,098 57,433 540,531 1,792,483 73,527,304 7,928,509 6,396,769 32,280,744 7,560,233 129,486,042 71,240 1,784,150 269,260 496,723 961,094 222,296 3,804,763 (246,508) $2,712,976 481,021 57,433 538,454 2,077 $1,155,407 500,312 18,018,818 2,096,025 4,233,582 2,653,801 6,767,142 34,269,680 95,216,362 $105,889,171 Augusta State University Annual Financial Report FY 2008 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $3,659,444 39,696 $3,699,140 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2007 $32,407,202 Addi ti on s $0 Re du cti on s Ending Balance June 30, 2008 $235,854 $32,171,348 Other Liabilities Compensated Absences T ot al 1,408,878 1,408,878 1,096,648 1,096,648 930,290 930,290 1,575,236 1,575,236 Total Long Term Obligations $33,816,080 $1,096,648 $1,166,144 $33,746,584 C u rre n t Portion $274,644 799,117 799,117 $1,073,761 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $462,640 as of June 30, 2008. 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 2009 and 2035. Expenditures for fiscal year 2008 were $2,032,754 of which $1,628,323 represented interest and $168,577 represented executory costs. Total principal paid on capital leases was $235,854 for the fiscal year ended June 30, 2008. 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, 2008: Augusta State University Annual Financial Report FY 2008 23 Buildings Equipment Total Assets Held Under Capital Lease $29,507,430 119,514 $29,626,944 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 two 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 the Augusta State University Foundation, Inc., whereby the University leases a student housing complex for a thirty year period that began September 2005 and will expire in January 2035. In February 2005, the University entered into an additional capital lease of $11,782,962 at 4.72 percent with the Augusta State University Foundation, Inc. whereby the University leases a student activities center for a 29 year term that began March 2006 and will expire in June 2034. The University is responsible for operating costs, such as utilities and insurance for both leases listed above. The outstanding liability as of June 30, 2008 on these capital leases is $20,467,034 an $11,704,314 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, Inc. is a component unit of Augusta State University. OPERATING LEASES Augusta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2013. 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, 2008, were as follows: Augusta State University Annual Financial Report FY 2008 24 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $2,064,169 2,140,170 2,199,881 2,251,741 2,293,743 11,939,811 12,990,919 13,553,125 13,839,682 3,229,134 66,502,375 27,427,397 6,903,630 $32,171,348 $102,549 96,638 88,287 84,280 80,254 $452,008 Augusta State University's FY2008 expense for rental of real property and equipment under operating leases was $119,574. 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 2008, 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: Augusta State University Annual Financial Report FY 2008 25 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $1,517,685 $1,427,681 $1,359,864 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 accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $1,036,958 (8.13% or 8.15%) and $636,868 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. 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, Augusta State University Annual Financial Report FY 2008 26 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 2008 amounted to $77,583 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 Augusta State University Annual Financial Report FY 2008 27 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. 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, 2008. 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. Augusta State University Annual Financial Report FY 2008 28 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 159 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Augusta State University recognized as incurred $696,769 of expenditures, which was net of $287,565 of participant contributions. Augusta State University Annual Financial Report FY 2008 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $16,556,779 1,719,106 3,999,526 51,240 182,042 63,011 99,313 1,167,276 145,781 $23,984,074 Research $0 47,058 589 200 24,709 217 12,923 1,419 $87,115 Functional Classification FY2008 Public Service Academic Support $0 152,550 49,514 $6,500 3,873,954 987,948 2,912 76,914 3,047 181,468 29,944 1,909,304 503,072 $386,579 $7,390,548 Student Services $1,000 2,163,177 576,670 19,627 53,094 545 41,754 781,178 29,914 $3,666,959 Institutional Support $6,924 3,877,786 2,059,395 202,937 33,057 800 48,593 902,985 83,682 $7,216,159 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 2,438,032 828,381 (81,660) 9,993 2,109,069 1,722,282 2,393,390 $0 1,855 6,008,638 $0 1,059,486 285,695 83,503 58,406 607,846 31,881 4,369,933 647,505 $9,419,487 $6,010,493 $7,144,255 Total Expenses $16,571,203 15,333,004 8,787,718 278,759 438,215 6,680,840 2,363,818 11,047,349 3,804,763 $65,305,669 Augusta State University Annual Financial Report FY 2008 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 consolidated financial statements of the Foundation have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. 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. 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, 2008, the Foundation distributed $767,507 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: Augusta State University Foundation holds endowment and other investments in the amount of $17 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, 2008: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Investment Pools Total Investments Cost $889,012 1,269,530 1,597,984 10,901,585 2,346,606 1,084,050 $18,088,767 Fair Value $889,012 1,299,465 1,579,577 10,485,676 1,805,394 987,332 $17,046,456 Augusta State University Annual Financial Report FY 2008 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, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $1,401,883 30,767,518 $32,169,401 $0 $142,000 $1,259,883 $142,000 269,841 30,497,677 260,000 $0 $411,841 $31,757,560 $402,000 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 $1,259,883 at June 30, 2008. The loan was for real estate improvements at the Forest Hills Golf Club for the benefit of the Augusta State University Athletic Association. This note carries a variable interest rate of LIBOR plus 1.20% but not less than 4.41% (4.41% at June 30, 2008). 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 $4,335,779 at June 30, 2008. Annual debt service requirements to maturity for the construction loan are as follows: Year ending June 30: 2009 1 2010 2 2011 3 Principal Notes and Loans Payable Interest $142,000 142,000 975,883 $1,259,883 $53,248 46,986 40,724 $140,958 Total $195,248 188,986 1,016,607 $1,400,841 Revenue Bonds Payable ASU Jaguar Student Housing I, LLC had the following revenue bonds payable at June 30, 2008: $19,515,000 ASU Jaguar Student Housing I, LLC, Revenue Bonds, Series 2004, dated August 1, 2004, due in annual installments of $90,000 to $1,445,000, due through February 1, 2035, interest at 4.375% to 5.375%. Interest expense on the bonds totaled $988,260 during the year ending June 30, 2008. 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, 2008 is $19,345,000. ASU Jaguar Student Center, LLC had the following revenue bonds payable at June 30, 2008: Augusta State University Annual Financial Report FY 2008 32 $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, 2008 totaled $497,148. Amortization of the bond premium began July 1, 2007 using the effective interest method which reduced interest expense for the year ended July 30, 2008 by $14,841. The bonds are secured by a deed on the Student Center and repayment responsibility of the bonds lies solely with the ASU Jaguar Student Center, LLC. The outstanding principal amount of the bonds as of June 30, 2008, including unamortized bond premium is $11,152,677. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $260,000 330,000 395,000 465,000 515,000 3,375,000 5,050,000 6,905,000 8,825,000 4,200,000 30,320,000 177,677 $30,497,677 Bonds Payable Interest $1,500,987 1,489,487 1,476,049 1,459,549 1,441,174 6,820,088 5,840,599 4,460,548 2,498,575 328,163 27,315,219 $27,315,219 Total $1,760,987 1,819,487 1,871,049 1,924,549 1,956,174 10,195,088 10,890,599 11,365,548 11,323,575 4,528,163 57,635,219 177,677 $57,812,896 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 is a nonprofit organization that 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 Association in turn has entered into a management agreement with the Augusta Golf Association, Inc. (the AGA) to manage, operate and maintain Forest Hills Golf Club. The income of the Association is solely derived from the revenues of the Golf Club and interest income. Because 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 2008 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, 2008, the Athletic Association distributed $20,041 for the support of other University programs. Complete financial statements for the Athletic Association can be obtained from the Administrative Office at 2500 Walton Way, Augusta, GA 30904-2200. Capital Assets for Component Units: Augusta State University Athletic Association held the following Capital Assets as of June 30, 2008: June 30, 2008 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 $3,432,988 943,926 4,376,914 2,585,267 1,791,647 $1,791,647 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Beginning Ending Amounts due Balance Balance within July 1, 2007 Additions Reductions June 30, 2008 One Year Capital Lease Obligations Notes and Loans Payable Total Long Term Liabilities $47,753 1,566,267 $1,614,020 $13,122 $13,122 $20,764 9,162 $29,926 $40,111 1,557,105 $1,597,216 $18,249 435,918 $454,167 Capital Lease Obligations: The Athletic Association leases course equipment under capital leases that expire in February 2010, April 2010, and June 2010. The terms of the leases require monthly payments totaling $2,011. Augusta State University Annual Financial Report FY 2008 34 Future minimum lease payments are: Year ending June 30: 2009 1 2010 2 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $24,128 19,921 44,049 3,938 $40,111 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 $12,410 as of June 30, 2008. 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, 2008. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 Notes and Loans Payable Principal Interest Total $435,918 144,492 976,695 $1,557,105 $54,883 47,019 41,000 $142,902 $490,801 191,511 1,017,695 $1,700,007 Augusta State University Annual Financial Report FY 2008 35 BAINBRIDGE COLLEGE Financial Report For the Year Ended June 30, 2008 Bainbridge College Bainbridge, Georgia Dr. Thomas A. Wilkerson President Natalie Higley Vice President for Fiscal Affairs BAINBRIDGE COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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................................................................................................................ 24 Note 14. Post-Employment Benefits Other Than Pension Benefits ............................................ 25 Note 15. Natural Classifications with Functional Classifications ............................................... 26 Note 16. Special Item................................................................................................................... 27 Note 17. Component Units .......................................................................................................... 27 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 decline in growth of headcount as shown by the following chart: Students Students Faculty (Headcount) (FTE) FY2008 67 2,661 2,042 FY2007 74 2,783 2,085 FY2006 58 2,475 1,825 Overview of the Financial Statements and Financial Analysis Bainbridge College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Bainbridge College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Bainbridge College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $5,191,616 11,416,975 585,079 17,193,670 June 30, 2007 $5,256,825 6,472,893 656,158 12,385,876 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,924,545 258,918 2,183,463 1,942,897 177,411 2,120,308 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 11,416,975 560,382 (84,315) 3,117,165 $15,010,207 6,472,893 586,433 98,975 3,107,267 $10,265,568 The total assets of the institution increased by $4,807,794. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,944,082 in the category of Capital Assets, net. The total liabilities for the year increased by $63,155. The combination of the increase in total assets of $4,807,794 and the increase in total liabilities of $63,155 yields an increase in total net assets of $4,744,639. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $4,944,082. Bainbridge College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $11,142,461 19,420,110 (8,277,649) 9,451,971 1,174,322 3,570,317 4,744,639 10,265,568 0 10,265,568 $15,010,207 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Bainbridge College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $2,370,850 8,134,370 362,603 266,931 7,707 11,142,461 9,410,148 0 30,777 11,046 9,451,971 173,601 3,396,716 3,570,317 $24,164,749 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $8,146,045 1,717,622 1,354,980 2,824,038 1,534,578 3,734,083 108,764 0 19,420,110 0 $19,420,110 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, 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 Operating revenues decreased by ($180,965) in fiscal 2008. Although Tuition & Fees and Grants and Contracts increased, revenues in Auxiliary and Other categories decreased significantly. Bainbridge College Annual Financial Report FY 2008 4 The Auxiliary revenue decrease of ($579,161) is a result of the changing environment of outsourcing of the College bookstore late in FY2007. The college will no longer see a revenue stream from the bookstore in the form of sales, but instead will receive a monthly commission payment from the management of the store. Nonoperating revenues increased by $760,065 for the year primarily due to an increase of $821,696 in State Appropriations. The compensation and employee benefits category increased by $419,669 and primarily affected the Instruction, Plant Operations & Maintenance and Institutional Support categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $7,986 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($6,992,646) 9,514,749 (1,980,759) 56,622 597,966 2,380,564 $2,978,530 June 30, 2007 ($7,603,895) 8,751,934 (717,045) 32,621 463,615 1,916,949 $2,380,564 Bainbridge College Annual Financial Report FY 2008 5 Capital Assets The College had two significant capital asset additions for facilities in fiscal year 2008: the completion of the Nursing Renovation, and the transfer of the building and land from Albany Technical Institute. For additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 16 in the Notes to the Financial Statements. Long Term Debt and Liabilities Bainbridge College had Long-Term Debt and Liabilities of $517,313 of which $258,395 was reflected as current liability at June 30, 2008. 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 FY2008. The Bainbridge College Foundation had endowment investments of $109,733 as of October 31, 2007. Details are available in Notes 1 and 17. 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 FY 2008 6 Statement of Net Assets BAINB RIDGE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets 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 Due From Com ponent Unit s P repaid items T ot al Current Asset s 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 Salaries P ayable Deferred Revenue (not e 7) Deposit s Held for Ot her Organizat ions Due t o P rim ary Governm ent Com pensat ed Absences (current port ion) Due t o Com ponent Unit s 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 e n dable E x p en da ble Unrest rict ed TO TAL NET AS S ETS B a i n bri dg e C olle ge $2,978,530 773,625 1,391,230 44,231 4,000 5,191,616 585,079 11,416,975 12,002,054 17,193,670 189,117 73,660 1,008,644 386,628 258,395 8,101 1,924,545 258,918 258,918 2,183,463 11,416,975 560,382 (84,315) 3,117,165 $15,010,207 C om pone nt Un it B a i n bri dg e College Fou n dati on $123,671 109,733 233,404 0 233,404 44,231 44,231 0 44,231 109,733 79,440 $189,173 Bainbridge College Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets B AINBRIDGE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 B a i n bri dg e College REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions 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 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 P ayment s t o or on behalf of Bainbridge College T ot al Operat ing Expenses Operat ing Income (loss) $4,708,138 (2,337,288) 6,602,432 1,517,717 14,221 362,603 103,246 2,500 161,185 7,707 11,142,461 4,796,482 4,048,848 2,402,503 96,020 146,767 3,728,785 397,322 3,184,638 618,745 19,420,110 (8,277,649) C om pone nt Unit B a i n bri dg e College Fou n dati on $0 20,229 20,229 7,147 12,180 19,327 902 Bainbridge College Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued B AINBRIDGE COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 B a i n bri dg e College C om pone nt Unit B a i n bri dg e College Fou n dati on NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Invest m ent Incom e (endowment s, auxiliary and ot her) Ot her Nonoperat ing Revenues Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or los Capit al Grant s and Gift s St at e Special It em 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 9,410,148 30,777 11,046 9,451,971 1,174,322 173,601 3,396,716 3,570,317 4,744,639 10,265,568 0 10,265,568 $15,010,207 1,086 1,086 1,988 40,000 40,000 41,988 147,185 0 147,185 $189,173 Bainbridge College Annual Financial Report FY 2008 9 Statement of Cash Flows BAINBRIDGE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 $2,353,479 8,532,800 359,198 (4,624,255) (8,723,256) (3,728,785) 3,706 163,937 2,500 169,562 (1,501,532) (6,992,646) 9,410,148 91,576 13,025 9,514,749 173,601 (2,154,360) (1,980,759) 56,622 56,622 597,966 2,380,564 $2,978,530 Bainbridge College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued BAINBRIDGE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Change in fair value of invest ment s recognized as a component of int erest income Special It em - Albany T echnical College Early Count y campus asset t ransfer June 30, 2008 ($8,277,649) 618,745 658,577 8,483 4,000 3,706 89,104 (186,833) (35,273) 124,494 ($6,992,646) ($25,845) $3,396,716 Bainbridge College Annual Financial Report FY 2008 11 BAINBRIDGE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 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 FY2008, Bainbridge College is reporting the activity for the Bainbridge College Foundation. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia 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 Bainbridge College Annual Financial Report FY 2008 12 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. 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 Bainbridge College Annual Financial Report FY 2008 13 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. 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, 2008, GSFIC did not transfer any capital additions to Bainbridge College. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. 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 $392,819 as of 7-1-2007. For FY2008, $353,466 was earned in Bainbridge College Annual Financial Report FY 2008 14 compensated absences and employees were paid $228,972, for a net increase of $124,494. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $517,313. 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, 2008 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 ($140,625) (9,859) 66,169 ($84,315) 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 Bainbridge College Annual Financial Report FY 2008 15 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, 2008 $148,355 1,793,980 21,099 1,153,731 $3,117,165 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Bainbridge College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 Bainbridge College Annual Financial Report FY 2008 16 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, 2008, the carrying value of deposits was $2,973,680 and the bank balance was $3,376,462. Of the College's deposits, $3,245,319 were uninsured. Of these uninsured deposits, $3,245,319 were collateralized with securities held by the financial institution's trust department or agent in the College's name. Bainbridge College Annual Financial Report FY 2008 17 B. Investments Bainbridge 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Pools Board of Regents Balanced Income Fund $585,079 T otal Investment Pools $585,079 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 7.84 years. Of the College's total investment of $585,079 in the Balanced Income Fund, $374,777 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. Bainbridge College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Due from Com ponent Unit s Other Less Allowance for Doubt ful Account s Net Account s Receivable $16,684 773,625 44,231 1,410,551 2,245,091 36,005 $2,209,086 Note 4. Inventories Bainbridge College had no Inventory as of June 30, 2008. Note 5. Notes/Loans Receivable Bainbridge College had no Notes/Loans Receivable as of June 30, 2008. Bainbridge College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 7/1/2007 $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 Special Item Transfer $351,362 351,362 3,704,000 3,704,000 658,646 658,646 3,045,354 $3,396,716 Additions $0 1,860,573 1,860,573 Reductions $0 376,740 376,740 Ending Balance 6/30/2008 $450,631 3,181,165 3,631,796 376,740 238,371 55,416 670,527 212,586 3,969 216,555 11,468,133 332,813 2,094,604 846,436 14,741,986 365,120 39,562 184,397 29,666 618,745 51,782 $1,912,355 224,336 3,970 228,306 (11,751) $364,989 4,563,232 302,069 1,403,873 687,633 6,956,807 7,785,179 $11,416,975 Bainbridge College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees T ot als June 30, 2008 $1,008,644 $1,008,644 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $392,819 Additions $353,466 Reductions Ending Balance June 30, 2008 $228,972 $517,313 Total Long Term Obligations $392,819 $353,466 $228,972 $517,313 Current Portion $258,395 $258,395 Note 9. Significant Commitments There were no significant unearned, outstanding construction or renovation contracts as of June 30, 2008. Note 10. Lease Obligations Bainbridge College has no lease obligations as of June 30, 2008. Bainbridge College had no expense for rental of real property and equipment under operating leases for the year ending June 30, 2008. Bainbridge College Annual Financial Report FY 2008 21 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 2008, 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 2008 2007 2006 100% 100% 100% $503,279 $492,798 $421,648 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 FY 2008 22 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $130,376 (8.13% or 8.15%) and $77,442 (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 2008 amounted to $52,718 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Bainbridge College Annual Financial Report FY 2008 23 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 FY 2008 24 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 42 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Bainbridge College recognized as incurred $241,582 of expenditures, which was net of $76,645 of participant contributions. Bainbridge College Annual Financial Report FY 2008 25 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $4,761,712 926,226 1,251,586 98,483 29,362 792,160 286,516 $8,146,045 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $34,770 632,779 161,075 $0 618,792 166,248 13,097 5,697 831,087 39,117 10,384 8,950 7,307 535,696 7,603 $1,717,622 $1,354,980 Inst it ut ional Sup p o r t $0 1,189,642 578,126 96,020 22,812 43,095 623,113 271,230 $2,824,038 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 & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 681,409 242,806 (7,397) 1,971 311,697 292,953 11,139 $0 2,662 3,719,835 11,586 $0 7,397 20 164 98,043 3,140 $1,534,578 $3,734,083 $108,764 T otal E x p en ses $4,796,482 4,048,848 2,402,503 96,020 146,767 3,728,785 397,322 3,184,638 618,745 $19,420,110 Bainbridge College Annual Financial Report FY 2008 26 Note 16. Special Item Bainbridge College absorbed the Early County Site of the Albany Technical College during fiscal year 2007. Per the transfer agreement, the Equipment assets for the Early County Campus were transferred in fiscal 2007 and the Land and Building assets were transferred to Bainbridge College as of July 1, 2007. The Land was transferred at its historical cost of $351,362 and the Building was transferred at its historical cost of $3,704,000 with an accumulated depreciation balance of $658,646 as of July 1, 2007. The net transfer to Bainbridge College was $3,396,716 in fiscal 2008. 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 is a legally separate, tax-exempt component unit of Bainbridge College. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The seven member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests 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. Amounts reported due to or due from the College do not necessarily agree because of the different fiscal year ends. During the year ended October 31, 2007, the Foundation distributed $12,180 to the University 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 endowments and other investments in the amount of $109,733. The corpus of the endowment portion 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 FY 2008 27 Investments are comprised of the following amounts at October 31, 2007: Certificates of Deposit Total Investments Cost $109,733 $109,733 Fair Value $109,733 $109,733 Bainbridge College Annual Financial Report FY 2008 28 CLAYTON STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Clayton State University Morrow, Georgia Dr. Thomas K. Harden President David K. Heflin Vice President for Business and Operations CLAYTON STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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 .............................................. 31 Note 16. Component Units .......................................................................................................... 32 CLAYTON STATE UNIVERSITY Management's Discussion and Analysis Introduction Clayton State University is one of the 35 institutions of higher education of the University System of Georgia. It is located 15 miles south of Atlanta and enrolls over 6,000 students from 30 states and 25 foreign countries. Clayton State University 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, 175 beautiful wooded acres with five lakes, is a hallmark of the institution and a surprising contrast to the vibrant urban life of metropolitan Atlanta. Students Students Faculty (Headcount) (FTE) FY2008 207 FY2007 191 FY2006 141 6,043 6,081 6,212 4,895 4,919 4,967 On June 12, 2007 the Board of Regents of the University System of Georgia 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 be completed in August 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. 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 2008. 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 Clayton State University Annual Financial Report FY 2008 1 analysis of the University's financial statements provide an overview of its financial activities for the year. Comparative data is provided for FY 2008 and FY 2007. 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 2008 2 Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $8,678,640 57,268,985 1,011,472 66,959,097 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,435,649 1,761,148 5,196,797 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 57,171,307 988,613 22,263 741,425 2,838,692 $61,762,300 June 30, 2007 $8,097,814 53,315,488 1,084,204 62,497,506 3,986,832 863,017 4,849,849 53,315,488 1,076,036 12,333 0 3,243,800 $57,647,657 The total assets of the institution increased by $4,461,591. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,953,497 in the category of Capital Assets, net. The balance of the increase is mainly in the Prepaid Asset category. The total liabilities for the year increased by $346,948. The combination of the increase in total assets of $4,461,591 and the increase in total liabilities of $346,948 yields an increase in total net assets of $4,114,643. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $3,855,819. 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 2008 3 Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2008 June 30, 2007 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 $37,118,118 62,368,063 (25,249,945) 26,545,108 1,295,163 2,819,480 4,114,643 57,647,657 0 57,647,657 $61,762,300 $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 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: Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $16,198,028 11,765,888 2,274,921 6,685,743 193,538 37,118,118 25,908,794 525,221 193,607 (74,562) 26,553,060 2,819,480 2,819,480 $66,490,658 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 Clayton State University Annual Financial Report FY 2008 4 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $21,317,827 19,957 704,551 8,255,477 4,664,687 8,377,625 6,018,438 5,346,215 7,663,286 0 62,368,063 7,952 $62,376,015 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 Operating revenues increased by $2,923,567, or 9%, in fiscal 2008. Although Tuition & Fees included a 14% increase, revenues decreased in Auxiliary and Sales and Services categories by 1% and 11%, respectively. The Auxiliary revenue decrease of ($99,835) is a result of the upcoming changing environment of residential life on the University's campus. During the year, the university has been preparing for on campus housing by adding new venues. Nonoperating revenues increased by $2,863,427 for the year primarily due to an increase of $2,870,004 in State Appropriations. The compensation and employee benefits category increased by $1,216,794 and primarily affected the Academic Support, Student Services and Institutional Support categories. The increase reflects merit increases along with increased cost of health insurance and other benefits such as workers compensation and unemployment insurance for the employees of the institution. Utilities increased by $402,194 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2008 and affected the Plant Operations and Maintenance category. 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 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($22,682,649) 26,454,010 (3,607,622) 280,977 444,716 4,499,663 $4,944,379 June 30, 2007 ($21,991,680) 23,201,194 (652,372) (631,052) (73,910) 4,573,573 $4,499,663 Capital Assets The University had three significant capital asset additions for facilities in fiscal year 2008; the purchase of 12 acres adjacent to the university's property and two buildings that are on that property. Clayton State University has a major building addition in progress which is the College of Business Academic Building. The $2.5 million for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). Other renovations funded by the GSFIC included $300,000 for buildings and $266,000 for equipment and non-capitalized repairs. Projected funding by GSFIC for FY2009 will be approximately $1.1 million for the completion of the Business building, $3 million for a major classroom building renovation and $600,000 for repairs and renovations. 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 Clayton State University had Long-Term Debt and Liabilities of $2,761,659 of which $1,000,511 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Clayton State University Annual Financial Report FY 2008 6 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 fiscal year 2008. The Walter and Emilie Spivey Foundation had investments of $7.6 million as of December 31, 2007. The Clayton State University Foundation, Inc. had investments of $4.7 million as of June 30, 2008. 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 generated a 13.5% increase in revenues and was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Thomas K. Harden, President Clayton State University Clayton State University Annual Financial Report FY 2008 7 Statement of Net Assets CLAYTON S TATE UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 C om pone nt Un it C layton State Un i ve rs i ty Th e W al te r & Em i l i e S pi ve y Fo u n dati on AS S ETS C urre nt Asse ts Cash an d Cash Equiv alen t s Sh ort -t erm In v est m ent s Acco unt s Receiv able, n et (n ot e 3 ) Receiv ables - Federal Fin ancial Assist an ce Receiv ables - Ot h er P ledges Receiv able Invent ories (not e 4) P repaid it em s T ot al Curren t Asset s $4,936,379 396,562 1,750,786 583,931 1,010,982 8,678,640 $117,729 117,729 Noncurre n t Asse ts No n current Cash In vest m ent s (in cludin g Real Est at e) No t es Receiv able, n et Capit al Asset s, net (not e 6) Ot her Asset s T ot al No n current Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabilitie s Acco unt s P ay able Salaries P ay able Co n t ract s P ayable Deposit s Deferred Rev en ue (n o t e 7 ) Ot h er Liabilit ies Dep osit s Held fo r Ot h er Organ izat ion s Lease P urch ase Obligat io ns (curren t p o rt io n ) Co m p ensat ed Absen ces (curren t p o rt io n ) T ot al Curren t Liabilit ies Non cu rre n t Liabilitie s Lease P urch ase Obligat io ns (n on curren t ) Co m p ensat ed Absen ces (n on curren t ) Rev en ue/M ort gage Bo nds P ay able (n o ncurren t ) T ot al No n current Liabilit ies TO TAL LIAB ILITIES NET AS S ETS In vest ed in Cap it al Asset s, net of relat ed debt Rest rict ed for Non ex pen dable Exp en dable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS 8,000 980,613 22,859 57,268,985 58,280,457 66,959,097 520,153 172,785 167,165 24,500 1,414,182 26,701 109,652 189,617 810,894 3,435,649 782,272 978,876 1,761,148 5,196,797 57,171,307 988,613 22,263 741,425 2,838,692 $61,762,300 7,596,971 15,405 144,497 7,756,873 7,874,602 0 0 0 144,497 7,730,105 $7,874,602 C om pone nt Unit C layton State Un i ve rs i ty Fo u n da ti o n , In c. $507,540 178,574 57,928 1,714 745,756 14,337,790 4,548,572 27,638,585 2,221,453 48,746,400 49,492,156 129,085 1,521,940 1,651,025 42,650,230 42,650,230 44,301,255 1,527,889 1,727,627 3,404,990 (1,469,605) $5,190,901 Clayton State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets CLAYTON STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 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 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) Clayton State University Component Unit The Walter & Emilie Spivey Foundation Component Unit Clayton State University Foundation, Inc. $20,545,156 (4,347,128) 10,077,132 1,018,084 670,672 2,274,921 27,584 3,654,915 303,023 394,301 2,044,751 288,753 165,954 37,118,118 14,122,347 16,247,496 7,946,747 246,969 458,368 6,300,676 1,675,577 12,712,776 2,657,107 62,368,063 (25,249,945) $0 0 22,215 425,941 448,156 (448,156) $0 895,778 89,240 985,018 284,418 214,904 458,366 957,688 27,330 Clayton State University Annual Financial Report FY 2008 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued CLAYTON STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 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 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 Clayton State University Component Unit The Walter & Emilie Spivey Foundation Component Unit Clayton State University Foundation, Inc. 25,908,794 525,221 193,607 (7,952) (74,562) 26,545,108 1,295,163 2,819,480 2,819,480 4,114,643 57,647,657 0 57,647,657 $61,762,300 504,378 504,378 56,222 0 56,222 7,818,380 0 7,818,380 $7,874,602 (230,812) (230,812) (203,482) 259,819 259,819 56,337 5,134,564 0 5,134,564 $5,190,901 Clayton State University Annual Financial Report FY 2008 10 Statement of Cash Flows CLAYTON S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Int erest on 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, 2008 $16,407,692 11,616,487 2,274,921 (23,973,532) (30,115,220) (6,300,676) (14,639) 24,300 3,780,188 (22,182) 309,955 394,425 2,033,515 340,971 561,146 (22,682,649) 25,908,794 46,453 531,202 (25,286) (7,153) 26,454,010 2,819,480 (6,423,478) (2,825) (799) (3,607,622) 280,977 280,977 444,716 4,499,663 $4,944,379 Clayton State University Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued CLAYTON S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Non-capit al it em 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 June 30, 2008 ($25,249,945) 2,657,107 635,786 127,864 (267) (14,639) (801,928) 35,035 (180,528) 108,866 ($22,682,649) $100,503 $899,497 ($87,370) Clayton State University Annual Financial Report FY 2008 12 CLAYTON STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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. For FY2008, Clayton State University is reporting the activity for the Walter and Emilie Spivey Foundation and the Clayton State University Foundation, Inc. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the 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 Clayton State University Annual Financial Report FY 2008 13 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. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable Clayton State University Annual Financial Report FY 2008 14 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, 2008, GSFIC did not transfer any capital additions to Clayton 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. Clayton State University Annual Financial Report FY 2008 15 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as 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 for compensated absences in the amount of $1,680,905 as of July 1, 2007. For FY2008, $1,184,701 was earned in compensated absences and employees were paid $1,075,836, for a net increase of $108,865. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $1,789,770. 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. The Auxiliary Division of the University has entered into a long term lease agreement in the amount of one million dollars to purchases equipment for the start up of oncampus dining services for residential students. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Clayton State University Annual Financial Report FY 2008 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, 2008 $9,930 8,607 3,726 $22,263 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, 2008 $847,694 1,522,219 468,779 $2,838,692 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 Clayton State University Annual Financial Report FY 2008 17 scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Clayton State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $4,290,450 and the bank balance was $5,023,212. Of the University's deposits, $5,023,212 were uninsured. Of these uninsured deposits, $5,023,212 were uncollateralized. B. Investments At June 30, 2008, the carrying value of the University's investments was $1,624,408, 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 2008 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 $298,526 980,613 1,279,139 345,269 345,269 $1,624,408 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 40 days. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk. The Weighted Average Maturity of the Short Term Fund is 1.99 years. Of the University's total investment of $298,526 in the Short Term Fund, $297,332 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the University's total investment of $980,613 in the Total Return Fund, $309,874 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 2008 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $390,306 24,708 396,562 1,474,154 2,285,730 138,382 $2,147,348 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore T otal June 30, 2008 $583,931 $583,931 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program, along with a small emergency loan program run by the university, comprises substantially all of the loans receivable at June 30, 2008. 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. The Federal Perkins Loan program has been formally closed out. The Allowance for Uncollectible Notes Receivable for the University is $0. Clayton State University Annual Financial Report FY 2008 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $640,501 422,671 1,063,172 64,017,373 758,454 5,840,909 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 Addi ti o n s $593,000 2,665,206 3,258,206 Re ductions $0 0 2,298,332 871,030 263,578 3,432,940 631,565 217,559 3,571 852,695 1,943,098 74,332 391,174 248,503 2,657,107 775,833 $4,034,039 590,901 177,681 3,571 772,153 80,542 $80,542 En di n g B a l a n ce 6/30/2008 $1,233,501 3,087,877 4,321,378 66,315,705 126,889 6,494,380 5,436,760 78,373,734 16,797,026 24,574 4,446,775 4,157,752 25,426,127 52,947,607 $57,268,985 Clayton State University Annual Financial Report FY 2008 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $1,210,656 203,526 $1,414,182 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $0 Additions $1,000,000 Reductions Ending Balance June 30, 2008 $28,111 $971,889 Other Liabilities Compensated Absences Total 1,680,905 1,680,905 1,184,701 1,184,701 1,075,836 1,075,836 1,789,770 1,789,770 Total Long Term Obligations $1,680,905 $2,184,701 $1,103,947 $2,761,659 Current Portion $189,617 810,894 810,894 $1,000,511 Note 9. Significant Commitments The University has significant commitments for two lease agreements executed in August 2007 to begin payment in August of 2008. The leases are for a Student Activity Center with a net present value of the minimum lease payment obligation of $21,037,011 which will expire in June 2038 and a Student Housing Complex with a net present value of the minimum lease payment obligation of $24,911,748 to expire in June 2038. This amount is not reflected in the accompanying basic financial statements. The University also has approximately $1.4 million dollars in outstanding construction projects. Note 10. Lease Obligations Clayton State University is obligated under one lease agreement to be used for the acquisition of real property and equipment. CAPITAL LEASES The single capital lease in the amount of $1,000,000 is payable in monthly installments, carries an interest rate of 2.3%, and expires in fiscal year 2013. Expenditures for fiscal year 2008 were Clayton State University Annual Financial Report FY 2008 23 $36,063, which included $7,952 in interest and $28,111 in principal. The outstanding lease liability at June 30, 2008 is $971,889. The leasing arrangement is in the form of an interest-bearing escrow account that is to be used to fund Auxiliary Food Service renovations. At June 30, 3008, $100,503 had been disbursed from this escrow account for equipment and the balance of the account is reported as a Prepaid Item in the Statement of Net Assets. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Equipment Total Assets Held Under Capital Lease $100,503 $100,503 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 Real P roperty and Equipm ent Capit al Leases $216,376 216,376 216,377 216,377 180,314 1,045,820 73,931 $971,889 Clayton State University had no expense for rental of real property and equipment under operating leases in FY2008. Clayton State University Annual Financial Report FY 2008 24 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Clayton State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Clayton State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Clayton State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, 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 2008 2007 2006 100% 100% 100% $1,373,059 $1,331,801 $1,309,323 Employees' Retirement System of Georgia Plan Description Clayton 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. Clayton State University Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $33,750. The University's total payroll for all employees was $30,369,843. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $ 3,513 $0 $0 Clayton State University Annual Financial Report FY 2008 26 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $921,087 (8.13% or 8.15%) and $565,822 (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 Clayton State University Annual Financial Report FY 2008 27 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 2008 amounted to $204,974 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 Clayton State University Annual Financial Report FY 2008 28 Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure that is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Clayton State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Clayton State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 Clayton State University Annual Financial Report FY 2008 29 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 136 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Clayton State University recognized as incurred $645,778 of expenditures, which was net of $244,842 of participant contributions. Clayton State University Annual Financial Report FY 2008 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $13,978,809 1,396,148 3,277,839 196,232 86,500 125,759 1,846,436 410,104 $21,317,827 Research $5,898 1,520 1,990 40 6,275 4,234 $19,957 Functional Classification FY2008 Public Service Academic Support $53,036 471,193 134,088 $110,480 4,368,361 1,015,615 3,956 42,278 56,731 5,000 20,433 2,372,381 306,476 $704,551 $8,255,477 Student Services $0 3,045,631 706,340 96,421 19,723 10,002 769,131 17,439 $4,664,687 Institutional Support ($25,876) 4,080,191 2,090,348 246,969 42,140 5,500 33,446 1,700,395 204,512 $8,377,625 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 1,449,472 391,037 (46,013) 4,258 1,480,293 1,111,042 1,628,349 $0 5,346,215 $0 1,434,980 329,490 46,013 58,630 837,698 5,644 4,864,838 85,993 $6,018,438 $5,346,215 $7,663,286 T ot al Expenses $14,122,347 16,247,496 7,946,747 246,969 458,368 6,300,676 1,675,577 12,712,776 2,657,107 $62,368,063 Clayton State University Annual Financial Report FY 2008 31 Note 16. Component Units The Walter & Emilie Spivey Foundation The Walter & Emily 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 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, 2007, the Foundation distributed $425,941 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 $7.6 million. Investments consist of marketable securities and real property. Investments are comprised of the following amounts at December 31, 2007: Cost Fair Value Real Estate Investment Pools Suntrust Investment Pool Total Investments $137,518 7,459,453 $7,596,971 $137,518 7,459,453 $7,596,971 Clayton State University Annual Financial Report FY 2008 32 Capital Assets for Component Units: The Walter & Emilie Spivey Foundation held the following Capital Assets as of December 31, 2007: December 31, 2007 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 10,769 4,615 $144,497 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 seven-member board of the Foundation is self-perpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $458,366 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, Student Center Building, 2000 Clayton State Blvd, Morrow, Georgia, 30260. Clayton State University Annual Financial Report FY 2008 33 Investments for Component Units: Clayton State University Foundation holds endowment and other investments in the amount of $4.7 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at June 30, 2008: Certificates of Deposit Real Estate Investment Pools BOR Short Term Fund Total Return Fund Total Investments Cost $202,252 1,836,464 177,290 2,723,315 $4,939,321 Fair Value $202,252 1,836,464 178,574 2,509,856 $4,727,146 Capital Assets for Component Units: Clayton State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Construction in Progress Capital Assets, Net $27,638,585 $27,638,585 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $42,650,230 $0 $42,650,230 $0 $42,650,230 $0 $0 $42,650,230 $0 Clayton State University Annual Financial Report FY 2008 34 Revenue Bonds Payable On August 15, 2007, the Foundation through its subsidiary CSU Foundation Real Estate I LLC the "Company" issued Series 2007 revenue bonds in the face value amount of $42,450,000. The proceeds of the Series 2007 Bonds will be applied to (a) finance or refinance the costs of the acquisition, construction and equipping of student housing comprised of approximately 451 beds and related amenities and a student activity center (collectively, the "Project") located on the campus of Clayton State University ("CSU"); (ii) fund capitalized interest on the Series 2007 Bonds, (iii) pay the premium for a debt service reserve surety bond to be issued by XL Capital Assurance Inc. (the "Bond Insurer"); and (iv) pay costs of issuance of the Series 2007 Bonds, including a municipal bond insurance policy to be issued by the Bond Insurer. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $0 600,000 85,000 135,000 175,000 1,745,000 3,730,000 6,440,000 10,200,000 15,465,000 3,875,000 42,450,000 200,230 $42,650,230 Bonds Payable Interest $1,852,874 2,021,318 1,997,318 1,993,918 1,988,518 9,776,952 9,232,108 8,193,815 6,371,715 3,372,439 193,750 46,994,725 $46,994,725 Total $1,852,874 2,621,318 2,082,318 2,128,918 2,163,518 11,521,952 12,962,108 14,633,815 16,571,715 18,837,439 4,068,750 89,444,725 200,230 $89,644,955 Clayton State University Annual Financial Report FY 2008 35 COASTAL GEORGIA COMMUNITY COLLEGE Financial Report For the Year Ended June 30, 2008 Coastal Georgia Community College Brunswick, Georgia Dr. Dorothy L. Lord President C. Tom Saunders Vice President for Business Affairs COASTAL GEORGIA COMMUNITY COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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 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 is experiencing a slight decrease in enrollment after years of exceptional growth as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 76 2,942 2,109 FY2007 88 3,054 2,175 FY2006 85 3,063 2,144 Overview of the Financial Statements and Financial Analysis Coastal Georgia Community College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $2,351,307 30,167,777 89,966 32,609,050 June 30, 2007 $2,142,987 28,627,183 98,739 30,868,909 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 985,756 146,886 1,132,642 1,287,652 181,293 1,468,945 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 30,167,777 68,879 39,640 1,200,112 $31,476,408 28,627,183 68,879 48,935 654,967 $29,399,964 The total assets of the institution increased by $1,740,141. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,540,594 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The total liabilities for the year decreased by ($336,303). The combination of the increase in total assets of $1,740,141 and the decrease in total liabilities of ($336,303) yields an increase in total net assets of $2,076,444. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,540,594. Coastal Georgia Community College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $8,437,269 23,421,576 (14,984,307) 14,293,561 (690,746) 2,767,190 2,076,444 29,399,964 0 29,399,964 $31,476,408 $8,354,116 22,505,573 (14,151,457) 13,181,531 (969,926) 2,084,746 1,114,820 28,285,144 0 28,285,144 $29,399,964 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income 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, 2008 $3,193,219 3,419,785 312,062 1,447,873 64,330 8,437,269 11,655,938 2,555,358 59,068 23,197 14,293,561 2,767,190 2,767,190 $25,498,020 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $9,854,303 48,745 1,352,097 1,588,229 3,276,315 3,551,335 2,348,283 1,402,269 0 $23,421,576 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 Operating revenues increased by $83,153 in fiscal 2008. Although Tuition & Fees included a 4% increase, revenues decreased in Sales and Services due to lower Continuing Education enrollment. The Auxiliary revenue decrease of ($23,190) is a result of lowering the markup on books for the College bookstore. Coastal Georgia Community College Annual Financial Report FY 2008 4 Nonoperating revenues increased by $1,112,030 for the year primarily due to an increase of $1,607,741 in State Appropriations. The compensation and employee benefits category increased by $511,491 and primarily affected the Instruction and Academic Support categories. The increase reflects the addition of staff, merit increases, and increased cost of health insurance for the employees of the institution. Utilities increased by $88,189 during the past year. The increase reflects a complete year's energy cost for the new classroom/warehouse building and continued energy price advances. Statement of Cash Flows The final statement presented by Coastal Georgia Community College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($13,414,335) 14,223,872 (1,036,251) 31,112 (195,602) 1,101,917 $906,315 June 30, 2007 ($12,460,740) 13,269,357 (425,612) 65,790 448,795 653,122 $1,101,917 Capital Assets The College had several capital projects underway during fiscal year 2008. The Library restrooms renovations and Science Building HVAC projects are reported as Construction Workin-Progress at the end of the fiscal year. Additionally there are two continuing major projects, the Physical Education Building renovation and the improvement of campus infrastructure. These two projects will continue into fiscal year 2009. Coastal Georgia Community College Annual Financial Report FY 2008 5 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 $521,891 of which $375,005 was reflected as current liability at June 30, 2008. 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 FY2008. The Coastal Georgia Community College Foundation, Inc. had investments of $7.5 million as of December 31, 2007. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The College received approval from the Board of Regents of the University System of Georgia for a change in mission and name, College of Coastal Georgia, for the next academic year. New baccalaureate programs will be added in teacher education, nursing, and business as early as Fall 2009. Current programs of study are under review to determine whether they remain consistent with the new College mission. This review may result in numerous changes to academic programs offered, which may affect enrollment and the finances of the institution. The addition of baccalaureate programs will require significant additional resources. The College does expect continued strong financial support from the Board of Regents including special funding increases due to the mission change. The College's overall financial position is strong. The College was able to generate a modest increase in Net Assets during the year. Management will maintain a close watch over resources to maintain the College's ability to react to these and other unknown internal and external issues. Dr. Dorothy L. Lord, President Coastal Georgia Community College Coastal Georgia Community College Annual Financial Report FY 2008 6 Statement of Net Assets COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets 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 Cont ribut ions Receivable Inventories (not e 4) P repaid items T ot al Current Asset s Noncurrent Assets 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 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 da ble E x p en da ble Capit al P rojects Unrest rict ed TO TAL NET AS S ETS C oastal Georgia C om m u n i ty College $906,315 94,838 1,050,241 288,909 11,004 2,351,307 89,186 780 30,167,777 30,257,743 32,609,050 128,117 275,906 15,498 191,230 375,005 985,756 146,886 146,886 1,132,642 30,167,777 68,879 39,640 1,200,112 $31,476,408 C om pone nt Unit C oastal Georgia C ommunity College Fou n dati on , In c. $1,295,625 7,487,181 177,585 8,960,391 0 8,960,391 0 0 0 4,284,665 1,396,360 894,819 2,384,547 $8,960,391 Coastal Georgia Community College Annual Financial Report FY 2008 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, 2008 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 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 Utilit ies Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense P ayment s t o or on behalf of Coast al Georgia Comm 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 om pon e n t Un it C oastal Georgia C om m u n i ty C olle ge Fou n dati on , In c. $5,107,974 (1,914,755) 3,419,785 312,062 24,198 1,243,426 189,502 14,945 40,132 8,437,269 4,395,248 6,359,471 3,119,611 100,959 210,839 2,443,294 819,683 4,260,105 1,712,366 23,421,576 (14,984,307) $0 701,628 287,988 989,616 19,247 47,801 18,139 733,315 818,502 171,114 Coastal Georgia Community College Annual Financial Report FY 2008 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, 2008 C oastal Georgia C om m u n ity College C om pon e n t Un it C oastal Georgia C om m u n i ty 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 Ot h er 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 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 11,655,938 647,341 1,162,464 745,553 59,068 23,197 14,293,561 (690,746) 2,767,190 2,767,190 2,076,444 29,399,964 0 29,399,964 $31,476,408 169,341 169,341 340,455 0 340,455 8,619,936 0 8,619,936 $8,960,391 Coastal Georgia Community College Annual Financial Report FY 2008 9 Statement of Cash Flows COAS TAL GEORGIA COMMUNITY COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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: 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 m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $3,173,534 3,451,694 312,063 (8,677,862) (10,854,613) (2,443,294) (3,893) 4,750 1,310,600 188,135 11,593 112,958 (13,414,335) 11,655,938 (46,493) 2,614,427 14,223,872 2,216,709 (3,252,960) (1,036,251) 35,226 (4,114) 31,112 (195,602) 1,101,917 $906,315 Coastal Georgia Community College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued COAS TAL GEORGIA COMMUNITY COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 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 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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2008 ($14,984,307) 1,712,366 148,856 4,603 (6,900) 857 (185,380) (20,025) (3,232) (81,173) ($13,414,335) ($12,029) Coastal Georgia Community College Annual Financial Report FY 2008 11 COASTAL GEORGIA COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Coastal Georgia Community College is reporting the activity for the Coastal Georgia Community College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Coastal Georgia Community College Annual Financial Report FY 2008 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 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. Coastal Georgia Community College Annual Financial Report FY 2008 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 valued at cost using the average-cost basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/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, 2008, GSFIC did not transfer any capital additions to Coastal Georgia Community 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. Coastal Georgia Community College Annual Financial Report FY 2008 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. Coastal Georgia Community College had accrued liability for compensated absences in the amount of $603,064 as of 7-1-2007. For FY2008, $450,981 was earned in compensated absences and employees were paid $532,154, for a net decrease of ($81,173). The ending balance as of 6-30-2008 in accrued liability for compensated absences was $521,891. 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, 2008 Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans T ot al Rest rict ed Expendable $33,009 6,631 $39,640 Coastal Georgia Community College Annual Financial Report FY 2008 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, 2008 $44,143 643,457 21,000 491,512 $1,200,112 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: 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 Coastal Georgia Community College Annual Financial Report FY 2008 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. Coastal Georgia Community College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $902,615 and the bank balance was $1,852,754. Of the College's deposits, $1,752,754 were uninsured. Of these uninsured deposits, $1,752,754 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments At June 30, 2008, the carrying value of the College's investments was $89,186, 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 $89,186 T otal Investment Pools $89,186 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 Total Return Fund is 7.84 years. Of the College's total investment of $89,186 in the Total Return Fund, $28,183 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. Coastal Georgia Community College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $142,827 81,426 94,838 550,481 307,844 1,177,416 32,337 $1,145,079 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Ot h er T otal $264,611 24,298 $288,909 Note 5. Notes/Loans Receivable Institutional loans comprise all of the loans receivables at June 30, 2008. There is no allowance for uncollectible loans. Coastal Georgia Community College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 3,033,622 3,033,622 Re ductions $0 0 4,900 150,416 64,022 219,338 30,628 979,342 42,760 476,764 182,872 1,712,366 (1,493,028) $1,540,594 75,117 223,806 298,923 75,117 223,806 298,923 0 $0 En di n g B a l a n ce 6/30/2008 $1,578,017 3,556,848 5,134,865 998,920 32,723,123 1,256,195 5,097,172 1,955,607 42,031,017 733,429 10,474,534 615,869 3,725,282 1,448,991 16,998,105 25,032,912 $30,167,777 Coastal Georgia Community College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $15,498 $15,498 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $603,064 Additions $450,981 Re du cti on s Ending Balance June 30, 2008 $532,154 $521,891 Total Long Term Obligations $603,064 $450,981 $532,154 $521,891 C u rre n t Portion $375,005 $375,005 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $4,291,285 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. 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 in FY2008. Coastal Georgia Community College Annual Financial Report FY 2008 21 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 2008, 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 2008 2007 2006 100% 100% 100% $564,124 $538,489 $520,382 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 2008 22 Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2008, for employees covered by ERS was $42,315. The College's total payroll for all employees was $10,754,719. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $4,405 $3,535 $0 Coastal Georgia Community College Annual Financial Report FY 2008 23 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $262,845 (8.13% or 8.15%) and $161,455 (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. Coastal Georgia Community College Annual Financial Report FY 2008 24 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 2008 amounted to $52,685 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 Coastal Georgia Community College Annual Financial Report FY 2008 25 property, employee and automobile liability, fidelity and certain other risks. Coastal Georgia Community College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Coastal Georgia Community College expects such amounts, if any, to be immaterial to its overall financial position. 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates Coastal Georgia Community College Annual Financial Report FY 2008 26 that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 98 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Coastal Georgia Community College recognized as incurred $339,426 of expenditures, which was net of $118,922 of participant contributions. Coastal Georgia Community College Annual Financial Report FY 2008 27 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $4,395,248 2,216,460 1,543,971 115,809 14,000 96,992 1,358,585 113,238 $9,854,303 Functional Classification FY2008 Public Service Academic Support Student Services $0 25,295 606 $0 741,877 189,044 $0 932,940 246,404 21,106 1,738 17,501 5,756 194,549 203,370 24,729 7,964 10,412 353,677 12,103 $48,745 $1,352,097 $1,588,229 Inst it ut ional Support $0 1,566,034 869,288 100,959 45,574 18,402 624,538 51,520 $3,276,315 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 FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 759,809 241,048 (20,017) 765 683,803 555,530 1,330,397 $0 2,348,283 $0 117,056 29,250 20,017 6,461 73,047 4,318 1,152,120 $3,551,335 $2,348,283 $1,402,269 T ot al Expenses $4,395,248 6,359,471 3,119,611 100,959 210,839 2,443,294 819,683 4,260,105 1,712,366 $23,421,576 Coastal Georgia Community College Annual Financial Report FY 2008 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, 2007, the Foundation distributed $733,315 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Business Affairs Office at 3700 Altama Avenue, Brunswick, GA 31520. Investments for Component Units: Coastal Georgia Community College Foundation, Inc. holds endowments and other investments in the amount of $7.5 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Coastal Georgia Community College Foundation, Inc. investments are comprised of the following amounts at December 31, 2007: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities M utual Funds Total Investments Cost $2,144,962 1,421,167 201,005 7,840 3,542,866 $7,317,840 Fair Value $2,152,756 1,427,782 216,205 5,875 3,684,563 $7,487,181 Coastal Georgia Community College Annual Financial Report FY 2008 29 COLUMBUS STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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............................................................................................... 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 .............................................. 36 Note 16. Component Units ......................................................................................................... 37 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 remains consistent with prior year enrollment as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 301 FY2007 309 FY2006 246 7,593 7,597 7,475 6,426 6,394 6,240 Overview of the Financial Statements and Financial Analysis Columbus State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $18,769,258 128,235,685 3,367,930 150,372,873 June 30, 2007 $17,451,900 52,434,293 3,459,446 73,345,639 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 9,954,335 63,002,117 72,956,452 6,670,510 1,007,763 7,678,273 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 64,352,120 1,663,685 2,784,148 8,616,468 $77,416,421 52,434,293 1,650,195 2,811,232 8,771,646 $65,667,366 The total assets of the institution increased by $77,027,234. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $75,801,392 in the category of Capital Assets, net. The balance of the increase is mainly in the cash and cash equivalents category. The total liabilities for the year increased by $65,278,179. The combination of the increase in total assets of $77,027,234 and the increase in total liabilities of $65,278,179 yields an increase in total net assets of $11,749,055. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $11,917,827. Columbus State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $37,701,346 82,962,343 (45,260,997) 43,026,858 (2,234,139) 13,983,194 11,749,055 65,667,366 0 65,667,366 $77,416,421 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $20,848,428 8,781,693 2,347,069 5,518,527 205,629 37,701,346 38,247,603 3,633,244 816,609 712,584 (5,784) 43,404,256 1,666,756 12,316,438 13,983,194 $95,088,796 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Expenses Inst ruct ion Research 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, 2008 $31,868,466 1,008 8,020,570 4,632,776 11,906,547 13,517,443 6,778,949 6,236,584 0 82,962,343 377,398 $83,339,741 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, 2007 $29,820,123 0 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 Columbus State University Annual Financial Report FY 2008 4 Operating revenues decreased by ($781,802) in fiscal 2008. Although Tuition & Fees included a 9% increase, revenues decreased in Auxiliary. The Auxiliary revenue decrease of ($2,843,380) is a result of the changing environment of residential life on and near the University's campus. Cougar Village, a privately owned development, opened during fiscal year 2008. A number of students made the decision to live in this particular private housing, decreasing institutionally owned housing revenues. Nonoperating revenues increased by $2,966,005 for the year primarily due to an increase of $3,650,817 in State Appropriations, although Grants and Contracts decreased by ($403,055) and Investment Income decreased by ($493,151). The compensation and employee benefits category increased by $3,008,556 and primarily affected the Instruction, Academic Support and Institutional Support categories. Notably, the number of faculty decreased by 8, however, the salary levels increased. Utilities increased by $736,515 during the past year. The increase was primarily associated with the increased natural gas costs as well as a full year of operation at the RiverPark Campus located in downtown Columbus. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($39,184,837) 42,342,674 (2,984,171) 833,224 1,006,890 14,481,687 $15,488,577 June 30, 2007 ($37,887,226) 39,985,680 (2,796,512) 1,047,834 349,776 14,131,911 $14,481,687 Columbus State University Annual Financial Report FY 2008 5 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2008. The Corn Center for the Visual Arts was gifted to Columbus State University by the Columbus State University Foundation. The value of the gift was $12,233,838. 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 Columbus State University had Long-Term Debt and Liabilities of $66,082,563 of which $3,080,446 was reflected as current liability at June 30, 2008. 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 FY2008. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook Columbus State University continues to have very significant concerns regarding the lack of funding for support of the RiverPark campus which has now been operational for one full year. The RiverPark campus is the nerve center for what will be a critical strategic emphasis on growing CSU's fine and performing arts programs. The Schwob School of Music, the Corn Center for Visual Arts, and extensive theatre programs involving world class facilities at the RiverCenter, and the State of Georgia Theatre at the Springer Opera House position CSU for a unique place in public higher education in Georgia. Well over 100 faculty and staff and close to 600 students daily take advantage of the RiverPark campus which is a most unique private/public partnership. While private funds built these exceptional facilities, they will require some public support to underwrite the management and maintenance of this campus. CSU plays an integral role in the economic development of uptown Columbus and has every intention of growing the fine and performing arts "franchise" at RiverPark. This wonderful arts complex reinforces the goal of the University System of Georgia to offer academic excellence, integrate with various state agencies, increase student access to the fine and performing arts and directly support faculty scholarship and research. Dr. Frank D. Brown, President Columbus State University Columbus State University Annual Financial Report FY 2008 6 Statement of Net Assets COLUMBUS S TATE UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 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 Due From Com ponent Unit s P ledges Receivable Due From P rim ary Governm ent Invent ories (note 4) P repaid it ems Ot her Asset s T ot al Current Asset s Noncurrent Assets Noncurrent Cash Due from Com ponent Unit s Invest m ent 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 C olum bus State Un i ve rs i ty C om pone nt Unit C olum bus State Un i ve rs i ty Fou n dati on , In c. $15,087,210 373,761 2,834,305 156,078 317,904 18,769,258 401,367 2,003,987 962,576 128,235,685 131,603,615 150,372,873 $0 13,748 761,236 5,285,805 41,571 150,931 6,253,291 7,570,603 288,849 35,385,669 9,484,025 52,729,146 58,982,437 Columbus State University Annual Financial Report FY 2008 7 Statement of Net Assets, Continued COLUMBUS S TATE UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 C olum bus State Un i ve rs i ty 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 Due t o P rim ary Governm ent 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 ) Due t o Com ponent Unit s Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Com pensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreem ent s (noncurrent ) Ot her Long-T erm Liabilit ies Due t o Com ponent Unit s Not es and Loans 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 en da ble E x p e n da ble Unrest rict ed TO TAL NET AS S ETS 259,001 240,806 163,925 5,174,413 4 1,035,740 1,934,114 1,146,332 9,954,335 61,949,451 1,052,666 63,002,117 72,956,452 64,352,120 1,663,685 2,784,148 8,616,468 $77,416,421 C om pone nt Unit C olum bus State Un i ve rs i ty Fou n dati on , In c. 485,644 1,021 333,000 279,175 116,317 41,485 1,256,642 1,239,023 303,099 4,065,602 5,607,724 6,864,366 26,029,589 22,317,198 3,771,284 $52,118,071 Columbus State University Annual Financial Report FY 2008 8 Statement of Net Assets, Continued COLUMBUS STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 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 Due from Component Units Investments (including Real Estate) Notes Receivable, net Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS Component Unit Component Unit Component Unit Fou n dati on Properties, Inc. Columbus State Un i ve rsi ty Athletic Fund, Inc. Columbus State University Alumni Association, Inc. $734,833 429,798 56,682 303,250 2,119 1,526,682 1,667,691 4,065,602 2,194,353 120,895,490 1,793,421 130,616,557 132,143,239 $134,959 90,344 100 23,867 2,500 2,130 3,350 257,250 314,344 1,380,902 22,327 1,717,573 1,974,823 $45,475 8,484 564 41,385 595 96,503 47,582 132,219 2,484 182,285 278,788 Columbus State University Annual Financial Report FY 2008 9 Statement of Net Assets, Continued COLUMBUS STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Component Unit Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. LIABILITIES Current Liabilities Accounts Payable Salaries 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) Liabilities under Split-Interest Agreements (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) 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 Unrestricted TOTAL NET ASSETS 1,883,148 116,187 2,190,878 29,835,936 1,469,916 695,922 3,974,296 40,166,283 74,985,084 242,874 75,227,958 115,394,241 46,839,128 (30,090,130) $16,748,998 60,206 27,419 243,021 121,996 452,642 288,849 288,849 741,491 1,338,572 394,094 (499,334) $1,233,332 7,320 654 7,974 4,940 4,940 12,914 2,484 64,723 198,667 $265,874 Columbus State University Annual Financial Report FY 2008 10 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, 2008 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 Other Sales and Services Rents 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 Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayments t o ot her Component Unit s 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) C olu m bus State Un i ve rs i ty C om pon e n t Un it C olum bus State Un i ve rsi ty Fou n dati on , In c. $28,996,238 (8,147,810) 8,137,239 502,016 142,438 2,347,069 48,640 1,588,402 223,775 180,207 887,814 543,774 2,023,751 70,804 156,989 37,701,346 18,791,343 20,712,160 10,908,831 148,272 510,070 7,549,943 3,770,401 15,903,892 4,667,431 82,962,343 (45,260,997) $0 4,321,112 2,278,073 244,193 15,154 6,858,532 974,805 116,050 376,475 5,653,497 281,590 983,187 8,385,604 (1,527,072) Columbus State University Annual Financial Report FY 2008 11 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, 2008 NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Grant s and Cont ract s St at e Other Gift s 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 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 m ent s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year C olu m bus State Un i ve rs i ty C om pon e n t Un it C olum bus State Un i ve rsi ty Fou n dati on , In c. 38,247,603 103,456 3,529,788 816,609 712,584 (377,398) (5,784) 43,026,858 (2,234,139) 1,666,756 12,316,438 13,983,194 11,749,055 65,667,366 0 65,667,366 $77,416,421 1,139,414 1,139,414 (387,658) 516,830 516,830 129,172 51,988,899 0 51,988,899 $52,118,071 Columbus State University Annual Financial Report FY 2008 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued COLUMBUS STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 REVENUES C om po n e n t Un i t Fou n dati on Prope rtie s, In c. C om pon e n t Un i t C ol u m bu s State Unive rsity Athletic 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 h er Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bo o k st o re Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues EXPENS ES Operating Expenses Salaries: Facult y St aff 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 Columbus State University T otal Operating Expenses Operating Income (loss) $0 1,341,505 6,218,952 344,390 7,904,847 414,861 54,839 331,884 1,908,963 2,327,808 199,137 482,076 5,719,568 2,185,279 $0 147,983 237,283 10,800 208 396,274 217,133 910,845 343,944 1,471,922 (1,075,648) Compone nt Un i t Columbus State Un i ve rs i ty Al u m n i As s oci ati on , In c. $0 88,412 47,503 1,569 137,484 33,566 3,714 41,216 660 16,875 11,659 107,690 29,794 Columbus State University Annual Financial Report FY 2008 13 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, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year C ompone nt Un i t Fo u n da ti o n Prope rtie s, In c. C ompone nt Un i t C olumbus State Unive rsity Athle tic Fund, In c. 462,105 (3,278,762) (2,816,657) (631,378) 207,051 207,051 (868,597) 0 (631,378) 17,380,376 0 17,380,376 $16,748,998 3,200 3,200 (865,397) 2,098,729 0 2,098,729 $1,233,332 C ompone nt Un i t C olumbus State Unive rsity Al u m n i As s oci ati on , In c. 14,311 14,311 44,105 0 44,105 221,769 0 221,769 $265,874 Columbus State University Annual Financial Report FY 2008 14 Statement of Cash Flows COLUMBUS S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 m ent s Int erest on 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, 2008 $21,207,048 6,915,111 2,347,069 (31,234,982) (39,299,032) (7,549,943) (1,693,874) 1,664,748 2,878,153 223,483 189,910 972,765 547,853 2,044,724 70,804 1,531,326 (39,184,837) 38,247,603 (354,782) 4,449,853 42,342,674 1,666,756 (2,397,269) (1,876,260) (377,398) (2,984,171) 113,047 720,177 833,224 1,006,890 14,481,687 $15,488,577 Columbus State University Annual Financial Report FY 2008 15 Statement of Cash Flows, Continued COLUMBUS S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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, 2008 ($45,260,997) 4,667,431 (305,480) (6,061) (29,126) 42,068 1,561,162 (23,749) 169,915 ($39,184,837) $65,759,825 ($7,593) ($12,316,438) Columbus State University Annual Financial Report FY 2008 16 COLUMBUS STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Columbus State University is reporting the activity for the Columbus State University Foundation, Inc., Foundation Properties, Inc., the Columbus State University Athletic Fund, Inc., and the Columbus State University Alumni Association, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 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 Columbus State University Annual Financial Report FY 2008 17 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 Board of Regents Short-Term Investment Pool. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Balanced Income Fund is included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Columbus State University Annual Financial Report FY 2008 18 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, 2008, 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 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 $2,029,083 as of 7-1-2007. For FY2008, $1,543,030 Columbus State University Annual Financial Report FY 2008 19 was earned in compensated absences and employees were paid $1,373,115, for a net increase of $169,915. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $2,198,998. 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, 2008 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 $956,976 607,676 1,060,686 158,810 $2,784,148 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 Columbus State University Annual Financial Report FY 2008 20 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, 2008 $1,885,589 2,971,550 3,759,329 $8,616,468 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. 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 Columbus State University Annual Financial Report FY 2008 21 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. 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, 2008, the carrying value of deposits was $14,335,011 and the bank balance was $15,845,683. Of the University's deposits, $15,745,683 were uninsured. Of these uninsured deposits, $15,745,683 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name. Columbus State University Annual Financial Report FY 2008 22 B. Investments Columbus State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. The University's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVES TMENTS Investment ty p e Debt Securities U.S. Agencies Exp licitly Guaranteed Corp orate Debt M unicip al Obligation Other Investments Equity Securities - Domestic Investment Pools Board of Regents Short-T erm Fund Balanced Income Fund Total Investments Fair Value Inves tment Maturity Les s Than 1 Year 387 11,383 5,000 $16,770 245,674 1,144,845 1,741,543 $3,148,832 387 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. Columbus State University Annual Financial Report FY 2008 23 The Weighted Average Maturity of the Short Term Fund is 1.99 years. Of the University's total investment of $1,144,845 in the Short Term Fund, $1,140,266 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the University's total investment of $1,741,543 in the Balanced Income Fund, $1,119,812 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, 2008, $234,241 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 Corp orate Debt M unicip al Obligation Fair Value $11,383 5,000 $16,383 AAA $0 5,000 $5,000 U nrat ed $11,383 $11,383 Columbus State University Annual Financial Report FY 2008 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $940,503 94,752 373,761 156,078 1,926,583 3,491,677 127,533 $3,364,144 Note 4. Inventories Columbus State University had no inventories at June 30, 2008. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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. As of June 30, 2008, Notes Receivable contained $0 in allowance for uncollectible accounts. Columbus State University Annual Financial Report FY 2008 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $2,415,543 137,350 2,552,893 2,309,513 67,210,997 2,584,312 9,793,758 0 7,389,888 22,000 89,310,468 1,272,045 22,734,714 1,884,107 6,685,270 0 6,852,932 39,429,068 49,881,400 $52,434,293 Addi ti o n s $0 1,564,414 1,564,414 Re ductions $0 137,350 137,350 En di n g B al an ce 6/30/2008 $2,415,543 1,564,414 3,979,957 12,445,510 688,836 65,759,825 152,297 79,046,468 436,155 436,155 2,309,513 79,656,507 2,584,312 10,046,439 65,759,825 7,542,185 22,000 167,920,781 79,959 1,621,903 94,218 817,608 1,913,034 140,709 4,667,431 74,379,037 $75,943,451 431,446 431,446 4,709 $142,059 1,352,004 24,356,617 1,978,325 7,071,432 1,913,034 6,993,641 43,665,053 124,255,728 $128,235,685 Columbus State University Annual Financial Report FY 2008 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $3,941,078 1,233,335 $5,174,413 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $0 2,029,083 Additions $65,759,825 1,543,030 Reductions Ending Balance June 30, 2008 $1,876,260 $63,883,565 1,373,115 2,198,998 Total Long Term Obligations $2,029,083 $67,302,855 $3,249,375 $66,082,563 Current Portion $1,934,114 1,146,332 $3,080,446 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $6,293,882 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Columbus 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 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 2031 and 2032. Expenditures for fiscal year 2008 were $2,253,658 of which $377,398 represented interest. Total principal paid on capital leases was $1,876,260 for the fiscal year ended June 30, 2008. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Columbus State University Annual Financial Report FY 2008 27 Buildings Total Assets Held Under Capital Lease $63,846,791 $63,846,791 Columbus State University had three capital leases with Foundation Properties, Inc., a discretely presented component unit, in the current fiscal year. In December 2006, Columbus State University entered into a capital lease of $5,873,076 whereby the University leases office space for one year with options to renew on a year-to-year basis for twenty-five consecutive one-year periods expiring on June 30, 2032. At the expiration of the lease, ownership transfers to the University. The outstanding liability at June 30, 2008 on this capital lease is $5,689,716. In July 2006, Columbus State University entered into a capital lease of $50,706,749 whereby the University leases student housing for one year with the option to renew on a year-to-year basis for twenty-five consecutive one-year periods expiring on June 30, 2031. At the expiration of the lease, ownership transfers to the University. The outstanding liability at June 30, 2008 on this capital lease is $49,233,849. In February 2006, Columbus State University entered into a capital lease of $9,180,000 at 4.5 percent whereby the University leases a parking deck for twenty-five year period that expires on June 30, 2032. The deck is constructed on land owned by the University and leased to Foundation Properties, Inc. for $10 annually for a period of twenty-five years commencing in February 2006. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2008 on this capital lease is $8,960,000. OPERATING LEASES Columbus State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2033. 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. The property under operating leases is for classroom space, office space, dormitories, copiers and other small business equipment. On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for student housing from 2007 through 2008 for annual rentals of $509,232. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for classroom and meeting room space from 2007 through 2008 for annual rentals of $172,883. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. Columbus State University Annual Financial Report FY 2008 28 On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for classroom and office space from 2007 through 2008 for annual rentals of $120,000. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for classroom space from 2007 through 2008 for annual rentals of $42,372. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for classroom and office space from 2007 through 2008 for annual rentals of $526,032. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. On July 1, 2007, Columbus State University entered into a real property operating lease with the Foundation Properties, Inc., a related party, for office space from 2007 through 2008 for annual rentals of $152,016. This operating lease was renewed in June 2008 to extend the lease to June 30, 2009. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 $2,301,811 2,347,645 2,399,620 2,452,305 2,506,647 13,392,384 15,001,839 16,837,135 12,001,762 69,241,148 5,357,583 $63,883,565 $1,635,889 1,667,606 1,558,370 1,548,422 1,419,698 7,670,396 8,721,938 9,923,254 3,627,313 $37,772,886 Columbus State University's FY2008 expense for rental of real property and equipment under operating leases was $1,556,236. Columbus State University Annual Financial Report FY 2008 29 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 2008, 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 2008 2007 2006 100% 100% 100% $2,107,302 $2,016,878 $1,898,175 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. Columbus State University Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $47,705. The University's total payroll for all employees was $39,503,503. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $4,966 $4,789 $1,171 Columbus State University Annual Financial Report FY 2008 31 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $955,170 (8.13% or 8.15%) and $586,751 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Columbus State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board Columbus State University Annual Financial Report FY 2008 32 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 2008 amounted to $155,923 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Columbus State University, as an organizational unit of the Board of Regents of the University System of Columbus State University Annual Financial Report FY 2008 33 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 Columbus State University Annual Financial Report FY 2008 34 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 258 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Columbus State University recognized as incurred $1,176,263 of expenditures, which was net of $495,066 of participant contributions. Columbus State University Annual Financial Report FY 2008 35 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 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 Inst ruct ion $18,390,845 4,483,614 4,969,768 216,233 197,025 3,269,656 341,325 $31,868,466 Functional Classification FY2008 Research Academic Support St udent Services $823 123 62 $398,675 4,058,494 1,025,460 $1,000 2,748,067 696,674 135,345 4,500 52,441 2,021,096 324,559 43,875 92,959 1,045,478 4,723 $1,008 $8,020,570 $4,632,776 Inst it ut ional Support $0 5,654,910 3,165,262 148,272 40,350 354,059 2,364,913 178,781 $11,906,547 Plant Operat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 2,666,588 765,072 $0 $0 1,100,364 286,533 11,676 3,028,347 5,006,477 2,039,283 6,778,949 62,591 766,494 45,570 2,196,272 1,778,760 $13,517,443 $6,778,949 $6,236,584 T ot al Expenses $18,791,343 20,712,160 10,908,831 148,272 510,070 7,549,943 3,770,401 15,903,892 4,667,431 $82,962,343 Columbus State University Annual Financial Report FY 2008 36 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 fiscal year of the Foundation is August 1 through July 31. This financial statement represents activity for the year ended July 31, 2007. The amount due to Columbus State University, $279,175 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, 2008. During the year ended July 31, 2007, the Foundation distributed $983,187 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. Subsequent Event Columbia State University Foundation, Inc. holds equity securities in the amount of $3,000,000 in Bill Heard Enterprises stock. During 2008, Bill Heard Enterprises ceased business operations and filed for chapter 11 bankruptcy. Investments for Component Units: Columbus State University Foundation, Inc. holds endowment and other investments in the amount of $35,385,669. 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 2008 37 Investments are comprised of the following amounts at July 31, 2007: Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split Interest Investments Total Investments Cost $27,006 2,844,006 1,654,062 25,968,257 776,945 1,848,188 $33,118,464 Fair Value $27,631 2,818,479 1,641,802 28,271,024 778,545 1,848,188 $35,385,669 Long-term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended July 31, 2007 are shown below: Beginning Balance August 1, 2006 Additions Reductions Ending Balance July 31, 2007 Amounts due within One Year Liabilities under split interest agreement Other Long Term Liabilities Total Long Term Liabilities $1,292,153 $1,292,153 $185,115 636,099 $821,214 $121,928 $121,928 $1,355,340 636,099 $1,991,439 $116,317 333,000 $449,317 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 Columbus State University Annual Financial Report FY 2008 38 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, 2007. The amount due to Columbus State University, $29,835,936, 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. During the year ended July 31, 2007, Foundation Properties, Inc. distributed $482,076 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 in the amount of $2,194,353 as of July 31, 2007. Investments consist of marketable securities and bonds as follows: Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $202,338 138,870 1,654,637 $1,995,845 Fair Value $200,196 135,870 1,858,287 $2,194,353 Capital Assets for Component Units: Foundation Properties, Inc. held the following Capital Assets as of July 31, 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 $12,052,473 41,938,633 53,991,106 73,895,156 1,656,816 75,551,972 8,647,588 66,904,384 $120,895,490 Columbus State University Annual Financial Report FY 2008 39 Long-term Liabilities for Component Units: Notes and Loans Payable include an unsecured line of credit with a local bank with a maximum availability of $4,200,000. The line of credit bears interest at the prime rate, payable monthly, and expires on October 13, 2007, at which time it is expected to be renewed on substantially similar terms. The amount outstanding under the line of credit totaled $3,960,000 at July 31, 2007. There is also a note payable in the amount of $257,170 that is payable to a bank in monthly installments of $2,915, including interest at the prime rate, through November 2009. This loan is collateralized by property with a cost of $478,792. 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 Foundation Properties, Inc. for the fiscal year ended July 31, 2007 are shown below: Beginning Balance Augsut 1, 2006 Additions Reductions Ending Balance July 31, 2007 Amounts due within One Year Notes and Loans Payable Revenue/M ortgage Bonds Payable $0 70,771,806 $3,960,000 6,700,000 ($257,170) 1,016,806 $4,217,170 76,455,000 $3,974,296 1,469,916 Total Long Term Liabilities $70,771,806 $10,660,000 $759,636 $80,672,170 $5,444,212 Debt Service Obligations Annual requirements to maturity for Notes Payable are as follows: Year ending July 31: 2008 1 2009 2 2010 3 Notes and Loans Payable Princip al Interest Total $3,974,296 15,521 227,353 $4,217,170 $88,684 19,459 6,196 $114,339 $4,062,980 34,980 233,549 $4,331,509 Columbus State University Annual Financial Report FY 2008 40 Annual debt service requirements to maturity for Student Housing, Educational Programming and Parking Facility revenue bonds payable are as follows: Year ending July 31: 2008 1 2009 2 2010 3 2011 4 2012 5 2013 through 2017 6-10 Princip al Bonds Payable Interest $1,469,916 12,849,909 1,420,175 36,171,000 16,549,000 7,995,000 76,455,000 $2,522,342 2,472,772 2,422,197 2,368,584 896,249 331,709 11,013,853 Total $3,992,258 15,322,681 3,842,372 38,539,584 17,445,249 8,326,709 87,468,853 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 month ended July 31, 2007. 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 $243,021 and due from Columbus State University of $2,500 are not reflected on the University's Statement of Net Assets. During the year ended July 31, 2007 the Athletic Fund distributed $343,944 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. Columbus State University Annual Financial Report FY 2008 41 Investments for Component Units: Columbus State University Athletic Fund, Inc. holds endowment and other investments in the amount of $1,380,902. 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 July 31, 2007: Cost Fair Value Equity Securities Total Investments $1,182,841 $1,182,841 $1,380,902 $1,380,902 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 Association's fiscal year is August 1 through July 31. This financial statement represents activity for the month ended July 31, 2007. Due to the difference in fiscal year ending dates between Columbus State University and the Association, the amount due to Columbus State University of $654 is not reflected on the University's Statement of Net Assets. During the year ended July 31, 2007, the Association distributed $11,659 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. Columbus State University Annual Financial Report FY 2008 42 Investments for Component Units: Columbus State University Alumni Association, Inc. holds endowment and other investments in the amount of $140,703. 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 July 31, 2007: Cost Fair Value Certificates of Deposit Equity M utual Funds $85,993 70,813 $85,993 54,710 Total Investments $156,806 $140,703 Capital Assets for Component Units: Columbus State University Alumni Association, Inc. held Capital Assets as of July 31, 2007 as follows: July 31, 2007 Capital Assets being Depreciated: Buildings and Improvements M achinery 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 7,816 2,484 $2,484 Columbus State University Annual Financial Report FY 2008 43 DALTON STATE COLLEGE Financial Report For the Year Ended June 30, 2008 Dalton State College Dalton, Georgia John Schwenn, Ph.D. President Scott Bailey Vice President for Fiscal Affairs DALTON STATE COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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............................................................................................... 16 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................................................................................................................ 24 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 24 Note 15. Natural Classifications with Functional Classifications .............................................. 25 Note 16. Component Units .......................................................................................................... 26 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) FY2008 139 FY2007 139 FY2006 119 4,532 4,349 4,267 3,521 3,208 3,122 Overview of the Financial Statements and Financial Analysis Dalton State College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Dalton State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's Dalton State College Annual Financial Report FY 2008 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $5,141,856 24,032,483 29,174,339 June 30, 2007 $4,629,818 23,938,062 28,567,880 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,685,391 194,360 1,879,751 1,693,242 189,896 1,883,138 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 24,032,483 1,961 3,260,144 $27,294,588 23,938,062 1,167 2,745,513 $26,684,742 The total assets of the institution increased by $606,459. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $512,038 in the category of Current Assets. This increase is mainly in Cash and Cash Equivalents and is due to the timing of accounts receivable collections and year end purchases. The total liabilities for the year decreased by ($3,387). The combination of the increase in total assets of $606,459 and the decrease in total liabilities of ($3,387) yields an increase in total net assets of $609,846. The increase in total net assets is primarily in the category of Unrestricted in the amount of $514,631. Dalton State College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $17,251,892 31,380,005 (14,128,113) 14,487,177 359,064 250,782 609,846 26,684,742 0 26,684,742 $27,294,588 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $6,192,131 8,450,748 552,860 1,942,900 113,253 17,251,892 14,337,871 0 151,985 (2,679) 14,487,177 250,782 250,782 $31,989,851 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, 2008 and June 30, 2007 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, 2008 $14,401,943 2,473,515 2,419,874 3,605,730 3,691,062 3,046,384 1,741,497 0 31,380,005 0 $31,380,005 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 Operating revenues increased by $1,676,109 in fiscal year 2008. This was due primarily to increases in three areas. Tuition, along with one other mandatory fee, was increased during 2008. Second, both enrollment and FTE increased during the 07-08 school year. Lastly, the college received an increase in grant funding from such grants as DTAE, PELL, etc. The college also experienced an increase of 40% in Continuing Education revenues. Dalton State College Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $325,696 is due primarily to a reporting change, in which Dalton State College began recording all parking fee revenue as an auxiliary service in fiscal year 2008. This provided additional revenues of over $225,000. The College currently owns and operates all of its Auxiliary Services. Nonoperating revenues increased by $1,505,187 for the year primarily due to an increase of $1,677,792 in State Appropriations. The compensation and employee benefits category increased by $1,208,832 and primarily affected the Instruction, Institutional Support and Plant Operations and Maintenance categories. The increase reflects the addition of new staff positions, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $139,641 during the past year. The increase was primarily associated with rising energy costs during fiscal year 2008 and affected the Plant Operations and Maintenance category. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($12,381,404) 14,207,965 (1,134,251) 151,985 844,295 2,016,184 $2,860,479 June 30, 2007 ($12,938,962) 12,915,977 (757,876) 209,013 (571,848) 2,588,032 $2,016,184 Dalton State College Annual Financial Report FY 2008 5 Capital Assets Dalton State College completed a major renovation to the Bandy Gymnasium in FY2008. The $1.4 million for this project was funded by the Georgia State Financing and Investment Commission (GSFIC), as well as by institutional funding. 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 $599,561 of which $405,201 was reflected as current liability at June 30, 2008. 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 FY2008. The Dalton State College Foundation, Inc. had investments of $14.6 million as of March 31, 2008. 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. An increase of 13% in State Appropriations (much of which was used for the addition of new faculty positions and MRR funding) contributed to the College's ability to generate a 2% increase in Net Assets during fiscal year 2008. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. John Schwenn, Ph.D., President Dalton State College Scott Bailey, VP of Fiscal Affairs Dalton State College Dalton State College Annual Financial Report FY 2008 6 Statement of Net Assets DALTO N S TATE CO LLEGE S TATEMEN T O F N ET AS S ETS June 30, 2008 Dalton State C ollege 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 - Ot h er Due Fro m Co m p o n en t Un it s P ledges Receiv able Invent ories (not e 4) P rep aid it em s T o t al Curren t A sset s Non cu rre n t Asse ts In v est m en t s (in cludin g Real E st at e) 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 LIA B ILITIES C u rre n t Liabilitie s A cco un t s P ay able Salaries P ay able D ep o sit s Deferred Rev en ue (no t e 7 ) Ot 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 ) L ia bilit ies un der Sp lit -I n t er e st A gr e e m e n t s ( c ur r en 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 Co m p en sat ed A bsen ces (n o n curren t ) L iabilit ies un der Sp lit -I n t er est A gr eem en t s ( n o n cur ren t ) N o t es an d L o an s P ay able (n o n curren t ) T o t al No n curren t L iabilit ies TO TA L LIA B ILITIES 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 No n ex p endable E x p en dable Un rest rict ed TO TA L N ET A S S ETS $ 2 ,8 6 0 ,4 7 9 6 3 2 ,5 7 5 1 ,2 8 8 ,9 0 6 4 9 ,6 4 7 3 0 5 ,1 0 6 5 ,1 4 3 5 ,1 4 1 ,8 5 6 2 4 ,0 3 2 ,4 8 3 2 4 ,0 3 2 ,4 8 3 2 9 ,1 7 4 ,3 3 9 6 2 4 ,6 8 7 4 2 0 ,4 7 4 9 6 ,0 1 6 1 ,2 3 7 1 3 7 ,7 7 6 4 0 5 ,2 0 1 1 ,6 8 5 ,3 9 1 1 9 4 ,3 6 0 1 9 4 ,3 6 0 1 ,8 7 9 ,7 5 1 2 4 ,0 3 2 ,4 8 3 1 ,9 6 1 3 ,2 6 0 ,1 4 4 $ 2 7 ,2 9 4 ,5 8 8 C om pon e n t Un it Dalton S tate C ollege Fo u n da ti o n , In c. $ 1 ,0 4 0 ,6 0 6 1 2 ,7 2 4 1 ,6 8 7 ,5 3 3 1 9 6 ,1 4 1 2 ,9 3 7 ,0 0 4 1 4 ,5 5 6 ,3 4 0 9 ,9 4 7 ,0 5 1 4 ,8 0 2 ,6 3 0 3 0 ,2 1 7 2 9 ,3 3 6 ,2 3 8 3 2 ,2 7 3 ,2 4 2 6 0 ,4 2 3 1 7 ,0 1 2 8 ,5 3 3 1 7 ,1 9 0 5 0 ,8 3 3 1 5 3 ,9 9 1 1 4 6 ,4 1 1 2 ,3 2 6 ,3 9 5 2 ,4 7 2 ,8 0 6 2 ,6 2 6 ,7 9 7 2 ,4 2 5 ,4 0 2 9 ,3 3 9 ,5 3 1 2 ,1 9 4 ,3 2 5 1 5 ,6 8 7 ,1 8 7 $ 2 9 ,6 4 6 ,4 4 5 Dalton State College Annual Financial Report FY 2008 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, 2008 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 Other Sales and Services Rents and Royalt ies 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 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 Dalt on St at e College T ot al Operat ing Expenses Operat ing Income (loss) Dalton State College C om pone nt Unit Dalton State College Fou n dati on , In c. $8,040,176 (1,848,045) 5,948,402 1,798,054 704,292 552,860 1,358,477 319,965 226,464 37,994 113,253 17,251,892 8,292,044 6,718,862 4,423,671 96,003 178,034 3,293,375 937,400 6,158,031 1,282,585 31,380,005 (14,128,113) $0 3,810,468 124,629 759,484 4,694,581 133,486 13,896 73,332 130 72,947 379,630 82,100 5,218 663,627 1,424,366 3,270,215 Dalton State College Annual Financial Report FY 2008 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, 2008 Dalton State College C om pone nt Unit Dalton State College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions 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 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 14,337,871 151,985 (2,679) 14,487,177 359,064 250,782 250,782 609,846 26,684,742 0 26,684,742 $27,294,588 (504,958) (135,378) (640,336) 2,629,879 1,788,685 1,788,685 4,418,564 25,227,881 0 25,227,881 $29,646,445 Dalton State College Annual Financial Report FY 2008 9 Statement of Cash Flows DALTO N S TATE CO LLEGE S TATEMENT O F CAS H FLO W S For the Year Ended J une 3 0 , 2 0 0 8 C A S H FLO 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) Sales an d Serv ices P ay m en t s t o Sup p liers P aym ents t o Em ployees P ay m en t s fo r Sch o larsh ip s an d Fello wsh ip s A ux iliary E n t erp rise Ch arges: Bo o k st o re Fo o d Serv ices P ark in g/T ransp o rt at io n O t h er Organ izat io n s Ot 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 FLO W S FR O M N O N -C A P ITA L FIN A N C IN G A C TIV ITIES St at e A p p ro p riat 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 FLO W S FR O M C A P ITA L A N D R ELA TED FIN A N C IN G A C TIV ITIES Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al A sset s Net Cash used by Cap it al an d Relat ed Fin an cin g Act iv it ies C A S H FLO W S FR O M IN V ES TIN G A C TIV ITIES Interest on Invest m ent s N et Cash P ro v ided (used) by In v est in g A ct iv it ies Net In crease/Decrease in Cash Cash an d Cash E quiv alen t s - Begin n in g o f y ear Cash an d Cash Equiv alen t s - E nd of Year R EC O N C ILIA TIO N O F O P ER A TIN G LO 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 : Operat ing Incom e (loss) Adjust m en t s t o Reco n cile Net In co m e (lo ss) t o Net Cash P ro v ided (used) by O p erat in g A ct iv it ies Dep reciat io n Ch an ge in A sset s an d L iabilit ies: Receiv ables, n et Invent ories P repaid Item s A cco un t s P ay able D eferred Rev en ue O t h er Liabilit ies Co m pen sat ed Absen ces Net Cash P ro v ided (used) by Op erat in g Act iv it ies * * N O N -CA SH IN VE ST IN G, N O N -CA P IT A L FIN A N CIN G, A N D CA P IT A L A N D RE L A T E D FIN A N CIN G T RA N SA CT IO N S D alt o n St at e Co llege h ad n o n o n -cash t ran sact io n s fo r fiscal 2 0 0 8 . Dalton State College Annual Financial Report FY 2008 10 June 30, 2008 $ 6 ,1 2 6 ,6 3 9 8 ,5 6 0 ,3 8 5 5 5 2 ,8 6 0 (1 1 ,7 5 3 ,7 8 9 ) (1 5 ,0 0 6 ,7 1 6 ) (3 ,2 9 3 ,3 7 5 ) 1 ,4 1 7 ,6 0 0 3 1 8 ,1 1 2 (827) 3 7 ,9 9 4 6 5 9 ,7 1 3 (1 2 ,3 8 1 ,4 0 4 ) 1 4 ,3 3 7 ,8 7 1 (1 3 5 ,2 5 5 ) 5 ,3 4 9 1 4 ,2 0 7 ,9 6 5 2 5 0 ,7 8 2 (1 ,3 8 5 ,0 3 3 ) (1 ,1 3 4 ,2 5 1 ) 1 5 1 ,9 8 5 1 5 1 ,9 8 5 8 4 4 ,2 9 5 2 ,0 1 6 ,1 8 4 $ 2 ,8 6 0 ,4 7 9 ($ 1 4 ,1 2 8 ,1 1 3 ) 1 ,2 8 2 ,5 8 5 2 9 8 ,1 8 1 3 6 ,3 4 7 (2 ,2 7 0 ) 4 1 ,2 4 9 6 2 ,7 3 4 (1 ,4 9 4 ) 2 9 ,3 7 7 ($ 1 2 ,3 8 1 ,4 0 4 ) DALTON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the Dalton State College Annual Financial Report FY 2008 11 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 2008 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. 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, 2008, 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 2008 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. Dalton State College had accrued liability for compensated absences in the amount of $570,184 as of 7-1-2007. For FY2008, $442,859 was earned in compensated absences and employees were paid $413,482, for a net increase of $29,377. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $599,561. 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, 2008 Rest rict ed - E&G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable $1,961 $1,961 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 Dalton State College Annual Financial Report FY 2008 14 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, 2008 $590,398 1,129,482 14,759 1,525,505 $3,260,144 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Dalton State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 Dalton State College Annual Financial Report FY 2008 15 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, 2008, the carrying value of deposits was $1,795,717 and the bank balance was $2,530,283. Of the College's deposits, $2,530,283 were uninsured and uncollateralized. B. Investments At June 30, 2008, the carrying value of the College's investments was $1,049,367, 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: Dalton State College Annual Financial Report FY 2008 16 Investment Pools Office of T reasury and Fiscal Services Georgia Fund 1 $1,049,367 T otal Investment Pools $1,049,367 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 40 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 2008 17 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $192,270 392,352 632,575 49,647 764,873 2,031,717 60,589 $1,971,128 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Food Services P hysical P lant Ot h er T otal $276,375 14,918 6,347 7,466 $305,106 Note 5. Notes/Loans Receivable Dalton State College does not have any note/loans receivables as of June 30, 2008 Dalton State College Annual Financial Report FY 2008 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 250,782 250,782 Re ductions $0 999,722 999,722 1,417,950 385,288 330,735 2,133,973 18,985 611,697 13,153 388,103 250,647 1,282,585 851,388 $1,102,170 408,840 23,044 431,884 400,813 23,044 423,857 8,027 $1,007,749 En di n g B a l a n ce 6/30/2008 $435,065 274,732 709,797 1,346,095 29,147,366 1,172,871 3,793,518 5,513,258 40,973,108 1,013,442 9,204,769 951,506 2,302,434 4,178,271 17,650,422 23,322,686 $24,032,483 Dalton State College Annual Financial Report FY 2008 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $96,016 $96,016 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $570,184 Additions $442,859 Reductions Ending Balance June 30, 2008 $413,482 $599,561 Total Long Term Obligations $570,184 $442,859 $413,482 $599,561 Current Portion $405,201 $405,201 Note 9. Significant Commitments Dalton State College had no significant commitments as of June 30, 2008 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 fiscal year 2008. OPERATING LEASES Dalton State College had only one lease for FY2008. A facility was leased for instructional classes at the following cost: $2,993 per month, or $35,916 annually. 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, 2008, were as follows: Dalton State College Annual Financial Report FY 2008 20 Year Ending June 30: 2009 T ot al m inim um lease paym ent s Year 1 Real P roperty and Equipm ent Operat ing Leases $35,916 $35,916 Dalton State College's FY2008 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 2008, 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 2008 2007 2006 100% 100% 100% $827,082 $795,321 $728,884 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 Dalton State College Annual Financial Report FY 2008 21 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $336,834 (8.13% or 8.15%) and $205,846 (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 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. Dalton State College Annual Financial Report FY 2008 22 Total contributions made by employees during fiscal year 2008 amounted to $43,633 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Dalton State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Dalton State College Annual Financial Report FY 2008 23 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 96 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Dalton State College recognized as incurred $434,059 of expenditures, which was net of $189,102 of participant contributions. Dalton State College Annual Financial Report FY 2008 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $8,257,408 1,862,005 2,444,206 115,592 246,991 101,893 1,285,327 88,521 $14,401,943 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $34,636 926,956 276,417 $0 1,063,637 310,553 5,866 21,009 15,456 897,408 316,776 19,291 991,285 14,099 $2,473,515 $2,419,874 Inst it ut ional Sup p o r t $0 1,849,017 952,886 96,003 30,306 37,829 574,782 64,907 $3,605,730 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 & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 736,398 374,749 (11,574) 876 759,404 1,040,907 790,302 $0 3,046,384 $0 280,849 64,860 11,574 4,385 3,527 1,368,322 7,980 $3,691,062 $3,046,384 $1,741,497 T otal E x p en ses $8,292,044 6,718,862 4,423,671 96,003 178,034 3,293,375 937,400 6,158,031 1,282,585 $31,380,005 Dalton State College Annual Financial Report FY 2008 25 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 forty member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is April 1 through March 31. Amounts reported due to or due from the College do not agree because of the different fiscal year ends. During the year ended March 31, 2008, the Foundation distributed $663,627 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, Inc. holds endowment and other investments in the amount of $14.6 million. The corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Investments are comprised of the following amounts at March 31, 2008: Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Total Investments Cost $274,991 418,771 2,730,921 11,610,022 $15,034,704 Fair Value $274,991 418,771 2,653,877 11,208,701 $14,556,340 Dalton State College Annual Financial Report FY 2008 26 Capital Assets for Component Units: Capital Assets at March 31, 2008 were as follows: March 31, 2008 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 2,950,796 5,527 2,956,323 191,656 2,764,667 $4,802,630 Long-term Liabilities for Component Units: Long-term liability activity for the year ended March 31, 2008 was as follows: Beginning Balance April 1, 2007 Additions Reductions Ending Balance March 31, 2008 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Total Long Term Liabilities $0 2,424,945 $2,424,945 $163,601 $163,601 $0 47,717 $47,717 $163,601 2,377,228 $2,540,829 $17,190 50,833 $68,023 In September 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 in March 2006, principle and interest became payable in monthly installments of $15,258. The note matures in March 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: Dalton State College Annual Financial Report FY 2008 27 Year ending March 31: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2015 6-7 Principal Notes and Loans Payable Interest $50,833 53,763 56,862 59,807 63,586 2,092,377 $2,377,228 $132,263 129,333 126,234 123,289 119,510 243,070 $873,699 Total $183,096 183,096 183,096 183,096 183,096 2,335,447 $3,250,927 The Liabilities under Split Interest Agreement represents a charitable remainder annuity trust that was established during the fiscal year by a local family naming the Foundation as trustee and ultimate beneficiary of the trust. Under the terms of the trust, the grantor is paid an annuity amount equal to nine percent (9%) of the net fair market value of the assets of the trust as of the date of the Trust in equal quarterly installments from trust income and, to the extent income is not sufficient, from principal for the lifetime of the last surviving grantor. Dalton State College Annual Financial Report FY 2008 28 DARTON COLLEGE Financial Report For the Year Ended June 30, 2008 Peter J. Sireno President Darton College Albany, Georgia Ronnie A. Henry Vice President for Business and Financial Services DARTON COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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......................................................................................................... 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 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 a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 4,700 students each year. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 147 FY2007 143 FY2006 107 4,760 4,679 4,578 3,438 3,357 3,408 Overview of the Financial Statements and Financial Analysis Darton College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Darton College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, Darton College Annual Financial Report FY 2008 1 provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $6,050,364 34,920,446 40,970,810 June 30, 2007 $5,639,568 33,887,975 39,527,543 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,626,116 743,097 3,369,213 2,343,382 817,471 3,160,853 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 34,459,181 3,142,416 $37,601,597 33,285,315 3,081,375 $36,366,690 The total assets of the institution increased by $1,443,267. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,032,471 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 $208,360. The combination of the increase in total assets of $1,443,267 and the increase in total liabilities of $208,360 yields an increase in total net assets of $1,234,907. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,173,866. Darton College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $17,863,002 35,676,766 (17,813,764) 17,499,285 (314,479) 1,549,386 1,234,907 36,366,690 0 36,366,690 $37,601,597 $16,579,731 31,657,191 (15,077,460) 15,255,937 178,477 3,872,090 4,050,567 32,316,123 0 32,316,123 $36,366,690 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income 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, 2008 $6,072,515 8,479,891 244,324 2,978,236 88,036 17,863,002 17,016,872 408,128 104,872 17,529,872 1,549,386 1,549,386 $36,942,260 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $14,232,087 383,826 2,093,763 2,365,394 4,886,316 4,384,015 4,509,504 2,821,861 0 35,676,766 30,587 $35,707,353 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, 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 Operating revenues increased by $1,283,271 in fiscal 2008. Tuition & Fee revenue increased by approximately 11%. Additionally, revenue increased in the Grants and Contracts and Auxiliary categories. The Auxiliary revenue increase of $323,473 is a result of the increase in the Student Athletic Fee and an increase in the prices of books sold in the bookstore. Darton College Annual Financial Report FY 2008 4 Nonoperating revenues increased by $2,235,558 for the year primarily due to an increase of $1,835,555 in State Appropriations. The compensation and employee benefits category increased by $1,578,539 and primarily affected the Instruction, Institutional Support and Student Services categories. The increase reflects the addition of several faculty members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by $148,446 during the past year. The decrease was primarily associated with the hiring of a campus wide energy resource manager. We anticipate that there may be further energy savings in the future Statement of Cash Flows The final statement presented by Darton College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($15,866,971) 17,376,164 (1,262,746) 104,872 351,319 3,845,583 $4,196,902 June 30, 2007 ($13,104,849) 15,210,004 (1,429,990) 90,901 766,066 3,079,517 $3,845,583 Capital Assets The College had two significant capital asset projects under construction in fiscal year 2008. The Darton College Academic Services Building had an increase of $1,427,000 in Construction Work in Progress and the College also began the engineering phase for the new Nursing and Health Sciences Building to be constructed next to the Library. Darton College Annual Financial Report FY 2008 5 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 $1,280,494 of which $537,397 was reflected as current liability at June 30, 2008. 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 FY2008. The Darton College Foundation, Inc. had investments of $1.38 million as of June 30, 2008. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong, and the College was able to generate a modest increase in Net Assets in FY 2008. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to ensure the College's ability to react to unknown internal and external issues. Peter J. Sireno, President Darton College Darton College Annual Financial Report FY 2008 6 Statement of Net Assets DARTON COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets Cash an d Cash Equiv alen t s Sh o rt -t erm In v est m en t s Acco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial Assist an ce Receiv ables - Ot her P ledges Receiv able Invent ories (not e 4) P repaid it em s T o t al Current Asset s Noncurrent Asse ts Sh o rt -t erm In v est m en t s In v est m en t s (in cludin g Real Est at e) P ledges Receiv able Capit al Asset s, net (not e 6) T o t al No n curren t 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 Deferred Rev enue (n o t e 7 ) Dep osit s Held fo r Ot h er Organ izat io n s Lease P urch ase Obligat io n s (curren t p o rt ion) Co m p en sat ed Absen ces (curren t p o rt io n) T o t al Current Liabilit ies Non cu rre n t Liabilitie s Lease P urch ase Obligat io n s (n o n curren t ) Co m p en sat ed Absen ces (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 Capit al Asset s, n et o f relat ed debt Rest rict ed for No n exp en dable Ex p en dable Capit al P roject s Unrest rict ed TO TAL NET AS S ETS Darton C ollege $4,196,902 371,688 1,303,972 177,802 6,050,364 34,920,446 34,920,446 40,970,810 209,236 766,301 771,106 342,076 149,638 387,759 2,626,116 311,627 431,470 743,097 3,369,213 34,459,181 3,142,416 $37,601,597 C om pon e n t Un it Darton C olle ge Fo u n da ti o n , In c. $269,459 250,031 18,506 168,579 491 707,066 136,982 990,096 61,988 796,010 1,985,076 2,692,142 0 0 0 796,010 991,802 610,669 230,667 62,994 $2,692,142 Darton College Annual Financial Report FY 2008 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, 2008 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 Other Sales and Services Rents and Royalt ies Auxiliary Ent erprises Bookst ore Food Services P arking/T ransport at ion 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 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 C om pone nt Unit Darton C ollege Fou n dati on , In c. $8,926,119 (2,853,604) 7,544,875 427,229 507,787 244,324 27,553 2,058,330 101,675 1,389 674,580 142,262 60,483 17,863,002 8,637,013 7,683,653 4,362,942 106,312 177,022 4,796,035 709,264 7,596,846 1,607,679 35,676,766 (17,813,764) $0 314,577 28,600 343,177 222,338 3,757 152,430 378,525 (35,348) Darton College Annual Financial Report FY 2008 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, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) 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 SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Darton C ollege C om pone nt Unit Darton C ollege Fou n dati on , In c. 17,016,872 408,128 104,872 (30,587) 17,499,285 (314,479) 1,549,386 1,549,386 1,234,907 36,366,690 0 36,366,690 $37,601,597 (42,728) (42,728) (78,076) (78,076) 2,770,218 0 2,770,218 $2,692,142 Darton College Annual Financial Report FY 2008 9 Statement of Cash Flows DARTON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 Auxiliary Ent erprise Charges: 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 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 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, 2008 $6,082,937 8,332,099 244,324 (13,509,430) (15,442,852) (4,796,035) 1,924,502 88,055 1,389 694,983 201,924 311,133 (15,866,971) 17,016,872 (48,836) 408,128 17,376,164 1,549,386 (2,640,150) (141,395) (30,587) (1,262,746) 104,872 104,872 351,319 3,845,583 $4,196,902 Darton College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued DARTON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 : 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 In v en t o ries 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 Dart on College had no non-cash t ransact ions for fiscal 2008. June 30, 2008 ($17,813,764) 1,607,679 (83,251) 23,773 234,911 106,253 (48,430) 105,858 ($15,866,971) Darton College Annual Financial Report FY 2008 11 DARTON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Darton College is reporting the activity for the 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 2008 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 2008 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 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, 2008, GSFIC did not transfer any capital additions to Darton College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Darton College Annual Financial Report FY 2008 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 $713,371 as of 7-1-2007. For FY2008, $648,268 was earned in compensated absences and employees were paid $542,410, for a net increase of $105,858. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $819,229. 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. 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 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, 2008 the College had no expendable restricted net assets. Darton College Annual Financial Report FY 2008 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, 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, 2008 $478,397 1,232,517 44,412 1,387,090 $3,142,416 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 2008 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. Darton College Annual Financial Report FY 2008 17 At June 30, 2008, the carrying value of deposits was $4,186,802 and the bank balance was $5,022,885. Of the College's deposits, $4,586,612 were uninsured. Of these uninsured deposits, $4,416,763 were collateralized with securities held by the financial institution's trust department or agent in the College's name and $169,849 were uncollateralized. B. Investments As of June 30, 2008 the College had no investments. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $162,403 632,423 371,688 855,232 2,021,746 346,086 $1,675,660 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Other T otal $135,736 42,066 $177,802 Note 5. Notes/Loans Receivable As of June 30, 2008 Darton College had no Notes or Loans Receivable. Darton College Annual Financial Report FY 2008 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 2,008,198 2,008,198 Re du cti on s $0 0 538,939 93,013 775 631,952 775 1,007,192 71,019 282,508 149,412 97,548 775 1,607,679 775 (975,727) 0 $1,032,471 $0 En di n g B al an ce 6/30/2008 $989,113 7,146,149 8,135,262 34,527,282 1,537,473 3,861,917 963,811 3,287,814 44,178,297 10,139,628 1,137,119 2,769,469 528,026 2,818,871 17,393,113 26,785,184 $34,920,446 Darton College Annual Financial Report FY 2008 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $771,106 $771,106 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $602,660 Additions $0 Reductions Ending Balance June 30, 2008 $141,395 $461,265 Other Liabilities Compensated Absences 713,371 648,268 542,410 819,229 Total Long Term Obligations $1,316,031 $648,268 $683,805 $1,280,494 Current Portion $149,638 387,759 $537,397 Note 9. Significant Commitments The College had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2008. 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 acquisition of telephone equipment. CAPITAL LEASES Expenditures for fiscal year 2008 were $171,982 of which $30,587 represented interest. Total principal paid on capital leases was $141,395 for the fiscal year ended June 30, 2008. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Telephone Equipment Total Assets Held Under Capital Lease $435,785 $435,785 Darton College Annual Financial Report FY 2008 20 Darton College has one capital lease executed for the purchase of telephone equipment in the amount of $747,060. The lease is financed through Sun Trust Bank and carries an interest rate of 5.68 percent. The term of the lease will extend until June 2011, and the outstanding liability on this lease at June 30, 2008 was $461,265. OPERATING LEASES Darton College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 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, 2008, were as follows: Year Ending June 30: 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 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $171,982 171,982 157,652 501,616 40,351 $461,265 $112,916 111,449 76,261 $300,626 Darton College's FY2008 expense for rental of real property and equipment under operating leases was $152,788. 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. Darton College Annual Financial Report FY 2008 21 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 2008, 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 2008 2007 2006 100% 100% 100% $828,142 $783,095 $754,167 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 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 Darton College Annual Financial Report FY 2008 22 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, 2008, for employees covered by ERS was $35,429. The College's total payroll for all employees was $16,320,666. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $3,688 $3,555 $3,443 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 Darton College Annual Financial Report FY 2008 23 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $267,123 (8.13% or 8.15%) and $164,077 (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 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. Darton College Annual Financial Report FY 2008 24 Total contributions made by employees during fiscal year 2008 amounted to $149,168 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Darton College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Darton College Annual Financial Report FY 2008 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 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 89 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Darton College recognized as incurred $437,601 of expenditures, which was net of $141,745 of participant contributions. Darton College Annual Financial Report FY 2008 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 Inst ruct ion $8,589,158 1,963,270 2,329,255 71,915 12,286 1,037 1,159,803 105,363 $14,232,087 Functional Classification FY2008 Public Service Academic Support St udent Services $0 192,482 66,488 $0 1,362,544 365,648 $30,855 1,522,597 369,610 16,307 16,123 32,468 2,850 105,699 9,482 210,700 129,266 122 409,742 $383,826 $2,093,763 $2,365,394 Inst it ut ional Support $0 1,646,225 977,478 106,312 31,813 41,677 1,966,929 115,882 $4,886,316 Plant Operat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 742,717 166,544 (18,185) 3,729 652,874 1,591,877 1,244,459 $0 4,509,504 $17,000 253,818 87,919 18,185 4,667 274,245 1,222 2,152,096 12,709 $4,384,015 $4,509,504 $2,821,861 T ot al Expenses $8,637,013 7,683,653 4,362,942 106,312 177,022 4,796,035 709,264 7,596,846 1,607,679 $35,676,766 Darton College Annual Financial Report FY 2008 27 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, 2008, the Foundation distributed $152,430 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: Investments are comprised of the following amounts at June 30, 2008: Cash held by investment organization Certificates of Deposit Corporate Bonds Equity Securities Cost $12,111 374,902 608,063 424,023 Fair Value $12,111 374,902 590,964 399,132 Total Investments $1,419,099 $1,377,109 Darton College Annual Financial Report FY 2008 28 Capital Assets for Component Units: Darton College Foundation, Inc. holds the following Capital Assets as of June 30, 2008: 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, 2008 $308,826 374,818 683,644 123,324 123,324 10,958 112,366 $796,010 Darton College Annual Financial Report FY 2008 29 EAST GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2008 Dr. John Black President East Georgia College Swainsboro, Georgia Adriance M. Galloway Vice President for Fiscal Affairs EAST GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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................................................................................................ 15 Note 3. Accounts Receivable...................................................................................................... 17 Note 4. Inventories...................................................................................................................... 17 Note 5. Notes/Loans Receivable................................................................................................. 17 Note 6. Capital Assets................................................................................................................. 18 Note 7. Deferred Revenue........................................................................................................... 19 Note 8. Long-Term Liabilities .................................................................................................... 19 Note 9. Significant Commitments............................................................................................... 19 Note 10. Lease Obligations......................................................................................................... 19 Note 11. Retirement Plans .......................................................................................................... 21 Note 12. Risk Management......................................................................................................... 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 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 1,900 students. The institution's headcount enrollment increased by 15.6 percent in the Fall Semester 2007 and by 21.3 percent in the Spring Semester 2008. The institution's historical enrollment data (as of Fall semester) follows: Students Students Faculty (Headcount) (FTE) FY2008 44 1,987 1,779 FY2007 36 1,719 1,524 FY2006 24 1,511 1,338 Overview of the Financial Statements and Financial Analysis East Georgia College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of East Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. East Georgia College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $1,320,586 16,894,903 471,319 18,686,808 June 30, 2007 $1,078,190 15,740,648 479,532 17,298,370 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 1,128,468 244,709 1,373,177 1,386,654 263,393 1,650,047 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 16,790,434 37,100 93,693 392,404 $17,313,631 15,599,845 37,100 9,277 2,101 $15,648,323 The total assets of the institution increased by $1,388,438. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,154,255 in the category of Capital Assets, net. The total liabilities for the year decreased by ($276,870). The combination of the increase in total assets of $1,388,438 and the decrease in total liabilities of ($276,870) yields an increase in total net assets of $1,665,308. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,190,589. 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 East Georgia College Annual Financial Report FY 2008 2 operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2008 June 30, 2007 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 $5,569,982 13,116,977 (7,546,995) 6,978,141 (568,854) 2,234,162 1,665,308 15,648,323 0 15,648,323 $17,313,631 $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 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: East Georgia College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $1,887,057 3,560,390 47,761 50,643 24,131 5,569,982 6,599,746 273,930 48,500 71,544 (2,012) 6,991,708 2,234,162 2,234,162 $14,795,852 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $4,116,059 933,387 963,785 949,270 2,123,449 2,051,272 1,943,793 35,962 13,116,977 13,567 $13,130,544 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 Operating revenues increased by $1,209,679 in fiscal 2008. Tuition & Fees included a 23% increase, and revenues increased in Grants and Contracts by 32%. East Georgia College Annual Financial Report FY 2008 4 East Georgia College is a commuter institution without a residential population. Revenues associated with auxiliary services decreased by ($1,211) during the year due primarily to a decrease in revenues from parking and transportation services. Non-operating revenue increased by $1,472,512 for the year. State Appropriations, Grants and Contracts, and Gifts increased by $1,291,261. Investment Income decreased by ($69,242) and Other Non-operating revenues increased by $250,493. The compensation and employee benefits category increased by $1,021,723 and primarily affected the Instruction and Student Services 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 $111,184 during the past year. The increase was primarily associated with increased electricity and water usage that was a result of a net increase in usable space of 31,512 square feet. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($6,760,995) 6,936,629 (215,226) 81,237 41,645 779,707 $821,352 June 30, 2007 ($5,665,402) 5,609,736 (332,242) 92,328 (295,580) 1,075,287 $779,707 East Georgia College Annual Financial Report FY 2008 5 Capital Assets East Georgia College completed and capitalized the expansion and renovation of the Student Services Complex in FY2007 and FY2008. The $4.9 million for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). In addition, the Campus Infrastructure and Roadway Project were substantially completed in FY2008. This project was funded by the GSFIC for $1.4 million and $125,548 from the Georgia Department of Transportation. Projected funding by GSFIC for FY2009 will be $500,000 in planning and design funds from the permanent instructional site in Statesboro. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements. Long Term Debt and Liabilities East Georgia College had Long-Term Debt and Liabilities of $462,867 of which $218,158 was reflected as current liability at June 30, 2008. 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 FY2008. East Georgia College Foundation, Inc. had investments of $943,936 as of June 30, 2008. 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 2008 6 Statement of Net Assets EA S T GEO R GIA C O LLEGE S TA TEMEN T O F N ET A S S ETS June 30, 2008 A S S ETS C u rre n t Asse ts Cash an d Cash E quiv alen t s Acco 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 Due Fro m Co m p o n en t U nit s P ledges Receiv able In v en t o ries (n ot e 4 ) P rep aid it em s T o t al Curren t A sset s Non cu rren t Asse ts N o n curren t Cash In v est m en t s (in cludin g Real E st at e) Cap it al A sset s, n et (n o t e 6 ) Ot h er Asset s T o t al N o n curren t A sset s TO TA L A S S ETS LIA B ILITIES C u rre n t Liabilitie s Acco un t s P ay able Sa lar ie s P a y a ble Co n t ract s P ay able Dep osit s Deferred Rev enue (n o t e 7 ) Ot 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 ) T o t al Current 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 ) T o t al N o n curren t L iabilit ies TO TA L LIA B ILITIES 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 Un rest rict ed TO TA L N ET A S S ETS Ea s t G e o rg i a C olle ge $ 8 0 2 ,3 7 2 5 1 ,0 8 5 2 7 1 ,4 3 0 1 ,6 8 8 1 ,4 0 3 1 9 2 ,6 0 8 1 ,3 2 0 ,5 8 6 1 8 ,9 8 0 4 5 2 ,3 3 9 1 6 ,8 9 4 ,9 0 3 1 7 ,3 6 6 ,2 2 2 1 8 ,6 8 6 ,8 0 8 3 3 ,4 5 5 4 4 ,3 8 4 1 1 4 ,5 0 0 2 ,0 0 0 4 9 4 ,1 5 0 1 4 9 ,2 0 5 7 2 ,6 1 6 4 9 ,0 3 8 1 6 9 ,1 2 0 1 ,1 2 8 ,4 6 8 5 5 ,4 3 1 1 8 9 ,2 7 8 2 4 4 ,7 0 9 1 ,3 7 3 ,1 7 7 1 6 ,7 9 0 ,4 3 4 3 7 ,1 0 0 9 3 ,6 9 3 3 9 2 ,4 0 4 $ 1 7 ,3 1 3 ,6 3 1 C om pon e n t Un it Ea s t G e o r g i a C olle ge Fo u n da ti o n , In c. $ 1 2 9 ,7 2 5 727 2 8 ,1 5 0 1 5 8 ,6 0 2 9 4 3 ,9 3 6 1 7 5 ,9 6 5 1 2 3 ,9 5 7 1 ,2 4 3 ,8 5 8 1 ,4 0 2 ,4 6 0 1 ,6 8 8 1 ,6 8 8 0 1 ,6 8 8 1 7 5 ,9 6 5 1 ,0 5 9 ,6 5 8 1 6 5 ,1 4 9 $ 1 ,4 0 0 ,7 7 2 East Georgia College Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets EAST GEORGIA COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 East Ge orgi a C ol l e ge REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal St at e Sales and Services Auxiliary Ent erprises Bookst ore Food Services Parking/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 ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of East Georgia College T ot al Operat ing Expenses Operat ing Income (loss) NO NO PERATING REVENUES (EXPENSES ) St at e Appropriat ions Grant s and Cont ract s St at e Ot her 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 los Capit al Grant s and Gift s St at e T ot al Ot her Revenues Increase in Net Asset s NET AS SETS 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 $3,493,022 (1,605,965) 3,552,354 8,036 47,761 28,819 2,318 18,645 861 24,131 5,569,982 2,482,480 2,869,976 1,655,186 61,803 56,280 1,965,984 514,712 2,798,497 712,059 13,116,977 (7,546,995) 6,599,746 152,877 121,053 48,500 71,544 (13,567) (2,012) 6,978,141 (568,854) 2,234,162 2,234,162 1,665,308 15,648,323 0 15,648,323 $17,313,631 C ompon e n t Un i t East Ge orgi a C ol l e ge Fou n dati on , In c. $0 252,896 10,720 263,616 200 96,943 40,969 138,112 125,504 (71,162) (71,162) 54,342 0 54,342 1,346,430 0 1,346,430 $1,400,772 East Georgia College Annual Financial Report FY 2008 8 Statement of Cash Flows EA S T GEO R GIA C O L L EGE 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 8 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 P ark in g/T ran sp o rt at io n 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 Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al A sset s P rin cip al P aid o n Cap it al D ebt an d L eases In t erest P aid o n Cap it al D ebt an d L eases 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 P urch ase o f 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 IN A N C IN G, A N D C A P IT 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 Fix ed asset s acquired by in currin g cap it al lease o bligat io 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 East Georgia College Annual Financial Report FY 2008 9 June 30, 2008 $ 1 ,9 6 1 ,9 9 3 3 ,4 3 0 ,7 9 6 4 7 ,7 6 1 (5 ,0 6 4 ,2 3 0 ) (5 ,2 9 0 ,2 5 2 ) (1 ,9 6 5 ,9 8 4 ) 6 3 ,4 0 3 3 ,4 3 5 1 8 ,6 5 4 830 3 2 ,5 9 9 (6 ,7 6 0 ,9 9 5 ) 6 ,5 9 9 ,7 4 6 1 4 ,4 5 3 3 2 2 ,4 3 0 6 ,9 3 6 ,6 2 9 2 ,2 3 4 ,1 6 2 (2 ,3 8 8 ,5 9 7 ) (4 7 ,2 2 4 ) (1 3 ,5 6 7 ) (2 1 5 ,2 2 6 ) 9 9 ,9 8 7 (1 8 ,7 5 0 ) 8 1 ,2 3 7 4 1 ,6 4 5 7 7 9 ,7 0 7 $ 8 2 1 ,3 5 2 ($ 7 ,5 4 6 ,9 9 5 ) 7 1 2 ,0 5 9 (1 6 8 ,4 2 3 ) (4 3 5 ) (3 3 ,3 7 5 ) 3 0 ,8 1 2 1 2 5 ,6 2 4 7 8 ,0 0 5 4 1 ,7 3 3 ($ 6 ,7 6 0 ,9 9 5 ) $ 1 0 ,8 9 0 ($ 2 8 ,4 4 3 ) EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 College's report. For FY2008, 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 2008 10 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. 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 East Georgia College Annual Financial Report FY 2008 11 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 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, 2008, GSFIC did not transfer any 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, 2008. 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. East Georgia College Annual Financial Report FY 2008 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. East Georgia College had accrued liability for compensated absences in the amount of $316,665 as of 7-1-2007. For FY2008, $225,651 was earned in compensated absences and employees were paid $183,918, for a net increase of $41,733. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $358,398. 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, 2008 Rest rict ed - E& G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable $93,693 $93,693 East Georgia College Annual Financial Report FY 2008 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. 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, 2008 $21,541 388,467 1,475 (19,079) $392,404 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 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, East Georgia College Annual Financial Report FY 2008 14 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, 2008, the carrying value of deposits was $782,034 and the bank balance was $1,236,764. Of the College's deposits, $1,036,764 were uninsured. Of these uninsured deposits, East Georgia College Annual Financial Report FY 2008 15 $1,036,764 were collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments At June 30, 2008, the carrying value of the College's investments was $490,682, 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-T erm Fund Balanced Income Fund T otal Return Fund Diversified Fund $38,343 361,426 18,519 72,394 T otal Investment Pools $490,682 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 1.99 years. Of the College's total investment of $38,343 in the Short Term Fund, $38,190 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the College's total investment of $361,426 in the Balanced Income Fund, $232,397 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the College's total investment of $18,519 in the Total Return Fund, $5,852 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the College's total investment of $72,394 in the Diversified Fund, $22,515 is invested in debt securities. East Georgia College Annual Financial Report FY 2008 16 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $48,527 9,457 51,085 1,688 214,614 325,371 1,168 $324,203 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Other T otal $1,403 $1,403 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, 2008. 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 2008, no new loans were made to students. As of June 30, 2008, the outstanding notes receivable was $0. East Georgia College Annual Financial Report FY 2008 17 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2007 $221,959 1,919,016 2,140,975 Addi ti o n s $0 142,223 142,223 Re ductions $0 1,919,016 1,919,016 Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated 0 16,589,471 421,017 1,612,742 221,502 1,106,117 19,950,849 1,316,826 2,090,114 214,596 10,890 12,693 3,645,119 366,000 255,068 207 621,275 Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation 0 3,678,097 381,405 1,233,044 49,051 1,009,579 6,351,176 20,352 493,261 121,059 53,492 23,895 712,059 366,000 253,056 207 619,263 T otal Capital Assets, Being Depreciated, Net 13,599,673 2,933,060 2,012 Capital Assets, net $15,740,648 $3,075,283 $1,921,028 En di n g B a l a n ce 6/30/2008 $221,959 142,223 364,182 1,316,826 18,313,585 421,017 1,572,270 232,392 1,118,603 22,974,693 20,352 3,805,358 381,405 1,101,047 102,543 1,033,267 6,443,972 16,530,721 $16,894,903 East Georgia College Annual Financial Report FY 2008 18 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $451,130 43,020 $494,150 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $140,803 Additions $10,890 Reductions Ending Balance June 30, 2008 $47,224 $104,469 Other Liabilities Compensated Absences 316,665 225,651 183,918 358,398 Total Long Term Obligations $457,468 $236,541 $231,142 $462,867 Current Portion $49,038 169,120 $218,158 Note 9. Significant Commitments The College did not have any significant unearned, outstanding, construction or renovation contracts as of June 30, 2008. 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 2009 and 2012. Expenditures for fiscal year 2008 were $60,791 of which $13,567 represented interest. Total principal paid on capital leases was $47,224 for the fiscal year ended June 30, 2008. Interest rates range from 5.50 percent to 15.40 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: East Georgia College Annual Financial Report FY 2008 19 Equipment Total Assets Held Under Capital Lease $129,849 $129,849 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. East Georgia College has various capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $104,469. OPERATING LEASES East Georgia College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2012. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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 2008, East Georgia College entered into a real property operating lease with Finger-LeFavi Properties for office space for faculty and staff at the Statesboro instructional site located near the Georgia Southern University campus. In fiscal year 2008, the monthly lease payment was $19,590 plus $2,146 monthly Common Area Maintenance fee. East Georgia College's FY2008 expense for rental of real property under operating leases was $191,962. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 P rincipal Out st anding 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 $58,391 55,416 7,075 305 121,187 16,718 $104,469 $235,386 235,422 235,330 235,080 $941,218 East Georgia College's FY2008 expense for rental of real property and equipment under operating leases was $192,236. East Georgia College Annual Financial Report FY 2008 20 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 2008, 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 2008 2007 2006 100% 100% 100% $302,395 $267,303 $302,018 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 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. East Georgia College Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $42,226. The College's total payroll for all employees was $5,352,456. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $4,396 $3,600 $0 East Georgia College Annual Financial Report FY 2008 22 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $111,406 (8.13% or 8.15%) and $68,428 (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. East Georgia College Annual Financial Report FY 2008 23 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 2008 amounted to $14,916 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' East Georgia College Annual Financial Report FY 2008 24 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. East Georgia College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although East Georgia College expects such amounts, if any, to be immaterial to its overall financial position. 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, 2008. 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. East Georgia College Annual Financial Report FY 2008 25 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 26 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, East Georgia College recognized as incurred $154,796 of expenditures, which was net of $57,854 of participant contributions. East Georgia College Annual Financial Report FY 2008 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel 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 Depreciation Total Expenses Inst ruct ion $2,479,710 184,816 647,084 4,809 6,066 20,625 55,219 690,505 27,225 $4,116,059 Functional Classification FY2008 Public Service Academic Support St udent Services $1,610 148,558 41,740 10,136 1,242 716,696 13,405 $1,160 535,483 137,681 2,212 12,125 8,379 178,551 88,194 $0 538,330 174,086 6,052 6,303 1,566 7,052 206,076 9,805 $933,387 $963,785 $949,270 Inst it ut ional Support $0 1,059,996 503,558 48,730 20,949 63,782 396,780 29,654 $2,123,449 Plant Operat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises T ot al Expenses $0 397,908 151,031 701 378,492 598,398 524,742 $2,051,272 $0 1,943,793 $1,943,793 $0 4,885 6 546 11,491 19,034 $35,962 $2,482,480 2,869,976 1,655,186 61,803 56,280 1,965,984 514,712 2,798,497 712,059 $13,116,977 East Georgia College Annual Financial Report FY 2008 27 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, 2008, the Foundation distributed $40,969 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of the Vice President for Fiscal Affairs at 131 College Circle, Swainsboro, GA 30401. Investments for Component Units: East Georgia College Foundation, Inc. holds investments in the amount of $943,936 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 purpose specified by the donor. Investments are comprised of the following amounts at June 30, 2008: Cash held by investment organization Equity Securities Investment Pools: BOR Short Term Fund BOR Balanced Income Fund SunTrust Diversified Fund Total Investments Cost $6,904 23,653 41,398 238,787 732,462 $1,043,204 Fair Value $6,904 23,653 41,236 198,056 674,087 $943,936 East Georgia College Annual Financial Report FY 2008 28 Capital Assets for Component Units: East Georgia College Foundation, Inc. has capital assets of $175,965 at June 30, 2008 in the form of Land. East Georgia College Annual Financial Report FY 2008 29 FORT VALLEY STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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......................................................................................................... 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 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 masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,000 students each year. The institution's enrollment data is shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 122 FY2007 125 FY2006 117 2,562 2,176 2,174 2,433 2,043 2,000 Overview of the Financial Statements and Financial Analysis Fort Valley State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $5,097,422 92,439,163 2,076,736 99,613,321 June 30, 2007 $3,582,014 49,876,441 2,154,409 55,612,864 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 5,687,692 45,102,296 50,789,988 4,570,245 1,150,802 5,721,047 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 48,363,450 68,099 2,008,638 (1,616,854) $48,823,333 49,876,441 68,099 2,084,767 (2,137,490) $49,891,817 The total assets of the institution increased by $44,000,457. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $42,562,722 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalent categories. The total liabilities for the year increased by $45,068,941. The combination of the increase in total assets of $44,000,457 and the increase in total liabilities of $45,068,941 yields a decrease in total net assets of ($1,068,484). Fort Valley State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $37,660,673 61,247,532 (23,586,859) 21,802,899 (1,783,960) 715,476 (1,068,484) 49,891,817 0 49,891,817 $48,823,333 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Fort Valley State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 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 Gift s Invest ment Income Other 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, 2008 $3,754,304 5,376,065 16,542,809 173,910 11,640,541 173,044 37,660,673 22,799,393 591,375 73,924 (102,892) 23,361,800 715,476 715,476 $61,737,949 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $12,915,764 7,120,713 2,854,168 7,156,913 4,220,704 8,304,741 7,236,129 1,299,697 10,138,703 0 61,247,532 1,558,901 $62,806,433 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 Operating revenues increased by $6,942,674 in fiscal 2008. Although Tuition & Fees included a 17% decrease, revenues increased in Grants and Contracts and Auxiliary categories. Fort Valley State University Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $5,418,051 is a result of the changing environment of residential life on the University's campus. During the year, residential life placed in-service over 950 beds of new housing on the campus using the Fort Valley State University Foundation Properties, LLC 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 commenced on August 1, 2007 and is treated as a capital lease. The compensation and employee benefits category increased by $1,695,104 and primarily affected the Research, Institutional Support and Academic Support 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 $453,524 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($19,608,779) 23,692,455 (2,698,690) 88,094 1,473,080 112,923 $1,586,003 June 30, 2007 ($20,448,763) 23,194,424 (1,906,104) 243,905 1,083,462 (970,539) $112,923 Fort Valley State University Annual Financial Report FY 2008 5 Capital Assets The University had two significant capital asset additions for facilities in fiscal year 2008. The Hendricks Houses renovation was completed. Construction of the Wildcat Commons residential housing was completed and placed into service early in fiscal year 2008. 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 Fort Valley State University had Long-Term Debt and Liabilities of $46,578,507 of which $1,476,211 was reflected as current liability at June 30, 2008. 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 FY2008. The Fort Valley State University Foundation, Inc. had investments of $5.6 million as of June 30, 2008. 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 minimize the decrease to its 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 2008 6 Statement of Net Assets FORT VALLEY STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 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 Net Invest ment in Capit al Leases Cont ribut ions Receivable P repaid it ems Not es and Mort gages Receivable T ot al Current Asset s Non cu rre n t Asse ts Noncurrent Cash Invest ment s (including Real Est at e) Not es Receivable, net Net Invest ment in Capit al Leases 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 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 ) US DOE Set t lement (current port ion) Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds P ayable (noncurrent ) US DOE Set t lement (noncurrent ) 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 Unrest rict ed TO TAL NET AS S ETS Fort Val l e y S tate Un i ve rsi ty $1,586,003 74,523 1,760,914 1,626,710 46,212 3,060 5,097,422 41,479 2,035,257 92,439,163 94,515,899 99,613,321 1,049,622 213,493 1,173,650 595,570 1,179,146 98,489 1,160,892 216,830 5,687,692 43,977,224 595,776 529,296 45,102,296 50,789,988 48,363,450 68,099 2,008,638 (1,616,854) $48,823,333 C ompon e n t Un i t Fort Val l e y S tate Un i ve rsi ty Fou n dati on , In c. $1,159,103 892,193 1,825,855 66,551 169,733 4,113,435 21,520,371 4,670,143 388,375 34,241,535 168,979 3,299,063 2,048,243 66,336,709 70,450,144 193,591 924,664 46,212 70,000 181,876 1,416,343 61,420,930 1,360,374 62,781,304 64,197,647 1,269,043 3,051,293 2,503,744 (571,583) $6,252,497 Fort Valley State University Annual Financial Report FY 2008 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, 2008 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 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 Realized/Unrealized Gains (Losses) 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 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 C om pon e nt Unit Fort Val l e y S tate Un i ve rsi ty Fou n dati on , In c. $9,107,902 (5,353,598) 5,376,065 15,390,284 372,606 779,919 173,910 6,226,919 319,125 3,427,226 114,707 299,743 1,183,415 69,406 173,044 37,660,673 7,351,513 18,375,728 7,876,116 396,106 500,377 3,249,842 3,359,485 16,873,000 3,265,365 61,247,532 (23,586,859) $0 726,882 997,642 (344,224) 1,380,300 534,403 26,607 31,804 896,245 1,489,059 (108,759) Fort Valley State University Annual Financial Report FY 2008 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, 2008 Fort Val l e y S tate Un i ve rs i ty C om pone nt Unit Fort Val l e y S tate Un i ve rs i ty Fou n dati on , In c. 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 Federal St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 22,799,393 591,375 73,924 (1,558,901) (102,892) 21,802,899 (1,783,960) 715,476 715,476 (1,068,484) 49,891,817 0 49,891,817 $48,823,333 783,616 (1,855,821) (1,072,205) (1,180,964) 118,451 478,458 596,909 (584,055) 6,836,552 0 6,836,552 $6,252,497 Fort Valley State University Annual Financial Report FY 2008 9 Statement of Cash Flows FORT VALLEY S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 ayments to Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes 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 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 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, 2008 $2,932,376 5,393,770 17,328,797 173,910 (20,124,886) (33,539,408) (3,645,948) (101,758) 163,527 6,226,919 319,125 3,427,226 114,707 299,743 1,183,415 69,406 170,300 (19,608,779) 22,799,393 507,964 591,375 (206,277) 23,692,455 (1,853,604) (845,086) (2,698,690) 88,094 88,094 1,473,080 112,923 $1,586,003 Fort Valley State University Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued FORT VALLEY S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 m ent 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 Fixed asset s acquired by incurring capit al lease obligat ions Change in fair value of invest ment s recognized as a com ponent of int erest incom e 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, 2008 ($23,586,859) 3,265,365 (37,534) (3,060) 61,769 55,321 17,705 591,553 26,961 ($19,608,779) $43,361,898 ($14,170) ($713,815) ($715,476) Fort Valley State University Annual Financial Report FY 2008 11 FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 Note 1. Summary of Significant Accounting Policies Nature of Operations Fort Valley State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Fort Valley State University is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Fort Valley State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Fort Valley State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Fort Valley State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Fort Valley State University) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 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 FY2008, 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 Fort Valley State University Annual Financial Report FY 2008 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. 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 Balanced Income Fund is included under Investments. Fort Valley State University Annual Financial Report FY 2008 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. 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, 2008, GSFIC did not transfer any capital additions to Fort Valley State University. 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, Fort Valley State University Annual Financial Report FY 2008 14 Expenses, and Changes in Net Assets. Fort Valley State University had accrued liability for compensated absences in the amount of $1,729,707 as of 7-1-2007. For FY2008, $1,166,271 was earned in compensated absences and employees were paid $1,139,310, for a net increase of $26,961. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,756,668. 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: Federal Loans Quasi-Endowm ent s T ot al Rest rict ed Expendable June 30, 2008 1,967,158 41,480 $2,008,638 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 Fort Valley State University Annual Financial Report FY 2008 15 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, 2008 $945,597 246,552 (2,809,003) ($1,616,854) 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 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 Fort Valley State University Annual Financial Report FY 2008 16 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. 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, 2008, the carrying value of deposits was $1,659,626 and the bank balance was $2,229,473. Of the University's deposits, $2,028,109 was uninsured. Of these uninsured deposits, $1,954,950 were collateralized with securities held by the financial institution's trust department or agent in the University's name and $73,159 were uncollateralized. Fort Valley State University Annual Financial Report FY 2008 17 B. Investments At June 30, 2008, the carrying value of the University's investments was $41,479, 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 $41,479 T otal Investment Pools $41,479 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 7.84 years. Of the University's total investment of $41,479 in the Balanced Income Fund, $26,672 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 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $1,016,540 824,830 1,760,914 46,212 240,340 3,888,836 455,000 $3,433,836 Note 4. Inventories Fort Valley University had no Inventory at June 30, 2008. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was $1,301,169. Fort Valley State University Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $3,762,548 1,382,221 5,144,769 62,642,058 1,506,124 7,706,939 0 6,490,231 78,345,352 21,332,559 1,352,090 5,362,818 0 5,566,213 33,613,680 44,731,672 $49,876,441 Addi ti o n s $0 1,316,861 1,316,861 Re ductions $0 1,382,221 1,382,221 1,501,410 1,077,938 43,361,898 55,092 45,996,338 312,205 312,205 1,331,757 406 753,665 993,091 186,446 3,265,365 42,730,973 $44,047,834 209,314 209,314 102,891 $1,485,112 En di n g B a l a n ce 6/30/2008 $3,762,548 1,316,861 5,079,409 64,143,468 1,506,124 8,472,672 43,361,898 6,545,323 124,029,485 22,664,316 1,352,496 5,907,169 993,091 5,752,659 36,669,731 87,359,754 $92,439,163 Fort Valley State University Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $1,173,650 $1,173,650 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $0 Additions $44,075,713 Reductions Ending Balance June 30, 2008 $0 $44,075,713 Other Liabilities Compensated Absences US DOE Settlement Total 1,729,707 952,403 2,682,110 1,166,271 1,166,271 1,139,310 206,277 1,345,587 1,756,668 746,126 2,502,794 Total Long Term Obligations $2,682,110 $45,241,984 $1,345,587 $46,578,507 Current Portion $98,489 1,160,892 216,830 1,377,722 $1,476,211 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $745,000 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Fort Valley State University is obligated under various operating leases for the use 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 2009 and 2037. Expenditures for fiscal year 2008 were $1,711,457 of which $1,558,901 represented interest and $152,556 represented additional rent toward repairs and maintenance. Of the $1,558,901 in interest expense, $713,815 was added to the principal balance. Interest rates range from 4.50 percent to 5.50 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Fort Valley State University Annual Financial Report FY 2008 21 Buildings Equipment Total Assets Held Under Capital Lease $42,341,806 27,001 $42,368,807 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. Fort Valley State University had one capital lease with related entities in the current fiscal year. In August 2007, Fort Valley State University entered into a capital lease of $43,334,897 at 4.544 percent with the Fort Valley State University Foundation Properties, LLC whereby the University leases a building for a thirty year period that began August 2007 and expires July 2037. Fort Valley State University also has various capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $27,001. OPERATING LEASES Fort Valley State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2012. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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, 2008, were as follows: Fort Valley State University Annual Financial Report FY 2008 22 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $2,104,356 2,162,013 2,221,400 2,280,943 2,291,391 12,149,609 13,854,251 15,316,213 17,590,688 16,770,901 86,741,765 42,666,052 $44,075,713 $45,033 31,997 31,997 27,234 $136,261 Fort Valley State University's FY2008 expense for rental of real property and equipment under operating leases was $34,429. 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 2008, 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: Fort Valley State University Annual Financial Report FY 2008 23 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $1,622,581 $1,597,028 $1,593,422 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 accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $369,230 (8.13% or 8.15%) and $226,798 (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. Fort Valley State University Annual Financial Report FY 2008 24 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 2008 amounted to $87,000 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Fort Valley State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' Fort Valley State University Annual Financial Report FY 2008 25 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Fort Valley State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the Fort Valley State University Annual Financial Report FY 2008 26 publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 280 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Fort Valley State University recognized as incurred $1,004,712 of expenditures, which was net of $427,765 of participant contributions. Fort Valley State University Annual Financial Report FY 2008 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $7,323,345 1,575,144 2,103,833 88,100 540,947 87,794 1,045,085 151,516 $12,915,764 Research $12,204 3,107,781 825,017 107,546 54,217 63,305 2,430,502 520,141 $7,120,713 Functional Classification FY2008 Public Service Academic Support $0 1,453,283 427,733 $500 4,010,271 1,143,392 113,722 21,747 758,122 79,561 55,321 3,413 113,353 1,430,424 400,239 $2,854,168 $7,156,913 Student Services $12,951 2,441,411 610,048 54,053 61,345 41,299 992,101 7,496 $4,220,704 Institutional Support $2,513 3,923,923 2,172,900 396,106 73,617 444,148 112,637 1,157,168 21,729 $8,304,741 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 1,291,338 461,322 $0 $0 572,577 131,871 3,786 2,794,384 749,676 1,935,623 1,299,697 4,232 846,075 124,966 8,309,922 149,060 $7,236,129 $1,299,697 $10,138,703 Total Expenses $7,351,513 18,375,728 7,876,116 396,106 500,377 3,249,842 3,359,485 16,873,000 3,265,365 $61,247,532 Fort Valley State University Annual Financial Report FY 2008 28 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, 2008, the Foundation distributed $896,245 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 $5.6 million, excluding investments limited to use (bond proceeds). The $3.1 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, 2008: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments Cost $923,540 892,193 203,473 160,602 683,340 2,767,193 92,000 $5,722,341 Fair Value $923,540 892,193 202,529 157,107 644,207 2,650,760 92,000 $5,562,336 Fort Valley State University Annual Financial Report FY 2008 29 Capital Assets for Component Units: Fort Valley State University Foundation, Inc. holds the following capital asset amounts at June 30, 2008: June 30, 2008 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 $298,607 1,931,926 2,230,533 1,280,326 52,600 1,332,926 264,396 1,068,530 $3,299,063 Long-term Liabilities for Component Units: Changes in long-term liabilities for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Revenue/M ortgage Bonds Payable Total Long Term Liabilities $1,477,315 43,254,894 $44,732,209 $131,653 18,236,036 $18,367,689 $66,718 $66,718 $1,542,250 61,490,930 $63,033,180 $181,876 70,000 $251,876 Notes and Loans Payable: The Foundation has two notes payable to the Department of Agriculture, Rural Business Cooperative Services through 2031 which bear interest at 1%. The notes are collateralized by real and personal property including mortgage loans. The notes payable balances at June 30, 2008 were $1,160,702. The Foundation has two banks loans due in 2009 at 5% which were for the purchase of a building and for Foundation operations. The loan balances at June 30, 2008 were $381,548. Fort Valley State University Annual Financial Report FY 2008 30 Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal Notes and Loans Payable Interest $181,876 300,622 51,237 51,752 52,272 269,344 283,149 297,958 54,040 $1,542,250 $27,660 23,156 10,647 10,131 9,612 40,074 26,272 11,336 1,025 $159,913 Total $209,536 323,778 61,884 61,883 61,884 309,418 309,421 309,294 55,065 $1,702,163 Revenue Bonds Payable: In June 2006, the Development Authority of Peach County (the Authority) issued $44 million in Revenue Bonds Series 2006 (the Bonds) and entered into an agreement to loan $44 million to the Foundation for Student Housing construction. The bonds are payable solely from the Trust Estate, as defined in the Indenture. Interest rates vary from 4.0% - 5.0%. The bond liability at June 30, 2008 was $43,289,857, net of bond discount of $770,143. In June 2008, the Authority issued $18 million in Revenue Bonds Series 2008 (the Bonds) and entered into an agreement to loan $18 million to the Foundation for additional Student Housing construction. The bonds are secured by a letter of credit issued by Wachovia Bank in favor of the Authority. The letter of credit must be renewed annually. Effective July 1, 2008, the Foundation entered into an interest rate Swap Agreement to mitigate the risk of future rate fluctuations of the variable rates on the Series 2008 Bonds. Pursuant to the Swap Agreement, the Foundation will pay a fixed rate of 4.75% to the Swap Provider in exchange for the Swap Provider's payment of a floating rate. The Swap Agreement is in the notional amount of $18,265,000. The bond liability at June 30, 2008 was $18,201,073, net of bond discount of $63,927. Annual debt service requirements to maturity for revenue bonds payable are as follows: Fort Valley State University Annual Financial Report FY 2008 31 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $70,000 130,000 195,000 290,000 345,000 3,175,000 6,590,000 9,485,000 15,935,000 26,110,000 62,325,000 (834,070) $61,490,930 Bonds Payable Interest $2,811,113 2,870,447 2,865,247 2,859,071 2,843,970 13,938,661 12,971,466 11,112,236 8,094,179 3,328,711 63,695,101 $63,695,101 Total $2,881,113 3,000,447 3,060,247 3,149,071 3,188,970 17,113,661 19,561,466 20,597,236 24,029,179 29,438,711 126,020,101 (834,070) $125,186,031 Fort Valley State University Annual Financial Report FY 2008 32 GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Georgia College & State University Milledgeville, Georgia Dorothy Leland President Peter W. Shields Vice President for Business & Finance GEORGIA COLLEGE & STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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 .............................................. 34 Note 16. Component Units .......................................................................................................... 35 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 1969 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. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 306 FY2007 317 FY2006 260 6,249 6,040 5,662 5,815 5,591 5,202 Overview of the Financial Statements and Financial Analysis Georgia College & State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Georgia College and State University Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $15,633,444 147,342,213 8,071,811 171,047,468 June 30, 2007 $11,650,447 148,312,808 6,550,463 166,513,718 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 9,038,861 101,761,111 110,799,972 7,227,913 102,472,538 109,700,451 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 50,119,094 3,171,410 5,367,762 1,589,230 $60,247,496 50,734,149 2,075,090 4,951,374 (947,346) $56,813,267 The total assets of the institution increased by $4,533,750. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $5,504,345 in Current Georgia College and State University Annual Financial Report FY 2008 2 Assets and Other Assets. A portion of this increase, $1,826,301, reflects a restatement of fiscal year 2007 Net Assets that represents returning the endowments from the Georgia College & State University Foundation to the Institution. This increase was primarily offset due to a decrease of ($970,595) in the category of Capital Assets, net. This decrease is attributed to depreciation. The total liabilities for the year increased by $1,099,521. The combination of the increase in total assets of $4,533,750 and the increase in total liabilities of $1,099,521 yields an increase in total net assets of $3,434,229. The increase in total net assets is primarily in the category of Restricted and Unrestricted Assets which is offset by a decrease in Invested in Capital Assets, net of debt, in the amount of ($615,055). 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, 2008 June 30, 2007 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 $48,559,950 87,100,854 (38,540,904) 36,718,816 (1,822,088) 3,430,016 1,607,928 56,813,267 1,826,301 58,639,568 $60,247,496 $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 Georgia College and State University Annual Financial Report FY 2008 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. This increase includes a Prior Year Adjustment for the return of the endowment funds from the Georgia College & State University Foundation. 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, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $25,637,289 382,259 1,022,197 20,937,952 580,253 48,559,950 33,154,191 5,553,767 1,204,253 465,881 (19,454) 40,358,638 3,430,016 0 3,430,016 $92,348,604 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 Georgia College and State University Annual Financial Report FY 2008 4 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $30,628,523 326,841 205,193 9,122,901 5,737,280 11,328,731 9,502,959 1,630,737 18,617,689 0 87,100,854 3,639,822 $90,740,676 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 Operating revenues increased by $9,964,141 in fiscal 2008. Tuition & Fees included a 15% increase, and increases were also realized in Auxiliaries. The Auxiliary revenue increase of $6,869,934 is a result of the changing environment of residential life on the University's campus. The Freshmen residence requirement is in place; thereby producing related increases in Residence Halls, Food Service and Vending Operations. In addition, since there are increasing numbers of students at the Milledgeville campus, mandatory fee revenues for Parking/Transportation, Health Services and Athletics have significantly increased. Of significance for Auxiliaries are the capital leases that were entered into with the Georgia College & State University Foundation for the student residential facilities and the Irwin Street Parking Facility. The University operated the student residential facilities for the first full year under the capital leases during FY 2008. Nonoperating revenues increased by $4,208,065 for the year primarily due to an increase of $3,320,554 in State Appropriations. The compensation and employee benefits category increased by $4,667,260 and primarily affected the Instruction, Student Services, Institutional Support, and Auxiliary categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $927,825 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter and increased cost of electricity during fiscal year 2008 and affected the Plant Operations and Maintenance category. Georgia College and State University Annual Financial Report FY 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($31,107,914) 39,846,579 (5,967,957) 818,696 3,589,404 7,501,749 $11,091,153 June 30, 2007 ($32,463,689) 35,336,189 (1,837,081) 392,743 1,428,162 6,073,587 $7,501,749 Capital Assets The University had no significant capital asset additions for facilities in 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 College & State University had Long-Term Debt and Liabilities of $103,888,848 of which $2,127,737 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Georgia College and State University Annual Financial Report FY 2008 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 FY2008. The Georgia College & State University Alumni Association, Inc. had investments of $5.6 million. The Georgia College & State University Foundation, Inc. had investments of $14.8 million as of June 30, 2008 and long-term debt of $111.9 million in the form of two bond issues and a note payable as of June 30, 2008. 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 as we concluded the year with a 6% increase in Total Net Assets. 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. Dorothy Leland, President Georgia College & State University Georgia College and State University Annual Financial Report FY 2008 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, 2008 C om pon e n t Un it 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. 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 N et In v est m en t in Cap it al L eases 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 $ 1 0 ,9 2 3 ,0 4 8 2 2 4 ,1 4 4 1 1 8 ,6 2 7 2 ,6 1 6 ,1 9 2 3 4 ,6 1 1 1 ,5 0 4 ,9 3 3 2 1 1 ,8 8 9 1 5 ,6 3 3 ,4 4 4 $ 2 8 2 ,1 8 5 50 8 ,1 1 1 1 ,7 4 8 2 9 2 ,0 9 4 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 N et In v est m en t in Cap it al L eases 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 ) 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 1 6 8 ,1 0 5 5 ,3 3 5 ,7 9 3 2 ,5 6 7 ,9 1 3 1 4 7 ,3 4 2 ,2 1 3 1 5 5 ,4 1 4 ,0 2 4 1 7 1 ,0 4 7 ,4 6 8 9 1 3 ,5 4 3 3 5 5 ,4 2 7 2 7 ,2 0 1 4 8 6 ,0 5 0 3 ,8 8 5 ,0 8 4 5 8 9 ,9 6 5 5 4 6 ,2 7 2 6 1 7 ,8 4 9 1 ,5 0 9 ,8 8 8 1 0 7 ,5 8 2 9 ,0 3 8 ,8 6 1 1 0 1 ,0 2 6 ,6 1 3 7 3 4 ,4 9 8 1 0 1 ,7 6 1 ,1 1 1 1 1 0 ,7 9 9 ,9 7 2 5 0 ,1 1 9 ,0 9 4 3 ,1 7 1 ,4 1 0 5 ,3 6 7 ,7 6 2 1 ,5 8 9 ,2 3 0 $ 6 0 ,2 4 7 ,4 9 6 5 ,5 5 4 ,8 2 2 8 2 ,0 1 3 4 ,5 0 0 5 ,6 4 1 ,3 3 5 5 ,9 3 3 ,4 2 9 679 2 3 ,8 0 3 2 4 ,4 8 2 0 2 4 ,4 8 2 8 2 ,0 1 3 4 ,3 0 1 ,6 8 0 1 ,4 9 6 ,0 3 8 2 9 ,2 1 6 $ 5 ,9 0 8 ,9 4 7 C om pon e n t Un it 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. $ 1 ,6 4 0 ,9 7 0 2 3 ,9 5 0 2 ,8 8 3 ,0 0 1 2 7 7 ,9 6 8 1 0 7 ,5 8 2 1 2 ,7 6 5 4 ,9 4 6 ,2 3 6 1 4 ,6 8 0 ,3 1 3 1 4 ,7 9 9 ,0 6 8 7 5 ,7 4 1 ,2 9 0 6 ,0 9 5 ,2 6 0 2 ,3 4 9 ,7 9 9 1 1 3 ,6 6 5 ,7 3 0 1 1 8 ,6 1 1 ,9 6 6 1 ,8 7 4 ,8 6 6 6 ,6 1 5 ,5 4 0 1 0 ,8 0 8 4 5 5 ,0 0 0 8 ,9 5 6 ,2 1 4 1 0 8 ,7 3 1 ,1 7 7 4 0 ,9 1 0 2 ,6 6 6 ,2 8 2 1 1 1 ,4 3 8 ,3 6 9 1 2 0 ,3 9 4 ,5 8 3 (1 0 ,1 5 0 ,4 8 4 ) 1 0 ,2 4 4 ,8 6 1 2 ,6 7 1 ,5 4 2 (4 ,5 4 8 ,5 3 6 ) ($ 1 ,7 8 2 ,6 1 7 ) Georgia College and State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA COLLEGE& STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 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) Component Unit Georgia College & State University Georgia College & State University Alumni Association, Inc. Component Unit Georgia College & State University Foundation, Inc. $30,267,912 (4,630,623) 241,889 15,963 124,407 1,022,197 22,221 9,793,599 2,906,084 4,165,136 744,021 871,766 2,053,065 404,281 558,032 48,559,950 19,078,325 22,353,692 12,007,723 178,866 849,759 2,487,190 4,316,957 19,331,685 6,496,657 87,100,854 (38,540,904) $0 2,917 246,006 $0 2,306,569 474,632 358,593 3,273,169 121,717 370,640 1,014,801 7,427,764 12,169 6,551 116,911 4,851 31,456 199,379 371,317 (677) 163,977 363,403 323,725 473,697 89,333 1,122,874 92,044 217,464 2,846,517 4,581,247 Georgia College and State University Annual Financial Report FY 2008 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA COLLEGE& STATEUNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Component Unit Georgia College & State University Georgia College & State University Alumni Association, Inc. Component Unit Georgia College & State University Foundation, Inc. 33,154,191 4,123,445 174,270 1,256,052 1,204,253 465,881 (3,639,822) (19,454) 36,718,816 (1,822,088) 3,430,016 3,430,016 1,607,928 56,813,267 1,826,301 58,639,568 $60,247,496 (359,591) (359,591) (360,268) 93,313 93,313 (266,955) 6,175,902 6,175,902 $5,908,947 (457,390) (11,285,175) (11,742,565) (7,161,318) 1,333,260 1,333,260 (5,828,058) 5,871,742 (1,826,301) 4,045,441 ($1,782,617) Georgia College and State University Annual Financial Report FY 2008 10 Statement of Cash Flows GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 Int erest on Invest m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $26,100,773 (6,930) 1,022,197 (36,187,853) (41,282,878) (2,487,190) (472,863) 339,263 10,173,260 2,863,607 3,941,575 745,018 886,447 2,122,408 507,685 627,567 (31,107,914) 33,154,191 133,683 6,782,406 (62,733) (160,968) 39,846,579 128,847 (2,262,818) (355,132) (3,478,854) (5,967,957) 822,506 (3,810) 818,696 3,589,404 7,501,749 $11,091,153 Georgia College and State University Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Change in fair value of invest ment s recognized as a component of int erest income June 30, 2008 ($38,540,904) 6,496,657 (280,700) (64,222) (51,673) (44,864) 427,006 653,684 214,693 82,409 ($31,107,914) ($356,625) Georgia College and State University Annual Financial Report FY 2008 12 GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Georgia College & State University is reporting the activity for the Georgia College & State University Alumni Association, Inc. and the Georgia College & State University Foundation, Inc. See Note 16, Component Units, for Alumni Association and Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Georgia College and State University Annual Financial Report FY 2008 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 and State University Annual Financial Report FY 2008 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 and 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, 2008, GSFIC did not transfer any capital additions to Georgia College & State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall and an admissions application confirmation deposit. The confirmation deposits are credited to student accounts for tuition and fee at registration. Georgia College and State University Annual Financial Report FY 2008 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. Georgia College & State University had accrued liability for compensated absences in the amount of $2,161,977 as of 7-1-2007. For FY2008, $1,704,883 was earned in compensated absences and employees were paid $1,622,474, for a net increase of $82,409. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $2,244,386. 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. In fiscal year 2008 a restatement of fiscal year 2007 Net Assets End of Year has been made to reflect the endowments that had been moved to the Georgia College & State University Foundation for investment management. The endowments remain with the institution and the Net Assets End of Year were restated to include the endowments. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Georgia College and State University Annual Financial Report FY 2008 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, 2008 $970,433 3,552,041 845,288 $5,367,762 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, 2008 $5,205,583 6,183,569 (9,799,922) $1,589,230 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: Georgia College and State University Annual Financial Report FY 2008 17 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Auxiliary Intercollegiate Athletics revenue of $2,053,065 is reported net of discounts and allowances. Auxiliary Intercollegiate Athletic Scholarships were $639,517 for fiscal year 2008. Prior Year Adjustment Georgia College and State University had a prior year adjustment increasing beginning net assets by $1,826,301. This is due to endowments funds that were transferred from the Georgia College & State University Foundation, Inc. to Georgia College & State University. Georgia College and State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $11,329,814 and the bank balance was $12,861,882. Of the University's deposits, $12,593,966 were uninsured. Of these uninsured deposits, $4,903,583 were collateralized with securities held by the financial institution's trust department or agent in the University's name, $47,983 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $7,642,400 were uncollateralized. Georgia College and State University Annual Financial Report FY 2008 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities U.S. Treasuries U.S. Agencies Implicitly Guaranteed Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Investment Pools Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years $496,591 204,509 $701,100 603,753 136,709 1,951,500 $100,281 $100,281 $305,888 30,825 $336,713 $90,422 173,684 $264,106 1,758,366 147,528 $5,298,956 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 2008, the Georgia College & State University endowment funds that were transferred to the Georgia College & State University Foundation in fiscal year 2007 were transferred back to Georgia College & State University and recorded on the University's Georgia College and State University Annual Financial Report FY 2008 20 financial records. These funds are managed by the Georgia College & State University Foundation through a management agreement. 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 40 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. During fiscal year 2008, 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 agencies 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 7.84 years. Of the University's total investment of $1,758,366 in the Total Return Fund, $555,644 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. Georgia College and State University Annual Financial Report FY 2008 21 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. 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 and Finance and the Assistant 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, 2008, $1,466,396 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $1,186,204 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. The investments subject to credit quality risk are reflected below: Related Debt Inves tments U. S. Agencies Fair Value $204,509 $204,509 AAA $174,575 $174,575 AA $29,934 $29,934 Georgia College and State University Annual Financial Report FY 2008 22 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $21,651 785,070 118,627 34,611 1,837,246 2,797,205 27,775 $2,769,430 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Other T otal $1,470,397 34,536 $1,504,933 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was zero. Georgia College and State University Annual Financial Report FY 2008 23 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $1,007,738 1,552,162 2,559,900 70,602,564 867,019 8,773,317 98,003,752 6,866,592 151,300 185,264,544 27,246,926 677,546 5,790,330 119,056 5,633,842 43,936 39,511,636 145,752,908 $148,312,808 Addi ti o n s $0 3,428,994 3,428,994 Re ductions $0 0 En di n g B a l a n ce 6/30/2008 $1,007,738 4,981,156 5,988,894 817,659 993,004 325,244 5,000 2,140,907 523,333 25,314 14,424 563,071 71,420,223 867,019 9,242,988 97,978,438 7,177,412 156,300 186,842,380 2,075,179 39,016 740,807 3,368,523 268,793 4,339 6,496,657 (4,355,750) ($926,756) 497,382 7,426 14,424 519,232 43,839 $43,839 29,322,105 716,562 6,033,755 3,480,153 5,888,211 48,275 45,489,061 141,353,319 $147,342,213 Georgia College and State University Annual Financial Report FY 2008 24 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $3,649,293 235,791 $3,885,084 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $102,062,327 Additions $0 Reductions Ending Balance June 30, 2008 $417,865 $101,644,462 Other Liabilities Compensated Absences Total 2,161,977 2,161,977 1,704,883 1,704,883 1,622,474 1,622,474 2,244,386 2,244,386 Total Long Term Obligations $104,224,304 $1,704,883 $2,040,339 $103,888,848 Current Portion $617,849 1,509,888 1,509,888 $2,127,737 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $5,231,056 as of June 30, 2008. 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 2009 and 2034. Expenditures for fiscal year 2008 were $4,057,687 of which $3,639,822 represented interest. Total principal paid on capital leases was $417,865 for the fiscal year ended June 30, 2008. 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, 2008: Georgia College and State University Annual Financial Report FY 2008 25 Land Buildings Equipment Total Assets Held Under Capital Lease $373,659 97,362,912 615,525 $98,352,096 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 the Georgia College & State University 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 24, 2034. In February 2005, the University entered into a capital lease of $6,382,006 at 4.10 percent with the Georgia College & State University 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 the Georgia College & State University 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, 2008 on these capital leases is $94,300,974 for Student Housing; $5,648,784 for the Student Center and $1,393,855 for the Parking facility. Georgia College & State University also has various capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $300,849. These leases expire in fiscal years 2009 through 2011. OPERATING LEASES Georgia College & State University's non-cancellable operating leases have remaining terms of more than one year that expire in various fiscal years from 2009 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 facilities, copiers and other small business equipment. In fiscal year 2007, Georgia College & State University entered into a real property operating lease with the Georgia College & State University 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. This operating lease was amended on July 1, 2007 for an additional annual rental of $75,000 for additional space. 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 $313,831 in the current year. Georgia College and State University Annual Financial Report FY 2008 26 Following are the Operating Leases held by the University: Property Leased Location Lessor Annual Lease Macon Graduate & Professional Programs Center 433 Cherry St Macon, Ga GCSU Foundation $ 313,831 Pawprints Bookstore 115 S. Wilkinson St McComb Family Milledgeville, Ga Trust $ 27,228 Office Space 100 E. Greene St Bank of Eastman Milledgeville, Ga $ 35,604 Parking Lot 425 N. Clark St Wilkinson Colonial $ 28,800 Milledgeville, Ga Properties Storage 121 Blandy Rd, NW Warehouse Solutions, $ 15,000 Milledgeville, Ga LLC Parking Lot Tatnall Street Norfolk Southern $ 656 Milledgeville, Ga Corp Depot Building Greene Street Norfolk Southern $ 240 Milledgeville, Ga Corp Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for non-cancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $5,362,271 5,451,772 5,593,855 5,639,473 5,790,171 31,398,788 35,947,237 39,510,684 44,492,947 7,077,940 186,265,138 84,620,676 $101,644,462 $402,133 28,884 29,748 $460,765 Georgia College and State University Annual Financial Report FY 2008 27 Georgia College & State University's FY2008 expense for rental of real property and equipment under operating leases was $421,359. 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 2008, 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 2008 2007 2006 100% 100% 100% $2,141,263 $1,991,790 $1,862,778 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. Georgia College and State University Annual Financial Report FY 2008 28 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, 2008, for employees covered by ERS was $132,431. The University's total payroll for all employees was $41,432,017. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Georgia College and State University Annual Financial Report FY 2008 29 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $12,408 $9,402 $6,346 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $1,115,346 (8.13% or 8.15%) and $685,535 (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 Georgia College and State University Annual Financial Report FY 2008 30 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 2008 amounted to $54,938 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. Georgia College and State University Annual Financial Report FY 2008 31 The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia College & State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia College & State University expects such amounts, if any, to be immaterial to its overall financial position. 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, 2008. 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 Georgia College and State University Annual Financial Report FY 2008 32 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 256 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia College & State University recognized as incurred $1,064,953 of expenditures, which was net of $336,115 of participant contributions. Georgia College and State University Annual Financial Report FY 2008 33 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 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 FY2008 Public Service Academic Support Student Services Institutional Support $18,294,378 2,662,436 5,002,494 240,556 150,972 117,963 2,524,897 1,634,827 $28,994 134,803 23,485 23,485 596 111,901 3,577 $12,930 106,794 27,889 657 2,164 54,759 $708,736 4,241,014 1,226,852 324,164 199,222 1,630,279 792,634 $33,287 3,220,738 830,600 89,690 64,575 1,276,964 221,426 $0 5,665,479 3,000,475 178,866 94,824 67,172 1,920,115 401,800 $30,628,523 $326,841 $205,193 $9,122,901 $5,737,280 $11,328,731 Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 3,508,345 1,192,405 (1,077,903) 673 2,292,692 3,419,145 167,602 $0 1,630,737 $0 2,814,083 703,523 1,077,903 75,710 705,481 1,572,573 8,393,625 3,274,791 $19,078,325 22,353,692 12,007,723 178,866 849,759 2,487,190 4,316,957 19,331,685 6,496,657 $9,502,959 $1,630,737 $18,617,689 $87,100,854 Georgia College and State University Annual Financial Report FY 2008 34 Note 16. Component Units 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, 2008, the Alumni Association distributed $199,379 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, 2008: Cost Fair Value M oney M arket Accounts Corporate Bonds Equity Securities M utual Funds Real Estate $255,758 1,342,565 3,007,282 554,998 3,500 $255,758 1,363,987 3,333,208 598,369 3,500 Total Investments $5,164,103 $5,554,822 Capital Assets for Component Units: Georgia College & State University Alumni Association, Inc. holds the following Capital Assets as of June 30, 2008: Georgia College and State University Annual Financial Report FY 2008 35 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net June 30, 2008 $24,000 24,000 227,692 110,600 338,292 280,279 58,013 $82,013 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-five 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, 2008, the Foundation distributed $217,464 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 Effective January 1, 2007, the University transferred ownership of certain endowment assets to the Foundation. During the year ended June 30, 2008, it was determined by the Board of Regents that ownership of these assets should not have transferred; rather the Foundation should hold the assets and invest them with the other endowment assets of the Foundation. The effect on Net Assets from transferring the endowment investments back to the University is a decrease in Beginning Net Assets of ($1,826,301). Georgia College and State University Annual Financial Report FY 2008 36 Investments for Component Units: Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $14.8 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 may 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, 2008: Money Market Accounts Corporate Bonds Equity Securities Mutual Funds Real Estate Total Investments Cost $3,663,279 2,598,662 6,748,149 1,025,000 380,000 $14,415,090 Fair Value $3,663,279 2,647,560 7,003,133 1,105,096 380,000 $14,799,068 Capital Assets for Component Units: Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $372,188 $1,889,906 2,262,094 3,892,722 49,139 3,941,861 108,695 3,833,166 $6,095,260 Georgia College and State University Annual Financial Report FY 2008 37 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, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable $46,652 2,670,957 109,448,601 $0 161,992 $5,742 166,667 262,424 $40,910 2,666,282 109,186,177 $0 455,000 Total Long Term Liabilities $112,166,210 $161,992 $434,833 $111,893,369 $455,000 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 + 1.88% (4.3375% at June 30, 2008). 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, 2008 was $2,666,282. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 Princip al Notes and Loans Payable Interest $0 2,666,282 $2,666,282 $115,650 33,731 $149,381 Total $115,650 2,700,013 $2,815,663 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 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, 2008 was $7,034,916, net of unamortized premium of $9,916. Georgia College and State University Annual Financial Report FY 2008 38 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, 2008 was $102,151,261, net of unamortized discount of $318,739. 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. Interest expense and an increase in liability from interest rate swap transactions of $5,970,968 have been recorded as of June 30, 2008. 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: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Premium/(Discount) Princip al $455,000 590,000 760,000 945,000 1,140,000 9,200,000 16,675,000 25,840,000 37,655,000 16,235,000 109,495,000 (308,823) $109,186,177 Bonds Payable Interest $5,099,056 5,075,961 5,045,008 5,006,253 4,957,346 23,699,463 20,684,888 15,585,686 8,122,261 195,040 93,470,962 $93,470,962 Total $5,554,056 5,665,961 5,805,008 5,951,253 6,097,346 32,899,463 37,359,888 41,425,686 45,777,261 16,430,040 202,965,962 (308,823) $202,657,139 Georgia College and State University Annual Financial Report FY 2008 39 GEORGIA HIGHLANDS COLLEGE Financial Report For the Year Ended June 30, 2008 Georgia Highlands College Rome, Georgia J. Randy Pierce President Robert L. Whitaker Vice President for Finance & Administration GEORGIA HIGHLANDS COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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................................................................................................ 16 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 ........................................... 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 University System of Georgia. The College, which is a multiple campus institution with locations in Rome, Cartersville, and Marietta, Georgia, was founded in 1970 and has become known for its state-ofthe-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 over 4,000. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 119 FY2007 113 FY2006 102 4,346 3,933 3,817 3,557 3,214 3,072 Overview of the Financial Statements and Financial Analysis Georgia Highlands College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Highlands College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Georgia Highlands College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $4,586,653 38,160,621 27,158 42,774,432 June 30, 2007 $3,623,507 33,379,650 28,365 37,031,522 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,371,508 254,351 2,625,859 2,456,572 210,191 2,666,763 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 38,160,621 27,160 45,833 1,914,959 $40,148,573 33,379,650 26,612 50,011 908,486 $34,364,759 The total assets of the institution increased by $5,742,910. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,780,971 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 ($40,904). The combination of the increase in total assets of $5,742,910 and the decrease in total liabilities of ($40,904) yields an increase in total net assets of $5,783,814. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $4,780,971. Georgia Highlands College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $11,242,545 26,523,027 (15,280,482) 15,730,256 449,774 2,411,524 2,861,298 34,364,759 2,922,516 37,287,275 $40,148,573 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $6,662,300 3,811,000 240,785 477,060 51,400 11,242,545 15,725,835 28,320 10,350 94,313 (128,562) 15,730,256 2,411,524 2,411,524 $29,384,325 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $11,325,507 1,494,128 1,969,449 5,158,226 4,071,344 2,320,557 183,816 26,523,027 0 $26,523,027 June 30, 2007 $10,095,747 1,313,911 1,815,797 5,507,621 2,303,801 1,779,715 (117,447) 22,699,145 0 $22,699,145 Operating revenues increased by $1,898,571 in fiscal 2008. This increase was primarily due to an 18% increase in tuition and fees related to the enrollment increase experienced by the College. Nonoperating revenues increased by $2,244,771 for the year primarily due to an increase of $2,660,421 in State Appropriations. Georgia Highlands College Annual Financial Report FY 2008 4 The compensation and employee benefits category increased by $1,821,224 and primarily affected the Instruction category. In addition to rate increases in salaries and benefits this increase also reflects the growth of the College. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($13,094,182) 15,758,290 (960,331) 95,521 1,799,298 313,609 $2,112,907 June 30, 2007 ($12,030,290) 13,663,490 (2,441,734) 112,818 (695,716) 1,009,325 $313,609 Capital Assets The College increased capital assets by $1,858,455. The majority of this addition is related to a major renovation of the Heritage Hall building at the Rome campus. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the Notes to the Financial Statements. Long Term Debt and Liabilities Georgia Highlands College had Long-Term Debt and Liabilities of $748,401 of which $494,050 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8 in the Notes to the Financial Statements. Georgia Highlands College Annual Financial Report FY 2008 5 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 FY2008. The Georgia Highlands College Foundation, Inc. had investments of $606,661 as of June 30, 2008. 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 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. J. Randy Pierce, President Georgia Highlands College Georgia Highlands College Annual Financial Report FY 2008 6 Statement of Net Assets GEORGIA HIGHLANDS COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her Due From Com ponent Unit s P ledges Receivable P repaid items T ot al Current Asset s Ge orgia H i g h l a n ds C olle ge C om pone nt Unit Ge orgia Highlands College Fou n dati on , In c. $2,112,907 579,423 1,187,615 242,742 463,966 4,586,653 $651,614 5,155 656,769 Noncurrent Assets 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 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 e x p e n da ble E x p en da ble Unrest rict ed TO TAL NET AS S ETS 27,158 38,160,621 38,187,779 42,774,432 138,461 101,324 16,325 1,447,554 20,213 153,581 494,050 2,371,508 254,351 254,351 2,625,859 38,160,621 27,160 45,833 1,914,959 $40,148,573 606,661 731,225 1,337,886 1,994,655 35,911 242,742 278,653 0 278,653 1,017,358 699,071 (427) $1,716,002 Georgia Highlands College Annual Financial Report FY 2008 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, 2008 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 Other Sales and Services Rents and Royalt ies Auxiliary Ent erprises Bookst ore 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 ilit ies Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense T ot al Operat ing Expenses Operat ing Income (loss) C om pone nt Unit Ge orgia Highlands C olle ge Ge orgia Highlands College Fou n dati on , In c. $7,990,105 (1,327,805) 3,519,761 7,049 284,190 240,785 2,100 171,611 19,133 286,316 49,300 11,242,545 6,676,678 6,670,622 3,829,389 48,692 254,804 2,334,187 1,113,413 4,397,915 1,197,327 26,523,027 (15,280,482) $0 469,460 30,800 500,260 265,775 5,100 174,748 9,100 125,525 580,248 (79,988) Georgia Highlands College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Ge orgia Highlands C olle ge Ge orgia Highlands College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 15,725,835 25,775 2,545 10,350 94,313 (128,562) 15,730,256 449,774 2,411,524 2,411,524 2,861,298 34,364,759 2,922,516 37,287,275 $40,148,573 (55,238) (55,238) (135,226) 546,314 546,314 411,088 1,304,914 0 1,304,914 $1,716,002 Georgia Highlands College Annual Financial Report FY 2008 9 Statement of Cash Flows GEO RGIA HIGHLANDS CO LLEGE S TATEMENT O F CAS H FLO W S For the Year Ended J une 3 0 , 2 0 0 8 C A S H FLO 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) Sales an d Serv ices P ay m en t s t o Sup p liers P aym ents t o Em ployees P ay m en t s fo r Sch o larsh ip s an d Fello wsh ip s A ux iliary E n t erp rise Ch arges: Bo o k st o re P ark in g/T ransp o rt at io n O t h er O rgan izat io n s Ot 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 FLO W S FR O M N O N -C A P ITA L FIN A N C IN G A C TIV ITIES St at e A p p ro p riat io n s Agen 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 FLO W S FR O M C A P ITA L A N D R ELA TED FIN A N C IN G A C TIV ITIES Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al A sset s Net Cash used by Cap it al an d Relat ed Fin an cin g Act iv it ies C A S H FLO W S FR O M IN V ES TIN G A C TIV ITIES Int erest o n Inv est m en t s N et Cash P ro v ided (used) by In v est in g A ct iv it ies Net In crease/Decrease 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 nd of Year R EC O N C ILIA TIO N O F O P ER A TIN G LO 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 : Operat ing Incom e (loss) Adjust m en t s t o Reco n cile Net In co m e (lo ss) t o Net Cash P ro v ided (used) by O p erat in g A ct iv it ies Dep reciat io n Ch an ge in A sset s an d L iabilit ies: Receiv ables, n et P repaid Item s A cco un t s P ay able D eferred Rev en ue O t h er Liabilit ies Co m pen sat ed Absen ces N et Cash P ro v ided (used) by O p erat in g A ct iv it ies * * N O N -CA SH IN VE ST IN G, N O N -CA P IT A L FIN A N CIN G, A N D CA P IT A L A N D RE L A T E D FIN A N CIN G T RA N SA CT IO 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 Georgia Highlands College Annual Financial Report FY 2008 10 June 30, 2008 $ 6 ,6 1 6 ,6 4 6 5 ,3 7 1 ,4 7 5 2 4 0 ,7 8 5 (9 ,6 6 5 ,3 7 7 ) (1 3 ,2 5 1 ,9 1 2 ) (2 ,3 3 4 ,1 8 7 ) 1 3 1 ,6 3 6 2 2 ,4 4 5 2 8 1 ,6 0 8 (5 0 7 ,3 0 1 ) (1 3 ,0 9 4 ,1 8 2 ) 1 5 ,7 2 5 ,8 3 5 (6 ,2 1 5 ) 3 8 ,6 7 0 1 5 ,7 5 8 ,2 9 0 2 ,4 1 1 ,5 2 4 (3 ,3 7 1 ,8 5 5 ) (9 6 0 ,3 3 1 ) 9 5 ,5 2 1 9 5 ,5 2 1 1 ,7 9 9 ,2 9 8 3 1 3 ,6 0 9 $ 2 ,1 1 2 ,9 0 7 ($ 1 5 ,2 8 0 ,4 8 2 ) 1 ,1 9 7 ,3 2 7 8 2 7 ,7 3 0 8 ,4 2 2 (3 5 ,0 1 0 ) 1 6 2 ,9 5 9 (6 9 ,4 3 5 ) 9 4 ,3 0 7 ($ 1 3 ,0 9 4 ,1 8 2 ) ($ 1 ,2 0 8 ) GEORGIA HIGHLANDS COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 Note 1. Summary of Significant Accounting Policies Nature of Operations Georgia Highlands College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Georgia Highlands College is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Highlands College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Highlands College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Highlands College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Georgia Highlands College) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 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 FY2008, 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 2008 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 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. 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 Georgia Highlands College Annual Financial Report FY 2008 12 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. The college has no inventories as of June 30th, 2008. 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, 2008, GSFIC did not transfer any capital additions to Georgia Highlands 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 Highlands College had accrued liability for compensated absences in the amount of $654,094 as of 7-1-2007. For FY2008, $524,568 was Georgia Highlands College Annual Financial Report FY 2008 13 earned in compensated absences and employees were paid $430,261, for a net increase of $94,307. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $748,401. 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, 2008 Rest rict ed - E& G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable $45,833 $45,833 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 Georgia Highlands College Annual Financial Report FY 2008 14 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, 2008 $110,572 1,587,385 217,002 $1,914,959 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. 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. Georgia Highlands College Annual Financial Report FY 2008 15 Restatement of Prior Year Net Assets Georgia Highlands College has a restatement of prior year net assets increasing beginning net assets by $2,922,516. This restatement was the result of a comprehensive review of capital asset useful lives and represents a depreciation expense correction on several assets. 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, 2008, the carrying value of deposits was $2,109,936 and the bank balance was $2,871,576. Of the College's deposits, $2,771,576 were uninsured. Of these uninsured deposits, $2,771,576 were collateralized with securities held by the financial institution's trust department or agent in the College's name. Georgia Highlands College Annual Financial Report FY 2008 16 B. Investments At June 30, 2008, the carrying value of the College's investments was $27,158, 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 $27,158 T otal Investment Pools $27,158 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 7.84 years. Of the College's total investment of $27,158 in the Balanced Income Fund, $17,463 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 2008 17 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $389,071 9,222 579,423 242,742 893,250 2,113,708 103,928 $2,009,780 Note 4. Inventories The College had no inventories at June 30, 2008: Note 5. Notes/Loans Receivable Georgia Highlands College had no Notes or Loans receivable as of June 30, 2008. Georgia Highlands College Annual Financial Report FY 2008 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated (Re stated) Beginning B al an ce s 7/1/2007 $3,069,490 1,885,657 4,955,147 Addi ti o n s $0 2,712,966 2,712,966 Re du cti on s $0 203,837 203,837 Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated 1,739,103 36,945,353 1,149,942 2,313,223 2,547,813 44,695,434 278,029 268,624 546,653 6,388 6,388 Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation 1,140,561 8,013,783 756,098 1,514,009 1,923,964 13,348,415 (17,605) 922,191 56,935 126,470 109,336 1,197,327 6,388 6,388 T otal Capital Assets, Being Depreciated, Net 31,347,019 (650,674) 0 Capital Assets, net $36,302,166 $2,062,292 $203,837 En di n g B al an ce 6/30/2008 $3,069,490 4,394,786 7,464,276 1,739,103 36,945,353 1,149,942 2,591,252 2,810,049 45,235,699 1,122,956 8,935,974 813,033 1,640,479 2,026,912 14,539,354 30,696,345 $38,160,621 Georgia Highlands College Annual Financial Report FY 2008 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $1,047,019 400,535 $1,447,554 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $654,094 Additions $524,568 Reductions Ending Balance June 30, 2008 $430,261 $748,401 Total Long Term Obligations $654,094 $524,568 $430,261 $748,401 Current Portion $494,050 $494,050 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $586,477 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. 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. CAPITAL LEASES Georgia Highlands College does not have any capital leases as of June 30, 2008. OPERATING LEASES Georgia Highlands College's noncancellable operating leases having remaining terms of more than one year expire in fiscal year 2009. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or Georgia Highlands College Annual Financial Report FY 2008 20 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, 2008, were as follows: Year Ending June 30: 2009 T ot al m inim um lease paym ent s Year 1 Real P roperty and Equipm ent Operat ing Leases $188,311 $188,311 Georgia Highlands College FY2008 expense for rental of real property and equipment under operating leases was $186,531. 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 2008, 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 2008 2007 2006 100% 100% 100% $743,243 $663,994 $665,258 Georgia Highlands College Annual Financial Report FY 2008 21 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 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, 2008, for employees covered by ERS was $108,290. The College's total payroll for all employees was $13,347,300. For the year ended June 30, 2008 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. Georgia Highlands College Annual Financial Report FY 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $11,273 $7,850 $5,862 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia Highlands College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 23 Georgia Highlands College and the covered employees made the required contributions of $273,119 (8.13% or 8.15%) and $169,909 (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 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 2008 amounted to $63,496 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Highlands College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. Georgia Highlands College Annual Financial Report FY 2008 24 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Highlands College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Highlands College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Highlands College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. Georgia Highlands College Annual Financial Report FY 2008 25 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 100 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Highlands College recognized as incurred $449,013 of expenditures, which was net of $141,421 of participant contributions. Georgia Highlands College Annual Financial Report FY 2008 26 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $6,678,227 1,542,136 1,893,472 134,938 16,723 700,110 359,901 $11,325,507 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $0 887,294 265,320 $0 1,237,443 339,642 30,591 2,536 225,435 82,952 43,592 13,630 962 334,180 $1,494,128 $1,969,449 Inst it ut ional Sup p o r t ($1,549) 2,510,536 1,164,040 48,692 43,265 96,470 1,505,807 (209,035) $5,158,226 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 & Maint enance $0 474,310 151,737 1,737 992,168 1,495,967 955,425 $4,071,344 Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 $0 18,903 15,178 2,320,557 681 4,554 136,416 8,084 $2,320,557 $183,816 T otal E x p en ses $6,676,678 6,670,622 3,829,389 48,692 254,804 2,334,187 1,113,413 4,397,915 1,197,327 $26,523,027 Georgia Highlands College Annual Financial Report FY 2008 27 Note 16. Component Units Georgia Highlands College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Georgia Highlands 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-five 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, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from the Administrative Office at 3175 Cedartown Hwy Rome, GA 30161. Investments for Component Units: Georgia Highlands College Foundation, Inc. holds endowment and other investments in the amount of $606,661. Georgia Highlands College Foundation, in conjunction with the donors, has established a spending plan whereby 100% of the earnings may be used for academic scholarships. Investments are comprised of the following amounts at June 30, 2008: Government and Agency Securities Equity Securities Mutual Funds Total Investments Cost $143,954 281,263 128,451 $553,668 Fair Value $157,789 307,852 141,020 $606,661 Georgia Highlands College Annual Financial Report FY 2008 28 GAINESVILLE STATE COLLEGE Financial Report For the Year Ended June 30, 2008 Gainesville State College Gainesville, Georgia Dr. Martha T. Nesbitt President Mr. Paul Glaser VP for Business & Finance GAINESVILLE STATE COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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............................................................................................... 16 Note 3. Accounts Receivable...................................................................................................... 17 Note 4. Inventories...................................................................................................................... 17 Note 5. Notes/Loans Receivable................................................................................................. 17 Note 6. Capital Assets................................................................................................................. 18 Note 7. Deferred Revenue........................................................................................................... 19 Note 8. Long-Term Liabilities .................................................................................................... 19 Note 9. Significant Commitments............................................................................................... 19 Note 10. Lease Obligations......................................................................................................... 19 Note 11. Retirement Plans .......................................................................................................... 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 Note 16. Component Units .......................................................................................................... 25 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, began offering 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 7,500 students. The institution continues to grow as shown by the comparative data that follows. FY2008 FY2007 FY2006 Students Students Faculty (Headcount) (FTE) 176 7,474 6,364 165 6,719 5,593 132 5,985 4,892 Overview of the Financial Statements and Financial Analysis Gainesville State College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Gainesville State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. Gainesville State College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $11,340,544 26,654,677 37,995,221 June 30, 2007 $9,483,486 22,290,884 31,774,370 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,901,360 425,543 4,326,903 2,929,496 361,474 3,290,970 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 26,654,677 7,013,641 $33,668,318 22,290,884 6,192,516 $28,483,400 The total assets of the institution increased by $6,220,851. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $4,363,793 in the category of Capital Assets, net. The balance of the increase is mainly in the Cash and Cash Equivalents category. The total liabilities for the year increased by $1,035,933. The combination of the increase in total assets of $6,220,851 and the increase in total liabilities of $1,035,933 yields an increase in total net assets of $5,184,918. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $4,363,793. Gainesville State College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $23,686,504 42,694,431 (19,007,927) 20,542,390 1,534,463 3,650,455 5,184,918 28,483,400 0 28,483,400 $33,668,318 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $13,282,443 4,492,451 751,001 3,519,189 1,641,420 23,686,504 19,370,700 680,111 37,321 484,076 (29,818) 20,542,390 3,650,455 3,650,455 $47,879,349 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, 2008 and June 30, 2007 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, 2008 $15,702,073 161,964 5,023,038 3,907,845 5,076,564 6,356,935 3,074,524 3,391,488 0 42,694,431 0 $42,694,431 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 Operating revenues increased by $5,961,509 in fiscal 2008. Although Tuition & Fees included a 24% increase, revenues also increased in Grants and Contracts, Auxiliary and Other categories. Gainesville State College Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $472,026 is a result of increased enrollment at Gainesville State College. Future plans include an expanded bookstore to accommodate the increase in student enrollment and other increased activities for Auxiliary services. Nonoperating revenues increased $1,347,160 for the year primarily due to an increase of $1,497,433 in State Appropriations. The compensation and employee benefits category increased by $3,227,481 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. Utilities increased by $121,045 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2008 and affected the Plant Operations and Maintenance category. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($16,963,397) 19,953,849 (1,767,222) 484,076 1,707,306 8,298,063 $10,005,369 June 30, 2007 ($16,533,423) 18,719,626 (1,220,819) 489,228 1,454,612 6,843,451 $8,298,063 Gainesville State College Annual Financial Report FY 2008 5 Capital Assets The College had two significant capital asset additions for facilities in fiscal year 2008. The new Parking Lot was completed in the fall of 2007 and the Student Center addition/renovation began in the fall 2007 and is expected to be completed in FY2009. 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 $922,762 of which $497,219 was reflected as current liability at June 30, 2008. 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 FY2008. The Gainesville State College Foundation, Inc. had investments of $11.5 million as of December 31, 2007. The Gainesville State College Foundation, Inc. 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 our continued annual increase, 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 2008 6 Statement of Net Assets GAINES VILLE S TATE COLLEGE S TATEMENT OF NET AS S ETS June 30, 2008 AS S ETS C urrent Assets Cash and Cash Equivalent s Account s Receivable, net (not e 3) Receivables - Federal Financial Assist ance Receivables - Ot her P ledges Receivable Inventories (not e 4) P repaid items T ot al Current Asset s Noncurrent Assets Noncurrent Cash 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 Cont ract 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 da ble E x p en da ble Unrest rict ed TO TAL NET AS S ETS G ai n e s vi l l e State C ollege $10,005,369 56,906 594,500 404,273 279,496 11,340,544 26,654,677 26,654,677 37,995,221 818,187 520,660 1,907,995 157,299 497,219 3,901,360 425,543 425,543 4,326,903 26,654,677 7,013,641 $33,668,318 C om pone nt Unit G ai n e svi l l e S tate College Fou n dati on , In c. $0 12,185 31,976 44,161 1,138,598 11,488,191 228,377 8,400 12,863,566 12,907,727 86,440 86,440 0 86,440 8,400 3,385,860 7,720,098 1,706,929 $12,821,287 Gainesville State College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Gai n e svi l l e S tate College Gai n e s vi l l e S tate College Fou n dati on , In c. 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 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 Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Gainesville St at e College T ot al Operat ing Expenses Operat ing Income (loss) $14,725,127 (1,442,684) 4,357,698 14,753 120,000 751,001 3,465,177 10,010 21,365 22,637 1,641,420 23,686,504 10,375,156 9,203,914 5,450,221 119,568 365,090 3,084,263 1,069,784 11,481,708 1,544,727 42,694,431 (19,007,927) $0 707,599 344,624 105,744 1,157,967 241,200 777,645 1,018,845 139,122 Gainesville State College Annual Financial Report FY 2008 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, 2008 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 S tate College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 19,370,700 526,985 23,633 129,493 37,321 484,076 (29,818) 20,542,390 1,534,463 3,650,455 3,650,455 5,184,918 28,483,400 0 28,483,400 $33,668,318 369,371 369,371 508,493 136,641 136,641 645,134 12,176,153 0 12,176,153 $12,821,287 Gainesville State College Annual Financial Report FY 2008 9 Statement of Cash Flows GAINESVILLE STATE COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 C ASH FLO WS FRO M O PERATING AC TIVITIES T uition and Fees Grants and Cont ract s (Exchange) Sales and Services Payments t o Suppliers Payments t o Employees Payments for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food Services Parking/T ransport at ion Ot her Organizations Other Receipts (payments) Net Cash Provided (used) by Operat ing Activities C ASH FLO WS 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 Other T han Capit al Purposes Net Cash Flows Provided by Non-capit al Financing Act ivit ies C ASH FLO WS FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received Purchases of Capit al Asset s Net Cash used by Capital and Related Financing Act ivit ies C ASH FLO WS FRO M INVESTING AC TIVITIES Interest on Invest ment s Net Cash Provided (used) by Invest ing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year REC O NC ILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING AC TIVITIES: Operat ing Income (loss) Adjustments t o Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Act ivit ies Dep reciat ion Change in Assets and Liabilit ies: Receivables, net Invent ories Prepaid It ems Account s Payable Deferred Revenue Ot her Liabilit ies Compensated Absences Net Cash Provided (used) by Operat ing Activit ies ** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS Gainesville State College had no non-cash transactions during fiscal 2008. Gainesville State College Annual Financial Report FY 2008 10 June 30, 2008 $13,570,992 4,493,386 751,001 (18,421,199) (19,457,314) (3,090,869) 3,468,535 10,010 14,525 22,637 1,674,899 (16,963,397) 19,370,700 (134,283) 717,432 19,953,849 3,650,455 (5,417,677) (1,767,222) 484,076 484,076 1,707,306 8,298,063 $10,005,369 ($19,007,927) 1,544,727 (82,685) (9,674) (57,391) 199,942 392,061 (57,127) 114,677 ($16,963,397) GAINESVILLE STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Gainesville State College is reporting the activity for the Gainesville State College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, 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 2008 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 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 2008 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 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, 2008, GSFIC did not transfer any capital additions to Gainesville State College. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Gainesville State College Annual Financial Report FY 2008 13 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 $808,085 as of 7-1-2007. For FY2008, $714,708 was earned in compensated absences and employees were paid $600,031, for a net increase of $114,677. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $922,762. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). 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, 2008 $24,084 4,036,623 2,952,934 $7,013,641 Gainesville State College Annual Financial Report FY 2008 14 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes 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 nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Gainesville State College Annual Financial Report FY 2008 15 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, 2008, the carrying value of deposits was $10,000,949 and the bank balance was $10,463,275. Of the College's deposits, $9,963,275 were uninsured. Of these uninsured deposits, $9,963,275 were 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, 2008. Gainesville State College Annual Financial Report FY 2008 16 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $377,779 66,553 56,906 152,102 653,340 1,934 $651,406 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore T otal $404,273 $404,273 Note 5. Notes/Loans Receivable Gainesville State College had no loans receivable as of June 30, 2008. Gainesville State College Annual Financial Report FY 2008 17 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 4,555,598 4,555,598 Re ductions $0 0 576,496 269,950 422,941 113,352 1,382,739 303,555 105,076 408,631 102,162 1,026,312 10,970 324,614 80,669 1,544,727 (161,988) $4,393,610 273,738 105,076 378,814 29,817 $29,817 En di n g B al an ce 6/30/2008 $105,849 4,555,598 4,661,447 2,740,384 30,233,542 1,188,698 2,840,185 2,010,048 39,012,857 467,102 11,925,461 1,005,969 1,839,322 1,781,773 17,019,627 21,993,230 $26,654,677 Gainesville State College Annual Financial Report FY 2008 18 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $1,770,128 137,867 $1,907,995 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $808,085 Additions $714,708 Reductions Ending Balance June 30, 2008 $600,031 $922,762 Total Long Term Obligations $808,085 $714,708 $600,031 $922,762 Current Portion $497,219 $497,219 Note 9. Significant Commitments The College had no unearned, outstanding, construction or renovation contracts executed as of June 30, 2008. Note 10. Lease Obligations Gainesville State College had no outstanding capital or operating lease obligations at June 30, 2008. Gainesville State College had no expense for rental of real property and equipment under operating leases in FY2008. Gainesville State College Annual Financial Report FY 2008 19 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 2008, 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 2008 2007 2006 100% 100% 100% $1,065,944 $947,090 $931,369 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Gainesville State College Annual Financial Report FY 2008 20 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $390,669 (8.13% or 8.15%) and $239,976 (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 2008 amounted to $99,302 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Gainesville State College Annual Financial Report FY 2008 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Gainesville State College expects such amounts, if any, to be immaterial to its overall financial position. Gainesville State College Annual Financial Report FY 2008 22 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 105 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Gainesville State College recognized as incurred $414,428 of expenditures, which was net of $171,376 of participant contributions. Gainesville State College Annual Financial Report FY 2008 23 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $10,304,603 1,426,019 2,673,493 6,254 110,271 9,739 6,220 1,110,592 54,882 $15,702,073 Functional Classification FY2008 Public Service Academic Support St udent Services $3,050 84,150 31,074 $67,503 2,335,997 653,308 $0 2,164,751 583,476 1,064 95,597 89,281 42,626 18,065 1,725,163 127,405 3,295 1,062,035 5,007 $161,964 $5,023,038 $3,907,845 Inst it ut ional Support $0 1,985,153 1,143,760 119,568 65,932 7,588 1,638,645 115,918 $5,076,564 P lan t Op erat io n s & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary En t erp rises $0 1,058,132 342,069 (27,827) 2,945 1,034,374 2,711,761 1,235,481 $0 3,074,524 $0 149,712 23,041 21,573 242 3,190,886 6,034 $6,356,935 $3,074,524 $3,391,488 T otal Expenses $10,375,156 9,203,914 5,450,221 119,568 365,090 3,084,263 1,069,784 11,481,708 1,544,727 $42,694,431 Gainesville State College Annual Financial Report FY 2008 24 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, 2007, the Foundation distributed $777,645 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 $11.5 million. Gainesville State College Foundation, Inc., 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 December 31, 2007: Cash held by investment organization Money Market Accounts Certificates of Deposit Equity Securities Mutual Funds Total Investments Cost $944,800 339,458 564,000 1,372,742 7,041,811 $10,262,811 Fair Value $1,577,112 339,458 564,000 1,631,085 7,376,536 $11,488,191 Gainesville State College Annual Financial Report FY 2008 25 Capital Assets for Component Units: Gainesville State College Foundation, Inc. holds the following Capital Assets as of December 31, 2007: 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 2008 26 GEORGIA PERIMETER COLLEGE Financial Report For the Year Ended June 30, 2008 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 2008 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............................................................................................. 24 Note 13. Contingencies................................................................................................... 24 Note 14. Post-Employment Benefits Other Than Pension Benefits ............................... 25 Note 15. Natural Classifications with Functional Classifications .................................. 26 Note 16. Component Units ............................................................................................. 27 GEORGIA PERIMETER COLLEGE Management's Discussion and Analysis Introduction Georgia Perimeter College is one of the 35 institutions of higher education of the University System of Georgia. The College has six convenient locations along the major access corridors of metropolitan Atlanta. Georgia Perimeter College was founded by the DeKalb County Board of Education in 1958 and later became a College in 1964. Georgia Perimeter College is the largest two year college and the third largest institution in the University System of Georgia. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 503 21,473 15,954 FY2007 516 19,955 14,964 FY2006 492 20,461 15,327 Overview of the Financial Statements and Financial Analysis Georgia Perimeter College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $37,204,668 88,822,016 1,045,501 127,072,185 June 30, 2007 $25,577,111 91,165,960 1,055,328 117,798,399 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 20,588,021 1,648,844 22,236,865 13,559,831 1,642,292 15,202,123 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 88,822,016 31,338 329,824 1,000,216 14,651,926 $104,835,320 91,165,960 31,338 80,901 1,000,216 10,317,861 $102,596,276 The total assets of the institution increased by $9,273,786. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $6,326,406 in the cash and cash equivalents category. An increase of $5,260,076 was also noted in the receivables categories. The total liabilities for the year increased by $7,034,742. The combination of the increase in total assets of $9,273,786 and the increase in total liabilities of $7,034,742 yields an increase in total net assets of $2,239,044. The increase in total net assets is primarily in the category of Unrestricted Net Assets, in the amount of $4,334,065. Georgia Perimeter College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $68,443,110 130,991,566 (62,548,456) 64,505,426 1,956,970 282,074 2,239,044 102,596,276 0 102,596,276 $104,835,320 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $37,701,585 22,790,360 1,495,439 5,618,108 837,618 68,443,110 63,597,031 0 852,037 56,358 64,505,426 282,074 282,074 $133,230,610 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 8,601,634 $135,557,869 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $48,693,677 4,000 12,095,568 12,189,461 24,144,889 17,040,607 12,637,399 4,185,965 0 130,991,566 0 $130,991,566 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 Operating revenues increased by $4,411,535 in fiscal 2008. Although Tuition & Fees included an 11% increase, revenues decreased in the Other operating revenue category. Georgia Perimeter College Annual Financial Report FY 2008 4 Nonoperating revenues increased by $1,580,766 for the year primarily due to an increase of $4,120,353 in State Appropriations accompanied by reductions totaling $2,539,587 in the categories of Gifts, Investment Income and Other Nonoperating revenues. The compensation and employee benefits category increased by $4,959,871 and primarily affected the Academic Support and Institutional Support categories The increase reflects the growth of distance learning programs, merit increases as well as an increased cost of health insurance for the employees of the institution. Utilities decreased by ($42,658) during the past year. While the price of natural gas increased significantly, the College was no longer paying utilities for the Lawrenceville campus or the Rockdale Center. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($55,168,468) 64,892,928 (4,250,091) 852,037 6,326,406 16,999,215 $23,325,621 June 30, 2007 ($61,477,062) 66,122,713 (3,129,530) 1,020,577 2,536,698 14,462,517 $16,999,215 Georgia Perimeter College Annual Financial Report FY 2008 5 Capital Assets The College did not have significant capital asset additions for facilities in fiscal year 2008. Georgia Perimeter College completed a major upgrade of the electrical system. The $93,670 used for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). Other improvements funded by the GSFIC included asbestos abatement and roof repair projects totaling over $188,000. Projected funding by GSFIC for FY2009 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 $3,282,931 of which $1,634,087 was reflected as current liability at June 30, 2008. 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 Georgia Perimeter College Foundation, Inc. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. 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. Anthony S. Tricoli, President Georgia Perimeter College Georgia Perimeter College Annual Financial Report FY 2008 6 Statement of Net Assets GEO RGIA P ERIMETER CO LLEGE S TATEMENT O F NET AS S ETS June 30, 2008 A S S ETS C urre nt Assets Cash an d Cash E quiv alen t s Sh o rt -t erm In v est m en t s Acco un t s Receiv able, n et (n o t e 3) Receiv ables - Federal Fin an cial Assist an ce Receiv ables - Ot h er Invent ories (not e 4) P repaid it em s T o t al Current A sset s Non cu rre n t Asse ts No n curren t Cash In v est m en t s (in cludin g Real E st at e) No t es Receiv able, n et Cap it al Asset s, n et (n o t e 6) Ot her Asset s T o t al No n curren t Asset s TO TA L A S S ETS LIA B ILITIES C u rre n t Liabilitie s Acco un t s P ay able Salaries P ay able Co nt ract s P ay able Deferred Rev enue (n o t e 7) Ot h er Liabilit ies Depo sit s Held fo r Ot h er Organ izat io n s 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 ) 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 ) T o t al No n curren t L iabilit ies TO TA L LIA B ILITIES N ET A S S ETS In v est ed in Capit al Asset s, n et o f relat ed debt Rest rict ed for No n ex p en dable E x p en dable Capit al P roject s Unrest rict ed TO TA L N ET A S S ETS Ge orgia Perim e te r C olle ge $22,282,656 17,846 3,583,548 11,151,649 166,776 2,193 37,204,668 1,042,965 2,536 88,822,016 89,867,517 127,072,185 1,464,965 749,451 41,323 11,618,130 240,816 4,839,249 1,634,087 20,588,021 1,648,844 1,648,844 22,236,865 88,822,016 31,338 329,824 1,000,216 14,651,926 $104,835,320 C om pon e n t Un it Ge orgia Perim e te r C olle ge Fo u n da ti o n , In c. $ 1 8 9 ,2 8 5 7 ,9 9 1 1 9 7 ,2 7 6 2 ,7 3 7 ,4 7 7 1 ,3 1 8 ,6 4 7 5 4 ,4 3 8 ,0 4 0 1 ,9 1 3 ,7 1 4 6 0 ,4 0 7 ,8 7 8 6 0 ,6 0 5 ,1 5 4 3 ,5 1 2 ,9 2 1 1 ,5 3 9 ,9 8 0 4 3 0 ,0 0 0 5 ,4 8 2 ,9 0 1 4 7 ,8 2 5 ,0 0 0 4 7 ,8 2 5 ,0 0 0 5 3 ,3 0 7 ,9 0 1 1 0 ,8 3 0 ,2 3 1 6 ,1 9 4 ,1 8 2 3 7 8 ,1 9 2 (1 0 ,1 0 5 ,3 5 2 ) $ 7 ,2 9 7 ,2 5 3 Georgia Perimeter College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Georgia Perim eter College Ge orgia Pe rim e te r C olle ge Fou n dati on , In c. 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 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 Ut ilit ies Supplies and Ot her Services Depreciat ion Ot her Operat ing Expense P ayment s t o or on behalf of Georgia P erim et er College T ot al Operat ing Expenses Operat ing Income (loss) $46,294,821 (8,593,236) 21,745,743 893,255 151,362 1,495,439 5,754 952,494 24,363 1,191,972 3,449,279 831,864 68,443,110 30,285,802 37,895,832 15,977,329 269,767 792,722 13,523,314 3,022,275 24,263,541 4,960,984 130,991,566 (62,548,456) 950,405 950,405 517,420 377,607 49,782 247,093 1,191,902 (241,497) Georgia Perimeter College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Georgia Perim eter College Ge orgia Pe rim e te r C olle ge Fou n dati on , In c. 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 Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 63,597,031 852,037 56,358 64,505,426 1,956,970 282,074 282,074 2,239,044 102,596,276 0 102,596,276 $104,835,320 400,199 (520,959) (120,760) (362,257) 36,983 36,983 (325,274) 4,941,202 2,681,325 7,622,527 $7,297,253 Georgia Perimeter College Annual Financial Report FY 2008 9 Statement of Cash Flows GEO RGIA PERIMETER COLLEGE S TATEMENT O F CAS H FLOW S For the Year Ended J une 3 0 , 2 0 0 8 C A S H FLO 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) Sales an d Serv ices P ay m en t s t o Sup p liers P aym ents t o Em ployees P ay m en t s fo r Sch o larsh ip s an d Fello wsh ip s L o an s Issued t o St uden t s an d E m p lo y ees Aux iliary E n t erp rise Ch arges: Bookst ore Fo o d Serv ices In t erco llegiat e At h let ics O t h er Organ izat io n s Ot her Receipt s (paym ent s) Net Cash P ro v ided (used) by O p erat in g Act iv it ies C A S H FLO W S FR O M N O N -C A P ITA L FIN A N C IN G A C TIV ITIES St at e A p p ro p riat io n s Agen 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 FLO W S FR O M C A P ITA L A N D R ELA TED FIN A N C IN G A C TIV ITIES Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al Asset s Net Cash used by Cap it al an d Relat ed Fin an cin g Act iv it ies C A S H FLO W S FR O M IN V ES TIN G A C TIV ITIES Int erest on Invest m ent s Net Cash P ro v ided (used) by In v est in g Act iv it ies Net Increase/Decrease in Cash Cash an d Cash Equiv alen t s - Begin n in g o f y ear Cash an d Cash Equiv alen t s - E nd of Year R EC O N C ILIA TIO N O F O P ER A TIN G LO 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 : Operat ing Incom e (loss) Adjust m en t s t o Reco n cile Net In co m e (lo ss) t o Net Cash P ro v ided (used) by Op erat in g Act iv it ies Depreciat ion Ch an ge in Asset s an d L iabilit ies: Receiv ables, n et Invent ories P repaid Item s Not es Receiv able, Net A cco un t s P ay able Deferred Rev en ue Ot h er Liabilit ies Co m pen sat ed Absen ces Net Cash P ro v ided (used) by Op erat in g Act iv it ies Georgia Perimeter College Annual Financial Report FY 2008 10 June 30, 2008 $38,253,157 23,144,598 1,495,440 (43,015,599) (68,028,047) (13,523,314) 9,827 2,026,721 (331,182) 1,166,478 3,307,163 326,290 (55,168,468) 63,597,031 1,292,539 3,358 64,892,928 282,074 (4,532,165) (4,250,091) 852,037 852,037 6,326,406 16,999,215 $23,325,621 ($62,548,456) 4,960,984 (5,260,075) (39,745) 9,827 (553) (99,120) 7,956,452 (167,704) 19,922 ($55,168,468) GEORGIA PERIMETER COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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. 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 Georgia Perimeter College Annual Financial Report FY 2008 12 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 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, 2008, GSFIC did not transfer any capital additions to Georgia Perimeter College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Georgia Perimeter College Annual Financial Report FY 2008 13 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 $3,263,009 as of 7-1-2007. For FY2008, $2,381,244 was earned in compensated absences and employees were paid $2,361,322, for a net increase of $19,922. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $3,282,931. 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 Perimeter College Annual Financial Report FY 2008 14 Expendable Restricted Net Assets include the following: June 30, 2008 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 $164,546 17,543 136,324 11,411 $329,824 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, 2008 $122,591 9,908,467 181,614 4,439,254 $14,651,926 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: Georgia Perimeter College Annual Financial Report FY 2008 15 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. Georgia Perimeter College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $20,219,974 and the bank balance was $21,460,806. Of the College's deposits, $21,440,441 were uninsured. Of these uninsured deposits, $21,440,441 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 2008 17 B. Investments At June 30, 2008, the carrying value of the College's investments was $3,095,492, 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 $3,095,492 T otal Investment Pools $3,095,492 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 40 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. Georgia Perimeter College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $6,922,190 627,924 3,583,548 5,138,071 16,271,733 1,536,536 $14,735,197 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 P hysical P lant T otal $166,776 $166,776 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 there is no allowance for uncollectible loans receivable. Georgia Perimeter College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 0 10,181,881 55,299,604 81,177,383 $91,165,960 Addi ti o n s $0 597,122 597,122 Re ductions $0 503,633 503,633 145,195 3,098,310 878,056 4,121,561 8,736 8,579 2,878,029 297,444 3,192,788 2,660,760 95,013 1,679,556 30,419 495,236 4,960,984 (839,423) ($242,301) 96,335 6,541 1,194,458 297,444 1,594,778 1,598,010 $2,101,643 En di n g B a l a n ce 6/30/2008 $4,420,776 5,661,290 10,082,066 106,439,665 4,776,345 13,196,336 12,993,414 137,405,760 36,933,098 2,643,779 8,678,841 30,419 10,379,673 58,665,810 78,739,950 $88,822,016 Georgia Perimeter College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $11,052,419 565,711 $11,618,130 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $3,263,009 Additions $2,381,244 Reductions Ending Balance June 30, 2008 $2,361,322 $3,282,931 Current Portion $1,634,087 Total Long Term Obligations $3,263,009 $2,381,244 $2,361,322 $3,282,931 $1,634,087 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,156,099 as of June 30, 2008. 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, 2008. Georgia Perimeter College had no expense for rental of real property and equipment under operating leases in FY2008. Georgia Perimeter College Annual Financial Report FY 2008 21 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 2008, 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 2008 2007 2006 100% 100% 100% $3,411,494 $3,394,465 $3,043,707 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 2008 22 accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $1,425,447 (8.13% or 8.15%) and $875,551 (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 2008 amounted to $731,020 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 2008 23 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 2008 24 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 286 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Perimeter College recognized as incurred $1,302,306 of expenditures, which was net of $424,570 of participant contributions. Georgia Perimeter College Annual Financial Report FY 2008 25 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel 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 Depreciation Total Expenses Inst ruct ion $29,180,012 6,644,167 7,101,924 347,840 252,595 116,611 4,612,220 438,308 $48,693,677 Functional Classification FY2008 P ublic Service Academic Support St udent Services $0 $1,054,053 7,102,214 1,460,494 $42,101 7,700,911 1,819,840 4,000 120,844 7,700 32,520 1,485,189 832,554 130,582 297,071 43,177 2,150,787 4,992 $4,000 $12,095,568 $12,189,461 Inst it ut ional Support $9,636 10,866,968 3,996,525 269,767 114,670 577,899 7,548,156 761,268 $24,144,889 Plant Operat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 $4,952,751 1,478,474 (111,948) 23,586 2,226,239 5,585,590 2,885,915 $0 12,637,399 $0 628,821 120,072 111,948 55,200 328,549 25,829 2,877,599 37,947 $17,040,607 $12,637,399 $4,185,965 T otal Expenses $30,285,802 37,895,832 15,977,329 269,767 792,722 13,523,314 3,022,275 24,263,541 4,960,984 $130,991,566 Georgia Perimeter College Annual Financial Report FY 2008 26 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, 2007, the Foundation distributed $247,093 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. Prior Period Adjustment: In the year ending December 31, 2006, the Foundation received the proceeds of a bond issuance and reported the proceeds and bond liability in its financial statements. It was subsequently discovered that Newton County was obligated for the debt and therefore, a gift to the Foundation of $2,550,000 should have been recognized instead of the bond liability. This error correction in 2007 includes bond principal and accrued interest for 2006. The beginning net assets of the Foundation were increased by $2,681,325 as a result of the correction. Investments for Component Units: Georgia Perimeter College Foundation, Inc. holds endowment and other investments in the amount of $1,318,647. Investments are comprised of the following amounts at December 31, 2007: Georgia Perimeter College Annual Financial Report FY 2008 27 Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Total Investments Cost $154,209 721,000 15,000 75,000 395,166 $1,360,375 Fair Value $154,209 725,184 15,000 75,000 349,254 $1,318,647 Capital Assets for Component Units: Georgia Perimeter College Foundation, Inc. holds the following Capital Assets as of December 31, 2007: December 31, 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 $3,000,000 26,689,930 29,689,930 24,192,829 932,888 25,125,717 377,607 24,748,110 $54,438,040 Long-term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended December 31, 2007 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance January 1, 2007 Prior Year Adjustment Adjusted Beginning Bal. January 1, 2007 $25,245,000 (2,550,000) 22,695,000 $25,245,000 ($2,550,000) $22,695,000 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year $25,560,000 $0 $48,255,000 $430,000 $25,560,000 $0 $48,255,000 $430,000 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 a building project. 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. The Georgia Perimeter College Annual Financial Report FY 2008 28 outstanding principal obligation on the Series 2005 bonds was $22,695,000 at December 31, 2007. In addition, two additional bond issuances were effected during 2007 that are accounted for on the Foundation's books. Georgia Gwinnett College Real Estate Parking I, LLC Project Incremental Draw Revenue Bonds Series 2007A - These funds will be used to construct a parking facility and a student center on the Georgia Gwinnett College campus. 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 will be due in annual principal installments ranging from $55,000 to $2,105,000 through 2032 at a variable interest rate (4.15% as of December 31, 2007). GGC Real Estate Parking I, LLC's indebtedness under the 2007A Series bonds is $15,315,000 at December 31, 2007. Georgia Perimeter College Real Estate Student Support I, LLC Project Incremental Draw Revenue Bonds Series 2007A These funds will be used to construct several facilities on four campuses of Georgia Perimeter College. Rental payments from the Board of Regents of the University System of Georgia will be used to amortize this bond indebtedness. The repayment of this debt will be due in annual principal installments ranging from $450,000 to $4,725,000 through 2035 at a variable interest rate (4.19% as of December 31, 2007). Georgia Perimeter College Real Estate Student Support I, LLC's indebtedness under the 2007A Series bonds is $10,245,000 at December 31, 2007. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 2008 2009 2010 2011 2012 2013 through 2019 2020 through 2024 2025 through 2029 1 2 3 4 5 6-10 11-15 16-20 Principal $430,000 970,000 1,100,000 1,645,000 1,705,000 11,010,000 16,730,000 14,665,000 $48,255,000 Bonds Payable Interest $5,828,601 4,293,763 4,612,051 4,569,770 5,255,236 2,551,325 18,647,966 14,330,576 $60,089,288 Total $6,258,601 5,263,763 5,712,051 6,214,770 6,960,236 13,561,325 35,377,966 28,995,576 $108,344,288 Georgia Perimeter College Annual Financial Report FY 2008 29 GEORGIA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Carl V. Patton President Georgia State University Atlanta, Georgia Jerry J. Rackliffe Vice President for Finance & Administration GEORGIA STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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............................................................................................. 24 Note 11. Retirement Plans .............................................................................................. 26 Note 12. Risk Management............................................................................................. 29 Note 13. Contingencies................................................................................................... 30 Note 14. Post-Employment Benefits Other Than Pension Benefits ............................... 30 Note 15. Natural Classifications with Functional Classifications .................................. 32 Note 16. Special Items .................................................................................................... 33 Note 17. Component Units ............................................................................................. 33 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 26,000 students each year. The comparison numbers follow. Students Students Faculty (Headcount) (FTE) FY2008 FY2007 FY2006 1,126 1,048 934 27,134 26,135 25,967 23,764 22,748 22,635 Overview of the Financial Statements and Financial Analysis Georgia State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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. Georgia State University Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $203,306,722 499,490,342 6,602,469 709,399,533 June 30, 2007 $163,413,445 328,827,899 6,518,372 498,759,716 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 61,338,463 238,341,461 299,679,924 52,840,699 45,547,700 98,388,399 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 260,030,830 45,781 9,826,994 335,535 139,480,469 $409,719,609 284,921,124 49,957 10,976,247 1,763,282 102,660,707 $400,371,317 The total assets of the institution increased by $210,639,817. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $170,662,443 in the category of Capital Assets, net. The balance of the increase is mainly in cash and cash equivalents, receivables and prepaid items categories. The total liabilities for the year increased by $201,291,525. The combination of the increase in total assets of $210,639,817 and the increase in total liabilities of $201,291,525 yields an increase in total net assets of $9,348,292. The net increase in total net assets is primarily a decrease in the category of Invested in Capital Assets, net of debt, in the amount of $24,890,294 and an increase in Unrestricted in the amount of $36,819,762. Georgia State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $260,515,175 470,146,551 (209,631,376) 243,895,956 34,264,580 (21,521,340) 12,743,240 400,371,317 (3,394,948) 396,976,369 $409,719,609 $237,916,539 425,057,948 (187,141,409) 210,827,321 23,685,912 7,687,024 31,372,936 368,998,381 0 368,998,381 $400,371,317 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s and Special It em s St at e Capit al Gift s and Grant s Ot her Capit al Gift s and Grant s Special It em s T ot al Capit al Gift s and Grant s and Special It em s T ot al Revenues June 30, 2008 $127,673,904 80,534,547 10,372,728 38,777,690 3,156,306 260,515,175 228,180,842 8,225,126 12,373,240 5,801,670 93,478 254,674,356 10,033,611 1,072,192 (32,627,143) (21,521,340) $493,668,191 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $158,614,525 78,559,136 26,562,665 57,247,474 26,055,120 38,676,798 34,804,662 16,524,709 33,101,462 470,146,551 10,778,400 $480,924,951 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 0 7,687,024 $459,546,672 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 Georgia State University Annual Financial Report FY 2008 4 Operating revenues increased by $22,598,636 in fiscal year 2008. In addition to a Tuition & Fees increase of 15%, revenues also increased in Grants and Contracts and Auxiliary categories. The Auxiliary revenue increase of $6,464,966 is a result of the changing environment of residential life on the University's campus. During the year, residential life transferred the University Village which was institutionally owned to Georgia Institute of Technology. However, at the same time, Georgia State University Foundation, a related party, constructed over 2,000 beds of new housing on the campus. The net effect to the campus is that the students actually have more on-campus residential life availability. The increase in revenue for Auxiliary reflects higher rental rates for the new facility and increases in Transportation and Other Organizations categories. Nonoperating revenues increased by $40,731,247 for the year primarily due to an increase of $27,469,862 in State Appropriations and $12,294,053 in Gifts. The compensation and employee benefits category increased by $24,233,373 and primarily affected the Instruction, Research, Student Services and Institutional Support categories. Utilities increased by $613,379 during the past year. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($180,548,361) 247,717,628 (60,329,197) 5,805,915 12,645,985 134,757,442 $147,403,427 June 30, 2007 ($172,295,428) 209,811,643 (29,214,867) 7,464,241 15,765,589 118,991,853 $134,757,442 Georgia State University Annual Financial Report FY 2008 5 Capital Assets During fiscal year 2008 (fiscal year 2009 Capital Budget), Georgia State University was approved for another capital project. The $12.8 million building is located in Alpharetta and is apportioned $8.9 million to Georgia State and $3.9 million to Georgia Perimeter College. The two institutions will share the completed facility, and it is expected to be ready for occupancy in Spring Semester 2010. The 50,000 square foot building will be used primarily to teach both graduate and undergraduate Business and Education classes. As noted last year, in fiscal year 2006, the State Legislature approved funding for the 213,000 square foot Science Teaching Laboratory building, and this remains the University's top capital priority. Additionally, in its 6 year capital funding plan the Board of Regents has included in its Major Capital Funding List our proposal for a 330,000 square foot Humanities Building and another classroom building. 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 State University had Long-Term Debt and Liabilities of $251,309,804 of which $12,968,343 was reflected as current liability at June 30, 2008. 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 FY2008. The Georgia State University Foundation, Inc. had endowment and other investments of $166.4 million, bonds payable of $248.7 million and long term capital leases of $9.0 million as of June 30, 2008. The Georgia State University Research Foundation, Inc. had endowment and other investments of $4.1 million and bonds payable of $91.1 million. Details are available in Note 1, Summary of Significant Accounting Policies and Note 17, Component Units. Economic Outlook The University anticipates the current fiscal year will be challenging with budget cuts on the horizon at the state level, but will continue to maintain a close watch over resources providing the University with the flexibility to react to internal and external situations that may develop. The University's overall financial position is strong. Carl V. Patton, President Georgia State University Georgia State University Annual Financial Report FY 2008 6 Statement of Net Assets GEORGIA STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 Component Unit Georgia State Un i ve rs i ty Georgia State Un i ve rs i ty Foundation, Inc. ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Due From Component Units Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid items T otal Current Assets $146,838,067 16,434,478 20,384,968 5,569,143 137,560 13,942,506 203,306,722 $707,639 228,251 8,667 2,912,018 4,692,227 87,050 94,861 8,730,713 Noncurrent Assets Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Pledges Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 565,360 47,785 5,989,324 499,490,342 506,092,811 709,399,533 338,026 29,826,142 136,542,949 164,731,097 2,134,797 60,769,373 7,264,119 401,606,503 410,337,216 Component Unit Georgia State Un i ve rs i ty Re s e arch Foundation, Inc. $96,241,998 4,362,101 617,605 5,933,858 107,155,562 1,928,092 4,099,891 9,072,492 1,189,033 16,289,508 123,445,070 Georgia State University Annual Financial Report FY 2008 7 Statement of Net Assets, Continued GEORGIA STATEUNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 Component Unit Georgia State Un i ve rs i ty Georgia State Un i ve rs i ty Foundation, Inc. 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) Revenue/Mortgage Bonds Payable (current) Liabilities under Split-Interest Agreements (current) Due to Component Units 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) 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 8,409,720 875,595 349,821 5,461 35,744,027 212,368 2,155,523 6,616,468 6,351,875 617,605 61,338,463 232,843,044 5,498,417 238,341,461 299,679,924 260,030,830 45,781 9,826,994 335,535 139,480,469 $409,719,609 4,669,063 4,533,379 735,724 945,374 759,993 11,515,000 37,769 23,196,302 8,240,033 957,767 37,738 237,197,747 214,591 246,647,876 269,844,178 6,293,093 74,178,687 45,185,029 14,836,229 $140,493,038 Component Unit Georgia State Un i ve rs i ty Re s e arch Foundation, Inc. 2,696,580 5,933,858 4,623,769 8,667 13,262,874 91,090,710 91,090,710 104,353,584 8,585,212 2,000,000 890,010 7,616,264 $19,091,486 Georgia State University Annual Financial Report FY 2008 8 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, 2008 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 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 other Component Units Payments to or on behalf of Georgia State University Total Operating Expenses Operating Income (loss) Georgia State University Component Unit Georgia State University Foundation, Inc. Component Unit Georgia State University Research Foundation, Inc. $142,693,539 (15,019,635) 62,055,403 7,137,024 11,342,120 10,372,728 40,051 17,840,885 1,137,476 211,677 6,103,199 8,560,153 4,924,300 3,116,255 260,515,175 $0 8,123,113 3,703,391 18,919,692 30,746,196 92,511,850 151,941,095 55,064,828 591,308 4,816,672 19,472,085 10,530,729 111,656,658 23,561,326 470,146,551 (209,631,376) 2,530,602 576,878 1,385,903 550,483 2,405,733 69,361 9,567,410 2,461,587 509,754 20,057,711 10,688,485 $0 36,183,144 2,710,164 9,820,216 48,713,524 1,865 1,256,720 171,763 48,315 46,847,040 48,325,703 387,821 Georgia State University Annual Financial Report FY 2008 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts 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 Ot her Special Item - Capital Asset T ransfer Special Item - Bond Defeasance Additions to permanent endowments T otal Other Revenues and Special Items Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Georgia State University Component Unit Georgia State University Foundation, Inc. Component Unit Georgia State University Research Foundation, Inc. 228,180,842 8,225,126 12,373,240 5,801,670 (10,778,400) 93,478 243,895,956 34,264,580 10,033,611 1,072,192 (7,916,649) (24,710,494) (21,521,340) 12,743,240 400,371,317 (3,394,948) 396,976,369 $409,719,609 (6,359,645) (16,734,039) (23,093,684) (12,405,199) 1,532,421 1,532,421 (10,872,778) 151,487,789 (121,973) 151,365,816 $140,493,038 (29,628) 489,998 460,370 848,191 0 848,191 18,243,295 0 18,243,295 $19,091,486 Georgia State University Annual Financial Report FY 2008 10 Statement of Cash Flows GEORGIA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 $130,457,199 77,335,704 10,372,729 (169,267,064) (243,316,001) (20,250,882) (5,863,738) 5,435,012 17,499,674 931,213 150,802 6,208,831 8,264,931 5,006,335 (3,513,106) (180,548,361) 228,180,842 (1,061,580) 20,598,366 247,717,628 10,033,611 9,488,360 (62,991,447) (6,081,321) (10,778,400) (60,329,197) 5,805,915 5,805,915 12,645,985 134,757,442 $147,403,427 Georgia State University Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued GEORGIA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep reciat io n Change in Asset s and Liabilit ies: Receivables, net 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 Special It em - Capit al Asset T ransfer Special It em - Bond Defeasance Gift of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2008 ($209,631,376) 23,561,326 (5,509,906) 9,158 (428,726) (1,013,384) 4,998,976 5,725,932 855,770 883,869 ($180,548,361) $161,885,192 ($4,245) ($7,916,649) ($24,710,494) ($1,072,192) Georgia State University Annual Financial Report FY 2008 12 GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Georgia State University is reporting the activity for the Georgia State University Foundation, Inc. and the Georgia State University Research Foundation, Inc. See Note 17, Component Units, for more information. 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 2008 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, Georgia State University reports summer school revenue and expenses in the subsequent fiscal year. 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. 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 Total Return Fund is included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Georgia State University Annual Financial Report FY 2008 14 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, 2008, 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 and deposits from tenants for retail rental space. 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 Georgia State University Annual Financial Report FY 2008 15 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 $10,966,424 as of July 1, 2007. For FY2008, $8,652,914 was earned in compensated absences and employees were paid $7,769,046, for a net increase of $883,868. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $11,850,292. 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: 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, 2008 $3,234,054 6,468,880 124,060 $9,826,994 Georgia State University Annual Financial Report FY 2008 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 Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $20,911,316 26,388,543 117,753 92,062,857 $139,480,469 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: 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 Georgia State University Annual Financial Report FY 2008 17 Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances. Restatement of Prior Year Net Assets In fiscal 2008, the University determined that the University Lofts rental agreement with the Georgia State University Foundation met the criteria for capital lease treatment. This agreement commenced in fiscal 2005 and was accounted for as an operating lease through fiscal 2007. The lease treatment correction resulted in an increase to Capital Assets, net of $36,353,918, an increase to Lease Purchase Obligations liability of $39,748,866, resulting in a net decrease to Net Assets of $3,394,948 as of July 1, 2007. 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 Georgia State University Annual Financial Report FY 2008 18 States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. At June 30, 2008, the carrying value of deposits was $11,974,859 and the bank balance was $17,751,354. Of the University's deposits, $17,742,575 were uninsured. Of these uninsured deposits, $17,742,575 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, 2008, the carrying value of the University's investments was $135,435,465, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and Office of Treasury and Fiscal Services investment pools as follows: Investment Pools Board of Regents T otal Return Fund Sub T otal $47,785 47,785 Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal 135,387,680 135,387,680 T otal Investment Pools $135,435,465 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 Georgia State University Annual Financial Report FY 2008 19 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 40 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 7.84 years. Of the University's total investment of $47,785 in the Total Return Fund, $15,100 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 policy for managing credit quality risk is to comply with University policy and applicable Federal and State laws. The University's policy for managing credit quality risk is that all debt issues must be investment grade with ratings of at least BAA by Moody's and Standard and Poor's at the time of purchase as defined by the University System of Georgia. 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 2008 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $4,637,667 13,030,897 16,434,478 1,208,351 5,569,143 5,232,325 46,112,861 3,724,272 $42,388,589 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 P hysical P lant Other T otal $110,778 26,782 $137,560 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $295,471. Georgia State University Annual Financial Report FY 2008 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated Restated Beginning Balances 7/1/2007 Special Item Transfer $42,411,854 $0 176,083 35,927,280 78,515,217 0 Additions $0 54,583 16,419,893 16,474,476 Reductions $0 21,417,034 21,417,034 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Total Assets Being Depreciated 9,259,657 371,382,181 1,463,019 64,729,648 1,557,733 96,775,111 545,167,349 (72,150,026) (466,803) (72,616,829) 1,924,239 198,527,564 934,492 10,794,638 602,389 8,090,043 220,873,365 310,000 6,386 6,256,277 450,520 133,855 7,157,038 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Total Accumulated Depreciation 1,365,482 139,644,580 894,344 44,826,011 391,087 71,379,245 258,500,749 (18,964,108) (280,578) (19,244,686) 428,668 14,732,981 81,794 3,424,023 288,184 4,605,676 23,561,326 2,154,465 179,904 133,856 2,468,225 Total Capital Assets, Being Depreciated, Net 286,666,600 (53,372,143) 197,312,039 4,688,813 Capital Assets, net $365,181,817 ($53,372,143) $213,786,515 $26,105,847 Ending Balance 6/30/2008 $42,411,854 230,666 30,930,139 73,572,659 11,183,896 497,449,719 1,924,322 69,268,009 1,709,602 104,731,299 686,266,847 1,794,150 135,413,453 695,560 46,095,569 499,367 75,851,065 260,349,164 425,917,683 $499,490,342 Georgia State University Annual Financial Report FY 2008 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Research Ot her Deferred Revenue T ot als June 30, 2008 $23,212,607 6,621,072 5,910,348 $35,744,027 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Total Long Term Obligations Restated Beginning Balance July 1, 2007 $83,655,641 Additions $161,885,192 Reductions Ending Balance June 30, 2008 $6,081,321 $239,459,512 Current Portion $6,616,468 10,966,424 10,966,424 $94,622,065 8,652,914 8,652,914 $170,538,106 7,769,046 7,769,046 $13,850,367 11,850,292 11,850,292 $251,309,804 6,351,875 6,351,875 $12,968,343 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $14,198,292 as of June 30, 2008. 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 for consecutive one-year periods until June 30, 2037. This activity is not reflected in the accompanying basic financial statements. Georgia State University Annual Financial Report FY 2008 23 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. Capital Leases Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 2039. Expenditures for fiscal year 2008 were $16.9 million of which $10.8 million represented interest. Total principal paid on capital leases was $6.1 million for the fiscal year ended June 30, 2008. Interest rates range up to 10.5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Infrastructure Buildings Equipment Total Assets Held Under Capital Lease $3,215,715 234,019,454 1,210,235 $238,445,404 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are not offered to Georgia State University at the expiration of the lease terms. Georgia State University has four 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. In January 2005, the University entered into a capital lease valued at $39,965,234 with an effective interest rate of 7.362 percent with the Foundation, whereby the University leases the Lofts for a twenty-seven year period that began January 2005 and expires August 2032. In August 2007, Georgia State University entered into a capital lease valued at $161,330,000 for a new dormitory complex with an effective interest rate of 5.50% with the Georgia State University Foundation. The University leases the University Commons for a 30 year period. The outstanding principal liability at June 30, 2008 on these capital building leases is $27,457,253, $10,389,287, $39,482,261, and $158,596,107 respectively. Each year the monthly payments for these leases will increase by the greater of 2 percent or the CPI. Georgia State University also has various capital leases for equipment and software with an outstanding balance at June 30, 2008 in the amount of $3,534,604. Georgia State University Annual Financial Report FY 2008 24 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 building leases renewed from FY07, during FY08, Georgia State University entered into a building lease with Park Plaza Property, Inc., for two suites in the Park Plaza Property in Decatur. This lease has one-year renewable options through June 30, 2009 only. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 2039 t hrough 2043 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 31-35 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $18,765,385 20,009,369 20,270,513 20,092,592 20,209,008 106,950,642 97,538,108 79,351,453 77,386,738 63,056,518 12,785,396 536,415,722 296,956,210 $239,459,512 $7,015,644 7,103,309 6,459,949 5,367,832 5,031,308 504,000 $31,482,042 Georgia State University's FY2008 expense for rental of real property and equipment under operating leases was $6,627,182. Georgia State University Annual Financial Report FY 2008 25 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 2008, 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 2008 2007 2006 100% 100% 100% $10,535,476 $9,727,493 $9,434,148 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 2008 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, 2008, for employees covered by ERS was $885,394. The University's total payroll for all employees was $244,452,945. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $92,322 $100,794 $76,414 Georgia State University Annual Financial Report FY 2008 27 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Georgia State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $7,211,877 (8.13% or 8.15%) and $4,431,364 (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. Georgia State University Annual Financial Report FY 2008 28 Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 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 2008 amounted to $607,127 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' Georgia State University Annual Financial Report FY 2008 29 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. 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. Georgia State University Annual Financial Report FY 2008 30 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 897 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia State University recognized as incurred $4,496,592 of expenditures, which was net of $1,822,429 of participant contributions. Georgia State University Annual Financial Report FY 2008 31 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $70,584,827 35,796,556 25,866,407 4,636 1,824,679 1,363,942 820,237 15,086,583 7,266,658 $158,614,525 Research $20,853,301 28,881,891 5,865,566 45 1,391,131 1,289,210 119,498 18,175,033 1,983,461 $78,559,136 Functional Classification FY2008 Public Service Academic Support $763,301 7,325,600 1,733,055 352,935 310,598 82,691 15,947,309 47,176 $290,073 28,579,313 7,027,117 342 685,238 400 858,513 14,321,008 5,485,470 $26,562,665 $57,247,474 Student Services Institutional Support $16,548 14,817,426 3,562,345 3,265 275,659 100,711 254,140 6,077,863 947,163 $2,800 22,320,253 7,357,535 581,887 215,991 4,507 263,738 7,255,045 675,042 $26,055,120 $38,676,798 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 10,161,771 2,842,026 22,212 6,545,042 13,113,059 2,120,552 $0 16,402,717 121,992 $1,000 4,058,285 810,777 1,133 48,827 1,586,870 21,558,766 5,035,804 $34,804,662 $16,524,709 $33,101,462 Total Expenses $92,511,850 151,941,095 55,064,828 591,308 4,816,672 19,472,085 10,530,729 111,656,658 23,561,326 $470,146,551 Georgia State University Annual Financial Report FY 2008 32 Note 16. Special Items Georgia State University transferred its University Village Student Housing Complex to Georgia Institute of Technology, a University System of Georgia institution, effective July 1, 2007. The complex contained approximately 2,000 student housing beds, 790 parking spaces, and site amenities. Georgia Institute of Technology provided consideration for the complex totaling $45,455,494. The net book value of the capital asset transfer to Georgia Institute of Technology at July 1, 2007 was $53,372,143. The difference of $7,916,649 is reported as a Special Item Capital Asset Transfer on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. See Note 6 for additional information. As a result of the capital asset transfer, Georgia State University was required to defease the associated bonds that were issued by GSFIC to construct the housing complex. To accomplish this requirement, a portion of the consideration reflected above was paid directly to GSFIC at the time of the asset transfer in the amount of $24,710,494. The bond defeasance is reported as a Special Item Bond Defeasance on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Note 17. 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. As such, certain 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, 2008, the Foundation distributed $509,754 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Foundation's Office at One Park Place South, Suite 533, Atlanta, GA 30303 or from the Foundation's website at www.gsu.edu. Georgia State University Annual Financial Report FY 2008 33 Prior Period Adjustment: During the year ended June 30, 2008 the Foundation determined that it had incorrectly classified two properties leased to the University as property and equipment instead of as direct financing leases. The 2007 consolidated financial statements have therefore been restated to properly present these assets as Net Investments in Capital Leases. The effect of the restatement was a decrease in unrestricted net assets as of June 30, 2007 of $121,973, a decrease in property and equipment of $35,697,615, and an increase in net investment in capital leases of $35,575,642. Investments for Component Units: Georgia State University Foundation, Inc. holds endowment and other investments in the amount of $166.4 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, 2008: Money Market Accounts Equity Securities Mutual Funds Real Estate Total Investments Cost $53,537,924 64,349,345 37,191,485 3,744,498 $158,823,252 Fair Value $53,537,924 70,825,752 36,644,994 5,360,421 $166,369,091 Capital Assets for Component Units: Georgia State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: Georgia State University Annual Financial Report FY 2008 34 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 June 30, 2008 $7,227,900 7,227,900 71,321,399 981,351 72,302,750 18,761,277 53,541,473 $60,769,373 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Liabilities under split interest agreement Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities $33,520 260,992 9,722,456 250,674,710 5,812,394 $4,218 $0 8,632 722,430 1,961,963 5,812,394 $37,738 252,360 9,000,026 248,712,747 0 $0 37,769 759,993 11,515,000 Total Long Term Liabilities $266,504,072 $4,218 $8,505,419 $258,002,871 $12,312,762 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 "Development Authority") for the purpose of financing the costs of acquiring, constructing and installing educational facilities which are 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 Development Authority. The Foundation in turn subleased the facilities to the Board of Regents of the University System of Georgia (the "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 Georgia State University Annual Financial Report FY 2008 35 payments derived from the project are insufficient for such purposes. The Foundation has entered into a lease with the University on this property. As the lease is classified as a capital lease by the University, the Foundation has recorded the asset as a net investment in capital leases on the Statement of Net Assets. Rialto Center Facilities Capital Lease During 1994, the Foundation purchased and has since renovated facilities currently occupied by the University's School of Music. The project included the purchase and renovation of two existing office buildings. The Foundation also entered into a long term land lease for the renovation and use of an existing performing arts theater, the Rialto Theater. The project was financed through contributions to the Foundation and through bonds issued by the Downtown Development Authority of the City of Atlanta (the "Authority"), the proceeds of which were loaned to The University Financing Foundation ("TUFF"). The Foundation has entered into long term lease commitments with TUFF to provide for the debt service payments on the bonds and other bond financing related expenses. The Foundation then leases the facilities to the University through a series of one year renewable lease agreements. At the end of the lease period or the retirement of the bonds, whichever occurs first, the title to the two office buildings will pass to the Foundation. Therefore, the Foundation has classified this lease as a capital lease and has recorded it as an asset under property and equipment in the consolidated statements of financial position. 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 the extension of the term of the lease through November 1, 2015. Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 2019 through 2023 11-15 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $1,214,618 1,212,585 1,209,232 1,208,651 1,210,863 4,700,743 691,415 11,448,107 2,448,081 $9,000,026 Interest expense related to the capital lease obligation for Alpharetta for the year ending June 30, 2008 totaled $281,064. Interest expense related to the TUFF lease obligation for Rialto for the year ending June 30, 2008 totaled $212,029. Georgia State University Annual Financial Report FY 2008 36 Rialto Ground Lease Pursuant to the lease agreement between the Foundation and TUFF, the lease payments include the cost of an underlying ground lease on the Rialto Theater property. At the end of the lease term, TUFF will transfer all interests in the ground lease to the Foundation. The Foundation has the option to renew the ground lease with the owner through December 31, 2045, once the Authority bond obligations are satisfied. Future minimum lease payments under the ground lease as of June 30, 2008 are as follows: Ground Lease Year ending June 30: 2009 1 $69,410 2010 2 69,410 2011 3 69,410 2012 4 69,410 2013 5 69,410 2014 through 2016 6-8 167,741 Total $514,791 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 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 until October 1, 2018. Interest is paid semi-annually through 2018 at a rate specified in the revenue bonds ranging from 3.60% to 4.60%. Interest expense for the year ended June 30, 2008 totaled $1,085,059. Piedmont Ellis Bonds On September 8, 2005, a total of $161,330,000 revenue bonds (tax-exempt $158,410,000 and taxable $2,920,000) were issued by the ADA on behalf of the Foundation with the proceeds 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 1,994 beds, including community activity facilities, site amenities and parking for 786 vehicles. There was a 22 month construction schedule for the project which was completed and opened for occupancy for 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. After construction was completed, the Foundation leased the facility to the Board of Regents on an annually renewable basis for a term of 33 years for the use and benefit of the University. Moody's Investors Services Inc. has assigned the series 2005 Bonds the rating of "Aaa" based Georgia State University Annual Financial Report FY 2008 37 upon the issuance of the policy by the Bond Insurer. 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%. Interest expense for the year ended June 30, 2008 totaled $7,762,468. Panther Place Bonds On May 31, 2007, $58,385,000 of revenue bonds (tax-exempt $49,175,000 and taxable $9,210,000) were issued by the 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 Banks, Inc. as the seller and the current tenant may remain in the building for up to five years. Upon expiration of the lease or early termination by SunTrust Banks, Inc. the Foundation will lease the property to the Board of Regents on an annually renewable basis. The Foundation began making semi-annual interest payments on January 1, 2008 at a rate of 4.289% on tax-exempt bonds and 5.409% on taxable bonds. Interest expense for the year ended June 30, 2008 totaled $3,186,562. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $11,515,000 13,045,000 13,375,000 13,805,000 22,865,000 28,585,000 27,515,000 31,680,000 40,440,000 40,250,000 243,075,000 5,637,747 $248,712,747 Bonds Payable Interest $11,385,338 11,253,067 11,092,477 10,878,877 10,252,053 47,235,109 39,310,737 30,526,309 19,285,184 5,331,090 196,550,241 $196,550,241 Total $22,900,338 24,298,067 24,467,477 24,683,877 33,117,053 75,820,109 66,825,737 62,206,309 59,725,184 45,581,090 439,625,241 5,637,747 $445,262,988 Interest Rate Swap Agreement On May 29, 2007, the Foundation entered into an interest rate swap agreement related to the Panther Place revenue bond issue utilized to purchase the SunTrust building. The Foundation has accounted for the interest rate swap agreement in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. By using a derivative financial instrument to hedge exposure to a change in interest rates, the financing is exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the additional funds, which creates repayment risk for the financing. The financing policy also requires that all derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement. Market risk is the adverse Georgia State University Annual Financial Report FY 2008 38 effect on the value of a financial instrument that results from a change in interest rates. The bond financing was constructed with an interest rate swap contract to convert the variable rate bonds into a synthetic fixed rate debt at the time the debt was offered, with the intent to reduce borrowing costs. Interest rate swaps used with the issuance of tax-exempt debt must be recorded as assets or liabilities in the statements of financial position, depending on whether the swap is in a gain or a loss position, at fair value. Unrealized gains or losses for a given period must be reflected in the earnings for that period. In volatile environments, this can result in large differences from one period to the next. The swap provider, Ambac Financial Services, calculated the fair value in accordance with generally accepted accounting principles in the United States of America using a proprietary valuation model, which they developed and had tested by external auditors. The model calculates future cash flows by projecting forward rates, and then discounts those cash flows at their present value. All rates used in valuation are mid-market levels (mid-way between bid and ask) or are model based mid-market levels when mid-market levels are not available. The fair value provided takes certain factors into consideration, including the liquidity of the swap market and the uniqueness of the deal structure. The fair value of the interest rate swap agreement is recognized in the accompanying Statement of Net Assets at $4,533,379 and is reported as "Other Liabilities" at June 30, 2008 and as "Interest Expense" in the Statement of Revenues, Expenses and Changes in Net Assets for the year ended June 30, 2008. 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 Research Foundation's results for fiscal 2008 include Science Park, LLC (the "Company"), a component unit of the Research Foundation, which was organized as a not-for-profit limited liability company on August 9, 2006 with its sole member the Research Foundation. The Company was created to develop a 248,806 square foot science research facility (the "Project"). Upon completion of the Project, the Company will lease the facility to the Board of Regents of the University System of Georgia for the use and benefit of Georgia State University. No financial activity occurred prior to July 1, 2007. 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. Georgia State University Annual Financial Report FY 2008 39 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, 2008, the Research Foundation paid to the University $45,828,253 in grant revenue and $1,018,787 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 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. At June 30, 2008, the Research Foundation's carrying amount of deposits was $7,566,660, and the bank balance was $7,952,968. Of the bank balance, $100,000 was covered by FDIC insurance at June 30, 2008, and $5,920,793 was collateralized by the State of Georgia pledging pool which thereby guarantees collateralization of any uninsured bank deposit balances. The remaining uncollateralized balance of $1,932,175 consists of cash equivalents held by investment custodians. Georgia State University Annual Financial Report FY 2008 40 Investments: The Research Foundation's investments at June 30, 2008 are presented below. All investments are presented by investment type. Fair Value Investment Maturity 1-5 Years Investment type Debt Securities Mutual Bond Fund $907,151 $907,151 $907,151 $907,151 Other Investments Bond/Fixed Income Mutual Funds Equity Securities - Domestic Equity Securities - International Real Estate Investment Fund Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 535,162 1,495,167 934,011 228,400 90,603,430 $94,703,321 The above investments are included in the Statement of Net Assets as follows: Cash and Cash Equivalents Investments unrestricted Investments restricted expendable Total investments $90,603,430 3,484,293 615,598 $94,703,321 All investments with the exception of equity securities of $28,665 and investment pools of $90,603,430 at June 30, 2008, are held by the Georgia State University Foundation on behalf of the Research Foundation and are held by outside investment managers. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The 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 2008 41 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. The Research Foundation does not have a formal policy related to credit quality risk of investments. The Research Foundation's investments as of June 30, 2008 are presented below. All investments are presented by investment type and fixed income securities are presented by credit quality ratings. Related Debt Investments Mutual Bond Fund Fair Value $907,151 $907,151 AAA $541,160 $541,160 AA $35,712 $35,712 A BBB BB $57,760 $57,760 $61,152 $61,152 $64,332 $64,332 B Unrated $146,670 $146,670 $365 $365 The Georgia Fund 1 investment is rated AAAm by Standard & Poor's. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the 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, 2008, $4,099,891 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 types as follows for the year ended June 30, 2008: Domestic equities 44% Alternative investments 22% Bonds 16% Real estate 11% International equities 7% Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The 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 2008 42 Capital Assets for Component Units: Georgia State University Research Foundation, Inc. had the following Capital Asset activity for the year ended June 30, 2008: 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 Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Total Accumulated Depreciation Beginning Balances 7/1/2007 $1,643,990 1,643,990 3,947,210 307,186 4,254,396 595,713 277,867 873,580 Additions $0 1,592,461 1,592,461 Reductions $0 0 Ending Balance 6/30/2008 $1,643,990 1,592,461 3,236,451 2,626,988 2,626,988 6,574,198 307,186 0 6,881,384 170,386 1,377 171,763 766,099 279,244 0 1,045,343 Total Capital Assets, Being Depreciated, Net Capital Assets, net 3,380,816 $5,024,806 2,455,225 $4,047,686 0 5,836,041 $0 $9,072,492 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia State University Research Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/M ortgage Bonds Payable $0 $91,090,710 $0 $91,090,710 $0 Total Long Term Liabilities $0 $91,090,710 $0 $91,090,710 $0 $90,205,000 Bond Issue -- The Series 2007 Bonds are being issued pursuant to a Trust Indenture and Security Agreement dated as of December 1, 2007 (the "Indenture"), between the Atlanta Development Authority (the "Authority") and Branch Banking and Trust Company, Wilson, North Carolina as trustee (the "Trustee"). The Authority will loan proceeds of the sale of the Series 2007 Bonds to the Company, pursuant to the terms and provisions of a Loan Agreement dated as of December 1, 2007 (the "Loan Agreement"), between the Authority and the Company. The Company's obligations under the Loan Agreement will be evidenced by a Promissory Note dated as of December 1, 2007 (the "Promissory Note"). Georgia State University Annual Financial Report FY 2008 43 The Company will use proceeds of the Series 2007 Bonds to (i) finance or refinance, in whole or in part, the cost of the acquisition, construction and equipping of approximately 248,806 square foot research facility (the "Project") to be located in a new Georgia State University Science Park on the campus of the University; (ii) fund a debt service reserve fund for the Series 2007 Bonds; (iii) fund capitalized interest for the Series 2007 Bonds; and (iv) pay costs of issuance of the Series 2007 Bonds. Term bonds under the Loan Agreement bear interest payable semiannually on January 1 and July 1 at fixed rates ranging from 4.75% to 5.25% depending on the schedule of bond maturities. Serial bonds under the loan agreement bear interest payable semi-annually on January 1 and July at the rate of 4.50% until July 1, 2014 when the interest rates increases to 5.00%. Principal payments are due on July 1 beginning in 2011 and continuing until 2039. The following is a summary as of June 30, 2008, of principal and interest payments due under all borrowings during each of the next five years ending June 30 and five-year increments thereafter: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31 Principal $0 0 1,470,000 1,535,000 1,605,000 9,270,000 11,830,000 15,075,000 19,210,000 24,540,000 5,670,000 90,205,000 885,710 $91,090,710 Bonds Payable Interest $4,482,350 4,482,350 4,482,350 4,416,200 4,347,125 20,492,500 17,931,500 14,685,562 10,533,125 5,218,250 283,500 91,354,812 $91,354,812 Total $4,482,350 4,482,350 5,952,350 5,951,200 5,952,125 29,762,500 29,761,500 29,760,562 29,743,125 29,758,250 5,953,500 181,559,812 885,710 $182,445,522 Georgia State University Annual Financial Report FY 2008 44 GORDON COLLEGE Financial Report For the Year Ended June 30, 2008 Gordon College Barnesville, Georgia Dr. Lawrence Weill President George J. Turner Vice President for Finance & Administration GORDON COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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 .................................. 29 Note 16. Component Units ............................................................................................. 30 GORDON COLLEGE Management's Discussion and Analysis Introduction Gordon College is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Barnesville, Georgia, was founded in 1852 and has become known for its quality instructional programs. The College 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 which started in the Fall of 2007. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 109 FY2007 107 FY2006 99 3,703 3,596 3,500 3,212 3,091 3,014 Overview of the Financial Statements and Financial Analysis Gordon College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $9,045,080 44,532,658 10,633 53,588,371 June 30, 2007 $7,715,224 43,408,200 10,633 51,134,057 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 2,923,066 15,316,717 18,239,783 2,448,774 15,690,172 18,138,946 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 28,911,181 13,053 6,424,354 $35,348,588 27,408,894 13,053 5,573,164 $32,995,111 The total assets of the institution increased by $2,454,314. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,124,458 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 $100,837. The combination of the increase in total assets of $2,454,314 and the increase in total liabilities of $100,837 yields an increase in total net assets of $2,353,477. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $1,502,287. Gordon College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $16,215,076 29,121,776 (12,906,700) 13,272,073 365,373 1,988,104 2,353,477 32,995,111 0 32,995,111 $35,348,588 $14,840,747 27,930,959 (13,090,212) 11,631,508 (1,458,704) 247,408 (1,211,296) 34,206,407 0 34,206,407 $32,995,111 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Gordon College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $4,467,327 4,790,028 54,473 6,817,913 85,335 16,215,076 13,079,450 374,041 366,658 216,347 14,036,496 1,988,104 1,988,104 $32,239,676 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $9,338,992 1,814,809 1,796,334 4,375,359 3,413,690 2,649,320 5,733,272 29,121,776 764,423 $29,886,199 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 Operating revenues increased by $1,374,329 in fiscal 2008. Although Tuition & Fees included an 8% increase, revenues decreased in Sales and Services and Other categories. The Auxiliary revenue increase of $472,105 is a result of the changing environment of residential life on the College's campus. Gordon College Annual Financial Report FY 2008 4 Nonoperating revenues increased by $1,622,762 for the year primarily due to an increase of $1,552,990 in State Appropriations. The compensation and employee benefits category increased by $1,298,673 and affected the College in every 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 $55,005 during the past year. The increase was primarily associated with the increased utility costs that were experienced in fiscal year 2008 and affected the Plant Operations and Maintenance category. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($10,456,660) 13,519,168 (2,949,136) 366,658 480,030 6,411,422 $6,891,452 June 30, 2007 ($11,168,580) 12,374,363 (1,058,372) 395,237 542,648 5,868,774 $6,411,422 Capital Assets The College had two significant capital asset additions for facilities in fiscal year 2008. The Student Success Center addition will be completed for the 2008 Fall semester. Gordon College completed the Spencer Parking Lot during fiscal year 2008, adding much needed new parking spaces. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Gordon College Annual Financial Report FY 2008 5 Long Term Debt and Liabilities Gordon College had Long-Term Debt and Liabilities of $16,092,099 of which $775,382 was reflected as current liability at June 30, 2008. 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 FY2008. Gordon College Foundation, Inc. had investments of $8.3 million as of December 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. Even with a relatively flat funded year, the College was able to generate a modest increase in Net Assets. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Dr. Lawrence Weill, President Gordon College Gordon College Annual Financial Report FY 2008 6 Statement of Net Assets GO R D O N C O L LEGE S T A TEM EN T O F N ET A S S ETS June 30, 2008 G ordon C olle ge 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 ) 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 Sh o r t - t e rm 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 D ep o sit s D eferred Rev en ue (n o te 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 ) 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 (c ur re n 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 ) 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 ) 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 $ 6 ,8 9 1 ,4 5 2 2 6 9 ,7 2 7 1 ,2 6 6 ,1 2 4 3 0 5 ,0 9 2 3 1 2 ,6 8 5 9 ,0 4 5 ,0 8 0 1 0 ,6 3 3 4 4 ,5 3 2 ,6 5 8 4 4 ,5 4 3 ,2 9 1 5 3 ,5 8 8 ,3 7 1 6 4 5 ,3 4 1 1 3 4 ,6 2 2 2 0 6 ,2 5 0 6 4 1 ,7 3 2 1 4 6 ,8 0 2 3 7 2 ,9 3 7 3 9 9 ,5 0 6 3 7 5 ,8 7 6 2 ,9 2 3 ,0 6 6 1 5 ,2 2 1 ,9 7 1 9 4 ,7 4 6 1 5 ,3 1 6 ,7 1 7 1 8 ,2 3 9 ,7 8 3 2 8 ,9 1 1 ,1 8 1 1 3 ,0 5 3 6 ,4 2 4 ,3 5 4 $ 3 5 ,3 4 8 ,5 8 8 C om pon e n t Un it G ordon C olle ge Fo u n da ti o n , In c. $ 2 4 2 ,8 0 5 2 4 2 ,8 0 5 1 3 ,8 1 6 ,1 8 3 5 ,5 0 5 ,3 9 4 2 ,7 5 3 ,6 0 9 2 0 ,6 2 0 ,1 9 1 1 ,2 1 3 ,9 2 2 4 3 ,9 0 9 ,2 9 9 4 4 ,1 5 2 ,1 0 4 3 1 9 ,3 5 5 4 1 5 ,0 0 0 7 ,9 8 7 1 9 3 ,6 4 2 9 3 5 ,9 8 4 3 3 ,8 1 5 ,1 9 0 4 1 ,6 8 8 1 ,8 5 3 ,3 0 0 3 5 ,7 1 0 ,1 7 8 3 6 ,6 4 6 ,1 6 2 (1 ,6 6 5 ,9 8 8 ) 1 ,9 7 1 ,5 9 8 2 0 4 ,3 9 8 6 ,9 9 5 ,9 3 4 $ 7 ,5 0 5 ,9 4 2 Gordon College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Gordon C olle ge Gordon C olle ge Fou n dati on , In c. REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal Other Sales and Services Rents 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 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 Gordon College T ot al Operat ing Expenses Operat ing Income (loss) $6,657,513 (2,190,186) 4,787,924 2,104 54,473 47,251 2,863,835 1,890,702 1,415,867 157,414 80,576 386,716 22,803 38,084 16,215,076 6,562,013 5,789,022 3,412,386 79,603 159,455 2,774,872 1,455,156 6,947,358 1,941,911 29,121,776 (12,906,700) $0 117,371 1,068,468 1,185,839 5,995 47,257 374,499 58,263 37,409 523,423 662,416 Gordon College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Gordon C olle ge Gordon C olle ge Fou n dati on , In c. 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 los Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 13,079,450 374,041 366,658 (764,423) 216,347 13,272,073 365,373 1,988,104 1,988,104 2,353,477 32,995,111 0 32,995,111 $35,348,588 1,122,675 (733,346) 389,329 1,051,745 119,329 119,329 1,171,074 6,334,868 0 6,334,868 $7,505,942 Gordon College Annual Financial Report FY 2008 9 Statement of Cash Flows GORDON COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 $4,612,372 4,564,751 54,473 (11,894,646) (12,263,955) (2,833,604) 3,085,268 1,833,795 1,419,260 154,649 79,841 396,415 22,485 312,236 (10,456,660) 13,079,450 65,677 374,041 13,519,168 1,043,140 (2,850,024) (377,829) (764,423) (2,949,136) 366,658 366,658 480,030 6,411,422 $6,891,452 Gordon College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued GORDON COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 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 In v en t o ries 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 Gordon College had no non-cas h trans actions during fis cal 2008. June 30, 2008 ($12,906,700) 1,941,911 166,276 (38,513) (32,622) 174,745 93,654 81,610 62,979 ($10,456,660) Gordon College Annual Financial Report FY 2008 11 GORDON COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Gordon College is reporting the activity for the 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 2008 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 2008 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, 2008, 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 2008 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 $407,644 as of 7-1-2007. For FY2008, $437,695 was earned in compensated absences and employees were paid $374,717, for a net increase of $62,978. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $470,622. 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, 2008 Federal Loans T ot al Rest rict ed Expendable $13,053 $13,053 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 Gordon College Annual Financial Report FY 2008 15 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, 2008 $2,963,394 3,097,744 363,216 $6,424,354 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Gordon College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The College has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and 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 Gordon College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $1,532,079 and the bank balance was $1,716,076. Of the College's deposits, $1,616,076 were uninsured. Of these uninsured deposits, $1,616,076 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. Gordon College Annual Financial Report FY 2008 17 B. Investments At June 30, 2008, the carrying value of the College's investments was $5,356,873, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents Short-Term Fund as follows: Investment Pools Board of Regents Short-T erm Fund $5,356,873 T otal Investment Pools $5,356,873 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 1.99 years. Of the College's total investment of $5,356,873 in the Short Term Fund, $5,335,445 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 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $36,448 219,078 269,727 994,964 133,535 1,653,752 117,901 $1,535,851 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore T otal $305,092 $305,092 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $408,874 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 Addi ti o n s $160,833 2,402,571 2,563,404 Re du cti on s $0 209,187 209,187 En di n g B al an ce 6/30/2008 $569,707 2,204,774 2,774,481 111,000 209,187 121,261 54,359 495,807 20,581 29,920 (50,500) 420,799 420,800 1,400,297 34,679,359 915,948 4,010,562 16,387,313 2,325,975 59,719,454 50,411 708,691 47,514 340,786 655,493 139,016 1,941,911 (1,446,104) $1,117,300 17,965 147,532 36,321 49,879 385,448 637,145 (216,345) ($7,158) 525,112 10,563,862 430,899 2,805,981 1,802,605 1,832,818 17,961,277 41,758,177 $44,532,658 Gordon College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $631,064 10,668 $641,732 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $15,999,306 Additions $0 Reductions Ending Balance June 30, 2008 $377,829 $15,621,477 Other Liabilities Compensated Absences Total Long Term Obligations 407,644 $16,406,950 437,695 $437,695 374,717 $752,546 470,622 $16,092,099 Current Portion $399,506 375,876 $775,382 Note 9. Significant Commitments The College executed a rental agreement for a student housing complex with Gordon College Properties Foundation II, LLC in January 2007. The rental agreement commences in fiscal 2009 and will expire in fiscal 2038. The present value of the minimum lease payments over the life of the rental agreement is $18,890,190. Note 10. Lease Obligations CAPITAL LEASES Capital leases are payable in monthly installments and have terms expiring in 2031. Expenditures for fiscal year 2008 were $1,142,252 of which $764,423 represented interest. Total principal paid on capital leases was $377,829 for the fiscal year ended June 30, 2008. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Total Assets Held Under Capital Lease $14,584,708 $14,584,708 Gordon College Annual Financial Report FY 2008 21 Certain capital lease 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 related entities 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, 2008 on this capital lease was $15,621,477. OPERATING LEASES Gordon College had no operating leases as of June 30, 2008. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 $1,145,206 1,142,594 1,143,749 1,143,828 1,146,824 5,748,109 5,781,166 5,799,711 2,429,647 25,480,834 9,859,357 $15,621,477 Gordon College had no expense for rental of real property and equipment under operating leases in FY2008. Gordon College Annual Financial Report FY 2008 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 2008, 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 2008 2007 2006 100% 100% 100% $694,544 $642,393 $543,411 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 allowing for retirement after 25 years of service regardless of age. Gordon College Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $118,005. The College's total payroll for all employees was $12,351,035. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $12,360 $11,837 $8,549 Gordon College Annual Financial Report FY 2008 24 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $282,571 (8.13% or 8.15%) and $167,944 (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. Gordon College Annual Financial Report FY 2008 25 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 2008 amounted to $43,028 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, a fully insured HSA/High Deductible PPO healthcare plan and 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' Gordon College Annual Financial Report FY 2008 26 indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gordon College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. 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, 2008. 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. Gordon College Annual Financial Report FY 2008 27 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25% As of June 30, 2008, there were 36 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Gordon College recognized as incurred $158,510 of expenditures, which was net of $64,350 of participant contributions. Gordon College Annual Financial Report FY 2008 28 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: N atural Classification F acu lt y St aff B en efit s Personal Services T ravel Scholarship s and Fellow ship s U tilities Sup p lies and O thers Services D ep 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 io n $6,562,013 403,561 1,687,537 37,722 43,822 494,446 109,891 $9,338,992 Fu n ctio nal Clas s ificatio n FY2008 Academ ic Sup p o rt St uden t Serv ices $0 796,140 207,326 $0 1,110,861 302,073 13,416 5,117 570,139 222,671 41,684 2,000 12,927 322,583 4,206 $1,814,809 $1,796,334 P lant Op erat io n s & Maint enance $0 1,043,152 348,250 162 9,978 1,080,576 844,515 87,057 $3,413,690 Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 2,649,320 $0 592,128 140,439 158 13,319 123,552 236,374 3,886,066 741,236 $2,649,320 $5,733,272 Inst it ut io nal Sup p o rt $0 1,843,180 726,761 79,283 43,336 76,340 829,609 776,850 $4,375,359 T otal E x p en ses $6,562,013 5,789,022 3,412,386 79,603 159,455 2,774,872 1,455,156 6,947,358 1,941,911 $29,121,776 Gordon College Annual Financial Report FY 2008 29 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 University. 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, 2007, the Foundation distributed $37,409 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 $5.5 million. The Foundation also holds investments in real property valued at $2.8 million. Investments are comprised of the following amounts at December 31, 2007: Cost Fair Value M utual Funds Venture Capital Real Estate $2,917,893 130 2,753,609 $5,505,264 130 2,753,609 Total Investments $5,671,632 $8,259,003 Gordon College Annual Financial Report FY 2008 30 Capital Assets for Component Units: The following represents Gordon College Foundation, Inc.'s Capital Assets as of December 31, 2007: December 31, 2007 Capital Assets not being Depreciated: Construction in Progress Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $8,286,475 8,286,475 12,649,270 582,676 13,231,946 898,230 12,333,716 $20,620,191 Long-term Liabilities for Component Units: Long-term liability activity for the year ended December 31, 2007 was as follows: Beginning Balance January 1, 2007 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $57,249 0 15,099,554 $15,156,803 $0 2,046,942 18,890,190 $20,937,132 $7,574 (240,446) ($232,872) $49,675 2,046,942 34,230,190 $36,326,807 $7,987 193,642 415,000 $616,629 Notes and Loans Payable In July 2007, Gordon College Properties Foundation, LLC purchased real estate located on Georgia Avenue in Barnesville Georgia. Two properties were purchased and each was financed with a one-year note payable to First National Bank of Barnesville with interest due at maturity at 8.25%. The notes in the amount of $142,592 and $51,050 are due on June 30, 2008. In October 2007, Gordon College Properties Foundation, LLC acquired 70 acres of vacant land on Collier Road in Barnesville, Georgia. To purchase the land, the LLC received proceeds from Gordon College Annual Financial Report FY 2008 31 a note payable in the amount of $1,853,300 from United Bank. Interest of 6.88% is due annually with the total principal due in October 2009. These real estate purchases were made with the intent that Gordon College would purchase the properties from the Foundation at such time that funds are available. The associated real estate is reported as Investments on the Statement of Net Assets. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31 2008 1 2009 2 Princip al Notes and Loans Payable Interest Total $193,642 1,853,300 $2,046,942 $143,482 127,507 $270,989 $337,124 1,980,807 $2,317,931 Bonds Payable Series 2004 Bonds On August 1, 2004, the Barnesville-Lamar County Industrial Development Authority issued certain bonds totaling $16,135,000. Proceeds of the sale of the Bonds were loaned to Gordon College Properties Foundation, LLC (Properties, LLC) whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2004 Bonds were used by 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; 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 of Georgia and is leased by the Board of Regents to the Properties, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties, LLC rents the project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents makes 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 Series 2004 bonds range from 3% to 5%. The balance owed on the bonds at December 31, 2007 was $15,340,000. Series 2006 Bonds On December 14, 2006, the Barnesville-Lamar County Industrial Development Authority issued certain bonds totaling $19,285,000. Proceeds of the sale of the Bonds were loaned to Gordon College Properties Foundation II, LLC (Properties II, LLC) whose sole member is Gordon College Foundation, Inc. Proceeds of the Series 2006 Bonds were used by Properties II, 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 405 beds and related amenities (the Project) located on the campus of Gordon College; fund capitalized interest on the Series 2006 Bonds; Gordon College Annual Financial Report FY 2008 32 pay the premium for a debt reserve surety bond and pay costs of issuance of the Series 2006 Bonds. 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 the Properties II, LLC pursuant to a Ground Lease. Pursuant to a Rental Agreement, the Properties II, 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 the Properties II, LLC estimates will be sufficient to pay, among other things, debt service on the Series 2006 Bonds. Interest rates on the Series 2006 bonds range from 3.5% to 4.5%. The balance owed on the bonds at December 31, 2007 was $18,890,190, which is net of ($394,810) bond discount. Annual debt service requirements to maturity for Student Housing bonds payable are as follows: Year ending December 31 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2037 2038 through 2042 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Bond Premium/(Discount) Princip al Bonds Payable Interest $415,000 430,000 460,000 490,000 530,000 3,435,000 4,940,000 7,150,000 7,805,000 7,180,000 1,790,000 34,625,000 (394,810) $34,230,190 $1,522,163 1,509,713 1,495,388 1,480,125 1,462,538 6,950,240 6,069,865 4,706,734 2,790,501 1,207,267 38,615 29,233,149 $29,233,149 Total $1,937,163 1,939,713 1,955,388 1,970,125 1,992,538 10,385,240 11,009,865 11,856,734 10,595,501 8,387,267 1,828,615 63,858,149 (394,810) $63,463,339 Gordon College Annual Financial Report FY 2008 33 GEORGIA SOUTHERN UNIVERSITY Financial Report For the Year Ended June 30, 2008 Georgia Southern University Statesboro, Georgia Dr. Bruce Grube President Dr. Ron Core Vice President for Business and Finance GEORGIA SOUTHERN UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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......................................................................................................... 35 Note 13. Contingencies............................................................................................................... 35 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 36 Note 15. Natural Classifications with Functional Classifications .............................................. 37 Note 16. Component Units ......................................................................................................... 38 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) FY2008 755 16,841 15,396 FY2007 719 16,425 14,962 FY2006 709 16,646 15,183 Overview of the Financial Statements and Financial Analysis Georgia Southern University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $48,149,366 341,242,917 5,518,234 394,910,517 June 30, 2007 $49,327,838 329,451,662 5,426,013 384,205,513 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 23,527,005 115,903,908 139,430,913 19,508,628 115,685,896 135,194,524 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 224,019,863 2,465,814 3,396,413 25,597,514 $255,479,604 212,925,169 2,464,884 3,329,191 30,291,745 $249,010,989 The total assets of the institution increased by $10,705,004. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $11,791,255 in the category of Capital Assets, net. The total liabilities for the year increased by $4,236,389. The combination of the increase in total assets of $10,705,004 and the increase in total liabilities of $4,236,389 yields an increase in total net assets of $6,468,615. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $11,094,694. Georgia Southern University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $125,420,929 215,326,268 (89,905,339) 86,909,877 (2,995,462) 9,464,077 6,468,615 249,010,989 0 249,010,989 $255,479,604 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $52,396,163 21,274,242 2,591,913 47,888,508 1,270,103 125,420,929 92,448,227 1,695,944 2,379,109 (3,997,240) 92,526,040 8,879,183 584,894 9,464,077 $227,411,046 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $76,965,995 3,117,421 2,530,964 15,324,733 16,835,210 23,044,542 24,402,401 6,982,943 46,122,059 215,326,268 5,616,163 $220,942,431 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 Operating revenues increased by $10,598,681 in fiscal 2008. Tuition and Fee revenues increased 12.7% primarily due to increases in headcount and FTE coupled with increased student retention Georgia Southern University Annual Financial Report FY 2008 4 rates. Sponsored revenue increased as a result of increased institution wide initiatives to expand research activities. The Auxiliary revenue increase of $3,315,537 is a result of growth and the changing environment of residential 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. Increased retention rates improve graduation rates and increase tuition and auxiliary revenues. Nearly all Auxiliary units experienced increases in revenues during 2008, with the greatest increase being realized in Food Services. Non-operating revenues increased by $1,740,668 for the year primarily due to an increase of $6,567,171 in State Appropriations. The increase in State Appropriations was realized primarily from the funding formula as a result of increasing enrollment in the past two years. The compensation and employee benefits category increased by $10,658,482 and primarily affected the Instruction category. Increases in Instruction are the result of campus initiatives to convert more part-time faculty positions to regular faculty. Regular full time faculty pool provides a more stable academic environment resulting in increases in retention and graduation rates. Utilities increased by $304,432 during the past year. Increases are an indicator of higher fuel costs in the later portion of 2008. This trend of higher utility cost is expected to carry over into fiscal year 2009. 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 2008 5 Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($73,287,153) 94,318,554 (23,957,610) (62,848) (2,989,057) 31,894,540 $28,905,483 June 30, 2007 ($66,450,881) 87,038,270 (19,315,095) 2,181,840 3,454,134 28,440,406 $31,894,540 Capital Assets The University completed several major building renovations during 2008. Two older residence halls were converted to faculty office space. The new office locations allowed conversion of office space in academic buildings to classroom spaces. One facility, Cone Hall was renovated to house the newly created College of Public Health. Cost of renovations was completed by redirection of University funds. Infrastructure additions were completed to enhance campus lighting and roadways as part of a master plan initiative to move traffic to the perimeter of campus thus creating a walking campus. Enhancements to lighting and roadways promote a safer campus environment for students, faculty and staff. 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 Southern University had Long-Term Debt and Liabilities of $122,070,286 of which $6,166,378 was reflected as current liability at June 30, 2008. 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 FY2008. 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 2008 6 Economic Outlook Budget reductions at the State level will present a challenging financial environment for the institution in the coming fiscal year. The University is in the beginning stages of analyzing financial consequences of the current reduction, as well as potential for additional reductions. We anticipate enrollment numbers for fall 2008 to provide significant growth of the freshman class which will increase tuition revenues. Dr. Bruce Grube, President Georgia Southern University Georgia Southern University Annual Financial Report FY 2008 7 Statement of Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Ge orgi a S ou th e rn Un i ve rs i ty Georgia Southern Un i ve rs i ty Foundation, Inc. Georgia Southern Un i ve rs i ty Housing Foundation, Inc. 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 Net Investment in Capital Leases Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid items T otal Current Assets $28,905,483 5,873,153 1,461,940 4,319,220 999,861 2,141,444 4,448,265 48,149,366 $153,630 39,796,167 34,378 1,138,733 41,122,908 $2,256,088 12,842 418,368 2,865,009 443,116 5,995,423 Noncurrent Assets Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Receivables Other Contributions Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 2,465,814 8,927 3,043,493 341,242,917 346,761,151 394,910,517 1,314,719 3,282,305 418,082 117,821 5,132,927 46,255,835 66,397,407 99,973,406 100,000 17,917,378 296,253 184,684,444 190,679,867 Georgia Southern University Annual Financial Report FY 2008 8 Statement of Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Ge orgi a S ou th e rn Un i ve rs i ty Georgia Southern Un i ve rs i ty Foundation, Inc. Georgia Southern Un i ve rs i ty Housing Foundation, Inc. LIABILITIES Current 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 2,147,714 1,108,777 1,998,245 536,575 10,597,920 926,939 3,499,714 2,581,636 44,457 85,028 23,527,005 111,515,242 2,265,596 2,123,070 115,903,908 139,430,913 224,019,863 2,465,814 3,396,413 25,597,514 $255,479,604 58,041 50,000 20,586 418,368 546,995 140,764 140,764 687,759 418,082 28,944,692 13,496,937 2,708,365 $45,568,076 3,045,152 826,061 80,468 42,120 2,800,000 6,793,801 1,776,985 176,896,654 178,673,639 185,467,440 7,752,799 5,820,075 (8,360,447) $5,212,427 Georgia Southern University Annual Financial Report FY 2008 9 Statement of Net Assets, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 C om pone nt Unit Southe rn Booste rs, In c. (G e orgi a S ou th e rn Un i ve rs i ty) AS S ETS C urrent Assets 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 Due From Com ponent Unit s Net Invest m ent in Capit al Leases Cont ribut ions Receivable Due From P rim ary Governm ent Inventories (note 4) P repaid it ems T ot al Current Asset s Noncurre nt Asse ts Noncurrent Cash Short -t erm Invest m ent s Invest m ent s (including Real Est at e) Not es Receivable, net Net Invest m ent in Capit al Leases Receivables Ot her 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 $1,111,527 509,836 38,000 590,665 2,250,028 431,070 1,649,282 2,080,352 4,330,380 C om pone nt Unit Ge orgia Southern Un i ve rsi ty Re se arch & S e rvi ce Fou n dati on , In c. $1,645,699 1,011,426 44,457 131,453 2,833,035 0 2,833,035 Georgia Southern University Annual Financial Report FY 2008 10 Statement of Net Assets, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF NET AS S ETS June 30, 2008 C om pone nt Unit Southe rn Booste rs, In c. (G e orgi a S ou th e rn Un i ve rs i ty) LIAB ILITIES C u rre n t Liabilitie s Account s P ayable Salaries P ayable Cont ract s P ayable Deposit s Deferred Revenue (not e 7) Deposit s Held for Ot her Organizat ions Due t o P rim ary Governm ent Lease P urchase Obligat ions (current port ion) Com pensat ed Absences (current port ion) Revenue/M ort gage Bonds P ayable (current ) Due t o Com ponent Unit s Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Com pensat ed Absences (noncurrent ) Revenue/M ort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreem ent s (noncurrent ) Not es and Loans 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 en da ble E x p e n da ble Unrest rict ed TO TAL NET AS S ETS 46,735 93,350 383,102 523,187 170,871 170,871 694,058 1,289,825 2,098,094 248,403 $3,636,322 C om pone nt Unit Ge orgia Southern Un i ve rsi ty Re se arch & S e rvi ce Fou n dati on , In c. 7,373 1,121,876 276,357 957,741 2,363,347 0 2,363,347 469,688 $469,688 Georgia Southern University Annual Financial Report FY 2008 11 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA SOUTHERN UNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 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 Payments to or on behalf of Georgia Southern University Total Operating Expenses Operating Income (loss) Georgia Southern University Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. $64,013,107 (11,616,944) 18,548,937 749,720 1,975,585 2,591,913 45,799 15,159,797 10,709,647 9,675,456 2,734,499 3,091,721 6,517,122 266 1,224,304 125,420,929 45,952,126 59,382,821 29,264,558 467,289 2,170,938 9,811,459 8,031,281 47,081,194 13,164,602 215,326,268 (89,905,339) $0 3,562,759 1,368,571 225,783 210,688 147,941 5,515,742 138,338 1,910,717 1,667 2,544,332 4,595,054 920,688 $0 5,697,312 60,000 5,757,312 38,915 505,513 544,428 5,212,884 Georgia Southern University Annual Financial Report FY 2008 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA SOUTHERN UNIVERSITY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 Component Unit Component Unit Georgia Southern University Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. NO NO PERATING REVENUES (EXPENSES) State Appropriations Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Other Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 92,448,227 1,695,944 2,379,109 (5,616,163) (3,997,240) 86,909,877 (2,995,462) 8,879,183 584,894 9,464,077 6,468,615 249,010,989 0 249,010,989 $255,479,604 (3,347,804) (3,347,804) (2,427,116) 1,788,418 1,788,418 (638,698) 46,206,774 0 46,206,774 $45,568,076 553,638 (5,103,067) 80,468 (4,468,961) 743,923 0 743,923 4,468,504 0 4,468,504 $5,212,427 Georgia Southern University Annual Financial Report FY 2008 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, 2008 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 Rents and Royalties Auxiliary Ent erprises Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Operat ing Revenues T ot al Operat ing Revenues EXPENS ES Operat ing Expenses Salaries: Facult y St aff Employee Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies 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) C om pone nt Unit S ou th e rn B oos te rs , In c. (Ge orgia S ou th e rn Un i ve rs i ty) C om pone n t Unit Ge orgia Southe rn Un i ve rsi ty Re se arch & S e rvi ce Fou n dati on , In c. $0 1,744,776 43,025 176,400 $0 4,012,695 566,846 377,014 303,962 2,268,163 4,956,555 1,077,402 20,079 909,111 2,006,592 261,571 121,129 4,854,603 4,975,732 (19,177) Georgia Southern University Annual Financial Report FY 2008 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, 2008 C om pone nt Unit S ou th e rn B oos te rs , In c. (Ge orgia S ou th e rn Un i ve rs i ty) C om pone n t Unit Ge orgia Southe rn Un i ve rsi ty Re se arch & S e rvi ce Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 69,607 (38,949) 30,658 292,229 0 292,229 3,344,093 0 3,344,093 $3,636,322 57,336 57,336 38,159 0 38,159 382,329 49,200 431,529 $469,688 Georgia Southern University Annual Financial Report FY 2008 15 Statement of Cash Flows GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $53,153,418 21,255,216 2,591,913 (89,100,682) (104,665,662) (9,811,459) (602,523) 432,797 15,270,848 10,925,522 9,946,092 2,757,379 3,100,172 6,713,479 (164,956) 4,911,293 (73,287,153) 92,448,227 170,309 1,700,018 94,318,554 9,464,077 (25,106,454) (2,699,070) (5,616,163) (23,957,610) 2,379,109 (2,441,957) (62,848) (2,989,057) 31,894,540 $28,905,483 Georgia Southern University Annual Financial Report FY 2008 16 Statement of Cash Flows, Continued GEORGIA S OUTHERN UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Loss on Disposal of Buildings Not Fully Depreciat ed Cancellat ion of Capit al Lease Obligat ion June 30, 2008 ($89,905,339) 13,164,602 3,448,850 (108,129) (830,843) (169,725) (254,260) 1,241,042 (97,796) 224,445 ($73,287,153) $3,552,724 $3,968,154 ($157,093) Georgia Southern University Annual Financial Report FY 2008 17 GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Georgia Southern University is reporting the activity for the Georgia Southern University Foundation Inc., Georgia Southern University Housing Foundation, Inc. and subsidiaries, 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 2008 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, 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. Georgia Southern University Annual Financial Report FY 2008 19 Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's 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. Prepaid Items Payments made to vendors and local government organizations for services that will benefit periods beyond June 30, 2008, are recorded as prepaid items. 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 2008 20 progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2008, GSFIC did not transfer any capital additions to Georgia Southern University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as 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 $4,622,787 as of 7-1-2007. For FY2008, $3,360,813 was earned in compensated absences and employees were paid $3,136,368, for a net increase of $224,445. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $4,847,232. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Georgia Southern University Annual Financial Report FY 2008 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: June 30, 2008 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 $220,027 3,121,904 54,482 $3,396,413 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, 2008 $2,211,090 16,418,742 111,000 6,856,682 $25,597,514 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 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: Georgia Southern University Annual Financial Report FY 2008 22 Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 Intercollegiate Athletics revenue of $6,517,122 is reported net of discounts and allowances of $1,068,229. 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. Georgia Southern University Annual Financial Report FY 2008 23 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, 2008, the carrying value of deposits was $37,061,120 and the bank balance was $39,060,511. Of the University's deposits, $38,560,511 were uninsured. Of these uninsured deposits, $38,528,431 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name, and $32,080 were uncollateralized. 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, 2008 are presented below. The University held an investment in a life insurance policy as noted below. All other funds are held in either demand or time deposits as described in the Deposit section of Note 2 above. Other Investments: Life Insurance Policy Cash Surrender Value $8,927 Georgia Southern University Annual Financial Report FY 2008 24 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $320,620 1,596,195 1,461,940 999,861 2,539,102 6,917,718 136,697 $6,781,021 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore Food Services P hysical P lant Other T otal June 30, 2008 $1,705,534 104,451 267,584 63,875 $2,141,444 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0 Georgia Southern University Annual Financial Report FY 2008 25 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2007 $4,737,316 15,772,491 20,509,807 Addi ti o n s $0 22,165,052 22,165,052 Re du cti on s $0 15,944,523 15,944,523 Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated 14,063,303 261,107,483 1,726,693 19,670,020 119,403,628 35,427,249 451,398,376 1,464,267 14,074,955 405,301 2,109,497 3,552,724 1,253,832 22,860,576 9,425,508 1,055,839 157,092 28,962 10,667,401 Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation 11,042,473 78,444,317 382,070 14,624,146 8,857,192 29,106,323 142,456,521 245,901 6,383,114 178,342 1,718,303 3,382,752 1,256,190 13,164,602 5,443,024 (11,564) 970,312 111,419 28,962 6,542,153 T otal Capital Assets, Being Depreciated, Net 308,941,855 9,695,974 4,125,248 Capital Assets, net $329,451,662 $31,861,026 $20,069,771 En di n g B al an ce 6/30/2008 $4,737,316 21,993,020 26,730,336 15,527,570 265,756,930 2,131,994 20,723,678 122,799,260 36,652,119 463,591,551 11,288,374 79,384,407 571,976 15,372,137 12,128,525 30,333,551 149,078,970 314,512,581 $341,242,917 Georgia Southern University Annual Financial Report FY 2008 26 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $9,626,231 971,689 $10,597,920 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $114,237,857 Additions $3,552,724 Reductions Ending Balance June 30, 2008 $2,775,625 $115,014,956 Current Portion $3,499,714 Other Liabilities Compensated Absences Notes and Loans Total 4,622,787 2,288,636 6,911,423 3,360,813 3,360,813 3,136,368 80,538 3,216,906 4,847,232 2,208,098 7,055,330 2,581,636 85,028 2,666,664 Total Long Term Obligations $121,149,280 $6,913,537 $5,992,531 $122,070,286 $6,166,378 Notes and Loans Payable: Included in total long-term liabilities is a $3,000,000 note payable with the University System of Georgia. The note was originally payable to Georgia Education Authority (University), (GEA(U)), and issued in October 1991 for the purpose of financing construction of a student resident hall through U.S. Department of Education Academic Housing Facility Loan Program. In 2008, the University System of Georgia paid off the debt to GEA(U). Georgia Southern University continues to render payments according to the original amortization schedule to the University System of Georgia. The note carries an interest rate of 5.50% and is due semiannually through the year 2025. The outstanding balance at June 30, 2008 is $2,208,098. Annual maturities are as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2025 Totals Principal $85,028 89,769 94,774 100,058 105,637 623,384 817,661 291,787 $2,208,098 Interest Total $120,292 115,551 110,546 105,262 99,683 403,217 208,939 16,193 $1,179,683 $205,320 205,320 205,320 205,320 205,320 1,026,601 1,026,600 307,980 $3,387,781 Georgia Southern University Annual Financial Report FY 2008 27 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $2,769,160 as of June 30, 2008 for the new Welcome Center/Alumni Center and the Softball Pavilion. This amount is not reflected in the accompanying basic financial statements. During the year, the Georgia Southern University Housing Foundation entered into an agreement to purchase and renovate University Villas with the intention of entering into a Capital Lease with the University to provide Student Housing. The actual terms of the lease have not yet been determined, but will be executed and in place in August, 2008. 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 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 2009 and 2031. Expenditures for fiscal year 2008 were $8,109,608 of which $5,491,076 represented interest. Total principal paid on capital leases was $2,618,532 for the fiscal year ended June 30, 2008. Interest rates range from 3.77 percent to 7.84 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Equipment Total Assets Held Under Capital Lease $106,774,863 3,895,872 $110,670,735 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, 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, 2008 for this capital leases was $38,361,044. 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, whereby the University leases a facility (Clements Baseball Stadium) for a twenty-four year Georgia Southern University Annual Financial Report FY 2008 28 period that began August 2005 and expires July 2029. The outstanding liability at June 30, 2008, for this capital lease was $2,076,676. 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, 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, 2008, for this capital lease was $646,195. 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, 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, 2008 for this capital lease was $1,561,750. 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, 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, 2008, for this capital lease was $28,202,071. 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 $40,264,057 at 4.73 percent with the Georgia Southern University Housing Foundation, Inc., an affiliated organization, 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, 2008, for this capital lease was $40,487,613. This lease includes $1,087,059 of capitalized interest. In June 2008, Georgia Southern University's project to install a University owned and operated voice over IP campus fiber and telephone system was materially complete. The project was funded by a five year capital equipment lease with Sun Trust Bank under lease agreement between Sun Trust Bank and the University System of Georgia. Total lease liability is $3,409,806. The first of 60 monthly payments will begin August 1, 2008 with an interest rate of 3.77%. Georgia Southern University also has various other capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $269,801. OPERATING LEASES Georgia Southern University's non-cancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2009. Certain operating leases Georgia Southern University Annual Financial Report FY 2008 29 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 office space, copiers and other small business equipment. In 2006, Georgia Southern University entered into a real property operating lease with an unrelated party for storage space in the former Winn-Dixie building for monthly rental payments 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. In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party for office space at College Plaza Unit #4 for monthly rental payments 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 at Georgia Avenue Building #810 for monthly rental payments of $1,000. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $12,000 in the current year. In 2007, Georgia Southern University entered into a real property operating lease with an unrelated party for storage space at the Costume Shop for monthly rental payments 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 in Building #7 at the Skidaway Institute of Oceanography for monthly rental payments of $875. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $10,097 in the current year. In 2008, Georgia Southern University entered into a real property operating lease with an unrelated party for office space in the Market District Center for monthly rental payments of $1,323. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $1,323 in the current year. In 2008, Georgia Southern University entered into a real property operating lease with an unrelated party for office space in the Harvey House for monthly rental payments of $3,400. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $6,800 in the current year. In 2008, Georgia Southern University entered into a real property operating lease with an unrelated party for Atlanta office space for monthly rental payments of $3,200. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $34,332 in the current year. Georgia Southern University Annual Financial Report FY 2008 30 In 2008, Georgia Southern University entered into a real property operating lease with a related party for Lodge, Village and Cambridge Apartments for monthly rental payments of $5,000. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $30,000 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 non-cancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 $9,054,070 9,057,101 8,999,858 8,973,640 8,938,303 40,870,483 39,567,865 40,528,807 20,752,633 186,742,760 71,727,804 $115,014,956 $551,160 $551,160 Georgia Southern University's FY2008 expenses for rental of real property and equipment under operating leases were $605,892. 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 2008, the employer Georgia Southern University Annual Financial Report FY 2008 31 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 2008 2007 2006 100% 100% 100% $4,403,648 $4,074,725 $3,867,088 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. 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. Georgia Southern University Annual Financial Report FY 2008 32 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, 2008, for employees covered by ERS was $304,514. The University's total payroll for all employees was $105,334,947. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $31,755 $25,615 $18,074 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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. Georgia Southern University Annual Financial Report FY 2008 33 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $3,510,534 (8.13% or 8.15%) and $2,155,658 (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 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 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 2008 amounted to $361,614 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 Southern University Annual Financial Report FY 2008 34 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Southern University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a 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. Georgia Southern University Annual Financial Report FY 2008 35 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 664 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Southern University recognized as incurred $2,898,310 of expenditures, which was net of $1,096,566 of participant contributions. Georgia Southern University Annual Financial Report FY 2008 36 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $44,912,993 9,642,222 13,168,720 592 790,486 148,389 327,250 7,516,907 458,436 $76,965,995 Research $626,409 946,812 171,809 181,044 24,366 6,360 1,119,377 41,244 $3,117,421 Functional Classification FY2008 Public Service Academic Support $59,571 1,127,665 211,873 58 73,403 193,354 17,135 803,456 44,449 $352,969 8,454,516 2,116,445 9,666 321,846 91,375 99,100 2,488,288 1,390,528 $2,530,964 $15,324,733 Student Services Institutional Support $0 9,917,151 2,366,975 (8,711) 206,164 157,374 217,740 3,830,079 148,438 $184 10,752,072 6,692,776 457,973 187,913 173,275 4,491,276 289,073 $16,835,210 $23,044,542 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 7,541,510 2,459,224 (447,440) 44,266 5,102,146 4,594,593 5,108,102 $0 6,982,943 $0 11,000,873 2,076,736 455,151 365,816 2,213,658 2,088,275 22,237,218 5,684,332 $45,952,126 59,382,821 29,264,558 467,289 2,170,938 9,811,459 8,031,281 47,081,194 13,164,602 $24,402,401 $6,982,943 $46,122,059 $215,326,268 Georgia Southern University Annual Financial Report FY 2008 37 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, 2008, the Foundation distributed $2,544,332 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 $41 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, 2008: Cost Fair Value Money Market Accounts Mutual Funds Real Estate $235,552 39,219,701 1,314,719 $235,552 39,560,615 1,314,719 Total Investments $40,769,972 $41,110,886 Georgia Southern University Annual Financial Report FY 2008 38 Capital Assets for Component Units: Georgia Southern University Foundation, Inc. had the following Capital Assets at June 30, 2008: June 30, 2008 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 27,778 22,222 $418,082 Long-Term Liabilities for Component Units Georgia Southern Foundation, Inc. had $140,764 in Liabilities Under Split-interest Agreements as of June 30, 2008. 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 2008 39 Capital Assets for Component Units Georgia Southern University Housing Foundation, Inc. had $ 17,917,378 in Construction Work in Progress at June 30, 2008. Long-Term Liabilities for Component Units Changes in long-term liabilities for the Housing Foundation for the fiscal year ended June 30, 2008 are shown below: Revenue/Mortgage Bonds Payable Total Long Term Liabilities Beginning Balance July 1, 2007 $112,450,827 $112,450,827 Additions $69,000,000 $69,000,000 Reductions $1,754,173 $1,754,173 Ending Balance June 30, 2008 Amounts due within One Year $179,696,654 $2,800,000 $179,696,654 $2,800,000 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. 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 $35,035,000 as of June 30, 2008. 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. 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 $34,170,000 as of June 30, 2008. Georgia Southern University Annual Financial Report FY 2008 40 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. 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, 2008. Georgia Southern University Housing Foundation Four, LLC has a bond obligation to BB&T for the acquisition and renovation of 472 beds of student housing, and the construction of four new buildings which will house 1,000 new beds of student housing. This project also includes the design, development and construction of approximately 8,700 square feet of retail space. The student housing and the retail space will be funded by the proceeds of the bond issuance. The Development Authority of Bulloch County issued $69,000,000 of Student Housing Revenue Bonds, Series 2008. The bonds were issued in $5,000 denominations, and consist of $69,000,000 Serial Bonds, maturing annually through 2039. 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 July 1st, commencing in 2009. Interest payments are due every January and July 1st, commencing on July 1, 2008. Interest rates vary from 3% to 5% over the obligation term. The balance of the bond obligation was $69,000,000 as of June 30, 2008. Annual debt service requirements to maturity for revenue bonds payable are as follows: Georgia Southern University Annual Financial Report FY 2008 41 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Bond Premium/(Discount) Principal Bonds Payable Interest $2,800,000 3,850,000 3,915,000 4,255,000 4,395,000 25,650,000 32,710,000 41,480,000 36,615,000 19,125,000 3,950,000 178,745,000 951,654 $179,696,654 $6,249,103 8,559,264 8,444,236 8,289,020 8,125,201 37,770,723 31,080,775 22,007,349 9,742,000 6,143,919 1,308,275 147,719,865 $147,719,865 Total $9,049,103 12,409,264 12,359,236 12,544,020 12,520,201 63,420,723 63,790,775 63,487,349 46,357,000 25,268,919 5,258,275 326,464,865 951,654 $327,416,519 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 Booster's fiscal year is July 1 through June 30. During the year ended June 30, 2008, Southern Boosters, Inc. distributed $550,000 to the University for athletic scholarship support and approximately $359,111 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. Investments for Component Units: Southern Boosters, Inc. holds the following investments as of June 30, 2008: Georgia Southern University Annual Financial Report FY 2008 42 Certificates of Deposit Total Investments Cost $509,836 $509,836 Fair Value $509,836 $509,836 Capital Assets for Component Units Southern Boosters, Inc. has the following Capital Assets as of June 30, 2008: June 30, 2008 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 $80,301 80,301 1,614,828 95,585 1,710,413 141,432 1,568,981 $1,649,282 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 (5.0% at June 30, 2008), through September 14, 2013, unsecured. The original note amount was $279,000 and the principal balance outstanding on the note at June 30, 2008 was $194,516. 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 (5.0% at June 30, 2008) and the note matures on January 15, 2009. This debt is secured by the Golf Practice facility. The outstanding principal balance was $359,457 at June 30, 2008. Changes in long-term liabilities for Southern Boosters, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable $578,802 $0 $24,829 $553,973 $383,102 Total Long Term Liabilities $578,802 $0 $24,829 $553,973 $383,102 Georgia Southern University Annual Financial Report FY 2008 43 Annual requirements to maturity for notes payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 Notes and Loans Payable Principal Interest Total 383,102 24,968 26,466 28,054 29,737 61,646 $553,973 $29,548 10,252 8,754 7,166 5,483 3,082 $64,285 $412,650 35,220 35,220 35,220 35,220 64,728 $618,258 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 Research Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Research Foundation's fiscal year is July 1 through June 30. During fiscal year 2008, the Research Foundation transferred $4,854,603 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. Restatement of Prior Year Net Assets During the year ended June 30, 2008, a correction was made to prior year grants receivable. The effect of the error increased Beginning Net Assets by $49,200. Georgia Southern University Annual Financial Report FY 2008 44 GEORGIA SOUTHWESTERN STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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 ........................................... 27 Note 15. Natural Classifications with Functional Classifications .............................................. 28 Note 16. Component Units ......................................................................................................... 29 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) FY2008 113 FY2007 107 FY2006 103 2,405 2,457 2,427 2,128 2,161 2,123 Overview of the Financial Statements and Financial Analysis Georgia Southwestern State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $7,759,759 45,953,519 1,222,348 54,935,626 June 30, 2007 $6,662,054 44,298,746 1,228,407 52,189,207 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,695,239 360,137 4,055,376 4,116,865 329,713 4,446,578 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 45,953,519 355,225 1,259,770 3,311,736 $50,880,250 44,298,746 398,221 1,252,025 1,793,637 $47,742,629 The total assets of the institution increased by $2,746,419. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,654,773 in the category of Capital Assets, net. The total liabilities for the year decreased by ($391,202). The combination of the increase in total assets of $2,746,419 and the decrease in total liabilities of ($391,202) yields an increase in total net assets of $3,137,621. Georgia Southwestern State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $20,120,645 34,306,119 (14,185,474) 14,506,254 320,780 2,816,841 3,137,621 47,742,629 0 47,742,629 $50,880,250 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $5,408,835 7,015,912 2,280,906 5,242,790 172,202 20,120,645 14,337,080 0 169,174 0 14,506,254 1,576,660 1,240,181 2,816,841 $37,443,740 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $12,482,811 75,049 1,106,184 2,367,021 2,266,912 4,950,509 4,385,006 1,781,822 4,890,805 34,306,119 0 $34,306,119 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 Operating revenues increased by $631,515 in fiscal 2008. Tuition & Fees included a 2% decrease while revenues increased in Grants and Contracts, Auxiliary and Sales and Services. Georgia Southwestern State University Annual Financial Report FY 2008 4 Nonoperating revenues increased by $1,875,815 for the year primarily due to an increase of $2,109,438 in State Appropriations. The compensation and employee benefits category increased by $1,389,158 and primarily affected the Instruction category. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities decreased by ($89,075) during the past year. The decrease was primarily associated with a moderate winter in fiscal year 2008 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($11,953,435) 14,344,416 (1,144,237) 232,844 1,479,588 4,743,333 $6,222,921 June 30, 2007 ($12,901,288) 12,306,147 (28,648) 274,787 (349,002) 5,092,335 $4,743,333 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2008. The Georgia Southwestern Golf and Conference Center was donated to the University in May of 2008. Georgia Southwestern State University Annual Financial Report FY 2008 5 For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Debt and Liabilities Georgia Southwestern State University had Long-Term Debt and Liabilities of $789,448 of which $429,311 was reflected as current liability at June 30, 2008. 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 FY2008. 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 2008 6 Statement of Net Assets GEO R GIA S O UTHW ES TER N S TA TE UN IV ER S IT Y S TA T EM EN T O F N ET A S S ETS June 30, 2008 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 P ledges Receiv able 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 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 r ie s P a y a ble Ben efit s P ay able 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 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 ) 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 ) 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 S ou th we ste rn S ta te U n i ve rs i ty $ 6 ,2 2 2 ,9 2 1 4 0 ,0 4 0 9 1 7 ,0 9 0 3 9 0 ,1 5 3 1 8 9 ,5 5 5 7 ,7 5 9 ,7 5 9 5 6 3 ,6 1 8 6 5 8 ,7 3 0 4 5 ,9 5 3 ,5 1 9 4 7 ,1 7 5 ,8 6 7 5 4 ,9 3 5 ,6 2 6 7 1 ,3 5 7 1 0 7 ,2 2 9 1 2 ,9 9 7 4 8 ,6 0 4 1 7 2 ,3 6 6 2 ,7 7 6 ,5 1 1 2 2 ,2 3 9 5 4 ,6 2 5 4 2 9 ,3 1 1 3 ,6 9 5 ,2 3 9 3 6 0 ,1 3 7 3 6 0 ,1 3 7 4 ,0 5 5 ,3 7 6 4 5 ,9 5 3 ,5 1 9 3 5 5 ,2 2 5 1 ,2 5 9 ,7 7 0 3 ,3 1 1 ,7 3 6 $ 5 0 ,8 8 0 ,2 5 0 C om pon e n t Un it G e orgia S ou th we ste rn Fo u n da ti o n , In c. $ 1 ,4 3 8 ,1 4 1 2 ,0 4 5 ,9 5 3 3 ,7 9 5 3 3 8 ,3 8 0 3 ,8 2 6 ,2 6 9 2 ,5 4 7 ,0 1 6 2 2 ,5 7 7 ,5 1 7 2 5 3 ,6 5 8 2 1 ,5 7 9 ,3 4 2 7 3 7 ,7 6 4 4 7 ,6 9 5 ,2 9 7 5 1 ,5 2 1 ,5 6 6 1 0 6 ,1 7 6 1 7 ,3 7 0 1 3 ,9 6 7 6 5 ,0 0 0 2 0 2 ,5 1 3 2 6 ,9 1 4 ,8 9 4 2 6 ,9 1 4 ,8 9 4 2 7 ,1 1 7 ,4 0 7 (2 ,1 9 6 ,0 2 7 ) 1 0 ,0 0 3 ,1 7 8 4 ,4 2 0 ,6 2 0 1 2 ,1 7 6 ,3 8 8 $ 2 4 ,4 0 4 ,1 5 9 Georgia Southwestern State University Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA S OUTHWES TERN S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 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 Other Sales and Services Rents 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 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 Georgia Sout hwest ern St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) G e orgi a S ou th we s te rn S tate Un i ve rs i ty C om pone nt Unit G e orgi a S ou th we ste rn Fou n dati on , In c. $7,841,624 (2,432,789) 4,093,057 294,565 2,628,290 2,280,906 5,595 1,573,447 1,080,553 1,230,317 68,098 330,212 871,642 88,521 166,607 20,120,645 6,262,153 8,640,771 4,728,098 102,405 297,715 2,226,514 1,463,859 8,980,130 1,604,474 34,306,119 (14,185,474) $0 563,700 1,221,333 (283,264) 1,501,769 143,353 34,789 16,029 912,269 185,038 1,653,246 2,944,724 (1,442,955) Georgia Southwestern State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA S OUTHWES TERN S TATE UNIVERS ITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 G e orgi a S ou th we s te rn S tate Un i ve rs i ty C om pone nt Unit G e orgi a S ou th we ste rn Fou n dati on , In c. 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 Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 14,337,080 169,174 14,506,254 320,780 1,576,660 1,240,181 2,816,841 3,137,621 47,742,629 0 47,742,629 $50,880,250 (837,958) (1,279,254) (1,372,980) (3,490,192) (4,933,147) 1,345,679 1,345,679 (3,587,468) 27,991,627 0 27,991,627 $24,404,159 Georgia Southwestern State University Annual Financial Report FY 2008 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, 2008 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 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 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 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, 2008 $5,504,959 7,181,945 2,280,906 (15,595,689) (14,836,843) (2,226,514) (57,254) 1,670,498 1,170,540 1,224,428 67,919 335,503 926,527 (14,528) 414,168 (11,953,435) 14,337,080 7,336 14,344,416 1,576,660 (2,720,897) (1,144,237) 16,587 216,257 232,844 1,479,588 4,743,333 $6,222,921 Georgia Southwestern State University Annual Financial Report FY 2008 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, 2008 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 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 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, 2008 ($14,185,474) 1,604,474 428,821 3,123 (50,061) 62,617 34,725 190,570 (2,424) (39,806) ($11,953,435) ($47,083) ($1,240,181) Georgia Southwestern State University Annual Financial Report FY 2008 11 GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Georgia Southwestern State University is reporting the activity for the Georgia Southwestern 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 Southwestern State University Annual Financial Report FY 2008 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. 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. 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 Southwestern State University Annual Financial Report FY 2008 13 Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average-cost basis. Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/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, 2008, GSFIC did not transfer any capital additions to Georgia Southwestern State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred Georgia Southwestern State University Annual Financial Report FY 2008 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. Georgia Southwestern State University had accrued liability for compensated absences in the amount of $749,642 as of 7-1-2007. For FY2008, $537,451 was earned in compensated absences and employees were paid $497,645, for a net increase of $39,806. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $789,448. 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: Georgia Southwestern State University Annual Financial Report FY 2008 15 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, 2008 $189,706 802,010 268,054 $1,259,770 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, 2008 $915,741 620,675 33,175 1,742,145 $3,311,736 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 2008 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 2008 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, 2008, the carrying value of deposits was $2,950,511 and the bank balance was $3,484,660. Of the University's deposits, $3,337,043 were uninsured. Of these uninsured deposits, $3,337,043 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment ty p e Bond/Equity M utual Funds Investment Pools Office of T reasury and Fiscal Services Georgia Fund 1 T otal Investments $563,618 3,266,810 $3,830,428 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 40 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. 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. Georgia Southwestern State University Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $180,107 288,627 40,040 512,452 1,021,226 64,096 $957,130 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Other T otal $332,462 57,691 $390,153 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $27,497. Georgia Southwestern State University Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $554,800 616,316 1,171,116 Re du cti on s $0 90,016 90,016 1,916,694 93,981 167,472 2,178,147 259,067 12,020 271,087 1,319,919 153,643 130,912 1,604,474 573,673 $1,744,789 259,067 12,020 271,087 0 $90,016 En di n g B al an ce 6/30/2008 $1,084,007 1,586,892 2,670,899 59,081,102 1,267,167 2,807,535 6,540,049 69,695,853 17,672,786 1,129,988 2,319,898 5,290,561 26,413,233 43,282,620 $45,953,519 Georgia Southwestern State University Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $1,259,130 1,517,381 $2,776,511 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: O the r Liabilitie s Compensated Absences Beginning Balance July 1, 2007 $749,642 Addi ti o n s $537,451 Re ductions En di n g Balance June 30, 2008 $497,645 $789,448 Total Long Te rm O bligations $749,642 $537,451 $497,645 $789,448 C u rre n t Porti on $429,311 $429,311 Note 9. Significant Commitments The University has no known significant commitments not reflected in the accompanying basic financial statements. Note 10. Lease Obligations CAPITAL LEASES Georgia Southwestern State University has no capital leases. OPERATING LEASES Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 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 2008 21 Future commitments of noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 T ot al m inim um lease paym ent s Year 1 2 3 Real P roperty and Equipm ent Operat ing Leases $14,801 12,763 5,078 $32,642 Georgia Southwestern State University's FY2008 expense for rental of real property and equipment under operating leases was $16,938. 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 2008, 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 2008 2007 2006 100% 100% 100% $737,530 $701,424 $672,470 Georgia Southwestern State University Annual Financial Report FY 2008 22 Employees' Retirement System of Georgia Plan Description Georgia Southwestern 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, 2008, for employees covered by ERS was $16,517. The University's total payroll for all employees was $14,902,924. For the year ended June 30, 2008 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. Georgia Southwestern State University Annual Financial Report FY 2008 23 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $1,719 $0 $0 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 24 Georgia Southwestern State University and the covered employees made the required contributions of $422,131 (8.13% or 8.15%) and $259,306 (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 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 2008 amounted to $25,001 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 Georgia Southwestern State University Annual Financial Report FY 2008 25 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Southwestern State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the 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, 2008. Georgia Southwestern State University Annual Financial Report FY 2008 26 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 162 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Southwestern State University recognized as incurred $703,625 of expenditures, which was net of $263,681 of participant contributions. Georgia Southwestern State University Annual Financial Report FY 2008 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Functional Classification FY2008 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $6,173,155 1,773,359 1,972,625 75,352 35,989 67,152 2,385,179 $18,642 8,914 5,023 2,920 3,451 773 33,072 2,254 $31,929 569,684 153,575 32,912 23,856 12,060 279,950 2,218 $2,500 1,461,943 396,900 29,748 6,132 321,977 147,821 $3,977 1,271,051 336,519 88,977 32,223 19,510 513,002 1,653 $0 2,216,398 1,400,545 102,405 41,860 7,715 24,873 1,100,265 56,448 Total Expenses $12,482,811 $75,049 $1,106,184 $2,367,021 $2,266,912 $4,950,509 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 742,140 232,861 (214,500) 2,572 1,217,066 1,082,343 1,322,524 $0 56,244 1,725,578 $31,950 597,282 173,806 214,500 23,374 397,702 116,293 3,264,342 71,556 $4,385,006 $1,781,822 $4,890,805 Total Expenses $6,262,153 8,640,771 4,728,098 102,405 297,715 2,226,514 1,463,859 8,980,130 1,604,474 $34,306,119 Georgia Southwestern State University Annual Financial Report FY 2008 28 Note 16. Component Units 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, 2008, the Foundation distributed $1,653,246 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Georgia Southwestern State University Business Office, 800 Georgia Southwestern State University Drive, Americus, GA 31709. Investments for Component Units: Georgia Southwestern Foundation holds endowment and other investments in the amount of $24.6 million. The corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. M oney M arket Accounts Certificates of Deposit Corporate Bonds & Fixed Income Funds Equity Securities & Funds Cost $1,066,144 2,045,953 2,023,991 18,636,412 Fair Value $1,066,144 2,045,953 2,010,197 19,501,176 Total Investments $23,772,500 $24,623,470 Georgia Southwestern State University Annual Financial Report FY 2008 29 Capital Assets for Component Units: Georgia Southwestern Foundation, Inc. holds the following Capital Assets as of June 30, 2008: 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, 2008 $131,199 224,384 355,583 21,766,967 987,111 22,754,078 1,530,319 21,223,759 $21,579,342 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%. Longterm liability activity for the year ended June 30, 2008 is as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable $27,233,914 $0 $254,020 $26,979,894 $65,000 Georgia Southwestern State University Annual Financial Report FY 2008 30 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $65,000 105,000 145,000 190,000 235,000 2,010,000 3,760,000 5,220,000 6,570,000 8,815,000 27,115,000 (135,106) $26,979,894 Bonds Payable Interest $1,274,108 1,271,508 1,267,308 1,261,507 1,253,907 6,073,617 5,492,738 4,495,212 3,151,881 1,232,050 26,773,836 $26,773,836 Total $1,339,108 1,376,508 1,412,308 1,451,507 1,488,907 8,083,617 9,252,738 9,715,212 9,721,881 10,047,050 53,888,836 (135,106) $53,753,730 Georgia Southwestern State University Annual Financial Report FY 2008 31 GEORGIA GWINNETT COLLEGE Financial Report For the Year Ended June 30, 2008 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 2008 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 .......................................................................................................... 19 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 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: FY2008 FY2007 Students Students Faculty (Headcount) (FTE) 103 788 695 22 118 76 Overview of the Financial Statements and Financial Analysis Georgia Gwinnett College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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. Georgia Gwinnett College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $6,316,433 58,890,305 65,206,738 June 30, 2007 $3,251,859 44,060,961 47,312,820 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,642,102 27,554,241 31,196,343 2,134,579 14,367,398 16,501,977 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 30,951,807 3,058,588 $34,010,395 29,216,838 1,594,005 $30,810,843 The total assets of the institution increased by $17,893,918. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,033,991 in Cash and Cash Equivalents and $14,829,344 in the category of Capital Assets, net. The total liabilities for the year increased by $14,694,366. The combination of the increase in total assets of $17,893,918 and the increase in total liabilities of $14,694,366 yields an increase in total net assets of $3,199,552. The increase in total net assets is in the categories of Invested in Capital Assets, net of debt, in the amount of $1,734,969 and Unrestricted Net Assets in the amount of $1,464,583. Georgia Gwinnett College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $3,539,008 24,783,440 (21,244,432) 22,067,191 822,759 2,376,793 3,199,552 30,810,843 0 30,810,843 $34,010,395 $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 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: Georgia Gwinnett College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Gift s Invest ment Income Other 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, 2008 $2,112,665 74,039 987,274 365,030 3,539,008 23,007,927 12,449 100,151 17,387 23,137,914 2,376,793 2,376,793 $29,053,715 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 2,939,953 $16,651,592 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Expenses Inst ruct ion Academ ic Support St udent Services Inst it ut ional Support P lant Operations and Maint enance 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, 2008 $9,813,577 3,143,845 1,508,238 8,138,105 1,629,343 550,332 0 24,783,440 1,070,723 $25,854,163 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 Operating revenues increased by $1,162,421 in fiscal 2008. During FY 2008, Georgia Gwinnett College increased its student count to nearly 800 students, which significantly increased operating revenues for both tuition and fee revenue. The Auxiliary revenue is a result of the parking fee charged to all students attending classes on campus. This fee will pay for a new parking deck that opened in fiscal year 2008. Other Georgia Gwinnett College Annual Financial Report FY 2008 4 Auxiliary revenue includes Dining Dollars. In addition, the College receives income from the Bookstore that is currently outsourced. Nonoperating revenues increased by $11,802,862 for the year primarily due to an increase of $12,064,379 in State Appropriations. The compensation and employee benefits category increased by $10,494,815 and primarily affected the Instruction, Academic Support, and Institutional Support categories. The increase reflects the addition of staff and faculty members hired by Georgia Gwinnett College and the corresponding increase to benefits. Utilities increased by $327,059 during the past year. The increase was primarily associated with the addition of new buildings and a Parking Deck and a general increase in utility costs that affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by Georgia Gwinnett College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($17,323,547) 23,191,743 (2,934,356) 100,151 3,033,991 2,801,004 $5,834,995 June 30, 2007 ($7,416,483) 11,169,190 (2,462,467) 71,873 1,362,113 1,438,891 $2,801,004 Capital Assets The College had two significant capital asset additions in fiscal year 2008. Phase II to Academic Building C was completed. The Academic building will provide much needed classroom and Georgia Gwinnett College Annual Financial Report FY 2008 5 office space for the campus. This addition was funded by the Georgia State Financing and Investment Commission (GSFIC). The second significant capital addition was a Parking Deck that was funded by GGC Real Estate Parking I, LLC, a related party. 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 Gwinnett College had Long-Term Debt and Liabilities of $28,543,895 of which $989,654 was reflected as current liability at June 30, 2008. 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 FY2008. The Georgia Gwinnett College Foundation does not meet the criteria to consider it significant for component unit reporting at this time. Economic Outlook Georgia Gwinnett College recently received its Candidacy for the Southern Association of Colleges and Schools (SACS). GGC will continue working with the (SACS) on the accreditation process. This will consist of a thorough review of academic, administrative, and financial components of the College. Accreditation standards for a new institution are particularly stringent. The requirements can be seen by the progressive steps of candidacy, initial accreditation, five year reaccreditation and accreditation of each substantive change. Only after this time period does an institution go on the standard ten year cycle. The standards involve maintaining sufficient funding for academic programs, faculty, library resources and technology. It is essential that GGC demonstrate solid on-going financial footing to support its needs and growth as we are completing the accreditation process. College administrators recognize this process to be vital to future enrollment and success; therefore, substantial resources and efforts will be dedicated toward achievement of the various milestones of accreditation. As Georgia Gwinnett College continues to grow, it 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 all levels, 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 two extremely successful years of fundraising and operation. Georgia Gwinnett College Annual Financial Report FY 2008 6 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 Investment and Financing 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. Additionally, the Georgia State Financing and Investment Commission (GSFIC), with the approval of the Georgia legislature, financed the second phase of the academic building C. The funding was provided by General Obligation bonds issued by the State of Georgia. Phase II was completed in fall 2007 and provided 24,000 additional square feet of space for classrooms and faculty offices. At the end of fiscal year 2008, construction costs financed by GSFIC totaled slightly over $5 million. In addition the College completed 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 FY 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. As a new and rapidly growing institution, GGC is at a different stage of life than is any other USG institution, and has unique budget considerations, constraints and requirements. Operating new facilities, educating thousands of additional students and supporting corresponding increases in faculty require sizable incremental budgets. 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 personnel and administrative resources necessary to meet the anticipated demand for student enrollment from the community. 2008-2009 will be an exciting time for Georgia Gwinnett College. 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 2008 7 Statement of Net Assets GEORGIA GWINNETT COLLEGE STATEMENT OF NET ASSETS June 30, 2008 AS S ETS Current Assets Cash and Cash Equivalent s Account s Receivable, net (not e 3) 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 tie 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 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 Li abil iti e s Lease P urchase Obligat ions (noncurrent ) Compensat ed Absences (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt Unrest rict ed TO TAL NET AS S ETS June 30, 2008 $5,834,995 479,448 1,990 6,316,433 58,890,305 58,890,305 65,206,738 1,349,565 7,858 1,124,766 26,877 143,382 657,902 331,752 3,642,102 27,280,596 273,645 27,554,241 31,196,343 30,951,807 3,058,588 $34,010,395 Georgia Gwinnett College Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA GWINNETT COLLEGE S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 REVENUES June 30, 2008 Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Sales and Services Rents and Royalt ies Auxiliary Ent erprises Bookst ore 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 Benefits Ot her P ersonal Services T ravel Ut ilit ies 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 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 $2,136,338 (23,673) 74,039 258,376 133,839 777,950 75,485 106,654 3,539,008 6,348,618 7,153,276 3,024,920 112 206,196 884,300 5,289,580 1,876,438 24,783,440 (21,244,432) 23,007,927 12,449 100,151 (1,070,723) 17,387 22,067,191 822,759 2,376,793 2,376,793 3,199,552 30,810,843 0 30,810,843 $34,010,395 Georgia Gwinnett College Annual Financial Report FY 2008 9 Statement of Cash Flows GEORGIA GWINNETT COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 C ASH FLO W S FRO M O PERATING AC TIVITIES T uition and Fees Grant s and Cont ract s (Exchange) Sales and Services Payment s t o Suppliers Payment s t o Employees Auxiliary Ent erprise Charges: Bookst ore Food Services Parking/T ransport at ion Ot her Organizat ions Ot her Receipt s (payment s) Net Cash Provided (used) by Operat ing Act ivit ies C ASH 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 Purposes Ot her Nonoperat ing Receipt s Net Cash Flows Provided by Non-capit al Financing Act ivit ies C ASH FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received Purchases of Capit al Asset s Principal Paid on Capit al Debt and Leases Int erest Paid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C ASH FLO W S FRO M INVESTING AC TIVITIES Int erest on Invest ment s Net Cash Provided (used) by Invest ing Activities Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year REC O NC ILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING AC TIVITIES: Operat ing Income (loss) Adjust ment s t o Reconcile Net Income (loss) t o Net Cash Provided (used) by Operating Act ivit ies Depreciat ion Change in Assets and Liabilit ies: Receivables, net Prepaid It ems Account s Payable Deferred Revenue Ot her Liabilit ies Compensat ed Absences Net Cash Provided (used) by Operat ing Act ivit ies ** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS Fixed asset s acquired by incurring capit al lease obligat ions Int erest on capit al lease obligat ions paid by St at e Agency on behalf of College Georgia Gwinnett College Annual Financial Report FY 2008 10 June 30, 2008 $2,243,549 116,020 74,039 (8,854,426) (13,199,783) 133,839 1,078,821 793,169 92,270 198,955 (17,323,547) 23,007,927 142,566 41,087 163 23,191,743 2,376,793 (3,936,346) (624,945) (749,858) (2,934,356) 100,151 100,151 3,033,991 2,801,004 $5,834,995 ($21,244,432) 1,876,438 (70,193) 610 802,618 1,111,024 (132,041) 332,429 ($17,323,547) $13,719,320 $320,865 GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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. 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. 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/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. Georgia Gwinnett College Annual Financial Report FY 2008 12 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. 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 $272,969 as of 7-1-2007. For FY2008, $491,526 was earned in compensated absences and employees were paid $159,098, for a net increase of $332,428. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $605,397. Noncurrent Liabilities Noncurrent liabilities include liabilities that will not be paid within the next fiscal year; and capital lease obligations with contractual maturities greater than one year. Net Assets The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Georgia Gwinnett College Annual Financial Report FY 2008 13 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, 2008 $1,781,497 1,277,091 $3,058,588 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 scholarship allowances and (2) sales and services of auxiliary enterprises, net of scholarship allowances. 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's 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. The College currently does not receive any Government grants, such as Pell grants or other Federal grants. Georgia Gwinnett College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $5,834,995 and the bank balance was $6,259,324. Of the College's deposits, $6,259,324 were uninsured. Of these uninsured deposits, $6,259,324 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. B. Investments Georgia Gwinnett College had no investments at June 30, 2008. Georgia Gwinnett College Annual Financial Report FY 2008 15 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Other Less Allowance for Doubt ful Account s Net Account s Receivable $6,784 472,664 479,448 0 $479,448 Note 4. Inventories Georgia Gwinnett College had no inventories at June 30, 2008. Note 5. Notes/Loans Receivable Georgia Gwinnett College had no Notes or Loans receivable as of June 30, 2008. Georgia Gwinnett College Annual Financial Report FY 2008 16 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $1,577,599 1,577,599 Re du cti on s $5,371,047 5,371,047 5,586,534 558,362 13,719,320 646,264 20,510,480 154,142 77,384 231,526 679,671 548,611 525,182 122,974 1,876,438 18,634,042 $20,211,641 142,891 77,385 220,276 11,250 $5,382,297 En di n g B al an ce 6/30/2008 $0 0 30,784,040 1,860,765 30,999,124 1,732,957 65,376,886 2,605,710 1,446,160 2,069,568 365,143 6,486,581 58,890,305 $58,890,305 Georgia Gwinnett College Annual Financial Report FY 2008 17 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $224,766 900,000 $1,124,766 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $14,844,123 Additions $13,719,320 Reductions Ending Balance June 30, 2008 $624,945 $27,938,498 Other Liabilities Compensated Absences Total 272,969 272,969 491,526 491,526 159,098 159,098 605,397 605,397 Total Long Term Obligations $15,117,092 $14,210,846 $784,043 $28,543,895 Current Portion $657,902 331,752 331,752 $989,654 Note 9. Significant Commitments The College executed two rental agreements with a related party during fiscal 2008 for a Student Services building and a Student Recreation center. Both rental agreements commence in fiscal 2009 and expire in fiscal 2032. The present value of the minimum lease payments for each rental agreement is approximately $7.8 million and $6.2 million, respectively. These amounts are not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Georgia Gwinnett College is obligated under two capital leases for the acquisition of real property. CAPITAL LEASES Georgia Gwinnett College has two capital leases payable in monthly and semi-annual installments with the terms expiring in fiscal 2023 and 2032. Expenditures for fiscal year 2008 were $1,695,668, of which $1,070,723 represented interest expense. Principal paid on capital leases was $624,945. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Georgia Gwinnett College Annual Financial Report FY 2008 18 Buildings $28,929,556 Future commitments for capital leases as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 T ot al m inim um lease paym ent s Less: Int erest Less: Execut ory cost s 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 $2,091,839 2,093,384 2,109,976 2,510,933 2,543,295 12,200,042 11,936,164 5,964,608 4,764,196 46,214,437 16,502,970 1,772,969 $27,938,498 Georgia Gwinnett College's FY2008 expense for rental of real property and equipment under operating leases was $0. 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 2008, 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: Georgia Gwinnett College Annual Financial Report FY 2008 19 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $507,371 $265,393 $64,331 Employees' Retirement System of Georgia Plan Description Georgia Gwinnett 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 Georgia Gwinnett College Annual Financial Report FY 2008 20 the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2008, for employees covered by ERS was $78,200. The College's total payroll for all employees was $13,501,894. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $8,141 $0 $0 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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. Georgia Gwinnett College Annual Financial Report FY 2008 21 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $554,490 (8.13% or 8.15%) and $340,570 (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 2008 amounted to $38,487 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 2008 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 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 expenditure that is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Gwinnett College expects such amounts, if any, to be immaterial to its overall financial position. Georgia Gwinnett College Annual Financial Report FY 2008 23 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, 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 2008 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: Natural Classification F acult y St aff B en efit s Personal Services T ravel U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion $6,250,011 88,167 1,436,146 54,185 63,394 836,911 1,084,763 $9,813,577 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $96,000 2,030,901 480,780 $0 1,078,916 271,606 37,199 7,136 302,748 189,081 23,012 134,704 $3,143,845 $1,508,238 Inst it ut ional Sup p o r t $2,607 3,762,799 775,672 112 90,932 271,970 3,244,352 (10,339) $8,138,105 Natural Classification F acult y St aff B en efit s Personal Services T ravel 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 FY2008 A ux ilia r y Ent erprises Unallocat ed E x p en se s $0 $0 $0 180,574 11,919 60,533 183 868 541,800 832,275 13,293 303,310 234,920 (364,720) 364,720 $1,629,343 $550,332 $0 T otal E x p en se s $6,348,618 7,153,276 3,024,920 112 206,196 884,300 5,289,580 1,876,438 $24,783,440 Georgia Gwinnett College Annual Financial Report FY 2008 25 KENNESAW STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Kennesaw State University Atlanta, Georgia Dr. Daniel S. Papp , Ph.D. President Dr. Ashok Roy, Ph.D., CIA, CBA Asst. Vice President Financial Services Dr. Randy Hinds, Ed.D. Vice President Operations Susan Dalton, MBA, CPA Controller KENNESAW STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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 .............................................................................................. 25 Note 12. Risk Management............................................................................................. 28 Note 13. Contingencies................................................................................................... 29 Note 14. Post-Employment Benefits Other Than Pension Benefits ............................... 29 Note 15. Natural Classifications with Functional Classifications .................................. 31 Note 16. Component Units ............................................................................................. 32 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) FY2008 748 20,607 18,076 FY2007 710 19,854 17,183 FY2006 629 18,556 15,931 Overview of the Financial Statements and Financial Analysis Kennesaw State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $51,701,646 198,322,542 4,450,970 254,475,158 June 30, 2007 $46,138,698 171,488,933 4,734,442 222,362,073 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 33,310,061 64,405,470 97,715,531 25,556,900 50,830,198 76,387,098 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 134,149,719 763,115 2,985,355 18,861,438 $156,759,627 122,398,041 787,991 3,177,009 19,611,934 $145,974,975 The total assets of the institution increased by $32,113,085. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $26,833,609 in the category of Capital Assets, net. The balance of the increase is mainly in cash. The total liabilities for the year increased by $21,328,433. The combination of the increase in total assets of $32,113,085 and the increase in total liabilities of $21,328,433 yields an increase in total net assets of $10,784,652. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $11,751,678. Kennesaw State University Annual Financial Report FY 2008 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 non-operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed June 30, 2008 June 30, 2007 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 $113,903,454 195,654,451 (81,750,997) 83,495,302 1,744,305 9,040,347 10,784,652 145,974,975 0 145,974,975 $156,759,627 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $66,144,896 16,069,649 5,865,519 24,962,597 860,793 113,903,454 82,056,394 2,567,675 1,189,848 1,393,424 (13,301) 87,194,040 7,924,687 1,115,660 9,040,347 $210,137,841 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $82,827,889 950,601 3,866,424 21,123,134 10,882,590 28,967,810 19,003,180 8,018,266 20,014,557 195,654,451 3,698,738 $199,353,189 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 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 Kennesaw State University Annual Financial Report FY 2008 4 Operating revenues increased by $14,349,202 in fiscal 2008, reflecting an increase in Tuition and Fees, Grants and Contracts, and Auxiliary enterprises. The increase in tuition and fees was attributable to a 7% increase in tuition rates and a 4% increase in enrollment. The Auxiliary revenue increase was $2, 935, 441, with the largest dollar increase being in Parking and Intercollegiate Athletics. Non-operating revenues increased by $4,510,036 for the year primarily due to an increase of $7,025,900 in State Appropriations. The compensation and employee benefits category increased by $12,850,840. 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 $516,238 during the past year. The increase was primarily associated with the increased electricity usage due to new space, affecting 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($63,911,388) 88,145,012 (15,374,234) 1,765,340 10,624,730 24,476,658 $35,101,388 June 30, 2007 ($68,757,661) 80,769,952 (7,726,646) 499,886 4,785,531 19,691,127 $24,476,658 Kennesaw State University Annual Financial Report FY 2008 5 Capital Assets Kennesaw State University had $36 million in capital asset additions in fiscal year 2008, of which $7.5 million was funded by the Georgia State Financing and Investment Commission (GSFIC), primarily for completion of the Performance Hall. The University also entered into three new capital leases with the Foundation. The leases added $17.2 million to capital assets for KSU Center and additional space in Chastain Pointe and Town Point. 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 $69,834,641 of which $5,429,171 was reflected as current liability at June 30, 2008. 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 FY2008. Kennesaw State University Foundation, Inc. had investments of $25.5 million as of June 30, 2008. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook At this time, like all public universities, the University is facing budgetary pressures emanating from the current economic downturn being experienced in the State and the nation. While the University's overall current financial position appears strong, the University will maintain a close watch over resources to address the University's ability to react to any predicted shortfalls in the State's budget. Although the scale of the challenges presented by an uncertain economic environment is great, in our opinion, the University is positioned to meet these challenges. Dr. Daniel S. Papp, President Kennesaw State University Kennesaw State University Annual Financial Report FY 2008 6 Statement of Net Assets K EN N ES A W 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, 2008 A S S ETS C u rre n t A sse ts C a sh a n d C a sh E quiv a le n t s Sh o rt -t e rm In v e st m e n t s A c c o un t s R e c e iv a ble , n e t (n o t e 3 ) R e c e iv a ble s - F e de ra l F in a n c ia l A ssist a n c e R e c e iv a ble s - O t h e r D ue F ro m C o m p o n en t U n it s L e a se s R e c e iv a ble P le dge s R e c e iv a ble D ue F ro m P rim a ry G o v e rn m e n t In v e n t o rie s (n o t e 4 ) P re p a id it e m s O t h er A sset s T o t al C urren t A sset s N o n cu rre n t A sse ts N o n curren t C ash In v e st m e n t s (in cludin g R e al E st at e ) N o t e s R e c eiv a ble , n e t L e a se s R e c e iv a ble P le dge s R e c e iv a ble C ap it a l 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 Lia bilitie s A c c o un t s P a y a ble Sa la r ie 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 R ev en ue (n o te 7 ) O t h e r L ia bilit ie s D e p o sit s H e ld fo r O t h e r O rga n iz a t io n s D ue t o P rim a ry Go v e rn m e n t L e a se P urc h a se O bliga t io n s (c urre n t p o rt io n ) C o m p e n sa t e d A bse n ce s (c urre n t p o rt io n ) R e v e n ue /M o rt ga ge B o n ds P a y a ble (c urre n 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 e n t U n it s N o t e s a n d L o a n s P a y a ble (c urre n t p o rt io n ) T o t a l C urre n t L ia bilit ie s N o n cu rre n t Lia bilitie s L e a se P urc h a se O bliga t io n s (n o n c urre n t ) D eferred R ev 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 e n ue /M o rt ga ge B o n ds P a y a ble (n o n c urre n 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 ) T o t a l N o n c urre n t L ia bilit 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 sse t s, n e t o f re la t e d de bt R est rict e d fo r N o n e x p e n da ble E x p e n da ble U n re st ric t e d TO TA L N ET A S S ETS K e n n e sa w S ta te U n ive rs ity $ 3 4 ,8 9 5 ,3 4 5 3 ,0 0 0 ,0 0 0 2 ,0 6 0 ,7 0 8 4 ,8 9 6 ,3 7 8 1 ,0 9 4 ,1 7 9 1 ,1 8 9 ,1 1 0 4 ,5 6 5 ,9 2 6 5 1 ,7 0 1 ,6 4 6 2 0 6 ,0 4 3 3 ,8 7 5 ,1 0 0 3 6 9 ,8 2 7 1 9 8 ,3 2 2 ,5 4 2 2 0 2 ,7 7 3 ,5 1 2 2 5 4 ,4 7 5 ,1 5 8 5 ,6 8 1 ,9 8 4 4 2 0 ,3 5 2 7 5 7 ,5 0 4 1 6 ,6 0 3 ,0 0 8 4 ,2 0 0 ,7 5 4 2 ,1 7 2 ,7 6 4 3 ,2 5 6 ,4 0 7 2 1 7 ,2 8 8 3 3 ,3 1 0 ,0 6 1 6 2 ,0 0 0 ,0 5 9 2 ,4 0 5 ,4 1 1 6 4 ,4 0 5 ,4 7 0 9 7 ,7 1 5 ,5 3 1 1 3 4 ,1 4 9 ,7 1 9 7 6 3 ,1 1 5 2 ,9 8 5 ,3 5 5 1 8 ,8 6 1 ,4 3 8 $ 1 5 6 ,7 5 9 ,6 2 7 C om pon e n t U n it K e n n e sa w S ta te U n ive rs ity Fo u n d a ti o n , In c. $ 2 ,6 1 2 ,4 4 4 6 6 1 ,2 2 7 6 ,0 1 9 ,5 7 5 7 7 7 ,5 2 8 2 1 7 ,2 8 8 9 5 8 ,8 3 1 2 7 0 ,4 3 0 1 1 ,5 1 7 ,3 2 3 5 1 ,2 1 8 ,0 6 8 2 5 ,5 0 6 ,2 6 4 9 9 ,6 6 6 ,2 2 2 1 ,4 3 7 ,6 3 7 1 5 3 ,9 3 9 ,0 8 8 8 ,9 5 3 ,0 6 6 3 4 0 ,7 2 0 ,3 4 5 3 5 2 ,2 3 7 ,6 6 8 7 ,2 6 2 ,9 7 0 5 ,3 1 1 ,6 2 6 6 2 ,6 8 6 4 ,8 3 8 ,9 1 0 5 4 8 ,5 4 8 1 ,0 9 4 ,1 7 9 4 ,4 0 0 ,0 0 0 2 0 ,0 1 2 5 6 1 ,2 9 4 2 4 ,1 0 0 ,2 2 5 4 1 ,8 2 1 ,7 4 1 2 6 5 ,9 9 9 ,2 1 3 1 8 3 ,8 6 0 3 0 8 ,0 0 4 ,8 1 4 3 3 2 ,1 0 5 ,0 3 9 2 ,8 8 6 ,8 0 3 1 7 ,6 7 5 ,0 5 3 6 ,0 4 1 ,2 9 5 (6 ,4 7 0 ,5 2 2 ) $ 2 0 ,1 3 2 ,6 2 9 Kennesaw State University Annual Financial Report FY 2008 7 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, 2008 Ke n n e saw S tate Un i ve rs i ty REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou 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 Rents 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 Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Kennesaw St at e Universit y T ot al Operat ing Expenses Operat ing Income (loss) $74,445,923 (8,301,027) 13,633,476 1,819,760 616,413 5,865,519 65,323 898,580 8,730,690 446,463 5,641,742 2,140,912 5,981,904 1,122,306 795,470 113,903,454 53,296,278 51,136,752 25,157,556 408,245 2,389,370 10,028,743 4,138,851 39,939,216 9,159,440 195,654,451 (81,750,997) C om pone nt Unit Ke n n e saw S tate Un i ve rs i ty Fou n dati on , In c. $0 3,538,262 125,902 97,000 19,647,185 23,408,349 1,962,795 57,384 1,737,093 4,756,855 3,171,627 4,662,283 16,348,037 7,060,312 Kennesaw State University Annual Financial Report FY 2008 8 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, 2008 Ke n n e saw S tate Un i ve rs i ty C om pone nt Unit Ke n n e saw S tate Un i ve rs i ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or los Capital Grants and Gifts St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 82,056,394 1,554,108 3,788 1,009,779 1,189,848 1,393,424 (3,698,738) (13,301) 83,495,302 1,744,305 7,924,687 1,115,660 9,040,347 10,784,652 145,974,975 0 145,974,975 $156,759,627 (8,604,837) (8,604,837) (1,544,525) 3,052,369 3,052,369 1,507,844 18,624,785 0 18,624,785 $20,132,629 Kennesaw State University Annual Financial Report FY 2008 9 Statement of Cash Flows KENNES AW S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 m ent s Int erest on 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, 2008 $67,012,120 15,924,017 5,865,519 (66,228,008) (103,930,310) (10,028,743) (274,939) 309,687 1,120,060 8,512,479 449,066 6,404,752 2,224,551 6,032,227 1,141,726 1,554,408 (63,911,388) 82,056,394 1,879,601 4,209,017 88,145,012 2,663,715 29,853 (12,253,494) (2,115,570) (3,698,738) (15,374,234) 278,838 1,486,502 1,765,340 10,624,730 24,476,658 $35,101,388 Kennesaw State University Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued KENNES AW S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 ($81,750,997) 9,159,440 198,462 (166,546) 4,828,961 34,748 1,459,671 1,607,737 215,074 502,062 ($63,911,388) $17,197,501 ($93,078) ($6,376,632) Kennesaw State University Annual Financial Report FY 2008 11 KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Kennesaw State University is reporting the activity for the Kennesaw 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 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 Kennesaw State University Annual Financial Report FY 2008 12 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'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 intraUniversity transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, and the Board of Regents Total Return Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made Kennesaw State University Annual Financial Report FY 2008 13 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. 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, 2008, GSFIC transferred capital additions valued at $10.9 million to Kennesaw State University, of which $4.5 million had previously been deposited by the University with GSFIC. 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. Kennesaw State University Annual Financial Report FY 2008 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. Kennesaw State University had accrued liability for compensated absences in the amount of $5,159,755 as of 7-1-2007. For FY2008, $3,921,873 was earned in compensated absences and employees were paid $3,419,810, for a net increase of $502,063. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $5,661,818. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as non-current assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed 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, 2008 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 $229,112 376,424 108,772 2,271,047 $2,985,355 Kennesaw State University Annual Financial Report FY 2008 15 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $1,591,586 7,663,494 9,606,358 $18,861,438 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Kennesaw State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Kennesaw State University Annual Financial Report FY 2008 16 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. 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, 2008, the carrying value of deposits was $24,021,145 and the bank balance was $26,068,669. Of the University's deposits, $25,968,669 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 $23,068,669 were uncollateralized. Kennesaw State University Annual Financial Report FY 2008 17 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities M utual Bond Fund Fair Value Investment Maturity 1-5 Years 6-10 Years $916,598 $458,299 $458,299 Other Investments Equity M utual Funds Investment Pools Board of Regents Short-Term Fund Legal Fund Balanced Income Fund Total Return Fund Total Investments 1,649,575 13,964,243 1,079,647 149,118 80,162 $17,839,343 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 1.99 years. Of the University's total investment of $13,964,243 in the Short Term Fund, $13,908,387 is invested in debt securities. Kennesaw State University Annual Financial Report FY 2008 18 The Weighted Average Maturity of the Legal Fund is 3.84 years. Of the University's total investment of $1,079,647 in the Legal Fund, $1,069,930 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the University's total investment of $149,118 in the Balanced Income Fund, $95,883 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the University's total investment of $80,162 in the Total Return Fund, $25,331 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 investments subject to credit quality risk are reflected below: Related Debt Investments M utual Bond Fund Fair Value U nrat ed $916,598 $916,598 $916,598 $916,598 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, 2008, $381,915 or 2% of Kennesaw State University's investments were invested in international equity mutual funds. Due to the diversity of the fund portfolios and the immateriality of these investments compared to total investments, the University does not consider there to be any significant foreign currency risk. The University does not have a formal policy for managing exposure to foreign currency risk. Kennesaw State University Annual Financial Report FY 2008 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $1,023,375 410,577 2,060,708 546,055 1,094,179 3,650,618 8,785,512 734,247 $8,051,265 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Health Clinic T otal $1,146,102 43,008 $1,189,110 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0. Kennesaw State University Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 522,475 3,256,214 3,778,689 Re du cti on s $0 1,383,864 1,383,864 En di n g B al an ce 6/30/2008 $5,334,656 2,786,656 4,207,678 12,328,990 1,260,415 11,125,483 445,351 3,312,890 17,197,501 244,738 55,000 33,641,378 1,205,868 2,200 1,208,068 3,288,747 145,521,209 4,685,493 14,929,422 69,306,005 19,790,817 967,400 258,489,093 101,370 3,365,803 108,012 1,503,194 3,163,274 894,175 23,612 9,159,440 24,481,938 $28,260,627 1,162,714 2,200 1,164,914 43,154 $1,427,018 1,185,940 32,948,318 2,316,989 8,654,310 10,884,219 16,141,063 364,702 72,495,541 185,993,552 $198,322,542 Kennesaw State University Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $12,326,592 4,276,416 $16,603,008 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2007 $49,090,892 Additions $17,197,501 Re du cti on s Ending Balance June 30, 2008 $2,115,570 $64,172,823 Other Liabilities Compensated Absences T ot al 5,159,755 5,159,755 3,921,873 3,921,873 3,419,810 3,419,810 5,661,818 5,661,818 Total Long Term Obligations $54,250,647 $21,119,374 $5,535,380 $69,834,641 Current Portion $2,172,764 3,256,407 3,256,407 $5,429,171 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $2,665,780 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. Note 10. Lease Obligations Kennesaw 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 2019 and 2030. Expenditures for fiscal year 2008 were $6.2 million of which $3.7 million represented interest and $0.4 million represented executory costs. Total principal paid on capital leases was $2.1 million for the fiscal year ended June 30, 2008. Interest rates range from 5.50 percent to 9.14 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Kennesaw State University Annual Financial Report FY 2008 22 Land Buildings Total Assets Held Under Capital Lease $1,814,402 58,421,787 $60,236,189 All capital leases are for one-year terms and provide for renewal options covering the remaining term. Non-renewal is considered a remote possibility. Most of the leases indicate that the property will be donated to the University at the end of the lease term. Kennesaw State University had nine 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, 2008 on this capital lease is $3,587,583. 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, 2008 on this capital lease is $20,210,105. 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 percent 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 percent bringing the value of the lease to $4,326,537. In September 2007, the University entered into a capital lease at 5.5 percent for additional space in the complex, bringing the value of the lease to $6,232,158. The outstanding liability at June 30, 2008 on these capital leases is $5,841,323. 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, 2008 on this capital lease is $147,201. 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 Kennesaw State University Annual Financial Report FY 2008 23 September 2004. At the expiration of the ground lease, ownership of the parking deck transfers to the University. The outstanding liability at June 30, 2008 on this capital lease is $13,163,798. 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. In July 2007, January 2008, April 2008, and May 2008 the University entered into additional capital leases at 8.22 percent for additional space in the complex, bringing the value of the lease to $7,955,987. The outstanding liability at June 30, 2008 on these capital leases is $7,743,675. 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, 2008 on this capital lease is $1,723,100. 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 for a twenty-three year period that expires June 30, 2030. 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, 2008 on this capital lease is $956,448. In July 2007, the University entered into a capital lease for an office/classroom building of $11,493,855 at 7.09 percent whereby the University leases a portion of a building for a twelve year period that expires June 30, 2019. The outstanding liability at June 30, 2008 on this capital lease is $10,799,590. OPERATING LEASES Kennesaw State University's noncancellable operating lease was amended during Fiscal Year 2008 and was classified as a capital lease. 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, 2008, were as follows: Kennesaw State University Annual Financial Report FY 2008 24 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 roperty and Equipm ent Capit al Leases $6,489,584 6,487,185 6,487,488 6,487,092 6,484,723 32,394,487 26,613,253 21,488,525 4,408,816 117,341,153 43,195,619 9,972,711 $64,172,823 Kennesaw State University had no expense for rental of real property and equipment under operating leases in FY2008. Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Kennesaw State University 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 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 2008, 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: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $4,662,513 $4,117,654 $3,772,319 Kennesaw State University Annual Financial Report FY 2008 25 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. 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, 2008, for employees covered by ERS was $31,977. The University's total payroll for all employees was $104,433,030. For the year ended June 30, 2008 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. Kennesaw State University Annual Financial Report FY 2008 26 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $3,505 $2,820 $566 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts or invest in mutual funds 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 or based on their account balance at the time of distribution. 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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. Kennesaw State University and the covered employees made the required contributions of $3,303,609 (8.13% or 8.15%) and $2,029,151 (5%), respectively. Kennesaw State University Annual Financial Report FY 2008 27 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 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 2008 amounted to $479,910 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 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 Kennesaw State University Annual Financial Report FY 2008 28 different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Kennesaw State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a SelfInsurance 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, 2008. Note 14. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-331, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System Kennesaw State University Annual Financial Report FY 2008 29 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 255 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Kennesaw State University recognized as incurred $1,213,160 of expenditures, which was net of $389,272 of participant contributions. Kennesaw State University Annual Financial Report FY 2008 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $49,637,402 9,547,955 12,676,005 1,147,139 386,860 319,658 8,866,974 245,896 $82,827,889 Research $280,653 364,422 64,000 25,638 0 259 213,878 1,751 $950,601 Functional Classification FY2008 Public Service Academic Support Student Services Institutional Support $431,167 1,925,564 508,875 178,108 4,900 36,626 773,372 7,812 $2,425,225 9,984,144 2,760,741 376,017 400 122,722 4,341,613 1,112,272 ($15,657) 6,618,970 1,528,477 138,417 23,274 85,013 2,283,575 220,521 $41,841 14,632,833 5,504,558 410,794 242,050 1,200 192,384 6,930,303 1,011,847 $3,866,424 $21,123,134 $10,882,590 $28,967,810 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 4,151,494 1,130,760 (104,822) 28,108 3,228,435 5,261,809 5,307,396 $0 8,018,266 $495,647 3,911,370 984,140 102,273 253,893 1,593,843 153,754 11,267,692 1,251,945 $53,296,278 51,136,752 25,157,556 408,245 2,389,370 10,028,743 4,138,851 39,939,216 9,159,440 $19,003,180 $8,018,266 $20,014,557 $195,654,451 Kennesaw State University Annual Financial Report FY 2008 31 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, 2008, the Foundation distributed $4,662,283 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 $25.5 million. The $14.1 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Kennesaw State University Foundation, Inc., in conjunction with the donors, has established a spending plan whereby 4% of the 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, 2008: Cost Fair Value Money Market Accounts Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Ventures/Partnerships $1,037,701 5,993,073 2,546,066 15,892,885 2,735,816 20,304 $1,037,701 5,373,354 2,537,368 13,682,852 2,863,007 11,982 Total Investments $28,225,845 $25,506,264 Kennesaw State University Annual Financial Report FY 2008 32 Capital Assets for Component Units: Kennesaw State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 M achinery and Equipment Total Capital Assets being Depreciated Less Total Accumulated Depreciation Total Capital Assets being Depreciated, Net Capital Assets, Net $6,006,139 68,492,095 74,498,234 90,546,722 3,654,007 94,200,729 14,759,875 79,440,854 $153,939,088 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities Beginning Balance July 1, 2007 $223,884 2,220,615 181,790,167 0 $184,234,666 Additions $0 561,294 93,123,701 548,548 $94,233,543 Reductions $20,012 2,220,615 4,514,655 $6,755,282 Ending Balance June 30, 2008 $203,872 561,294 270,399,213 548,548 $271,712,927 Amounts due within One Year $20,012 561,294 4,400,000 548,548 $5,529,854 Notes and Loans Payable During the year ending June 30, 2008, the Foundation entered into an unsecured line of credit of $5,000,000 with a financial institution to provide interim financing for new dining hall construction. The line of credit bears interest at the 30 day LIBOR plus 1.5% (3.96% at June 30, 2008) and matures April 2009. The line of credit balance was $561,294 at June 30, 2008. Kennesaw State University Annual Financial Report FY 2008 33 Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 Principal Notes and Loans Payable Interest $561,294 $561,294 $18,000 $18,000 Total $579,294 $579,294 Revenue Bonds Payable During the year ending June 30, 2004, the Foundation assumed Educational Facilities Revenue Bonds, Series 1998, issued by the Development Authority of Cobb County. The Series 1998 bonds were issued to finance the acquisition of an existing facility. The Foundation assumed the bonds in conjunction with acquiring the property that the bonds originally financed. The obligations of the Foundation under the bond documents are nonrecourse obligations. The bonds were issued in the aggregate amount of $15,990,000 and will mature in August 2031, subject to mandatory and optional redemption provisions. The bonds bear interest payable on the first business day of each month at a variable interest rate determined weekly. Interest accrues at the weekly rate until converted to another variable rate or the fixed rate in accordance with the terms of the Indenture. The outstanding principal obligation on the Series 1998 bond issue was $10,865,000 at June 30, 2008. When the Foundation assumed the 1998 Series bonds, they also assumed an interest-rate swap transaction that was entered into originally to convert a portion of its variable-rate bond obligations to fixed rates. A liability from interest-rate swap transactions of $548,548 has been recorded as of June 30, 2008 and is reported in Other Liabilities on the Statement of Net Assets. When the Foundation assumed the 1998 Series bonds, they also assumed a forward purchase agreement that was entered into originally to produce a guaranteed yield to the trustee. A receivable from forward purchase agreement transactions of $270,430 has been recorded as of June 30, 2008 and is reported in Other Assets on the Statement of Net Assets. During the year ended June 30, 2005, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2004 bonds were issued in the aggregate principal amount of $155,060,000. The bonds consist of six series and were issued to finance the cost of construction of 132 beds of new student housing, purchase and renovate the property known as "Chastain Pointe", refund the 2003A and 2003B bond series, including payment of swap termination fees, and finance or refinance certain parking facilities. The bonds bear interest payable semiannually at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. The outstanding principal obligations on the Series 2004 bond issues were $148,065,000 at June 30, 2008. During the year ended June 30, 2007, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2006A and B bonds were issued to repay an interim loan incurred to finance the acquisition of an office building on approximately 6.3 acres, Town Point, the acquisition of approximately 7.2 acres of unimproved land for future development, to pay the cost of issuance of the 2006 bonds and to pay a portion of the premium for a Kennesaw State University Annual Financial Report FY 2008 34 surety bond. The bonds were issued in the aggregate principal amount of $15,055,000. The Series 2006A bonds will mature in July 2031, subject to mandatory and optional redemption provisions. The Series 2006B bonds will mature in July 2013, subject to mandatory and optional redemption provisions. The bonds bear interest payable semiannually at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008, the applicable interest rates range from 4% to 5.34%. The outstanding principal obligations on the Series 2006 bond issues were $14,685,000 at June 30, 2008. During the year ended June 30, 2008, the Development Authority of Cobb County issued revenue bonds and loaned the proceeds to the Foundation. The Series 2007 bonds were issued to finance the costs of acquisition, construction and equipping of a parking deck containing approximately 2,500 parking spaces on land leased by KSU Central Parking Deck Real Estate Foundation, LLC, and to fund capitalized interest, debt service reserve, and pay a portion of the costs of issuance of the Series 2007 Parking Facilities Bonds. The bonds were issued in the aggregate amount of $38,550,000 and will mature in July 2038, subject to mandatory and optional redemption provisions. The bonds bear interest, payable semiannually, at a fixed interest rate set at issuance. Interest will accrue at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008, the applicable interest rates ranged from 4% to 4.75%. The outstanding principal obligation on the Series 2007 bond issue was $38,550,000 at June 30, 2008. During the year ended June 30, 2008, the Development Authority of Cobb County issued student housing revenue bonds and loaned the proceeds to the Foundation. The Series 2007A, B and C bonds were issued in the aggregate principal amount of $53,320,000 to finance the acquisition, construction, renovation, furnishing and equipping of student housing to be located on the campus of Kennesaw State University on land leased by Village II Real Estate Foundation, LLC, fund a debt service reserve, fund capitalized interest on the Series 2007 bonds, and pay all or a portion of the costs of issuing the Series 2007 bonds. The Series 2007 bonds will mature in July 2038, subject to mandatory and optional redemption provisions. The bonds bear interest, payable semiannually, at a fixed interest rate set at issuance. Interest accrues at the fixed rate until converted to another fixed rate in accordance with the terms of the Indenture. At June 30, 2008 the applicable interest rates ranged from 3.5% to 5.25%. The outstanding principal obligations on the Series 2007A, B and C bond issues were $53,320,000 at June 30, 2008. Kennesaw State University Annual Financial Report FY 2008 35 Annual debt service requirements to maturity for the bond issues detailed above are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $4,400,000 6,105,000 6,340,000 6,585,000 6,830,000 38,380,000 42,575,000 50,505,000 48,755,000 49,365,000 5,645,000 265,485,000 4,914,213 $270,399,213 Bonds Payable Interest $12,097,845 11,918,914 11,712,508 11,506,406 11,284,434 52,474,361 43,682,816 32,177,650 18,405,094 8,496,495 141,131 213,897,654 $213,897,654 Total $16,497,845 18,023,914 18,052,508 18,091,406 18,114,434 90,854,361 86,257,816 82,682,650 67,160,094 57,861,495 5,786,131 479,382,654 4,914,213 $484,296,867 Kennesaw State University Annual Financial Report FY 2008 36 MACON STATE COLLEGE Financial Report For the Year Ended June 30, 2008 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 2008 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. Subsequent Event ............................................................................................. 22 Note 12. Retirement Plans .............................................................................................. 22 Note 13. Risk Management............................................................................................. 25 Note 14. Contingencies................................................................................................... 26 Note 15. Post-Employment Benefits Other Than Pension Benefits ............................... 27 Note 16. Natural Classifications with Functional Classifications .................................. 28 Note 17. 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 new baccalaureate degrees in Early Childhood Education, Nursing, History and English. In June 2008, the Board of Regents granted approval to Macon State College to launch a bachelor of science in education with a major in middle grades starting fall semester 2009. The program will be the nation's first undergraduate degree to give students the opportunity to earn dual certification in general and special education to teach children in the fourth through eighth grades. 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 over 75% since its mission changed in 1996. Enrollment for fall semester 2007 continued to increase with a total enrollment of 6,464 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) FY2008 202 FY2007 199 FY2006 160 6,464 6,244 6,150 4,957 4,744 4,624 Overview of the Financial Statements and Financial Analysis Macon State College is proud to present its financial statements for fiscal year 2008. The emphasis of discussion 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 2008 and FY 2007. Macon State College Annual Financial Report FY 2008 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 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $9,034,883 57,980,212 1,141,074 68,156,169 June 30, 2007 $9,386,208 47,782,073 348,637 57,516,918 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,759,519 795,247 4,554,766 4,284,888 644,345 4,929,233 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 57,980,212 1,272,559 53,431 4,295,201 $63,601,403 47,782,073 1,360,993 53,431 3,391,188 $52,587,685 Macon State College Annual Financial Report FY 2008 2 The total assets of the institution increased by $10,639,251. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $10,198,139 in the category of Capital Assets, net. The total liabilities for the year decreased by ($374,467). The combination of the increase in total assets of $10,639,251 and the decrease in total liabilities of ($374,467) yields an increase in total net assets of $11,013,718. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $10,198,139. 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, 2008 June 30, 2007 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 $14,801,971 48,824,166 (34,022,195) 33,375,832 (646,363) 11,660,081 11,013,718 52,587,685 0 52,587,685 $63,601,403 $14,362,421 44,007,999 (29,645,578) 29,575,628 (69,950) 410,902 340,952 52,246,733 0 52,246,733 $52,587,685 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $9,860,609 524,670 374,498 3,737,502 304,692 14,801,971 22,456,234 9,611,942 50,000 195,726 1,061,930 33,375,832 11,660,081 0 11,660,081 $59,837,884 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $20,084,694 158,377 2,592,708 3,518,058 5,935,918 6,841,562 6,514,939 3,177,910 0 48,824,166 0 $48,824,166 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 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 0 $44,007,999 Macon State College Annual Financial Report FY 2008 4 Operating revenues increased by $439,550 in fiscal year 2008. Although Tuition & Fees revenue increased by over 4%, Grants and Contracts and Sales and Services revenues decreased. Nonoperating revenues increased by $3,800,204 for the year primarily due to an increase of $2,655,196 in State Appropriations. Capital Gifts and Grants increased by $11,249,179 in fiscal year 2008 due to construction funds received from the Georgia State Financing and Investment Commission (GSFIC) for construction of Macon State College's new conference center. Operating expenses increased by $4,816,167 in fiscal year 2008. A substantial part of this increase was in Instruction expenses which increased by $1,399,352, or 7.5%, primarily due to the addition of faculty members, merit increases and an increased cost of health insurance for the employees of the institution. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($32,907,709) 32,249,238 (3,390,332) (591,555) (4,640,358) 7,075,457 $2,435,099 June 30, 2007 ($27,680,188) 29,209,544 (609,361) 1,237,182 2,157,177 4,918,280 $7,075,457 Macon State College Annual Financial Report FY 2008 5 Capital Assets Capital additions were approximately $11.9 million during fiscal 2008, primarily in the Construction Work in Progress category and were related to the Professional Sciences 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 Macon State College had Long-Term Debt and Liabilities of $1,285,335 of which $490,088 was reflected as current liability at June 30, 2008. 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 FY2008. The Macon State College Foundation, Inc. had endowment and other investments of $7,124,443 as of June 30, 2008. 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 generous 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 2008 6 Statement of Net Assets MACO N S TATE CO LLEGE S TATEMENT O F NET AS S ETS June 30, 2008 A S S ETS C urre nt Asse ts Cash an d Cash Equiv alen t s Sh o rt -t erm In v est m en t s Acco un t s Receiv able, n et (n o t e 3 ) Receiv ables - Federal Fin an cial Assist an ce Receiv ables - Ot h er P ledges Receiv able Invent ories (not e 4) P repaid it em s T o t al Current Asset s Noncurrent Asse ts No n curren t Cash In v est m en t s (in cludin g Real E st at e) P ledges Receiv able Cap it al Asset s, n et (n o t e 6 ) Ot her Asset s T o t al No n curren t Asset s TO TA L A S S ETS LIA B ILITIES C u rre n t Liabilitie s Acco un t s P ay able Salaries P ay able Deferred Rev enue (n o t e 7 ) Ot h er Liabilit ies Dep o sit s Held fo r Ot h er Organ izat io n s Co m p en sat ed A bsen ces (curren t p o rt io n ) No t es an d Lo an s P ay able (current po rt io n ) T o t al Current Liabilit ies Non cu rre n t Liabilitie s Co m p en sat ed A bsen ces (n o n curren t ) T o t al No n curren t L iabilit ies TO TA L LIA B ILITIES N ET A S S ETS In v est ed in Cap it al Asset s, n et o f 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 TA L N ET A S S ETS Macon S tate C olle ge $2,435,099 99,962 84,909 5,665,769 560,830 188,314 9,034,883 1,141,074 57,980,212 59,121,286 68,156,169 330,029 117,921 2,230,735 132,592 458,154 490,088 3,759,519 795,247 795,247 4,554,766 57,980,212 1,272,559 53,431 4,295,201 $63,601,403 C om pon e n t Un it Macon State C olle ge Fo u n da ti o n , In c. $496,453 2,159 106,198 604,810 285,734 7,124,443 81,774 32,054 7,524,005 8,128,815 121,097 226,061 347,158 0 347,158 6,294,127 915,221 572,309 $7,781,657 Macon State College Annual Financial Report FY 2008 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, 2008 Macon State College REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal St at e Sales and Services Rents 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 Ut ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Macon St at e College T ot al Operat ing Expenses Operat ing Income (loss) $13,433,937 (3,573,328) 64,314 460,356 374,498 27,500 3,700,663 36,839 277,192 14,801,971 13,874,603 8,753,362 6,216,879 190,689 346,867 6,514,939 1,306,535 9,890,967 1,729,325 48,824,166 (34,022,195) C om pone nt Unit Macon State College Fou n dati on , In c. $0 498,331 1,750 500,081 86,151 567,728 653,879 (153,798) Macon State College Annual Financial Report FY 2008 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, 2008 C om pone nt Unit Macon State College Macon State College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or los Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 22,456,234 9,172,885 113,216 325,841 50,000 195,726 1,061,930 33,375,832 (646,363) 11,660,081 11,660,081 11,013,718 52,587,685 0 52,587,685 $63,601,403 (537,834) (3,177) (541,011) (694,809) 68,736 68,736 (626,073) 8,407,730 0 8,407,730 $7,781,657 Macon State College Annual Financial Report FY 2008 9 Statement of Cash Flows MACON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $9,551,661 341,955 374,498 (17,803,727) (22,500,958) (6,514,939) (20,636) 3,203,773 (141,907) 36,839 565,732 (32,907,709) 22,456,234 31,063 9,761,941 32,249,238 8,703,488 (12,093,820) (3,390,332) 284,530 (876,085) (591,555) (4,640,358) 7,075,457 $2,435,099 Macon State College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued MACON S TATE COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 In v en t o ries Ot her Asset s 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, 2008 ($34,022,195) 1,729,325 (634,736) (119,317) 555,394 (41,712) (150,634) (249,602) (126,655) 152,423 ($32,907,709) ($88,804) Macon State College Annual Financial Report FY 2008 11 MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Macon State College is reporting the activity for the Macon State College Foundation, Inc. See Note 17, Component Units, for Foundation notes. Macon State College Annual Financial Report FY 2008 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 2008 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 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, 2008, GSFIC did not transfer any capital additions to Macon State College. Macon State College Annual Financial Report FY 2008 14 Deposits Macon State College did not hold any student deposits at June 30, 2008. 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 $1,132,911 as of 7-1-2007. For FY2008, $676,609 was earned in compensated absences and employees were paid $524,185, for a net increase of $152,424. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,285,335. 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, 2008 Rest rict ed - E& G and Ot her Organized Act ivit ies Inst it ut ional Loans T erm Endowm ent s T ot al Rest rict ed Expendable $82,901 137,687 1,051,971 $1,272,559 Macon State College Annual Financial Report FY 2008 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 Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $440,715 976,053 2,878,433 $4,295,201 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 2008 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 2008 17 At June 30, 2008, the carrying value of deposits was $559,241 and the bank balance was $5,249,385. Of the College's deposits, $5,149,423 were uninsured but collateralized with securities held by the financial institution's trust department or agent in the College's name. B. Investments At June 30, 2008, the carrying value of the College's investments was $3,110,971, 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-T erm Fund Diversified Fund $1,969,897 1,141,074 T otal Investment Pools $3,110,971 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 1.99 years. Of the College's total investment of $1,969,897 in the Short Term Fund, $1,962,018 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the College's total investment of $1,141,074 in the Diversified Fund, $354,874 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. Macon State College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $461,945 595,754 84,909 2,956,593 1,797,566 5,896,767 146,089 $5,750,678 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore T otal $560,830 $560,830 Note 5. Notes/Loans Receivable Macon State College did not have any notes/loans receivable at June 30, 2008. Macon State College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 11,660,081 11,660,081 Re du cti on s $0 166,356 166,356 260,170 173,569 433,739 1,189,525 337,471 71,060 131,269 1,729,325 (1,295,586) $10,364,495 93,622 4,129 97,751 93,622 4,129 97,751 0 $166,356 En di n g B al an ce 6/30/2008 $2,518,062 12,645,363 15,163,425 53,153,879 2,746,914 2,195,273 3,848,899 61,944,965 13,115,292 1,175,441 1,530,405 3,307,040 19,128,178 42,816,787 $57,980,212 Macon State College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $2,228,583 2,152 $2,230,735 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Other Liabilities Compensated Absences $1,132,911 $676,609 $524,185 $1,285,335 Total Long Term Obligations $1,132,911 $676,609 $524,185 $1,285,335 Current Portion $490,088 $490,088 Note 9. Significant Commitments Macon State College did not have any unrecorded significant commitments as of June 30, 2008. 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 2008. OPERATING LEASES Macon State College's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2012. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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. Macon State College Annual Financial Report FY 2008 21 Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Real P roperty and Equipm ent Operat ing Leases Year Ending June 30: Year 2009 1 $67,552 2010 2 54,552 2011 3 54,552 2012 4 54,552 T ot al m inim um lease paym ent s $231,208 Macon State College's FY2008 expense for rental of real property and equipment under operating leases was $82,280. Note 11. Subsequent Event The College was struck by a tornado on May 11, 2008. Insurance proceeds of $2,850,844 were received during fiscal year 2009 for debris removal and repairs. Note 12. 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 2008, 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 2008 2007 2006 100% 100% 100% $1,130,675 $1,075,983 $1,020,941 Macon State College Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $240,914. The College's total payroll for all employees was $22,627,965. For the year ended June 30, 2008 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 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $25,079 $17,386 $7,174 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 24 Macon State College and the covered employees made the required contributions of $616,326 (8.13% or 8.15%) and $378,611 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Macon State College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 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 2008 amounted to $60,028 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 13. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Macon State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The Macon State College Annual Financial Report FY 2008 25 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 14. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although 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, 2008. Macon State College Annual Financial Report FY 2008 26 Note 15. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 101 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Macon State College recognized as incurred $547,497 of expenditures, which was net of $242,600 of participant contributions. Macon State College Annual Financial Report FY 2008 27 Note 16. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $13,847,923 1,063,941 3,448,683 232,187 91,930 1,344,605 55,425 $20,084,694 Functional Classification FY2008 Public Service Academic Support St udent Services $12,000 57,854 15,156 $1,000 1,560,998 396,929 $13,680 2,055,996 541,174 1,606 19,322 43,323 2,025 69,736 50,194 376,068 188,197 33,808 825,173 4,904 $158,377 $2,592,708 $3,518,058 Inst it ut ional Support $0 2,885,231 1,473,162 190,689 45,495 60,323 1,407,811 (126,793) $5,935,918 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Op erat ions & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Ent erprises $0 797,072 264,264 $0 $0 332,270 77,511 3,360 1,064,327 3,112,964 1,599,575 6,514,939 1,574 3,928 2,754,610 8,017 $6,841,562 $6,514,939 $3,177,910 T ot al Expenses $13,874,603 8,753,362 6,216,879 190,689 346,867 6,514,939 1,306,535 9,890,967 1,729,325 $48,824,166 Macon State College Annual Financial Report FY 2008 28 Note 17. Component Units Macon State College Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of Macon State College (College). The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The twenty-four member board of the Foundation is self-perpetuating and consists of graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College and is discretely presented in the College's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $567,728 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Development & Alumni Affairs Office at 100 College Station Drive, Macon, GA 31206. Investments for Component Units: Macon State College Foundation, Inc. holds endowment and other investments in the amount of $7,124,443. The endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Macon State College Foundation, in conjunction with the donors, has established a spending plan whereby 4-6% of the three-year rolling average may be expended. The remaining percentage stays intact. Investments are comprised of the following amounts at June 30, 2008: Equity Securities Real Estate SunTrust Pooled Investments Total Investments Cost $6 304,554 7,156,585 $7,461,145 Fair Value $6 304,554 6,819,883 $7,124,443 Macon State College Annual Financial Report FY 2008 29 Long-term Debt for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Total Long Term Liabilities $0 $226,061 $0 $226,061 $0 $226,061 $226,061 $0 $226,061 $226,061 Notes and Loans Payable The Foundation has a note payable with BB&T in the amount of $226,061 as of June 30, 2008. This note has a variable interest rate at .375% less than prime and is payable in consecutive monthly installments of principal and interest of $25,705 with the final payment due during the year ending June 30, 2009. This note is secured by real estate. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year end ing June 30: 2009 1 Total Notes and Loans Payable Pr inc ip al Notes and Loans Payable Interest $ 226 ,0 61 $ 226 ,0 61 $ 7,363 $ 7,363 T ota l $ 233 ,4 24 $ 233 ,4 24 Macon State College Annual Financial Report FY 2008 30 MEDICAL COLLEGE OF GEORGIA Financial Report For the Year Ended June 30, 2008 Medical College of Georgia Augusta, Georgia Daniel W. Rahn, M.D. President William R. Bowes, MBA Vice President for Finance/CFO MEDICAL COLLEGE OF GEORGIA ANNUAL FINANCIAL REPORT FY 2008 Table of Contents Management's Discussion and Analysis ............................................................................ 1 Statement of Net Assets ...................................................................................................... 7 Statement of Revenues, Expenses and Changes in Net Asset .......................................... 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 .............................................................................................. 30 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) FY2008 644 FY2007 629 FY2006 612 2,862 2,696 2,585 2,752 2,642 2,522 Overview of the Financial Statements and Financial Analysis Medical College of Georgia is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $111,128,807 289,104,730 50,059,564 450,293,101 June 30, 2007 $102,528,923 287,279,113 49,755,879 439,563,915 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 90,051,160 40,958,883 131,010,043 87,504,201 41,997,809 129,502,010 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 260,440,796 1,612,466 62,446,417 5,000,000 (10,216,621) $319,283,058 257,535,916 1,756,794 65,285,087 387,687 (14,903,579) $310,061,905 The total assets of the institution increased by $10,729,186. A review of the Statement of Net Assets will reveal that the increase was primarily due to a net increase in Cash and Short-term Investments of $8,481,159 and an increase in Prepaid Items of $4,822,901. The total liabilities for the year increased by $1,508,033. The combination of the increase in total assets of $10,729,186 and the increase in total liabilities of $1,508,033 yields an increase in total net assets of $9,221,153. The increase in total net assets is primarily in the category of Restricted - Capital Projects of $4,612,313. Medical College of Georgia Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $418,062,501 590,268,506 (172,206,005) 173,068,284 862,279 8,358,874 9,221,153 310,061,905 0 310,061,905 $319,283,058 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $24,151,307 377,137,993 8,834,807 7,048,026 890,368 418,062,501 161,597,858 7,231,443 3,999,416 2,346,798 (111,540) 175,063,975 8,353,317 5,557 8,358,874 $601,485,350 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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 at ient 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, 2008 $141,635,295 40,735,964 96,673,997 18,787,075 3,731,271 39,969,306 24,183,285 1,552,322 7,344,846 215,655,145 590,268,506 1,995,691 $592,264,197 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 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 Medical College of Georgia Annual Financial Report FY 2008 4 Operating revenues increased by $26,457,662 in fiscal 2008. Revenue increased in all categories including a 12% increase in tuition & fees. Nonoperating revenues increased by $15,341,531 for the year primarily due to an increase of $19,683,322 in State Appropriations. The compensation and employee benefits category increased by $9,306,889 and primarily affected the Instruction, Plant Operations and Maintenance, and Patient Care categories. The increase reflects an increased cost of health insurance for the employees of the institution. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($147,339,368) 174,176,046 (20,051,379) (23,304,140) (16,518,841) 52,245,414 $35,726,573 June 30, 2007 ($121,104,566) 153,380,747 (17,596,765) 348,810 15,028,226 37,217,188 $52,245,414 Capital Assets The College had capital asset additions for buildings and building improvements in fiscal year 2008. Numerous projects were completed during the fiscal year totaling $12,977,154. Medical College of Georgia concluded additional work on the Health Sciences Building which was substantially completed in the prior fiscal year. A total of $1,819,359 of this subsequent project spend was funded by Georgia State Financing and Investment Commission (GSFIC). Medical College of Georgia Annual Financial Report FY 2008 5 Other on-going projects funded by GSFIC included $8,773,064. Projected funding by GSFIC for fiscal year 2009 will be approximately 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 Medical College of Georgia had Long-Term Debt and Liabilities of $57,890,541 of which $16,931,658 was reflected as current liability at June 30, 2008. 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 FY2008. 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 challenging with budget cuts on the horizon at the state level, but will continue to maintain a close watch over resources providing the College with the flexibility to react to internal and external situations that may develop. Daniel W. Rahn, M.D., President Medical College of Georgia Medical College of Georgia Annual Financial Report FY 2008 6 Statement of Net Assets MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Medical College of Georgia MCG Health, Inc. Medical College of Ge orgi a Foundation, Inc. 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 Net Investment in Capital Leases Due From Primary Government Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets $35,726,573 25,000,000 2,051,792 7,231,443 10,797,175 16,838,532 529,093 12,954,199 111,128,807 $59,207,286 28,515,148 66,839,323 77,991 327,412 8,100,474 2,132,578 165,200,212 $14,999,787 1,107,082 4,779 190,431 19,864 16,321,943 Noncurrent Assets Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TO TAL ASSETS 46,157,517 3,902,047 289,104,730 339,164,294 450,293,101 488,374 105,104,372 94,108,364 85,541,577 2,102,540 287,345,227 452,545,439 129,016,200 122,724 1,624,036 362,838 131,125,798 147,447,741 Medical College of Georgia Annual Financial Report FY 2008 7 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit Medical College of Georgia MCG Health, Inc. Component Unit Medical College of Ge orgi a Foundation, Inc. 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) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Other Long-Term Liabilities Notes and Loans Payable (noncurrent) Total 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 41,289,832 2,959,733 341,445 26,209,338 975,977 876,748 16,054,910 1,343,177 90,051,160 27,787,186 13,171,697 40,958,883 131,010,043 260,440,796 1,612,466 62,446,417 5,000,000 (10,216,621) $319,283,058 29,861,946 3,955,191 167,868 2,248,015 15,841,149 11,872,637 270,108 64,216,914 135,000,000 6,744,043 141,744,043 205,960,957 55,366,882 20,000 468,374 190,729,226 $246,584,482 0 2,268,972 2,268,972 2,268,972 1,624,036 114,174,486 17,513,255 11,866,992 $145,178,769 Medical College of Georgia Annual Financial Report FY 2008 8 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Component Unit Medical College of Georgia PPG Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation 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 Net Investment in Capital Leases Due From Primary Government Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets $27,478,631 24,908,399 546,827 270,108 344,393 153,341 $6,341,506 4,358,499 53,701,699 10,700,005 $141,298 18,952 957,138 175,108 1,292,496 Noncurrent Assets Noncurrent Cash Short-term Investments Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS 452,539 17,829,823 26,597,213 5,943,517 1,253,712 52,076,804 105,778,503 10,993 10,993 10,710,998 503,569 2,965,744 3,469,313 4,761,809 Medical College of Georgia Annual Financial Report FY 2008 9 Statement of Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit Component Unit Component Unit Medical College of Georgia PPG Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation 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) Due to Component Units Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Other Long-Term Liabilities Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NETASSETS 1,999,546 1,198,900 2,731,585 77,991 685,000 6,693,022 452,539 31,320,854 31,773,393 38,466,415 5,943,517 61,368,571 $67,312,088 7,500 14,263 4,652,056 4,673,819 0 4,673,819 10,993 106,278 5,919,908 $6,037,179 8,558 458,040 3,934,182 4,400,780 0 4,400,780 88,225 272,804 $361,029 Medical College of Georgia Annual Financial Report FY 2008 10 Statement of Revenues, Expenses and Changes in Net Assets MEDICAL COLLEGE OF GEORGIA STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2008 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 Other Organizations 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 Payments to other Component Units Payments to or on behalf of Medical College of Georgia Total Operating Expenses Operating Income (loss) Component Unit Medical College of Georgia MCG Health, Inc. Component Unit Medical College of Georgia Foundation, Inc. $26,264,325 $0 (2,113,018) 47,749,777 193,551,785 135,836,431 8,834,807 472,936 871,779 1,220,731 122,167 1,267,243 1,278,406 2,287,700 417,432 418,062,501 4,633,056 453,495 358,643,151 363,729,702 115,970,905 178,644,159 81,890,971 122,308 3,316,220 1,834,587 8,741,556 181,469,941 18,277,859 590,268,506 (172,206,005) 167,100,775 47,536,457 35,828,053 667,092 4,485,713 117,743,225 18,063,013 391,424,328 (27,694,626) $0 4,398,340 4,527 134,773 455,540 (5,351) 692,237 140,789 5,820,855 584,799 182,934 296,938 122,706 7,679,522 8,866,899 (3,046,044) Medical College of Georgia Annual Financial Report FY 2008 11 Statement of Revenues, Expenses and Changes in Net Assets, Continued MEDICAL COLLEGEOF GEORGIA STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Component Unit Medical College of Georgia MCG Health, Inc. Component Unit Medical College of Georgia Foundation, Inc. 161,597,858 7,231,443 3,999,416 2,346,798 (1,995,691) (111,540) 173,068,284 862,279 8,353,317 5,557 8,358,874 9,221,153 310,061,905 0 310,061,905 $319,283,058 33,181,112 1,075,966 7,396,007 369,070 940,780 4,538,270 (1,090,714) (7,231,443) (957,230) 38,221,818 10,527,192 20,000 20,000 10,547,192 236,037,290 0 236,037,290 $246,584,482 (3,776,349) 187,154 (3,589,195) (6,635,239) 1,865,948 1,865,948 (4,769,291) 149,948,060 0 149,948,060 $145,178,769 Medical College of Georgia Annual Financial Report FY 2008 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, 2008 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 Other Organizations 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 Payments to other Component Units Payments to or on behalf of Medical College of Georgia Total Operating Expenses Operating Income (loss) Component Unit Medical College of Georgia PPG Foundation Component Unit Medical College of Georgia Research Institute, Inc. Component Unit Medical College of Georgia Dental Foundation $0 $0 $0 2,023,836 43,822,274 12,368,513 70,101 394,674 246,732 92,958,031 94,981,867 56,655,562 7,284,461 7,531,193 9,658,072 11,794,636 1,301,586 214,760 55,856 8,640,655 658,624 3,564,981 51,765,783 87,654,953 7,326,914 3,408,888 5,735 53,226,334 56,640,957 14,605 1,381,170 87,208 7,450 38,551 3,959,137 1,909,672 7,383,188 148,005 Medical College of Georgia Annual Financial Report FY 2008 13 Statement of Revenues, Expenses and Changes in Net Assets, Continued MEDICAL COLLEGE OF GEORGIA STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot h er Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Combined Margin Allocation Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot h er Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Component Unit Medical College of Georgia PPG Foundation Component Unit Medical College of Georgia Research Institute, Inc. Component Unit Medical College of Georgia Dental Foundation 636,822 (1,399,486) (762,664) 6,564,250 245,384 245,384 259,989 22,645 22,645 170,650 0 6,564,250 60,747,838 0 60,747,838 $67,312,088 0 259,989 5,777,190 0 5,777,190 $6,037,179 0 170,650 190,379 0 190,379 $361,029 Medical College of Georgia Annual Financial Report FY 2008 14 Statement of Cash Flows MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Nonoperat ing 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 m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $24,918,631 382,791,342 9,067,510 (275,734,007) (294,360,433) (1,834,587) (726,485) 1,073,738 1,002,716 1,215,941 120,352 1,425,460 1,089,908 2,300,592 309,954 (147,339,368) 161,597,858 (1,231,050) 13,920,778 (111,540) 174,176,046 6,533,958 1,525,313 (24,886,180) (1,228,779) (1,995,691) (20,051,379) 1,695,860 (25,000,000) (23,304,140) (16,518,841) 52,245,414 $35,726,573 Medical College of Georgia Annual Financial Report FY 2008 15 Statement of Cash Flows, Continued MEDICAL COLLEGE OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 In v en t o ries 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 of capit al asset s reducing proceeds of capit al grant s and gift s June 30, 2008 ($172,206,005) 18,277,859 2,699,420 (4,805) (210,588) 347,253 304,148 3,480,485 (27,135) ($147,339,368) $149,516 $650,938 ($1,824,916) Medical College of Georgia Annual Financial Report FY 2008 16 MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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. See Note 16, Component Units, for Foundation notes. Medical College of Georgia Annual Financial Report FY 2008 17 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. 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 Medical College of Georgia Annual Financial Report FY 2008 18 component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Total Return Fund is included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and 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, 2008, GSFIC transferred capital additions valued at $1,819,359 to Medical College of Georgia. Medical College of Georgia Annual Financial Report FY 2008 19 Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as 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 $29,253,742 as of 7-1-2007. For FY2008, $20,223,682 was earned in compensated absences and employees were paid $20,250,817, for a net decrease of ($27,135). The ending balance as of 6-30-2008 in accrued liability for compensated absences was $29,226,607. 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 2008 20 Expendable Restricted Net Assets include the following: June 30, 2008 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 $49,836,150 5,365,889 1,793,990 5,450,388 $62,446,417 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 $5,000,000 in Restricted Net Assets Capital Projects. These funds are on deposit with GSFIC and will be used for construction of the School of Dentistry. 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, 2008 $1,235,068 10,424,688 127,467 (22,003,844) ($10,216,621) 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 2008 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 2008 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, 2008, the carrying value of deposits was $60,581,580 and the bank balance was $71,949,496. Of the College's deposits, $71,849,496 were uninsured. Of these uninsured deposits, $1,358,460 were collateralized with securities held by the financial institution's trust department or agent in the College's name, and $70,491,036 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 2008 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Funds Other Investments Equity Mutual Funds Real Estate Investment Fund Investment Pools Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments Fair Value Investment Maturity Less Than 1 Year 1-5 Years $266,964 11,403,637 11,596,634 $23,267,235 12,646,555 1,822,413 7,062,854 1,495,407 $46,294,464 $102,487 4,608,522 $4,711,009 $164,477 6,795,115 11,596,634 $18,556,226 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 Medical College of Georgia Annual Financial Report FY 2008 24 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 40 days. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College's Investment Policy and Guidelines manages interest rate risk by recognizing that short-term loss of principal may be necessary in order to achieve long-term safety and growth of principal; and that in order to maximize income from debt instruments with maturities longer than sixty days, market values may be exposed to shortterm price volatility. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the College's total investment of $ 7,062,854 in the Total Return Fund, $2,231,862 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, 2008, $11,670,601 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: Related Debt Investments U. S. Agencies M utual Bond Funds Fair Value Unrated $11,403,637 11,596,634 $23,000,271 $11,403,637 11,596,634 $23,000,271 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 Annual Financial Report FY 2008 25 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 14.8% and 7.3% respectively of the College's total investments. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $359,075 374,207 2,051,792 7,231,443 16,838,532 10,220,275 37,075,324 156,382 $36,918,942 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Other T otal $399,103 129,990 $529,093 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 no provision has been made for uncollectible loans. Medical College of Georgia Annual Financial Report FY 2008 26 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2007 $9,053,256 11,489,517 20,542,773 Addi ti o n s $0 8,040,747 8,040,747 Re du cti on s $0 10,080,374 10,080,374 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated 320,281,292 2,339,679 63,668,132 33,887,929 16,807,856 436,984,888 13,158,043 7,856,997 149,516 1,308,283 22,472,839 1,515,995 170,473 29,076 1,715,544 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation 111,514,359 1,605,756 41,608,617 4,309,714 11,210,102 170,248,548 7,779,713 91,538 7,216,485 2,274,970 915,153 18,277,859 1,237,764 118,969 29,075 1,385,808 T otal Capital Assets, Being Depreciated, Net 266,736,340 4,194,980 329,736 Capital Assets, net $287,279,113 $12,235,727 $10,410,110 En di n g B al an ce 6/30/2008 $9,053,256 9,449,890 18,503,146 333,439,335 2,339,679 70,009,134 33,866,972 18,087,063 457,742,183 119,294,072 1,697,294 47,587,338 6,465,715 12,096,180 187,140,599 270,601,584 $289,104,730 Medical College of Georgia Annual Financial Report FY 2008 27 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Research Ot her Deferred Revenue T ot als June 30, 2008 $6,163,218 16,416,673 3,629,447 $26,209,338 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Beginning Balance July 1, 2007 $29,743,197 Additions $149,516 Reductions Ending Balance June 30, 2008 $1,228,779 $28,663,934 Current Portion $876,748 29,253,742 29,253,742 20,223,682 20,223,682 20,250,817 20,250,817 29,226,607 29,226,607 16,054,910 16,054,910 Total Long Term Obligations $58,996,939 $20,373,198 $21,479,596 $57,890,541 $16,931,658 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,621,741 as of June 30, 2008. 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 2009 and 2037. Expenditures for fiscal year 2008 were $3,224,470, of which $1,995,691 represented interest. Total principal paid on capital leases was $1,228,779 for the fiscal year ended June 30, 2008. 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, 2008: Medical College of Georgia Annual Financial Report FY 2008 28 Buildings Equipment Total Assets Held Under Capital Lease $24,613,745 2,787,512 $27,401,257 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, 2008, on this capital lease is $26,939,615. Medical College of Georgia also has various capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $1,724,319. OPERATING LEASES Medical College of Georgia's noncancellable operating leases have remaining terms of two years or less. 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, 2008, were as follows: Medical College of Georgia Annual Financial Report FY 2008 29 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $2,812,070 2,768,487 2,756,869 2,291,787 2,181,520 10,878,086 10,878,086 10,878,086 10,878,086 5,439,043 61,762,120 33,098,186 $28,663,934 $12,547 375 $12,922 Medical College of Georgia's FY2008 expense for rental of real property and equipment under operating leases was $25,631. 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 2008, 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 2008 2007 2006 100% 100% 100% $14,403,080 $13,884,229 $13,331,269 Medical College of Georgia Annual Financial Report FY 2008 30 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 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, 2008, for employees covered by ERS was $625,917. The College's total payroll for all employees was $294,615,064. For the year ended June 30, 2008 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. Medical College of Georgia Annual Financial Report FY 2008 31 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $65,531 $48,203 $37,388 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 32 Medical College of Georgia and the covered employees made the required contributions of $7,042,577 (8.13% or 8.15%) and $4,326,070 (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 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 2008 amounted to $408,963 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. Medical College of Georgia Annual Financial Report FY 2008 33 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. The ERP does not issue a standalone report, however, 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 employee's 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. The funding policy is reasonable and in compliance with the minimum funding requirements set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. The plan should be fully funded by June 30, 2019. Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for the current year were as follows: Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contribution Total $12,966,492 (710,615) 1,224,890 MCG $7,052,602 (376,626) 649,192 Other Units $5,943,890 (333,989) 575,698 Annual Pension Cost $13,510,767 $7,325,168 $6,185,599 Contributions Made 12,996,492 7,052,602 5,943,890 Increase (Decrease) in Net Pension Obligation Net Pension Obligation Beginning of Year Adjustment $514,275 (8,577,887) (896,976) $272,566 (7,512,997) (475,397) $241,709 (1,064.890) (421,579) Net Pension Obligation End of Year $(8,960,588) $(7,715,828) $(1,244,760) Medical College of Georgia Annual Financial Report FY 2008 34 Three-Year Trend Information FY 2006 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year 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 2007 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation 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 2008 Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation Total $13,510,767 96.19% $(8,960,588) MCG $7,325,168 96.28% $(7,715,828) Other Units $6,185,599 96.09% $(1,244,760) Funded Status and Funding Progress As of January 1, 2008, the most recent actuarial valuation date, the plan was 35.0 percent funded. The actuarial accrued liability for benefits was $148,797,058, and the actuarial value of assets was $52,044,359, resulting in an unfunded actuarial accrued liability (UAAL) of $96,752,699. Schedule of Funding Progress The schedule of funding progress which follows, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits: Actuarial Valuation Date 1/1/2006 1/1/2007 1/1/2008 Actuarial Value of Assets (a) 43,203,598 47,722,236 52,044,359 Actuarial Accrued Liability (b) 148,323,853 148,253,721 148,797,058 Unfunded AAL (UAAL) (b-a) 105,120,255 100,531,485 96,752,699 Funded Ratio (a/b) 29.1% 32.2% 35.0% Annual Covered Payroll (c) N/A N/A N/A UAAL as a Percentage of Covered Payroll ((b-a)/c) N/A N/A N/A Medical College of Georgia Annual Financial Report FY 2008 35 Actuarial Methods and Assumptions The annual required contribution for the current year was determined as part of the January 1, 2007 actuarial valuation using the Entry Age Actuarial cost method. The remaining amortization period is 11 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 3.5%, and (c) annual cost of living increase of 3.0%. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Medical College of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 Medical College of Georgia Annual Financial Report FY 2008 36 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 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 1,399 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Medical College of Georgia recognized as incurred $7,372,215 of expenditures, which was net of $2,668,446 of participant contributions. Medical College of Georgia Annual Financial Report FY 2008 37 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $57,445,896 30,660,754 21,388,977 26,559 1,223,171 309,098 625,932 24,043,966 5,910,942 Research $9,547,120 11,799,706 4,531,407 272 485,112 2,820 20,992 13,443,397 905,138 Functional Classification FY2008 Public Service Academic Support $42,294,394 28,977,179 13,667,144 580,355 27,310 158,661 10,719,746 249,208 $3,474,767 7,935,240 5,069,555 1,070 239,118 112,762 564,095 1,390,468 Student Services $437,519 1,619,104 573,733 459 56,280 17,212 1,001,842 25,122 Institutional Support $301,016 14,234,118 12,965,980 93,869 343,463 167,968 4,173,154 7,689,738 $141,635,295 $40,735,964 $96,673,997 $18,787,075 $3,731,271 $39,969,306 Plant Operations & Maintenance Functional Classification FY2008 MCG only Scholarships Auxiliary Patient & Fellowships Enterprises Care Total Expenses $0 8,053,377 2,633,386 (483,604) 43,206 7,248,794 5,028,202 1,659,924 $2,912 42,987 11,064 1,495,359 $210,352 2,207,442 839,298 483,683 19,638 61,812 3,075,302 447,319 $2,256,929 73,114,252 20,210,427 325,877 327,423 119,420,237 $115,970,905 178,644,159 81,890,971 122,308 3,316,220 1,834,587 8,741,556 181,469,941 18,277,859 $24,183,285 $1,552,322 $7,344,846 $215,655,145 $590,268,506 Medical College of Georgia Annual Financial Report FY 2008 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 Hospital and Clinics (Hospital). The Hospital, which is owned by the Board of Regents of the University System of Georgia (Regents), consists of 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 utilized 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 20912. Deposits and Investments Deposits At June 30, 2008, $63,631,153 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, 2008, 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 2008 39 A summary of investments follows: Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Mortgage Backed Securities (Commercial) Municipal Obligation $15,799,141 $0 $15,799,141 308,415 62,257,572 23,508,290 19,213,833 3,058,662 $124,145,913 6,481,177 3,456,527 719,589 $10,657,293 51,744,862 20,051,763 6,372,495 1,770,332 $95,738,593 $0 $0 251,084 308,415 3,780,449 1,159,759 $1,410,843 10,961,990 1,288,330 $16,339,184 Other Investments Money Market Funds Equity Securities - Domestic Equity Securities - International Joint Venture 79,659,511 22,703,501 355,464 863,495 $227,727,884 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, 2008, $147.2 million of the Company's applicable investments are held by the investment managers in the Company'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 Company's policy for managing credit quality risk is as follows: The Company's assets may be invested only in investment grade bonds rated AA (or equivalent) or better. The Company's assets may be invested only in commercial paper rated A1 (or equivalent) or better. Fixed income maturity restrictions are as follows: Maximum maturity for any single security is five years, and weighted average portfolio maturity may not exceed 3 years. Securities comprising money market funds must be rated investment grade by Standard and Poor's and/or Moody's. Medical College of Georgia Annual Financial Report FY 2008 40 The investments subject to credit quality risk at June 30, 2008 are rated as follows: Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt M ortgage Backed Securities (Commercial) M unicipal Obligation Fair Value $62,257,572 23,508,290 19,213,833 3,058,662 AAA $62,257,572 2,304,173 18,165,282 631,242 AA A $0 9,128,334 675,346 2,427,420 $0 11,353,162 373,205 BAA $0 722,621 $108,038,357 $83,358,269 $12,231,100 $11,726,367 $722,621 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, 2008, the following MCG Health, Inc.'s applicable investments exceed 5% of its total investment balance: Federal Home Loan Bank 14.8%, Federal National Mortgage Association 6.2%, and Federal Home Loan Mortgage Corporation 5.5%. 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 Company does not have a policy for managing exposure to foreign currency risk. MCG Health, Inc. holds investments totaling $355,464 or 0.2% in International equity securities. Foreign currency risk is considered negligible related to this holding in comparison to total investments. Medical College of Georgia Annual Financial Report FY 2008 41 Capital Assets for Component Units: MCG Health, Inc.'s capital asset activity for the year ending June 30, 2008 was as follows: Capital Assets, Not Being Depreciated: Land (and other assets) Construction Work-in-Progress Total Capital Assets Not Being Depreciated Beginning Balances 7/1/2007 $7,138,554 10,692,641 17,831,195 Additions $581,676 24,415,032 24,996,708 Reductions $0 18,579,924 18,579,924 Ending Balance 6/30/2008 $7,720,230 16,527,749 24,247,979 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Total Assets Being Depreciated 3,936,122 21,147,609 124,090,086 17,930,364 167,104,181 279,541 6,055,847 34,409,205 40,744,593 3,917,908 17,930,364 21,848,272 4,215,663 27,203,456 154,581,383 0 186,000,502 Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Total Accumulated Depreciation 393,352 7,752,867 96,248,220 6,030,191 110,424,630 178,480 3,309,006 10,677,017 3,898,510 18,063,013 (6,147,962) 9,928,701 3,780,739 571,832 11,061,873 113,073,199 0 124,706,904 Total Capital Assets, Being Depreciated, Net Capital Assets, net 56,679,551 $74,510,746 22,681,580 $47,678,288 18,067,533 $36,647,457 61,293,598 $85,541,577 Long-term Liabilities for Component Units: On April 1, 2008, the Company issued a total of $135,000,000 of Development Authority of Richmond County Revenue Bonds, Series 2008A and 2008B (the Bonds). Proceeds from the Bonds are to be used to fund certain construction and renovation projects and to purchase new and replacement equipment. The proceeds were also used to refund outstanding capital lease obligations and to pay certain costs associated with the issuance of the Bonds. Prior to the issuance of the Bonds on April 1, 2008, the Company's long-term debt consisted primarily of capital lease obligations. Other Long-Term Liabilities represents the self-insured portion of professional liability risks. Accrued professional liability costs are determined actuarially. Medical College of Georgia Annual Financial Report FY 2008 42 Changes in long-term liabilities for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Capital Lease Obligations Revenue/Mortgage Bonds Payable Other Long Term Liabilities $11,190,803 11,672,954 0 9,298,000 $2,775,205 3,954,764 135,000,000 68,699 $2,093,371 15,627,718 374,641 $11,872,637 0 135,000,000 8,992,058 $11,872,637 2,248,015 Total Long Term Liabilities $32,161,757 $141,798,668 $18,095,730 $155,864,695 $14,120,652 The Bonds initially bear interest at weekly rates determined by the remarketing agent as the lowest rate of interest which, in the judgment of the remarketing agent, would cause the Bonds to have a market value as of the date of determination equal to the principal amount thereof, taking into account prevailing market conditions. In the event that the remarketing agent fails to determine an applicable interest rate, the interest rate to be used shall equal 100% of the S&P Weekly Index plus twenty-five basis points or 100% of the One Month London Interbank Offered Rate (LIBOR) plus twenty-five basis points, depending on the income tax treatment of the resulting interest in the gross income of the beneficial owner of the Bonds. In no event, the interest rate on the Bonds will exceed the lesser of 15% per annum and the maximum rate permitted by law. The Company may, under certain conditions, elect to convert all of the Bonds of a Series from a weekly rate to a daily rate or other variable rate described in the Bond indenture. For the period from April 1, 2008 to June 30, 2008, the annual effective variable interest rate incurred on the Bonds was 1.872%. Each Bond Series is secured by irrevocable letters of credit. All principal and interest payments are drawn from the letter of credit and are reimbursed by the Company under the terms of separate reimbursement agreements with the issuers of the letters of credit. Each letter of credit is currently set to expire on March 31, 2011, unless extended. The bond indenture and letter of credit reimbursement agreements contain certain terms and restrictive covenants typical of such agreements, including maintenance of certain debt service levels, limitations on indebtedness, maintenance of certain days' cash on hand, and maintenance of a certain ratio of debt service coverage. With respect to the 2008 capital lease refunding, funds were deposited in an irrevocable trust to provide for the debt service of the lease payable, and, therefore, all related amounts have been removed from the Company's balance sheet. The deposits into the trust have been or will be used to pay all scheduled principal and interest payments on the leases through 2013. The refunding transaction resulted in an accounting loss totaling approximately $849,000 which is reported as a nonoperating item in the accompanying statement of revenues, expenses, and changes in net assets. Medical College of Georgia Annual Financial Report FY 2008 43 Concurrent with the issuance of the Bonds, the Company entered into a variable-to-fixed interest rate swap (the Swap). The intention of the Swap is to effectively convert the Company's variable interest rate on the Bonds into a synthetic fixed rate of 3.302%. The Bonds and the Swap mature on July 1, 2037. The initial notional amount of the Swap is $135,000,000. The notional value of the Swap declines in conjunction with payments of Bond principal such that the outstanding balance of the Series 2008A and 2008B Bonds and the notional amount of the Swap remain equal at all times. Under the Swap, the Company pays the counterparty interest at a fixed rate of 3.302% and receives interest payments at a variable rate computed at 68% of LIBOR. As of June 30, 2008, the Swap had a fair value of $81,085 (favorable to the Company), as computed using the zero-coupon method. As of June 30, 2008, the Company was exposed to credit risk in the amount of the fair value of the Swap. The Swap counterparty was rated AA by Fitch Ratings and Standard & Poor's and Aaa by Moody's Investors Service as of June 30, 2008. To mitigate the potential for credit risk, various levels of collateralization by the counterparty may be required should the counterparty's credit rating be downgraded and the fair value of the Swap be in a position due to the Company at a level above certain thresholds specified in the Swap agreement. Collateral would be posted with a third party custodian. The Swap exposes the Company to basis risk should the relationship between LIBOR and prevailing market rates change significantly, changing the synthetic rate on the Bonds from the intended synthetic rate of 3.302%. As of June 30, 2008, the prevailing market rate was an aggregate 1.706%, whereas 68% of LIBOR was 1.688%. The Company or the counterparty may terminate the Swap if the other party fails to perform under the terms of the agreement. If the Swap is terminated, the variable rate Bonds would no longer carry a synthetic fixed interest rate. Also, if at the time of termination the Swap has a negative fair value (unfavorable to the Company), the Company would be liable to the counterparty for a payment equal to the Swap's fair value. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal $0 0 3,225,000 3,335,000 3,450,000 19,050,000 22,475,000 26,510,000 31,270,000 25,685,000 $135,000,000 Bonds Payable Interest $4,481,362 4,481,400 4,401,019 4,291,266 4,177,625 19,047,976 15,580,617 11,491,328 6,666,955 1,367,146 $75,986,694 Total $4,481,362 4,481,400 7,626,019 7,626,266 7,627,625 38,097,976 38,055,617 38,001,328 37,936,955 27,052,146 $210,986,694 Medical College of Georgia Annual Financial Report FY 2008 44 Medical College of Georgia Foundation, Inc. Medical College of Georgia Foundation, Inc. (the "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, 2008, the Foundation distributed $7.7 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, Georgia 30912 or from the Foundation's website at www.mcgfoundation.org. Investments for Component Units: Investments are comprised of the following amounts at June 30, 2008: Cost Fair Value Cash held by investment organization Certificates of Deposit Fixed Income Equity Securities Real Estate Alternative Strategies $601,027 1,107,082 21,968,337 53,006,141 6,052,808 24,881,753 $601,027 1,107,082 21,417,184 62,669,078 6,683,254 37,645,657 Total Investments $107,617,148 $130,123,282 Medical College of Georgia Annual Financial Report FY 2008 45 Capital Assets for Component Units: Medical College of Georgia Foundation, Inc. held the following Capital Assets as of June 30, 2008: June 30, 2008 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 $1,510,594 1,510,594 271,318 271,318 157,876 113,442 $1,624,036 Long-term Liabilities for Component Units: At June 30, 2008, Medical College of Georgia Foundation's long-term liabilities consisted of a $2,268,972 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 Medical College of Georgia 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 Medical College of Georgia Annual Financial Report FY 2008 46 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, 2008, PPG distributed $51.8 million to the College for salaries and departmental support. Complete financial statements for the PPG can be obtained from the Administrative Office at 1499 Walton Way, Suite 1400, Augusta, Georgia 30901. Investments for Component Units: PPG invests in mutual funds, equity securities, and debt securities which are measured at fair value. For investments other than common stock and mutual funds, classification between current and non-current is determined based upon individual investment maturity dates. Investments in common stock and mutual funds are actively traded and are classified as current. Investment income or loss (including realized gains and losses, interest, and dividends) is included in the nonoperating revenue section of the accompanying Statement of Revenues, Expenses, and Changes in Net Assets. Investments are comprised of the following amounts at June 30, 2008: Cost Fair Value Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Joint Ventures/Partnerships Total Investments $8,925,480 10,455,931 13,676,616 7,882,842 585,000 $41,525,869 $8,966,200 10,131,452 15,529,745 7,525,825 585,000 $42,738,222 Medical College of Georgia Annual Financial Report FY 2008 47 Capital Assets for Component Units: PPG held the following Capital Assets as of June 30, 2008: June 30, 2008 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 $3,269,355 3,269,355 2,422,416 6,249,455 8,671,871 5,997,709 2,674,162 $5,943,517 Long-Term Liabilities for Component Units: Changes in long-term liabilities for component units for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable Other Long Term Liabilities Total Long Term Liabilities 32,689,063 558,885 $33,247,948 683,209 106,346 32,005,854 452,539 685,000 $0 $789,555 $32,458,393 $685,000 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 premium is amortized semi-annually over the term of the loan. 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, 2008 was $31,550,000. The loan is secured by certain personal property constituting a portion of the building recorded as net investment in capital lease in the Statement of Net Assets. Medical College of Georgia Annual Financial Report FY 2008 48 Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Notes and Loans Payable Interest $685,000 705,000 725,000 745,000 765,000 4,240,000 5,125,000 6,465,000 8,210,000 3,885,000 31,550,000 455,854 $32,005,854 $1,384,150 1,365,798 1,344,953 1,321,829 1,296,600 6,029,418 5,064,346 3,723,904 1,969,857 190,267 23,691,122 $23,691,122 Total $2,069,150 2,070,798 2,069,953 2,066,829 2,061,600 10,269,418 10,189,346 10,188,904 10,179,857 4,075,267 55,241,122 455,854 $55,696,976 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 $452,539 at June 30, 2008. 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 education, research, and service functions of the College in obtaining contracts from individuals, industrial or other private organizations, government or other public agencies for the performance of sponsored research, development or other programs by the various departments or other units of the College. All research contracts awarded to the Institute are sub-contracted to the College, which is responsible for the fiscal administration of the research projects. Although the College does not control the timing or amount of activity, all grant awards are sub-contracted and managed by the College. Because of this special relationship, the Institute is considered a component unit of the College and is discretely presented in the College's financial statements. The Institute's financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board ("GASB"), in order to be consistent with the accounting principles followed by its primary government, Medical College of Georgia. The Institute's fiscal year is July 1 through June 30. During the year ended June 2008, the Institute sub-contracted approximately $53.2 million of research projects to the College. Complete financial statements for the Institute can be obtained Medical College of Georgia Annual Financial Report FY 2008 49 from the Medical College of Georgia's Division of Sponsored Program Administration at Medical College of Georgia, Augusta, Georgia 30912. Deposits and Investments Deposits As of June 30, 2008, $7,033,741 of the Institute's bank balance was exposed to custodial credit risk. Of that amount, $200,000 was insured by Federal depository insurance and $6,833,741 was uncollateralized. The Institute had no investments as of June 30, 2008. Capital Assets for Component Units: The Institute's Capital Asset activity for the year ending June 30, 2008 was as follows: Capital Assets, Being Depreciated: Equipment Total Assets Being Depreciated Less: Accumulated Depreciation Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2007 $28,676 28,676 11,948 11,948 16,728 $16,728 Additions $0 0 Reductions $0 0 Ending Balance 6/30/2008 $28,676 28,676 5,735 5,735 (5,735) ($5,735) 17,683 0 17,683 0 10,993 $0 $10,993 Medical College of Georgia Dental Foundation Medical College of Georgia Dental Foundation (Foundation) is a legally separate, tax-exempt component unit of the Medical College of Georgia (College). The objectives and purposes of the Dental Foundation are to acquire and administer funds and property which are derived from fees charged for services rendered in the practice of dentistry at the School of Dentistry at the Medical College of Georgia by members of the faculty, residents, and hygienists of the School of Dentistry. Dental Foundation funds are used to maintain and improve the high standard of instruction at the Medical College of Georgia Dental School for advanced study by members of the School's student body and faculty and for research in the dental health field. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income 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 No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain Medical College of Georgia Annual Financial Report FY 2008 50 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 March 1, 2007 through February 29, 2008. Because the Foundation's fiscal year 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 29, 2008, the Foundation distributed $1.9 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 29, 2008: Cost Fair Value Certificates of Deposit Unit Investment Trust Government Bonds Preferred Stocks Domestic Equities Total Investments $1,069,000 130,869 57,030 24,979 2,219,826 $3,501,704 $1,081,292 128,970 53,265 23,830 2,181,956 $3,469,313 Medical College of Georgia Annual Financial Report FY 2008 51 MIDDLE GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2008 Middle Georgia College Cochran, Georgia Mary Ellen Wilson Interim President Lynn E. Hobbs Vice President for Fiscal Affairs MIDDLE GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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 .............................................. 30 Note 16. Special Item.................................................................................................................. 31 Note 17. Component Units ......................................................................................................... 31 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 main campus in Cochran serves both commuting and residential students. The Dublin Center serves commuting students from the middle Georgia Area. The Georgia Aviation campus in Eastman offers several aviation technical certificates and Associate of Applied Science degrees. The College provides the best educational environment possible for the development of its students and serves the needs of its community. 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 Aviation, 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) FY2008 133 FY2007 96 FY2006 81 3,444 3,051 2,677 2,951 2,576 2,274 Overview of the Financial Statements and Financial Analysis Middle Georgia College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Middle Georgia College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $9,354,363 96,286,628 1,089,320 106,730,311 June 30, 2007 $6,397,232 57,097,523 1,228,619 64,723,374 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 4,310,931 26,669,669 30,980,600 2,480,639 11,106,249 13,586,888 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 70,014,811 28,007 1,192,740 4,514,153 $75,749,711 46,320,667 2,608 1,331,253 3,481,958 $51,136,486 Middle Georgia College Annual Financial Report FY 2008 2 The total assets of the institution increased by $42,006,937. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $39,189,105 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 $17,393,712. The combination of the increase in total assets of $42,006,937 and the increase in total liabilities of $17,393,712 yields an increase in total net assets of $24,613,225. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $23,694,144. 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, 2008 June 30, 2007 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 $19,369,420 38,041,563 (18,672,143) 17,267,054 (1,405,089) 26,018,314 24,613,225 51,136,486 0 51,136,486 $75,749,711 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Middle Georgia College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s and Special It em St at e Ot her Capit al Gift s and Grant s Special It em T ot al Capit al Gift s and Grant s and Special It em T ot al Revenues June 30, 2008 $4,003,072 5,632,232 236,143 9,403,921 94,052 19,369,420 18,164,477 7,408 355,786 116,682 (112,666) 18,531,687 5,238,077 3,380,811 17,399,426 26,018,314 $63,919,421 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $13,249,801 2,636,681 2,867,141 3,306,306 5,824,902 2,221,533 7,935,199 0 38,041,563 1,264,633 $39,306,196 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 0 15,044,787 $42,478,057 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 Middle Georgia College Annual Financial Report FY 2008 4 Operating revenues increased by $4,503,953 in fiscal 2008. Tuition & Fees included a 42% increase, revenues also increased for Grants and Contracts, Sales and Services, and Auxiliary while Other Revenues decreased ($21,404). The Auxiliary revenue increase of $1,987,034 in consistent with the increase in the residential student population. Nonoperating revenues increased by $5,963,884 for the year primarily due to an increase of $6,096,742 in State Appropriations. This large increase was due primarily to the merger of the Georgia Aviation & Technical College into Middle Georgia College at July 1, 2007. The compensation and employee benefits category increased by $4,801,691 and primarily affected the Instruction, Institutional Support and Plant Operations categories. The increase reflects the addition of the faculty and staff from Georgia Aviation & Technical College, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $430,286 during the past year. Some of this increase was relative to the addition of the Georgia Aviation Campus and also to the increased utility rates which 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($14,905,765) 18,564,756 (1,294,718) 265,184 2,629,457 4,670,026 $7,299,483 June 30, 2007 ($9,005,810) 12,520,981 (1,872,735) 233,344 1,875,780 2,794,246 $4,670,026 Middle Georgia College Annual Financial Report FY 2008 5 Capital Assets The addition of the Georgia Aviation & Technical College provided an increase in net capital assets of $17,109,795. The College also added $14,872,104 in capital leases for two dorms which were financed through the MGC Real Estate Foundation, LLC. Welch Hall was completed in FY2008 at a value of $1,993,700. After a fire in 2005 which resulted in a nearly complete loss, Browning Hall was reopened in FY 2008. The final building was completed at a cost of $5,525,045, including $2,380,811 of noncash additions which were covered by the contractor's insurance. 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 Middle Georgia College had Long-Term Debt and Liabilities of $27,073,299 of which $403,630 was reflected as current liability at June 30, 2008. 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 FY2008. The Middle Georgia College Foundation, Inc. had investments of $1.2 million as of June 30, 2008. The MGC Real Estate Foundation, LLC had long-term debt of $26.85 million and MGC Real Estate Foundation II, LLC had long-term debt of $36.34 million. This debt is relative to residential facilities that are or will be leased to the College. 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. Due to the State of Georgia's current economic conditions, the College expects flat state appropriations in FY2009 but anticipates increased tuition and fee revenues relative to increased enrollments. Mary Ellen Wilson, Interim President Middle Georgia College Middle Georgia College Annual Financial Report FY 2008 6 Statement of Net Assets M ID D L E G EO R G IA C O L L EG E S T A T EM EN T O F N ET A S S ET S June 30, 2008 C om pon e n t Un it M iddle G e orgia C ollege M iddle G e orgia C o lle g e Fo u n da tio n , In c. 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 rm 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 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 $ 7 ,28 0 ,30 3 3 37 ,6 97 7 40 ,3 85 20 ,4 20 9 08 ,0 16 12 ,9 98 54 ,5 44 9 ,35 4 ,3 63 $ 21 0 ,58 0 30 0 ,00 0 1 6 ,15 0 52 6 ,73 0 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 N et In v est m en t in Cap it al L eases 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 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 ) 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 ) 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 19 ,1 80 9 48 ,5 70 1 21 ,5 70 9 6 ,28 6 ,62 8 9 7 ,37 5 ,94 8 1 06 ,7 30 ,3 11 4 26 ,0 02 2 67 ,0 50 1 ,01 4 ,4 71 3 72 ,7 11 1 ,65 9 ,8 42 5 ,52 8 1 61 ,6 97 (6 ,2 30 ) 4 09 ,8 60 4 ,31 0 ,9 31 2 6 ,27 8 ,04 7 3 91 ,6 22 2 6 ,66 9 ,66 9 3 0 ,98 0 ,60 0 7 0 ,01 4 ,81 1 28 ,0 07 1 ,19 2 ,7 40 4 ,51 4 ,1 53 $ 75 ,7 49 ,7 11 3 2 ,33 7 ,40 8 85 7 ,51 8 2 6 ,25 8 ,63 2 9 ,54 8 ,82 9 1 ,82 9 ,31 8 7 0 ,83 1 ,70 5 7 1 ,35 8 ,43 5 3 ,38 1 ,70 0 2 0 ,42 0 3 ,40 2 ,12 0 6 3 ,19 0 ,00 0 6 3 ,19 0 ,00 0 6 6 ,59 2 ,12 0 6 ,78 4 ,18 7 79 9 ,95 5 56 9 ,04 2 (3 ,38 6 ,86 9 ) $ 4 ,76 6 ,31 5 Middle Georgia College Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets MIDDLE GEORGIA COLLEGE S TATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASS ETS for the Year Ended June 30, 2008 REVENUES Operating Revenues St udent T uit ion and Fees (net of allowance for doubt ful account s) Less: Scholarship Allowances Gift s and Cont ributions Endowment Income (per spending plan) Grants 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 Healt h Services Intercollegiat e Athletics Ot her Organizat ions Ot her Operating Revenues T ot al Operating Revenues EXPENS ES Operating Expenses Salaries: Facult y St aff Employee Benefit s Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Other Services Dep reciat io n P ayment s to or on behalf of Middle Georgia College T ot al Operating Expenses Operating Income (loss) Middl e Ge orgi a College C ompone nt Unit Mi ddl e Ge orgi a C ol l e ge Fou n dati on , In c. $7,621,280 (3,618,208) 5,569,629 35,587 27,016 236,143 11,294 3,775,799 2,073,160 2,764,008 58,003 450,036 282,915 82,758 19,369,420 6,593,600 7,272,710 4,260,353 606,720 225,240 2,390,021 1,870,301 12,256,635 2,565,983 38,041,563 (18,672,143) $0 117,772 62,100 13,057 1,385,548 1,578,477 138,068 51,975 45,909 235,952 1,342,525 Middle Georgia College Annual Financial Report FY 2008 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, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts St at e 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 Special Item Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS S ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Middle Ge orgia C ol l e ge C om pone nt Unit Middle Ge orgia C ol l e ge Fou n dati on , In c. 18,164,477 7,408 355,786 116,682 (1,264,633) (112,666) 17,267,054 (1,405,089) 5,238,077 3,380,811 17,399,426 26,018,314 24,613,225 51,136,486 0 51,136,486 $75,749,711 (20,430) (1,289,548) 3,357,132 2,047,154 3,389,679 1,012,369 1,907 1,014,276 4,403,955 362,360 0 362,360 $4,766,315 Middle Georgia College Annual Financial Report FY 2008 9 Statement of Cash Flows MIDDLE GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest m ent s Int erest on Invest m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $4,186,045 5,765,879 236,143 (19,101,020) (13,528,488) (2,390,021) 8,380 3,824,328 1,805,715 3,575,334 58,462 442,116 285,002 (73,640) (14,905,765) 18,164,477 (252,546) 652,825 18,564,756 4,271,187 (4,924,129) (1,015) (640,761) (1,294,718) 1,176,360 237,706 (1,148,882) 265,184 2,629,457 4,670,026 $7,299,483 Middle Georgia College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued MIDDLE GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 m ent s t o Reconcile Net Incom e (loss) t o Net Cash P rovided (used) by Operat ing Act ivit ies Dep reciat io n Change in Asset s and Liabilit ies: Receivables, net In v en t o ries 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 m ent s recognized as a com ponent of int erest incom e Special It em - Georgia Aviat ion T echnical College T ransfer 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, 2008 ($18,672,143) 2,565,983 (27,507) (283,002) (35,392) 649 8,380 525,851 844,716 4,483 162,217 ($14,905,765) $14,872,104 ($121,024) $17,399,426 ($623,872) ($15,180) ($4,347,701) Middle Georgia College Annual Financial Report FY 2008 11 MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Middle Georgia College is reporting the activity for the Middle Georgia College Foundation, Inc., which includes the MGC Real Estate Foundation, LLC, and the MGC Real Estate Foundation II, LLC. 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 Middle Georgia College Annual Financial Report FY 2008 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 Board of Regents Short-Term 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 Balanced Income Fund is included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Middle Georgia College Annual Financial Report FY 2008 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 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, 2008, GSFIC did not transfer any capital additions to Middle Georgia College. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a College residence hall. 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 2008 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 $639,265 as of 7-1-2007. For FY2008, $568,724 was earned in compensated absences and employees were paid $406,507, for a net increase of $162,217. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $801,482. Noncurrent Liabilities Noncurrent liabilities include liabilities that will not be paid within the next fiscal year; and capital lease obligations with contractual maturities greater than one 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. 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, 2008 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 $83,442 176,135 4,993 578,928 349,242 $1,192,740 Middle Georgia College Annual Financial Report FY 2008 15 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Invent ory Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $1,856,645 4,684,055 5,040 (2,031,587) $4,514,153 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. 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. Middle Georgia College Annual Financial Report FY 2008 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. Auxiliary Residential revenue of $3,775,799 is reported net of discounts and allowances of $178,725. 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. Middle Georgia College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $6,483,235 and the bank balance was $6,892,310. Of the College's deposits, $6,750,315 were uninsured. Of these uninsured deposits, $5,895,622 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $854,693 were uncollateralized. B. Investments Middle Georgia College maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVES TMENTS Equity M utual Funds Equity Securities - Domestic Investment Pools Board of Regents Short-T erm Fund Balanced Income Fund T otal Investments $223,913 579,595 808,798 145,062 $1,757,368 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 1.99 years. Of the College's total investment of $808,798 in the Short Term Fund, $805,563 is invested in debt securities. Middle Georgia College Annual Financial Report FY 2008 18 The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the College's total investment of $145,062 in the Balanced Income Fund, $93,275 is invested in debt securities. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the College will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The College does not have a formal policy for managing custodial credit risk for investments. At June 30, 2008, 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. 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 14.2% of its investments in Coca-Cola stock with a fair market value of $249,504. This stock is part of the Harris Endowment and was donated to the College in 1966. Middle Georgia College Annual Financial Report FY 2008 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $34,577 332,528 337,697 13,061 20,420 429,954 1,168,237 69,735 $1,098,502 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore P hysical P lant T otal $903,615 4,401 $908,016 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0. Middle Georgia College Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Total Assets Being Depreciated Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2007 Special Item Transfer $2,233,395 5,117,859 7,351,254 $25,994 25,994 8,281,528 46,095,906 3,565,710 2,614,556 10,349,924 2,412,773 73,320,397 279,920 17,736,331 4,507,279 22,523,530 462,780 16,917,330 2,054,998 1,788,387 283,325 2,067,308 23,574,128 49,746,269 $57,097,523 279,920 2,151,725 3,008,084 5,439,729 17,083,801 $17,109,795 Additions $5,718 10,239,626 10,245,344 Reductions $0 9,358,795 9,358,795 8,533,333 162,875 174,307 14,872,104 128,795 23,871,414 669,915 31,532 33,499 13,368 748,314 351,819 1,212,958 74,620 85,076 775,206 66,304 2,565,983 21,305,431 $31,550,775 564,695 24,080 33,501 13,368 635,644 112,670 $9,471,465 Ending Balance 6/30/2008 $2,265,107 5,998,690 8,263,797 8,561,448 71,695,655 3,697,053 7,262,643 25,222,028 2,528,200 118,967,027 1,094,519 19,717,318 2,105,538 4,848,046 1,058,531 2,120,244 30,944,196 88,022,831 $96,286,628 Middle Georgia College Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $244,939 1,414,903 $1,659,842 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning B al an ce July 1, 2007 $10,776,856 Addi ti on s $15,495,976 Re du cti on s En di n g B al an ce June 30, 2008 $1,015 $26,271,817 C u rre n t Porti on ($6,230) O ther Liabilities Compensated Absences T ot al 639,265 639,265 568,724 568,724 406,507 406,507 801,482 801,482 409,860 409,860 Total Long Term O bligations $11,416,121 $16,064,700 $407,522 $27,073,299 $403,630 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $700,705 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. The College has executed a capital operating lease with MGC Real Estate Foundation II, LLC which will begin August 2008. The College's lease obligation related to this lease is $13,660,611. Note 10. Lease Obligations Middle Georgia College is obligated under various operating leases for the use of equipment, and also is obligated under capital leases for the acquisition of real property. CAPITAL LEASES The College has capital leases for student residential facilities and office equipment which are payable in monthly installments and expire in 2036. Interest expense for fiscal year 2008 was $1,264,633 with accrued interest of $623,872 added to the lease principal and interest paid of $640,761. 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, 2008: Middle Georgia College Annual Financial Report FY 2008 22 Buildings Facilities & Other Improvements Equipment Total Assets Held Under Capital Lease $22,969,666 208,250 985,582 $24,163,498 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. Middle Georgia College entered into three residential facilities thirty year capital leases at 4.856% interest with MGC Real Estate Foundation, LLC, a related entity, in November 2005. One facility was occupied in August 2006 and the remaining two facilities became operational in July 2007. The total outstanding liability, including accrued interest, was $26,258,632 at June 30, 2008. Middle Georgia College also has capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $13,185. OPERATING LEASES Middle Georgia College's noncancellable operating lease has a remaining term of one year and expires in fiscal year 2009. 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $1,274,567 1,313,456 1,351,677 1,393,336 1,426,229 7,777,515 9,026,366 10,479,285 10,997,754 6,613,678 51,653,863 25,382,046 $26,271,817 $6,864 $6,864 Middle Georgia College's FY2008 expense for rental of real property and equipment under operating leases was $6,864. Middle Georgia College Annual Financial Report FY 2008 23 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 2008, 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 2008 2007 2006 100% 100% 100% $897,742 $655,271 $631,254 Employees' Retirement System of Georgia Plan Description Middle 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 Middle Georgia College Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $63,022. The College's total payroll for all employees was $13,866,310. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $6,561 $0 $0 Middle Georgia College Annual Financial Report FY 2008 25 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 Middle Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $186,557 (8.13% or 8.15%) and $114,595 (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 Middle Georgia College Annual Financial Report FY 2008 26 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 2008 amounted to $44,227 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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, Middle Georgia College Annual Financial Report FY 2008 27 is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Middle Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Middle Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and Middle Georgia College Annual Financial Report FY 2008 28 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 120 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Middle Georgia College recognized as incurred $633,588 of expenditures, which was net of $179,566 of participant contributions. Middle Georgia College Annual Financial Report FY 2008 29 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $6,543,600 1,362,881 1,877,821 218,051 71,710 46,384 1,381,281 1,748,073 $13,249,801 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $50,000 1,054,092 340,600 100,245 30,412 19,165 748,512 293,655 $0 1,301,284 354,232 11,142 67,656 12,800 17,443 1,063,867 38,717 $2,636,681 $2,867,141 Inst it ut ional Sup p o r t $0 1,529,665 1,049,544 75,115 31,890 82,107 515,707 22,278 $3,306,306 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 & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 1,450,219 497,324 (452,323) 5,252 1,394,659 2,914,557 15,214 $0 2,221,533 $0 574,569 140,832 654,490 18,320 155,688 310,543 5,632,711 448,046 $5,824,902 $2,221,533 $7,935,199 T otal E x p en ses $6,593,600 7,272,710 4,260,353 606,720 225,240 2,390,021 1,870,301 12,256,635 2,565,983 $38,041,563 Middle Georgia College Annual Financial Report FY 2008 30 Note 16. Special Item As of July 1, 2007, Georgia Aviation Technical College (GAVTC) merged with Middle Georgia College. It is now the Georgia Aviation campus of Middle Georgia College. As a result of this merger, GAVTC assets and liabilities as of July 1, 2007 transferred to Middle Georgia College. The net transfer of $17,399,426 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 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 University in support of its programs. The sixty-two 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, 2008, the Foundation distributed $ 45,909 to the College for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Middle Georgia College Foundation, Inc. at 1100 Second St., SE, Cochran, GA 31014. Investments for Component Units: Middle Georgia College Foundation, Inc. holds endowment and other investments in the amount of $1,157,518. The $799,955 corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Middle Georgia College Foundation, Inc. has established a spending plan whereby 100% of the realized earnings may be used for current and future expenditures except where restricted by donors. Middle Georgia College Annual Financial Report FY 2008 31 Investments are comprised of the following amounts at June 30, 2008: Money Market Accounts Certificates of Deposit Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $100,039 300,000 5,053 30,000 562,357 278,118 $1,275,567 Fair Value $100,039 300,000 5,039 29,151 480,039 243,250 $1,157,518 Capital Assets for Component Units: Middle Georgia College Foundation, Inc. holds Capital Assets as of June 30, 2008 as follows: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Construction in Progress 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 $79,482 8,699,823 8,779,305 820,500 820,500 50,976 769,524 $9,548,829 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $26,850,000 $26,850,000 $36,340,000 $36,340,000 $0 $63,190,000 $0 $0 $63,190,000 $0 Middle Georgia College Annual Financial Report FY 2008 32 On November 1, 2005, the Bleckley-Cochran Development Authority issued certain bonds totaling $26,850,000. Proceeds of the sale of the bond were loaned to MGC Real Estate Foundation, LLC. The proceeds of the Series 2005 Bonds are being used to (i) finance or reimburse, in whole or in part, the cost of construction and equipping of three residence halls containing approximately 704 beds including related parking located on the campus of Middle Georgia College, a unit of the University System of Georgia; (ii) fund capitalized interest on the Series 2005 Bonds; (iii) fund a debt service reserve fund for the Series 2005 Bonds; and (iv) pay costs of issuance of the Series 2005 Bonds. The Series 2005 bonds have interest rates ranging from 3.5% to 5.25% and the final maturity is July 1, 2036. On July 1, 2007, the Joint Development Authority of Bleckley County and Dodge County issued certain bonds totaling $36,340,000. Proceeds of the sale of the bonds were loaned to MGC Real Estate Foundation II, LLC. The proceeds of the Series 2008 Bonds are being used to (i) finance or refinance the costs of acquisition, construction, and equipping of student housing containing approximately 699 beds and related amenities located on two campuses of Middle Georgia College, a unit of the University System of Georgia; (ii) fund capitalized interest on the Series 2008 Bonds; (iii) fund a debt service reserve fund and (iv) pay costs of issuance of the Series 2008 Bonds. The project consists of one residence hall with approximately 143 beds and related amenities on the Eastman campus and two residences halls with approximately 278 beds each on the Cochran campus. The Series 2008 bonds have interest rates ranging from 3% to 5.25% and the final maturity is July 1, 2038. The outstanding balance of these obligations at 6/30/08 is $63,190,000. Debt Service Obligations Annual debt service requirements to maturity for Student Housing bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2043 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Principal $0 40,000 80,000 175,000 275,000 2,860,000 6,215,000 10,985,000 16,650,000 20,890,000 5,020,000 $63,190,000 Bonds Payable Interest $1,953,234 3,108,326 3,106,226 3,103,426 3,097,396 15,127,749 14,091,255 11,912,175 8,417,538 3,131,900 263,550 $67,312,775 Total $1,953,234 3,148,326 3,186,226 3,278,426 3,372,396 17,987,749 20,306,255 22,897,175 25,067,538 24,021,900 5,283,550 $130,502,775 Middle Georgia College Annual Financial Report FY 2008 33 Special Item Transfer: Georgia Aviation and Technical College Foundation, Inc. merged with and into Middle Georgia College Foundation, Inc. with an effective date of December 19, 2007. Middle Georgia College Foundation, Inc. is the surviving Corporation of the merger. All the assets and liabilities of Georgia Aviation and Technical College Foundation became those of Middle Georgia College Foundation, Inc. and resulted in a Net Asset transfer of $1,012,369. This transfer is reported as a Special Item in the Statement of Revenues, Expenses and Changes in Net Assets. Middle Georgia College Annual Financial Report FY 2008 34 NORTH GEORGIA COLLEGE & STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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......................................................................................................... 29 Note 13. Contingencies................................................................................................................ 29 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 30 Note 15. Natural Classifications with Functional Classifications .............................................. 31 Note 16. Component Units .......................................................................................................... 32 NORTH GEORGIA COLLEGE & STATE UNIVERSITY Management's Discussion and Analysis Introduction North Georgia College and 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 has become 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 5,000 students each year. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 233 FY2007 227 FY2006 163 5,227 4,922 4,765 4,629 4,414 4,222 Overview of the Financial Statements and Financial Analysis North Georgia College and State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 and 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 and State University Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $14,689,148 76,230,276 3,638,481 94,557,905 June 30, 2007 $15,489,370 69,946,035 3,801,512 89,236,917 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 6,468,416 18,389,138 24,857,554 5,734,013 18,608,204 24,342,217 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 58,461,853 2,578,939 1,712,620 6,946,939 $69,700,351 51,915,569 2,762,864 1,583,753 8,632,514 $64,894,700 The total assets of the institution increased by $5,320,988. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $6,284,241 in the category of Capital Assets, net. The total liabilities for the year increased by $515,337. The combination of the increase in total assets of $5,320,988 and the increase in total liabilities of $515,337 yields an increase in total net assets of $4,805,651. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $6,546,284. North Georgia College and State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $33,585,891 61,263,447 (27,677,556) 29,685,816 2,008,260 2,797,391 4,805,651 64,894,700 0 64,894,700 $69,700,351 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: North Georgia College and State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $15,027,420 2,631,702 692,810 14,371,334 862,625 33,585,891 26,792,332 3,053,772 96,097 513,891 7,358 30,463,450 2,422,429 374,962 2,797,391 $66,846,732 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $26,361,033 4,809,218 3,698,491 7,017,692 6,160,963 924,105 12,291,945 61,263,447 777,634 $62,041,081 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 Operating revenues increased by $3,331,156 in fiscal 2008. Although Tuition & Fees included an average increase of 7%, and a 215 FTE gain; revenues also increased in Grants and Contracts, Auxiliary and Other categories. North Georgia College and State University Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $1,530,803 is a primary result of the increased sales of food services, retail operations and residence hall occupancy. Nonoperating revenues increased by $3,355,754 for the year primarily due to an increase of $3,723,309 in State Appropriations. The compensation and employee benefits category increased by $3,147,703 and primarily affected the Instruction category. The increase reflects the addition of 6 full-time faculty members, 8 part-time faculty members, 6 full-time staff members, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $331,664 during the past year. The increase was primarily associated with the increased electrical and natural gas costs that were experienced in the winter of fiscal year 2008 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by North Georgia College and 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($25,137,589) 29,998,303 (7,265,856) 755,421 (1,649,721) 12,584,181 $10,934,460 June 30, 2007 ($21,942,583) 26,197,933 (2,280,476) 770,365 2,745,239 9,838,942 $12,584,181 North Georgia College and State University Annual Financial Report FY 2008 5 Capital Assets North Georgia College and State University had approximately $8.7 million in capital asset additions during fiscal 2008. $7.2 million of these additions were in the Construction Work in Progress category and included $4.9 million for the Recreation Center/Parking Deck and $2.3 million for the Education Building Renovation projects. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Debt and Liabilities North Georgia College and State University had Long-Term Debt and Liabilities of $19,379,164 of which $990,026 was reflected as current liability at June 30, 2008. 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 and State University has included the financial statements and notes for all required component units for FY2008. The North Georgia College and State University Foundation, Inc. had investments of $29.2 million as of June 30, 2008 and long-term debt of $46.6 million in the form of two bond issues. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The declining trend in Georgia state revenue collections and the potential for substantial midyear budget reductions pose a significant risk to the University's financial stability. Dramatic reductions in service to our students, faculty and staff could result. Our ability to service increasing numbers of students and provide critically needed outreach in our service area could be greatly compromised. While our current financial position in strong, the University must remain diligent in protecting our assets and reacting proactively to an ever changing financial environment. David L. Potter, President North Georgia College and State University North Georgia College and State University Annual Financial Report FY 2008 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, 2008 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 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 Fro m C o m p o n en t U n it s N et In v est m en t in C ap it al L eases 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 orth G e orgia C olle ge & S tate U n i ve rs ity C om pon e n t Un it N orth G e orgia C olle ge an d S tate U n i ve rs ity Fo u n da ti o n , In c. $ 9 ,9 2 5 ,0 0 6 5 2 ,4 4 7 2 0 0 ,6 6 3 1 ,4 1 8 ,0 9 1 5 6 7 ,0 6 4 1 ,5 7 1 ,6 7 2 9 5 4 ,2 0 5 1 4 ,6 8 9 ,1 4 8 $ 8 0 ,3 2 8 8 3 ,0 0 4 3 1 2 ,2 6 8 1 0 3 ,7 5 5 2 8 ,2 6 9 6 0 7 ,6 2 4 N on cu rre n t A sse ts N o n curren t C ash 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 N et In v est m en t in C ap it al L eases 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 te 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 ) D ue t o C o 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 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 ) 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 1 ,0 0 9 ,4 5 4 1 ,5 0 9 ,1 5 2 1 ,1 1 9 ,8 7 5 7 6 ,2 3 0 ,2 7 6 7 9 ,8 6 8 ,7 5 7 9 4 ,5 5 7 ,9 0 5 6 5 1 ,2 8 6 2 2 2 ,8 0 9 5 4 2 ,5 9 0 6 9 5 ,2 0 5 3 ,0 4 6 ,4 2 3 2 1 6 ,3 2 2 3 1 2 ,2 6 7 6 7 7 ,7 5 9 1 0 3 ,7 5 5 6 ,4 6 8 ,4 1 6 1 7 ,4 5 6 ,1 5 6 9 3 2 ,9 8 2 1 8 ,3 8 9 ,1 3 8 2 4 ,8 5 7 ,5 5 4 5 8 ,4 6 1 ,8 5 3 2 ,5 7 8 ,9 3 9 1 ,7 1 2 ,6 2 0 6 ,9 4 6 ,9 3 9 $ 6 9 ,7 0 0 ,3 5 1 1 6 ,4 3 0 ,3 8 9 2 9 ,1 6 8 ,6 0 0 1 7 ,4 5 6 ,3 5 6 1 5 7 ,0 3 5 2 0 ,8 9 4 ,4 9 7 9 9 7 ,8 8 2 8 5 ,1 0 4 ,7 5 9 8 5 ,7 1 2 ,3 8 3 3 ,8 0 4 ,1 3 0 7 6 5 ,9 8 6 5 6 7 ,0 6 4 5 9 0 ,0 0 0 3 3 8 ,7 6 9 6 ,0 6 5 ,9 4 9 6 ,9 7 7 ,2 1 6 4 5 ,9 9 5 ,0 0 3 2 5 ,2 1 2 5 2 ,9 9 7 ,4 3 1 5 9 ,0 6 3 ,3 8 0 9 ,4 4 5 ,9 6 9 2 3 ,5 7 0 ,3 7 0 4 ,6 2 7 ,0 0 0 (1 0 ,9 9 4 ,3 3 6 ) $ 2 6 ,6 4 9 ,0 0 3 North Georgia College and State University Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets 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, 2008 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 Sales and Services Rents 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 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 Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Nort h Georgia College & St at e Universit y T ot al Operat ing Expenses Operat ing Incom e (loss) North Georgia C ollege & State Un i ve rs i ty C om pone nt Unit North Ge orgia C ollege and State Un i ve rs i ty Fou n dati on , In c. $18,195,990 (3,168,570) 2,631,702 692,810 4,627,651 3,161,015 3,007,337 898,347 759,958 1,832,915 84,111 862,625 33,585,891 15,017,763 14,716,370 8,331,981 148,318 596,987 1,755,089 2,755,876 14,785,776 3,155,287 61,263,447 (27,677,556) $0 1,269,644 30,037 2,238,172 1,376 229,452 3,768,681 65,200 103,872 76,537 1,873 914,403 27,000 1,414,745 2,603,630 1,165,051 North Georgia College and State University Annual Financial Report FY 2008 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, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASS ETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year North Georgia C ollege & State Un i ve rs i ty C om pone nt Unit North Ge orgia C ollege and State Un i ve rs i ty Fou n dati on , In c. 26,792,332 909,800 94,986 2,048,986 96,097 513,891 (777,634) 7,358 29,685,816 2,008,260 2,422,429 374,962 2,797,391 4,805,651 64,894,700 0 64,894,700 $69,700,351 (1,435,612) (1,593,366) (3,028,978) (1,863,927) 1,420,570 1,420,570 (443,357) 27,092,360 0 27,092,360 $26,649,003 North Georgia College and State University Annual Financial Report FY 2008 9 Statement of Cash Flows NORTH GEORGIA COLLEGE & S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 m ent s Int erest on 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, 2008 $14,940,286 2,556,046 692,810 (26,759,998) (29,566,914) (1,755,089) (105,298) 74,352 4,632,233 2,927,270 3,005,878 893,039 760,736 1,831,109 38,084 697,867 (25,137,589) 26,792,332 56,101 3,149,870 29,998,303 2,422,429 9,075 (8,657,683) (262,043) (777,634) (7,265,856) 55,440 699,981 755,421 (1,649,721) 12,584,181 $10,934,460 North Georgia College and State University Annual Financial Report FY 2008 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, 2008 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 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 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, 2008 ($27,677,556) 3,155,287 (649,615) (214,837) (32,600) (30,946) 13,841 158,976 15,451 124,410 ($25,137,589) ($186,090) ($374,962) North Georgia College and State University Annual Financial Report FY 2008 11 NORTH GEORGIA COLLEGE & STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 and State University Annual Financial Report FY 2008 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 and State University Annual Financial Report FY 2008 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, 2008, 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 and State University Annual Financial Report FY 2008 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 $1,486,331 as of 7-1-2007. For FY2008, $1,050,280 was earned in compensated absences and employees were paid $925,870, for a net increase of $124,410. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,610,741. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The University's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. North Georgia College and State University Annual Financial Report FY 2008 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, 2008 $138,792 669,382 904,446 $1,712,620 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, 2008 $7,347,807 3,723,680 41,613 (4,166,161) $6,946,939 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 and State University Annual Financial Report FY 2008 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. North Georgia College and State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $10,342,038 and the bank balance was $10,914,278. Of the University's deposits, $10,861,832 were uninsured. Of these uninsured deposits, $10,861,832 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 North Georgia College and State University Annual Financial Report FY 2008 18 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, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities General Obligation Bonds Other Investments Equity Securities - Domestic Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments Fair Value 1-5 Years Investment Maturity 6-10 Years More Than 10 Years $1,053,147 $1,053,147 456,005 $149,112 $149,112 $613,059 $613,059 $290,976 $290,976 630,209 $2,139,361 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 40 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. 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, 2008, $1,509,152 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name. North Georgia College and State University Annual Financial Report FY 2008 19 Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk. The investments subject to credit quality risk are reflected below: Related Debt Inves tments General Obligation Bonds Fair Value $1,053,147 $1,053,147 AAA $1,053,147 $1,053,147 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, 2008 North Georgia College and State University had five investments in a single issuer that exceeded 5% of the university's total investments as shown below: Investment: Percent of Total General Obligation Bonds -PrimeVest (Gwinnett Cty Water & Sewer) General Obligation Bonds -PrimeVest (Dekalb Cty Bldg Auth) General Obligation Bonds -PrimeVest (Gilmer Cty Bldg Auth) General Obligation Bonds -PrimeVest (Gwinnett Cty Water & Sewer) Equity Securities AT&T 15.3% 6.9% 6.7% 6.6% 7.4% North Georgia College and State University Annual Financial Report FY 2008 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $456,042 267,340 200,663 567,064 892,947 2,384,056 198,238 $2,185,818 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore Other T otal $1,524,310 47,362 $1,571,672 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was $0. North Georgia College and State University Annual Financial Report FY 2008 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 0 3,118,238 33,033,716 64,701,118 $69,946,035 Addi ti o n s $374,962 7,787,077 8,162,039 Re du cti on s $0 212,973 212,973 617,078 328,724 546,379 1,492,181 50,401 1,675,010 52,617 371,599 727,132 278,528 3,155,287 (1,663,106) $6,498,933 300,036 22,304 322,340 298,317 22,304 320,621 1,719 $214,692 En di n g B al an ce 6/30/2008 $4,179,162 9,014,821 13,193,983 3,883,833 64,918,567 2,721,293 4,818,568 17,346,542 5,215,872 98,904,675 2,336,221 24,094,692 1,690,668 3,645,207 727,132 3,374,462 35,868,382 63,036,293 $76,230,276 North Georgia College and State University Annual Financial Report FY 2008 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $2,243,192 803,231 $3,046,423 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning B al an ce July 1, 2007 $18,030,466 Addi ti on s $0 Re du cti on s En di n g B al an ce June 30, 2008 $262,043 $17,768,423 C u rre n t Porti on $312,267 O ther Liabilities Compensated Absences T otal 1,486,331 1,486,331 1,050,280 1,050,280 925,870 925,870 1,610,741 1,610,741 677,759 677,759 Total Long Term O bligations $19,516,797 $1,050,280 $1,187,913 $19,379,164 $990,026 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,432,116 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. In addition, the University executed a rental agreement for a Student Recreation Center and Parking Deck with the North Georgia College and State University Foundation, Inc. The rental agreement commences in September 2008 and will expire in FY 2038. The net present value of the minimum lease payments over the life of the rental agreement is $25,700,844. Note 10. Lease Obligations North Georgia College and 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. North Georgia College and State University Annual Financial Report FY 2008 23 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 2008 were $1,039,677 of which $777,634 represented interest. Total principal paid on capital leases was $262,043 for the fiscal year ended June 30, 2008. 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, 2008: Land Buildings - Owen Hall Buildings - 60 Main Street West Infrastructure - Radar Ridge Total Assets Held Under Capital Lease $815,443 10,499,002 2,394,917 3,725,491 $17,434,853 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 leased land and a building; Downtown Office Building 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 leased a residence hall building for a 20 year period that began March 2007 and expires 2028. The outstanding liability at June 30, 2008 on these capital leases is $17,768,423. 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. OPERATING LEASES North Georgia College and State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2026. 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 December 2007, North Georgia College and State University entered into a real property operating lease with the City of Dahlonega, for office space for one year with an option to extend the term for five years with an annual rental payment of $38,196. In February, 2007 the University entered into a real property lease with the North Georgia College and State University Foundation for an athletic complex for one year with an option to extend the term for nineteen years with an annual rental payment of $58,000. North Georgia College and State University Annual Financial Report FY 2008 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $1,078,258 1,105,073 1,132,706 1,188,894 1,287,775 7,308,373 7,219,840 5,931,155 1,094,089 561,301 27,907,464 10,139,041 $17,768,423 $298,095 238,281 210,533 96,196 96,196 290,000 290,000 232,000 $1,751,301 North Georgia College and State University's FY2008 expense for rental of real property and equipment under operating leases was $305,421. 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 2008, 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: North Georgia College and State University Annual Financial Report FY 2008 25 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $1,485,182 $1,392,527 $1,292,601 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 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. North Georgia College and State University Annual Financial Report FY 2008 26 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, 2008, for employees covered by ERS was $204,348. The University's total payroll for all employees was $29,734,133. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $21,388 $18,492 $16,466 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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. North Georgia College and State University Annual Financial Report FY 2008 27 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $877,008 (8.13% or 8.15%) and $472,033 (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 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 2008 amounted to $91,422 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. North Georgia College and State University Annual Financial Report FY 2008 28 Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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. 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. North Georgia College and State University Annual Financial Report FY 2008 29 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 224 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, North Georgia College and State University recognized as incurred $1,111,156 of expenditures, which was net of $348,476 of participant contributions. North Georgia College and State University Annual Financial Report FY 2008 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 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 $14,469,668 2,993,939 3,889,278 287,465 353,130 157,904 4,042,819 166,830 $26,361,033 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $175,236 2,515,336 551,498 $46,634 2,021,852 545,529 131,093 151,476 952,790 331,789 40,956 17,466 48,813 960,805 16,436 $4,809,218 $3,698,491 Inst it ut ional Sup p o r t $93,648 3,302,981 2,195,795 148,318 66,793 5,653 51,851 1,034,512 118,141 $7,017,692 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 & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 2,066,542 722,043 (889,559) 3,701 1,966,460 63,532 2,228,244 $0 924,055 50 $232,577 1,815,720 427,838 889,559 66,979 454,785 379,372 7,731,268 293,847 $6,160,963 $924,105 $12,291,945 T otal E x p en ses $15,017,763 14,716,370 8,331,981 148,318 596,987 1,755,089 2,755,876 14,785,776 3,155,287 $61,263,447 North Georgia College and State University Annual Financial Report FY 2008 31 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 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 ends on June 30th each year. During the year ended June 30, 2008, the Foundation distributed $1,414,745 to or for the benefit of the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation may be obtained from their Office at 70 Alumni Drive, Dahlonega, GA 30533 or from the University's website at www.ngcsu.edu and click on "Alumni & Friends" to go to the Foundation's page. Investments for Component Units: North Georgia College & State University Foundation, Inc. holds endowment and other investments in the amount of $29.2 million. The $23.6 million corpus of the endowment is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. North Georgia College & State University Foundation, in conjunction with the donors, has established a spending plan whereby 50% of the earnings may be used for academic scholarships. The remaining 50% of the earnings are set aside as a reserve. Investments are comprised of the following amounts at June 30, 2008: North Georgia College and State University Annual Financial Report FY 2008 32 Money Market Accounts Government and Agency Securities Equity Securities Mutual Funds Real Estate Total Investments Cost $743,208 200,000 1,004,030 25,267,777 1,648,677 $28,863,692 Fair Value $743,208 201,938 717,180 25,857,597 1,648,677 $29,168,600 Capital Assets for Component Units: North Georgia College & State University Foundation, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Construction in Progress Total Capital Assets not being Depreciated $39,005 20,280,552 20,319,557 Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment Total Capital Assets being Depreciated 585,065 16,875 601,940 Less Total Accumulated Depreciation 27,000 Total Capital Assets being Depreciated, Net 574,940 Capital Assets, Net $20,894,497 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the year ended June 30, 2008 are as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $22,665 300,873 46,979,761 $47,303,299 $2,547 37,896 $40,443 $0 394,758 $394,758 $25,212 338,769 46,585,003 $46,948,984 $0 338,769 590,000 $928,769 North Georgia College and State University Annual Financial Report FY 2008 33 Notes and Loans Payable: The $338,769 Notes and Loans Payable balance at June 30, 2008 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 less .50% (4.5% at June 30, 2008). Payments of quarterly interest only are required through January 5, 2009, at which time the line of credit matures. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 Notes and Loans Payable Principal Interest Total 1 $338,769 $8,000 $346,769 Revenue Bonds Payable: In August 2001, the Downtown Development Authority of the City of Dahlonega (the Authority) issued $10.8 million in Revenue Bonds Series 2001 (the Bonds) and entered into an agreement to loan $10.8 million to the Foundation for Student Housing construction. The bonds were secured by a letter of credit issued by a financial institution in favor of the Authority. The letter of credit must be renewed annually. Borrowings under the agreement were subject to an annual fee of .25% of the letter of credit amount. The loan was paid off in February, 2007 with proceeds of the Series 2007 Bond Issue. In February 2007, the Student Housing financed the retirement of the Series 2001A Bonds and debt associated with the purchase of real estate held for investment with the Downtown Development Authority of the City of Dahlonega 2007 Series C Revenue Bonds (the C Bonds) totaling $16,215,000. The C Bonds carried interest ranging from 3.63% to 5.00%, payable semiannually on January 1 and July 1 of each year beginning July 1, 2007. In February 2007,the Park & Recreation Center financed the acquisition and renovation of an existing office building and the construction of a Recreation Center and Parking Deck for the North Georgia College & State University with the Downtown Development Authority of the City of Dahlonega 2007 Series A & B Revenue Bonds (the A & B Bonds) totaling $30,270,000. The Series A & B Bonds carry interest ranging from 3.63% to 5.00%, payable semi-annually on January 1 and July 1 of each year beginning July 1, 2007. North Georgia College and State University Annual Financial Report FY 2008 34 Annual debt service obligations to maturity for the revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) Principal Bonds Payable Interest Total 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 $590,000 525,000 585,000 670,000 835,000 4,905,000 7,530,000 11,340,000 8,430,000 10,695,000 46,105,000 480,003 $46,585,003 $2,090,515 2,069,015 2,047,455 2,023,410 1,993,052 9,293,069 7,887,385 5,693,688 2,981,675 940,319 37,019,583 $37,019,583 $2,680,515 2,594,015 2,632,455 2,693,410 2,828,052 14,198,069 15,417,385 17,033,688 11,411,675 11,635,319 83,124,583 480,003 $83,604,586 North Georgia College and State University Annual Financial Report FY 2008 35 SAVANNAH STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 Savannah, Georgia Earl G. Yarbrough, Sr., Ph.D. President Edward B. Jolley, Jr., CPA, MBA Vice President for Fiscal Affairs SAVANNAH STATE UNIVERSITY ANNUAL FINANCIAL REPORT FY 2008 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 ...........................30 Note 15. Natural Classifications with Functional Classifications ..............................31 Note 16. Component Units .........................................................................................32 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. Chartered by the State of Georgia in 1890, as a department of the State University for the education and training of Negro students, Savannah State University now serves a diverse student population as a senior university of the University System of Georgia. The University serves a primarily African-American student population, enriched by a diversity of traditional and nontraditional students from other countries, cultures, and races. Savannah State University, located in a coastal, urban, port city setting, serves residential and commuter students from diverse educational, geographical, and racial backgrounds. In a beautiful and unique setting of a live oak forest next to a salt marsh estuary, the University is well situated for the study of commercial, technological, environmental and urban issues. The University's mission is consistent with the core missions of the University System of Georgia and the senior universities in the System. The University's mission is to graduate students prepared to perform at higher levels of economic productivity, social responsibility, and excellence in their chosen fields of endeavor in a changing global community. 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 Sciences and Technology, which lead 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 has grown over the last several fiscal years as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 136 FY2007 141 FY2006 118 3,169 3,241 3,091 2,950 3,065 2,853 Overview of the Financial Statements and Financial Analysis Savannah State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Savannah State University Annual Financial Report FY 2008 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 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. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed: Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $9,368,193 84,241,090 3,769,899 97,379,182 June 30, 2007 $8,584,873 52,722,785 3,417,316 64,724,974 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 3,399,136 29,707,437 33,106,573 2,521,155 668,199 3,189,354 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 55,085,635 2,586,254 1,411,771 5,188,949 $64,272,609 52,722,785 2,305,790 1,261,120 5,245,925 $61,535,620 The total assets of the institution increased by $32,654,208. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $31,518,305 in the Savannah State University Annual Financial Report FY 2008 2 category of Capital Assets, net. The increase is directly due to asset acquisitions, which included a capital lease for campus housing. The total liabilities for the year increased by $29,917,219 due primarily to a capital lease liability incurred. The combination of the increase in total assets of $32,654,208 and the increase in total liabilities of $29,917,219 yields an increase in total net assets of $2,736,989. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $2,362,850. 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, 2008 June 30, 2007 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 $30,793,401 51,902,854 (21,109,453) 20,169,847 (939,606) 3,676,595 2,736,989 61,535,620 0 61,535,620 $64,272,609 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a loss before other revenues and expenses, but a positive increase in net assets. Although revenues increased $1,981,523 or 6.9% and nonoperating revenues increased $1,681,711 or 8.9%, operating Savannah State University Annual Financial Report FY 2008 3 expenses increased $4,627,516 or 9.8%. The net loss before Capital Grants and Gifts was ($939,606), a decrease in net margin of ($1,404,385) over prior year. This loss was offset by capital gifts and grants in the amount of $3,676,595, creating an increase in net assets of $2,736,989. 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, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $6,365,449 13,801,927 348,107 10,199,247 78,671 30,793,401 18,892,885 1,235,059 517,761 (35,755) 20,609,950 3,676,595 3,676,595 $55,079,946 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 Savannah State University Annual Financial Report FY 2008 4 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $14,703,589 1,470,687 2,219,032 4,927,690 3,163,252 7,465,528 6,836,889 2,325,150 8,791,037 0 51,902,854 440,103 $52,342,957 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 0 $47,275,338 Operating revenues increased by $1,981,523 in fiscal 2008. Although Tuition & Fees included a 10.8% average increase and Auxiliary revenues increased 22.5%, revenues decreased in Grants and Contracts and Other categories. The Auxiliary revenue increase of $1,875,323 is a result of the changing environment of residential life on the University's campus. In February 2008, the University entered into a capital lease for University Village. Therefore, student housing fees are collected through the campus and a fee is paid to American Campus to continue to manage the facility until such time that a housing contract may be sent for proposal and accepted. University Village rents for fiscal year 2008, without consideration of fines and fee waivers, was $1,897,881. Nonoperating revenues increased by $1,681,711 for the year primarily due to an increase of $986,523 in State Appropriations and an increase of $741,816 in gift revenue. The compensation and employee benefits category increased by $2,013,568 and was primarily affected by faculty, academic and institutional support, research, and auxiliary wage increases, as well as an increase in employee benefits of $619,317 or 10.3%. The increase primarily reflects merit increases; personnel increases in academic support, institutional support, and auxiliary; and the increased cost of health insurance for the employees of the institution. Depreciation expense increased $707,252 over the prior year due directly to the acquisition of University Village housing and various other major assets (i.e., two new buses acquired in fiscal year 2008). The increase in interest expense was a direct result of the capital lease. Utilities increased by $285,397 during the past year. The increase was primarily due to water, which increased $274,273 over the prior year. Savannah State University Annual Financial Report FY 2008 5 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($17,595,173) 20,309,941 (2,251,593) 205,769 668,944 4,734,809 $5,403,753 June 30, 2007 ($16,666,913) 18,264,497 (365,474) 324,020 1,556,130 3,178,679 $4,734,809 Capital purchases for fiscal year 2008 were $5,489,938, as compared to $3,727,005 prior year. Additionally, the University spent $440,103 in interest expense related to a capital lease purchase. Capital Assets The University had two significant capital asset additions for facilities in fiscal year 2008. The Hill Hall renovation was completed at a cost of $3,407,923, which was funded by GSFIC, and will reopen August, 2008. Additionally, the University entered into a capital lease for University Village Housing in the amount of $29,229,205. Other renovations funded by the GSFIC included $378,678 for the Drew Griffith Science Building. Included in the major equipment purchases for the University were two buses at a total cost of $398,000; five vehicles (primarily for public safety); equipment for the surveying lab; computer hardware; and various other equipment items essential for on-going operations. For additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the Notes to the Financial Statements. Savannah State University Annual Financial Report FY 2008 6 Long Term Debt and Liabilities Savannah State University had Long-Term Debt and Liabilities of $30,466,225 of which $758,788 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Debt and Liabilities, see notes 1 and 8, and 10 in the Notes to the Financial Statements. Component Units In compliance with GASB Statement No. 39, Savannah State University has included the financial statements and notes for all required component units for FY2008. Savannah State University Foundation, Inc., a Georgia non-profit corporation (the "Foundation") adopted resolutions authorizing the organization of SSU Foundation Real Estate Ventures, LLC (the "LLC"), a Georgia limited liability company of which the Foundation is the sole member, for the purpose of acquiring, renovating, equipping and leasing to the Board of Regents for the benefit of the University. At June 30, 2008, the Foundation, which includes the LLC, had long-term debt of $49.2 million in the form of two bond issues. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is 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 challenging with budget cuts on the horizon at the state level, but will continue to maintain a close watch over resources providing the University with the flexibility to react to internal and external situations that may develop. Earl G. Yarbrough, Sr., Ph.D., President Savannah State University Savannah State University Annual Financial Report FY 2008 7 Statement of Net Assets S A V A N N A H S T A T E UN IV ER S IT Y S TA T EM EN T O F N ET A S S ETS June 30, 2008 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 N et In v est m en t in Cap it al L eases Co n t ribut io n s Receiv able 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 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 N et In v est m en t in Cap it al L eases 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 r ie s P a y a ble D ep o sit s D eferred Rev en ue (n o te 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 ) 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 ) 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 S a va n n a h S ta te U n ive rs i ty $ 5 ,1 7 7 ,6 1 7 4 0 8 ,2 7 6 1 ,1 8 1 ,5 6 8 2 ,5 0 7 ,8 9 3 5 5 ,5 4 8 3 7 ,2 9 1 9 ,3 6 8 ,1 9 3 2 2 6 ,1 3 6 1 ,6 1 3 ,6 2 3 1 ,0 6 1 ,9 7 0 8 6 8 ,1 7 0 8 4 ,2 4 1 ,0 9 0 8 8 ,0 1 0 ,9 8 9 9 7 ,3 7 9 ,1 8 2 5 6 9 ,6 0 0 2 4 6 ,1 3 6 3 9 7 ,9 8 0 3 8 9 ,8 7 9 1 ,0 3 6 ,7 5 3 1 7 3 ,3 4 6 5 8 5 ,4 4 2 3 ,3 9 9 ,1 3 6 2 8 ,9 8 2 ,1 0 9 7 2 5 ,3 2 8 2 9 ,7 0 7 ,4 3 7 3 3 ,1 0 6 ,5 7 3 5 5 ,0 8 5 ,6 3 5 2 ,5 8 6 ,2 5 4 1 ,4 1 1 ,7 7 1 5 ,1 8 8 ,9 4 9 $ 6 4 ,2 7 2 ,6 0 9 C om pon e n t Un it S a va n n a h S ta te U n i ve rs i ty Fo u n da ti o n , In c. $ 3 7 5 ,6 3 4 1 5 7 ,5 6 7 1 6 4 ,0 1 2 1 ,4 7 8 ,3 7 1 4 0 ,0 0 0 1 5 2 ,4 7 3 2 ,3 6 8 ,0 5 7 8 ,1 0 3 ,8 2 3 2 7 ,6 7 7 ,0 8 4 4 0 ,0 0 0 1 6 ,6 7 2 ,4 7 2 1 ,1 8 6 ,1 5 3 5 3 ,6 7 9 ,5 3 2 5 6 ,0 4 7 ,5 8 9 1 ,6 5 8 ,4 9 4 3 ,8 5 3 ,9 7 0 1 1 0 ,0 0 0 5 ,6 2 2 ,4 6 4 4 9 ,1 1 0 ,0 0 0 4 9 ,1 1 0 ,0 0 0 5 4 ,7 3 2 ,4 6 4 5 ,8 9 7 ,9 0 3 (4 ,5 8 2 ,7 7 8 ) $ 1 ,3 1 5 ,1 2 5 Savannah State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets SAVANNAH STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 REVENUES Operating Revenues Student T uition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Grants and Contracts Federal St at e Ot her Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookst ore Food Services Parking/T ransportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues T otal Operating Revenues 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 T otal Operating Expenses Operating Income (loss) Savannah State Un i ve rs i ty Component Unit Savannah State Un i ve rs i ty Foundation, Inc. $11,750,281 (5,384,832) 13,315,557 107,383 378,987 348,107 5,004 4,464,020 108,770 3,332,030 5,722 413,574 1,856,592 18,539 73,667 30,793,401 8,343,305 13,486,063 6,627,341 368,040 567,919 3,826,020 2,995,775 12,563,153 3,125,238 51,902,854 (21,109,453) $0 9,497 1,040,139 24,134 1,073,770 19,260 1,161,759 124,662 23,588 1,329,269 (255,499) Savannah State University Annual Financial Report FY 2008 9 Statement of Revenues, Expenses and Changes in Net Assets, Continued SAVANNAH STATE UNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASS ETS for the Year Ended June 30, 2008 NO NO PERATING REVENUES (EXPENSES) State Appropriations Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year Savannah State Unive rsity C ompone nt Unit Savannah State Unive rsity Foundation, Inc. 18,892,885 1,235,059 517,761 (440,103) (35,755) 20,169,847 (939,606) 3,676,595 3,676,595 2,736,989 61,535,620 0 61,535,620 $64,272,609 41,940 (4,866,536) 6,112,593 1,287,997 1,032,498 0 1,032,498 282,627 0 282,627 $1,315,125 Savannah State University Annual Financial Report FY 2008 10 Statement of Cash Flows SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 C AS H FLO W S FRO M O PERATING AC TIVITIES T uit ion and Fees Grants and Cont ract s (Exchange) Sales and Services P ayment s t o Suppliers Payments to Employees P ayment s for Scholarships and Fellowships Loans Issued to Student s and Employees Auxiliary Enterprise 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 Receipts (payment s) Net Cash P rovided (used) by Operating 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 Capital Grant s and Gifts Received P roceeds from Sale of Capit al Assets P urchases of Capital 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 Investment s P urchase of Investment s Net Cash P rovided (used) by Investing 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, 2008 $5,932,710 14,173,243 348,107 (22,949,915) (21,591,367) (3,826,020) (49,300) 4,990,726 108,770 3,213,671 5,722 407,875 1,853,280 (152,460) (60,215) (17,595,173) 18,892,885 181,998 1,235,058 20,309,941 3,676,595 75,603 (5,489,938) (73,750) (440,103) (2,251,593) 420,063 625,832 (840,126) 205,769 668,944 4,734,809 $5,403,753 Savannah State University Annual Financial Report FY 2008 11 Statement of Cash Flows, Continued SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 REC O NCILIATIO N O F O PERATING LO SS TO NET CASH 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 Inv ent o ries Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (used) by Operating Activities ** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS Fixed assets acquired by incurring capital lease obligations Change in fair value of investments recognized as a component of interest income June 30, 2008 ($21,109,453) 3,125,238 (92,653) (10,037) (17,534) (49,300) 736,612 51,643 (327,070) 97,381 ($17,595,173) $29,229,205 ($108,071) Savannah State University Annual Financial Report FY 2008 12 SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 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 FY2008, Savannah State University is reporting the activity for the Savannah State University Foundation, Inc. as a discretely presented component unit. See Note 16, Component Units, for the Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Savannah State University Annual Financial Report FY 2008 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. 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 Balanced Income Fund is included under Investments. Savannah State University Annual Financial Report FY 2008 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. 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, 2008, no capital assets were transferred to the University by GSFIC. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Savannah State University Annual Financial Report FY 2008 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. Savannah State University had accrued liability for compensated absences in the amount of $1,213,388 as of 7-1-2007. For FY2008, $932,347 was earned in compensated absences and employees were paid $834,965, for a net increase of $97,382. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,310,770. 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 2008 16 Expendable Restricted Net Assets include the following: June 30, 2008 Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans T erm Endowments T otal Restricted Expendable $199,565 875,266 21,465 315,475 $1,411,771 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted T otal Unrestricted Net Assets June 30, 2008 $2,248,542 2,795,267 49,864 95,276 $5,188,949 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 Savannah State University Annual Financial Report FY 2008 17 scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 2008 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, 2008, the carrying value of deposits was $7,424,275 and the bank balance was $8,696,037. Of the University's deposits, $8,368,834 were uninsured. Of these uninsured deposits, $8,368,834 were collateralized with securities held by the financial institution's trust department or agent in the University's name. Savannah State University Annual Financial Report FY 2008 19 B. Investments At June 30, 2008, the carrying value of the University's investments was $1,061,970, 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: Investment Pools Board of Regents Balanced Income Fund $1,061,970 T otal Investment Pools $1,061,970 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. 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 7.84 years. Of the University's total investment of $1,061,970 in the Balanced Income Fund, $682,846 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. Savannah State University Annual Financial Report FY 2008 20 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $585,260 631,898 1,181,568 1,988,026 4,386,752 697,291 $3,689,461 Note 4. Inventories Inventories consisted of the following at June 30, 2008: P hysical P lant Other T otal June 30, 2008 $50,854 4,694 $55,548 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0. Savannah State University Annual Financial Report FY 2008 21 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 Capital Leases Library Collections Capitalized Collections Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2007 $575,975 444,189 1,020,164 68,976,721 2,520,259 7,740,282 0 6,818,959 55,285 86,111,505 22,424,877 1,368,843 5,248,359 0 5,358,247 8,559 34,408,884 51,702,621 $52,722,785 Additions $0 3,671,145 3,671,145 Reductions $0 4,115,334 4,115,334 4,868,267 812,312 29,229,205 253,548 35,163,332 75,600 7,098 82,698 1,653,601 97,634 712,735 401,776 258,110 1,382 3,125,238 32,038,094 $35,709,239 7,098 7,098 75,600 $4,190,934 Ending Balance 6/30/2008 $575,975 0 575,975 73,844,988 2,520,259 8,476,994 29,229,205 7,065,409 55,285 121,192,139 24,078,478 1,466,477 5,961,094 401,776 5,609,259 9,941 37,527,024 83,665,115 $84,241,090 Savannah State University Annual Financial Report FY 2008 22 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $389,879 $389,879 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $0 Additions Reductions Ending Balance June 30, 2008 $29,229,205 $73,750 $29,155,455 Current Portion $173,346 Other Liabilities Compensated Absences Total 1,213,388 1,213,388 932,347 932,347 834,965 834,965 1,310,770 1,310,770 585,442 585,442 Total Long Term Obligations $1,213,388 $30,161,552 $908,715 $30,466,225 $758,788 Note 9. Significant Commitments In February 2008, Savannah State University entered into a capital lease of $24,586,826 at 4.655 percent with the SSU Foundation Real Estate Ventures, LLC (LLC). Under the capital lease agreement, the University will lease a 742-bed housing facility and adjacent buildings situated on existing land acquired by the LLC. The twenty-five year lease for this facility commences August 2009 and expires June 2033. The 0.275 acre of land on which these buildings are located (also known as 4750 LaRoche Avenue) is part of the capital lease agreement. This capital lease is not reflected in the accompanying basic financial statements. The University did not have any significant unearned, outstanding, construction or renovation contracts. Note 10. Lease Obligations Savannah State University is obligated under various operating leases for the use of equipment, but has no operating leases for real property (land, buildings, and office facilities). The University is obligated under a capital lease, but has no other installment purchase agreements for the acquisition of real property. Savannah State University Annual Financial Report FY 2008 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 2033. During the year, the University paid the LLC $416,037 (principal of $73,750, interest of $276,614, and rent expense of $65,673) for the capital lease related to University Village. At year-end, the University recorded interest accrual on this same lease in the amount of $163,489, for total interest recorded of $440,103 for fiscal year 2008. The interest rate was 4.486 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings $28,827,429 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. Savannah State University has one capital lease with SSU Foundation Real Estate Ventures, LLC, of which Savannah State University Foundation, Inc. is the sole member. In February 2008, Savannah State University entered into a capital lease of $29,229,205 at 4.486 percent with the LLC, which is included in the discrete presentation of Savannah State University Foundation, Inc. The University leases a 660-bed housing facility, University Village, for a twenty-five year period that began February 2008 and expires June 2032. The 13.768 acres of land on which these buildings are located is owned by the Board of Regents, and was leased to the LLC for $10 per year, payable in advance upon commencement of a ground lease. The outstanding liability at June 30, 2008 on capital leases is $29,155,455. OPERATING LEASES Savannah State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 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. Savannah State University has two operating leases. The Xerox lease for copy machines requires a monthly minimum lease payment in the amount of $26,182 and expires at the end of September, 2008. The University also has a lease agreement with LADCO Leasing for the use of credit card machines, which carries a minimum lease payment of $188. 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, 2008, were as follows: Savannah State University Annual Financial Report FY 2008 24 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 $1,478,371 1,522,723 1,568,404 1,614,914 1,663,280 9,090,869 10,535,487 12,213,518 11,157,220 50,844,786 21,689,331 $29,155,455 $80,802 2,256 $83,058 Savannah State University's FY2008 expense for rental of real property and equipment under operating leases was $289,981. Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description Savannah State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Savannah State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Savannah State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, 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 2008 2007 2006 100% 100% 100% $1,286,574 $1,244,360 $1,147,046 Savannah State University Annual Financial Report FY 2008 25 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. 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, 2008, for employees covered by ERS was $101,500. The University's total payroll for all employees was $21,829,368. For the year ended June 30, 2008 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. Savannah State University Annual Financial Report FY 2008 26 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $10,566 $3,383 $4,164 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 27 Savannah State University and the covered employees made the required contributions of $453,784 (8.13% or 8.15%) and $275,923 (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 2008 amounted to $28,292 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. Note 12. Risk Management The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Savannah State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. Savannah State University Annual Financial Report FY 2008 28 The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 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, a fully insured HSA/High Deductible PPO healthcare plan and 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. 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, 2008. Savannah State University Annual Financial Report FY 2008 29 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 191 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Savannah State University recognized as incurred $922,999 of expenditures, which was net of $384,331 of participant contributions. Savannah State University Annual Financial Report FY 2008 30 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $8,060,146 2,099,717 2,499,343 98,287 408,777 82,675 1,385,797 68,847 $14,703,589 Research $144,387 272,875 75,059 26,886 305,237 8,015 622,788 15,440 $1,470,687 Functional Classification FY2008 Public Service Academic Support $48,501 1,009,509 219,981 $88,771 2,504,082 623,622 38,626 133,037 12,555 754,249 2,574 127,923 25,540 49,218 1,154,135 354,399 $2,219,032 $4,927,690 Student Services $1,500 1,680,333 472,510 60,518 17,200 32,424 884,488 14,279 $3,163,252 Institutional Support $0 3,500,767 1,984,677 368,040 109,422 61,675 1,296,316 144,631 $7,465,528 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 1,093,777 387,266 (254,294) 6,177 2,542,937 1,513,936 1,547,090 $0 2,324,150 1,000 $0 1,325,003 364,883 254,294 100,080 612,079 206,276 4,950,444 977,978 $6,836,889 $2,325,150 $8,791,037 Total Expenses $8,343,305 13,486,063 6,627,341 368,040 567,919 3,826,020 2,995,775 12,563,153 3,125,238 $51,902,854 Savannah State University Annual Financial Report FY 2008 31 Note 16. Component Units Savannah State University Foundation, Inc., a Georgia non-profit corporation (the "Foundation") adopted resolutions authorizing the organization of SSU Foundation Real Estate Ventures, LLC (the "LLC"), a Georgia limited liability company of which the Foundation is the sole member, for the purpose of acquiring, renovating, equipping and leasing to the Board of Regents for the benefit of the University. Although the University does not control transactions of the Foundation, all activity of the Foundation is restricted for the benefit of the University. As such, the Foundation (including the LLC) is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation (including the LLC) is a private, nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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, 2008, the Foundation distributed $0 to the University. Complete financial statements for the Foundation can be obtained from Savannah State University, Office of Fiscal Affairs, Colston Administration Building, P. O. Box 20419, Savannah, Georgia, 31404. Investments for Components Units: Savannah State University Foundation, Inc. held the following investments at June 30, 2008: M oney M arket Accounts Equity Securities M utual Funds Fair Value $7,549 11,296 138,722 Total Investments $157,567 Savannah State University Annual Financial Report FY 2008 32 Capital Assets for Component Units: Savannah State University Foundation, Inc. held the following capital assets at June 30, 2008: June 30, 2008 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 $1,712,590 5,641,394 7,353,984 9,443,150 9,443,150 124,662 9,318,488 $16,672,472 Long-term Liabilities for Component Units: Changes in long-term debt for Savannah State University Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable $0 $49,220,000 $0 $49,220,000 $110,000 Total Long Term Liabilities $0 $49,220,000 $0 $49,220,000 $110,000 The Savannah Economic Development Authority offered Series 2008 bonds in February 2008 in the form of two issues for $26,245,000 (2008A) and $22,975,000 (2008B). The proceeds of the bond issues were used to construct and equip a dining/recreational facility, acquire and enhance an existing apartment complex and convert it to a student housing facility, fund capitalized interest on the bonds, and pay the costs of issuance of the bonds. In order to mitigate interest rate risk associated with the Series 2008A and 2008B bonds, the Foundation entered into two interest rate swap agreements with Wachovia Bank, N.A. Pursuant to the agreements, the Foundation pays a fixed rate of 4.3862% on the Series 2008A bonds and a fixed rate of 4.5550% on the Series 2008B bonds based on the outstanding principal of the respective bond issues. At June 30, 2008, the Foundation recorded an unrealized loss on the fair value of the interest rate swap agreements of $3,853,970. This loss is reported as Other Liabilities (current) on the Statement of Net Assets and as a component of Interest Expense on the Statement of Revenues, Expenses and Changes in Net Assets. Savannah State University Annual Financial Report FY 2008 33 Annual debt service requirements to maturity for Bonds Payable are as follows: Bonds Payable Princip al Interest Total Year ending June 30: 2009 1 $110,000 $2,197,267 $2,307,267 2010 2 245,000 2,191,938 2,436,938 2011 3 335,000 2,180,713 2,515,713 2012 4 435,000 2,165,436 2,600,436 2013 5 545,000 2,145,660 2,690,660 2014 through 2018 6-10 4,655,000 10,246,997 14,901,997 2019 through 2023 11-15 8,785,000 8,850,311 17,635,311 2024 through 2028 16-20 14,520,000 6,389,782 20,909,782 2029 through 2033 21-25 19,590,000 2,474,963 22,064,963 $49,220,000 $38,843,067 $88,063,067 Savannah State University Annual Financial Report FY 2008 34 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Financial Report For the Year Ended June 30, 2008 Skidaway Institute of Oceanography Savannah, Georgia Dr. James G. Sanders Director Marc Mascolo Assistant Director for Business Affairs SKIDAWAY INSTITUTE OF OCEANOGRAPHY ANNUAL FINANCIAL REPORT FY 2008 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................................................................................................ 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 .......................................................................................................... 19 Note 12. Risk Management......................................................................................................... 21 Note 13. Contingencies................................................................................................................ 21 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 22 Note 15. Natural Classifications with Functional Classifications .............................................. 23 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Management's Discussion and Analysis Introduction The Skidaway Institute of Oceanography is a unique, multidisciplinary Institute, within the University System of Georgia, dedicated to furthering our understanding of marine and environmental sciences. Located sixteen miles southeast of the city of Savannah on the north end of Skidaway Island, the Institute offers easy access to the barrier islands, estuaries, and continental shelf of the southeastern U.S. as well as the open ocean. The Institute conducts leading edge research on marine and coastal systems, trains tomorrow's marine scientists, serves as a gateway to marine environments and integrates University System marine programs. It is committed to excellence in research and education and to the communication of our understanding of marine systems. The goal of the Institute is to create a more knowledgeable citizen capable of appreciating coastal natural environments and the conditions required to sustain them while capitalizing on coastal economic opportunities. Overview of the Financial Statements and Financial Analysis The Skidaway Institute of Oceanography is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 1 equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Total As se ts June 30, 2008 $836,326 6,361,779 7,198,105 June 30, 2007 $1,373,065 5,909,293 7,282,358 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 618,543 349,618 968,161 1,002,761 218,682 1,221,443 Net Assets: Invest ed in Capit al Asset s, net of debt Unrest rict ed Total Ne t As s e ts 6,199,150 30,794 $6,229,944 5,827,152 233,763 $6,060,915 The total assets of the institute decreased by ($84,253). A review of the Statement of Net Assets will reveal that the change was primarily due to a decrease in Cash and Cash Equivalents of $595,603 and a corresponding increase of $452,486 in the category of Capital Assets, net. The balance of the increase is mainly in receivable categories. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($253,282). This was primarily comprised of decreases in Accounts Payable and Deferred Revenue. The combination of the decrease in total assets of ($84,253) and the decrease in total liabilities of ($253,282) yields an increase in total net assets of $169,029. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $371,998. Skidaway Institute of Oceanography Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $4,853,891 7,770,715 (2,916,824) 2,778,144 (138,680) 307,709 169,029 6,060,915 0 6,060,915 $6,229,944 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue 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 Gift s Invest ment Income Other 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, 2008 $4,369,580 14,820 56,846 412,645 4,853,891 2,647,779 115,284 50,001 (27,478) 2,785,586 307,709 307,709 $7,947,186 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $69,994 4,286,219 1,057,200 1,014,944 1,284,312 58,046 7,770,715 7,442 $7,778,157 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 Operating revenues decreased by ($325,978) in fiscal 2008. The revenue decrease in the category of Rents and Royalties was the primary factor in this decrease. Operational days at sea for the Research Vessel Savannah experienced a sharp decline due to decreased federal funding and a significant downturn in the overall economy. The Grants and Contracts revenue decrease of $86,138 is also a result of the changing environment of funding for research in this economy. Many factors have contributed to an overall decrease in available funding at the federal and state levels. This is compounded by the Skidaway Institute of Oceanography Annual Financial Report FY 2008 4 fact that more proposals are being submitted for the limited dollars available as more institutions fight to offset revenue reductions due to the slowing economy. Nonoperating revenues increased by $11,738 for the year due to increases in State Appropriations, Gifts and Other categories, partially offset by a decrease in Investment Income. The compensation and employee benefits category increased by $33,802. The increase was due to the rising cost of health care insurance. Utilities decreased by ($29,353) during the past year. The decrease was associated with the implementation of a campus-wide strategic initiative to reduce electricity consumption. This project started last fiscal year with the replacement of the electrical grid on campus. In FY 2008 the focus was on replacing inefficient equipment with more energy efficient equipment. This decrease affected the Plant Operations and Maintenance category. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($2,710,650) 2,740,988 (675,942) 50,001 (595,603) 802,499 $206,896 June 30, 2007 ($1,788,179) 2,882,986 (810,596) 82,920 367,131 435,368 $802,499 Skidaway Institute of Oceanography Annual Financial Report FY 2008 5 Capital Assets The Institute had two significant capital asset events in fiscal year 2008. The first was the purchase and installation of several leading edge pieces of research equipment, including a $400,000 Delta V Plus Mass Spectrometer. The second event was the ground breaking of the Marine and Coastal Science Research Instructional Center; 12,000 square feet of state-of-the-art scientific research labs. It is anticipated that this building will be fully operational in FY 2009. 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 Skidaway Institute of Oceanography had Long-Term Debt and Liabilities of $672,538 of which $322,920 was reflected as current liability at June 30, 2008. 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's overall financial position continues to be steady. Even with a relatively flat funded year, the Institute was able to generate a modest increase in Net Assets. The Institute anticipates the current fiscal year will be a challenging one as we continue to face a slowing economy. Governor Purdue has already warned of eminent budget reductions as state revenues decreased over $700 million in FY 2008. The Institute has been asked to project decreases of 5%. Such reductions would have a negative impact in our ability to hire new faculty and provide the necessary research support for ongoing research operations. On the other hand, the faculty are well positioned to remain competitive for federal funding. Strategic faculty hires in FY 2009 will help the Institute remain successful in its research and education mission. We will continue to maintain a close watch over our 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 2008 6 Statement of Net Assets SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF NET ASSETS June 30, 2008 AS S ETS C urrent Assets 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, 2008 $206,896 465,146 161,284 3,000 836,326 Noncurre nt Asse ts Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS 6,361,779 6,361,779 7,198,105 LIAB ILITIES C u rre n t Liabi li tie s Account s P ayable Deferred Revenue (not e 7) Lease P urchase Obligat ions (current port ion) Compensat 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 Li abil iti e s Lease P urchase Obligat ions (noncurrent ) Compensat ed Absences (noncurrent ) Not es and Loans P ayable (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES 42,981 252,642 35,232 276,287 11,401 618,543 127,397 99,059 123,162 349,618 968,161 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 6,199,150 30,794 $6,229,944 Skidaway Institute of Oceanography Annual Financial Report FY 2008 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, 2008 REVENUES June 30, 2008 Operat ing Revenues Grant s and Cont ract s Federal St at e Other Sales and Services Rents 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 ilit ies 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 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 $3,847,548 292,191 229,841 14,820 359,107 48,329 8,517 53,538 4,853,891 1,068,860 2,626,987 1,058,066 147,836 263,943 2,016,713 588,310 7,770,715 (2,916,824) 2,647,779 115,284 50,001 (7,442) (27,478) 2,778,144 (138,680) 307,709 307,709 169,029 6,060,915 0 6,060,915 $6,229,944 Skidaway Institute of Oceanography Annual Financial Report FY 2008 8 Statement of Cash Flows S KIDAW AY INS TITUTE O F O CEANO GRAP HY S TATEMENT O F CAS H FLO W S For the Year Ended J une 3 0 , 2 0 0 8 C A S H FLO W S FR O M O P ER A TIN G A C TIV ITIES Gran t s an d Co n t ract s (E x ch an ge) Sales an d Serv ices P ay m en t s t o Sup p liers P aym ents t o Em ployees Aux iliary E n t erp rise Ch arges: Residen ce H alls O t h er O rgan izat io n s Ot h er Receipt s (paym ent s) N et Cash P ro v ided (used) by O p erat in g A ct iv it ies C A S H FLO W S FR O M N O N -C A P ITA L FIN A N C IN G A C TIV ITIES St at e A p p ro p riat 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 P rin cip al P aid o n In st allm ent Debt In t erest P aid o n In st allm en t D ebt Ot h er No no p erat in g Receip t s 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 FLO W S FR O M C A P ITA L A N D R ELA TED FIN A N C IN G A C TIV ITIES Cap it al Gran t s an d Gift s Receiv ed P urch ases o f Cap it al A sset s P rin cip al P aid o n Cap it al Debt an d L eases In t erest P aid o n Cap it al D ebt an d L eases Net Cash used by Cap it al an d Relat ed Fin an cin g Act iv it ies C A S H FLO W S FR O M IN V ES TIN G A C TIV ITIES Interest on Invest m ent s N et Cash P ro v ided (used) by In v est in g A ct iv it ies Net In crease/Decrease 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 nd of Year R EC O N C ILIA TIO N O F O P ER A TIN G LO 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 : Operat ing Incom e (loss) Adjust m en t s t o Reco n cile Net In co m e (lo ss) t o Net Cash P ro v ided (used) by O p erat in g A ct iv it ies Dep reciat io n Ch an ge in Asset s an d L iabilit ies: Receiv ables, n et P repaid Item s A cco un t s P ay able D eferred Rev en ue Co m pen sat ed Absen ces N et Cash P ro v ided (used) by O p erat in g A ct iv it ies * * N O N -CA SH IN VE ST IN G, N O N -CA P IT A L FIN A N CIN G, A N D CA P IT A L A N D RE L A T E D FIN A N CIN G T RA N SA CT IO N S Fix ed asset s acquired by in currin g cap it al lease o bligat io n s June 30, 2008 $ 4 ,1 4 6 ,5 8 5 1 4 ,8 2 0 (3 ,6 6 2 ,9 9 5 ) (3 ,6 7 5 ,4 1 7 ) 4 8 ,3 2 9 8 ,5 1 8 4 0 9 ,5 1 0 (2 ,7 1 0 ,6 5 0 ) 2 ,6 4 7 ,7 7 9 1 1 5 ,2 8 4 (1 0 ,5 0 2 ) (1 1 ,5 7 7 ) 4 2 ,7 4 0 ,9 8 8 3 0 7 ,7 0 9 (8 7 1 ,3 6 4 ) (1 0 4 ,8 4 5 ) (7 ,4 4 2 ) (6 7 5 ,9 4 2 ) 5 0 ,0 0 1 5 0 ,0 0 1 (5 9 5 ,6 0 3 ) 8 0 2 ,4 9 9 $ 2 0 6 ,8 9 6 ($ 2 ,9 1 6 ,8 2 4 ) 5 8 8 ,3 1 0 (6 6 ,6 6 1 ) 7 ,7 9 6 (1 7 7 ,4 0 2 ) (1 5 9 ,4 7 1 ) 1 3 ,6 0 2 ($ 2 ,7 1 0 ,6 5 0 ) $ 1 8 5 ,3 3 3 Skidaway Institute of Oceanography Annual Financial Report FY 2008 9 SKIDAWAY INSTITUTE OF OCEANOGRAPHY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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. 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. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. Short-Term Investments Short-Term Investments consist of investments of 90 days 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. Investments The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Skidaway Institute of Oceanography Annual Financial Report FY 2008 11 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, 2008, GSFIC did not transfer any capital additions to Skidaway Institute of Oceanography. Deferred Revenues Deferred revenues include amounts received prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues includes 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. The Skidaway Institute of Oceanography had accrued liability for compensated absences in the amount of $361,743 as of July 1, 2007. For FY2008, $257,656 was earned in compensated absences and employees were paid $244,053, for a net Skidaway Institute of Oceanography Annual Financial Report FY 2008 12 increase of $13,603. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $375,346. 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 Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $350,560 (319,766) $30,794 When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Skidaway Institute of Oceanography, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Skidaway Institute of Oceanography Annual Financial Report FY 2008 13 Classification of Revenues The Institute has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Skidaway Institute of Oceanography Annual Financial Report FY 2008 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 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, 2008, the carrying value of deposits was $204,896 and the bank balance was $529,241. Of the Institute's deposits, $529,241 were uninsured. Of these uninsured deposits, $529,241 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name. Skidaway Institute of Oceanography Annual Financial Report FY 2008 15 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $465,146 161,284 626,430 0 $626,430 Note 4. Inventories The Institute did not have any inventories at June 30, 2008. Note 5. Notes/Loans Receivable The Institute did not have any notes or loans receivable at June 30, 2008. Skidaway Institute of Oceanography Annual Financial Report FY 2008 16 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 Other 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 Other 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 7/1/2007 $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 Addition s $0 267,153 267,153 Re ductions $0 0 600,211 185,333 4,000 789,544 163,281 29,706 325,936 66,706 2,681 588,310 201,234 $468,387 226,553 54,048 280,601 210,652 54,048 264,700 15,901 $15,901 En di n g B al an ce 6/30/2008 $449,460 329,774 779,234 5,431,161 604,524 4,816,003 780,319 132,859 11,764,866 2,409,636 220,707 3,006,195 428,657 117,126 6,182,321 5,582,545 $6,361,779 Skidaway Institute of Oceanography Annual Financial Report FY 2008 17 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Research T ot als June 30, 2008 $252,642 $252,642 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning Balance July 1, 2007 $82,141 Additions $185,333 Re du cti on s Ending Balance June 30, 2008 $104,845 $162,629 Other Liabilities Compensated Absences Notes and Loans T ot al 361,743 145,065 506,808 257,656 257,656 244,053 10,502 254,555 375,346 134,563 509,909 Total Long Term Obligations $588,949 $442,989 $359,400 $672,538 C u rre n t Porti on $35,232 276,287 11,401 287,688 $322,920 Note 9. Significant Commitments The Institute had no significant commitments at June 30, 2008. Note 10. Lease Obligations Skidaway Institute of Oceanography is obligated under various operating leases, 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 2009 and 2013. The Institute had two capital leases in FY2008, both for equipment. Expenditures for fiscal year 2008 were $112,287 of which $7,442 represented interest and $104,845 represented principal paid. Interest rates range from 3.79 percent to 8 percent. The outstanding principal balance of capital leases was $162,629 as of June 30, 2008. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Skidaway Institute of Oceanography Annual Financial Report FY 2008 18 Equipment Total Assets Held Under Capital Lease $351,662 $351,662 OPERATING LEASES Skidaway Institute of Oceanography's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2013. 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 or quarterly 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, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 T ot al m inim um lease paym ent s Less: Int erest P rincipal Out st anding Year 1 2 3 4 5 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $40,668 40,668 40,668 40,668 13,556 176,228 13,599 $162,629 $6,180 6,180 4,129 2,664 666 $19,819 Skidaway Institute of Oceanography's FY2008 expense for rental of real property and equipment under operating leases was $6,802. 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 Skidaway Institute of Oceanography Annual Financial Report FY 2008 19 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 2008, 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 2008 2007 2006 100% 100% 100% $221,003 $226,027 $228,046 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Skidaway Institute of Oceanography makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $86,548 (8.13% or 8.15%) and $53,161 (5%), respectively. Skidaway Institute of Oceanography Annual Financial Report FY 2008 20 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Skidaway Institute of Oceanography, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 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 Skidaway Institute of Oceanography Annual Financial Report FY 2008 21 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, 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, 2008, Skidaway Institute of Oceanography recognized as incurred $130,260 of expenditures, which was net of $55,605 of participant contributions. Skidaway Institute of Oceanography Annual Financial Report FY 2008 22 Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2008 are shown below: Natural Classification F acult 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 Inst ruct ion $55,282 13,896 784 32 $69,994 Functional Clas s ification FY2008 Research Academ ic Sup p o r t $1,003,802 1,151,694 500,780 108,992 24,521 1,087,550 408,880 $9,776 467,080 117,266 13,336 5,109 364,749 79,884 $4,286,219 $1,057,200 Inst it ut ional Sup p o r t $0 592,533 288,529 22,583 98,128 13,171 $1,014,944 Natural Classification F acult 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 Functional Clas s ification FY2008 P lant Op erat io n s A ux ilia r y & Maintenance Ent erprises T otal E x p en ses $0 411,462 136,403 2,141 223,480 444,692 66,134 $0 4,218 1,192 10,833 21,562 20,241 $1,068,860 2,626,987 1,058,066 147,836 263,943 2,016,713 588,310 $1,284,312 $58,046 $7,770,715 Skidaway Institute of Oceanography Annual Financial Report FY 2008 23 SOUTH GEORGIA COLLEGE Financial Report For the Year Ended June 30, 2008 South Georgia College Douglas, Georgia Dr. Virginia Carson Interim President Wanda E. Lloyd Vice President for Fiscal Affairs SOUTH GEORGIA COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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 .................................. 29 Note 16. Component Units ............................................................................................. 30 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 meets 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 shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 51 1,756 1,557 FY2007 49 1,465 1,291 FY2006 35 1,504 1,319 Overview of the Financial Statements and Financial Analysis South Georgia College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of South Georgia College. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net South Georgia College Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $1,363,339 30,010,486 203,071 31,576,896 June 30, 2007 $845,121 11,183,999 203,071 12,232,191 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 680,548 16,621,760 17,302,308 476,158 93,753 569,911 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 13,450,528 153,798 116,986 553,276 $14,274,588 11,183,999 153,798 103,892 220,591 $11,662,280 The total assets of the institution increased by $19,344,705. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $18,826,487 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 $16,732,397. This increase in liabilities is the result of two capital leases that commenced during the fiscal year. The combination of the increase in total assets of $19,344,705 and the increase in total liabilities of $16,732,397 yields an increase South Georgia College Annual Financial Report FY 2008 2 in total net assets of $2,612,308. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $2,266,529. 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, 2008 June 30, 2007 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 $8,457,335 16,481,564 (8,024,229) 7,065,638 (958,591) 2,408,818 1,450,227 11,662,280 1,162,081 12,824,361 $14,274,588 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other 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, 2008 $1,492,126 3,611,622 67,906 3,191,019 94,662 8,457,335 7,716,606 86,137 21,237 (85,927) 7,738,053 2,408,818 2,408,818 $18,604,206 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $4,816,646 789,774 1,562,137 2,636,019 2,237,223 1,387,756 3,052,009 0 16,481,564 672,415 $17,153,979 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 Operating revenues increased by $2,170,676 in fiscal 2008. Tuition & Fees revenue increased 12%, while Auxiliary Enterprises and Grants and Contracts operating revenue also increased significantly. Revenues decreased in Sales and Services and Other categories. South Georgia College Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $1,228,097 is a result of the changing environment of residential life on the College's campus. The residential population of the campus increased dramatically this year with the opening of a new 250 bed residence hall, Tiger Village. The facility was constructed with the assistance of the SGC Real Estate Foundation, LLC through a public/private venture. Tiger Village and Shannon Hall, a traditional residence facility, provided students with housing options that had not been available. Non-operating revenues increased by $924,705 for the year primarily due to an increase of $1,290,466 in State Appropriations. The compensation and employee benefits category increased by $1,205,884 and primarily affected the Instruction, Institutional Support and Plant Operations and Maintenance categories. The increase reflects merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $131,415 during the past year. The increase was primarily associated with the opening of Tiger Village residence hall and affected the Auxiliary Enterprise category. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($7,102,563) 7,728,399 (387,251) 21,237 259,822 172,317 $432,139 June 30, 2007 ($6,758,451) 6,878,217 (18,760) 30,496 131,502 40,815 $172,317 South Georgia College Annual Financial Report FY 2008 5 Capital Assets South Georgia College is completing major renovations to the College of Natural Sciences and Math Building in FY2008. The $5 million for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). In addition, two buildings totaling $16.3 million were acquired during fiscal 2008 through capital leases with SGC Real Estate Foundation, LLC: Tiger Village, which is a residence hall, and Clower Center, which is a Student Activities center. 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 South Georgia College had Long-Term Debt and Liabilities of $16,931,366 of which $309,606 was reflected as current liability at June 30, 2008. 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 FY2008. The South Georgia College Foundation, Inc. had investments of $2.6 million as of June 30, 2008. 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 leaner that in past years. While enrollment is expected to grow, the state of the economy in Georgia will have a significant impact on the level of funding provided by the state. We will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues. Dr. Virginia Carson, Interim President South Georgia College South Georgia College Annual Financial Report FY 2008 6 Statement of Net Assets S O UTH GEO R GIA C O LLEGE S TA TEM EN T O F N ET A S S ETS June 30, 2008 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 N et In v est m en t in Cap it al L eases 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 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 N et In v est m en t in Cap it al L eases 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 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 ) 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 ) 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 S ou th G e orgia C ollege $ 4 2 8 ,3 4 1 8 4 ,2 8 2 5 8 1 ,2 7 8 2 4 9 ,6 8 0 1 9 ,7 5 8 1 ,3 6 3 ,3 3 9 3 ,7 9 8 1 5 0 ,0 0 0 4 9 ,2 7 3 3 0 ,0 1 0 ,4 8 6 3 0 ,2 1 3 ,5 5 7 3 1 ,5 7 6 ,8 9 6 1 1 3 ,7 2 5 7 6 ,1 9 5 5 0 ,6 0 0 930 209 1 2 9 ,2 8 3 7 2 ,4 9 9 2 3 7 ,1 0 7 6 8 0 ,5 4 8 1 6 ,4 8 7 ,4 5 9 1 3 4 ,3 0 1 1 6 ,6 2 1 ,7 6 0 1 7 ,3 0 2 ,3 0 8 1 3 ,4 5 0 ,5 2 8 1 5 3 ,7 9 8 1 1 6 ,9 8 6 5 5 3 ,2 7 6 $ 1 4 ,2 7 4 ,5 8 8 C om pon e n t Un it S ou th G e orgia C ollege Fo u n da ti o n , In c. $ 7 5 ,0 7 2 1 9 5 ,0 2 0 3 2 8 ,5 7 7 5 9 8 ,6 6 9 2 ,8 0 3 ,0 7 5 3 0 ,5 0 0 2 ,5 7 7 ,0 6 8 1 2 ,2 7 6 ,9 6 6 2 2 1 ,9 4 5 1 7 ,9 0 9 ,5 5 4 1 8 ,5 0 8 ,2 2 3 1 6 9 ,2 1 5 5 0 ,0 0 0 2 1 9 ,2 1 5 1 5 ,7 3 7 ,7 0 8 1 5 ,7 3 7 ,7 0 8 1 5 ,9 5 6 ,9 2 3 2 ,2 4 0 ,8 5 2 1 5 9 ,1 5 2 1 5 1 ,2 9 6 $ 2 ,5 5 1 ,3 0 0 South Georgia College Annual Financial Report FY 2008 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, 2008 South Georgia College REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal Other Sales and Services Rents and Royalt ies 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 ilit ies Supplies and Ot her Services Depreciat ion P ayment s t o or on behalf of Sout h Georgia College T ot al Operat ing Expenses Operat ing Income (loss) $3,532,229 (2,040,103) 3,594,504 17,118 67,906 1,146,335 993,746 785,348 232,171 33,419 94,662 8,457,335 2,437,435 4,263,299 2,258,026 97,969 123,944 1,491,235 860,916 3,836,572 1,112,168 16,481,564 (8,024,229) C om pone nt Unit South Ge orgia College Fou n dati on , In c. $0 105,430 330,746 89,182 525,358 44,222 189,067 233,289 292,069 South Georgia College Annual Financial Report FY 2008 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, 2008 South Georgia College C om pone nt Unit South Ge orgia College Fou n dati on , In c. NO NO PERATING REVENUES (EXPENS ES ) St at e Appropriat ions Gift s 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 los 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 m ent s Net Asset s-beginning of year, rest at ed Net Asset s-End of Year 7,716,606 86,137 21,237 (672,415) (85,927) 7,065,638 (958,591) 2,408,818 2,408,818 1,450,227 11,662,280 1,162,081 12,824,361 $14,274,588 (87,257) (669,740) (756,997) (464,928) 9,874 9,874 (455,054) 3,006,354 0 3,006,354 $2,551,300 South Georgia College Annual Financial Report FY 2008 9 Statement of Cash Flows S OUTH GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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 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 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, 2008 $1,408,625 3,526,160 67,906 (7,225,187) (6,569,756) (1,491,236) 1,182,004 738,829 762,825 230,007 241,872 25,388 (7,102,563) 7,716,606 11,793 7,728,399 2,408,818 (2,465,322) (330,747) (387,251) 21,237 21,237 259,822 172,317 $432,139 South Georgia College Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued S OUTH GEORGIA COLLEGE S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 In v en t o ries 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 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 June 30, 2008 ($8,024,229) 1,112,168 (184,424) (66,250) (7,722) 86,348 (690) (69,050) 51,286 ($7,102,563) $16,311,041 ($341,668) ($86,137) South Georgia College Annual Financial Report FY 2008 11 SOUTH GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 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 FY2008, South Georgia College is reporting the activity for South Georgia College 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 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 South Georgia College Annual Financial Report FY 2008 12 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. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and South Georgia College Annual Financial Report FY 2008 13 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 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, 2008, 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. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred South Georgia College Annual Financial Report FY 2008 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. South Georgia College had accrued liability for compensated absences in the amount of $320,121 as of 7-1-2007. For FY2008, $296,923 was earned in compensated absences and employees were paid $245,636, for a net increase of $51,287. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $371,408. 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 2008 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, 2008 $64,920 52,066 $116,986 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 Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $363,591 114,283 75,402 $553,276 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 2008 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. . Restatement of Prior Year Net Assets South Georgia College has a restatement of prior year net assets increasing beginning net assets by $1,162,081. This is due to an overstatement of depreciation expense in prior years. South Georgia College Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $580,581 and the bank balance was $699,913. Of the College's deposits, $599,913 were uninsured. Of these uninsured deposits, $64,126 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, 2008. South Georgia College Annual Financial Report FY 2008 18 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $98,229 77,453 84,282 443,226 703,190 37,630 $665,560 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore T otal June 30, 2008 $249,680 $249,680 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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. South Georgia College Annual Financial Report FY 2008 19 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated (Re state d) Beginning B al an ce s 7/1/2007 $197,146 2,380,031 2,577,177 Addi ti o n s $0 2,446,389 2,446,389 Re ductions $0 0 Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections T otal Assets Being Depreciated 1,293,392 20,973,555 1,239,613 978,999 0 1,209,742 25,695,301 16,311,041 18,933 16,329,974 2,147 2,147 Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections T otal Accumulated Depreciation 391,898 12,516,698 954,065 928,780 0 1,134,957 15,926,398 46,562 551,688 23,290 20,387 455,615 14,626 1,112,168 211 2,147 2,358 T otal Capital Assets, Being Depreciated, Net 9,768,903 15,217,806 (211) Capital Assets, net $12,346,080 $17,664,195 ($211) En di n g B a l a n ce 6/30/2008 $197,146 4,826,420 5,023,566 1,293,392 20,973,555 1,239,613 978,999 16,311,041 1,226,528 42,023,128 438,460 13,068,386 977,355 948,956 455,615 1,147,436 17,036,208 24,986,920 $30,010,486 South Georgia College Annual Financial Report FY 2008 20 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: Ot her Deferred Revenue T ot als June 30, 2008 $930 $930 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $0 Additions $16,559,958 Reductions Ending Balance June 30, 2008 $0 $16,559,958 Other Liabilities Compensated Absences 320,121 296,923 245,636 371,408 Total Long Term Obligations $320,121 $16,856,881 $245,636 $16,931,366 Current Portion $72,499 237,107 $309,606 Note 9. Significant Commitments The College had no significant commitments as of June 30, 2008. Note 10. Lease Obligations CAPITAL LEASES Capital leases are payable in semi-annual installments and have terms expiring in fiscal 2037. Expenditures for fiscal year 2008 were $672,415 which was comprised entirely of interest. Of the $672,415 in interest expense, $248,917 was added to the principal balance. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Total Assets Held Under Capital Lease $15,855,426 $15,855,426 South Georgia College Annual Financial Report FY 2008 21 South Georgia College had two capital leases with a related entity in the current fiscal year. In December 2006, Gordon College entered into two capital leases with SGC Real Estate Foundation, LLC, a wholly owned entity of South Georgia College Foundation, Inc. The leases commenced in August 2007 for Tiger Village, a residence hall, and Clower Center, a student activities building. The lease liability and associated capital assets were valued at $13,289,289 and $3,021,752, respectively, which are the present values of the minimum lease payments at an interest rate of 4.481%. The lease term on both leases is approximately thirty years and both expire in June 2037. The outstanding liability at June 30, 2008 on these capital leases was $16,559,958. At the end of the lease terms, South Georgia College will own Tiger Village and Clower Center. OPERATING LEASES South Georgia College is obligated under various operating leases for the use of equipment. Future commitments for capital and operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $863,902 888,408 911,959 934,557 956,202 5,146,674 5,654,532 6,130,230 6,534,609 5,465,851 33,486,924 14,657,110 2,269,856 $16,559,958 $91,395 86,591 25,867 6,198 $210,051 South Georgia College's FY2008 expense for rental of real property and equipment under operating leases was $83,919. South Georgia College Annual Financial Report FY 2008 22 Note 11. Retirement Plans Teachers Retirement System of Georgia Plan Description South Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of South Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. South Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, 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 2008 2007 2006 100% 100% 100% $415,901 $363,798 $321,012 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. South Georgia College Annual Financial Report FY 2008 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, 2008, for employees covered by ERS was $24,596. The College's total payroll for all employees was $6,700,734. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $2,560 $2,430 $0 South Georgia College Annual Financial Report FY 2008 24 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $95,732 (8.13% or 8.15%) and $58,731 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description South Georgia College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. South Georgia College Annual Financial Report FY 2008 25 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 2008 amounted to $9,788 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 employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and 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' South Georgia College Annual Financial Report FY 2008 26 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, 2008. 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. South Georgia College Annual Financial Report FY 2008 27 The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, 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, 2008, South Georgia College recognized as incurred $404,479 of expenditures, which was net of $147,193 of participant contributions. South Georgia College Annual Financial Report FY 2008 28 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 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 $2,369,747 691,776 785,642 44,293 27,447 248,532 649,209 $4,816,646 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Ser v ic e s $0 514,170 165,068 $0 824,692 233,152 3,496 22,014 4,443 87,971 14,626 15,299 381,582 85,398 $789,774 $1,562,137 Inst it ut ional Sup p o r t $66,866 1,120,881 719,819 97,969 39,852 37,822 551,094 1,716 $2,636,019 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 & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 879,421 303,995 (284,020) 4,909 650,730 675,216 6,972 $0 1,387,756 $822 232,359 50,350 284,020 9,380 103,479 125,175 1,892,177 354,247 $2,237,223 $1,387,756 $3,052,009 T otal E x p en ses $2,437,435 4,263,299 2,258,026 97,969 123,944 1,491,235 860,916 3,836,572 1,112,168 $16,481,564 South Georgia College Annual Financial Report FY 2008 29 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. 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, 2008, the Foundation distributed $189,067 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 $2.6 million. The 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, 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, 2008: Cost Fair Value Cash held by investment organization Certificates of Deposit Equity Securities M utual Funds Real Estate Investment Pools BOR Balanced Income Fund Total Return & Holding Fund $37,935 30,500 83,789 47,234 13,500 85,462 2,430,949 $37,935 30,500 86,473 46,611 13,500 76,183 2,316,366 Total Investments $2,729,369 $2,607,568 South Georgia College Annual Financial Report FY 2008 30 Long-term Liabilities for Component Units: Long-term liability activity for the year ended June 30, 2008 was as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $15,801,289 $15,801,289 $0 $13,581 $15,787,708 $50,000 $0 $13,581 $15,787,708 $50,000 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 were loaned to SGC Real Estate Foundation, LLC whose sole member is South Georgia College Foundation, Inc. Proceeds of the Series 2006 Bonds are being 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 a Rental Agreement, SGC Real Estate Foundation, LLC leases the Project, on an annually-renewable basis, to the Board of Regents for use by the College. The Board of Regents makes 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. South Georgia College Annual Financial Report FY 2008 31 Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal 50,000 75,000 100,000 125,000 150,000 1,215,000 2,020,000 3,025,000 4,240,000 4,395,000 15,395,000 392,708 $15,787,708 Bonds Payable Interest $730,625 728,625 725,625 721,625 716,625 3,457,325 3,110,975 2,524,625 1,647,875 498,825 14,862,750 $14,862,750 Total $780,625 803,625 825,625 846,625 866,625 4,672,325 5,130,975 5,549,625 5,887,875 4,893,825 30,257,750 392,708 $30,650,458 South Georgia College Annual Financial Report FY 2008 32 SOUTHERN POLYTECHNIC STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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 .............................................. 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. Students Students Faculty (Headcount) (FTE) FY2008 168 FY2007 160 FY2006 143 4,460 4,207 3,807 3,818 3,523 3,184 Overview of the Financial Statements and Financial Analysis Southern Polytechnic State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Southern Polytechnic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non- Southern Polytechnic State University Annual Financial Report FY 2008 1 current), and Net Assets (Assets minus Liabilities). The difference between current and noncurrent assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $9,894,054 80,173,161 3,146,944 93,214,159 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 6,492,655 30,915,011 37,407,666 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 48,864,913 1,463,340 1,795,614 3,682,626 $55,806,493 47,860,915 1,674,222 1,984,046 1,450,059 $52,969,242 The total assets of the institution increased by $3,248,923. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,425,900 in the category of Current Assets. The total liabilities for the year increased by $411,672. The combination of the increase in total assets of $3,248,923 and the increase in total liabilities of $411,672 yields an increase in total net assets of $2,837,251. Southern Polytechnic State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $29,175,674 50,016,461 (20,840,787) 21,438,813 598,026 2,239,225 2,837,251 52,969,242 0 52,969,242 $55,806,493 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows: Southern Polytechnic State University Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $15,657,682 3,872,684 1,220,377 7,971,764 453,167 29,175,674 22,497,075 249 463,045 146,461 (78,657) 23,028,173 2,239,225 2,239,225 $54,443,072 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 21,294,055 683,435 683,435 $47,051,617 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $20,148,440 597,065 1,599 3,741,031 3,453,071 7,249,736 6,416,402 2,385,149 6,023,968 0 50,016,461 1,589,360 $51,605,821 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 Operating revenues increased by $4,101,547 in fiscal 2008. Tuition & Fees increased by 14 percent and Grants and Contracts, Sales and Service, Auxiliary and Other revenues increased by 19 percent. Southern Polytechnic State University Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $869,672 is a result of the changing environment of residential life on the University's campus. Nonoperating revenues increased by $1,734,118 for the year primarily due to an increase of $2,509,213 in State Appropriations. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($16,769,820) 23,288,668 (4,942,089) 84,350 1,661,109 3,455,676 $5,116,785 June 30, 2007 ($17,449,024) 20,892,153 (2,987,250) 381,397 837,276 2,618,400 $3,455,676 Capital Assets Southern Polytechnic State University expended $2,239,225 in capital projects utilizing funding from the Georgia State Financing and Investment Commission (GSFIC). 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 Southern Polytechnic State University had Long-Term Debt and Liabilities of $32,572,972 of which $1,657,961 was reflected as current liability at June 30, 2008. Southern Polytechnic State University Annual Financial Report FY 2008 5 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 FY2008. The Southern Polytechnic State University Foundation, Inc. had endowment and other investments of $8.1 million as of June 30, 2008. 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 2008 6 Statement of Net Assets S O UT HER N P O L YT EC HN IC S T A T E UN IV ER S IT Y S T A TEM EN T O F N ET A S S ETS June 30, 2008 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 N et In v est m en t in Cap it al L eases P ledges Receiv able D ue Fro m P rim ary Go v ern m en t P rep aid it em s T o t al Curren t A sset s S ou th e rn Polyte ch n ic S ta te U n i ve rs i ty C om pon e n t Un it S ou th e rn Polyte ch n ic S tate U n i ve rs i ty Fo u n da ti o n , In c. $ 5 ,1 1 6 ,7 8 5 2 8 2 ,6 4 4 3 ,7 4 2 ,0 6 9 7 5 2 ,5 5 6 9 ,8 9 4 ,0 5 4 $ 6 2 8 ,7 2 5 1 ,2 5 9 ,0 0 0 9 2 ,6 3 3 9 3 4 ,8 1 8 3 ,7 0 5 2 ,9 1 8 ,8 8 1 Non cu rre n t Asse ts 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 N et In v est m en t in Cap it al L eases 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 r ie s P a y a ble 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 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 ) 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 ) O t h er L o n g-T erm L iabilit ies 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 2 ,8 3 7 ,3 9 2 3 0 9 ,5 5 2 8 0 ,1 7 3 ,1 6 1 8 3 ,3 2 0 ,1 0 5 9 3 ,2 1 4 ,1 5 9 1 7 8 ,6 7 1 1 7 3 ,0 1 6 2 ,9 8 1 ,6 6 7 5 6 6 ,5 2 2 9 1 5 ,3 1 5 7 4 2 ,6 4 6 9 3 4 ,8 1 8 6 ,4 9 2 ,6 5 5 3 0 ,3 9 2 ,9 3 3 5 2 2 ,0 7 8 3 0 ,9 1 5 ,0 1 1 3 7 ,4 0 7 ,6 6 6 4 8 ,8 6 4 ,9 1 3 1 ,4 6 3 ,3 4 0 1 ,7 9 5 ,6 1 4 3 ,6 8 2 ,6 2 6 $ 5 5 ,8 0 6 ,4 9 3 4 ,2 2 7 ,5 6 7 3 ,8 3 1 ,3 4 3 2 8 ,6 2 1 ,7 8 6 1 3 2 ,2 8 0 4 6 5 ,2 0 3 3 7 ,2 7 8 ,1 7 9 4 0 ,1 9 7 ,0 6 0 4 7 9 ,6 7 3 9 7 0 ,0 0 0 1 ,4 4 9 ,6 7 3 3 2 ,4 6 3 ,1 2 8 5 4 2 ,1 1 0 3 3 ,0 0 5 ,2 3 8 3 4 ,4 5 4 ,9 1 1 2 ,1 6 4 ,8 4 4 1 ,8 1 3 ,5 2 4 1 ,7 6 3 ,7 8 1 $ 5 ,7 4 2 ,1 4 9 Southern Polytechnic State University Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets SOUTHERN POLYTECHNIC STATE UNIVERSITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 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 Other 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 Benefits 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 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 rsi ty C om pone nt Unit Southe rn Polyte chnic State Un i ve rsi ty Fou n dati on , In c. $17,879,720 (2,222,038) 3,585,729 215,723 71,232 1,220,377 5,303,873 112,615 957,164 284,304 233,080 1,005,135 75,593 453,167 29,175,674 11,366,802 14,095,372 6,788,898 92,558 348,234 2,623,727 1,432,242 10,223,843 3,044,785 50,016,461 (20,840,787) $0 2,416,028 82,176 2,837,478 5,335,682 311,850 53,645 176,754 1,690,722 210,072 1,088,250 3,531,293 1,804,389 Southern Polytechnic State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued SOUTHERN POLYTECHNIC STATE UNIVERSITY S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 S ou th e rn Polytechnic State Un i ve rsi ty C om pone nt Unit Southe rn Polyte chnic State Un i ve rsi ty Fou n dati on , In c. NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts St at e Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET AS SETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 22,497,075 249 463,045 146,461 (1,589,360) (78,657) 21,438,813 598,026 2,239,225 2,239,225 2,837,251 52,969,242 52,969,242 $55,806,493 128,742 (1,608,244) (1,479,502) 324,887 99,294 99,294 424,181 5,317,968 5,317,968 $5,742,149 Southern Polytechnic State University Annual Financial Report FY 2008 9 Statement of Cash Flows S OUTHERN POLYTECHNIC S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Nonoperat ing 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 m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $15,938,750 3,813,639 1,220,377 (18,959,157) (25,328,283) (2,623,727) 28,658 6,274,648 114,331 994,244 355,207 47,368 1,205,377 279,660 (130,912) (16,769,820) 22,497,075 59,179 463,294 269,120 23,288,668 700,169 (4,113) (3,178,020) (870,765) (1,589,360) (4,942,089) 146,461 (62,111) 84,350 1,661,109 3,455,676 $5,116,785 Southern Polytechnic State University Annual Financial Report FY 2008 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, 2008 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 Sout hern P olyt echnic St at e Universit y had no non-cash t ransact ions in fiscal 2008. June 30, 2008 ($20,840,787) 3,044,785 (332,430) 106,695 28,658 (3,534) 230,726 859,545 136,522 ($16,769,820) Southern Polytechnic State University Annual Financial Report FY 2008 11 SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 Note 1. Summary of Significant Accounting Policies Nature of Operations Southern Polytechnic State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity Southern Polytechnic State University is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Southern Polytechnic State University as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus Southern Polytechnic State University) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, in fiscal year 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 FY2008, Southern Polytechnic State University is reporting the activity for the Southern Polytechnic State University Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Southern Polytechnic State University Annual Financial Report FY 2008 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. Southern Polytechnic State University Annual Financial Report FY 2008 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. 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, 2008, 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 Southern Polytechnic State University Annual Financial Report FY 2008 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. Southern Polytechnic State University had accrued liability for compensated absences in the amount of $1,128,203 as of 7-1-2007. For FY2008, $936,116 was earned in compensated absences and employees were paid $799,595, for a net increase of $136,521. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $1,264,724. 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 2008 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, 2008 $1,377,957 274,358 143,299 $1,795,614 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, 2008 $2,833,026 8,908,867 (8,059,267) $3,682,626 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 2008 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. Southern Polytechnic State University Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $4,662,950 and the bank balance was $5,942,840. Of the University's deposits, $5,942,840 were uninsured. Of these uninsured deposits, $5,942,840 were uncollateralized. 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. Southern Polytechnic State University Annual Financial Report FY 2008 18 The University's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVES TMENTS Equity Securities - Domestic Investment Pools Board of Regents Short-T erm Fund Balanced Income Fund T otal Return Fund T otal Investments $3,404 448,235 491,374 2,342,614 $3,285,627 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 1.99 years. Of the University's total investment of $448,235 in the Short Term Fund, $446,442 is invested in debt securities. The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the University's total investment of $491,374 in the Balanced Income Fund, $315,953 is invested in debt securities. The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the University's total investment of $2,342,614 in the Total Return Fund, $740,266 is invested in debt securities. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the 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. Southern Polytechnic State University Annual Financial Report FY 2008 19 At June 30, 2008, $3,404 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $980,520 831,502 282,644 1,539,056 2,044,293 5,678,015 1,653,302 $4,024,713 Note 4. Inventories Southern Polytechnic State University had no inventories at June 30, 2008. Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the University had no balance in the allowance for uncollectible notes receivable. Southern Polytechnic State University Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $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 Addi ti o n s $0 2,206,750 2,206,750 Re ductions $0 0 7,842 629,498 333,930 971,270 58,446 1,387,538 871 482,688 844,808 269,671 763 3,044,785 (2,073,515) $133,235 8,700 7,542 16,242 9,074 7,166 16,240 2 $2 En di n g B a l a n ce 6/30/2008 $1,700,397 4,467,963 6,168,360 1,623,504 56,644,304 583,473 9,706,277 33,792,318 6,441,022 30,500 108,821,398 901,585 17,878,304 511,914 7,960,424 2,464,023 5,084,922 15,425 34,816,597 74,004,801 $80,173,161 Southern Polytechnic State University Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $2,300,579 681,088 $2,981,667 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Beginning Balance July 1, 2007 $32,179,013 1,128,203 Additions $0 936,116 Reductions Ending Balance June 30, 2008 $870,765 $31,308,248 799,595 1,264,724 Total Long Term Obligations $33,307,216 $936,116 $1,670,360 $32,572,972 Current Portion $915,315 742,646 $1,657,961 Note 9. Significant Commitments The University had no significant unearned, outstanding, construction or renovation contracts as of June 30, 2008. Note 10. Lease Obligations Southern Polytechnic State University is obligated under capital leases and installment purchase agreements for the acquisition of real property. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2027 and 2029. Expenditures for fiscal year 2008 were $2,460,125 of which $1,589,360 represented interest. Total principal paid on capital leases was $870,765 for the fiscal year ended June 30, 2008 with an interest rate of 5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Total Assets Held Under Capital Lease $31,328,295 $31,328,295 Southern Polytechnic State University Annual Financial Report FY 2008 22 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. 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 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 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, 2008 on these capital leases is $31,308,248. The University at its option may terminate the lease and purchase the Foundation's interest for the unamortized principal balance and the payment of $1. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 11,426,943 1,604,333 49,933,376 18,625,128 $31,308,248 Southern Polytechnic State University had no expense for rental of real property and equipment under operating leases in FY2008. 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 Southern Polytechnic State University Annual Financial Report FY 2008 23 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 2008, 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 2008 2007 2006 100% 100% 100% $1,130,521 $1,072,920 $1,016,840 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $788,585 (8.13% or 8.15%) and $484,377 (5%), respectively. Southern Polytechnic State University Annual Financial Report FY 2008 24 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 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 2008 amounted to $101,137 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. Southern Polytechnic State University Annual Financial Report FY 2008 25 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Southern Polytechnic State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Southern Polytechnic State University expects such amounts, if any, to be immaterial to its overall financial position. 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, 2008. 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 Southern Polytechnic State University Annual Financial Report FY 2008 26 life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 183 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Southern Polytechnic State University recognized as incurred $994,437 of expenditures, which was net of $336,960 of participant contributions. Southern Polytechnic State University Annual Financial Report FY 2008 27 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction 11,289,987 3,244,363 3,280,336 152,552 6,278 41,232 1,908,287 225,405 $20,148,440 Research 40,213 368,454 24,464 12,840 15,780 16 135,298 $597,065 Functional Classification FY2008 Public Service Academic Support $0 35,216 2,395,960 520,337 72,664 1,599 10,146 688,340 18,368 $1,599 $3,741,031 Student Services $0 1,971,702 465,351 46,807 200 14,231 944,849 9,931 $3,453,071 Institutional Support 1,386 3,558,646 1,769,477 48,556 39,597 (13,019) 1,711,248 133,845 $7,249,736 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 1,751,584 542,021 (435,785) 4,607 1,269,787 1,486,551 1,797,637 $0 23 44,002 2,341,124 $0 804,663 186,889 435,785 19,167 260,345 109,849 3,349,270 858,000 $6,416,402 $2,385,149 $6,023,968 Total Expenses $11,366,802 14,095,372 6,788,898 92,558 348,234 2,623,727 1,432,242 10,223,843 3,044,785 $50,016,461 Southern Polytechnic State University Annual Financial Report FY 2008 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 seven member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted to the activities of the University by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the University, the Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Foundation distributed $1,088,250 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Advancement Office at 1100 S. Marietta Parkway, Marietta GA 30060 or from the Foundation's website at www.spsu.edu. Investments for Component Units: Southern Polytechnic State University Foundation, Inc. holds endowment and other investments in the amount of $8.1 million. The $1.8 million corpus of the endowment portion is nonexpendable, but the earnings on the investment may be expended as restricted by the donors. Southern Polytechnic State University Foundation, in conjunction with the donors, has established a spending plan whereby 5% of the average of the past 3 years earnings may be used for the endowments designated purpose. Investments are comprised of the following amounts at June 30, 2008: Corporate Bonds Equity Securities Mutual Funds Total Investments Cost $5,268,640 2,285,126 2,029,254 $9,583,020 Fair Value $3,687,291 2,342,465 2,029,154 $8,058,910 Southern Polytechnic State University Annual Financial Report FY 2008 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, 2008 are as follows: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $34,357,823 551,896 $34,909,719 $0 $924,695 $33,433,128 $970,000 9,786 542,110 $0 $934,481 $33,975,238 $970,000 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 Principal $970,000 1,000,000 1,030,000 1,065,000 1,100,000 6,250,000 8,010,000 10,275,000 3,430,000 33,130,000 303,128 $33,433,128 Bonds Payable Interest 1,576,020 1,546,920 1,515,920 1,481,415 1,443,075 6,478,912 4,715,988 2,451,569 259,250 21,469,069 $21,469,069 Total $2,546,020 2,546,920 2,545,920 2,546,415 2,543,075 12,728,912 12,725,988 12,726,569 3,689,250 54,599,069 303,128 $54,902,197 Southern Polytechnic State University Annual Financial Report FY 2008 30 GEORGIA INSTITUTE OF TECHNOLOGY Financial Report For the Year Ended June 30, 2008 Georgia Institute of Technology Atlanta, Georgia Dr. Gary B. Schuster Interim President Mr. Steven G. Swant Executive Vice President for Administration and Finance GEORGIA INSTITUTE OF TECHNOLOGY ANNUAL FINANCIAL REPORT FY 2008 Table of Contents Management's Discussion and Analysis ........................................................................................ 1 Statement of Net Assets .................................................................................................................. 9 Statement of Revenues, Expenses and Changes in Net Assets..................................................... 13 Statement of Cash Flows .............................................................................................................. 17 Note 1. Summary of Significant Accounting Policies ................................................................ 19 Note 2. Deposits and Investments............................................................................................... 25 Note 3. Accounts Receivable...................................................................................................... 28 Note 4. Inventories...................................................................................................................... 28 Note 5. Notes/Loans Receivable................................................................................................. 28 Note 6. Capital Assets................................................................................................................. 29 Note 7. Deferred Revenue........................................................................................................... 30 Note 8. Long-Term Liabilities .................................................................................................... 30 Note 9. Significant Commitments............................................................................................... 30 Note 10. Lease Obligations......................................................................................................... 30 Note 11. Retirement Plans .......................................................................................................... 35 Note 12. Risk Management......................................................................................................... 38 Note 13. Contingencies............................................................................................................... 39 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 40 Note 15. Natural Classifications with Functional Classifications .............................................. 41 Note 16. Special Item.................................................................................................................. 42 Note 17. Component Units ......................................................................................................... 42 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 provides a focused, technology based education for nearly 19,000 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) FY2008 970 18,747 17,836 FY2007 940 17,936 17,027 FY2006 878 17,135 16,299 Overview of the Financial Statements and Financial Analysis The Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2008, which began July 1, 2007 and ended June 30, 2008. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and Georgia Institute of Technology Annual Financial Report FY 2008 1 depreciation of equipment and fixed assets. Comparative data is provided for FY 2008 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, 2008 and June 30, 2007: Statement of Net Assets, Condensed As se ts : Current Asset s Capit al Asset s, net Ot her Asset s Total Asse ts June 30, 2008 $186,023,497 1,420,414,332 72,926,737 1,679,364,566 June 30, 2007 $171,893,931 1,261,604,842 70,001,585 1,503,500,358 Liabi l itie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 112,482,457 529,865,464 642,347,921 102,305,597 417,817,152 520,122,749 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capit al P roject s Unrest rict ed Total Ne t Asse ts 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962 $1,037,016,645 851,635,161 53,098,742 30,748,494 49,599,664 (1,704,452) $983,377,609 Georgia Institute of Technology Annual Financial Report FY 2008 2 The total assets of the institution increased by $175,864,208. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $158,809,490 in the category of Capital Assets, net. The balance of the increase is primarily in receivable categories. The total liabilities for the year increased by $122,225,172. The combination of the increase in total assets of $175,864,208 and the increase in total liabilities of $122,225,172 yields an increase in total net assets of $53,639,036. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $41,258,746. 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, 2008 June 30, 2007 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 $721,356,596 980,433,038 (259,076,442) 265,273,178 6,196,736 38,889,899 45,086,635 983,377,609 8,552,401 991,930,010 $1,037,016,645 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in both Operating and Nonoperating Revenues. Overall, revenue increased by $54.9 million across the Georgia Institute of Technology Annual Financial Report FY 2008 3 board as illustrated in the graph below. The increase includes a $7.9 million Special Item transfer that is included in the FY 2008 Capital Gifts and Grants amount. Georgia Institute of Technology Revenue (dollars in millions) FY 2008 $1,051.8 FY 2007 $996.9 $460. 1 $500 $450 439.3 $400 $350 $135. 1 $38.9 $142. 6 $275. 1 $300 252.6 $250 $200 $150 120.6 $100 $50 132.6 51.8 $0 Tuition and Fees Gifts, Grants and Capital Gifts and Sales, Services, Contracts Grants and Other State Appropriations Georgia Institute of Technology Annual Financial Report FY 2008 4 The following graph shows year-to-date expenditure changes by object of expenditure: Total operating expenses for the year were approximately $980.4 million, an increase of $61.2 million, or 6.7% over the previous year. Significant increases in operating expenses from fiscal year 2007 to fiscal year 2008 include compensation and employee benefits, and utilities. The compensation and employee benefits category increased by $48.4 million primarily due to an increase in research expenditures. Utilities increased from $24.0 million in fiscal year 2007 to $36.4 million in fiscal year 2008. This is largely due to the reclassification of telecommunications expense from supplies to utilities. Telecommunications expense in fiscal year 2007 was $7.7 million and $9.6 million in fiscal year 2008. Thus, if the $7.7 million in telecommunications expenses had been included in utilities for fiscal year 2007, the utilities expense would have been $31.7 million and the percent increase from fiscal year 2007 to fiscal year 2008 would have only been 14.8%. In the Expenses by Functional Class graph, depreciation expense was unallocated between functional classifications in prior fiscal years. In FY2008, the Natural Classifications with Functional Classifications schedule in Note 15 required the Institute to allocate depreciation among functional classifications. Thus, the unallocated expense for depreciation for FY2008 is $0. Georgia Institute of Technology Operating Expenses by Object of Expenditure Class (dollars in millions) FY 2008 $980.4 FY 2007 $919.2 $700 $600 $500 $400 $300 $200 $100 $0 $614. 5 $566. 1 Salaries and Benefits Travel, Supplies and Other Depreciation $261. 0 $253. 1 $57. 6 $61. 9 $36. 4 $24. 0 $10. 9 $14. 1 Utilities Scholarships and Fellowships Georgia Institute of Technology Annual Financial Report FY 2008 5 Georgia Institute of Technology Expenses by Functional Class (dollars in millions) FY 2008 $980.4 FY 2007 $919.2 $684.6 $598.0 $115.4 $108.4 $85. 6 $77. 7 $83. 9 $65. 4 $10. 9 $14. 1 $0 $55. 6 $800 $700 $600 $500 $400 $300 $200 $100 $0 Ins truction, Research, and Public Service Academic, Student, and Institutional Support Operations and Maintenance of Plant Auxiliary Enterprises Scholarships and Fellows hips Unallocated Depreciation 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. Georgia Institute of Technology Annual Financial Report FY 2008 6 Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivities Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($237,262,062) 285,398,048 (109,360,010) 12,292,080 (48,931,944) 100,953,346 $52,021,402 June 30, 2007 ($180,304,402) 274,039,837 (76,013,550) 7,841,204 25,563,089 75,390,257 $100,953,346 Capital Assets The Institute had two significant capital additions in fiscal year 2008. The Electrical Sub Station was completed this year, resulting in an addition of $39.7 million. Also, the Institute acquired a complex of buildings collectively called "North Avenue Apartments" from Georgia State University for $74.5 million, which includes an adjacent parking facility. 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 $561,020,762 of which $36,580,298 was reflected as current liability at June 30, 2008. 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 FY2008. These units are: Georgia Tech Foundation, Inc., Georgia Tech Athletic Association, Georgia Tech Research Corporation, Georgia Advanced Technology Ventures, Inc., Georgia Tech Alumni Association, and Georgia Tech Facilities, Inc. Details are available in Note 1, Summary of Significant Accounting Policies and Note 17, Component Units. Economic Outlook The Institute is expecting significant economic challenges in the next fiscal year. Planning guidelines from the USG Chancellor have been received for a 5% budget cut from the FY09 state appropriations which is approximately $14.5 million. These cuts, coupled with rapidly rising energy costs and increased fixed debt service costs of $5.9 million in the next fiscal year will necessitate management examine all aspects of the Institute's operations, including the primary Georgia Institute of Technology Annual Financial Report FY 2008 7 missions of instruction, research and public service. Enrollment is expected to be stable. While every effort has been made in the past to absorb the brunt of economic downturns in the support services area, this may not be possible given the magnitude of the downturn and the impact of the proposed budget cut. At the same time the Institute anticipates a bright economic future with the continued growth of the sponsored research program. Sponsored awards grew to $445.4 million in FY2008 which is a 19.0% increase over the previous fiscal year. In the current fiscal year, sponsored revenue increased by $23.8 million or 5.5%. The Institute expects growth to continue in future fiscal years but at a more normal rate than in FY08. These revenues should help to mitigate the stagnant or negative growth in other areas. Dr. Gary B. Schuster, Interim President Georgia Institute of Technology Georgia Institute of Technology Annual Financial Report FY 2008 8 Statement of Net Assets GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2008 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 Net Investment in Capital Leases Pledges Receivable Contributions Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Due from Component Units Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS Ge orgi a Institute of Te ch n ol ogy Component Unit Georgia Tech Foundation, Inc. Component Unit Georgia Tech Ath l e ti c Association $52,021,402 143,902 4,520,709 13,752,712 72,822,042 321,856 42,440,874 186,023,497 $7,442,000 3,033,880 4,030,989 21,898,288 1,234,948 37,640,105 $6,216,725 1,993,168 5,467,185 604,767 14,281,845 63,530,650 9,396,087 1,420,414,332 1,493,341,069 1,679,364,566 1,334,683,679 163,860,101 44,368,897 37,667,491 27,559,637 1,608,139,805 1,645,779,910 80,058,950 8,074,285 95,504,970 2,111,114 185,749,319 200,031,164 Georgia Institute of Technology Annual Financial Report FY 2008 9 Statement of Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2008 Ge orgi a Institute of Te ch n ol ogy Component Unit Georgia Tech Foundation, Inc. Component Unit Georgia Tech Ath l e ti c Association LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits 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) 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 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) Other Long-T erm Liabilities 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 19,506,400 1,179,451 307,021 1,930,375 20,557,187 15,245,362 3,503,959 13,672,404 18,143,084 18,437,214 112,482,457 509,594,341 5,425,000 14,846,123 529,865,464 642,347,921 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962 $1,037,016,645 9,499,237 2,417,845 663,197 264,073 4,825,000 1,953,062 437,000 61,536,874 81,596,288 40,894,155 202,569,624 13,095,498 10,939,238 89,143,950 356,642,465 438,238,753 (245,733) 385,631,562 418,704,165 12,605,024 390,846,139 $1,207,541,157 Georgia Institute of Technology Annual Financial Report FY 2008 10 3,668,533 7,780,000 405,861 1,080,357 2,025,000 27,978 14,987,729 101,955,849 2,414,872 907,778 105,278,499 120,266,228 (6,129,775) 24,098,941 64,886,682 (3,090,912) $79,764,936 Statement of Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2008 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 Net Investment in Capital Leases Pledges Receivable Contributions Receivable Inventories (note 4) Prepaid items Notes and Mortgages Receivable Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Due from Component Units Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net (note 6) Other Assets Total Noncurrent Assets TOTAL ASSETS Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Alumni Association Component Unit Georgia Tech Facilities, Inc. $57,657,833 $1,573,271 30,615,886 43,231 41,340,568 129,657,518 331,674 526,993 50,000 12,322 2,162,586 370,933 957,061 1,618,331 1,950,005 131,607,523 745,443 114,277,597 116,351,034 118,513,620 $184,643 $3,120,000 6,792,000 302,380 31,000 437,000 12,691,000 7,948 54,406 5,674,000 549,377 28,745,000 35,722,000 9,085,000 248,061,000 448,621 448,621 997,998 2,617,000 8,415,000 303,900,000 332,645,000 Georgia Institute of Technology Annual Financial Report FY 2008 11 Statement of Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENT OF NET ASSETS June 30, 2008 LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to 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) Liabilities under Split-Interest Agreements (noncurrent) 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 NETASSETS Component Unit Georgia Tech Research Corporation 2,302,375 36,584,010 44,567,685 83,454,070 0 83,454,070 1,618,331 46,535,122 $48,153,453 Component Unit Georgia Advanced Technology Ventures, Inc. 649,840 641,225 3,420,567 217,773 1,678,898 6,608,303 90,371,687 8,716,241 99,087,928 105,696,231 15,110,771 2,222,998 (4,516,380) $12,817,389 Component Unit Georgia Tech Alumni Association 183,995 310,000 25,584 207,461 727,040 0 727,040 448,621 (177,663) $270,958 Component Unit Georgia Tech Facilities, Inc. 4,269,000 669,000 800,000 2,422,000 28,011,000 2,179,000 5,723,000 44,073,000 5,215,000 559,000 289,084,000 294,858,000 338,931,000 5,305,000 9,522,000 (21,113,000) ($6,286,000) Georgia Institute of Technology Annual Financial Report FY 2008 12 Statement of Revenues, Expenses and Changes in Net Assets GEORGIA INSTITUTEOFTECHNOLOGY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2008 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 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 Payments to other Component Units Payments to or on behalf of Georgia Institute of Technology Total Operating Expenses Operating Income (loss) Component Unit Georgia Institute of Technology Georgia Tech Foundation, Inc. Component Unit Georgia Tech Athletic Association $161,887,461 (26,737,688) 287,998,687 17,236,932 149,509,237 23,942,293 1,253,966 49,248,564 1,902,078 16,942,378 13,200,396 5,948,091 6,647,384 12,376,817 721,356,596 $0 59,881,465 4,879,994 411,395 18,224,413 83,397,267 $0 7,764,881 32,167,614 9,266,962 49,199,457 245,468,028 263,915,877 104,557,932 548,389 16,616,963 10,919,734 36,396,206 244,423,689 57,586,220 980,433,038 (259,076,442) 2,208,712 395,506 1,306,176 80,206 32,832 1,708,169 2,070,268 7,050,366 69,285,346 84,137,581 (740,314) 12,901,921 3,004,969 3,602,578 7,008,363 8,987,612 4,732,730 12,389,256 52,627,429 (3,427,972) Georgia Institute of Technology Annual Financial Report FY 2008 13 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA INSTITUTEOFTECHNOLOGY STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2008 Component Unit Georgia Institute of Technology Georgia Tech Foundation, Inc. Component Unit Georgia Tech Athletic Association 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 Special Item - Capital Asset Transfer 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 275,144,403 5,323,093 14,551,850 (26,374,717) (3,371,451) 265,273,178 6,196,736 21,855,280 9,117,970 7,916,649 38,889,899 45,086,635 983,377,609 8,552,401 991,930,010 $1,037,016,645 (1,921,334) (14,540,537) (10,939,238) (27,401,109) (28,141,423) 34,420,595 34,420,595 6,279,172 1,201,261,985 0 1,201,261,985 $1,207,541,157 1,339,275 498,856 (5,754,551) (3,916,420) (7,344,392) 7,632,330 7,632,330 287,938 79,476,998 0 79,476,998 $79,764,936 Georgia Institute of Technology Annual Financial Report FY 2008 14 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 REVENUES Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Alumni Association Component Unit Georgia Tech Facilities, 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 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 Payments to other Component Units Payments to or on behalf of Georgia Institute of Technology Total Operating Expenses Operating Income (loss) $0 301,812,234 16,659,334 62,748,887 7,363,605 2,215 388,586,275 138,262 5,174,733 411,744 377,569,043 383,293,782 5,292,493 $0 232,299 1,325,606 327,409 12,057,297 33,940 13,976,551 66,792 21,208 1,009,023 6,524,638 2,967,203 9,688 295,569 10,894,121 3,082,430 $0 $0 4,333,393 1,048,977 814,904 152,000 11,368,000 37,599 315,893 6,550,766 1,000 11,521,000 3,274,435 794,000 360,239 66,722 1,442,920 126,852 735,099 6,800,267 (249,501) 1,544,000 60,000 6,227,000 7,831,000 3,690,000 Georgia Institute of Technology Annual Financial Report FY 2008 15 Statement of Revenues, Expenses and Changes in Net Assets, Continued GEORGIA INSTITUTEOF TECHNOLOGY STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 Component Unit Georgia Tech Research Corporation Component Unit Georgia Advanced Technology Ventures, Inc. Component Unit Georgia Tech Alumni Association Component Unit Georgia Tech Facilities, 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 Special Item - Capital Asset Transfer 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 1,723,482 (17,066) 1,706,416 6,998,909 80,000 58,774 (7,365,001) (7,306,227) (4,223,797) 80,000 7,078,909 41,074,544 0 41,074,544 $48,153,453 0 (4,223,797) 17,041,186 0 17,041,186 $12,817,389 0 (249,501) 2,162,000 (15,323,000) (13,161,000) (9,471,000) 0 (249,501) 520,459 0 520,459 $270,958 (3,214,000) (3,214,000) (12,685,000) 6,399,000 0 6,399,000 ($6,286,000) Georgia Institute of Technology Annual Financial Report FY 2008 16 Statement of Cash Flows GEORGIA INS TITUTE OF TECHNOLOGY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 roceeds from Capit al Debt 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, 2008 $134,652,521 447,227,033 23,701,801 (407,770,465) (507,336,031) (10,919,734) (3,131,037) 2,456,978 49,473,232 1,913,535 16,937,074 13,230,546 5,950,468 6,650,667 (10,298,650) (237,262,062) 275,144,403 3,362,324 5,323,093 1,568,228 285,398,048 20,338,415 217,000 (91,524,603) (14,226,388) (24,164,434) (109,360,010) 19,578,480 (7,286,400) 12,292,080 (48,931,944) 100,953,346 $52,021,402 Georgia Institute of Technology Annual Financial Report FY 2008 17 Statement of Cash Flows, Continued GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 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 : Operat ing Income (loss) Adjustment s to Reconcile Net Income (loss) t o Net Cash P rovided (used) by Operat ing Activities Dep reciat io n Change in Assets and Liabilities: Receivables, net Invent ories Prepaid Items Not es Receivable, Net Account s P ayable Deferred Revenue Other Liabilit ies Compensat ed 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 assets acquired by incurring capit al lease obligat ions Change in fair value of invest ments recognized as a component of int erest income Special Item - Capital Asset T ransfer Change in accrued int erest payable affecting interest paid Gift of capital asset s reducing proceeds of capit al grant s and gifts June 30, 2008 ($259,076,442) 57,586,220 (32,756,992) (29,176) (2,408,183) (674,059) 430,212 838,623 (2,978,538) 1,806,273 ($237,262,062) $131,777,132 ($5,026,630) $7,916,649 ($2,210,283) ($10,634,835) Georgia Institute of Technology Annual Financial Report FY 2008 18 GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 Tech Alumni Association Georgia Tech Facilities, Inc. Georgia Institute of Technology Annual Financial Report FY 2008 19 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 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 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. Georgia Institute of Technology Annual Financial Report FY 2008 20 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 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. 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 Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as 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 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 Institute when complete. Georgia Institute of Technology Annual Financial Report FY 2008 21 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, 2008, GSFIC transferred capital additions valued at $2,275,680 to Georgia Institute of Technology. The amount of this transfer that was put on deposit with GSFIC and privately funded is $772,432. Deposits Deposits represent good faith deposits from students to reserve housing assignments in an Institute 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 Institute of Technology had accrued liability for compensated absences in the amount of $31,477,064 as of July 1, 2007. For FY2008, $19,961,337 was earned in compensated absences and employees were paid $18,155,064, for a net increase of $1,806,273. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $33,283,337. Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Net Assets The Institute's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional Georgia Institute of Technology Annual Financial Report FY 2008 22 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: June 30, 2008 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 $1,566,009 6,531,565 4,992,207 14,453,860 $27,543,641 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, 2008 $12,095,692 12,842,413 319,012 (22,738,155) $2,518,962 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. Georgia Institute of Technology Annual Financial Report FY 2008 23 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. 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 nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. Restatement of Prior Year Net Assets During fiscal year 2008, the Institute conducted a comprehensive review of building and infrastructure historical costs and the associated depreciation and accumulated depreciation for these assets. As a result of this review, it was determined that depreciation expense had been overstated in prior years by a net amount of $8,552,401, with buildings being overburdened by $9,540,330 and infrastructure being under burdened by $987,929. To correctly reflect carrying values: 1. The beginning balance for accumulated depreciation on buildings was restated and reduced by $9,540,330. 2. The beginning balance for accumulated depreciation on infrastructure was restated and increased by $987,929. 3. Net Assets Invested in Capital Assets, Net of Related Debt, was increased by $8,552,401. Note 6 reflects these changes in the Beginning Balance column. Georgia Institute of Technology Annual Financial Report FY 2008 24 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, 2008, the carrying value of deposits was $537,594 and the bank balance was $14,963,097. Of the Institute's deposits, $14,784,821 were uninsured. Of these uninsured deposits, $11,080,139 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name, and $3,704,682 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 Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. Georgia Institute of Technology Annual Financial Report FY 2008 25 The Institute's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes Investment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool Total Investments Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $5,132,841 9,837 4,665,180 7,274,305 $17,082,163 483,522 373,066 1,000,122 1,458 29,966,352 44,590,319 21,466,438 143,902 $115,107,342 $100,281 280 561,356 160,394 $822,311 $3,201,916 297 2,610,561 1,279,026 $7,091,800 $1,740,222 857,393 830,210 $3,427,825 $90,422 9,260 635,870 5,004,675 $5,740,227 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 40 days. The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Georgia Institute of Technology Annual Financial Report FY 2008 26 Value (NAV) is calculated daily to determine current share price, which was $2.02 at June 30, 2008. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Effective Duration of the Fund is .81 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 1.99 years. Of the Institute's total investment of $29,966,352 in the Short Term Fund, $29,846,487 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the Institute's total investment of $44,590,319 in the Diversified Fund, $13,867,589 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, 2008, $12,975,007 were uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk 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 $4,665,180 7,274,305 $11,939,485 $4,665,180 5,367,939 $10,033,119 AA 672,645 $672,645 A BAA Unrated 884,552 $884,552 344,494 $344,494 4,675 $4,675 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 Georgia Institute of Technology Annual Financial Report FY 2008 27 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. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $3,594,976 1,291,088 4,520,709 72,822,042 11,197,182 93,425,997 2,330,534 $91,095,463 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 P hysical P lant Other T otal 289,063 32,793 $321,856 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2008 the allowance for uncollectible loans was approximately $78,433. Georgia Institute of Technology Annual Financial Report FY 2008 28 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated (Restated) Beginning Balances 7/1/2007 $50,647,905 16,914,836 25,679,962 93,242,703 Special Item Transfer $0 0 Additions $2,488,541 1,516,994 37,997,110 42,002,645 Reductions $0 727,903 13,200,129 13,928,032 Ending Balance 6/30/2008 $53,136,446 17,703,927 50,476,943 121,317,316 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Total Assets Being Depreciated 55,147,216 1,214,210,280 14,815,338 323,998,406 89,878,032 1,698,049,272 72,150,026 466,803 72,616,829 45,415,184 30,157,777 3,851,359 46,369,649 4,830,137 130,624,106 5,111,690 11,439,190 14,968 16,565,848 100,562,400 1,311,406,393 19,133,500 358,928,865 94,693,201 1,884,724,359 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Library Collections Total Accumulated Depreciation 11,831,745 232,792,327 7,089,530 207,340,340 62,080,790 521,134,732 18,964,108 280,578 19,244,686 2,187,083 26,571,504 422,904 25,993,141 2,411,588 57,586,220 1,658,578 10,664,749 14,968 12,338,295 14,018,828 276,669,361 7,793,012 222,668,732 64,477,410 585,627,343 Total Capital Assets, Being Depreciated, Net 1,176,914,540 53,372,143 73,037,886 4,227,553 1,299,097,016 Capital Assets, net $1,270,157,243 $53,372,143 $115,040,531 $18,155,585 $1,420,414,332 Georgia Institute of Technology Annual Financial Report FY 2008 29 Note 7. Deferred Revenue Current deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Research Ot her Deferred Revenue T ot als June 30, 2008 $12,398,192 1,768,242 1,078,928 $15,245,362 Long-Term deferred revenue totaled $5,425,000. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $409,969,681 Additions $131,994,132 Reductions Ending Balance June 30, 2008 $14,226,388 $527,737,425 Current Portion $18,143,084 Other Liabilities Compensated Absences Total Total Long Term Obligations 31,477,064 31,477,064 $441,446,745 19,961,337 19,961,337 $151,955,469 18,155,064 18,155,064 $32,381,452 33,283,337 33,283,337 $561,020,762 18,437,214 18,437,214 $36,580,298 Note 9. Significant Commitments The Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $15,885,993 as of June 30, 2008. 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 2008 and 2037. Expenditures for fiscal year 2008 were $40,601,105 of which $26,374,717 represented interest. Total principal paid on capital leases was $14,226,388 for the fiscal year ended June 30, 2008. Interest rates range from 3.36 percent Georgia Institute of Technology Annual Financial Report FY 2008 30 to 11.0 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Facilities and Other Improvements Infrastructure Land Buildings Equipment Total Assets Held Under Capital Lease $191,540 39,625,307 11,457,418 516,156,196 16,026,312 $583,456,773 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 seven capital leases with related parties in fiscal year 2008. 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, 2008 the remaining long-term debt obligation (principal) under the lease was $18,020,000 and the amount due (principal and interest) in the next fiscal year is $1,425,695. 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, 2008 the remaining long-term debt obligation (principal) under the lease was $128,636,400, and the amount due (principal and interest) in the next fiscal year is $9,938,499. 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, 2008 the remaining long-term debt obligation (principal) under the lease was $40,845,000, and the amount due (principal and interest) in the next fiscal year is $3,068,765. 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, 2008 the remaining long-term debt obligation under the lease was $65,235,000 and the amount due (principal and interest) in the next fiscal year is $5,079,853. 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, Georgia Institute of Technology Annual Financial Report FY 2008 31 2008 the remaining long-term debt obligation under the lease was $73,915,000 and the amount due (principal and interest) in the next fiscal year is $4,980,850. In July 2007, Georgia Institute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named "North Avenue Apartments", including an adjoining parking deck. The lease term is for 25 years and expires in June, 2032. At June 30, 2008 the remaining long-term debt obligation under the lease was $76,720,452 and the amount due (principal and interest) in the next fiscal year is $5,280,000. In January 2008, Georgia Institute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for an Electrical Sub Station. The lease term is for 30 years and expires in December 2037. At June 30, 2008 the remaining longterm debt obligation under the lease was $39,485,146 and the amount due (principal and interest) in the next fiscal year is $3,000,000. 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 23 year period that began June 2003 and expires June 2026. At June 30, 2008 the remaining longterm debt obligation (principal) under the lease was $61,338,282 and the amount due (principal and interest) in the next fiscal year is $4,410,189. 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. 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, 2013. At June 30, 2008, the remaining long term debt obligation under these agreements was $23,542,145. The amount due (principal and interest) in the next fiscal year is $7,965,511. OPERATING LEASES Georgia Institute of Technology's non-cancelable operating leases with remaining terms of more than one year expire in 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. Georgia Institute of Technology Annual Financial Report FY 2008 32 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, 2008 through June 30, 2009 for monthly fees of $18,788. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $225,456 in the next fiscal year. In 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Smyrna, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $105,056. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,670 in the next fiscal year. 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, 2008 through June 30, 2009 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 the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $16,788. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $201,457 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $4,134. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $49,611 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $74,194. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $890,322 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $55,763. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc $316,931 in the next fiscal year. Georgia Institute of Technology Annual Financial Report FY 2008 33 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, 2008 through June 30, 2009 for monthly fees of $24,384. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 2, Inc. $292,602 in the next fiscal year. 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, 2008 through June 30, 2009 with monthly fees of $2,352. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $28,000 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $134,660. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc. $1,615,925 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $34,736. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 3, Inc. $416,828 in the next fiscal year. 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, 2008 through June 30, 2009 for monthly fees of $5,348. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $64,179 in the next fiscal year. Georgia Institute of Technology's FY2008 expense for rental of real property and equipment under operating leases was $9,810,714. Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: Georgia Institute of Technology Annual Financial Report FY 2008 34 FUTURE COMMITMENTS Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 T otal minimum lease payment 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 Equipment Capit al Leases Operat ing Leases $45,149,362 44,296,871 42,574,478 39,323,158 39,565,696 194,181,260 194,905,753 172,078,400 109,961,814 28,443,497 910,480,289 382,742,864 $527,737,425 $9,606,316 $9,606,316 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 2008, 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 2008 2007 2006 100% 100% 100% $18,963,675 $18,025,456 $17,233,661 Georgia Institute of Technology Annual Financial Report FY 2008 35 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. 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 Institute's payroll for the year ended June 30, 2008, for employees covered by ERS was $567,198. The Institute's total payroll for all employees was $509,383,905. For the year ended June 30, 2008 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 Institute's pays the remainder on behalf of the employee. Georgia Institute of Technology Annual Financial Report FY 2008 36 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $59,300 $57,305 $43,713 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Institute of Technology Annual Financial Report FY 2008 37 Georgia Institute of Technology and the covered employees made the required contributions of $16,287,458 (8.13% or 8.15%) and $9,998,034 (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. 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 2008 amounted to $802,054 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. 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 Georgia Institute of Technology Annual Financial Report FY 2008 38 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are 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 for the fiscal year ended June 30, 2008. Georgia Institute of Technology Annual Financial Report FY 2008 39 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 1,211 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Institute of Technology recognized as incurred $6,572,585 of expenditures, which was net of $2,114,450 of participant contributions. Georgia Institute of Technology Annual Financial Report FY 2008 40 Note 15. Natural Classifications with Functional Classifications The Institute's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Functional Classification FY2008 Instruction Research Public Service Academic Support Student Services Institutional Support $95,932,013 49,914,387 32,073,792 39,843 3,306,673 $134,828,067 98,722,051 44,474,493 21,131 10,663,714 $6,557,747 14,285,168 4,866,845 438,337 1,044,438 $5,735,222 18,396,302 6,000,306 7,871 640,015 $367,927 11,307,441 2,581,732 26,048 300,008 $1,710,206 31,129,907 4,491,202 10,469 416,027 2,095,842 23,198,603 7,603,706 1,883,664 108,333,041 23,541,662 321,157 19,112,633 1,359,854 518,941 9,214,672 4,449,096 214,169 10,655,725 746,992 444,692 234,590 5,794,224 $214,164,859 $422,467,823 $47,986,179 $44,962,425 $26,200,042 $44,231,317 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $295,148 23,172,196 5,905,474 2,254 95,089 20,143,243 30,048,878 5,889,789 10,919,734 $41,698 16,988,425 4,164,088 2,436 150,999 10,774,498 43,625,547 8,200,897 $245,468,028 263,915,877 104,557,932 548,389 16,616,963 10,919,734 36,396,206 244,423,689 57,586,220 $85,552,071 $10,919,734 $83,948,588 $980,433,038 Georgia Institute of Technology Annual Financial Report FY 2008 41 Note 16. Special Item Georgia State University, a University System of Georgia institution, transferred its University Village Student Housing Complex to Georgia Institute of Technology effective July 1, 2007. The complex contains approximately 2,000 student housing beds, 790 parking spaces, and site amenities and was renamed the North Avenue Apartments by the Institute. Georgia Institute of Technology provided consideration for the complex totaling $45,455,494. The net book value of the capital asset transfer to Georgia Institute of Technology at July 1, 2007 was $53,372,143. The difference of $7,916,649 is reported as a Special Item Capital Asset Transfer on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. See Note 6 for additional information. Note 17. 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 is restricted for support of the Institute. Because the resources held by the Foundation are used by, or for the benefit of, the Institute, the Foundation is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. The foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain 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 2008, the Foundation distributed approximately $69.3 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 $1.335 billion as of June 30, 2008, of which $376.96 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 Georgia Institute of Technology Annual Financial Report FY 2008 42 established a spending policy in which up to 6% of the twelve (12) quarter average market value of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2008, the Foundation allocated 5% of that average. Investments are comprised of the following amounts at June 30, 2008: Cost Fair Value Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities M utual Funds Venture Capital Real Estate Diversify ing Strategies Total Investments $47,287,914 18,657,446 29,808,809 349,557,663 58,430,310 222,785,550 47,451,789 317,668,284 $1,091,647,765 $47,287,914 18,802,404 27,639,374 472,381,398 59,020,515 298,147,904 50,417,484 360,986,686 $1,334,683,679 Capital Assets for Component Units: Georgia Tech Foundation, Inc. holds the following Capital Assets at June 30, 2008: June 30, 2008 Capital Assets not being Depreciated: Land and other Assets Total Capital Assets not being Depreciated Capital Assets being Depreciated: Buildings and Improvements M achinery 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 7,530,000 45,581,000 10,466,509 35,114,491 $37,667,491 Long-term Liabilities for Component Units: Changes in long-term liabilities for Georgia Tech Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Georgia Institute of Technology Annual Financial Report FY 2008 43 Beginning Balance June 30, 2007 Compensated Absences Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities $245,178 10,474,837 63,725,993 211,935,000 0 Total Long Term Liabilities $286,381,008 Additions Reductions $197,272 6,391,975 52,202,000 10,939,238 $178,377 1,818,252 54,391,119 4,540,376 $69,730,485 $60,928,124 Ending Balance June 30, 2008 $264,073 15,048,560 61,536,874 207,394,624 10,939,238 $295,183,369 Amounts due within One Year $264,073 1,953,062 61,536,874 4,825,000 $68,579,009 Notes and Loans Payable: The Foundation has two $30 million revolving lines of credit. At June 30, 2008, $45.955 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 2.73% at June 30, 2008. Both lines of credit expire on June 30, 2009. The Foundation expects to renew both lines of credit upon expiration. The Foundation also has a $20 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, 2008, $15.582 million was outstanding on the line of credit. Interest is calculated using the 30day LIBOR rate plus 0.25%, which was 2.73% at June 30, 2008. The line of credit expires on June 30, 2009. The Foundation also has available one other line of credit in the amount of $20 million. As of June 30, 2008, no amounts have been drawn on this credit facility. This line of credit expires on June 30, 2009. Annual estimated debt service requirements to maturity for Notes and Loans Payable are as follows: Year Ending June 30: Year 2009 1 Princip al Notes and Loans Payable Interest $61,536,874 $1,680,000 Total $63,216,874 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 4.30% to 5.75% until maturity in November 2030. The outstanding principal on the bonds was $40.845 million at June 30, 2008. Georgia Institute of Technology Annual Financial Report FY 2008 44 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 4.0% to 6.60% through maturity in November 2031. The outstanding principal on the bonds was $168.04 million at June 30, 2008. Annual debt service requirements to maturity for Georgia Tech Foundation's revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 Bond Discount, net Year 1 2 3 4 5 6-10 11-15 16-20 21-25 Princip al $4,825,000 5,060,000 5,310,000 5,600,000 5,915,000 35,170,000 45,085,000 51,900,000 50,020,000 208,885,000 (1,490,376) $207,394,624 Bonds Payable Interest $11,437,491 11,203,637 10,945,586 10,653,001 10,339,689 46,097,954 34,575,148 21,345,317 5,509,682 162,107,505 $162,107,505 Total $16,262,491 16,263,637 16,255,586 16,253,001 16,254,689 81,267,954 79,660,148 73,245,317 55,529,682 370,992,505 (1,490,376) $369,502,129 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 in accordance with the accounting principles generally accepted in the United States as prescribed by the Governmental Accounting Standards Board (GASB). The financial statements are prepared in accordance with Statements of Governmental Accounting Standards (SGAS) No. 35, Basic Financial Statements- Georgia Institute of Technology Annual Financial Report FY 2008 45 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 Athletic Association's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Athletic Association distributed approximately $12.4 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, 2008, $6,135,596 of the Athletic Association's bank balance of $6,235,596 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 an $80,058,950 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, 2008: Georgia Institute of Technology Annual Financial Report FY 2008 46 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 Equip ment Total Assets Being Dep reciated Less: Accumulated Depreciation Buildings Facilities and Other improvements Equip ment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balances 7/1/2007 $49,946 208,675 258,621 126,095,186 453,078 5,708,799 132,257,063 30,598,005 347,594 3,085,137 34,030,736 98,226,327 $98,484,948 Additions $0 0 Reductions $42,946 208,675 251,621 Ending Balance 6/30/2008 $7,000 0 7,000 1,272,979 542,928 188,466 2,004,373 127,368,165 996,006 5,897,265 0 134,261,436 4,044,705 83,705 604,320 4,732,730 (2,728,357) ($2,728,357) 0 0 $251,621 34,642,710 431,299 3,689,457 38,763,466 95,497,970 $95,504,970 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $1,044,814 963,311 106,018,678 0 $0 3,495,229 $108,026,803 $3,495,229 $1,044,814 27,555 2,037,829 $3,110,198 $0 935,756 103,980,849 3,495,229 $108,411,834 $0 27,978 2,025,000 1,080,357 $3,133,335 Notes and Loans Payable: Notes Payable at June 30, 2008 represents the Athletic Association's obligation to Georgia Tech Foundation, Inc. with respect to the William C. Wardlaw Center. The effective interest rate at June 30, 2008 is 4.92%. Georgia Institute of Technology Annual Financial Report FY 2008 47 Annual debt service requirements to maturity for the Athletic Association's note payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 1 2 3 4 5 6-10 11-15 16-20 Notes and Loans Payable Princip al Interest Total $27,978 29,476 30,975 32,474 33,973 198,343 255,297 327,240 $935,756 $46,376 44,998 43,510 41,917 40,249 173,091 116,455 43,516 $550,112 $74,354 74,474 74,485 74,391 74,222 371,434 371,752 370,756 $1,485,868 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, 2008, the swaption had a fair value (representing a liability) of $8,442,390, 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: Georgia Institute of Technology Annual Financial Report FY 2008 48 Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 1 2 3 4 5 6-10 11-15 16-20 21-25 Bond Discount/Swaption Premium Princip al $2,025,000 2,120,000 2,210,000 2,315,000 2,445,000 14,445,000 18,775,000 24,240,000 34,380,000 102,955,000 1,025,849 $103,980,849 Bonds Payable Interest $5,233,586 5,137,911 5,045,346 4,939,956 4,814,844 21,839,294 17,503,303 12,042,725 4,639,150 81,196,115 $81,196,115 Total $7,258,586 7,257,911 7,255,346 7,254,956 7,259,844 36,284,294 36,278,303 36,282,725 39,019,150 184,151,115 1,025,849 $185,176,964 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 2008, GTRC distributed approximately $377.6 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. Georgia Institute of Technology Annual Financial Report FY 2008 49 Deposits and Investments for Component Units: Deposits At June 30, 2008, the carrying value of deposits was $10,057,833 and the bank balance was $10,424,177. Of Georgia Tech Research Corporation's deposits, $10,224,177 were uninsured and collateralized with securities held by the Office of Treasury and Fiscal Services, but not in GTRC's name. Investments Georgia Tech Research Corporation's investments at June 30, 2008 were as follows: Fair Value Commercial Paper Equity Securities $47,600,000 331,674 Total Investments $47,931,674 Interest Rate Risk Interest rate risk is the risk that changes of interest rates of debt investments will adversely affect the fair value of an investment. GTRC does not have a formal policy for managing interest rate risk. The investment in Commercial Paper matures in less than one year. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, GTRC will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. GTRC does not have a formal policy for managing custodial credit risk. At June 30, 2008, $47,600,000 of GTRC's applicable investments were held by the investment's counterparty in GTRC'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. GTRC does not have a formal policy for managing credit quality risk. The Commercial Paper investment is rated A-1+ by Standard and Poor's. 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. GTRC does not have a formal policy for managing concentration of credit risk. Georgia Institute of Technology Annual Financial Report FY 2008 50 Of GTRC's total investments of $47,931,674, $47,600,000, or 99%, are invested in Federal Home Loan Bank discount notes. Capital Assets for Component Units: Georgia Tech Research Corporation had the following Capital Asset activity for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Capitalized Collections Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Beginning B al an ce s 7/1/2007 $240,735 0 240,735 Addi ti o n s $0 32,098 32,098 Re du cti on s $0 0 En di n g B al an ce 6/30/2008 $240,735 32,098 272,833 Capital Assets, Being Depreciated: Building and Building Improvements Equipment T otal Assets Being Depreciated 21,133 3,498,102 3,519,235 74,100 270,957 345,057 206,762 206,762 95,233 3,562,297 3,657,530 Less: Accumulated Depreciation Buildings Equipment T otal Accumulated Depreciation 3,056 2,086,929 2,089,985 3,348 408,396 411,744 189,697 189,697 6,404 2,305,628 2,312,032 T otal Capital Assets, Being Depreciated, Net 1,429,250 (66,687) 17,065 1,345,498 Capital Assets, net $1,669,985 ($34,589) $17,065 $1,618,331 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, 2008, Georgia Advanced Technology Ventures, Inc. distributed $295,569 to the Institute for operating expenses. Complete financial statements for GATV can Georgia Institute of Technology Annual Financial Report FY 2008 51 be requested at the following address: Georgia Advanced Technology Ventures, Inc., Treasurer's Office - Attention: Joel Hercik, Lyman Hall, Room 315, Atlanta, GA 30332-0257. Investments for Component Units: Georgia Advanced Technology Ventures, Inc. holds investments in the amount of $957,061. 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, 2008: Cap ital Assets not being Dep reciated: Land and other Assets Total Cap ital Assets not being Dep reciated Cap ital Assets being Dep reciated: Buildings and Improvements Infrastructure M achinery and Equipment Total Cap ital Assets being Dep reciated Less Total Accumulated Depreciation Total Cap ital Assets being Dep reciated, Net Capital Assets, Net June 30, 2008 $11,428,530 11,428,530 107,659,415 3,411,274 1,047,396 112,118,085 9,269,018 102,849,067 $114,277,597 Long-term Liabilities for Component Units: Changes in long-term liabilities for the GATV for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Capital Lease Obligations Notes and Loans Payable $85,145,694 8,047,352 $6,371,037 3,883,669 $1,145,044 1,535,882 $90,371,687 10,395,139 $0 1,678,898 Total Long Term Liabilities $93,193,046 $10,254,706 $2,680,926 $100,766,826 $1,678,898 Capital Lease Obligations: Georgia Advanced Technology Ventures, Inc. has three long-term capital leases. The leases are for Centergy One Building, Floors 1-3 with an interest rate of 6.25%, Centergy One Building, Floors 4-5 with an interest rate of 7.75%, and Technology Enterprise Park with an interest rate of Georgia Institute of Technology Annual Financial Report FY 2008 52 8.224%. The balances for these leases total $90,371,687 at June 30, 2008, which includes $1,593,351 in capitalized interest payable. Future minimum lease payments under the capital leases, and the net present value of future minimum lease payments are as follows at June 30, 2008: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 2014 through 2018 6-10 2019 through 2023 11-15 2024 through 2028 16-20 2029 through 2033 21-25 2034 through 2038 26-30 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $6,811,817 6,958,532 7,103,045 7,251,074 7,398,582 38,467,746 38,153,078 42,220,348 46,924,028 19,254,482 220,542,732 130,171,045 $90,371,687 Notes and Loans Payable: Georgia Advanced Technology Ventures, Inc. has four notes payable and a line of credit arrangement with The University Financing Foundation, Inc. (TUFF). Three of the notes payable are secured by Technology Enterprise Park land and the fourth is unsecured. Interest rates on the notes payable range from 6.00% to 7.53%. The notes payable balances at June 30, 2008 total $8,795,139, which includes $91,795 in capitalized interest payable. The credit arrangement with TUFF includes advances at June 30, 2008 of $1,600,000, out of a total credit limit of $1,900,000. Principal is payable within 30 days of demand by TUFF. Interest on the credit line is prime plus 2%. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Princip al Notes and Loans Payable Interest $1,678,898 229,092 270,110 299,086 330,531 2,009,506 1,299,453 2,001,348 2,053,070 224,045 $10,395,139 $434,381 440,374 446,538 452,894 459,465 2,416,843 2,724,484 3,084,971 2,481,836 193,469 $13,135,255 Total $2,113,279 669,466 716,648 751,980 789,996 4,426,349 4,023,937 5,086,319 4,534,906 417,514 $23,530,394 Georgia Institute of Technology Annual Financial Report FY 2008 53 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, 2008, the Alumni Association distributed $735,099 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, 2008: Capital Assets being Depreciated: Buildings and Improvements Machinery and Equipment T otal Capital Assets being Depreciated June 30, 2008 $718,980 788,253 1,507,233 Less T otal Accumulated Depreciation 1,058,612 T otal Capital Assets being Depreciated, Net 448,621 Capital Assets, Net $448,621 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 Georgia Institute of Technology Annual Financial Report FY 2008 54 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 the Institute. 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. During the year ended June 30, 2008, the Foundation distributed $6,227,000 to the University for both restricted and unrestricted purposes. Complete financial statements for Facilities can be obtained from the following address: Georgia Tech Facilities, Inc., Treasurer's Office, Lyman Hall, Room 315, Atlanta, GA 30332-0257, Attention: Joel Hercik. Investments for Component Units: Georgia Tech Facilities, Inc.'s investments at June 30, 2008 were as follows: Government and Agency Securities Corporate Bonds Cost $4,500,000 2,500,000 Fair Value $4,346,880 2,445,120 Total Investments $7,000,000 $6,792,000 Capital Assets for Component Units: Georgia Tech Facilities, Inc. holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 1,419,000 2,017,000 1,200,000 1,200,000 600,000 600,000 $2,617,000 Georgia Institute of Technology Annual Financial Report FY 2008 55 Long-term Liabilities for Component Units: Changes in long-term liabilities for Facilities for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Capital Lease Obligations Revenue/Mortgage Bonds Payable $9,492,000 210,125,000 $0 199,990,000 $2,098,000 115,308,000 $7,394,000 294,807,000 $2,179,000 5,723,000 Total Long Term Liabilities $219,617,000 $199,990,000 $117,406,000 $302,201,000 $7,902,000 Capital Lease Obligations: Effective April 15, 2007, Facilities entered into an installment sale agreement with the Institute for telecommunications equipment and installation. The agreement commences on the date the equipment was accepted and is renewable at the option of the Institute annually on July 1 for five successive one-year terms. The total extended term of the agreement will be approximately 63 months, to July 15, 2011. 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, 2008 is $7,394,000. Annual debt service requirements to maturity for capital lease obligations are as follows: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $2,430,000 2,430,000 2,430,000 607,000 7,897,000 503,000 $7,394,000 Revenue Bonds Payable: Georgia Tech Facilities, Inc. has nine bond issues outstanding with balances totaling $285,405,000. The proceeds from the bond issues were used to acquire or construct (for the benefit of Georgia Institute of Technology) the Habersham Building, which houses the Ivan Allen College, Bioengineering and Biosciences Building, Family Housing Complex, Klaus Parking Deck, the Molecular Science and Engineering Building, the Electrical Substation, and the North Avenue Apartments. Interest rates on the bonds range from 2.625% to 5.25%. Facilities also has some variable rate demand bonds. For 2008A and 2008C Bonds, Facilities has Georgia Institute of Technology Annual Financial Report FY 2008 56 interest rate swap agreements. Facilities retains an independent entity to provide periodic valuations of the interest rate swaps. At June 30, 2008, the value of the swaps total is ($2,422,000) and is reported as an Other Liability (current) on the Statement of Net Assets. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond/Swaption Premiums Princip al Bonds Payable Interest $5,723,000 6,880,000 7,217,000 7,536,000 7,880,000 45,174,000 58,568,000 69,295,000 54,913,040 22,218,960 285,405,000 9,402,000 $294,807,000 $12,217,660 12,484,332 12,218,336 11,921,126 11,587,541 52,349,919 40,808,158 26,329,350 11,541,969 2,154,425 193,612,816 $193,612,816 Total $17,940,660 19,364,332 19,435,336 19,457,126 19,467,541 97,523,919 99,376,158 95,624,350 66,455,009 24,373,385 479,017,816 9,402,000 $488,419,816 Georgia Institute of Technology Annual Financial Report FY 2008 57 THE UNIVERSITY OF GEORGIA Financial Report For the Year Ended June 30, 2008 The University of Georgia Athens, Georgia Michael F. Adams President Tim Burgess Senior Vice President for Fiscal Affairs THE UNIVERSITY OF GEORGIA ANNUAL FINANCIAL REPORT FY 2008 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...................................................................................................... 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 .......................................................................................................... 31 Note 12. Risk Management......................................................................................................... 35 Note 13. Contingencies............................................................................................................... 35 Note 14. Post-Employment Benefits Other Than Pension Benefits ........................................... 36 Note 15. Natural Classifications with Functional Classifications .............................................. 37 Note 16. Component Units ......................................................................................................... 38 THE UNIVERSITY OF GEORGIA Management's Discussion and Analysis Introduction The University of Georgia is one of the 35 institutions of higher education of the University System of Georgia. 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. A comparison of Faculty and Student numbers follow: Students Students Faculty (Headcount) (FTE) FY2008 FY2007 FY2006 1,822 1,848 1,608 33,831 33,959 33,660 31,818 31,987 31,492 Overview of the Financial Statements and Financial Analysis The University of Georgia is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 University of Georgia Annual Financial Report FY 2008 1 purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $284,248,689 1,160,318,033 63,023,779 1,507,590,501 June 30, 2007 $244,942,760 1,108,970,295 73,212,196 1,427,125,251 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 120,406,694 167,155,107 287,561,801 122,049,947 178,728,038 300,777,985 Net Assets: Invest ed in Capit al Asset s, net of debt Rest rict ed - nonexpendable Rest rict ed - expendable Capital P rojects Unrest rict ed Total Ne t As s e ts 1,009,701,095 50,137,516 67,356,275 756,840 92,076,974 $1,220,028,700 947,231,389 47,281,351 63,543,343 863,501 67,427,682 $1,126,347,266 The total assets of the institution increased by $80,465,250. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $51,347,738 in the category of Capital Assets, net. The balance of the increase is due to $35,336,327 higher balances in cash and cash equivalents. University of Georgia Annual Financial Report FY 2008 2 The combination of the increase in total assets of $80,465,250 and the decrease in total liabilities of ($13,216,184) yields an increase in total net assets of $93,681,434. The increase in total net assets is primarily in the category of Invested in Capital Assets, net of debt, in the amount of $62,469,706. 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, 2008 June 30, 2007 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 $600,026,555 1,110,921,074 (510,894,519) 525,466,438 14,571,919 79,109,515 93,681,434 1,126,347,266 0 1,126,347,266 $1,220,028,700 $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 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with a $93,681,434 increase to net assets. 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Federal Appropriat ions Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $203,244,615 15,395,942 201,514,041 47,404,503 129,804,359 2,663,095 600,026,555 471,177,285 17,346,248 34,870,520 6,571,468 7,798,838 537,764,359 43,671,987 35,437,528 79,109,515 $1,216,900,429 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $230,999,493 286,889,193 153,546,888 104,828,251 32,395,645 67,946,589 98,936,420 14,398,059 120,980,536 1,110,921,074 12,297,921 $1,123,218,995 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 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 University of Georgia Annual Financial Report FY 2008 4 Operating revenues increased by $28,394,533 in fiscal 2008, which included $14,939,751 net increase in tuition and fees, $3,530,924 in sales and services, and $6,167,432 in auxiliary revenues. While Federal grants and contracts revenues have decreased, the University experienced a slight increase overall in contracts and grants revenue due to a 16.6% increase in state grants and contracts and a 5.4% increase in private and other grants and contracts revenues. As a result of modest fee increases and additional participation in services provided by Auxiliary units, the Auxiliary revenue increased overall by $6,167,432 primarily as the result of a $1,351,403 increase in Residence Hall revenues, $925,600 increase in Food Services revenues, and $1,454,614 increase in Health Service revenues. Nonoperating revenues increased by $32,242,420 for the year primarily due to an increase of $34,150,528 in State Appropriations resulting from salary increases provided by the Governor and State Legislature. Capital Gifts and Grants increased from fiscal year 2007 to fiscal year 2008 as a result of capital improvements and additions funded by Georgia State Financing and Investment Commission (GSFIC) and the University of Georgia Athletic Association, Inc. GSFIC project funding increased slightly and the UGA Athletic Association funded the Coliseum Practice Facility which was completed during fiscal 2008. Total operating expenses increased overall by $65,938,600, which includes a $44,977,909 increase in employee compensation and benefits. Operating expense in the Instruction, Research, and Public Service categories increased by $34,577,854 with $17,089,227 of this increase representing the addition of faculty members and annual merit increases for faculty and staff. 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 2008 5 Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($445,367,663) 524,904,812 (76,191,024) 24,878,440 28,224,565 185,192,492 $213,417,057 June 30, 2007 ($396,922,373) 498,264,722 (90,257,246) 27,431,636 38,516,739 146,675,753 $185,192,492 Capital Assets The University had a significant capital asset addition in fiscal year 2008 provided by the University of Georgia Athletic Association, Inc. The new Coliseum Practice Facility was completed and placed into service early in fiscal year 2008. This 120,000 square foot facility will provide substantial expansion of facilities for the men's and women's basketball teams and the women's gymnastics team. The Practice Facility will house separate training areas for each team including two full-length practice courts, coaches' offices, locker rooms, lounges, video assessment rooms and meeting rooms. The history of each sport is commemorated and integrated into the interior design with displays of trophies, archives, graphics and interactive kiosks. During FY2008, the University of Georgia also had other significant capital projects that are under construction. The new Lamar Dodd School of Art facility, the Tate Student Center Expansion and integrated parking deck, a new facility for the College of Pharmacy, a new Student Learning Center in Griffin that will enable the expansion of undergraduate degree programs being delivered at that campus, a new dining facility at the Rock Eagle 4-H Center, and the University Health Center Expansion. 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 The University of Georgia had Long-Term Debt and Liabilities of $193,267,749 of which $28,068,540 was reflected as current liability at June 30, 2008. 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 FY2008. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. University of Georgia Annual Financial Report FY 2008 6 Economic Outlook During fiscal year 2008, the University continued to use its resources wisely and emphasized energy and water conservation in terms of cost containment and environmental initiatives especially as the State of Georgia experienced drought conditions throughout the year. 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 fund significant and oftentimes uncontrollable increases in energy and health care costs. In an effort to fiscally prepare for these needs, the University directed each of its academic and administrative units to set aside 1% of their operating budget during fiscal year 2008 budget development. Another component of the University's deliberate strategy to reduce expenditures throughout the institution was the March 2008 implementation of a hiring process that requires all faculty and state-funded staff positions to be approved by a senior vice president before the position can be posted. These actions provided the University with flexibility to address increasing energy and health care costs while also providing for increases in faculty lines and instructional support. These actions allowed the University to fund the instructional needs associated with increased access to education at the University campuses in Griffin, Georgia and the graduate center in Gwinnett County. As fiscal year 2009 begins, the University is facing declines in State of Georgia revenues, budget reduction requirements, and rising energy and health care costs. In order to address the economic changes, the University directed each academic and administrative unit to reserve 2% of their budget during the development of the University's fiscal year 2009 budget and increased this to 6% of their current budget in August 2008. Along with continuing to control hiring for new and replacement positions through the approval process that was put in place in March 2008, all vehicle purchases now require approval at the senior vice president level and all out-ofstate travel requires approval by either a dean or a vice president. In addition, all University units have been directed to exercise great prudence in authorizing expenditures of a discretionary nature and to limit equipment procurement actions to only those items that are vital to the delivery of our core missions and services. As the 2009 fiscal year progresses, the University will take appropriate action to increase these reserves and to implement any additional expenditure control measures that are necessary to meet state mandated budget reductions and to protect the University's ability to provide core mission instruction, research, and public service activities. Michael F. Adams, President The University of Georgia University of Georgia Annual Financial Report FY 2008 7 Statement of Net Assets UNIVERSITY OF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit University of Ge orgi a University of Ge orgi a Fou n dati on 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 Net Investment in Capital Leases Pledges Receivable Contributions Receivable Due From Primary Government Inventories (note 4) Prepaid items Other Assets T otal Current Assets $208,884,769 15,687,652 27,622,848 20,644,955 5,259,729 6,148,736 284,248,689 $1,406,499 39,664,777 2,988,077 7,206,817 78,417 51,344,587 Noncurrent Assets Noncurrent Cash Due from Component Units Due From Primary Government Investments (including Real Estate) Notes Receivable, net Net Investment in Capital Leases Contributions Receivable Pledges Receivable Capital Assets, net (note 6) Other Assets T otal Noncurrent Assets TO TAL ASSETS 4,532,288 1,649,017 45,444,641 11,397,833 1,160,318,033 1,223,341,812 1,507,590,501 566,387,353 57,115 12,970,206 13,999,293 1,688,239 595,102,206 646,446,793 Component Unit University of Georgia Athletic Association, Inc. $86,132,121 1,225,830 2,839,534 203,670 90,401,155 3,114,876 185,280,206 1,265,215 189,660,297 280,061,452 University of Georgia Annual Financial Report FY 2008 8 Statement of Net Assets, Continued UNIVERSITYOF GEORGIA STATEMENT OF NET ASSETS June 30, 2008 Component Unit University of Ge orgi a University of Ge orgi a 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) Revenue/Mortgage Bonds Payable (current) Due to Component Units Notes and Loans Payable (current portion) T otal Current Liabilities Noncurrent Liabilities Due to Primary Government Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) Compensated Absences (noncurrent) Revenue/Mortgage Bonds Payable (noncurrent) Liabilities under Split-Interest Agreements (noncurrent) Other Long-T erm Liabilities 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 15,572,426 6,112,476 4,983,452 1,371,273 48,587,711 820,274 14,335,848 2,255,740 25,812,800 554,694 120,406,694 148,361,198 16,838,011 1,955,898 167,155,107 287,561,801 1,009,701,095 50,137,516 67,356,275 756,840 92,076,974 $1,220,028,700 836,070 686,085 785,774 847,156 2,839,534 126,617 6,121,236 12,341,775 6,996,749 19,338,524 25,459,760 6,875,927 294,075,724 293,560,214 26,475,168 $620,987,033 Component Unit University of Georgia Athletic Association, Inc. 6,043,391 18,513,850 1,946,359 2,140,000 500,000 29,143,600 1,649,017 93,330,000 1,265,215 470,588 96,714,820 125,858,420 90,922,049 63,280,983 $154,203,032 University of Georgia Annual Financial Report FY 2008 9 Statement of Net Assets, Continued UNIVERS ITY OF GEORGIA S TATEMENT OF NET AS S ETS June 30, 2008 C om pone nt Unit Arch Fou n dati on for th e Un i ve rsi ty of G e orgi a, In c. AS S ETS C urrent Assets 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 Due From Com ponent Unit s Net Invest ment in Capit al Leases P ledges Receivable Cont ribut ions Receivable Due From P rim ary Governm ent Invent ories (not e 4) P repaid it ems Ot her Asset s T ot al Current Asset s $25,694,119 1,428,776 500,000 11,357,558 38,980,453 Noncurre nt Asse ts Noncurrent Cash Due from Com ponent Unit s Due From P rim ary Governm ent Invest m ent s (including Real Est at e) Not es Receivable, net Net Invest ment in Capit al Leases Cont ribut ions Receivable 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 470,588 30,296,001 11,057,819 41,824,408 80,804,861 C om pone nt Unit Un i ve rsi ty of Ge orgia Rese arch Fou n dati on , In c. $22,371,760 19,811,476 2,239,791 554,694 518,162 12,377,600 57,873,483 46,127,862 1,955,898 52,301,523 154,377,287 52,636,173 5,995,912 313,394,655 371,268,138 University of Georgia Annual Financial Report FY 2008 10 Statement of Net Assets, Continued UNIVERS ITY OF GEORGIA S TATEMENT OF NET AS S ETS June 30, 2008 C om pone nt Unit Arch Fou n dati on for th e Un i ve rsi ty of G e orgi a, In c. LIAB ILITIES C u rre n t Liabilitie 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 rim ary Governm ent Lease P urchase Obligat ions (current port ion) Com pensat ed Absences (current port ion) Revenue/M ort gage Bonds P ayable (current ) Due t o Com ponent Unit s Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Non cu rre n t Liabilitie s Due t o P rim ary Governm ent Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Com pensat ed Absences (noncurrent ) Revenue/M ort gage Bonds P ayable (noncurrent ) Liabilit ies under Split -Int erest Agreem ent s (noncurrent ) Ot her Long-T erm Liabilit ies Due t o Com ponent Unit s Not es and Loans 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 da ble Capit al P rojects Unrest rict ed TO TAL NET AS S ETS 1,086,727 345,560 333,666 1,765,953 0 1,765,953 31,108,337 46,529,570 1,401,001 $79,038,908 C om pone nt Unit Un i ve rsi ty of Ge orgia Rese arch Fou n dati on , In c. 18,138,668 5,049,038 12,305,725 5,209,442 17,517,774 28,264 3,595,000 61,843,911 1,699,635 224,582,541 18,226,887 244,509,063 306,352,974 8,351,397 2,411,877 54,151,890 $64,915,164 University of Georgia Annual Financial Report FY 2008 11 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITY OF GEORGIA STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Federal Appropriations Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Payments to other Component Units Payments to or on behalf of University of Georgia Total Operating Expenses Operating Income (loss) University of Georgia Component Unit University of Georgia Foundation Component Unit University of Georgia Athletic Association, Inc. $280,659,875 (77,415,260) 15,395,942 96,468,803 38,720,573 66,324,665 47,404,503 318,102 37,625,434 4,076,785 33,680,822 14,579,695 17,414,540 18,479,602 3,947,481 2,344,993 600,026,555 $0 11,842,554 9,945,379 3,511,796 1,326,840 26,626,569 180,270,865 402,258,012 161,214,071 725,438 14,411,709 22,067,333 30,491,931 235,885,354 63,596,361 1,110,921,074 (510,894,519) 262,890 13,850 506,617 82,233 2,661,802 371,372 1,529,051 22,252,188 27,680,003 (1,053,434) $0 81,059,333 81,059,333 6,111,168 256,995 610,910 6,378,721 13,822,929 5,570,426 1,784,216 29,766,110 64,301,475 16,757,858 University of Georgia Annual Financial Report FY 2008 12 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITYOF GEORGIA STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 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 Special Item Transfer 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 University of Georgia Component Unit University of Georgia Foundation Component Unit University of Georgia Athletic Association, Inc. 471,177,285 4,500 916,832 16,424,916 34,870,520 6,571,468 (12,297,921) 7,798,838 525,466,438 14,571,919 43,671,987 35,437,528 79,109,515 93,681,434 1,126,347,266 0 1,126,347,266 $1,220,028,700 (37,424,044) (1,144,009) (389,132) (38,957,185) (40,010,619) (6,638,835) 9,329,003 2,690,168 (37,320,451) 658,307,484 0 658,307,484 $620,987,033 124,777 1,518,393 (3,581,552) (25,614) (1,963,996) 14,793,862 0 14,793,862 139,409,170 0 139,409,170 $154,203,032 University of Georgia Annual Financial Report FY 2008 13 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERS ITY OF GEORGIA S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 R EV EN U ES 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 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 Benefits Ot her P ersonal Services T ravel Scholarships and Fellowships Ut ilit ies Supplies and Ot her Services Depreciat ion P ayments t o ot her Com ponent Unit s P aym ent s t o or on behalf of Universit y of Georgia T ot al Operat ing Expenses Operat ing Incom e (loss) C om pone nt Unit Arch Fou n dati on for th e 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 Georgia Research Fou n dati on , In c. $0 $0 9,313,811 1,276,531 2,306,201 115,294,840 29,853 38,357,221 12,896,543 383,240 154,065,154 223,167 52,710 1,734,004 7,353,573 9,087,577 3,808,966 17,359,927 169,481 117,799,198 135,604,483 18,460,671 University of Georgia Annual Financial Report FY 2008 14 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERS ITY OF GEORGIA S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2008 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 Special Item Transfer 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 C om pone nt Unit Arch Fou n dati on for th e Un i ve rsi ty of G e orgi a, In c. C om pone nt Unit Un i ve rs i ty of Georgia Research Fou n dati on , In c. (1,516,223) (1,516,223) 2,292,743 5,223,429 5,223,429 7,516,172 71,522,736 0 71,522,736 $79,038,908 2,167,253 (8,344,937) (3,357,891) (9,535,575) 8,925,096 6,638,835 6,638,835 15,563,931 37,576,329 11,774,904 49,351,233 $64,915,164 University of Georgia Annual Financial Report FY 2008 15 Statement of Cash Flows UNIVERS ITY OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 ayments to Employees P ayment s for Scholarships and Fellowships Loans Issued t o St udent s and Employees Collect ion of Loans t o St udent s and Employees Auxiliary Ent erprise Charges: Residence Halls Bookst ore Food Services P arking/T ransport at ion Healt h Services Int ercollegiat e At hlet ics Ot her Organizat ions Ot her Receipt s (payment s) Net Cash P rovided (used) by Operat ing Act ivit ies C AS H FLO W S FRO M NO N-C APITAL FINANC ING AC TIVITIES St at e Appropriat ions Agency Funds T ransact ions Gift s and Grant s Received for Ot her T han Capit al P urposes Ot her Nonoperat ing Receipts Net Cash Flows P rovided by Non-capit al Financing Act ivit ies C AS H FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received P roceeds from Sale of Capit al Asset s P urchases of Capit al Asset s P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest m ent s Int erest on Invest 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, 2008 $204,750,107 14,109,473 206,058,575 47,695,506 (443,293,545) (579,490,907) (22,067,333) (2,356,114) 1,674,129 36,170,484 4,119,130 33,712,684 14,480,954 17,603,814 18,341,826 4,020,967 (897,413) (445,367,663) 471,177,285 (4,975,932) 52,216,768 6,486,691 524,904,812 45,066,339 530,786 (97,645,570) (11,844,658) (12,297,921) (76,191,024) 16,388,056 8,490,384 24,878,440 28,224,565 185,192,492 $213,417,057 University of Georgia Annual Financial Report FY 2008 16 Statement of Cash Flows, Continued UNIVERS ITY OF GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 ($510,894,519) 63,596,361 2,273,255 (536,716) (520,334) (453,382) (495,017) 1,195,930 (1,868,527) 2,335,286 ($445,367,663) $722,690 ($1,918,916) ($34,043,176) University of Georgia Annual Financial Report FY 2008 17 THE UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, 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 2008 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, 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 University's Investment Advisory Account which is invested in short-term highly liquid U.S. Agencies. Investments The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund and the Board of Regents Diversified Fund are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable University of Georgia Annual Financial Report FY 2008 19 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, 2008, GSFIC transferred capital additions valued at $1,980,423 to the University of Georgia. 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. University of Georgia Annual Financial Report FY 2008 20 Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as 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 of Georgia had accrued liability for compensated absences in the amount of $40,315,525 as of July 1, 2007. For FY2008, $29,138,606 was earned in compensated absences and employees were paid $26,803,320, for a net increase of $2,335,286. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $42,650,811. 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, 2008 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 $46,546,393 10,360,828 10,449,054 $67,356,275 University of Georgia Annual Financial Report FY 2008 21 Restricted net assets expendable Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially 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, 2008 $11,223,820 63,200,586 1,487,000 16,165,568 $92,076,974 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: 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 University of Georgia Annual Financial Report FY 2008 22 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 $14,579,695 and $17,414,540, respectively, are reported net of discounts and allowances of $518,749 and $1,179,768, respectively. 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. University of Georgia Annual Financial Report FY 2008 23 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, 2008, the carrying value of deposits was $25,485,322 and the bank balance was $33,803,349. Of the University's deposits, $33,597,458 were uninsured. Of these uninsured deposits, $288,083 were collateralized with securities held by the financial institution's trust department or agent in the University's name, and $33,309,375 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. The University's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. INVESTMENTS Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Fair Value Less Than 1 Year Investment Maturity 1-5 Years 6-10 Years More Than 10 Years $293,062 1,431,180 57,854,271 $59,578,513 $100,281 586,837 24,191,703 $24,878,821 $102,359 841,390 33,653,594 $34,597,343 2,953 8,974 $11,927 $90,422 $90,422 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 Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Total Investments 13,631,366 21,398,911 893,748 240,469 7,460,547 1,478,176 123,325,285 $228,007,015 University of Georgia Annual Financial Report FY 2008 24 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 40 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. The Weighted Average Maturity of the Legal Fund is 3.84 years. Of the University's total investment of $7,460,547 in the Legal Fund, $7,393,402 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the University's total investment of $1,478,176 in the Diversified Fund, $459,713 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, 2008, $59,271,165 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $1,186,204 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 on investment of loan and endowment funds which are funded by private sources. For loan and endowment University of Georgia Annual Financial Report FY 2008 25 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 Inves tments U. S. Agencies Fair Value $57,854,271 $57,854,271 U nrat ed $57,854,271 $57,854,271 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University's policy for managing concentration of credit risk is divided between short-term and long-term investments. For short-term investments, certificates of deposit and repurchase agreements should comprise 25-50%, investment in the Office of Treasury and Fiscal Services Georgia Fund 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, 2008, applicable investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 16% Federal Home Loan Mortgage Corporation 8% University of Georgia Annual Financial Report FY 2008 26 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $3,378,113 1,319,600 15,687,652 3,332,807 20,644,955 20,261,696 64,624,823 669,368 $63,955,455 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Food Services P hysical P lant Other T otal $1,593,325 1,794,128 1,872,276 $5,259,729 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $665,004. University of Georgia Annual Financial Report FY 2008 27 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 7/1/2007 $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 Other Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 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 Other improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 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 1,029,985,317 Capit al Asset s, net $1,108,970,295 Addition s $740,000 1,084,100 52,801,416 54,625,516 Re ductions $3,142 7,732,479 7,735,621 En di n g B al an ce 6/30/2008 $26,478,298 12,708,615 86,687,960 125,874,873 1,124,431 41,267,449 1,246,179 27,688,978 722,690 10,351,016 82,400,743 11,781,594 15,031,999 850,239 81,995 27,745,827 44,068,943 1,133,187,893 150,399,447 326,014,318 839,383 225,227,875 1,879,737,859 1,353,131 25,580,624 3,730,990 21,983,077 176,756 10,771,783 63,596,361 18,804,382 $73,429,898 691,709 12,373,078 252,506 81,995 13,399,288 16,888,167 368,225,760 38,557,641 252,859,840 386,797 168,376,494 845,294,699 14,346,539 1,034,443,160 $22,082,160 $1,160,318,033 University of Georgia Annual Financial Report FY 2008 28 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Research Ot her Deferred Revenue T ot als June 30, 2008 $20,581,117 13,328,816 14,677,778 $48,587,711 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Beginning Balance July 1, 2007 $161,738,906 Additions $722,690 Reductions Ending Balance June 30, 2008 $11,844,658 $150,616,938 Current Portion $2,255,740 40,315,525 40,315,525 29,138,606 29,138,606 26,803,320 26,803,320 42,650,811 42,650,811 25,812,800 25,812,800 Total Long Term Obligations $202,054,431 $29,861,296 $38,647,978 $193,267,749 $28,068,540 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $21,854,926 as of June 30, 2008. 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 2009 and 2012. Reductions in principal on capital leases were $11,844,658 with $12,297,921 in interest expense University of Georgia Annual Financial Report FY 2008 29 for a total of $24,142,579 in fiscal year 2008. Interest rates range from 6.83 percent to 9.00 percent. The carrying values of assets held under capital lease at June 30, 2008 were as follows: Buildings Equipment Total Assets Held Under Capital Lease $143,221,259 421,493 $143,642,752 All six of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In 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, 2008 on these capital leases is $150,036,057. The University of Georgia will enter into two additional real property capital leases with UGAREF during fiscal year 2009. The exact capital lease amounts and related payment amounts have not yet been established. There is no outstanding liability related to these leases at June 30, 2008. The University also has various capital leases for equipment with an outstanding balance of $580,881 at June 30, 2008 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. University of Georgia Annual Financial Report FY 2008 30 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, 2008, were as follows Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 T ot al m inim um lease paym ent s Less: Int erest Less: Execut ory cost s 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 $13,677,918 13,631,938 13,611,786 13,555,689 13,425,271 67,126,355 67,126,355 67,126,355 64,872,272 12,030,901 346,184,840 182,480,902 13,087,000 $150,616,938 $7,019,521 $7,019,521 Noncancellable operating lease expenditures in 2008 were $6,783,013 for real property. No expenditures were made for equipment under noncancellable operating leases. 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 2008, 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: University of Georgia Annual Financial Report FY 2008 31 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $32,103,416 $30,182,072 $29,007,246 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. 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 of Georgia Annual Financial Report FY 2008 32 University's payroll for the year ended June 30, 2008, for employees covered by ERS was $1,122,242. The University's total payroll for all employees was $582,528,877. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $122,876 $98,268 $59,819 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 University of Georgia Annual Financial Report FY 2008 33 accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $11,308,338 (8.13% or 8.15%) and $6,947,655 (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 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 2008 amounted to $1,799,075 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. University of Georgia Annual Financial Report FY 2008 34 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University of Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University of Georgia expects such amounts, if any, to be immaterial to its overall financial position. University of Georgia Annual Financial Report FY 2008 35 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 3,810 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, the University of Georgia recognized as incurred $21,053,488 of expenditures, which was net of $7,438,830 of participant contributions. University of Georgia Annual Financial Report FY 2008 36 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Functional Classification FY2008 Instruction Research Public Service Academic Support $90,014,667 61,192,420 35,826,821 74,316 2,750,909 3,719,099 1,459,871 22,699,152 13,262,238 $76,217,243 87,347,302 37,809,572 23,559 5,849,041 1,154,409 1,153,782 60,541,391 16,792,894 $13,328,102 70,899,516 27,998,638 6,077 3,728,512 94,794 1,338,097 32,433,143 3,720,009 $637,231 50,368,200 14,988,685 27,324 872,802 8,589 717,164 23,055,171 14,153,085 $230,999,493 $286,889,193 $153,546,888 $104,828,251 Student Services $71,112 14,772,670 4,412,648 7,160 275,680 1,817,843 218,816 10,152,587 667,129 $32,395,645 Institutional Support $2,510 37,053,208 16,139,175 585,202 630,045 10,000 650,151 11,837,671 1,038,627 $67,946,589 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 29,008,012 11,362,957 81,289 18,825,377 36,741,112 2,917,673 $0 14,398,059 $0 51,616,684 12,675,575 1,800 223,431 864,540 6,128,673 38,425,127 11,044,706 $180,270,865 402,258,012 161,214,071 725,438 14,411,709 22,067,333 30,491,931 235,885,354 63,596,361 $98,936,420 $14,398,059 $120,980,536 $1,110,921,074 University of Georgia Annual Financial Report FY 2008 37 Note 16. Component Units The University of Georgia Foundation The University of Georgia Foundation (Foundation) is a legally separate, tax-exempt component unit of the University of 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 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, 2008, the Foundation distributed $22,252,188 to 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. Special Item Transfer In 2006, the Board of Trustees of the Foundation agreed to transfer its sole membership of the UGA Real Estate Foundation (Real Estate Foundation) to the University of Georgia Research Foundation, Inc. The transfer was contingent upon a private letter ruling from the Internal Revenue Service accepting the transfer with no negative impact on the tax-exempt status of the Real Estate Foundation's outstanding bond debt. In 2007, the private letter ruling favorable to the transfer was received, and the transfer of sole membership became effective July 1, 2007. The transfer of the Real Estate Foundation's Assets and Liabilities as of July 1, 2007 resulted in a Net Asset transfer of ($6,638,835), which is reported as a Special Item Transfer on the Statement of Revenues, Expenses and Changes in Net Assets. Investments for Component Units: The University of Georgia Foundation holds investments in the amount of $606 million at June 30, 2008. Investments consist of the following: University of Georgia Annual Financial Report FY 2008 38 Cash held by investment organization Government and Agency Securities Corporate Bonds Equity Securities Mutual Funds Split Interest Investments Real Estate Diversifying Strategies Investment Pools Total Investments Cost $39,793,183 231,943 304,827 2,668,042 1,920,332 15,232,070 16,155,937 599,994 392,105,046 $469,011,374 Fair Value $39,793,183 234,316 301,002 2,693,996 1,828,504 16,727,272 16,155,937 613,950 527,703,970 $606,052,130 Capital Assets for Component Units: The University of Georgia Foundation holds the following Capital Assets as of June 30, 2008: June 30, 2008 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 $4,810,092 44,187 4,854,279 9,414,449 1,071,428 10,485,877 1,340,863 9,145,014 $13,999,293 Long-Term Liabilities for Component Units: Changes in long-term liabilities for the University of Georgia Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Transfer of Real Estate Foundation Adjusted Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Liabilities under split interest agreement Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $29,495 11,686,162 20,691,533 175,667,798 0 $208,074,988 ($29,495) (10,499,210) (175,667,798) ($186,196,503) $0 11,686,162 10,192,323 0 0 $21,878,485 $0 655,613 5,014,961 $0 8,083,918 686,085 $6,356,659 $8,083,918 $0 12,341,775 7,123,366 0 686,085 $20,151,226 $0 126,617 686,085 $812,702 University of Georgia Annual Financial Report FY 2008 39 Notes and Loans 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, 2008, $974,091 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 45 basis points (or 0.45%), or 2.91% at June 30, 2008. Principal and interest are payable monthly. During 2007, the Foundation signed a $6,200,000 promissory loan agreement with a bank, which expires on November 1, 2017. As of June 30, 2008, $6,149,275 was outstanding under this agreement. Interest is charged at the bank's 30-day LIBOR rate plus 32.5 basis points (or 0.325%), or 2.78% at June 30, 2008. Principal and interest are payable monthly. Interest Rate Caps The Foundation has two outstanding interest rate cap agreements effectively limiting the interest rate exposure on the $1,117,865 note payable to a 5.75% fixed rate over the term of the note payable and limiting the interest rate exposure on the $6,200,000 note payable from variable to a 5.95% fixed rate over the term of the note payable. As of June 30, 2008, the fair value of these interest rate caps was a liability of $686,085 and is reported in the Other Liabilities (current) line on the Statement of Net Assets. The Foundation recorded a charge of $691,109 in fiscal 2008 as a result of these caps as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 Notes and Loans Payable Principal Interest Total 1 $126,617 $418,741 $545,358 2 134,261 411,110 545,371 3 142,367 403,018 545,385 4 921,202 390,742 1,311,944 5 101,376 342,301 443,677 6-10 5,697,543 1,406,626 7,104,169 $7,123,366 $3,372,538 $10,495,904 The University of Georgia Athletic Association, Inc. The University of Georgia Athletic Association, Inc. (the Association) is a legally separate, taxexempt component unit of the University of Georgia (the "University"). The Association was organized in 1938 as a not-for-profit corporation to promote intercollegiate athletic sports representing the University. The twenty-member board of directors consists of faculty, staff, students, and alumni of the University. Although the University does not control the timing or amount of receipts from the Association, the majority of resources or income thereon that the Association holds and invests are restricted to the athletic activities of the University. Because these restricted resources held by the Association can only be used by or for the benefit of the University and their management role is significant to the accomplishment of the University's mission, the Association is considered a component unit of the University and is discretely presented in the University's financial statements. University of Georgia Annual Financial Report FY 2008 40 For financial reporting purposes, the Association is considered a special purpose government agency engaged only in business type activities, as defined by GASB Statement 34. The Association's fiscal year is July 1 through June 30. During the year ended June 30, 2008, the Association made payments to the University for services such as food services, parking services, health services, tuition, gas, electricity, security, and golf course maintenance. These payments totaled $29,766,110 and were recognized as expenses of the Association. Capital assets net of accumulated depreciation of $185 million are included in the financial statements of the 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, 2008, the book-carrying amount of the Athletic Association's deposits, including noncurrent cash and cash equivalents, was $89,246,997 and the bank balance was $92,433,058. The Athletic Association's bank balance is classified as follows at June 30, 2008: University of Georgia Annual Financial Report FY 2008 41 Amount insured by the FDIC and FSLIC Collateralized with securities held in the Athletic Association's name Uncollateralized $ 333,000 80,613,869 11,486,189 $92,433,058 Capital Assets for Component Units: The University of Georgia Athletic Association, Inc. had the following Capital Assets activity for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: 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 7/1/2007 $29,493,360 29,493,360 176,834,763 19,476,061 6,879,287 203,190,111 35,018,890 6,374,570 4,264,753 45,658,213 157,531,898 $187,025,258 Additions $466,936 466,936 Reductions $29,354,321 29,354,321 Ending Balance 6/30/2008 $605,975 605,975 31,971,945 145,581 622,646 32,740,172 173,528 173,528 208,806,708 19,621,642 7,328,405 235,756,755 3,549,328 842,110 1,178,988 5,570,426 27,169,746 $27,636,682 146,115 146,115 27,413 $29,381,734 38,568,218 7,216,680 5,297,626 51,082,524 184,674,231 $185,280,206 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Athletic Association for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Notes and Loans Payable-Primary Government Notes and Loans Payable Revenue/Mortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities $2,336,428 87,113 97,560,000 2,754,277 $102,737,818 $0 $333,395 $2,003,033 $354,016 87,113 0 2,090,000 95,470,000 2,140,000 518,474 2,235,803 500,000 $0 $3,028,982 $99,708,836 $2,994,016 University of Georgia Annual Financial Report FY 2008 42 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. The note has an outstanding principal balance at June 30, 2008 of $2,003,033. The principal balance due within one year, $354,016, is reflected within the Due to Primary Government - Current Liabilities balance on the Statement of Net Assets. The Association made payments of principal and interest of $477,917 during the year ended June 30, 2008, and will make an equal payment in each succeeding year through 2013. The interest rate associated with this liability is 6.19%. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 2012 4 2013 5 Total Principal Notes and Loans Payable Interest $354,016 375,915 399,167 423,858 450,077 $2,003,033 $123,901 102,002 78,750 54,059 27,840 $386,552 Total $477,917 477,917 477,917 477,917 477,917 $2,389,585 Revenue Bonds Payable On September 27, 2001, the Development Authority of Athens-Clarke County, Georgia (the Authority) issued $34 million in Revenue Bonds (UGA Athletic Association, Inc. Project), Series 2001 (the Bonds) and entered into an agreement (the Loan Agreement) to loan $34 million to the Association. The Bonds are secured by a letter of credit issued by SunTrust Bank in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). The loan matures in 2031, subject to certain early repayment provisions. At June 30, 2008, 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 Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). The loan matures in 2033, subject to certain early repayment provisions. On March 7, 2005, the University of Georgia Annual Financial Report FY 2008 43 Association redeemed $16 million of these bonds. The remaining obligation at June 30, 2008 was $18,195,000. 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 Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.10% on June 30, 2008). The loan matures in 2021 and requires yearly principal reductions. At June 30, 2008, the balance of this obligation was $15,280,000. 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 Association. The Bonds are secured by a letter of credit issued by Bank of America, NA in favor of the Authority that must be renewed annually. Under the Loan Agreement, the Association is required to use the proceeds of such loan to fund improvements of certain properties as specified in the Loan Agreement. Borrowings under the Loan Agreement bear interest payable monthly at a formula rate adjusted daily (2.50% on June 30, 2008). The loan matures in 2035, subject to certain early repayment provisions. The June 30, 2008 remaining obligation for these revenue bonds was $28,895,000. Interest Rate Swap Agreements The 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 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 Association and the Counterparty and three Confirmations, the 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 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 University of Georgia Annual Financial Report FY 2008 44 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 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 Association's making or receiving a termination payment As of June 30, 2008, the fair value of the interest rate swap agreement on the 2001 Series Bonds was ($1,224,921), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2003 Series Bonds was ($439,283), indicating the amount that the Association counterparty would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2005A Series Bonds was ($585,624), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. As of June 30, 2008, the fair value of the interest rate swap agreement on the 2005B series Bonds was ($998,313), indicating the amount that the Association would be required to pay the counterparty to terminate the swap agreement. Swap Payments and Associated Debt As of June 30, 2008, 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 Ending 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 2029-2033 2034-2036 Total Variable Rate Bonds Principal Interest $2,140,000 $2,275,870 2,195,000 2,224,835 2,245,000 2,172,630 2,295,000 2,119,275 2,355,000 2,064,500 12,685,000 9,451,250 13,050,000 7,888,970 9,330,000 6,626,000 43,760,000 3,844,917 5,415,000 118,865 $ 95,470,000 $ 38,787,112 Interest Rate Swaps, Net $1,182,926 1,143,088 1,102,376 1,060,686 1,018,030 4,412,533 3,217,542 2,582,177 1,505,379 46,525 $ 17,271,262 Total $5,598,796 5,562,923 5,520,006 5,474,961 5,437,530 26,548,783 24,156,512 18,538,177 49,110,296 5,580,390 $ 151,528,374 Credit Risk As of June 30, 2008, the fair value of the swaps represents the Association's credit exposure to the Counterparty. Should the Counterparty fail to perform in accordance with the University of Georgia Annual Financial Report FY 2008 45 terms of the swap agreements, the Association could see a possible gain equivalent of $17.3 million less the cumulative fair value of $3.2 million. As of June 30, 2008, the Counterparty was rated Aaa by Moody's and AA+ by S&P. Basis Risk The swaps expose the 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. Taxexempt 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 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 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 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 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. (the "Foundation") is a not-for-profit foundation that was chartered in 2005 to receive and administer contributions for the support of the University of Georgia (the "University"). The University is governed by the Board of Regents of the University System of Georgia (the "Board of Regents"). The mission and purpose of the Foundation is to provide support to the teaching, research, public service and outreach programs of the University by means of volunteer leadership and assistance in development and fundraising activities; fiduciary care for the assets of the Foundation for the long-term benefit and enhancement of the University; and the provision of broad advice, consultation and support to the President of the University. The Foundation operates as a Cooperative Organization in accordance with policies of the Board of Regents. 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, 2008, the Foundation distributed $7,353,573 to 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. University of Georgia Annual Financial Report FY 2008 46 Investments for Component Units: The Arch Foundation for the University of Georgia, Inc. holds investments in the amount of $30.3 million. Investments consist of marketable securities, bonds, real property, and an investment in a limited partnership as follows: Equity Securities Split Interest Investments Joint Ventures/Partnerships Real Estate Investment Pools Total Investments Cost $39,025 28,077 630,000 2,624,000 27,190,416 $30,511,518 Fair Value $39,025 28,077 630,000 2,624,000 26,974,899 $30,296,001 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 (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 twenty member board of the Foundation consists of designated University personnel, appointees of several University constituent groups, and individuals selected by the Research Foundation itself. Although the University does not control the timing or amount of receipts from the Research Foundation, all sponsored research awards are subcontracted to the University and other resources and related income are restricted to benefit the research mission of the University. Consequently, the Research Foundation is considered a component unit of the University and is discretely presented in the University's financial statements. The Research Foundation is 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. The Research Foundation financial statements include two blended component units: the UGA Real Estate Foundation, Inc. and UGARF Media Holdings, LLC. During fiscal year 2008, the Research Foundation transferred approximately $118 million in sponsored research and other support funds to the University and shows a net payable to the University at June 30 related to this activity. Complete financial statements for the Research Foundation can be obtained from the Treasurer's office at 456 East Broad Street, Athens, GA 30602. University of Georgia Annual Financial Report FY 2008 47 Special Item Transfer: Effective July 1, 2007, the Research Foundation became the sole member of the UGA Real Estate Foundation, Inc. (Real Estate Foundation). The Real Estate Foundation had previously been the sole member of the University of Georgia Foundation. The transfer at July 1, 2007 of the assets and liabilities of the Real Estate Foundation to the Research Foundation resulted in a Net Asset addition of $6,638,835. This transfer is reported as a Special Item Transfer in the Statement of Revenues, Expenses and Changes in Net Assets. Prior Period Adjustment: The UGA Real Estate Foundation, as the lessor of several leases wherein the ownership of the leased property is converted to the Board of Regents at the end of the lease term, changed its method of accounting for these leases from operating leases to capital lease treatment. The amount recognized as a prior period increase to net assets as of June 30, 2007 is $11,774,904. This increase in net assets is due to the difference between the previously recorded net of rental income less depreciation and the amount that would be recorded as net income using capital lease interest amortization. Capital Assets as of June 30, 2007 were restated as a result of the change in lease treatment, from $165,199,306 to $18,271,896 and were replaced by Net Investment in Capital Leases of $158,702,315 on the Statement of Net Assets. 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, 2008, the book value of the Research Foundation's deposits was $68,499,622. The bank and investment account balances at June 30, 2008 were $68,810,956 of which $67,769,750 was uninsured. Of these uninsured deposits, $11,281,000 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Research Foundation's name and $56,488,750 were uncollateralized. Investments The University of Georgia Research Foundation, Inc. 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. University of Georgia Annual Financial Report FY 2008 48 The Research Foundation's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Municipal Obligation Other Investments 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 $3,480,885 1,557,910 10,060,298 21,147,955 50,967 $36,298,015 5,443,301 3,827,681 2,228,145 4,504,381 $52,301,523 $2,156,323 660,058 18,305,443 $21,121,824 $396,311 6,209,089 2,206,599 $8,811,999 $564,416 2,891,818 635,913 $4,092,147 $363,835 1,557,910 299,333 50,967 $2,272,045 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. The Real Estate Foundation's policy for managing interest rate risk is to invest only in short-term United State treasury obligations with a maximum maturity of one year. 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, 2008, $40,197,518 of the Research Foundation's applicable investments were uninsured and held by the investment counterparty's trust department or agent in the Research Foundation's name and $2,156,323 of the Real Estate Foundation's applicable investments were uninsured and held by the investment counterparty's trust department or agent, but not 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 University of Georgia Annual Financial Report FY 2008 49 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, 2008 are presented below. All investments are presented by investment type and fixed income securities are presented by credit quality ratings. Related Debt Investments U. S. Agencies - Implicitly Guaranteed Corporate Debt Municipal Obligation Fair Value $10,060,298 21,147,955 50,967 $31,259,220 Aaa $1,033,795 81,815 $1,115,610 Aa A Baa $0 2,953,906 50,967 $3,004,873 $0 4,563,349 $0 13,138,163 $4,563,349 $13,138,163 Ba $0 410,722 $410,722 Unrated $9,026,503 $9,026,503 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, 2008, investments in a single issuer where those investments exceed 5% of total investments were as follows: Federal National Mortgage Association 10% Federal Home Loan Mortgage Corporation 9% 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. The Real Estate Foundation's investments increased by $64,010 due to foreign currency fluctuations between the Euro and the dollar on cash balances held in banks. Amounts held in foreign currency denominations are valued at $267,788 as of June 30, 2008. University of Georgia Annual Financial Report FY 2008 50 Capital Assets for Component Units: The University of Georgia Research Foundation, Inc. had Capital Assets activity as follows for the year ended June 30, 2008: 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 Equipment Total Assets Being Depreciated Less: Accumulated Depreciation Buildings Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net Beginning Balance 7/1/2007 $110,000 0 110,000 Restated Real Estate Fdn Transfer Adjusted Beg. Balance 7/1/2007 $15,722,163 224,900 15,947,063 $15,832,163 224,900 16,057,063 Additions Reductions $4,702,061 34,149,651 38,851,712 $0 5,110,857 5,110,857 Ending Balance 6/30/2008 $20,534,224 29,263,694 49,797,918 1,142,307 0 1,142,307 2,535,466 184,134 2,719,600 3,677,773 184,134 3,861,907 5,385,599 3,167 5,388,766 5,110,857 5,110,857 3,952,515 187,301 4,139,816 737,313 737,313 404,994 $514,994 260,539 134,228 394,767 2,324,833 $18,271,896 997,852 134,228 1,132,080 2,729,827 $18,786,890 143,008 26,473 169,481 0 5,219,285 5,110,857 $44,070,997 $10,221,714 1,140,860 160,701 1,301,561 2,838,255 $52,636,173 Long-term Liabilities for Component Units: Changes in long-term liabilities for the Research Foundation for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Transfer of Real Estate Foundation Adjusted Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Compensated Absences Notes and Loans Payable Revenue/Mortgage Bonds Payable Total Long Term Liabilities $0 $29,495 0 10,499,210 0 175,667,798 $0 $186,196,503 $29,495 10,499,210 175,667,798 $186,196,503 $0 20,688,117 56,359,497 $77,047,614 $1,231 12,960,440 3,849,754 $16,811,425 $28,264 18,226,887 228,177,541 $246,432,692 $28,264 3,595,000 $3,623,264 Notes and Loans Payable During 2008, the Real Estate Foundation renewed a $50 million revolving credit agreement with a bank. The agreement expires on November 30, 2010. 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, 2008, amounts outstanding or issued under this agreement included borrowings of $18,226,887 and unused letters of credit and bank reserves of $8,159,715, resulting in $23,613,398 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, 2008, the rate applicable to the borrowings was 2.79563%. University of Georgia Annual Financial Report FY 2008 51 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, 2008, the borrowings subject to this guarantee requirement were $7,797,561. Effective July 1, 2007, the Real Estate Foundation's $50 million revolving credit agreement was amended and a new guarantee was executed to reflect the Research Foundation as guarantor. 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, 2008 is $25,665 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $17,316 on the fair value of the derivative for the year ended June 30, 2008 as an adjustment to interest expense. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending June 30: 2009 1 2010 2 2011 3 Notes and Loans Payable Principal Interest Total $0 0 18,226,887 $18,226,887 $509,556 509,556 212,315 $1,231,427 $509,556 509,556 18,439,202 $19,458,314 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 (1.53% at June 30, 2008). The loan matures in 2031, subject to certain early repayment provisions. During the year ended June 30, 2008, principal payments of $410,000 were made. At June 30, 2008, the balance of this obligation was $8,015,000. During 2005, the Real Estate Foundation entered into an interest rate cap agreement effectively limiting the interest rate on 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 Real Estate Foundation recorded a loss of $15,495 on the fair value of the derivative for the year ended June 30, 2008. University of Georgia Annual Financial Report FY 2008 52 During 2008, 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 4.0% fixed rate until December 3, 2012. The Real Estate Foundation paid a premium of $75,000 in connection with this agreement. The fair value of the interest rate cap as of June 30, 2008 was $74,033 and has been recorded as an asset in accordance with SFAS No. 133. The Real Estate Foundation recorded a loss of $967 on the fair value of this derivative for the year ended June 30, 2008. $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, 2008, principal payments of $800,000 were made. At June 30, 2008, the balance of this obligation was $36,075,000. $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 "Bonds") and entered into an agreement (the "Loan Agreement") to loan $99,860,000 to the Real Estate Foundation. Payment of principal and interest under the Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting the facilities and by the Real Estate Foundation's interest in certain rents and leases derived from the facilities. The Real Estate Foundation used the proceeds of this loan to fund construction of certain real estate projects which were completed in July 2004. Borrowings under the Loan Agreement bear interest payable semiannually 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, 2008 principal payments of $1,935,000 were made. At June 30, 2008, the balance of this obligation was $94,100,000. $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 University of Georgia Annual Financial Report FY 2008 53 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 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, 2008, principal payments of $250,000 were made. At June 30, 2008, the balance of this obligation was $7,155,000. $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. The Coverdell Entity used the proceeds of this loan to fund construction of a portion of the facility, which was completed in 2007. Borrowings under the Coverdell Loan Agreement bear interest payable semiannually 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, 2008, a principal payment of $500,000 was made on the outstanding Series 2004A bonds. At June 30, 2008, the balance of this obligation was $25,010,000. $62,475,000 Bond Issue: In 2008, the Development Authority issued $35,055,000 of Educational Facilities Current Interest Revenue Bonds (UGAREF Central Precinct, LLC Project), and $27,420,000 of Educational Facilities Convertible Revenue Bonds (UGAREF Central Precinct, LLC Project) (collectively, the "Central Precinct Bonds"). The Development Authority entered into an agreement (the "Central Precinct Loan Agreement") to loan $62,475,000 to UGAREF Central Precinct, LLC (a single-member limited liability company owned by the Real Estate Foundation) (the "Central Precinct Entity"). Payment of principal and interest under the Central Precinct Bonds is insured by a financial guaranty insurance policy and secured by certain real property constituting a parking deck and building addition, and by the Central Precinct Entity's interest in certain rents and leases derived from these facilities. The Central Precinct Entity is using the proceeds of this loan to fund construction of the facilities. The building addition is reported as construction in progress at June 30, 2008. Subsequent to the issuance of these financial statements, the parking deck was placed in service on August 6, 2008. Borrowings under the Central Precinct Loan Agreement bear interest payable semiannually at fixed rates ranging from 2% to 5% depending on the schedule of bond maturities. Principal payments are due on June 15 starting in 2010 and continuing through 2038. The total balance of the obligation at June 30, 2008 is $62,475,000. University of Georgia Annual Financial Report FY 2008 54 During 2007, the Real Estate Foundation entered into an interest rate hedge agreement at no cost to lock in the then current interest rate on this future borrowing. This forward swap agreement expired during the year ended June 30, 2008 and the Real Estate Foundation paid a termination fee in the amount of $1,277,320. The Real Estate Foundation recorded a loss of $3,324,113 on the fair value of the derivative for the year ended June 30, 2008. Annual debt service requirements to maturity for Bonds Payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 Bond Premium/(Discount) 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Principal Bonds Payable Interest $3,595,000 4,080,000 4,225,000 4,385,000 4,540,000 31,280,000 39,435,000 49,690,000 66,780,000 24,820,000 232,830,000 (4,652,459) $228,177,541 $9,368,150 9,248,435 9,097,922 8,937,625 8,767,050 47,025,033 38,466,504 27,572,570 13,862,117 2,467,476 174,812,882 $174,812,882 Total $12,963,150 13,328,435 13,322,922 13,322,625 13,307,050 78,305,033 77,901,504 77,262,570 80,642,117 27,287,476 407,642,882 (4,652,459) $402,990,423 University of Georgia Annual Financial Report FY 2008 55 UNIVERSITY SYSTEM OFFICE Financial Report For the Year Ended June 30, 2008 University System Office Board of Regents of the University System of Georgia Atlanta, Georgia Errol B. Davis, Jr. Chancellor Usha Ramachandran Vice Chancellor for Fiscal Affairs/Treasurer Vikki L. Williamson Executive Director for Business and Financial Affairs UNIVERSITY SYSTEM OFFICE ANNUAL FINANCIAL REPORT FY 2008 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 Statement of Fiduciary Net Assets.................................................................................... 11 Statement of Changes in Fiduciary Net Assets................................................................. 12 Note 1. Summary of Significant Accounting Policies .................................................... 13 Note 2. Deposits and Investments................................................................................... 18 Note 3. Accounts Receivable.......................................................................................... 24 Note 4. Inventories.......................................................................................................... 24 Note 5. Notes Receivable................................................................................................ 24 Note 6. Capital Assets..................................................................................................... 25 Note 7. Deferred Revenue............................................................................................... 26 Note 8. Long-Term Liabilities ........................................................................................ 26 Note 9. Significant Commitments................................................................................... 26 Note 10. Lease Obligations............................................................................................. 26 Note 11. Retirement Plans .............................................................................................. 28 Note 12. Risk Management............................................................................................. 31 Note 13. Contingencies................................................................................................... 33 Note 14. Post-Employment Retiree Health Benefit Plan................................................ 33 Note 15. Natural Classifications with Functional Classifications .................................. 37 Note 16. Special Items .................................................................................................... 38 Required Supplementary Information............................................................................... 39 UNIVERSITY SYSTEM OFFICE Management's Discussion and Analysis Introduction The University System Office of Georgia's Board of Regents was created in 1931 as part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today, the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a chancellor who serves as its chief executive officer and the chief administrative officer of the University System. The Board oversees 35 institutions: four research institutions, two regional universities, 13 state universities, seven state colleges, and nine two-year colleges. In addition, one marine research institute is governed by the Board. These institutions enroll more than 270,000 students and employ more than 11,000 faculty and 28,600 staff to provide teaching and related services to students and the communities in which they are located. The University System Office also is the custodian of a newly created Fiduciary Fund for University System of Georgia retiree health and life insurance benefits. Overview of the Financial Statements and Financial Analysis The University System Office is proud to present its financial statements for fiscal year 2008. The emphasis of discussions about these statements will be on current year data. There are three primary 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 2008 and FY 2007. As custodian of the Board of Regents Retiree Health Benefit Fund, two additional statements are presented: the Statement of Fiduciary Net Assets and the Statement of Changes in Fiduciary Net Assets. 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. University System Office Annual Financial Report FY 2008 1 From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the University 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 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 only is available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $239,792,056 38,015,009 5,820,141 283,627,206 June 30, 2007 $163,749,761 38,074,946 3,612,043 205,436,750 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 223,071,142 24,238,938 247,310,080 149,109,263 25,022,843 174,132,106 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 8,785,101 3,612,043 16,270,567 7,649,415 $36,317,126 9,016,623 3,612,043 10,554,442 8,121,536 $31,304,644 The total assets of the University System Office increased by $78,190,456. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase in cash and cash equivalents of $64,464,722, which was partially offset by a decrease in short term investments of $6,385,802. Capital assets, net, decreased by ($59,937). Other assets increased $2,208,098, which was attributable to a Note Receivable that was payable from Georgia Southern to the Georgia Education Authority (University) that was transferred as payable to the University System Office, since the GEAU met in July 2007 and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities (see Note 5 for additional details). The total liabilities for the year increased by $73,177,974. This was primarily due to the increase in deposits held for other organizations of $64,270,195, increase in accounts payable of University System Office Annual Financial Report FY 2008 2 $11,433,974 and decrease in benefits payable of ($3,098,435). The combination of the increase in total assets of $78,190,456 and the increase in total liabilities of $73,177,974 yields an increase in total net assets of $5,012,482. The increase in total net assets is primarily in the category of restricted, expendable in the amount of $5,716,125, which was partially offset by the decrease in invested in capital assets, net of debt, in the amount of ($231,522) and a decrease in the unrestricted net asset balance of ($472,121). 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, 2008 June 30, 2007 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 $266,014,185 432,031,929 (166,017,744) 166,628,304 610,560 4,401,922 5,012,482 31,304,644 0 31,304,644 $36,317,126 $323,192,952 472,882,393 (149,689,441) 152,780,956 3,091,515 3,930,389 7,021,904 24,282,740 0 24,282,740 $31,304,644 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year, as demonstrated by an increase in net assets of $5,012,482 at the end of the year. Some 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue Grant s and Cont ract s Sales and Services Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Invest ment Income Ot her Revenue/(Expense) T ot al Nonoperat ing Revenue Capit al Gift s and Grant s and Special It em s St at e Capit al Gift s and Grant s Special It em s T ot al Capit al Gift s and Grant s and Special It em s T ot al Revenues June 30, 2008 $11,899,973 27,336,275 226,777,937 266,014,185 165,172,381 2,466,332 345,412 (44,445) 167,939,680 1,688,517 2,713,405 4,401,922 $438,355,787 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 3,930,389 0 3,930,389 $481,233,002 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Expenses Inst ruct ion Research P ublic Service Academ ic Support St udent Services Inst it ut ional Support Scholarships and Fellowships T ot al Operat ing Expenses Nonoperat ing Expenses Int erest Expense (Capit al Asset s) T ot al Expenses June 30, 2008 $3,071,652 229,322 99,688,676 23,839,064 281,848 304,669,679 251,688 432,031,929 1,311,376 $433,343,305 June 30, 2007 $3,970,782 385,005 99,536,846 20,697,178 280,625 347,780,221 231,736 472,882,393 1,328,705 $474,211,098 Total operating revenue decreased by ($57,178,767) in fiscal 2008. This was primarily due to a ($55,257,096) decrease in other operating revenue related to the transfer of retiree-related health insurance premiums to the Retiree Health Benefit Fund. Operating revenue increases included sales and services revenue of $3,665,503, which were primarily related to increased billings for GALILEO $1,587,131, PeopleSoft $893,382, Oracle $810,112, and Peachnet $234,256. Operating revenue increases were partially offset by decreased grants and contracts revenue of University System Office Annual Financial Report FY 2008 4 ($5,587,174), primarily due to funding decreases in the National Foundation on the Arts and Humanities and the Partnership for Reform in Science and Mathematics (PRISM) grants. Non-operating revenues increased by $13,830,019 for the year, primarily due to an increase of $13,930,843 in State Appropriations. Non-operating grants and contracts revenue increased $1,152,021, which was related to public/private venture (PPV) funding. These increases were partially offset by decreased investment income of ($1,194,170). The Special Items of $2,713,405 is related to the transfer of all of the assets and liabilities of the Georgia Education Authority (GEAU) to the University System Office as noted in the explanation for Other Current Assets provided above. Additional details related to this transaction may be found in Note 5. Operating expenses decreased by ($40,850,464) in fiscal year 2008. Operating expense decreases were primarily related to the transfer of retiree-related health insurance expenses to the Retiree Health Benefit Fund. This decrease was partially offset by increased software purchases of $4,524,831, increased consulting contracts of $3,743,307 that were primarily related to the PeopleSoft upgrade, and increased information technology contracts of $1,995,614. Statement of Cash Flows The third statement presented by the University System Office is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivit ies Non-capit al Financing Activit ies Capital and Related Financing Act ivities Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($167,177,903) 234,393,786 (7,911,589) 5,160,478 64,464,772 66,218,624 $130,683,396 June 30, 2007 ($142,474,649) 142,507,019 (6,686,361) 393,594 (6,260,397) 72,479,021 $66,218,624 University System Office Annual Financial Report FY 2008 5 Capital Assets In fiscal year 2006 and 2007, 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 2008, additional equipment was transferred to the University System Office under this arrangement. The value of the equipment transferred in fiscal year 2008 was $1,688,517; in addition, $17,925 in equipment disposals also was recorded. The total value of the land and equipment transferred was $26,698,347, and the accumulated depreciation was $21,374,872, for a net value of $5,323,475. The transfer was required for the Commission to obtain the use of five-year, general obligation bonds sold in the University System Office's 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 10 in the notes to the financial statements. Long Term Debt and Liabilities The University System Office had Long-Term Debt and Liabilities of $32,299,552, of which $8,060,614 was reflected as current liability at June 30, 2008. 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. Health and Dental Insurance The University System Office is the fiscal agent for health and dental insurance for all of 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 statement 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 2008 is provided below: University System Office Annual Financial Report FY 2008 6 Emp loy ees: Unp aid Claims and Claim Adjustments (Prior Year IBNR) Incurred Claims and Claim Adjustments Exp enses Provisions for Insured Events of the Current Year Pay ments - Claims and Claim Adjustments Attributable T o Insured Events of the Current Year and Prior Years Unp aid Claims and Claim Adjustments (Current Year IBNR) R et irees : Unp aid Claims and Claim Adjustments (Prior Year IBNR) Incurred Claims and Claim Adjustments Exp enses Provisions for Insured Events of the Current Year Pay ments - Claims and Claim Adjustments Attributable T o Insured Events of the Current Year and Prior Years Unp aid Claims and Claim Adjustments (Current Year IBNR) June 30, 2008 $ 27,147,291 June 30, 2007 $ 27,983,473 204,892,976 264,356,511 207,991,411 $ 24,048,856 $ 265,192,693 27,147,291 $ 0$ 0 90,144,273 0 83,441,613 0 $ 6,702,660 $ 0 Retiree Health Benefit Fund As a result of creating the Board of Regents Retiree Health Benefit Fund, the Board of Regents implemented the provisions of GASB Statement Nos. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans and 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions in fiscal 2008. This fund was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance benefits. Please see Note 14 for additional information. Economic Outlook Although the State of Georgia is experiencing a less positive year from a budgetary standpoint, the University System Office is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University System Office's overall financial position is strong, and the State of Georgia is committed to providing educational opportunities for its citizenry. Even with a relatively flat funded year, the University System Office was able to generate a modest increase in Net Assets. Due to the current state budget constraints, the University System Office will maintain an even closer watch over resources to ensure the University System Office's ability to react to unknown internal and external issues. Usha Ramachandran, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office University System Office Annual Financial Report FY 2008 7 Statement of Net Assets UNIVERS ITY S YS TEM OFFICE S TATEMENT OF NET ASSETS June 30, 2008 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 P repaid Items T ot al Current Asset s Noncurre nt Asse ts Invest ment s Not es Receivable, net Capit al Asset s, net (not e 6) T ot al Noncurrent Asset s TO TAL AS S ETS LIAB ILITIES C u rre n t Liabi li tie 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 Li abil iti 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 e n da ble E x p e n dable Unrest rict ed TO TAL NET AS S ETS June 30, 2008 $130,683,396 89,831,625 1,172,624 18,099,975 4,436 239,792,056 3,612,043 2,208,098 38,015,009 43,835,150 283,627,206 11,453,273 24,048,856 179,508,399 6,232,259 1,828,355 223,071,142 22,997,649 1,241,289 24,238,938 247,310,080 8,785,101 3,612,043 16,270,567 7,649,415 $36,317,126 University System Office Annual Financial Report FY 2008 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, 2008 REVENUES June 30, 2008 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) 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/(Expenses) Net Nonoperat ing Revenues Income before ot her revenues, expenses, gains, or loss Capit al Grant s and Gift s St at e Special It em - Not e Receivable T ransfer Special It em - Aut horit y Dissolut ion 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 $11,587,848 312,125 27,336,275 226,777,937 266,014,185 26,387,280 6,700,976 759,614 251,688 23,587,137 365,890,276 8,454,958 432,031,929 (166,017,744) 165,172,381 213,612 2,252,720 345,412 (1,311,376) (44,445) 166,628,304 610,560 1,688,517 2,288,636 424,769 4,401,922 5,012,482 31,304,644 0 31,304,644 $36,317,126 University System Office Annual Financial Report FY 2008 9 Statement of Cash Flows UN IV ER S ITY S YS TEM O FFIC E 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 8 C A S H FL O W S FR O M O P ER A TIN G A C TIV ITIES 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 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 O t h er N o n o p erat in g Receip t s Sp e c ia l I t e m - A ut h o r it y D isso lut io n 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 r o c e e ds f r o m Sa le o f C a p it a l A sse t s P urch ases o f Cap it al A sset s P rin cip al P aid o n Cap it al D ebt an d L eases In t erest P aid o n Cap it al D ebt an d L eases 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 P r o c e e ds f r o m Sa le s a n d M a t ur it ie s o f I n v e st m e n t s 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 P rep aid It em s A cco un t s P ay able O t h er L iabilit ies - Ben efit s P ay able 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 Fix ed asset s acquired by in currin g cap it al lease o bligat io 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 Sp e c ia l I t e m - N o t e R e c e iv a ble T r a n sf e r Gift o f cap it al asset s reducin g p ro ceeds o f cap it al gran t s an d gift s June 30, 2008 1 1 ,0 7 4 ,1 2 2 2 7 ,2 5 1 ,8 9 4 (3 8 9 ,0 1 1 ,3 2 2 ) (2 6 ,0 0 0 ,2 2 7 ) (2 5 1 ,6 8 8 ) 2 0 9 ,7 5 9 ,3 1 8 (1 6 7 ,1 7 7 ,9 0 3 ) 1 6 5 ,1 7 2 ,3 8 1 6 6 ,2 2 8 ,9 1 7 2 ,4 6 6 ,3 3 2 1 0 1 ,3 8 7 4 2 4 ,7 6 9 2 3 4 ,3 9 3 ,7 8 6 6 6 ,2 3 2 (1 ,1 0 0 ,7 9 9 ) (5 ,5 6 5 ,6 4 6 ) (1 ,3 1 1 ,3 7 6 ) (7 ,9 1 1 ,5 8 9 ) 4 ,6 6 8 ,8 5 0 4 9 1 ,6 2 8 5 ,1 6 0 ,4 7 8 6 4 ,4 6 4 ,7 7 2 6 6 ,2 1 8 ,6 2 4 $ 1 3 0 ,6 8 3 ,3 9 6 ($ 1 6 6 ,0 1 7 ,7 4 4 ) 8 ,4 5 4 ,9 5 8 (1 7 ,9 2 8 ,8 5 1 ) (4 ,4 3 6 ) 1 1 ,0 1 5 ,9 5 0 (3 ,0 9 8 ,4 3 5 ) 4 0 0 ,6 5 5 ($ 1 6 7 ,1 7 7 ,9 0 3 ) $ 5 ,7 3 7 ,2 3 1 ($ 1 4 6 ,2 1 6 ) $ 2 ,2 8 8 ,6 3 6 ($ 1 ,6 8 8 ,5 1 7 ) University System Office Annual Financial Report FY 2008 10 Statement of Fiduciary Net Assets S TATEMENT OF FIDUCIARY NET AS S ETS BOARD OF REGENTS RETIREE HEALTH B ENEFIT FUND June 30, 2008 AS S ETS June 30, 2008 Cas h and Cas h Equivalents Re c e iv a b le s Emp lo y e r Total Receivables $4,374,041 2,618,873 2,618,873 Inves tments , at fair value TOTAL AS S ETS 0 6,992,914 LIAB ILITIES Benefits payable TOTAL LIABILITIES 6,702,660 6,702,660 NET AS S ETS Net as s ets held in trus t for other pos temployment benefits TOTAL NET AS S ETS 290,254 $290,254 University System Office Annual Financial Report FY 2008 11 Statement of Changes in Fiduciary Net Assets S TATEMENT OF CHANGES IN FIDUCIARY NET AS S ETS BOARD OF REGENTS RETIREE HEALTH B ENEFIT FUND for the Year Ended June 30, 2008 ADDITIONS Co n t rib u t io n s Emp lo y e r Plan member Total Contributions Inves tment Income Interes t/dividends Les s : Inves tment expens e Net Inves tment Income DEDUCTIONS Be n e fit s Life Ins urance Premium Expens e A dminis trative expens e Total Deductions NET INCREAS E/(DECREAS E) NET AS S ETS HELD IN TRUS T FOR OTHER POS TEMPLOYMENT BENEFITS Beginning of year End of year June 30, 2008 $66,717,298 21,091,336 87,808,634 19,245 19,245 0 19,245 79,995,991 4,096,012 3,445,622 87,537,625 290,254 0 $290,254 University System Office Annual Financial Report FY 2008 12 UNIVERSITY SYSTEM OFFICE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 270,000 students and employ more than 11,000 faculty and 28,600 staff 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 University System Office also is the custodian of a newly created Fiduciary Fund for retiree health and life insurance benefits. The accompanying financial statements reflect the operations of the University System Office as a separate reporting entity and as custodian of the Board of Regents Retiree Health Benefit Fund. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System Office does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University System Office is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. The Board of Regents of the University System of Georgia (and thus the University System Office) implemented GASB Statement No. 39 Determining Whether Certain Organizations are Component Unit - an amendment of Statement No. 14, in fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that University System Office Annual Financial Report FY 2008 13 qualify as component units in the Annual Financial Report for the institution. For FY2008, the University System Office does not have any foundations or affiliated organizations that qualify as component units. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University System Office was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University System Office's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. As a result of creating the Board of Regents Retiree Health Benefit Fund, the Board of Regents implemented the provisions of GASB Statement Nos. 43 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans and 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions in fiscal 2008. The financial statements for the plan are presented directly after the University System Office Enterprise Fund financial statements and include a Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. See Note 14 - Post-Employment Retiree Health Benefit Plan for additional information regarding this fund. Basis of Accounting For financial reporting purposes, the University System Office is considered a special-purpose government engaged in business-type and fiduciary activities. Accordingly, the University System Office's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-system transactions have been eliminated. The University System Office has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System Office has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool. University System Office Annual Financial Report FY 2008 14 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, Expenses, and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University System Office'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 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/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 System Office when complete. For projects managed by the University System Office, the University University System Office Annual Financial Report FY 2008 15 System Office retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2008, GSFIC transferred equipment for the Georgia Public Telecommunications Commission to the University System Office valued at $1,688,517. Deposits Held for Other Organizations The University System Office had $179,508,399 in Deposits Held for Other Organizations as of June 30, 2008. 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. 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 $2,668,989 as of July 1, 2007. For fiscal year 2008, $2,145,896 was earned in compensated absences and employees were paid $1,745,241, for a net increase of $400,655. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $3,069,644. 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 University System Office's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University System Office's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System Office may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. University System Office Annual Financial Report FY 2008 16 Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System Office is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Expendable Restricted Net Assets include the following: June 30, 2008 Rest rict ed - E&G and Ot her Organized Act ivit ies T ot al Rest rict ed Expendable $16,270,567 $16,270,567 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System Office, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. Reserve for Encumbrances Ot her Unrest rict ed T ot al Unrest rict ed Net Asset s June 30, 2008 $4,996,555 2,652,860 $7,649,415 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System Office's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System Office, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University System Office has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: 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. University System Office Annual Financial Report FY 2008 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. 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, 2008, the carrying value of deposits was $27,733,269 and the bank balance was $29,908,718. Of the University System Office's deposits, $29,908,718 were uninsured. Of these uninsured deposits, $29,908,718 were collateralized with securities held by the financial institution's trust department or agent in the University System Office's name. University System Office Annual Financial Report FY 2008 18 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 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 ten 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 2008 19 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. The University System Office's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. University System Office Annual Financial Report FY 2008 20 INVESTMENTS Investment type Debt Securities U.S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Fund Other Investments Bond/Equity Mutual Funds 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 $6,399,792 1,425,021 112,194,514 26,940,853 $146,960,180 1,662,106 36,944,466 12,604,226 2,596,858 $200,767,836 569,480 45,702,687 $46,272,167 $4,051,090 855,541 66,491,827 24,830,683 $96,229,141 $2,348,702 2,110,170 $4,458,872 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 Regents policy for managing interest rate risk is contained in the investment policy guidelines for the various pooled 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 Office will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System Office's policy for managing custodial credit risk for investments is: 1. The University System Office has appointed a Federally regulated banking institution as custodian. The custodian performs its duties to the standards of a University System Office Annual Financial Report FY 2008 21 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, 2008, $132,623,553 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 portfolio 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 M utual Bond Fund Fair Value $112,194,514 26,940,853 $139,135,367 U nrat ed $112,194,514 26,940,853 $139,135,367 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, 2008: University System Office Annual Financial Report FY 2008 22 Investment: Amount: Federal National Mortgage Association Federal Home Loan Mortgage Corporation $81,864,105 $22,142,409 Condensed financial information for the investment pool is as follows: % of Total: 41% 11% Statement of Net A s s ets - June 30, 2008 Assets Inves tments A ccrued Interes t and Other Receivables $ 198,521,222 399,525 $ 198,920,747 Net A s s ets Held in Trus t for Pool Participants Internal Portion External Portion $ 19,772,415 179,148,332 $ 198,920,747 Statement of Changes in Net A s s ets - June 30, 2008 Re v e n u e s Interes t Income $ Net Increas e (Decreas e) in Fair Value of Inves tments Total Revenues Expens es Operating Expens es A dminis trative Expens es Net Increas e (Decreas e) in A s s ets Res ulting from Operations Dis tribution to Participants Capital Trans actions Total Increas e (Decreas e) in A s s ets Res ulting from Operations Net A s s ets July 1, 2007 Net A s s ets June 30, 2008 $ 5,749,548 (8,396,833) (2,647,285) (377,394) (3,024,679) (17,191,992) 89,029,662 68,812,991 130,107,756 198,920,747 University System Office Annual Financial Report FY 2008 23 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $1,172,624 18,139,692 19,312,316 39,717 $19,272,599 Note 4. Inventories The University System Office had no inventories at June 30, 2008. Note 5. Notes Receivable The Georgia Education Authority (University), (GEA (U)), was authorized to acquire, construct and operate housing accommodations for students of any institution under the control of the Board of Regents of the University System of Georgia. The GEA (U) constructed a dormitory on the campus of Georgia Southern University (GSOU) and financed the construction by obtaining a loan in 1994 from the U.S. Department of Education in the amount of $3,000,000 at an interest rate of 5.5% for a term of thirty years. In July 2007, GEA (U) met and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities. As a result of that decision, a Note Receivable that is payable from GSOU was transferred by Resolution from GEA (U) to the University System Office (USO) in the amount of $2,288,636. GSOU has an obligation to send the USO annual payments of $205,321 through the year 2025. In fiscal year 2008, the USO collected $205,321, $124,783 of which represented interest. Total principal collected on the Note Receivables was $80,538. At June 30, 2008, the Notes Receivable balance was $2,208,098. University System Office Annual Financial Report FY 2008 24 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Equipment Capital Leases T otal Assets Being Depreciated Less: Accumulated Depreciation Equipment Capital Leases T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $2,476,877 10,000 2,486,877 52,494,274 43,478,191 95,972,465 45,596,093 14,788,303 60,384,396 35,588,069 $38,074,946 Addi ti o n s $0 0 Re du cti on s $0 0 2,789,316 5,737,231 8,526,547 11,576,466 11,576,466 2,273,083 6,181,875 8,454,958 71,589 $71,589 11,444,940 11,444,940 131,526 $131,526 En di n g B al an ce 6/30/2008 $2,476,877 10,000 2,486,877 43,707,124 49,215,422 92,922,546 36,424,236 20,970,178 57,394,414 35,528,132 $38,015,009 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 and 2008, additional land and equipment was transferred to the University System Office under this arrangement. The value of the equipment transferred in fiscal year 2008 was $1,688,517; in addition, $17,925 in equipment disposals also were recorded. The total value of the land and equipment transferred is $26,698,347 and the accumulated depreciation is $21,374,872, for a net value of $5,323,475. 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 of $1,688,517. University System Office Annual Financial Report FY 2008 25 Note 7. Deferred Revenue The University System Office had no deferred revenue at June 30, 2008. Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $29,058,323 Additions $5,737,231 Reductions Ending Balance June 30, 2008 $5,565,646 $29,229,908 Other Liabilities Compensated Absences Total 2,668,989 2,668,989 2,145,896 2,145,896 1,745,241 1,745,241 3,069,644 3,069,644 Total Long Term Obligations $31,727,312 $7,883,127 $7,310,887 $32,299,552 Current Portion $6,232,259 1,828,355 1,828,355 $8,060,614 Note 9. Significant Commitments The University System Office had no significant unearned, outstanding construction or renovation contracts executed as of June 30, 2008. Note 10. Lease Obligations The University System Office is obligated under various capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES The University System Office has 21 capital leases payable in monthly installments with terms expiring in various years between 2010 and 2025. Expenditures for fiscal year 2008 were $6,877,022, of which $1,311,376 represented interest. Total principal paid on capital leases was $5,565,646 for the fiscal year ended June 30, 2008. Interest rates range from 2.62 percent to 4.88 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Equipment Total Assets Held Under Capital Lease $11,378,997 16,866,248 $28,245,245 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. University System Office Annual Financial Report FY 2008 26 The University System Office entered into five new capital lease obligations in the current year. In September 2007, the University System Office entered into a capital lease of $1,221,041 at 3.772 percent for optical equipment, and capital leases of $1,203,028 and $1,064,237 at 3.73 percent for equipment, software, support and installation. The outstanding liability at June 30, 2008 on these capital leases is $2,986,656. In February 2008, the University System Office entered into a capital lease of $650,000 at 2.99 percent for equipment, software, support and installation. The outstanding liability at June 30, 2008 on this capital lease is $599,463. In March 2008, the University System Office entered into a capital lease of $1,598,925 at 2.62 percent for video conference equipment and support. The outstanding liability at June 30, 2008 on this capital lease is $1,498,716. The University System Office also has various capital leases for equipment and a capital lease for one building with outstanding balances at June 30, 2008 in the amount of $11,799,437 and $12,345,636, respectively. OPERATING LEASES The University System Office has one operating lease for office space used by the Georgia Public Library System. The lease is annually renewable through fiscal 2010. Future commitments for capital and operating leases, including other installment purchase agreements, are as follows: Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 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 Real P ropert y and Equipm ent Capit al Leases Operat ing Leases $7,371,343 6,665,234 4,717,147 2,778,463 1,536,527 5,532,533 5,960,111 1,562,413 36,123,771 6,893,863 $29,229,908 $177,777 187,155 $364,932 The University System Office's expense for rental of real property and/or equipment under operating leases in FY2008 was $177,777. University System Office Annual Financial Report FY 2008 27 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 2008, 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 2008 2007 2006 100% 100% 100% $1,952,167 $1,787,733 $1,657,223 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 2008 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 also are 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, 2008, for employees covered by ERS was $593,025. The University System Office's total payroll for all employees was $26,387,280. For the year ended June 30, 2008 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, 2008, 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 also are made on amounts paid for accumulated leave to retiring employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $61,924 $40,840 $45,379 University System Office Annual Financial Report FY 2008 29 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $260,768 (8.13% or 8.15%) and $158,389 (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. University System Office Annual Financial Report FY 2008 30 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 2008 amounted to $17,788 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. In addition to the two different, self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. Express Scripts is the administrator of the Board of Regents' prescription drug plan. Pharmacy drug claims will be processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Express Scripts for verification, processing and payment. Express Scripts University System Office Annual Financial Report FY 2008 31 maintains an eligibility file based on information furnished by Blue Cross Blue Shield on behalf of the various organizational units of the University System of Georgia. A reconciliation of total estimated claims liabilities for employees and retirees for the fiscal years ended June 30, 2008 and June 30, 2007 is shown below: Emp loy ees: Unp aid Claims and Claim Adjustments (Prior Year IBNR) Incurred Claims and Claim Adjustments Exp enses Provisions for Insured Events of the Current Year Pay ments - Claims and Claim Adjustments Attributable T o Insured Events of the Current Year and Prior Years Unp aid Claims and Claim Adjustments (Current Year IBNR) R et irees : Unp aid Claims and Claim Adjustments (Prior Year IBNR) Incurred Claims and Claim Adjustments Exp enses Provisions for Insured Events of the Current Year Pay ments - Claims and Claim Adjustments Attributable T o Insured Events of the Current Year and Prior Years Unp aid Claims and Claim Adjustments (Current Year IBNR) June 30, 2008 $ 27,147,291 June 30, 2007 $ 27,983,473 204,892,976 264,356,511 207,991,411 $ 24,048,856 $ 265,192,693 27,147,291 $ 0$ 0 90,144,273 0 83,441,613 0 $ 6,702,660 $ 0 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. University System Office Annual Financial Report FY 2008 32 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 that may be disallowed by the grantor cannot be determined at this time, although the University System Office expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University System Office (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. Note 14. Post-Employment Retiree Health Benefit Plan Plan Description The Board of Regents Retiree Health Benefit Fund (the "Plan") is a single-employer, defined benefit, healthcare plan administered by the University System Office. The plan was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance 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 who 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. The Board of Regents of the University System of Georgia issues a publicly available financial report that includes financial statements and required supplementary information for the Plan within its Consolidated Annual Financial Report. This report may be obtained at the following website address: http://www.usg.edu/usg_stats/annual_fin_rep/ University System Office Annual Financial Report FY 2008 33 Membership of the plan consisted of the following at June 30, 2008: June 30, 2008 Retirees and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members 18,909 0 33,794 Total 52,703 Summary of Significant Accounting Policies The financial statements of the Plan are prepared using the accrual basis of accounting. Employer contributions are recognized in the period in which they are due. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Funding Policy The contribution requirements of plan members and the University System of Georgia, as employer, are established and may be amended by the Board of Regents. The Plan is substantially funded on a "pay-as-you-go" basis; however, amounts above the pay-as-you-go basis may be contributed annually, either by specific appropriation or by Board designation. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for eligible retirees. The employer portion of health insurance for its eligible retirees is based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2008 plan year, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. 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 retiree. For fiscal year 2008, the University System of Georgia contributed $66,717,298 to the plan, including $66,446,289 for current premiums or claims and an additional $271,009 to pre-fund benefits. Plan members receiving benefits contributed $21,091,336 for current premiums or claims. The University System Office had 71 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits as of June 30, 2008. For the year ended June 30, 2008, the University System Office recognized as incurred $382,751 of expenditures, which was net of $120,420 of participant contributions. Annual OPEB Cost and Net OPEB Obligation The University System of Georgia's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal University System Office Annual Financial Report FY 2008 34 cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of the University System's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the University System's net OPEB obligation to the Retiree Health Benefit Fund (dollar amounts in millions): Annual required contribution Interest on net OP EB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Less: Contributions made Increase in net OP EB obligation Net OP EB obligation - beginning of year Net OP EB obligation - end of year $224.9 0.0 0.0 224.9 (66.7) 158.2 0.0 $158.2 Since the net OPEB obligation to the Retiree Health Benefit Fund is a liability of the entire University System and not only the University System Office, the annual OPEB cost and net OPEB obligation are reported in the Consolidated Annual Financial Report of the University System of Georgia. The University System's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2008, which is the transition year for the Retiree Health Benefit Plan, were as follows (dollar amounts in millions): Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB O bliga tion 2008 $224.9 29.7% $158.2 Funded Status and Funding Progress Actuarial Valuation Date 7/1/2007 Actuarial Value of Assets (a) $0 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $1,985,200,000 Unfunded AAL (UAAL) (b-a) $1,985,200,000 Funded Ratio (a/b) 0.0% Covered Payroll $2,201,804,465 UAAL as a Percentage of Covered Payroll ((b-a)/c) 90.2% Note: The allocation and transfer of assets to the plan took place subsequent to the actuarial valuation date. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the University System Office Annual Financial Report FY 2008 35 employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method Amortization method Asset Valuation method Remaining amortization period Actuarial assumptions: Investment rate of return* Healthcare cost trend rate* Ultimate trend rate Year of Ultimate trend rate *Includes an inflation assumption of 2.5% July 1, 2007 Projected Unit Credit Level Dollar, Closed, 30-year Market Value of Assets 30 years 6.00% 8.50% 5.50% 2012 University System Office Annual Financial Report FY 2008 36 Note 15. Natural Classifications with Functional Classifications The University System Office's operating expenses by functional classification for FY2008 are shown below: 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 Exp enses Inst ruct ion $1,361,899 252,037 39,735 3,040 1,414,061 880 $3,071,652 Functional Clas s ification FY2008 Research P ublic Se r v ice $27,517 6,515 $2,065,502 491,311 77,689 195,290 19,350,787 77,475,746 227,641 $229,322 $99,688,676 Academ ic Sup p o r t $1,874,236 472,738 79,366 45,939 20,613,869 752,916 $23,839,064 Natural Classification St aff B enefit s T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses St udent Ser v ic es $226,108 44,250 8,638 1,465 1,387 $281,848 Functional Clas s ification FY2008 Inst it ut ional Sup p o r t Sc h o la r sh ip s & Fellowships $20,832,018 5,434,125 554,186 4,185,906 266,189,923 7,473,521 $0 251,688 $304,669,679 $251,688 T otal E x p e n se s 26,387,280 6,700,976 759,614 251,688 23,587,137 365,890,276 8,454,958 $432,031,929 University System Office Annual Financial Report FY 2008 37 Note 16. Special Items Georgia Education Authority (University), (GEA(U)), an entity outside of the Board of Regents of the University System of Georgia reporting entity, is authorized to acquire, construct and operate housing accommodations for students of any institution under the control of the Board of Regents. In July 2007, GEA(U) met and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities. As a result of that decision, a Note Receivable that is payable from Georgia Southern University was transferred by Resolution from GEA(U) to the University System Office (USO) in the amount of $2,288,636. This amount is reported as a Note Receivable in the Statement of Net Assets and as a Special Item Note Receivable Transfer on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. Payments on the note receivable will be made by Georgia Southern University to the USO according to the original amortization schedule, which matures in 2025. After funding a start-up amount to the Georgia Higher Education Facilities Authority, the balance of GEA(U)'s remaining assets were transferred to the USO in the form of a payment of $424,769. This amount is reported as Cash and Cash Equivalents in the Statement of Net Assets and as a Special Item Authority Dissolution on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. University System Office Annual Financial Report FY 2008 38 Required Supplementary Information BOARDOFREGENTS RETIREEHEALTHBENEFITFUND SCHEDULE OF FUNDING PROGRESS Actuarial Valuation Date 7/1/2007 Actuarial Value of Assets (a) $0 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $1,985,200,000 Unfunded AAL (UAAL) (b-a) $1,985,200,000 Funded Ratio (a/b) 0.0% Covered Payroll $2,201,804,465 Note: The allocation and transfer of assets to the plan took place subsequent to the actuarial valuation date. UAAL as a Percentage of Covered Payroll ((b-a)/c) 90.2% B OARD OF REGENTS RETIREE HEALTH B ENEFIT FUND S CHEDULE OF EMPLOYER CONTRIBUTIONS Year Ended June 30 2008 Annual Required Contribution $224,900,000 P e r c e ntag e Contributed 29.7% University System Office Annual Financial Report FY 2008 39 VALDOSTA STATE UNIVERSITY Financial Report For the Year Ended June 30, 2008 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 2008 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 ........................................... 29 Note 15. Natural Classifications with Functional Classifications .............................................. 30 Note 16. Component Units ......................................................................................................... 31 VALDOSTA STATE UNIVERSITY Management's Discussion and Analysis Introduction Valdosta State University is one of the 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 11,000 students. The institution continues to grow as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 528 11,280 10,287 FY2007 521 10,888 9,842 FY2006 480 10,503 9,431 Overview of the Financial Statements and Financial Analysis Valdosta State University is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Valdosta State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Valdosta State University Annual Financial Report FY 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $18,107,780 135,639,052 12,290,906 166,037,738 June 30, 2007 $11,993,719 139,805,559 12,654,301 164,453,579 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 9,575,601 37,911,884 47,487,485 8,891,409 40,594,613 49,486,022 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 97,829,878 2,460,134 3,638,487 14,621,754 $118,550,253 99,992,255 2,902,355 3,923,829 8,149,118 $114,967,557 The total assets of the institution increased by $1,584,159. The increase is primarily due to increases in Cash and Cash Equivalents and Accounts Receivable of $5,509,099 which were partially offset by a decrease in Capital Assets, net of ($4,166,507). The total liabilities for the year decreased by ($1,998,537). The combination of the increase in total assets of $1,584,159 and the decrease in total liabilities of ($1,998,537) yields an increase in total net assets of $3,582,696. The increase in total net assets is primarily in the category of Unrestricted Net Assets, mainly as a result of Auxiliary profits for the year. Valdosta State University Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $80,086,547 131,539,697 (51,453,150) 53,106,976 1,653,826 1,928,870 3,582,696 114,967,557 0 114,967,557 $118,550,253 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $34,697,606 14,248,999 895,367 29,645,806 598,769 80,086,547 53,079,000 729,523 2,825,057 427,508 (1,596,875) 55,464,213 0 1,928,870 1,928,870 $137,479,630 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, 2008 and June 30, 2007 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, 2008 $47,504,525 339,391 1,526,183 10,663,157 10,201,146 16,914,560 11,549,091 6,675,989 26,165,655 131,539,697 2,357,237 $133,896,934 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 Operating revenues increased by $8,162,198 in fiscal 2008. Tuition & Fees included significant increases for students on non-guaranteed tuition plans. All other operating revenue categories also increased compared to prior year. Valdosta State University Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $2,029,533 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 continued with privatized 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 $1,432,313 for the year primarily due to an increase of $3,578,231 in State Appropriations, which was offset by decreases in non-operating Grants and Contracts and Investment Income categories. The compensation and employee benefits category increased by $5,349,615 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 $70,951 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2008 and affected the Institutional Support and Plant Operations and Maintenance categories. 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. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($45,559,737) 56,098,123 (7,494,223) 795,740 3,839,903 6,371,655 $10,211,558 June 30, 2007 ($40,002,618) 52,707,244 (13,159,600) 924,147 469,173 5,902,482 $6,371,655 Valdosta State University Annual Financial Report FY 2008 5 Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2008. The Palms Dining Center and other Food Service location renovations were completed, 80% of which were a 15 year gift from the Food Services contractor which will be amortized according to the contract. 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 Valdosta State University had Long-Term Debt and Liabilities of $38,659,941 of which $2,114,127 was reflected as current liability at June 30, 2008. 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 FY2008. Valdosta State University Foundation, Inc. had investments of $21.1 million as of December 31, 2007. VSU Auxiliary Services Real Estate Foundation, Inc. was established in July 2007 for significant future campus construction that is to be funded through bond issues as well as student fees. Further details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University continues to move toward its strategic goals incorporating planning and realizing efficiencies in operations whenever possible. Although we anticipate a significant reduction in State allocations in the current fiscal year, the University 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 2008 6 Statement of Net Assets VALDOSTA STATE UNIVERSITY STATEMENT OF NET ASSETS June 30, 2008 C ompon e n t Uni t Val dosta S tate Uni ve rsi ty Val dosta S tate Uni ve rsi ty Fou ndati on, Inc. AS SETS 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 Due From Component Unit s Pledges Receivable Due From P rimary Government Invent ories (not e 4) Prepaid it ems T ot al Current Asset s $10,182,585 2,987,986 2,832,972 30,299 1,993,941 79,997 18,107,780 $2,493,437 12,438 366 95,328 9,216 24,859 2,635,644 Noncu rre n t Asse ts Noncurrent Cash Invest ment 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 ASS ETS LIABILITIES C urre nt Li abi l i ti e s Account s Payable Salaries Payable 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 Payable (current ) Not es and Loans P ayable (current port ion) T ot al Current Liabilit ies Noncu rre n t Li abi l i ti e s Lease P urchase Obligat ions (noncurrent ) Deferred Revenue (noncurrent ) Compensat ed Absences (noncurrent ) Revenue/Mort gage Bonds Payable (noncurrent ) Liabilit ies under Split -Int erest Agreement s (noncurrent ) Ot her Long-T erm Liabilit ies Not es and Loans P ayable (noncurrent ) T ot al Noncurrent Liabilit ies TO TAL LIABILITIES NET AS SETS Invest ed in Capit al Asset s, net of relat ed debt Rest rict ed for Nonexpendable Expendable Capit al P roject s Unrest rict ed TO TAL NET ASS ETS 28,973 12,223,823 38,110 135,639,052 147,929,958 166,037,738 2,642,312 1,383,049 351,678 738,000 1,313,545 10,306 1,022,584 368,596 1,703,565 41,966 9,575,601 35,139,935 1,366,070 1,344,002 61,877 37,911,884 47,487,485 97,829,878 2,460,134 3,638,487 14,621,754 $118,550,253 14,000,186 21,132,309 124,923 34,084,765 1,185,332 70,527,515 73,163,159 649,866 220,776 111,565 104,848 5,472 1,049,705 787,816 2,930,048 8,008 42,485,736 389,011 6,891 82,485 42,972,131 45,902,179 5,531,367 19,171,160 662,857 1,842,993 52,603 $27,260,980 C ompone n t Un i t VSU Au xi l i ary Se rvi ce s Re al Estate Foun dati on , In c. $0 166,286 166,286 74,894,200 9,607,301 1,848,556 86,350,057 86,516,343 2,086,627 2,086,627 84,429,716 84,429,716 86,516,343 1,920,341 (1,920,341) $0 Valdosta State University Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets VALDOSTA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 REVENUES Valdosta State Un i ve rs i ty Component Unit Valdosta State Un i ve rs i ty Foundation, Inc. Component Unit VSU Auxiliary Services Real Estate Foundation, In c. Operating Revenues Student T uition and Fees (net of allowance for doubtful accou $43,163,685 $0 $0 Less: Scholarship Allowances (8,466,079) Gifts and Contributions 1,386,487 Grants and Contracts Federal 12,190,737 St at e 1,375,695 Ot h er 682,567 Sales and Services 895,367 460,696 Rents and Royalties 3,443,243 Auxiliary Enterprises Residence Halls 7,733,861 Boo k st o re 6,491,569 Food Services 7,054,443 Parking/T ransportation 2,406,282 Health Services 1,929,579 Intercollegiate Athletics 3,379,999 Other Organizations 650,073 Other Operating Revenues 598,769 410,055 T otal Operating Revenues 80,086,547 5,700,481 0 EXPENS ES Operating Expenses Salaries: Facult y 32,240,107 St aff 29,282,682 Employee Benefits 18,826,113 Other Personal Services 385,116 T ravel 1,081,238 7,818 Scholarships and Fellowships 7,962,631 110,875 Ut ilit ies 4,630,514 141 Supplies and Other Services 30,205,232 1,112,144 Dep reciat io n 6,926,064 1,064,941 Other Operating Expense 9,042 Payments to or on behalf of Valdosta State University 1,575,933 T otal Operating Expenses 131,539,697 3,880,894 0 Operating Income (loss) (51,453,150) 1,819,587 0 Valdosta State University Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued VALDOSTA STATEUNIVERSITY STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 Valdosta State Un i ve rs i ty NO NO PERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal St at e Ot her Gift s Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or los Capital Grants and Gifts Ot her Additions to permanent endowments T otal Other Revenues Increase in Net Assets NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 53,079,000 430,761 116,852 181,910 2,825,057 427,508 (2,357,237) (1,596,875) 53,106,976 1,653,826 1,928,870 1,928,870 3,582,696 114,967,557 0 114,967,557 $118,550,253 Component Unit Valdosta State Un i ve rs i ty Foundation, Inc. Component Unit VSU Auxiliary Services Real Estate Foundation, In c. 1,715,709 (2,180,010) (57,994) (522,295) 0 1,297,292 0 137,882 137,882 0 1,435,174 0 25,825,806 0 0 0 25,825,806 0 $27,260,980 $0 Valdosta State University Annual Financial Report FY 2008 9 Statement of Cash Flows VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 P rincipal P aid on Capit al Debt and Leases Int erest P aid on Capit al Debt and Leases Net Cash used by Capit al and Relat ed Financing Act ivit ies C AS H FLO W S FRO M INVES TING AC TIVITIES P roceeds from Sales and Mat urit ies of Invest m ent s Int erest on Invest m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $34,926,582 14,005,050 895,367 (55,468,938) (61,157,510) (8,312,561) (334,669) 343,162 7,913,447 6,679,408 7,488,458 2,413,808 1,932,107 3,711,179 490,804 (1,085,431) (45,559,737) 53,079,000 (552,641) 3,571,764 56,098,123 (4,194,350) (942,636) (2,357,237) (7,494,223) 236,334 1,282,755 (723,349) 795,740 3,839,903 6,371,655 $10,211,558 Valdosta State University Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued VALDOS TA S TATE UNIVERS ITY S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 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, 2008 ($51,453,150) 6,926,064 (1,684,770) (616,119) 34,604 10,267 156,164 944,703 (10,589) 133,089 ($45,559,737) $15,061 ($855,247) ($1,928,870) Valdosta State University Annual Financial Report FY 2008 11 VALDOSTA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Valdosta State University is reporting the activity for VSU Auxiliary Services Real Estate Foundation, Inc., as well as 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. Valdosta State University Annual Financial Report FY 2008 12 Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place. Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated. The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. 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 Valdosta State University Annual Financial Report FY 2008 13 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 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 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, 2008, GSFIC did not transfer any capital additions to Valdosta State University. Valdosta State University Annual Financial Report FY 2008 14 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 $2,914,477 as of 7-1-2007. For FY2008, $2,309,219 was earned in compensated absences and employees were paid $2,176,129, for a net increase of $133,090. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $3,047,567. 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 2008 15 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, 2008 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 $2,500,827 1,948 338,432 692,407 104,873 $3,638,487 Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets June 30, 2008 $3,664,549 7,695,894 338,131 2,923,180 $14,621,754 When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes Valdosta State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues The University has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Valdosta State University Annual Financial Report FY 2008 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. 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. Auxiliary Intercollegiate Athletics revenue of $3,379,999 is reported net of discounts and allowances of $445,232. 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. Valdosta State University Annual Financial Report FY 2008 17 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. At June 30, 2008, the carrying value of deposits was $10,174,422 and the bank balance was $12,954,140. Of the University's deposits, $12,954,140 were uninsured. Of these uninsured deposits, $12,954,140 were uncollateralized. B. Investments At June 30, 2008, the carrying value of the University's investments was $12,223,823, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and Office of Treasury and Fiscal Services investment pools as follows: Investment Pools Board of Regents Diversified Fund Sub T otal $5,985,062 5,985,062 Office of T reasury and Fiscal Services Georgia Extended Asset Pool Sub T otal 6,238,761 6,238,761 T otal Investment Pools $12,223,823 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. Valdosta State University Annual Financial Report FY 2008 18 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 $2.02 at June 30, 2008. The Georgia Extended Asset Pool is an AAAf rated investment pool by Standard and Poor's. The Effective Duration of the fund for the month of June is .81 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 7.84 years. Of the University's total investment of $5,985,062 in the Diversified Fund, $1,861,354 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 2008 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $319,159 439,158 2,987,986 475,763 30,299 1,666,504 5,918,869 67,612 $5,851,257 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore P hysical P lant Other T otal June 30, 2008 $1,620,182 265,703 108,056 $1,993,941 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises approximately 5% of the loans receivable at June 30, 2008 (the remainder are 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, 2008, no provision has been made for uncollectible loans as the institution is in the final stages of closing this loan fund. Valdosta State University Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: 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 7/1/2007 $2,686,656 26,817 6,785,099 9,498,572 Addition s $255,703 3,137,558 3,393,261 Re ductions $0 6,405,880 6,405,880 Capit al Asset s, Being Depreciat ed: Building and Building Improvement s Facilities and Other Improvements E quip m en t Capit al Leases Library Collect ions T ot al Asset s Being Depreciat ed 119,939,869 9,087,639 15,487,551 38,072,882 20,676,401 203,264,342 6,643,603 175,453 734,510 15,061 1,255,440 8,824,067 5,892,208 306,119 242,565 1,154,207 16,681 7,611,780 Less: Accumulat ed Depreciat ion Buildin gs Facilities and Other improvements E quip m en t Capit al Leases Library Collect ions T ot al Accumulat ed Depreciat ion 38,957,325 3,152,387 11,597,998 3,255,533 15,994,112 72,957,355 3,309,132 418,771 1,219,225 960,123 1,018,813 6,926,064 4,128,423 181,885 221,575 11,325 16,681 4,559,889 T ot al Capit al Asset s, Being Depreciat ed, Net 130,306,987 1,898,003 3,051,891 Capit al Asset s, net $139,805,559 $5,291,264 $9,457,771 En di n g B a l a n ce 6/30/2008 $2,942,359 26,817 3,516,777 6,485,953 120,691,264 8,956,973 15,979,496 36,933,736 21,915,160 204,476,629 38,138,034 3,389,273 12,595,648 4,204,331 16,996,244 75,323,530 129,153,099 $135,639,052 Valdosta State University Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $66,300 1,247,245 $1,313,545 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Le as e s Lease Obligations Beginning B al an ce July 1, 2007 $36,394,616 Addi ti on s $15,061 Re du cti on s En di n g B al an ce June 30, 2008 $901,146 $35,508,531 O ther Liabilities Compensated Absences Notes and Loans T ot al Total Long Term O bligations 2,914,477 145,333 3,059,810 $39,454,426 2,309,219 2,309,219 $2,324,280 2,176,129 41,490 2,217,619 $3,118,765 3,047,567 103,843 3,151,410 $38,659,941 C u rre n t Portion $368,596 1,703,565 41,966 1,745,531 $2,114,127 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,791,917 as of June 30, 2008. 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 2009 and 2031. Expenditures for fiscal year 2008 were $3,258,383 of which $2,357,237 represented interest and $901,146 represented principal. Interest rates range from 4.25 percent to 10 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Valdosta State University Annual Financial Report FY 2008 22 Buildings Equipment Total Assets Held Under Capital Lease $32,674,717 54,689 $32,729,406 Certain capital leases provide for renewal and/or purchase options. Valdosta State University had three capital leases with related entities in the current fiscal year. In fiscal year 2007, the University entered into a capital lease of $10,399,786 at a variable 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 variable 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 variable interest rate with the Valdosta State University Foundation Real Estate I, LLC, for Centennial Hall, a housing unit located on Sustella Avenue. The outstanding liability at June 30, 2008 on these capital leases is $10,298,737, $7,128,838, and $18,033,477 respectively. Valdosta State University entered into two new equipment capital leases during fiscal 2008 in the amount of $15,061 and also has various other capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $47,479. 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 2009 through 2016. 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. 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, 2008, were as follows: Valdosta State University Annual Financial Report FY 2008 23 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 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 $2,873,485 2,939,928 3,021,316 3,094,448 3,152,508 15,956,448 16,335,144 16,815,012 8,163,140 72,351,429 36,842,898 $35,508,531 $378,647 147,697 147,697 141,194 139,440 278,880 $1,233,555 Valdosta State University's FY2008 expense for rental of real property and equipment under operating leases was $600,480.00. 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 2008, 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 2008 2007 2006 100% 100% 100% $3,087,054 $2,947,248 $2,878,308 Valdosta State University Annual Financial Report FY 2008 24 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. 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, 2008, for employees covered by ERS was $30,907. The University's total payroll for all employees was $61,522,789. For the year ended June 30, 2008 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. Valdosta State University Annual Financial Report FY 2008 25 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $3,218 $2,920 $3,047 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 Annual Financial Report FY 2008 26 Valdosta State University and the covered employees made the required contributions of $1,761,722 (8.13% or 8.15%) and $1,082,087 (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 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 2008 amounted to $100,135 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. Valdosta State University Annual Financial Report FY 2008 27 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, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Valdosta State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. Note 13. Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Valdosta State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Valdosta State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008. Valdosta State University Annual Financial Report FY 2008 28 Note 14. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 395 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Valdosta State University recognized as incurred $1,992,129 of expenditures, which was net of $742,131 of participant contributions. Valdosta State University Annual Financial Report FY 2008 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Functional Classification FY2008 Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation $32,063,306 2,860,653 8,782,952 293,769 336,304 189,961 2,506,407 471,173 $68,135 88,404 20,898 10,360 1,860 105,701 44,033 $77,050 726,070 188,876 25,148 18,914 14,954 1,035,275 (560,104) $9,674 5,973,362 1,395,332 397,492 54,846 1,464,862 1,367,589 $0 3,726,456 1,051,934 75,055 101,052 122,564 4,967,700 156,385 $4,521 6,907,952 4,434,235 385,116 125,902 191,425 4,522,725 342,684 Total Expenses $47,504,525 $339,391 $1,526,183 $10,663,157 $10,201,146 $16,914,560 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises $0 3,761,126 1,305,659 (1,040,520) 5,413 3,663,655 849,887 3,003,871 $0 6,675,989 $17,421 5,238,659 1,646,227 965,465 122,102 929,564 393,109 14,752,675 2,100,433 $11,549,091 $6,675,989 $26,165,655 Total Expenses $32,240,107 29,282,682 18,826,113 385,116 1,081,238 7,962,631 4,630,514 30,205,232 6,926,064 $131,539,697 Valdosta State University Annual Financial Report FY 2008 30 Note 16. Component Units 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. During the year ended December 31, 2007, the Foundation distributed $1,575,933 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, GA 31698. Investments for Component Units: Valdosta State University Foundation, Inc. holds endowment and other investments in the amount of $21.1 million. The $19.2 million corpus of the endowment portion 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, 2007: M oney M arket Accounts Equity Securities M utual Funds Split Interest Investments Cost $188,254 3,184,589 12,996,017 765,801 Fair Value $188,254 3,271,607 16,892,840 792,046 Total Investments $17,134,661 $21,144,747 Valdosta State University Annual Financial Report FY 2008 31 Capital Assets for Component Units: Valdosta State University Foundation, Inc. had the following capital assets as of December 31, 2007: December 31, 2007 Cap ital Assets not being Dep reciated: Land and other Assets Construction in Progress Total Cap ital Assets not being Dep reciated Cap ital Assets being Dep reciated: Buildings and Improvements M achinery and Equipment Total Cap ital Assets being Dep reciated Less Total Accumulated Depreciation Total Cap ital Assets being Dep reciated, Net Capital Assets, Net $2,928,106 516,913 3,445,019 34,342,521 52,966 34,395,487 3,755,741 30,639,746 $34,084,765 Long-term Liabilities for Component Units: Changes in long-term debt for Valdosta State Foundation, Inc. for the fiscal year ended December 31, 2007 are shown below: Liabilities under split interest agreement Capital Lease Obligations Notes and Loans Payable Revenue/M ortgage Bonds Payable Other Long Term Liabilities Total Long Term Liabilities Beginning Balance January 1, 2007 $394,948 21,175 1,343,920 38,120,736 596 $39,881,375 Additions $0 5,800,000 227,667 $6,027,667 Reductions $5,937 7,695 473,619 385,295 596 $873,142 Ending Balance December 31, 2007 $389,011 13,480 870,301 43,535,441 227,667 $45,035,900 Amounts due within One Year $0 5,472 787,816 1,049,705 220,776 $2,063,769 Capital Lease Obligations 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, 2007 is $13,480. Annual debt service requirements to maturity for capital lease obligations are as follows: Valdosta State University Annual Financial Report FY 2008 32 Year ending December 31: 2008 1 2009 2 2010 3 Total minimum lease payments Less: Interest Principal Outstanding Capital Leases $5,472 6,597 2,753 14,822 1,342 $13,480 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 $124,922 as of December 31, 2007. The Foundation has two lines of credit and a short-term note payable with a total outstanding principal balance of $745,379 as of December 31, 2007. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 Princip al Notes and Loans Payable Interest $787,816 44,276 38,209 $870,301 $39,300 2,650 746 $42,696 Total $827,116 46,926 38,955 $912,997 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 bonds are a floating tax-exempt rate, currently 4.89%, and an associated collar with a floor of 3.25% and a ceiling of 5.75%. 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 $1,879,550 as of December 31, 2007. 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, 2007 is $35,855,891. Valdosta State University Annual Financial Report FY 2008 33 In November 2007, The Development Authority of Lowndes County issued $5,800,000 of Series 2007 First Mortgage Revenue Bond. The Authority then loaned the proceeds to VSU Foundation, Inc. The bonds are secured by a lien upon certain leasehold deeds to secure debt and certain pledged revenues and assignment of rents and leases. The bonds bear interest at a variable rate equal to the sum of (i) 61.1% of LIBOR plus (ii) 115 basis points. Interest is due monthly on December 31, 2007, and principal is due monthly beginning November 1, 2008. The balance of the obligation at December 31, 2007 is $5,800,000. Annual debt service requirements to maturity for bonds payable are as follows: Year ending December 31: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2030 1 2 3 4 5 6-11 12-15 16-20 21-25 Bond Premium Princip al $1,049,705 1,278,009 1,351,556 1,315,093 1,448,733 7,740,827 9,446,230 11,986,281 7,653,116 43,269,550 265,891 $43,535,441 Bonds Payable Interest $2,055,495 2,011,264 1,958,675 1,909,321 1,852,630 8,299,349 6,395,659 3,746,063 765,563 28,994,019 $28,994,019 Total $3,105,200 3,289,273 3,310,231 3,224,414 3,301,363 16,040,176 15,841,889 15,732,344 8,418,679 72,263,569 265,891 $72,529,460 VSU Auxiliary Services Real Estate Foundation, Inc. VSU Auxiliary Services Real Estate Foundation (Real Estate Foundation) is a legally separate, tax-exempt component unit of Valdosta State University (University). The Real Estate Foundation constructs auxiliary buildings and facilities for use by the University and then leases the completed buildings to the institution. The seven-member board of the Foundation is selfperpetuating and consists of graduates and friends of the University. Although the University does not control the timing or amount of receipts from the Real Estate Foundation, the majority of resources or income thereon that the Real Estate Foundation holds and invests is restricted to the real estate activities of the University. Because these restricted resources held by the Real Estate Foundation can only be used by, or for the benefit of, the University, the Real Estate 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. Valdosta State University Annual Financial Report FY 2008 34 Complete financial statements for the Foundation can be obtained from the Administrative Office at 102 Georgia Avenue, Valdosta, GA 31698. Capital Assets for Component Units: VSU Auxiliary Services Real Estate Foundation, Inc. had $9,607,301 in Construction Work in Progress as of December 31, 2007. Long-term Liabilities for Component Units: Changes in long-term debt for VSU Auxiliary Services Real Estate Foundation, Inc. for the fiscal year ended December 31, 2007 are shown below: Beginning Balance January 1, 2007 Additions Reductions Ending Balance December 31, 2007 Amounts due within One Year Revenue/M ortgage Bonds Payable $0 $84,429,716 $0 $84,429,716 $0 Revenue Bonds were issued on October 18, 2007 by the Valdosta Housing Authority. The Authority loaned the proceeds to the VSU Auxiliary Services Real Estate Foundation to finance the construction of student housing on university property. The bonds are secured by 1) the trust estate, 2) the Debt Service Reserve Fund, 3) the loan agreement, 4) project real estate and personal property set forth in the deeds and documents relating to construction and management of the project and 5) any and all rents and leases for use of the project property. The interest rate ranges from 4% to 5%. Annual debt service requirements to maturity for Student Housing revenue bonds payable are as follows: Year ending December 31: 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 2033 through 2037 26-30 2038 through 2042 31-35 Bond Discount Princip al Bonds Payable Interest $0 0 0 645,000 750,000 5,275,000 8,790,000 13,325,000 18,480,000 25,615,000 12,680,000 85,560,000 (1,130,284) $84,429,716 $660,659 3,906,839 3,906,840 3,893,940 3,866,041 18,793,990 17,308,240 14,748,716 11,189,950 6,145,165 600,628 85,021,008 $85,021,008 Total $660,659 3,906,839 3,906,840 4,538,940 4,616,041 24,068,990 26,098,240 28,073,716 29,669,950 31,760,165 13,280,628 170,581,008 (1,130,284) $169,450,724 Valdosta State University Annual Financial Report FY 2008 35 WAYCROSS COLLEGE Financial Report For the Year Ended June 30, 2008 David A. Palmer President Waycross College Waycross, Georgia William E. Deason Vice President for Fiscal Affairs WAYCROSS COLLEGE ANNUAL FINANCIAL REPORT FY 2008 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................................................................................................ 16 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 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 around 1,000 students each year. The institution has a fairly stable student base as shown by the comparison numbers that follow. Students Students Faculty (Headcount) (FTE) FY2008 21 989 691 FY2007 21 1,018 714 FY2006 19 882 622 Overview of the Financial Statements and Financial Analysis Waycross College is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $1,615,153 8,132,055 273,389 10,020,597 June 30, 2007 $1,333,042 8,428,970 289,453 10,051,465 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 437,920 85,007 522,927 622,027 48,766 670,793 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 8,132,055 135,240 79,419 1,150,956 $9,497,670 8,428,970 133,240 109,015 709,447 $9,380,672 The total assets of the institution decreased by ($30,868). A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of ($296,915) in the category of Capital Assets, net. This was offset primarily by an increase in Cash and Cash Equivalents of $253,880. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year decreased by ($147,866). The combination of the decrease in total assets of ($30,868) and the decrease in total liabilities of ($147,866) yields an increase in total net assets of $116,998. The increase in total net assets is primarily due to an increase in the category of Unrestricted Net Assets totaling $441,509 and decreases in Restricted Net Assets in the amount of ($27,596) and in Invested in Capital Assets, net of debt, in the amount of ($296,915). Waycross College Annual Financial Report FY 2008 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, 2008 June 30, 2007 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 $2,727,131 7,098,813 (4,371,682) 4,208,205 (163,477) 280,475 116,998 9,380,672 0 9,380,672 $9,497,670 $2,616,501 6,683,183 (4,066,682) 3,846,065 (220,617) 0 (220,617) 9,601,289 0 9,601,289 $9,380,672 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: Waycross College Annual Financial Report FY 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees Grant s and Cont ract s Sales and Services A ux ilia r y Other T ot al Operat ing Revenue Nonoperat ing Revenue St at e Appropriat ions Grant s and Cont ract s Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $1,002,145 1,186,407 10,026 524,417 4,136 2,727,131 4,083,250 68,335 22,942 34,188 (510) 4,208,205 280,475 280,475 $7,215,811 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 0 $6,462,566 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $1,710,766 858,541 695,926 1,393,635 1,259,217 693,313 487,415 7,098,813 0 $7,098,813 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 Operating revenues increased by $110,630 in fiscal 2008. Although Tuition & Fees included a 5.4% increase, revenues also increased in Grants and Contracts and Auxiliary Enterprises categories. Waycross College Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $4,657 is a result of increases in food services and vending sales offset by a small decrease in bookstore sales. Non-operating revenues increased by $362,140 for the year primarily due to an increase of $636,047 in State Appropriations. The compensation and employee benefits category increased by $312,119 and affected the Instruction, Student Services, Institutional Support and Plant Operations categories. The increase reflects the filling of vacant faculty, professional staff, and maintenance positions, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $130,490 during the past year. The increase was primarily associated with the increases in the cost of electricity even though our consumption dropped, and the installation of a new telecommunication system. 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, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($3,905,146) 4,192,246 (85,472) 52,252 253,880 1,135,680 $1,389,560 June 30, 2007 ($3,529,879) 3,774,080 (37,803) 55,438 261,836 873,844 $1,135,680 Capital Assets The College began and completed several renovation projects in fiscal 2008 and began the design phase of a major renovation project. The Upgrade and Repair to HVAC Systems, Administrative Building was completed and the Upgrade and Repair to HVAC Systems, Waycross College Annual Financial Report FY 2008 5 Education Building was designed and contracts awarded. A completion date of October 2008 is anticipated for this project. Renovations to two bathrooms got underway during the year as well. Waycross College received funding and hired an architect to design an addition to the Administrative Building that will enlarge our library and add classroom space. This project is funded by the Georgia State Financing and Investment Commission (GSFIC) and is 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 $224,065 of which $139,058 was reflected as current liability at June 30, 2008. 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 FY2008. The Waycross College Foundation, Inc. had investments of $1.4 million and no long-term debt as of June 30, 2008. 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 experienced excellent increases in revenue from state appropriations and tuition and fees. These increases allowed staff positions to be filled and other improvements for instruction and student recruitment were made possible. The College anticipates revenue reductions in state appropriations during the next fiscal year due to the State's slowing economy. We also anticipate growth in student enrollment to help mediate this anticipated reduction in funding. We will maintain a close watch over resources to maintain the College's ability to react to these and other unknown internal and external issues. David A. Palmer, President Waycross College Waycross College Annual Financial Report FY 2008 6 Statement of Net Assets WAYCROSS COLLEGE STATEMENT OF NET ASSETS June 30, 2008 C ompone nt Unit W a y cro s s College Waycross College Foundation, Inc. AS S ETS Curre nt Asse ts Cash and Cash Equivalents 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 Noncurrent Asse ts Short-term Investments Investments (including Real Estate) Capital Assets, net (note 6) T otal Noncurrent Assets TO TAL ASSETS LIABILITIES Curre nt Liabilitie s Accounts Payable Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Due to Primary Government Compensated Absences (current portion) T otal Current Liabilities Noncurrent 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 $1,389,560 1,154 84,165 210 138,129 1,935 1,615,153 273,389 8,132,055 8,405,444 10,020,597 46,118 187,782 1,374 63,588 139,058 437,920 85,007 85,007 522,927 8,132,055 135,240 79,419 1,150,956 $9,497,670 $118,587 480 498 210 119,775 14,000 1,389,047 1,403,047 1,522,822 2,100 210 2,310 0 2,310 1,273,635 122,736 124,141 $1,520,512 Waycross College Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets WAYCROSS COLLEGE STATEMENT of REVENUES, EXPENSES, and CHANGES in NET ASSETS for the Year Ended June 30, 2008 C ompon e n t Un i t W aycross C ol l e ge W aycross C ol l e ge Fou n dati on , In c. REVENUES Operat ing Revenues St udent T uit ion and Fees (net of allowance for doubt ful accou Less: Scholarship Allowances Gift s and Cont ribut ions Grant s and Cont ract s Federal Sales and Services Rent s and Royalt ies Auxiliary Ent erprises Bookst ore Food Services Parking/T ransport at ion 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 Depreciat ion P ayment s t o or on behalf of Waycross College T ot al Operat ing Expenses Operat ing Income (loss) NO NO PERATING REVENUES (EXPENSES ) St at e Appropriat ions Grant s and Cont ract s St at e Ot her 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 los 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 SETS 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 $1,546,022 (543,877) 1,186,407 10,026 750 450,679 43,756 7,429 22,553 3,386 2,727,131 1,067,880 2,035,975 987,620 40,002 54,740 695,163 336,243 1,448,008 433,182 7,098,813 (4,371,682) 4,083,250 20,436 47,899 22,942 34,188 (510) 4,208,205 (163,477) 280,475 280,475 116,998 9,380,672 0 9,380,672 $9,497,670 $0 34,924 30,320 65,244 41,630 6,144 18,629 66,403 (1,159) (132,689) (132,689) (133,848) 10,529 10,529 (123,319) 1,643,831 0 1,643,831 $1,520,512 Waycross College Annual Financial Report FY 2008 8 Statement of Cash Flows WAYCROSS COLLEGE STATEMENT OF CASH FLOWS For the Year Ended June 30, 2008 C ASH FLO W S FRO M O PERATING AC TIVITIES T uition and Fees Grants and Cont ract s (Exchange) Sales and Services Payments t o Suppliers Payments t o Employees Payments for Scholarships and Fellowships Auxiliary Ent erprise Charges: Bookst ore Food Services Parking/T ransport at ion Ot her Organizations Other Receipts (payments) Net Cash Provided (used) by Operat ing Activities C ASH 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 Other T han Capit al Purposes Net Cash Flows Provided by Non-capit al Financing Act ivit ies C ASH FLO W S FRO M C APITAL AND RELATED FINANC ING AC TIVITIES Capit al Grant s and Gift s Received Purchases of Capit al Asset s Net Cash used by Capital and Related Financing Act ivit ies C ASH FLO W S FRO M INVESTING AC TIVITIES Interest on Invest ment s Purchase of Invest ments Net Cash Provided (used) by Invest ing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year REC O NC ILIATIO N O F O PERATING LO SS TO NET C ASH PRO VIDED (USED) BY O PERATING AC TIVITIES: Operat ing Income (loss) Adjustments t o Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Act ivit ies Dep reciat ion Change in Assets and Liabilit ies: Receivables, net Invent ories Prepaid It ems Account s Payable Deferred Revenue Ot her Liabilit ies Compensated Absences Net Cash Provided (used) by Operat ing Activit ies ** NON-CASH INVEST ING, NON-CAPIT AL FINANCING, AND CAPIT AL AND RELAT ED FINANCING T RANSACT IONS Change in fair value of invest ment s recognized as a component of interest income Waycross College Annual Financial Report FY 2008 9 June 30, 2008 $1,025,439 1,171,151 10,026 (2,869,421) (3,057,731) (695,163) 425,134 47,188 7,429 22,493 8,309 (3,905,146) 4,083,250 19,719 89,277 4,192,246 280,475 (365,947) (85,472) 61,620 (9,368) 52,252 253,880 1,135,680 $1,389,560 ($4,371,682) 433,182 2,019 (28,824) (1,935) (6,659) 18,303 4,383 46,067 ($3,905,146) ($27,432) WAYCROSS COLLEGE NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, Waycross College is reporting the activity for the Waycross College Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Waycross College Annual Financial Report FY 2008 10 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 2008 11 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 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, 2008, 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 2008 12 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. Waycross College had accrued liability for compensated absences in the amount of $177,998 as of 7-1-2007. For FY2008, $156,853 was earned in compensated absences and employees were paid $110,786, for a net increase of $46,067. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $224,065. 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 2008 13 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, 2008 $79,419 $79,419 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, 2008 $201,762 626,058 12,790 310,346 $1,150,956 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. 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 Waycross College Annual Financial Report FY 2008 14 defined as non-operating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or non-operating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. Waycross College Annual Financial Report FY 2008 15 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, 2008, the carrying value of deposits was $1,346,613 and the bank balance was $1,605,603. Of the College's deposits, $1,605,603 were uninsured. Of these uninsured deposits, $1,605,603 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. Waycross College Annual Financial Report FY 2008 16 B. Investments At June 30, 2008, the carrying value of the College's investments was $314,734, 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-T erm Fund Legal Fund Diversified Fund $41,345 84,798 188,591 T otal Investment Pools $314,734 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 1.99 years. Of the College's total investment of $41,345 in the Short Term Fund, $41,179 is invested in debt securities. The Weighted Average Maturity of the Legal Fund is 3.84 years. Of the College's total investment of $84,798 in the Legal Fund, $84,035 is invested in debt securities. The Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the College's total investment of $188,591 in the Diversified Fund, $58,652 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. Waycross College Annual Financial Report FY 2008 17 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 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 Other Less Allowance for Doubt ful Account s Net Account s Receivable $2,347 6,641 1,154 210 77,209 87,561 2,032 $85,529 Note 4. Inventories Inventories consisted of the following at June 30, 2008: Bookst ore Food Services P hysical P lant Other T otal June 30, 2008 $118,063 5,925 13,958 183 $138,129 Note 5. Notes/Loans Receivable The College did not have Notes/Loans Receivable as of June 30, 2008. Waycross College Annual Financial Report FY 2008 18 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $358,790 0 236,255 595,045 1,343,722 11,276,571 1,193,893 1,071,552 0 1,172,543 0 16,058,281 867,078 4,616,737 800,244 906,303 0 1,033,994 0 8,224,356 7,833,925 $8,428,970 Addi ti o n s $0 21,900 21,900 Re ductions $0 236,255 236,255 292,304 35,472 22,846 350,622 23,270 331,489 21,981 23,042 33,400 433,182 (82,560) ($60,660) 19,325 19,325 19,325 19,325 0 $236,255 En di n g B a l a n ce 6/30/2008 $358,790 0 21,900 380,690 1,343,722 11,568,875 1,193,893 1,107,024 0 1,176,064 0 16,389,578 890,348 4,948,226 822,225 929,345 0 1,048,069 0 8,638,213 7,751,365 $8,132,055 Waycross College Annual Financial Report FY 2008 19 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Ot her Deferred Revenue T ot als June 30, 2008 $182,739 5,043 $187,782 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: O th e r Liabi li tie s Compensat ed Absences Total Lon g Te rm O bl i gati on s Beginning B al an ce July 1, 2007 Addi ti o n s Re ductions En di n g Balance June 30, 2008 $177,998 $177,998 $156,853 $156,853 $110,786 $110,786 $224,065 $224,065 C urrent Portion $139,058 $139,058 Note 9. Significant Commitments The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $383,500 as of June 30, 2008. This amount is reflected in the Reserve for Encumbrances in the Note for Unrestricted Net Assets in the accompanying basic financial statements. Note 10. Lease Obligations Waycross College is not obligated under any operating leases for the use of real property (land, buildings, and office facilities) and equipment, nor is the College 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 2008. Waycross College Annual Financial Report FY 2008 20 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 2008, 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 2008 2007 2006 100% 100% 100% $178,543 $169,460 $173,165 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 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 Waycross College Annual Financial Report FY 2008 21 with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $72,284 (8.13% or 8.15%) and $44,400 (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 2008 amounted to $5,351 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 2008 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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 2008 23 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, 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, 2008, Waycross College recognized as incurred $125,049 of expenditures, which was net of $40,696 of participant contributions. Waycross College Annual Financial Report FY 2008 24 Note 15. Natural Classifications with Functional Classifications The College's operating expenses by functional classification for FY2008 are shown below: Natural Classification F acult y St aff B enefit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses Inst ruct ion $1,067,880 69,923 291,336 7,834 36,573 234,788 2,432 $1,710,766 Functional Clas s ification FY2008 Academ ic Sup p o r t St udent Se r v ice s $0 441,792 117,906 $0 413,596 102,406 12,689 22,649 228,130 35,375 9,334 1,850 21,550 146,036 1,154 $858,541 $695,926 Inst it ut ional Sup p o r t $0 732,632 346,647 40,002 23,382 36,116 210,296 4,560 $1,393,635 Natural Classification F acult y St aff B enefit s Personal Services T ravel Scholarship s and Fellowship s U t ilit ies Sup p lies and Others Services Dep reciation T otal Exp enses P lant Operat ions & Maint enance Functional Clas s ification FY2008 Sc h o la r sh ip s & Fellowships A ux ilia r y Ent erprises $0 311,455 109,350 (3,434) 1,501 212,518 243,734 384,093 $0 693,313 $0 66,577 19,975 3,434 6,837 385,024 5,568 $1,259,217 $693,313 $487,415 T otal E x p e n ses $1,067,880 2,035,975 987,620 40,002 54,740 695,163 336,243 1,448,008 433,182 $7,098,813 Waycross College Annual Financial Report FY 2008 25 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, 2008, the Foundation distributed $18,629 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 $1.4 million. The $1.3 million corpus of the endowment 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 cash earnings may be used for academic scholarships. The realized gains on investments are set aside as a reserve. Investments are comprised of the following amounts at June 30, 2008: Certificates of Deposit BOR Short Term Fund SunTrust Diversified Fund Total Investments Cost $14,000 30,087 1,427,474 $1,471,561 Fair Value $14,000 29,789 1,359,258 $1,403,047 Waycross College Annual Financial Report FY 2008 26 UNIVERSITY OF WEST GEORGIA Financial Report For the Year Ended June 30, 2008 University of West Georgia Carrollton, Georgia Dr. Beheruz N. Sethna President James R. Sutherland Vice President for Business and Finance UNIVERSITY OF WEST GEORGIA ANNUAL FINANCIAL REPORT FY 2008 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......................................................................................................... 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 UNIVERSITY OF WEST GEORGIA Management's Discussion and Analysis Introduction University of West Georgia is one of the 35 institutions of higher education of the University System of Georgia. The University, located in Carrollton, Georgia, was founded in 1906, and remains second to none in relation to our theme of Educational Excellence in a Personal Environment. The wide range of educational opportunities offered by the University attracts a highly qualified faculty and a student body of more than 10,000 students each year. In general we continue to grow, as shown by the year to year comparison numbers that follow. West Georgia (UWG) offers a range of disciplinary, interdisciplinary and professional programs at the baccalaureate level. There are 109 programs of study, including 56 at the Bachelors level, 40 at the Masters and Specialists level, 11 Certificates, and two Doctoral program. During the 2004 fiscal year, the Southern Association of Colleges and Schools (SACS) reaffirmed UWG's accreditation for 10 years based on the February 2003 accreditation visit. In addition, the University has achieved national recognition in several areas including academic debate, facultydirected student research, and athletic competition. Students Students Faculty (Headcount) (FTE) FY2008 424 10,677 9,461 FY2007 430 10,163 8,941 FY2006 287 10,154 8,907 Overview of the Financial Statements and Financial Analysis University of West Georgia is proud to present its financial statements for fiscal year 2008. 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 2008 and FY 2007. 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 2008 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 Asse ts: Current Asset s Capit al Asset s, net Ot her Asset s Total As se ts June 30, 2008 $28,830,154 123,561,136 2,511,135 154,902,425 June 30, 2007 $22,542,662 124,826,968 1,632,081 149,001,711 Liabilitie s: Current Liabilit ies Noncurrent Liabilit ies Total Li abi l i ti e s 16,446,781 63,098,889 79,545,670 12,927,518 64,786,405 77,713,923 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 61,245,873 3,088,157 11,022,725 $75,356,755 61,113,208 2,133,422 8,041,158 $71,287,788 The total assets of the institution increased by $5,900,714. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $5,397,495 in Cash and Cash Equivalents and the balance was in Prepaids and Non-current Cash. The Capital Asset, net category decreased by $ ($1,265,832), of which $455,000 was from a razed residence hall and the remainder in equipment. The total liabilities for the year increased by $1,831,747. The combination of the increase in total assets of $5,900,714 and the increase in total liabilities of $1,831,747 yields an increase in University of West Georgia Annual Financial Report FY 2008 2 total net assets of $4,068,967. The increase in total net assets is primarily in the category of Unrestricted Net Assets of $2,981,567 and Restricted Expendable Net Assets of $954,735. 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, 2008 June 30, 2007 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 $68,279,187 115,308,363 (47,029,176) 47,989,235 960,059 3,108,908 4,068,967 71,287,788 0 71,287,788 $75,356,755 $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 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 2008 3 Revenue by Source For the Years Ended June 30, 2008 and June 30, 2007 Operat ing Revenue T uit ion and Fees 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 Gift s Invest ment Income Other T ot al Nonoperat ing Revenue Capit al Gift s and Grant s St at e Ot her Capit al Gift s and Grant s T ot al Capit al Gift s and Grant s T ot al Revenues June 30, 2008 $29,764,091 11,854,837 394,268 25,023,703 1,242,288 68,279,187 48,576,377 1,531,698 1,142,250 (327,062) 50,923,263 3,108,908 0 3,108,908 $122,311,358 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 Expenses (By Functional Classification) For the Years Ended June 30, 2008 and June 30, 2007 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, 2008 $41,902,840 1,001,673 187,015 14,099,789 7,701,243 11,120,730 10,303,180 4,916,218 24,075,675 0 115,308,363 2,934,028 $118,242,391 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 Operating revenues increased by $7,948,209 in fiscal 2008. Tuition & Fees included an 11.4% increase, and revenues increased in Grants and Contracts, Auxiliary and Other categories. University of West Georgia Annual Financial Report FY 2008 4 The Auxiliary revenue increase of $2,365,390 is a result of an overall 5% increase in student population and additional increases in student fees. Non-operating revenues increased by $3,849,626 for the year primarily due to an increase of $3,929,437 in State Appropriations. The compensation and employee benefits category increased by $4,331,454 and primarily affected the Instruction, Academic Support and Institutional Support categories. The increase reflects the addition of staff, merit increases and an increased cost of health insurance for the employees of the institution. Utilities increased by $185,793 during the past year. The increase was primarily associated with increased energy prices that were experienced throughout fiscal year 2008 and affected the Plant Operations and Maintenance category. Statement of Cash Flows The final statement presented by the University of West Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2008 and 2007, Condensed Cash P rovided (used) By: Operat ing Act ivities Non-capital Financing Activit ies Capit al and Relat ed Financing Act ivit ies Invest ing Act ivit ies Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2008 ($38,324,627) 50,271,002 (6,754,601) 873,688 6,065,462 19,212,577 $25,278,039 June 30, 2007 ($36,213,975) 45,866,787 (6,148,225) 1,246,728 4,751,315 14,461,262 $19,212,577 University of West Georgia Annual Financial Report FY 2008 5 Capital Assets During fiscal year 2008, the University recorded $4,355,738 in capital asset additions. These additions included $2,083,059 in building improvements (library renovations $831,636, education center roof replacement $581,060, Boyd Building improvements $253,308, and other$417,055), $1,520,307 in equipment purchases, and $752,372 in library collections. Additionally, $1,930,366 in net additions was recorded to the construction work in progress account. These additions consisted primarily of projects funded through Georgia State Financing and Investment Commission (GSFIC), and the majority was for the construction and renovation on the Callaway Building. Overall, the Capital Asset, net category decreased by ($1,265,832), primarily due to the excess of the current year depreciation expense charge over capital asset additions. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements. Long Term Debt and Liabilities University of West Georgia had Long-Term Debt and Liabilities of $65,013,064 of which $2,789,175 was reflected as current liability at June 30, 2008. 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 FY2008. The University of West Georgia Foundation, Inc. had investments of $22.9 million as of December 31, 2007, and longterm debt of $38.8 million. The UWG Real Estate Foundation, Inc. had long-term debt of $30.6 million in the form of one bond issue. Details are available in Note 1, Summary of Significant Accounting Policies and Note 16, Component Units. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations which have a global effect on virtually all types of business operations. Dr. Beheruz N. Sethna, President University of West Georgia University of West Georgia Annual Financial Report FY 2008 6 Statement of Net Assets UN IV ER S IT Y O F W ES T G EO R G IA S TA T EM EN T O F N ET A S S ET S June 30, 2008 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 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 F in an cial A ssist an ce R eceiv ables - O t h er N et In v est m en t in C ap it al L eases P ledges R eceiv 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 U n ive rs ity o f W e st G e orgia U n i ve rs i ty o f W e st G e orgia Fo u n da ti o n , In c. $ 2 4 ,6 1 0 ,0 7 2 8 7 3 ,4 3 7 1 8 7 ,3 8 9 1 ,1 9 9 ,0 5 0 9 7 7 ,3 5 5 9 8 2 ,8 5 1 2 8 ,8 3 0 ,1 5 4 $ 2 ,9 9 0 ,1 9 9 5 ,7 4 0 ,4 5 7 7 5 ,3 4 0 8 2 7 ,9 9 1 1 ,3 7 0 ,9 3 0 1 4 ,0 7 8 1 1 ,0 1 8 ,9 9 5 N on cu rre n t A sse 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 R eal E st at e) N o t es Receiv able, n et N et In v est m en t in C ap it al L eases P ledges R eceiv 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 te 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 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 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 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 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 6 6 7 ,9 6 7 7 0 ,5 7 0 1 ,7 7 2 ,5 9 8 1 2 3 ,5 6 1 ,1 3 6 1 2 6 ,0 7 2 ,2 7 1 1 5 4 ,9 0 2 ,4 2 5 3 ,0 6 2 ,1 3 1 4 6 5 ,0 3 5 8 3 7 ,4 4 4 8 4 7 ,3 9 0 7 ,2 1 5 ,9 4 1 2 1 1 ,6 3 6 1 ,0 1 8 ,0 2 9 1 ,4 9 9 ,1 6 6 1 ,2 9 0 ,0 0 9 1 6 ,4 4 6 ,7 8 1 6 0 ,8 1 6 ,0 9 7 8 7 5 ,0 0 0 1 ,4 0 7 ,7 9 2 6 3 ,0 9 8 ,8 8 9 7 9 ,5 4 5 ,6 7 0 6 1 ,2 4 5 ,8 7 3 3 ,0 8 8 ,1 5 7 1 1 ,0 2 2 ,7 2 5 $ 7 5 ,3 5 6 ,7 5 5 1 7 ,1 1 0 ,4 9 6 3 1 ,4 0 6 ,6 8 7 1 ,3 3 3 ,8 3 6 6 ,4 1 1 ,0 7 4 1 ,0 5 2 ,9 8 6 5 7 ,3 1 5 ,0 7 9 6 8 ,3 3 4 ,0 7 4 5 0 9 ,5 4 9 2 2 0 ,9 0 8 8 7 0 ,0 0 0 5 ,3 0 3 ,5 5 2 6 ,9 0 4 ,0 0 9 3 1 ,4 7 9 ,4 3 8 6 4 ,4 1 9 1 ,1 8 0 ,0 3 1 3 2 ,7 2 3 ,8 8 8 3 9 ,6 2 7 ,8 9 7 7 0 9 ,6 5 6 1 0 ,3 5 0 ,0 6 1 1 7 ,8 4 7 ,5 4 4 (2 0 1 ,0 8 4 ) $ 2 8 ,7 0 6 ,1 7 7 C om pon e n t Un it U W G R e a l Es ta te Fo u n da ti o n , In c. $ 4 ,0 9 3 ,7 5 6 1 2 ,8 1 9 3 2 0 ,5 1 3 4 ,4 2 7 ,0 8 8 2 9 ,7 8 5 ,5 7 5 1 7 ,7 0 0 7 3 1 ,6 5 3 3 0 ,5 3 4 ,9 2 8 3 4 ,9 6 2 ,0 1 6 5 8 4 ,4 3 2 3 9 0 ,0 0 0 9 7 4 ,4 3 2 2 ,1 1 9 ,1 3 4 3 0 ,1 6 5 ,4 2 4 3 2 ,2 8 4 ,5 5 8 3 3 ,2 5 8 ,9 9 0 3 0 0 ,0 1 7 1 ,4 0 3 ,0 0 9 $ 1 ,7 0 3 ,0 2 6 University of West Georgia Annual Financial Report FY 2008 7 Statement of Revenues, Expenses and Changes in Net Assets UNIVERSITYOFWEST GEORGIA STATEMENT of REVENUES, EXPENSES, andCHANGES in NET ASSETS for the Year Ended June 30, 2008 Component Unit University of West Georgia University of West Georgia Foundation, Inc. REVENUES Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Gifts and Contributions Endowment Income (per spending plan) Grants and Contracts Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Interest and Dividend income Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on behalf of University of West Georgia Total Operating Expenses Operating Income (loss) $37,360,171 (7,596,080) 9,986,155 560,552 1,308,130 394,268 22,644 9,301,004 3,951,557 5,351,913 1,299,267 1,741,445 2,831,354 547,163 1,219,644 68,279,187 26,557,060 28,523,370 16,185,043 317,413 1,037,847 6,138,899 3,439,610 26,037,631 7,071,490 115,308,363 (47,029,176) $0 3,554,729 810,951 523,522 1,702,410 475,091 7,066,703 508,572 131,396 5,129 844,755 94,653 1,727,291 3,311,796 3,754,907 Component Unit UWG Real Estate Foundation, Inc. $0 90,000 1,536,510 1,626,510 133,328 71,000 204,328 1,422,182 University of West Georgia Annual Financial Report FY 2008 8 Statement of Revenues, Expenses and Changes in Net Assets, Continued UNIVERSITYOF WEST GEORGIA STATEMENTof REVENUES, EXPENSES, andCHANGES in NETASSETS for the Year Ended June 30, 2008 Component Unit Component Unit University of West Georgia University of West Georgia Foundation, Inc. UWG Real Estate 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 48,576,377 1,531,698 1,142,250 (2,934,028) (327,062) 47,989,235 960,059 3,108,908 3,108,908 4,068,967 71,287,788 0 71,287,788 $75,356,755 457,931 (1,791,389) (1,333,458) 2,421,449 198,726 198,726 2,620,175 26,086,002 0 26,086,002 $28,706,177 30,963 (1,416,336) (1,385,373) 36,809 0 36,809 1,666,217 0 1,666,217 $1,703,026 University of West Georgia Annual Financial Report FY 2008 9 Statement of Cash Flows UNIVERS ITY OF WES T GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 (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 m ent s Int erest on Invest m ent s P urchase of Invest ment s Net Cash P rovided (used) by Invest ing Act ivit ies Net Increase/Decrease in Cash Cash and Cash Equivalent s - Beginning of year Cash and Cash Equivalent s - End of Year June 30, 2008 $30,976,062 12,134,364 394,268 (46,861,584) (54,954,486) (6,138,899) (626,808) 486,292 9,356,305 4,050,965 5,156,436 1,403,028 1,767,440 2,956,329 533,488 1,042,173 (38,324,627) 48,576,377 9,542 1,685,083 50,271,002 3,108,908 (5,530,984) (1,398,497) (2,934,028) (6,754,601) 675,445 1,142,250 (944,007) 873,688 6,065,462 19,212,577 $25,278,039 University of West Georgia Annual Financial Report FY 2008 10 Statement of Cash Flows, Continued UNIVERS ITY OF WES T GEORGIA S TATEMENT OF CAS H FLOWS For the Year Ended June 30, 2008 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 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 Univers ity of W es t Georgia had no non-cas h trans actions during fis cal 2008. June 30, 2008 ($47,029,176) 7,071,490 (97,552) (58,657) (535,796) (140,516) 1,220,475 1,160,585 7,077 77,443 ($38,324,627) University of West Georgia Annual Financial Report FY 2008 11 UNIVERSITY OF WEST GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 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 FY2008, University of West Georgia is reporting the activity for the University of West Georgia Foundation, Inc. and the UWG Real Estate Foundation, Inc. See Note 16, Component Units, for Foundation notes. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and University of West Georgia Annual Financial Report FY 2008 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. University of West Georgia Annual Financial Report FY 2008 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, 2008, GSFIC did not transfer any 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 2008 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. University of West Georgia had accrued liability for compensated absences in the amount of $2,620,358 as of 7-1-2007. For FY2008, $1,964,465 was earned in compensated absences and employees were paid $1,887,022, for a net increase of $77,443. The ending balance as of 6-30-2008 in accrued liability for compensated absences was $2,697,801. 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 2008 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, 2008 $869,671 1,939,992 278,494 $3,088,157 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, 2008 $9,381,066 6,686,515 129,803 (5,174,659) $11,022,725 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. University of West Georgia Annual Financial Report FY 2008 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. University of West Georgia Annual Financial Report FY 2008 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, 2008, the carrying value of deposits was $11,587,173 and the bank balance was $14,492,615. Of the University's deposits, $14,191,530 were uninsured. Of these uninsured deposits, $14,191,440 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $90 were uncollateralized. B. Investments At June 30, 2008, the carrying value of the University's investments was $14,615,748, 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: University of West Georgia Annual Financial Report FY 2008 18 Investment Pools Board of Regents Short-T erm Fund Sub T otal $8,075,521 8,075,521 Office of T reasury and Fiscal Services Georgia Fund 1 Sub T otal 6,540,227 6,540,227 T otal Investment Pools $14,615,748 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 40 days. Interest rate risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk. The Weighted Average Maturity of the Short Term Fund is 1.99 years. Of the University's total investment of $8,075,521 in the Short Term Fund, $8,043,218 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 2008 19 Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2008: June 30, 2008 St udent T uit ion and Fees Auxiliary Ent erprises and Ot her Operat ing Act ivit ies Federal Financial Assist ance Other Less Allowance for Doubt ful Account s Net Account s Receivable $598,031 629,705 187,389 611,384 2,026,509 640,070 $1,386,439 Note 4. Inventories Inventories consisted of the following at June 30, 2008: June 30, 2008 Bookst ore P hysical P lant T otal $842,553 134,802 $977,355 Note 5. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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, 2008 the allowance for uncollectible loans was approximately $0. University of West Georgia Annual Financial Report FY 2008 20 Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Land Construction Work-in-Progress T otal Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: In frast ruct ure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Assets Being Depreciated Less: Accumulated Depreciation In frast ruct ure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections T otal Accumulated Depreciation T otal Capital Assets, Being Depreciated, Net Capital Assets, net Beginning B al an ce s 7/1/2007 $554,184 4,106,135 4,660,319 3,144,580 88,505,752 2,353,312 17,008,531 65,795,927 14,859,551 13,516 191,681,169 323,891 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 Addi ti o n s $0 4,676,866 4,676,866 Re ductions $0 2,746,500 2,746,500 En di n g B al an ce 6/30/2008 $554,184 6,036,501 6,590,685 2,083,059 1,520,307 752,372 4,355,738 2,254,000 2,216,164 26,903 4,497,067 3,144,580 88,334,811 2,353,312 16,312,674 65,795,927 15,585,020 13,516 191,539,840 100,627 2,840,096 115,038 1,259,190 2,056,558 699,643 338 7,071,490 (2,715,752) $1,961,114 1,798,504 2,191,214 26,903 4,016,621 480,446 $3,226,946 424,518 43,513,302 1,011,307 11,202,996 6,507,953 11,900,602 8,711 74,569,389 116,970,451 $123,561,136 University of West Georgia Annual Financial Report FY 2008 21 Note 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2008: P repaid T uit ion and Fees Research Ot her Deferred Revenue T ot als June 30, 2008 $4,568,345 698,911 1,948,685 $7,215,941 Note 8. Long-Term Liabilities Long-term liability activity for the year ended June 30, 2008 was as follows: Leases Lease Obligations Beginning Balance July 1, 2007 $63,713,760 Additions $0 Reductions Ending Balance June 30, 2008 $1,398,497 $62,315,263 Other Liabilities Compensated Absences Total 2,620,358 2,620,358 1,964,465 1,964,465 1,887,022 1,887,022 2,697,801 2,697,801 Total Long Term Obligations $66,334,118 $1,964,465 $3,285,519 $65,013,064 Current Portion $1,499,166 1,290,009 1,290,009 $2,789,175 Note 9. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,993,595 as of June 30, 2008. Of this amount, institution projects account for $1,879,021 and GSFIC projects are $2,114,574. This amount is not reflected in the accompanying basic financial statements. The major institutional projects are: Row Hall elevators of $754,200, chiller for Z6 of $169,000 and Callaway building of $116,034. The major GSFIC project is the Callaway addition and renovation of $1,550,931. 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 for the acquisition of real property. University of West Georgia Annual Financial Report FY 2008 22 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 2008 were $4,821,751 of which $2,934,028 represented interest and $489,226 represented executory costs. Total principal paid on capital leases was $1,398,497 for the fiscal year ended June 30, 2008. Interest rates range from 3.5 percent to 5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings Equipment Total Assets Held Under Capital Lease $56,328,623 2,959,351 $59,287,974 Certain capital leases provide for renewal and/or purchase options. Two separate capital leases for student residence halls are with the University of West Georgia Foundation, Inc. The University Suites lease has $12,028,822 principal outstanding and the Arbor View Apartments lease has $19,800,481 principal outstanding as of June 30, 2008. The University Center is being leased from the UWG Real Estate Foundation, Inc, UWG Campus Center, LLC. The remaining principal balance on this lease is $30,106,087 as of June 30, 2008. University of West Georgia also has a capital lease for PBX equipment with an outstanding principal balance at June 30, 2008 in the amount of $379,873. 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 20092013. 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. 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, 2008, were as follows: University of West Georgia Annual Financial Report FY 2008 23 Year Ending June 30: 2009 2010 2011 2012 2013 2014 t hrough 2018 2019 t hrough 2023 2024 t hrough 2028 2029 t hrough 2033 2034 t hrough 2038 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 $4,904,921 4,762,307 4,739,579 4,787,435 4,842,693 25,070,387 26,594,701 28,281,531 16,723,828 4,190,000 124,897,382 42,577,601 20,004,518 $62,315,263 $323,902 245,653 108,816 46,238 11,304 $735,913 University of West Georgia's FY2008 expense for rental of real property and equipment under operating leases was $293,330. 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 2008, 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: University of West Georgia Annual Financial Report FY 2008 24 Fiscal Year Percentage Contributed Required Contribution 2008 2007 2006 100% 100% 100% $2,534,743 $2,372,082 $2,242,017 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. 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 University of West Georgia Annual Financial Report FY 2008 25 the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2008, for employees covered by ERS was $74,151. The University's total payroll for all employees was $55,080,430. For the year ended June 30, 2008 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, 2008, 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. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $7,856 $8,230 $8,229 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 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. University of West Georgia Annual Financial Report FY 2008 26 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 2008, the employer contribution was 8.13% for the first six months and 8.15% 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 $1,776,144 (8.13% or 8.15%) and $1,091,061 (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 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 2008 amounted to $68,086 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. University of West Georgia Annual Financial Report FY 2008 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. 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, a fully insured HSA/High Deductible PPO healthcare plan and 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. 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. University of West Georgia Annual Financial Report FY 2008 28 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, 2008. 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. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were 399 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, University of West Georgia recognized as incurred $1,725,419 of expenditures, which was net of $563,376 of participant contributions. University of West Georgia Annual Financial Report FY 2008 29 Note 15. Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2008 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Instruction $25,910,858 4,176,681 7,304,883 494,744 96,156 119,481 2,780,957 1,019,080 $41,902,840 Research $261,698 272,653 80,164 27,338 44,800 381 203,570 111,069 $1,001,673 Functional Classification FY2008 Public Service Academic Support $0 137,460 37,521 $319,453 6,663,884 1,792,730 4,147 212,311 94 7,793 56,055 3,729,485 1,325,871 $187,015 $14,099,789 Student Services $18,390 3,831,925 898,668 110,803 9,545 28,727 1,902,242 900,943 $7,701,243 Institutional Support $31,001 5,307,927 3,591,473 316,100 76,005 34,980 1,588,451 174,793 $11,120,730 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Total Expenses Plant Operations & Maintenance Functional Classification FY2008 Scholarships & Fellowships Auxiliary Enterprises Total Expenses $0 4,431,388 1,489,856 (2,427,710) 12,200 3,296,193 2,655,293 845,960 $0 4,916,218 $15,660 3,701,452 989,748 2,429,023 100,299 1,072,180 (96,301) 13,169,840 2,693,774 $26,557,060 28,523,370 16,185,043 317,413 1,037,847 6,138,899 3,439,610 26,037,631 7,071,490 $10,303,180 $4,916,218 $24,075,675 $115,308,363 University of West Georgia Annual Financial Report FY 2008 30 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, 2007 through December 31, 2007. The due from amount on the Foundation's Statement of Net Assets does not agree with the University's statement due to the difference in fiscal year ends. Investments carried as Net Investment in Capital Leases and valued at $32.2 million and the associated bond debt of $32.3 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, 2007, the Foundation distributed $1,727,291 to the University for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Office of Development and Alumni Services at 1901 Maple Street, Carrollton Georgia 30118. Investments for Component Units: University of West Georgia Foundation, Inc. holds endowment investments in the amount of $22.9 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 accounts. University of West Georgia Annual Financial Report FY 2008 31 The University of West Georgia Foundation, Inc. investments was comprised of the following amounts at December 31, 2007: Cash held by investment organization Certificates of Deposit Government and Agency Securities Equity Securities and Options M utual Funds Total Investments Cost $4,828,077 1,325,581 4,489,325 10,597,237 286,490 $21,526,710 Fair Value $4,828,077 1,325,581 4,590,574 11,818,517 288,204 $22,850,953 Capital Assets for Component Units: The University of West Georgia Foundation, Inc. holds the following Capital Assets as of December 31, 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 Dec. 31, 2007 $2,320,036 604,639 2,924,675 3,786,134 3,786,134 299,735 3,486,399 $6,411,074 Long-term Liabilities for Component Units: Long-term liability activity for the Foundation for the year ended December 31, 2007 was as follows: Beginning Balance Jan. 1, 2007 Additions Reductions Ending Balance Dec. 31, 2007 Amounts due within One Year Liabilities under split interest agreement Notes and Loans Payable Revenue/M ortgage Bonds Payable Total Long Term Liabilities $56,377 6,095,000 33,189,181 $39,340,558 $17,976 1,488,583 $1,506,559 $9,934 1,100,000 839,743 $1,949,677 $64,419 6,483,583 32,349,438 $38,897,440 $0 5,303,552 870,000 $6,173,552 University of West Georgia Annual Financial Report FY 2008 32 Notes and Loans Payable: During 2007, the Foundation renewed its mortgage collateralized by an apartment complex purchased by the Foundation after making a principal payment of $1,100,000. The principal amount of the loan was $4,600,000. The mortgage note payable is payable in monthly installments of interest computed at the London Interbank Rate (LIBOR) plus 1.20% per annum adjusted monthly as of the first business day of each month. At December 31, 2007 the rate was 6.42%. Principal is due at September 29, 2008. In October 2007, The Foundation obtained a mortgage collateralized by real estate in order to construct a parking lot. The principal balance at December 31, 2007 was $1,488,583. The mortgage note payable is payable in six monthly installments of interest and fifty four payments of principal and interest based upon a twenty year amortization schedule. The final payment shall include all principal and interest due. Interest is computed at the rate of London Interbank rate (LIBOR) plus 1.00% per annum adjusted monthly as of the first business day of each month. At December 31, 2007 the rate was 6.22%. Principal is due October 19, 2012. The debt payment schedule below reflects an accelerated payment schedule by the Foundation. Annual debt service requirements to maturity for Notes and Loans payable are as follows: Year ending December 31: 2008 1 2009 2 2010 3 2011 4 Principal Notes and Loans Payable Interest $5,303,552 482,975 509,833 187,223 $6,483,583 $288,816 52,115 25,258 2,245 $368,434 Total $5,592,368 535,090 535,091 189,468 $6,852,017 Revenue Bonds Payable: Student Housing Bonds are issued by the University of West Georgia Foundation, Inc. to finance student housing on university property. The bonds, serial and term, are secured by pledges of gross receipts from student housing at University of West Georgia. Series 2004A bonds were issued on October 1, 2004 in the amount of $19,175,000 to fund the Construction of Phase II. The bonds bear interest rates ranging from 3.0% to 5.0%. The balance of the obligation as of 12/31/2007 is $18,900,000. 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 rate of 3.4%. The balance of the obligation as of 12/31/2007 is $0. University of West Georgia Annual Financial Report FY 2008 33 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%. The balance of the obligation as of 12/31/2007 is $13,130,000. Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending December 31: 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 Bond Premium/(Discount) Princip al $870,000 910,000 1,000,000 1,040,000 1,075,000 6,025,000 7,430,000 9,320,000 4,360,000 32,030,000 319,438 $32,349,438 Bonds Payable Interest $1,391,369 1,363,344 1,328,819 1,294,569 1,253,494 5,598,937 4,232,731 2,342,683 303,107 19,109,050 $19,109,050 Total $2,261,369 2,273,344 2,328,819 2,334,569 2,328,494 11,623,937 11,662,731 11,662,683 4,663,107 51,139,050 319,438 $51,458,488 UWG Real Estate Foundation, Inc. UWG Real Estate Foundation, Inc. (Foundation) is a legally separate, tax-exempt component unit of 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 Net Investment in Capital Leases and valued at $30.1 million and the associated long-term bond debt of $30.6 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. University of West Georgia Annual Financial Report FY 2008 34 Capital Assets for Component Units: The UWG Real Estate Foundation, Inc. holds $17,700 in Construction in Progress as of June 30, 2008. 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. Series 2004 bonds were issued on December 20, 2004 in the amount of $30,720,000 to fund the construction of Campus Center. The bonds bear interest rates ranging from 3.0% to 5.25%. The balance of the obligation as of 06/30/2008 is $30,360,000. Changes in long-term liabilities for UWG Real Estate Foundation, Inc. for the fiscal year ended June 30, 2008 are shown below: Beginning Balance July 1, 2007 Additions Reductions Ending Balance June 30, 2008 Amounts due within One Year Revenue/Mortgage Bonds Payable Total Long Term Liabilities $30,922,900 $30,922,900 $0 $367,476 $0 $367,476 $30,555,424 $30,555,424 Debt Service Obligations Annual debt service requirements to maturity for revenue bonds payable are as follows: Year ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 Bond Premium/(Discount) Principal Bonds Payable Interest $390,000 425,000 465,000 505,000 545,000 3,425,000 4,955,000 7,210,000 8,765,000 3,675,000 30,360,000 195,424 $30,555,424 $1,410,383 1,395,545 1,378,326 1,360,770 1,342,395 6,360,389 5,493,388 3,954,888 1,928,620 174,207 24,798,911 $24,798,911 Total $1,800,383 1,820,545 1,843,326 1,865,770 1,887,395 9,785,389 10,448,388 11,164,888 10,693,620 3,849,207 55,158,911 195,424 $55,354,335 $390,000 $390,000 University of West Georgia Annual Financial Report FY 2008 35 UNIVERSITY SYSTEM OF GEORGIA Consolidated Statutory Reporting (Non-GAAP Basis) For the Year Ended June 30, 2008 UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets Total Assets $371,725,029.47 56,626,714.11 75,573,639.97 204,888,180.62 7,247,639.00 41,170,614.76 4,733,542.00 5,543,577.60 $767,508,937.53 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Accrued Payroll Encumbrance Payable 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 Tuition Carry-Forward Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $22,748,782.74 2,906,076.67 14,689,046.68 147,608,441.54 105,694,003.82 96,015.58 209,459,209.56 15,295,037.90 12,234,773.67 $530,731,388.16 $6,694,149.08 21,979,729.29 51,154,871.97 12,539,684.95 105,792,974.28 11,287,655.86 3,173,177.35 10,664,996.97 3,549,074.23 7,365,016.53 2,575,910.43 308.43 $236,777,549.37 $767,508,937.53 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, 2008 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available ORIGINAL BUDGET FINAL BUDGET ACTUAL $2,115,477,060.00 20,337,799.00 1,417,322,782.00 1,514,587,141.00 $5,067,724,782.00 $5,067,724,782.00 $2,121,723,333.00 20,337,799.00 1,525,579,153.00 1,776,169,789.00 $5,443,810,074.00 $5,443,810,074.00 $2,121,723,333.00 20,337,799.00 1,368,958,572.97 1,677,654,977.10 $5,188,674,682.07 209,946,250.18 $5,398,620,932.25 VARIANCE $0.00 0.00 (156,620,580.03) (98,514,811.90) ($255,135,391.93) 209,946,250.18 ($45,189,141.75) EXPENDITURES Advanced Technology Development Center/EDI Agricultural Experiment Station Athens Tifton Vet Labs Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Eminent Scholar Endowment Trust Fund Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute MCG 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 $27,974,712.00 75,377,483.00 4,882,330.00 58,486,061.00 987,793.00 5,826,331.00 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 130,786,385.00 33,181,112.00 1,731,994.00 2,761,521.00 884,273.00 14,587,799.00 45,537,501.00 7,683,800.00 36,745,015.00 7,370,710.00 46,081,344.00 314,737.00 4,530,679,466.00 3,384,254.00 7,202,585.00 $5,067,724,782.00 $0.00 $29,574,712.00 86,015,877.00 6,268,386.00 68,438,718.00 1,170,484.00 7,706,916.00 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 154,736,385.00 33,181,112.00 1,786,536.00 4,316,521.00 884,273.00 14,587,799.00 44,851,896.00 7,762,975.00 36,745,015.00 6,470,710.00 45,856,344.00 314,737.00 4,852,246,263.00 3,384,254.00 12,252,585.00 $5,443,810,074.00 $0.00 $27,175,514.08 80,354,212.99 5,908,662.02 65,093,392.11 1,008,149.45 7,645,793.68 500,000.00 3,062,152.00 18,069,614.00 3,625,810.00 149,869,704.44 33,181,112.00 1,420,923.86 3,684,272.67 883,081.61 14,587,490.57 44,657,879.92 8,442,787.75 36,735,472.49 6,443,433.25 45,762,009.90 314,737.00 4,629,055,370.60 3,384,254.00 10,068,145.59 $5,200,933,975.98 $197,686,956.27 $2,399,197.92 5,661,664.01 359,723.98 3,345,325.89 162,334.55 61,122.32 0.00 0.00 0.00 0.00 4,866,680.56 0.00 365,612.14 632,248.33 1,191.39 308.43 194,016.08 (679,812.75) 9,542.51 27,276.75 94,334.10 0.00 223,190,892.40 0.00 2,184,439.41 $242,876,098.02 $197,686,956.27 UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 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 Mandatory Transfers Mandatory Transfers - Restricted Non-Mandatory Transfers Other Additions (Deletions) Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Capital Outlay Department Sales & Services Early Retirement Program Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Forward Property Reserves Total Reserved Unreserved Surplus Total Fund Balance 230,386,955.87 1,968,440.84 4,680,279.06 (3,344,349.25) 13,617.57 (1,968,440.84) 1,066,226.00 (3,838.16) 16,037,024.72 200,927.47 (209,946,250.18) $236,777,549.37 $6,694,149.08 21,979,729.29 7,365,016.53 51,154,871.97 3,173,177.35 12,539,684.95 105,792,974.28 11,287,655.86 10,664,996.97 3,549,074.23 $234,201,330.51 2,576,218.86 $236,777,549.37 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. Advanced Technology Development Center State Appropriation State General Funds Other Funds Total Advanced Technology Development Center Agricultural Experiment Station State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Agricultural Experiment Station Athens and Tifton Veterinary Laboratories State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Athens and Tifton Veterinary Lab Cooperative Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Cooperative Extension Service Forestry Cooperative Extension State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Cooperative Extension Original Appropriation $ 15,099,712.00 12,875,000.00 $ 27,974,712.00 $ Original Appropriation $ 42,936,221.00 $ 22,000,000.00 10,441,262.00 $ 75,377,483.00 $ Original Appropriation $ 62,192.00 $ 4,820,138.00 $ 4,882,330.00 $ Original Appropriation $ 35,391,924.00 13,000,000.00 10,094,137.00 $ 58,486,061.00 $ Original Appropriation $ 687,388.00 $ 200,000.00 100,405.00 $ 987,793.00 $ UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances 15,099,712.00 14,475,000.00 29,574,712.00 $ 15,099,712.00 $ 12,042,668.25 27,142,380.25 $ 0.00 $ 0.00 0.00 $ 15,099,712.00 $ 12,042,668.25 27,142,380.25 $ 0.00 $ (2,432,331.75) (2,432,331.75) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 15,099,712.26 $ 12,075,801.82 (0.26) $ 2,399,198.18 (0.26) $ (33,133.57) 16,806.44 8,410.50 27,175,514.08 $ 2,399,197.92 $ (33,133.83) $ 25,216.94 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.26 $ 46,268.01 46,268.27 $ Other Adjustments 16,806.44 21,544.94 38,351.38 Total Program Fund Balances 42,936,221.00 $ 25,000,000.00 18,079,656.00 86,015,877.00 $ 42,936,221.00 $ 23,791,106.14 14,305,679.24 81,033,006.38 $ $ 7,974,091.98 709,197.47 8,683,289.45 $ 42,936,221.00 $ 31,765,198.12 15,014,876.71 89,716,295.83 $ 0.00 $ 6,765,198.12 (3,064,779.29) 3,700,418.83 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 42,936,221.00 $ 0.00 $ 0.00 $ 72,724.38 23,249,351.41 14,168,640.58 1,750,648.59 3,911,015.42 8,515,846.71 846,236.13 0.00 6,830.63 80,354,212.99 $ 5,661,664.01 $ 9,362,082.84 $ 79,555.01 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 363.40 363.40 $ 72,724.38 8,515,846.71 853,430.16 9,442,001.25 Other Adjustments Program Fund Balances 62,192.00 $ 6,120,138.00 86,056.00 6,268,386.00 $ 62,192.00 $ 5,771,956.96 73,161.01 5,907,309.97 $ 0.00 $ 2,293,261.29 35,099.40 2,328,360.69 $ 62,192.00 $ 8,065,218.25 108,260.41 8,235,670.66 $ 0.00 $ 1,945,080.25 22,204.41 1,967,284.66 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 61,862.00 $ 330.00 $ 330.00 $ (330.00) 5,776,490.08 70,309.94 343,647.92 15,746.06 2,288,728.17 37,950.47 0.00 330.00 5,908,662.02 $ 359,723.98 $ 2,327,008.64 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 (330.00) (330.00) $ 0.00 2,288,728.17 37,950.47 2,326,678.64 Other Adjustments Program Fund Balances 35,391,924.00 19,000,000.00 14,046,794.00 68,438,718.00 $ 35,391,924.00 $ 18,567,741.73 11,571,359.19 65,531,024.92 $ 0.00 $ 1,914,732.87 240,190.33 2,154,923.20 $ 35,391,924.00 $ 20,482,474.60 11,811,549.52 67,685,948.12 $ 0.00 $ 1,482,474.60 (2,235,244.48) (752,769.88) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 35,391,924.00 $ 0.00 $ 0.00 $ 26,629.73 18,014,357.14 11,687,110.97 985,642.86 2,359,683.03 2,468,117.46 124,438.55 0.00 8,349.92 65,093,392.11 $ 3,345,325.89 $ 2,592,556.01 $ 34,979.65 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 (828.00) (828.00) $ Other Adjustments 26,629.73 2,468,117.46 131,960.47 2,626,707.66 Total Program Fund Balances 687,388.00 $ 350,000.00 133,096.00 1,170,484.00 $ 687,388.00 $ 317,731.81 16,477.69 1,021,597.50 $ 0.00 $ 29,896.06 38,801.37 68,697.43 $ 687,388.00 $ 347,627.87 55,279.06 1,090,294.93 $ 0.00 $ (2,372.13) (77,816.94) (80,189.07) $ 687,388.00 $ 287,675.19 33,086.26 1,008,149.45 $ 0.00 $ 62,324.81 100,009.74 162,334.55 $ 0.00 $ 59,952.68 22,192.80 82,145.48 $ 145.68 0.00 300.00 445.68 0.00 $ 0.00 0.00 0.00 $ 145.68 59,952.68 22,492.80 82,591.16 Transfers 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 0.00 Transfers 0.00 Reserve Program Fund Balances Surplus 0.00 $ 13,134.44 13,134.44 $ 16,806.44 $ 8,410.50 25,216.94 $ Total 16,806.44 21,544.94 38,351.38 Reserve Program Fund Balances Surplus Total 0.00 $ 8,515,846.71 853,430.16 9,369,276.87 $ 72,724.38 $ 0.00 0.00 72,724.38 $ 72,724.38 8,515,846.71 853,430.16 9,442,001.25 Reserve Program Fund Balances Surplus Total 0.00 $ 2,288,728.17 37,950.47 2,326,678.64 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 2,288,728.17 37,950.47 2,326,678.64 Reserve Program Fund Balances Surplus Total 0.00 $ 2,468,117.46 131,960.47 2,600,077.93 $ 26,629.73 $ 0.00 0.00 26,629.73 $ 26,629.73 2,468,117.46 131,960.47 2,626,707.66 Reserve Program Fund Balances Surplus 0.00 $ 59,952.68 22,492.80 82,445.48 $ 145.68 $ 0.00 0.00 145.68 $ Total 145.68 59,952.68 22,492.80 82,591.16 Forestry Research State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Research Georgia Radiation Therapy Center State Appropriation State General Funds Other Funds Total Georgia Radiation Therapy Center Georgia Tech Research Institute State Appropriation State General Funds Other Funds Total Georgia Tech Research Institute Marine Institute State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Institute Marine Resources Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Resources Extension Service Medical College of Georgia Hospital and Clinics State Appropriation State General Funds Other Funds Total Medical College of Georgia Hospital and Clinics Original Appropriation $ 3,276,331.00 $ 2,000,000.00 550,000.00 $ 5,826,331.00 $ Original Appropriation $ 3,625,810.00 $ 3,625,810.00 $ Original Appropriation $ 7,868,427.00 122,917,958.00 $ 130,786,385.00 $ Original Appropriation $ 964,361.00 $ 700,000.00 67,633.00 $ 1,731,994.00 $ Original Appropriation $ 1,576,721.00 $ 600,000.00 584,800.00 $ 2,761,521.00 $ Original Appropriation $ 33,181,112.00 $ $ 33,181,112.00 $ UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances 3,276,331.00 $ 3,500,000.00 930,585.00 7,706,916.00 $ 3,276,331.00 $ 3,553,178.63 1,070,782.29 7,900,291.92 $ 0.00 $ 673,544.71 358,490.09 1,032,034.80 $ 3,276,331.00 $ 4,226,723.34 1,429,272.38 8,932,326.72 $ 0.00 $ 726,723.34 498,687.38 1,225,410.72 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 3,276,331.00 $ 0.00 $ 0.00 $ 8,848.57 3,438,216.89 931,245.79 61,783.11 (660.79) 788,506.45 498,026.59 0.00 2,163.69 7,645,793.68 $ 61,122.32 $ 1,286,533.04 $ 11,012.26 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 0.00 $ 8,848.57 788,506.45 500,190.28 1,297,545.30 Other Adjustments Program Fund Balances 3,625,810.00 3,625,810.00 $ $ 3,625,810.00 3,625,810.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 3,625,810.00 3,625,810.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) $ 3,625,810.00 0.00 $ 0.00 $ 0.00 0.00 0.00 3,625,810.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 0.00 0.00 0.00 0.00 $ 0.00 Other Adjustments Program Fund Balances 7,868,427.00 146,867,958.00 154,736,385.00 $ 7,868,427.00 $ 142,001,279.33 149,869,706.33 $ 0.00 $ 0.00 0.00 $ 7,868,427.00 $ 142,001,279.33 149,869,706.33 $ 0.00 $ (4,866,678.67) (4,866,678.67) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 7,868,427.00 $ 142,001,277.44 0.00 $ 4,866,680.56 0.00 $ 1.89 1,294.50 73,237.59 149,869,704.44 $ 4,866,680.56 $ 1.89 $ 74,532.09 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 115,397.67 115,397.67 $ Other Adjustments 1,294.50 188,637.15 189,931.65 Total Program Fund Balances 964,361.00 $ 700,000.00 122,175.00 1,786,536.00 $ 964,361.00 $ 372,941.32 48,194.24 1,385,496.56 $ 0.00 $ 11,273.94 54,542.13 65,816.07 $ 964,361.00 $ 384,215.26 102,736.37 1,451,312.63 $ 0.00 $ (315,784.74) (19,438.63) (335,223.37) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 964,361.00 $ 0.00 $ 0.00 $ 800.00 369,274.87 330,725.13 14,940.39 0.00 87,287.99 34,887.01 15,448.38 0.00 1,420,923.86 $ 365,612.14 $ 30,388.77 $ 800.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 0.00 $ 800.00 14,940.39 15,448.38 31,188.77 Other Adjustments Program Fund Balances 1,576,721.00 $ 2,000,000.00 739,800.00 4,316,521.00 $ 1,576,721.00 $ 1,400,996.35 702,918.25 3,680,635.60 $ 0.00 $ 185,949.68 0.00 185,949.68 $ 1,576,721.00 $ 1,586,946.03 702,918.25 3,866,585.28 $ 0.00 $ (413,053.97) (36,881.75) (449,935.72) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 1,576,721.00 $ 0.00 $ 0.00 $ 814.45 1,404,633.42 702,918.25 595,366.58 36,881.75 182,312.61 0.00 0.00 65.82 3,684,272.67 $ 632,248.33 $ 182,312.61 $ 880.27 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 0.00 $ 814.45 182,312.61 65.82 183,192.88 Other Adjustments Program Fund Balances 33,181,112.00 $ 33,181,112.00 $ 33,181,112.00 $ 33,181,112.00 $ 0.00 $ 0.00 $ 33,181,112.00 $ 0.00 33,181,112.00 $ 0.00 $ 0.00 0.00 $ 33,181,112.00 $ 33,181,112.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 0.00 0.00 0.00 $ 0.00 Transfers 0.00 Transfers 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 0.00 Transfers 0.00 0.00 0.00 0.00 Transfers 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 788,506.45 500,190.28 1,288,696.73 $ 8,848.57 $ 0.00 0.00 8,848.57 $ 8,848.57 788,506.45 500,190.28 1,297,545.30 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ Total 0.00 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 115,399.56 115,399.56 $ 1,294.50 $ 73,237.59 74,532.09 $ Total 1,294.50 188,637.15 189,931.65 Reserve Program Fund Balances Surplus 0.00 $ 14,940.39 15,448.38 30,388.77 $ 800.00 $ 0.00 0.00 800.00 $ Total 800.00 14,940.39 15,448.38 31,188.77 Reserve Program Fund Balances Surplus 0.00 $ 182,312.61 65.82 182,378.43 $ 814.45 $ 0.00 0.00 814.45 $ Total 814.45 182,312.61 65.82 183,192.88 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ Total 0.00 0.00 0.00 Office of Minority Business Enterprise State Appropriation State General Funds Other Funds Total Office of Minority Business Enterprise Georgia Cancer Coalition State Appropriation State General Funds Tobacco Funds Total Georgia Cancer Coalition Public Libraries State Appropriation State General Funds Other Funds Total Public Libraries Special Funding Initiative State Appropriation State General Funds Tobacco Funds Total Special Funding Initiative Regents Central Office State Appropriation State General Funds Other Funds Total Regents Central Office Research Consortium State Appropriation State General Funds Tobacco Funds Total Research Consortium Original Appropriation $ 884,273.00 $ $ 884,273.00 $ Original Appropriation $ 0.00 $ 14,587,799.00 $ 14,587,799.00 $ Original Appropriation $ 41,015,101.00 $ 4,522,400.00 $ 45,537,501.00 $ Original Appropriation $ 41,081,344.00 $ 5,000,000.00 $ 46,081,344.00 $ Original Appropriation $ 7,683,800.00 $ 0.00 $ 7,683,800.00 $ Original Appropriation $ 35,995,015.00 $ 750,000.00 $ 36,745,015.00 $ UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances 884,273.00 $ 884,273.00 $ 884,273.00 $ 884,273.00 $ 0.00 $ 0.00 $ 884,273.00 $ 0.00 884,273.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 883,081.61 $ 1,191.39 $ 0.00 1,191.39 $ 0.00 0.00 $ 0.00 $ 883,081.61 $ 1,191.39 $ 1,191.39 $ 0.00 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 1,191.39 0.00 1,191.39 Total Program Fund Balances $ 14,587,799.00 14,587,799.00 $ $ 14,587,799.00 14,587,799.00 $ $ 0.00 0.00 $ 0.00 $ 14,587,799.00 14,587,799.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) $ 0.00 $ 0.00 $ 14,587,490.57 308.43 308.43 0.00 14,587,490.57 $ 308.43 $ 308.43 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 $ 0.00 308.43 308.43 Other Adjustments Program Fund Balances 40,329,496.00 $ 4,522,400.00 44,851,896.00 $ 40,329,496.00 $ 4,395,430.71 44,724,926.71 $ 0.00 $ 22,773.34 22,773.34 $ 40,329,496.00 $ 4,418,204.05 44,747,700.05 $ 0.00 $ (104,195.95) (104,195.95) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 40,298,425.87 $ 4,359,454.05 31,070.13 $ 162,945.95 31,070.13 $ 58,750.00 133,382.40 $ 0.00 0.00 $ 0.00 44,657,879.92 $ 194,016.08 $ 89,820.13 $ 133,382.40 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 164,452.53 58,750.00 223,202.53 Program Fund Balances 40,856,344.00 $ 5,000,000.00 45,856,344.00 $ 40,856,344.00 $ 5,000,000.00 45,856,344.00 $ 0.00 $ 0.00 0.00 $ 40,856,344.00 $ 5,000,000.00 45,856,344.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 40,762,009.90 $ 5,000,000.00 94,334.10 $ 0.00 94,334.10 $ 0.00 88,274.86 0.00 45,762,009.90 $ 94,334.10 $ 94,334.10 $ 88,274.86 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 $ Other Adjustments 182,608.96 0.00 182,608.96 Total Program Fund Balances 7,683,800.00 $ 79,175.00 7,762,975.00 $ 7,683,800.00 $ 73,319.24 7,757,119.24 $ 0.00 $ 5,696,782.64 5,696,782.64 $ 7,683,800.00 $ 5,770,101.88 13,453,901.88 $ 0.00 $ 5,690,926.88 5,690,926.88 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 7,641,783.99 $ 42,016.01 $ 42,016.01 $ 0.00 801,003.76 (721,828.76) 4,969,098.12 0.00 8,442,787.75 $ (679,812.75) $ 5,011,114.13 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 $ 42,016.01 4,969,098.12 5,011,114.13 Other Adjustments Program Fund Balances 35,995,015.00 $ 750,000.00 36,745,015.00 $ 35,995,015.00 $ 750,000.00 36,745,015.00 $ 0.00 $ 0.00 0.00 $ 35,995,015.00 $ 750,000.00 36,745,015.00 $ 0.00 $ 0.00 0.00 $ 35,985,472.49 $ 750,000.00 36,735,472.49 $ 9,542.51 $ 0.00 9,542.51 $ 9,542.51 $ 0.00 9,542.51 $ (959,064.72) 0.00 (959,064.72) 0.00 $ 0.00 0.00 $ (949,522.21) 0.00 (949,522.21) Transfers 0.00 0.00 Transfers 0.00 0.00 Transfers 0.00 0.00 0.00 Transfers (53,380.24) 0.00 (53,380.24) Transfers 0.00 0.00 0.00 Transfers 820,085.30 0.00 820,085.30 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 1,191.39 $ 1,191.39 $ Total 1,191.39 0.00 1,191.39 Reserve Program Fund Balances Surplus $ 0.00 0.00 $ 0.00 $ 308.43 308.43 $ Total 0.00 308.43 308.43 Reserve Program Fund Balances Surplus 0.00 $ 58,750.00 58,750.00 $ 164,452.53 $ 0.00 164,452.53 $ Total 164,452.53 58,750.00 223,202.53 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 129,228.72 $ 0.00 129,228.72 $ Total 129,228.72 0.00 129,228.72 Reserve Program Fund Balances Surplus Total 0.00 $ 4,969,098.12 4,969,098.12 $ 42,016.01 $ 0.00 42,016.01 $ 42,016.01 4,969,098.12 5,011,114.13 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ (129,436.91) $ 0.00 (129,436.91) $ Total (129,436.91) 0.00 (129,436.91) Skidaway Institute of Oceanography State Appropriation State General Funds Other Funds Total Skidaway Institute of Oceanography Student Education Enrichment Program State Appropriation State General Funds Other Funds Total Student Education Enrichment Program Teaching State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Teaching Veterinary Medicine Experiment Station State Appropriation State General Funds Other Funds Total Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds Total Veterinary Medicine Teaching Hospital Payments to Georgia Military College State Appropriation State General Funds Other Funds Total Payments to Georgia Military College Original Appropriation UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances $ 1,712,710.00 5,658,000.00 $ 7,370,710.00 $ Original Appropriation 1,712,710.00 4,758,000.00 6,470,710.00 $ 1,712,710.00 $ 4,847,044.74 6,559,754.74 $ 0.00 $ 0.00 0.00 $ 1,712,710.00 $ 4,847,044.74 6,559,754.74 $ 0.00 $ 89,044.74 89,044.74 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 1,712,710.00 $ 0.00 $ 0.00 $ 0.00 4,730,723.25 27,276.75 116,321.49 0.00 6,443,433.25 $ 27,276.75 $ 116,321.49 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 $ Other Adjustments 0.00 116,321.49 116,321.49 Total Program Fund Balances $ 314,737.00 $ $ 314,737.00 $ Original Appropriation 314,737.00 $ 314,737.00 $ 314,737.00 $ 314,737.00 $ 0.00 $ 0.00 $ 314,737.00 $ 0.00 314,737.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 314,737.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 314,737.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 0.00 0.00 $ 0.00 Other Adjustments Program Fund Balances $ 1,820,227,086.00 $ 275,402,955.00 2,435,049,425.00 $ 4,530,679,466.00 $ Original Appropriation 1,827,383,964.00 $ 278,829,892.00 2,746,032,407.00 4,852,246,263.00 $ 1,826,638,102.00 $ 205,197,233.86 2,583,569,411.19 4,615,404,747.05 $ 0.00 $ 30,853,721.75 157,750,624.92 188,604,346.67 $ 1,826,638,102.00 $ 236,050,955.61 2,741,320,036.11 4,804,009,093.72 $ (745,862.00) $ (42,778,936.39) (4,712,370.89) (48,237,169.28) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 1,827,089,987.00 $ 293,977.00 $ (451,885.00) $ 997,748.12 202,958,089.41 2,599,007,294.19 75,871,802.59 147,025,112.81 33,092,866.20 142,312,741.92 0.00 833,126.80 4,629,055,370.60 $ 223,190,892.40 $ 174,953,723.12 $ 1,830,874.92 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 357,161.70 $ 903,024.82 0.00 15,428,773.87 33,092,866.20 158,574,642.59 15,785,935.57 $ 192,570,533.61 Other Adjustments Program Fund Balances $ 3,384,254.00 $ 3,384,254.00 $ Original Appropriation 3,384,254.00 3,384,254.00 $ 3,384,254.00 $ 3,384,254.00 $ 0.00 $ 0.00 $ 3,384,254.00 $ 0.00 3,384,254.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 3,384,254.00 $ 0.00 $ 0.00 0.00 $ 0.00 1,575.25 3,384,254.00 $ 0.00 $ 0.00 $ 1,575.25 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ 0.00 $ Other Adjustments 1,575.25 0.00 1,575.25 Total Program Fund Balances $ 502,585.00 $ 6,700,000.00 $ 7,202,585.00 $ Original Appropriation 502,585.00 $ 11,750,000.00 12,252,585.00 $ 502,585.00 $ 10,042,989.90 10,545,574.90 $ 0.00 $ 1,103,276.21 1,103,276.21 $ 502,585.00 $ 11,146,266.11 11,648,851.11 $ 0.00 $ (603,733.89) (603,733.89) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 502,585.00 $ 9,565,560.59 0.00 $ 2,184,439.41 0.00 $ 1,580,705.52 0.00 13,465.19 10,068,145.59 $ 2,184,439.41 $ 1,580,705.52 $ 13,465.19 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ (17,993.35) (17,993.35) $ 0.00 1,576,177.36 1,576,177.36 Other Adjustments Program Fund Balances $ 3,062,152.00 $ $ 3,062,152.00 $ 3,062,152.00 $ 3,062,152.00 $ 3,062,152.00 $ 3,062,152.00 $ 0.00 $ 0.00 $ 3,062,152.00 $ 0.00 3,062,152.00 $ 0.00 $ 0.00 0.00 $ 3,062,152.00 $ 3,062,152.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 0.00 0.00 0.00 $ 0.00 Transfers 0.00 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 116,321.49 116,321.49 $ 0.00 $ 0.00 0.00 $ Total 0.00 116,321.49 116,321.49 Transfers 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ 0.00 $ 0.00 $ Total 0.00 0.00 0.00 Transfers Reserve Program Fund Balances Surplus Total 748,718.58 0.00 (1,515,423.64) (766,705.06) 0.00 $ 33,092,866.20 156,553,790.75 189,646,656.95 $ 1,651,743.41 $ 0.00 505,428.19 2,157,171.60 $ 1,651,743.41 33,092,866.20 157,059,218.94 191,803,828.55 Transfers 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 1,575.25 $ 0.00 1,575.25 $ Total 1,575.25 0.00 1,575.25 Transfers 0.00 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 1,576,177.36 1,576,177.36 $ 0.00 $ 0.00 0.00 $ 0.00 1,576,177.36 1,576,177.36 Transfers 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ Total 0.00 0.00 0.00 Payments to Georgia Public Telecommunications Commission State Appropriation State General Funds Other Funds Total Payments to Georgia Public Telecommunications Commission Georgia Eminent Scholars Endowment Trust Fund State Appropriation State General Funds Other Funds Total Georgia Eminent Scholars Endowment Trust Fund Original Appropriation $ 18,069,614.00 $ $ 18,069,614.00 $ Original Appropriation $ 500,000.00 $ $ 500,000.00 $ 5,067,724,782.00 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 18,069,614.00 $ 18,069,614.00 $ 18,069,614.00 $ 18,069,614.00 $ 0.00 $ 0.00 $ 18,069,614.00 $ 0.00 18,069,614.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 500,000.00 $ 500,000.00 $ 5,443,810,074.00 500,000.00 $ $ 500,000.00 $ 0.00 $ 5,188,674,682.07 209,946,250.18 500,000.00 $ 0.00 500,000.00 $ 5,398,620,932.25 0.00 $ 0.00 0.00 $ (45,189,141.75) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 18,069,614.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 18,069,614.00 $ 0.00 $ 0.00 $ 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 500,000.00 $ 500,000.00 $ 5,200,933,975.98 0.00 $ 0.00 0.00 $ 0.00 0.00 $ 0.00 $ 242,876,098.02 197,686,956.27 0.00 1,335,929.80 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. Other Adjustments Program Fund Balances Transfers 0.00 $ 0.00 0.00 0.00 0.00 $ 0.00 0.00 Other Adjustments Program Fund Balances Transfers $ 0.00 0.00 0.00 $ 0.00 0.00 15,928,813.56 $ 214,951,699.63 0.00 Unexpendable Reserves Uncollectible Accounts Receivable Inventories Early Retirement Program Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ Total 0.00 0.00 0.00 Reserve Program Fund Balances Surplus Total $ 0.00 0.00 $ 212,375,480.77 $ 0.00 $ 0.00 0.00 0.00 0.00 $ 0.00 2,576,218.86 $ 214,951,699.63 11,287,655.86 3,173,177.35 7,365,016.53 $ 236,777,549.37 ABRAHAM BALDWIN AGRICULTURAL COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 ABRAHAM BALDWIN AGRICULTURAL COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 946,056.30 932,605.23 234,955.50 16,164.19 Total Assets $ 2,129,781.22 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 345,631.38 590,289.28 615,032.90 163,436.25 $ 1,714,389.81 $ 68,529.16 229,822.09 24,249.79 3,586.10 20,031.50 68,843.11 329.66 $ 415,391.41 $ 2,129,781.22 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 15,705,922.00 $ 15,805,424.00 $ 15,805,424.00 $ 6,000,000.00 6,153,551.00 7,231,729.00 7,261,930.00 6,641,970.99 7,210,112.38 $ 27,859,473.00 $ 30,299,083.00 $ 29,657,507.37 $ $ $ $ 293,806.97 $ $ 27,859,473.00 $ 30,299,083.00 $ 29,951,314.34 $ 0 -589,758.01 -51,817.62 -641,575.63 293,806.97 -347,768.66 $ 169,995.00 27,689,478.00 169,995.00 30,129,088.00 169,995.00 29,374,467.15 $ 27,859,473.00 $ 30,299,083.00 $ 29,544,462.15 $ $ 406,852.19 0 754,620.85 754,620.85 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 8,210.01 3,821.45 -3,821.45 329.21 415,391.41 68,529.16 229,822.09 24,249.79 3,586.10 20,031.50 68,843.11 415,061.75 329.66 415,391.41 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation ABRAHAM BALDWIN AGRICULTURAL COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 169,995.00 $ Original Appropriation 169,995.00 $ 169,995.00 $ $ 169,995.00 $ 0.00 $ 169,995.00 $ 0.00 $ 0.00 $ 0.00 Actual Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 0.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 15,535,927.00 $ 15,635,429.00 $ 15,635,429.00 $ 12,153,551.00 14,493,659.00 13,852,083.37 $ 27,689,478.00 $ 30,129,088.00 $ 29,487,512.37 $ $ 293,806.97 293,806.97 $ 15,635,429.00 $ 14,145,890.34 29,781,319.34 $ 0.00 $ (347,768.66) (347,768.66) $ 15,635,428.55 $ 13,739,038.60 29,374,467.15 $ 0.45 $ 754,620.40 754,620.85 $ 0.45 406,851.74 $ 406,852.19 $ 329.21 $ 329.21 $ (11,821.49) (11,821.49) $ 0.45 $ 395,359.46 395,359.91 $ 0.00 $ 0.00 $ $ 395,030.25 395,030.25 $ 0.45 329.21 $ 329.66 $ Total 0.00 Total 0.45 395,359.46 395,359.91 27,859,473.00 30,299,083.00 29,657,507.37 293,806.97 29,951,314.34 (347,768.66) 29,544,462.15 754,620.85 406,852.19 Actual amounts were prepared on a prescribed basis of accounting that demonstrate compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. 329.21 (11,821.49) $ 395,359.91 $ 0.00 $ 395,030.25 $ 329.66 $ Unexpendable Reserves Uncollectible Accounts Receivable $ 395,359.91 20,031.50 415,391.41 ALBANY STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 ALBANY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 4,294,377.45 1,889,628.69 946,385.17 7,818.61 Total Assets $ 7,138,209.92 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 183,276.99 3,926,932.61 30,729.62 677,580.42 -572,929.65 $ 4,245,589.99 $ 309,428.21 1,290,703.96 439,587.17 781,649.54 42,668.75 28,582.30 $ 2,892,619.93 $ 7,138,209.92 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 23,119,156.00 $ 23,105,463.00 $ 23,105,463.00 $ 18,000,000.00 14,005,764.00 19,260,114.00 14,304,255.00 18,807,537.52 16,049,652.39 0 -452,576.48 1,745,397.39 Total Revenue $ 55,124,920.00 $ 56,669,832.00 $ 57,962,652.91 $ Prior Year Reserves Available for Expenditure $ $ $ 1,436,618.39 $ Total Funds Available $ 55,124,920.00 $ 56,669,832.00 $ 59,399,271.30 $ EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures $ 91,931.00 91,931.00 91,931.00 631,255.00 451,255.00 432,368.56 54,401,734.00 56,126,646.00 56,185,273.62 $ 55,124,920.00 $ 56,669,832.00 $ 56,709,573.18 $ Excess of Funds Available over Expenditures $ 2,689,698.12 1,292,820.91 1,436,618.39 2,729,439.30 0 18,886.44 -58,627.62 -39,741.18 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 0 177,874.76 0 0 124,911.50 -99,864.45 Ending Fund Balance - June 30 $ 2,892,619.93 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 309,428.21 1,290,703.96 439,587.17 781,649.54 42,668.75 $ 2,864,037.63 28,582.30 $ 2,892,619.93 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Office of Minority Business State Appropriation State General Funds Original Appropriation $ 91,931.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 91,931.00 91,931.00 $ 0.00 $ 91,931.00 $ 0.00 $ 91,931.00 $ 0.00 $ 0.00 $ Other Adjustments Total Program Fund Balances 0.00 $ 0.00 Special Funding Initiative State Appropriation State General Funds Original Appropriation $ 631,255.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 451,255.00 451,255.00 $ 0.00 $ 451,255.00 $ 0.00 $ 432,368.56 $ 18,886.44 $ 18,886.44 $ Other Adjustments Total Program Fund Balances 0.00 $ 18,886.44 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 22,395,970.00 $ 22,562,277.00 $ 22,562,277.00 $ 32,005,764.00 33,564,369.00 34,857,189.91 $ 54,401,734.00 $ 56,126,646.00 $ 57,419,466.91 $ $ 1,436,618.39 1,436,618.39 $ 22,562,277.00 $ 36,293,808.30 58,856,085.30 $ 0.00 $ 2,729,439.30 2,729,439.30 $ 22,577,435.69 $ 33,607,837.93 56,185,273.62 $ (15,158.69) $ (43,468.93) (58,627.62) $ (15,158.69) $ 2,685,970.37 2,670,811.68 $ 18,424.74 6,622.31 25,047.05 $ (603,774.78) (603,774.78) $ 3,266.05 2,088,817.90 2,092,083.95 55,124,920.00 56,669,832.00 57,962,652.91 1,436,618.39 59,399,271.30 2,729,439.30 56,709,573.18 (39,741.18) 2,689,698.12 25,047.05 (603,774.78) $ 2,110,970.39 Transfers Transfers (15,158.69) Transfers 15,158.69 15,158.69 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus 0.00 $ 3,727.75 $ Total 3,727.75 Reserve Program Fund Balances Surplus Total $ 2,082,388.09 2,082,388.09 $ 18,424.74 $ 6,429.81 24,854.55 $ 18,424.74 2,088,817.90 2,107,242.64 2,082,388.09 $ 28,582.30 $ 2,110,970.39 Actual amounts were prepared on a prescribed basis of accounting that demonstrate compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. Unexpendable Reserves Uncollectible Accounts Receivable 781,649.54 $ 2,892,619.93 ARMSTRONG ATLANTIC STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 ARMSTRONG ATLANTIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 1,418,330.86 13,534.62 1,681,454.09 2,836,364.40 5,830.91 68,154.38 Total Assets $ 6,023,669.26 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 243,384.15 304,412.83 203,350.67 3,868,614.39 -264.42 368,868.12 $ 4,988,365.74 $ 103,454.67 210,875.95 305,211.55 292,599.93 76,054.29 47,107.13 $ 1,035,303.52 $ 6,023,669.26 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. ARMSTRONG ATLANTIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 33,817,794.00 $ 34,538,171.00 $ 34,538,171.00 $ 8,310,186.00 20,760,008.00 9,877,586.00 24,654,917.00 10,949,572.77 24,519,428.52 $ 62,887,988.00 $ 69,070,674.00 $ 70,007,172.29 $ $ $ $ 275,897.12 $ $ 62,887,988.00 $ 69,070,674.00 $ 70,283,069.41 $ 0 1,071,986.77 -135,488.48 936,498.29 275,897.12 1,212,395.41 $ 582,665.00 305,884.00 61,999,439.00 582,665.00 375,884.00 68,112,125.00 582,665.00 375,884.00 68,449,706.36 $ 62,887,988.00 $ 69,070,674.00 $ 69,408,255.36 $ $ 874,814.05 0 0 -337,581.36 -337,581.36 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 73,765.93 175,129.62 4,731.11 -4,731.11 21,482.21 -109,888.29 Ending Fund Balance - June 30 $ 1,035,303.52 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 103,454.67 210,875.95 76,054.29 305,211.55 292,599.93 47,107.13 $ 1,035,303.52 0 $ 1,035,303.52 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. Special Funding Initiative State Appropriation State General Funds Research Consortium State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching ARMSTRONG ATLANTIC STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Expenditures Compared to Budget Prior Year Total Variance Variance Carry-Over Funds Available Positive (Negative) Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 305,884.00 $ Original Appropriation 375,884.00 $ 375,884.00 $ $ 375,884.00 $ 0.00 $ 375,884.00 $ 0.00 $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Expenditures Compared to Budget Prior Year Total Variance Variance Carry-Over Funds Available Positive (Negative) Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 0.00 $ 0.00 $ 0.00 Program Fund Balances Reserve Surplus Total $ 582,665.00 $ Original Appropriation 582,665.00 $ 582,665.00 $ $ 582,665.00 $ 0.00 $ 582,665.00 $ 0.00 $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Expenditures Compared to Budget Prior Year Total Variance Variance Carry-Over Funds Available Positive (Negative) Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 0.00 $ 0.00 $ 0.00 Program Fund Balances Reserve Surplus Total $ 32,929,245.00 $ 33,579,622.00 $ 33,579,622.00 $ $ 33,579,622.00 $ 0.00 $ 33,626,722.12 $ (47,100.12) $ 29,070,194.00 34,532,503.00 35,469,001.29 275,897.12 35,744,898.41 1,212,395.41 34,822,984.24 (290,481.24) $ 61,999,439.00 $ 68,112,125.00 $ 69,048,623.29 $ 275,897.12 $ 69,324,520.41 $ 1,212,395.41 $ 68,449,706.36 $ (337,581.36) $ (47,100.12) 921,914.17 $ 874,814.05 $ $ (119,758.67) $ (166,858.79) $ (88,406.08) 833,508.09 (88,406.08) $ (119,758.67) $ 666,649.30 $ $ 0.00 $ 0.00 $ (166,858.79) $ (166,858.79) 666,649.30 166,858.79 833,508.09 666,649.30 $ (0.00) $ 666,649.30 62,887,988.00 69,070,674.00 70,007,172.29 275,897.12 70,283,069.41 1,212,395.41 69,408,255.36 (337,581.36) 874,814.05 (88,406.08) $ (119,758.67) $ 666,649.30 $ 0.00 $ 666,649.30 $ (0.00) $ 666,649.30 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. Unexpended Reserve Uncollectible Accounts Receivable Inventories 292,599.93 76,054.29 $ 1,035,303.52 ATLANTA METROPOLITAN COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 ATLANTA METROPOLITAN COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 2,751,219.23 315,655.38 742,834.65 84,501.96 50,997.25 Total Assets $ 3,945,208.47 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 335,927.98 3,037,772.06 103,551.62 1,814.08 $ 3,479,065.74 $ 6,604.27 227,603.48 5,383.93 24,238.50 53,474.10 107,475.42 41,363.03 $ 466,142.73 $ 3,945,208.47 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. ATLANTA METROPOLITAN COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 8,703,067.00 $ 8,902,049.00 $ 8,902,049.00 $ 4,200,000.00 3,780,979.00 5,611,314.00 4,526,157.00 5,081,963.83 4,743,818.02 $ 16,684,046.00 $ 19,039,520.00 $ 18,727,830.85 $ $ $ $ 183,220.62 $ $ 16,684,046.00 $ 19,039,520.00 $ 18,911,051.47 $ 0 -529,350.17 217,661.02 -311,689.15 183,220.62 -128,468.53 $ 158,955.00 6,485.00 16,518,606.00 158,955.00 6,485.00 18,874,080.00 157,763.61 0 18,398,994.06 $ 16,684,046.00 $ 19,039,520.00 $ 18,556,757.67 $ $ 354,293.80 1,191.39 6,485.00 475,085.94 482,762.33 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 53,923.79 17,283.50 72,701.80 -72,701.80 40,641.64 466,142.73 6,604.27 227,603.48 53,474.10 5,383.93 24,238.50 107,475.42 424,779.70 41,363.03 466,142.73 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. Office of Minority Business State Appropriation State General Funds Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching ATLANTA METROPOLITAN COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 158,955.00 Original Appropriation 158,955.00 Final Budget 158,955.00 $ $ 158,955.00 $ 0.00 $ 157,763.61 $ 1,191.39 $ 1,191.39 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 1,191.39 Total Program Fund Balances $ 6,485.00 $ Original Appropriation 6,485.00 $ 6,485.00 $ $ 6,485.00 $ 0.00 $ 0.00 $ 6,485.00 $ 6,485.00 $ 1,708.95 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 8,193.95 Program Fund Balances $ 8,537,627.00 $ 8,736,609.00 $ 8,736,609.00 $ 7,980,979.00 10,137,471.00 9,825,781.85 $ 16,518,606.00 $ 18,874,080.00 $ 18,562,390.85 $ $ 183,220.62 183,220.62 $ 8,736,609.00 $ 10,009,002.47 18,745,611.47 $ 0.00 $ (128,468.53) (128,468.53) $ 8,743,488.24 $ 9,655,505.82 18,398,994.06 $ (6,879.24) $ 481,965.18 475,085.94 $ (6,879.24) $ 353,496.65 346,617.41 $ 35,097.99 3,834.70 38,932.69 $ (6,505.31) (6,505.31) $ 28,218.75 350,826.04 379,044.79 16,684,046.00 19,039,520.00 18,727,830.85 183,220.62 18,911,051.47 (128,468.53) 18,556,757.67 482,762.33 354,293.80 40,641.64 (6,505.31) $ 388,430.13 Transfers Transfers Transfers 6,879.24 (6,879.24) 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 1,191.39 $ Total 1,191.39 Reserve Program Fund Balances Surplus $ 8,193.95 $ Reserve Program Fund Balances Surplus $ 347,067.10 347,067.10 $ 35,097.99 $ (3,120.30) 31,977.69 $ 347,067.10 $ 41,363.03 $ Total 8,193.95 Total 35,097.99 343,946.80 379,044.79 388,430.13 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 24,238.50 53,474.10 $ 466,142.73 AUGUSTA STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 AUGUSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Prepaid Expenditures Inventories $ 2,962,724.87 102,248.81 3,847,892.97 1,504,642.88 44,803.38 Total Assets $ 8,462,312.91 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 20,133.38 4,270,624.98 784.4 3,130,552.88 43.67 $ 7,422,139.31 $ 105,836.00 25,589.59 389,349.27 279,933.43 40,532.29 198,911.15 21.87 $ 1,040,173.60 $ 8,462,312.91 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Office of Minority Business Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 29,649,588.00 $ 28,847,864.00 $ 28,847,864.00 $ 6,890,928.00 18,301,423.00 7,959,457.00 23,271,907.00 8,088,736.63 23,031,229.71 $ 54,841,939.00 $ 60,079,228.00 $ 59,967,830.34 $ $ $ $ 336,752.95 $ $ 54,841,939.00 $ 60,079,228.00 $ 60,304,583.29 $ 0 129,279.63 -240,677.29 -111,397.66 336,752.95 225,355.29 $ 153,218.00 14,480.00 54,674,241.00 153,218.00 114,480.00 59,811,530.00 153,218.00 114,458.13 59,255,481.80 $ 54,841,939.00 $ 60,079,228.00 $ 59,523,157.93 $ $ 781,425.36 0 21.87 556,048.20 556,070.07 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 38,526.03 220,207.22 1,260.41 -1,260.41 45,466.41 -45,451.42 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 1,040,173.60 $ 105,836.00 40,532.29 25,589.59 389,349.27 279,933.43 198,911.15 $ 1,040,151.73 21.87 $ 1,040,173.60 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. Special Funding Initiative State Appropriation State General Funds Office of Minority Business State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching AUGUSTA STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 14,480.00 Original Appropriation 114,480.00 Final Budget 114,480.00 $ $ 114,480.00 $ 0.00 $ 114,458.13 $ 21.87 $ 21.87 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 21.87 Total Program Fund Balances $ 153,218.00 $ Original Appropriation 153,218.00 $ 153,218.00 $ $ 153,218.00 $ 0.00 $ 153,218.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 0.00 Program Fund Balances $ 29,481,890.00 $ 28,580,166.00 $ 28,580,166.00 $ 25,192,351.00 31,231,364.00 31,119,966.34 $ 54,674,241.00 $ 59,811,530.00 $ 59,700,132.34 $ $ 336,752.95 336,752.95 $ 28,580,166.00 $ 31,456,719.29 60,036,885.29 $ 0.00 $ 225,355.29 225,355.29 $ 28,578,174.73 $ 30,677,307.07 59,255,481.80 $ 1,991.27 $ 554,056.93 556,048.20 $ 1,991.27 $ 779,412.22 781,403.49 $ 14.99 14.99 (2,006.26) $ (59,726.21) (61,732.47) $ (0.00) 719,686.01 719,686.01 54,841,939.00 60,079,228.00 59,967,830.34 336,752.95 60,304,583.29 225,355.29 59,523,157.93 556,070.07 781,425.36 14.99 (61,732.47) $ 719,707.88 Transfers Transfers Transfers 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 21.87 $ Total 21.87 Reserve Program Fund Balances Surplus $ 0.00 $ Reserve Program Fund Balances Surplus $ 719,686.01 719,686.01 $ (0.00) $ 0.00 (0.00) $ 719,686.01 $ 21.87 $ Total 0.00 Total (0.00) 719,686.01 719,686.01 719,707.88 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 279,933.43 40,532.29 $ 1,040,173.60 BAINBRIDGE COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 BAINBRIDGE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Margin Allocation $ 2,294,753.49 773,625.04 399,985.98 16,196.00 Total Assets $ 3,484,560.51 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 72,167.90 1,790,178.20 -81,032.90 945,872.38 16.25 $ 2,727,201.83 $ 73,512.90 46,456.85 353,058.16 -9,858.89 35,412.46 124,372.99 134,404.21 $ 757,358.68 $ 3,484,560.51 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. BAINBRIDGE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 9,470,207.00 $ 9,469,105.00 $ 9,469,105.00 $ 6,100,000.00 4,602,519.00 8,200,129.00 4,945,009.00 8,111,633.20 5,134,323.05 $ 20,172,726.00 $ 22,614,243.00 $ 22,715,061.25 $ $ $ $ 322,628.17 $ $ 20,172,726.00 $ 22,614,243.00 $ 23,037,689.42 $ $ 3,650.00 20,169,076.00 3,650.00 22,610,593.00 0 22,313,041.51 $ 20,172,726.00 $ 22,614,243.00 $ 22,313,041.51 $ $ 724,647.91 0 -88,495.80 189,314.05 100,818.25 322,628.17 423,446.42 3,650.00 297,551.49 301,201.49 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 21,099.30 41,046.85 58,957.43 -58,957.43 72,515.55 -101,950.93 757,358.68 73,512.90 46,456.85 353,058.16 -9,858.89 35,412.46 124,372.99 622,954.47 134,404.21 757,358.68 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching BAINBRIDGE COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 3,650.00 Original Appropriation 3,650.00 Final Budget 3,650.00 $ 0.00 $ 3,650.00 $ 0.00 $ 0.00 $ 3,650.00 $ 3,650.00 $ 589.99 Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 4,239.99 Total Program Fund Balances $ 9,466,557.00 $ 9,465,455.00 $ 9,465,455.00 $ 10,702,519.00 13,145,138.00 13,245,956.25 $ 20,169,076.00 $ 22,610,593.00 $ 22,711,411.25 $ 0.00 $ 322,628.18 322,628.18 $ 9,465,455.00 $ 13,568,584.43 23,034,039.43 $ 0.00 $ 423,446.43 423,446.43 $ 9,467,897.05 $ 12,845,144.46 22,313,041.51 $ (2,442.05) $ 299,993.54 297,551.49 $ (2,442.05) $ 723,439.97 720,997.92 $ 71,925.56 (101,950.93) (30,025.37) $ 26,733.68 26,733.68 $ 69,483.51 648,222.72 717,706.23 20,172,726.00 22,614,243.00 22,715,061.25 322,628.18 23,037,689.43 423,446.43 22,313,041.51 301,201.49 724,647.92 (29,435.38) 26,733.68 $ 721,946.22 Transfers (2,442.05) Transfers 2,442.05 2,442.05 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 1,797.94 $ 1,797.94 Reserve Program Fund Balances Surplus Total $ 587,542.01 587,542.01 $ 71,925.56 $ 60,680.71 132,606.27 $ 71,925.56 648,222.72 720,148.28 587,542.01 $ 134,404.21 $ 721,946.22 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. Unexpendable Reserves Uncollectible Accounts Receivable 35,412.46 $ 757,358.68 CLAYTON STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 CLAYTON STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 2,376,106.90 396,561.85 1,029,666.57 40,978.43 Total Assets $ 3,843,313.75 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 152,044.46 1,504,836.63 302,445.09 1,414,182.43 27,843.08 $ 3,401,351.69 $ 54,476.48 227,813.63 499.56 -3,804.00 123,832.90 35,242.63 3,900.86 $ 441,962.06 $ 3,843,313.75 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 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 25,922,459.00 $ 25,931,266.00 $ 25,931,266.00 $ 9,429,815.00 20,201,848.00 12,199,551.00 24,875,413.00 11,734,327.64 23,920,423.76 $ 55,554,122.00 $ 63,006,230.00 $ 61,586,017.40 $ $ $ $ 268,084.39 $ $ 55,554,122.00 $ 63,006,230.00 $ 61,854,101.79 $ 0 -465,223.36 -954,989.24 -1,420,212.60 268,084.39 -1,152,128.21 $ 368,979.00 55,185,143.00 368,979.00 62,637,251.00 368,979.00 61,170,894.49 $ 55,554,122.00 $ 63,006,230.00 $ 61,539,873.49 $ $ 314,228.30 0 1,466,356.51 1,466,356.51 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 156,803.57 22,471.79 -22,471.79 9,797.53 -38,867.34 441,962.06 54,476.48 227,813.63 499.56 -3,804.00 123,832.90 35,242.63 438,061.20 3,900.86 441,962.06 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching CLAYTON STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 368,979.00 Original Appropriation 368,979.00 Final Budget 368,979.00 $ 0.00 $ 368,979.00 $ 0.00 $ 368,979.00 $ 0.00 $ 0.00 $ 0.00 Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 0.00 Total Program Fund Balances $ 25,553,480.00 $ 25,562,287.00 $ 25,562,287.00 $ 29,631,663.00 37,074,964.00 35,654,751.40 $ 55,185,143.00 $ 62,637,251.00 $ 61,217,038.40 $ 0.00 $ 268,084.39 268,084.39 $ 25,562,287.00 $ 35,922,835.79 61,485,122.79 $ 0.00 $ (1,152,128.21) (1,152,128.21) $ 25,562,287.00 $ 35,608,607.49 61,170,894.49 $ 0.00 $ 1,466,356.51 1,466,356.51 $ 0.00 $ 314,228.30 314,228.30 $ 3,900.86 (32,970.67) (29,069.81) 0.00 $ 32,970.67 32,970.67 $ 3,900.86 314,228.30 318,129.16 55,554,122.00 63,006,230.00 61,586,017.40 268,084.39 61,854,101.79 (1,152,128.21) 61,539,873.49 1,466,356.51 314,228.30 (29,069.81) 32,970.67 $ 318,129.16 Transfers 0.00 Transfers 0.00 0.00 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 314,228.30 314,228.30 $ 3,900.86 $ 0.00 3,900.86 $ 3,900.86 314,228.30 318,129.16 314,228.30 $ 3,900.86 $ 318,129.16 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. Unexpendable Reserves Uncollectible Accounts Receivable 123,832.90 $ 441,962.06 COASTAL GEORGIA COMMUNITY COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 COLLEGE OF COASTAL GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 423,977.43 31,943.34 94,837.67 741,649.36 11,004.00 24,298.16 Total Assets $ 1,327,709.96 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 273,792.39 643,457.32 58,393.66 15,497.50 13,785.99 $ 1,004,926.86 $ 75,063.24 83,031.97 44,645.94 32,336.70 21,000.00 64,822.93 1,882.32 $ 322,783.10 $ 1,327,709.96 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. COLLEGE OF COASTAL GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 11,120,049.00 $ 11,658,941.00 $ 6,300,000.00 9,105,000.00 6,600,000.00 7,865,000.00 $ 26,525,049.00 $ 26,123,941.00 $ $ $ $ $ 26,525,049.00 $ 26,123,941.00 $ $ 15,895.00 26,509,154.00 15,895.00 26,108,046.00 $ 26,525,049.00 $ 26,123,941.00 $ $ ACTUAL VARIANCE 11,658,941.00 $ 5,947,756.12 7,614,804.10 25,221,501.22 $ 125,727.55 $ 25,347,228.77 $ 0 -652,243.88 -250,195.90 -902,439.78 125,727.55 -776,712.23 15,895.00 25,043,122.84 25,059,017.84 $ 288,210.93 0 1,064,923.16 1,064,923.16 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Indirect Cost Recovery $ Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 21,000.00 32,671.65 3,003.00 -3,003.00 1,547.37 -20,646.85 322,783.10 75,063.24 21,000.00 83,031.97 44,645.94 32,336.70 64,822.93 320,900.78 1,882.32 322,783.10 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. COLLEGE OF COASTAL GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiative State Appropriation State General Funds Original Appropriation $ 15,895.00 $ Original Appropriation Teaching State Appropriation State General Funds $ 11,104,154.00 $ Federal Funds Federal Funds Not Specifically Identified 6,300,000.00 Other Funds 9,105,000.00 Total Teaching $ 26,509,154.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 15,895.00 $ 15,895.00 $ 0.00 $ 15,895.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 15,895.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 11,643,046.00 $ 6,600,000.00 7,865,000.00 26,108,046.00 $ 11,643,046.00 $ 4,033,004.00 9,529,556.22 25,205,606.22 $ 0.00 $ 0.00 125,727.55 125,727.55 $ 11,643,046.00 $ 4,033,004.00 9,655,283.77 25,331,333.77 $ 0.00 $ (2,566,996.00) 1,790,283.77 (776,712.23) $ 11,643,046.00 $ 4,033,004.00 9,367,072.84 25,043,122.84 $ 0.00 $ 2,566,996.00 (1,502,072.84) 1,064,923.16 $ 0.00 $ 0.00 288,210.93 288,210.93 $ 1,882.32 $ 0.00 (20,981.80) (19,099.48) 0.00 $ 0.00 334.95 334.95 $ Total Program Fund Balances 0.00 Total Program Fund Balances 1,882.32 0.00 267,564.08 269,446.40 26,525,049.00 26,123,941.00 25,221,501.22 125,727.55 25,347,228.77 (776,712.23) 25,059,017.84 1,064,923.16 288,210.93 (19,099.48) 334.95 $ 269,446.40 Transfers 0.00 Transfers 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ Total 0.00 Reserve Program Fund Balances Surplus $ 1,882.32 $ 267,564.08 267,564.08 $ 0.00 1,882.32 $ 267,564.08 $ 1,882.32 $ Total 1,882.32 267,564.08 269,446.40 269,446.40 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 principle Unexpendable Reserves Inventories Uncollectible Accounts Receivable 21,000.00 32,336.70 $ 322,783.10 COLUMBUS STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 COLUMBUS STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 6,830,191.33 916,482.24 311,085.91 1,832,838.49 317,904.06 Total Assets $ 10,208,502.03 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 235,102.79 2,840,144.07 89,733.11 4,425,567.17 -2,181.75 $ 7,588,365.39 $ 787,874.23 217,216.96 21,231.31 1,083,295.82 89,496.71 400,204.78 20,816.83 $ 2,620,136.64 $ 10,208,502.03 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. COLUMBUS STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 37,802,023.00 $ 38,247,603.00 $ 38,247,603.00 $ 11,762,942.00 24,308,326.00 14,753,463.00 26,597,343.00 12,592,942.52 26,065,298.19 $ 73,873,291.00 $ 79,598,409.00 $ 76,905,843.71 $ $ $ $ 1,795,776.17 $ $ 73,873,291.00 $ 79,598,409.00 $ 78,701,619.88 $ 0 -2,160,520.48 -532,044.81 -2,692,565.29 1,795,776.17 -896,789.12 $ 26,227.00 73,847,064.00 123,479.00 79,474,930.00 123,479.00 75,994,026.41 $ 73,873,291.00 $ 79,598,409.00 $ 76,117,505.41 $ $ 2,584,114.47 0 3,480,903.59 3,480,903.59 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 0 34,509.09 0 0 8,663.49 -7,150.41 Ending Fund Balance - June 30 $ 2,620,136.64 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 787,874.23 217,216.96 21,231.31 1,083,295.82 89,496.71 400,204.78 $ 2,599,319.81 20,816.83 $ 2,620,136.64 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching COLUMBUS STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 26,227.00 $ Original Appropriation 123,479.00 $ 123,479.00 $ $ 123,479.00 $ 0.00 $ 123,479.00 $ 0.00 $ 0.00 $ 470.27 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 470.27 Program Fund Balances $ 37,775,796.00 $ 38,124,124.00 $ 38,124,124.00 $ 36,071,268.00 41,350,806.00 38,658,240.71 $ 73,847,064.00 $ 79,474,930.00 $ 76,782,364.71 $ $ 1,795,776.17 1,795,776.17 $ 38,124,124.00 $ 40,454,016.88 78,578,140.88 $ 0.00 $ (896,789.12) (896,789.12) $ 38,124,124.00 $ 37,869,902.41 75,994,026.41 $ 0.00 $ 3,480,903.59 3,480,903.59 $ 0.00 $ 2,584,114.47 2,584,114.47 $ (455.23) 1,498.04 1,042.81 $ (54,987.62) (54,987.62) $ (455.23) 2,530,624.89 2,530,169.66 73,873,291.00 79,598,409.00 76,905,843.71 1,795,776.17 78,701,619.88 (896,789.12) 76,117,505.41 3,480,903.59 2,584,114.47 1,513.08 (54,987.62) $ 2,530,639.93 Transfers Transfers 455.23 (455.23) 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 470.27 $ 470.27 Reserve Program Fund Balances Surplus Total $ 2,509,823.10 2,509,823.10 $ 0.00 $ 20,346.56 20,346.56 $ 0.00 2,530,169.66 2,530,169.66 2,509,823.10 $ 20,816.83 $ 2,530,639.93 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. Unexpendable Reserves Uncollectible Accounts Receivable 89,496.71 $ 2,620,136.64 DALTON STATE COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 DALTON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 735,421.48 632,574.88 550,578.33 5,142.00 13,812.45 Total Assets $ 1,937,529.14 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Benefits Payable Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 413,068.36 1,117,805.68 69,821.18 96,015.58 870.06 $ 1,697,580.86 $ 88 8,480.00 1,437.39 2,336.94 60,305.42 14,758.72 133,612.26 18,929.55 $ 239,948.28 $ 1,937,529.14 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 14,431,929.00 $ 14,440,736.00 $ 14,440,736.00 $ 7,250,000.00 11,659,718.00 8,481,487.00 8,742,218.00 8,442,268.14 8,459,413.48 $ 33,341,647.00 $ 31,664,441.00 $ 31,342,417.62 $ $ $ $ 11,945.90 $ $ 33,341,647.00 $ 31,664,441.00 $ 31,354,363.52 $ 0 -39,218.86 -282,804.52 -322,023.38 11,945.90 -310,077.48 $ 5,369.00 33,336,278.00 5,369.00 31,659,072.00 5,369.00 31,190,523.16 $ 33,341,647.00 $ 31,664,441.00 $ 31,195,892.16 $ $ 158,471.36 0 468,548.84 468,548.84 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 10,585.27 107,888.02 102,864.89 -102,864.89 19,687.31 -56,683.68 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 239,948.28 $ 88 8,480.00 14,758.72 1,437.39 2,336.94 60,305.42 133,612.26 $ 221,018.73 18,929.55 $ 239,948.28 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching DALTON STATE COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 5,369.00 $ Original Appropriation 5,369.00 $ 5,369.00 $ $ 5,369.00 $ 0.00 $ 5,369.00 $ 0.00 $ 0.00 $ 0.00 Actual Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 0.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 14,426,560.00 $ 14,435,367.00 $ 14,435,367.00 $ 18,909,718.00 17,223,705.00 16,901,681.62 $ 33,336,278.00 $ 31,659,072.00 $ 31,337,048.62 $ $ 11,945.90 11,945.90 $ 14,435,367.00 $ 16,913,627.52 31,348,994.52 $ 0.00 $ (310,077.48) (310,077.48) $ 14,434,740.14 $ 16,755,783.02 31,190,523.16 $ 626.86 $ 467,921.98 468,548.84 $ 626.86 157,844.50 $ 158,471.36 $ (36,996.37) $ (36,996.37) $ 43,409.15 43,409.15 $ 626.86 $ 164,257.28 164,884.14 $ 0.00 $ 0.00 $ $ 145,954.59 145,954.59 $ 626.86 $ 18,302.69 18,929.55 $ Total 0.00 Total 626.86 164,257.28 164,884.14 33,341,647.00 31,664,441.00 31,342,417.62 11,945.90 31,354,363.52 (310,077.48) 31,195,892.16 468,548.84 158,471.36 (36,996.37) 43,409.15 $ 164,884.14 $ 0.00 $ 145,954.59 $ 18,929.55 $ 164,884.14 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 principle Unexpendable Reserves Uncollectible Accounts Receivable Inventories 60,305.42 14,758.72 $ 239,948.28 DARTON COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 DARTON COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Inventories $ 2,647,988.95 371,687.73 534,067.41 42,065.75 Total Assets $ 3,595,809.84 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 756,041.88 1,116,834.15 220,401.94 767,696.14 -105,709.36 $ 2,755,264.75 $ 14,808.36 163,964.45 88,855.20 -3,940.38 323,151.47 44,412.21 209,293.78 $ 840,545.09 $ 3,595,809.84 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 16,649,881.00 $ 17,024,183.00 $ 17,024,183.00 $ 8,644,025.00 9,870,168.00 8,644,025.00 11,253,395.00 8,408,174.37 10,282,452.49 $ 35,164,074.00 $ 36,921,603.00 $ 35,714,809.86 $ $ $ $ 397,765.78 $ $ 35,164,074.00 $ 36,921,603.00 $ 36,112,575.64 $ 0 -235,850.63 -970,942.51 -1,206,793.14 397,765.78 -809,027.36 $ 27,343.00 35,136,731.00 27,343.00 36,894,260.00 27,343.00 35,528,993.13 $ 35,164,074.00 $ 36,921,603.00 $ 35,556,336.13 $ $ 556,239.51 0 1,365,266.87 1,365,266.87 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 46,140.00 312,898.36 7,311.20 -7,311.20 7,396.16 -82,128.94 840,545.09 14,808.36 163,964.45 44,412.21 88,855.20 -3,940.38 323,151.47 209,293.78 840,545.09 0 840,545.09 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching DARTON COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 27,343.00 Original Appropriation 27,343.00 Final Budget 27,343.00 $ 0.00 $ 27,343.00 $ 0.00 $ 27,343.00 $ 0.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 0.00 Program Fund Balances $ 16,622,538.00 $ 16,996,840.00 $ 16,996,840.00 $ 18,514,193.00 19,897,420.00 18,690,626.86 $ 35,136,731.00 $ 36,894,260.00 $ 35,687,466.86 $ 0.00 $ 397,765.78 397,765.78 $ 16,996,840.00 $ 19,088,392.64 36,085,232.64 $ 0.00 $ (809,027.36) (809,027.36) $ 16,962,978.88 $ 18,566,014.25 35,528,993.13 $ 33,861.12 $ 1,331,405.75 1,365,266.87 $ 33,861.12 $ 522,378.39 556,239.51 $ (141,113.38) 66,380.60 (74,732.78) $ (8,525.32) (8,525.32) $ (107,252.26) 580,233.67 472,981.41 35,164,074.00 36,921,603.00 35,714,809.86 397,765.78 36,112,575.64 (809,027.36) 35,556,336.13 1,365,266.87 556,239.51 (74,732.78) (8,525.32) $ 472,981.41 Transfers Transfers 107,252.26 (107,252.26) 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 472,981.41 472,981.41 $ 0.00 $ 0.00 0.00 $ 0.00 472,981.41 472,981.41 472,981.41 $ 0.00 $ 472,981.41 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 323,151.47 44,412.21 $ 840,545.09 EAST GEORGIA COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 EAST GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 746,910.76 81,053.08 51,085.01 159,582.70 193,873.26 1,402.50 Total Assets $ 1,233,907.31 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 43,618.84 388,455.24 4,708.95 481,420.03 111,653.99 $ 1,029,857.05 $ 41,449.34 7,467.68 27,676.30 102,419.06 879.34 1,475.00 4,697.37 17,986.17 $ 204,050.26 $ 1,233,907.31 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 6,549,013.00 $ 6,609,834.00 $ 6,609,834.00 $ 2,793,191.00 5,340,338.00 4,138,652.00 6,153,173.00 3,825,348.61 5,652,840.74 $ 14,682,542.00 $ 16,901,659.00 $ 16,088,023.35 $ $ $ $ 63,647.74 $ $ 14,682,542.00 $ 16,901,659.00 $ 16,151,671.09 $ 0 -313,303.39 -500,332.26 -813,635.65 63,647.74 -749,987.91 $ 742,191.00 13,940,351.00 742,191.00 16,159,468.00 739,440.33 15,222,299.54 $ 14,682,542.00 $ 16,901,659.00 $ 15,961,739.87 $ $ 189,931.22 2,750.67 937,168.46 939,919.13 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 720 2,484.73 10,088.19 -10,088.19 15,732.20 -4,817.89 204,050.26 41,449.34 7,467.68 1,475.00 27,676.30 102,419.06 879.34 4,697.37 186,064.09 17,986.17 204,050.26 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. Special Funding Initiative State Appropriation State General Funds EAST GEORGIA COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 742,191.00 742,191.00 742,191.00 $ $ 742,191.00 $ 0.00 $ 739,440.33 $ 2,750.67 $ 2,750.67 $ Other Adjustments Total Program Fund Balances $ 2,750.67 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances $ 5,806,822.00 $ 5,867,643.00 $ 5,867,643.00 $ 8,133,529.00 10,291,825.00 9,478,189.35 $ 13,940,351.00 $ 16,159,468.00 $ 15,345,832.35 $ $ 63,647.74 63,647.74 $ 5,867,643.00 $ 9,541,837.09 15,409,480.09 $ 0.00 $ (749,987.91) (749,987.91) $ 5,866,576.24 $ 9,355,723.30 15,222,299.54 $ 1,066.76 $ 936,101.70 937,168.46 $ 1,066.76 $ 186,113.79 187,180.55 $ 13,478.76 (2,564.45) 10,914.31 $ 850.39 850.39 $ 14,545.52 184,399.73 198,945.25 14,682,542.00 16,901,659.00 16,088,023.35 63,647.74 16,151,671.09 (749,987.91) 15,961,739.87 939,919.13 189,931.22 10,914.31 850.39 $ 201,695.92 Transfers Transfers 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 2,750.67 $ 2,750.67 Reserve Program Fund Balances Surplus Total $ 183,709.75 183,709.75 $ 14,545.52 $ 689.98 15,235.50 $ 14,545.52 184,399.73 198,945.25 183,709.75 $ 17,986.17 $ 201,695.92 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 879.34 1,475.00 $ 204,050.26 FORT VALLEY STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 FORT VALLEY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 0 2,340.25 1,760,914.00 1,792,849.25 3,060.00 Total Assets $ 3,559,163.50 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 708,585.81 186,063.54 927,100.52 1,173,650.01 409,426.48 $ 3,404,826.36 $ 46,381.00 103,736.79 142,218.97 -380,287.22 231,515.53 10,772.07 $ 154,337.14 $ 3,559,163.50 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. FORT VALLEY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 23,920,429.00 $ 22,799,393.00 $ 22,799,393.00 $ 0 26,090,695.00 8,971,434.00 33,451,418.00 11,643,892.00 21,590,147.81 10,262,389.94 -11,861,270.19 -1,381,502.06 $ 58,982,558.00 $ 67,894,703.00 $ 54,651,930.75 $ -13,242,772.25 $ $ $ -610,431.01 $ -610,431.01 $ 58,982,558.00 $ 67,894,703.00 $ 54,041,499.74 $ -13,853,203.26 $ 1,866,111.00 57,116,447.00 1,866,111.00 66,028,592.00 1,821,399.48 51,974,718.29 44,711.52 14,053,873.71 $ 58,982,558.00 $ 67,894,703.00 $ 53,796,117.77 $ 14,098,585.23 $ 245,381.97 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 86,180.00 0 0 -177,224.83 154,337.14 46,381.00 103,736.79 142,218.97 -380,287.22 231,515.53 143,565.07 10,772.07 154,337.14 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching FORT VALLEY STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 1,866,111.00 Original Appropriation 1,866,111.00 Final Budget 1,866,111.00 $ $ 1,866,111.00 $ 0.00 $ 1,821,399.48 $ 44,711.52 $ 44,711.52 $ 0.00 Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 44,711.52 Total Program Fund Balances $ 22,054,318.00 $ 20,933,282.00 $ 20,933,282.00 $ 35,062,129.00 45,095,310.00 31,852,537.75 $ 57,116,447.00 $ 66,028,592.00 $ 52,785,819.75 $ $ (610,431.00) (610,431.00) $ 20,933,282.00 $ 31,242,106.75 52,175,388.75 $ 0.00 $ (13,853,203.25) (13,853,203.25) $ 21,044,145.12 $ 30,930,573.17 51,974,718.29 $ (110,863.12) $ 14,164,736.83 14,053,873.71 $ (110,863.12) $ 311,533.58 200,670.46 $ 76,923.67 (254,148.51) (177,224.84) $ 86,180.00 86,180.00 $ (33,939.45) 143,565.07 109,625.62 58,982,558.00 67,894,703.00 54,651,930.75 (610,431.00) 54,041,499.75 (13,853,203.25) 53,796,117.77 14,098,585.23 245,381.98 (177,224.84) 86,180.00 $ 154,337.14 Transfers (33,939.45) Transfers 33,939.45 33,939.45 0.00 Reserve Program Fund Balances Surplus 0.00 $ 10,772.07 $ Total 10,772.07 Reserve Program Fund Balances Surplus Total $ 143,565.07 143,565.07 $ (0.00) $ 0.00 (0.00) $ (0.00) 143,565.07 143,565.07 143,565.07 $ 10,772.07 $ 154,337.14 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) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA COLLEGE & STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 8,261,925.39 625,281.72 -50,338.83 3,289,187.28 186,844.65 Total Assets $ 12,312,900.21 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 305,883.79 5,567,383.40 338,787.66 3,308,498.91 448,554.52 $ 9,969,108.28 $ 42,453.57 678,838.31 132,977.48 27,774.30 862,795.82 33,515.86 555,422.42 10,014.17 $ 2,343,791.93 $ 12,312,900.21 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 33,926,531.00 $ 33,164,322.00 $ 5,169,409.00 27,164,445.00 6,019,436.00 34,818,632.00 $ 66,260,385.00 $ 74,002,390.00 $ $ $ $ $ 66,260,385.00 $ 74,002,390.00 $ $ 1,410,987.00 64,849,398.00 1,410,987.00 72,591,403.00 $ 66,260,385.00 $ 74,002,390.00 $ $ ACTUAL VARIANCE 33,164,322.00 $ 6,409,665.42 34,969,655.95 74,543,643.37 $ 1,175,456.20 $ 75,719,099.57 $ 0 390,229.42 151,023.95 541,253.37 1,175,456.20 1,716,709.57 1,410,987.00 71,995,230.41 73,406,217.41 $ 2,312,882.16 0 596,172.59 596,172.59 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 0 61,875.58 10,130.82 -10,130.82 9,929.23 -40,895.04 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 2,343,791.93 $ 42,453.57 678,838.31 132,977.48 27,774.30 862,795.82 33,515.86 555,422.42 $ 2,333,777.76 10,014.17 $ 2,343,791.93 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA COLLEGE AND STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 1,410,987.00 Original Appropriation 1,410,987.00 Final Budget 1,410,987.00 $ $ 1,410,987.00 $ 0.00 $ 1,410,987.00 $ 0.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 0.00 Total Program Fund Balances $ 32,515,544.00 $ 31,753,335.00 $ 31,536,735.00 $ 32,333,854.00 40,838,068.00 41,595,921.37 $ 64,849,398.00 $ 72,591,403.00 $ 73,132,656.37 $ $ 1,175,456.20 1,175,456.20 $ 31,536,735.00 $ 42,771,377.57 74,308,112.57 $ (216,600.00) $ 1,933,309.57 1,716,709.57 $ 31,536,735.00 $ 40,458,495.41 71,995,230.41 $ 216,600.00 $ 379,572.59 596,172.59 $ 0.00 $ 2,312,882.16 2,312,882.16 $ 10,014.17 (40,979.98) (30,965.81) $ 28,359.72 28,359.72 $ 10,014.17 2,300,261.90 2,310,276.07 66,260,385.00 74,002,390.00 74,543,643.37 1,175,456.20 75,719,099.57 1,716,709.57 73,406,217.41 596,172.59 2,312,882.16 (30,965.81) 28,359.72 $ 2,310,276.07 Transfers Transfers 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 2,300,261.90 2,300,261.90 $ 10,014.17 $ 0.00 10,014.17 $ 10,014.17 2,300,261.90 2,310,276.07 2,300,261.90 $ 10,014.17 $ 2,310,276.07 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. Unexpendable Reserves Uncollectible Accounts Receivable 33,515.86 $ 2,343,791.93 GEORGIA HIGHLANDS COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA HIGHLANDS COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 1,495,992.22 579,423.14 858,289.83 459,181.14 Total Assets $ 3,392,886.33 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 100,533.47 1,584,455.00 55,996.22 1,369,712.37 14,495.23 $ 3,125,192.29 $ 66,220.07 7,739.96 47,096.27 46,842.10 95,527.43 4,268.21 $ 267,694.04 $ 3,392,886.33 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. GEORGIA HIGHLANDS COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 15,520,044.00 $ 15,725,835.00 $ 15,725,835.00 $ 3,678,928.00 6,342,059.00 3,993,857.00 10,873,752.00 3,839,319.63 10,432,337.63 $ 25,541,031.00 $ 30,593,444.00 $ 29,997,492.26 $ $ $ $ 121,129.83 $ $ 25,541,031.00 $ 30,593,444.00 $ 30,118,622.09 $ 0 -154,537.37 -441,414.37 -595,951.74 121,129.83 -474,821.91 $ 192,835.00 25,348,196.00 192,835.00 30,400,609.00 192,835.02 29,678,805.81 $ 25,541,031.00 $ 30,593,444.00 $ 29,871,640.83 $ $ 246,981.26 -0.02 721,803.19 721,803.17 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis 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 $ 0 33,950.17 0 0 33,904.98 -47,142.37 267,694.04 66,220.07 7,739.96 47,096.27 46,842.10 95,527.43 263,425.83 4,268.21 267,694.04 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA HIGHLANDS COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 192,835.00 Original Appropriation 192,835.00 Final Budget 192,835.00 $ $ 192,835.00 $ 0.00 $ 192,835.02 $ (0.02) $ (0.02) $ 0.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments (0.02) $ Program Fund Balances 0.02 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 15,327,209.00 $ 15,533,000.00 $ 10,020,987.00 14,867,609.00 $ 25,348,196.00 $ 30,400,609.00 $ 15,533,000.00 $ 14,271,657.26 29,804,657.26 $ $ 121,129.83 121,129.83 $ 15,533,000.00 $ 14,392,787.09 29,925,787.09 $ 0.00 $ (474,821.91) (474,821.91) $ 15,517,314.15 $ 14,161,491.66 29,678,805.81 $ 15,685.85 $ 706,117.34 721,803.19 $ 15,685.85 $ 231,295.43 246,981.28 $ (13,237.39) $ (13,237.39) $ (61,577.26) (61,577.26) $ 2,448.46 169,718.17 $ 172,166.63 (0.02) $ (0.02) $ 167,898.40 167,898.40 $ 2,448.46 $ 1,819.75 4,268.21 $ 25,541,031.00 30,593,444.00 29,997,492.26 121,129.83 30,118,622.09 (474,821.91) 29,871,640.83 721,803.17 246,981.26 (13,237.39) (61,577.26) $ 172,166.61 0.00 167,898.40 $ 4,268.21 $ 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. Unexpendable Reserves Uncollectible Accounts Receivable $ Total 0.00 Total 2,448.46 169,718.15 172,166.61 172,166.61 95,527.43 267,694.04 GAINESVILLE STATE COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GAINESVILLE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 5,145,517.88 56,905.88 454,437.78 279,495.92 Total Assets $ 5,936,357.46 LIABILITIES AND FUND EQUITY Liabilities Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 3,838,476.68 19,516.42 1,774,555.97 $ 5,632,549.07 $ 249,461.98 9,738.57 42,615.64 1,934.00 35.29 22.91 $ 303,808.39 $ 5,936,357.46 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. GAINESVILLE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 19,366,323.00 $ 19,370,723.00 $ 19,370,723.00 $ 3,906,938.00 12,331,935.00 4,977,694.00 20,567,225.00 5,033,943.91 19,959,100.22 $ 35,605,196.00 $ 44,915,642.00 $ 44,363,767.13 $ $ $ $ 226,600.88 $ $ 35,605,196.00 $ 44,915,642.00 $ 44,590,368.01 $ 0 56,249.91 -608,124.78 -551,874.87 226,600.88 -325,273.99 $ 9,988.00 35,595,208.00 9,988.00 44,905,654.00 9,988.00 44,276,476.62 $ 35,605,196.00 $ 44,915,642.00 $ 44,286,464.62 $ $ 303,903.39 0 629,177.38 629,177.38 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 0 22.91 -22.91 -95 303,808.39 249,461.98 9,738.57 42,615.64 1,934.00 35.29 303,785.48 22.91 303,808.39 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GAINESVILLE STATE COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 9,988.00 $ Original Appropriation 9,988.00 $ 9,988.00 $ 0.00 $ 9,988.00 $ 0.00 $ 9,988.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ Actual Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 0.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 19,356,335.00 $ 19,360,735.00 $ 19,360,735.00 16,238,873.00 25,544,919.00 24,993,044.13 $ $ 35,595,208.00 $ 44,905,654.00 $ 44,353,779.13 $ $ 226,600.88 226,600.88 $ 19,360,735.00 $ 25,219,645.01 44,580,380.01 $ 0.00 $ (325,273.99) (325,273.99) $ 19,360,735.00 $ 24,915,741.62 44,276,476.62 $ 0.00 $ 629,177.38 629,177.38 $ 0.00 303,903.39 $ 303,903.39 $ (95.00) $ (95.00) $ (1,934.00) (1,934.00) $ 0.00 $ 301,874.39 301,874.39 $ 0.00 $ 0.00 $ 301,851.48 301,851.48 $ 0.00 $ 22.91 22.91 $ Total 0.00 Total 0.00 301,874.39 301,874.39 35,605,196.00 44,915,642.00 $ 44,363,767.13 $ 226,600.88 $ 44,590,368.01 (325,273.99) $ 44,286,464.62 629,177.38 303,903.39 $ (95.00) $ (1,934.00) $ 301,874.39 $ 0.00 $ 301,851.48 $ 22.91 $ 301,874.39 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 comprehensive basis of accounting other than generally accepted accounting principles. Unexpendable Reserves Uncollectible Accounts Receivable $ 1,934.00 303,808.39 GEORGIA PERIMETER COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA PERIMETER COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 17,718,330.60 7,845.78 3,588,876.82 10,392,574.12 2,193.00 206,594.17 Total Assets $ 31,916,414.49 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 6,369,518.72 729,915.14 8,782,257.29 1,077,883.74 9,067,837.32 104,998.35 $ 26,132,410.56 $ 1,080,755.88 -131,819.04 183,874.58 2,753,501.00 146,017.94 1,445,052.68 181,614.28 125,006.61 $ 5,784,003.93 $ 31,916,414.49 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 63,691,165.00 $ 63,966,338.00 $ 63,966,338.00 $ 18,911,550.00 47,492,315.00 20,411,550.00 50,902,315.00 22,623,063.81 47,523,579.48 $ 130,095,030.00 $ 135,280,203.00 $ 134,112,981.29 $ $ $ $ 2,695,336.30 $ $ 130,095,030.00 $ 135,280,203.00 $ 136,808,317.59 $ 0 2,211,513.81 -3,378,735.52 -1,167,221.71 2,695,336.30 1,528,114.59 $ 50,575.00 130,044,455.00 50,575.00 135,229,628.00 50,575.00 132,478,241.40 $ 130,095,030.00 $ 135,280,203.00 $ 132,528,816.40 $ $ 4,279,501.19 0 2,751,386.60 2,751,386.60 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 175,368.73 1,402,909.94 369,306.65 -369,306.65 277,803.26 -351,579.19 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 5,784,003.93 $ 1,080,755.88 -131,819.04 183,874.58 181,614.28 2,753,501.00 146,017.94 1,445,052.68 125,006.61 $ 5,784,003.93 0 $ 5,784,003.93 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA PERIMETER COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 50,575.00 Original Appropriation 50,575.00 Final Budget 50,575.00 $ $ 50,575.00 $ 0.00 $ 50,575.00 $ 0.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 0.00 Total Program Fund Balances $ 63,640,590.00 $ 63,915,763.00 $ 63,915,763.00 $ 66,403,865.00 71,313,865.00 70,146,643.29 $ 130,044,455.00 $ 135,229,628.00 $ 134,062,406.29 $ 130,095,030.00 135,280,203.00 134,112,981.29 $ 2,695,336.30 2,695,336.30 $ 63,915,763.00 $ 72,841,979.59 136,757,742.59 $ 2,695,336.30 136,808,317.59 0.00 $ 1,528,114.59 1,528,114.59 $ 64,154,722.59 $ 68,323,518.81 132,478,241.40 $ 1,528,114.59 132,528,816.40 (238,959.59) $ 2,990,346.19 2,751,386.60 $ 2,751,386.60 (238,959.59) $ 4,518,460.78 4,279,501.19 $ sch "2" 4,279,501.19 (73,775.93) (73,775.93) (73,775.93) $ (48,388.29) (48,388.29) $ (238,959.59) 4,396,296.56 4,157,336.97 (48,388.29) $ 4,157,336.97 Transfers Transfers 238,959.59 (238,959.59) 0.00 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ Total 0.00 Reserve Program Fund Balances Surplus Total $ 4,157,336.97 4,157,336.97 $ 0.00 $ 0.00 0.00 $ 0.00 4,157,336.97 4,157,336.97 4,157,336.97 $ 0.00 $ 4,157,336.97 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 comprehensive basis of accounting other than generally accepted accounting principles. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 1,445,052.68 181,614.28 $ 5,784,003.93 GEORGIA STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 67,107,998.29 2,004.40 3,279,385.90 23,241,075.07 3,613,625.20 110,777.76 Total Assets $ 97,354,866.62 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Carry-Over "Per State Accounting Office" Unreserved Surplus Tobacco Settlement Funds Total Fund Balances Total Liabilities and Fund Balances $ 949,620.27 26,388,542.78 696,861.15 29,198,895.01 801,821.62 $ 58,035,740.83 $ 1,575.02 6,343,397.82 15,030,951.73 3,069,564.24 7,788,149.38 3,048,763.76 117,753.14 2,290,076.03 1,200,000.00 428,586.24 308.43 $ 39,319,125.79 $ 97,354,866.62 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 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available 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 VARIANCE $ 212,491,125.00 $ 213,285,261.00 $ 213,285,261.00 $ 0 15,337,799.00 15,337,799.00 15,337,799.00 0 105,000,000.00 178,844,236.00 110,000,000.00 244,447,487.00 81,804,419.71 203,718,857.44 -28,195,580.29 -40,728,629.56 $ 511,673,160.00 $ 583,070,547.00 $ 514,146,337.15 $ -68,924,209.85 $ $ $ 38,204,365.48 $ 38,204,365.48 $ 511,673,160.00 $ 583,070,547.00 $ 552,350,702.63 $ -30,719,844.37 $ 14,587,799.00 14,587,799.00 14,587,490.57 4,922,504.00 148,001.00 6,336,530.00 298,001.00 6,326,988.35 294,841.00 492,014,856.00 561,848,217.00 495,496,275.70 $ 511,673,160.00 $ 583,070,547.00 $ 516,705,595.62 $ $ 35,645,107.01 308.43 9,541.65 3,160.00 66,351,941.30 66,364,951.38 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers 89,732.15 3,583,736.63 442,218.14 -442,218.14 669,078.04 -669,078.04 550 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Property Reserves Total Reserved Unreserved Surplus Total Fund Balance $ 39,319,125.79 $ 1,575.02 6,343,397.82 15,030,951.73 117,753.14 3,069,564.24 7,788,149.38 3,048,763.76 2,290,076.03 1,200,000.00 $ 38,890,231.12 428,894.67 $ 39,319,125.79 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 Cancer Coalition State Appropriation Tobacco Funds Research Consortium State Appropriation State General Funds Tobacco Funds Total Research Consortium Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus Total $ 14,587,799.00 $ 14,587,799.00 $ 14,587,799.00 $ $ 14,587,799.00 $ 0.00 $ 14,587,490.57 $ 308.43 $ 308.43 $ $ $ 308.43 $ $ Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 0.00 $ 308.43 $ Reserve Program Fund Balances Surplus 308.43 Total $ 4,172,504.00 $ 750,000.00 $ 4,922,504.00 $ Original Appropriation 5,586,530.00 $ 750,000.00 5,586,530.00 $ 750,000.00 0.00 $ 5,586,530.00 $ 750,000.00 0.00 $ 0.00 5,576,988.35 $ 750,000.00 9,541.65 $ 0.00 9,541.65 $ 0.00 $ 0.00 $ 6,336,530.00 $ 6,336,530.00 $ 0.00 $ 6,336,530.00 $ 0.00 $ 6,326,988.35 $ 9,541.65 $ 9,541.65 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 9,541.65 $ 0.00 9,541.65 Program Fund Balances $ 0.00 Transfers $ 0.00 $ 9,541.65 $ 9,541.65 $ Reserve Program Fund Balances Surplus 9,541.65 0.00 9,541.65 Total $ 148,001.00 $ Original Appropriation 298,001.00 $ 298,001.00 $ 0.00 $ 298,001.00 $ 0.00 $ 294,841.00 $ 3,160.00 $ 3,160.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 3,160.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 3,160.00 $ Reserve Program Fund Balances Surplus 3,160.00 Total $ 208,170,620.00 $ 207,400,730.00 $ 207,400,730.00 $ 283,844,236.00 354,447,487.00 285,523,277.15 $ 492,014,856.00 $ 561,848,217.00 $ 492,924,007.15 $ $ 38,204,365.48 38,204,365.48 $ 207,400,730.00 $ 323,727,642.63 531,128,372.63 $ 0.00 $ (30,719,844.37) (30,719,844.37) $ 207,398,626.64 $ 288,097,649.06 495,496,275.70 $ 2,103.36 $ 66,349,837.94 66,351,941.30 $ 2,103.36 $ 35,629,993.57 35,632,096.93 $ 0.00 390,510.83 $ 392,614.19 0.00 116,991.05 35,746,984.62 0.00 507,501.88 $ 36,139,598.81 $ 35,723,714.22 392,614.19 $ 23,270.40 392,614.19 35,746,984.62 0.00 35,723,714.22 $ 415,884.59 $ 36,139,598.81 511,673,160.00 583,070,547.00 514,146,337.15 38,204,365.48 552,350,702.63 (30,719,844.37) 516,705,595.62 66,364,951.38 35,645,107.01 0.00 507,501.88 $ 36,152,608.89 0.00 35,723,714.22 $ 428,894.67 $ 36,152,608.89 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 principle Unexpendable Reserves Uncollectible Accounts Receivable Inventories 3,048,763.76 117,753.14 $ 39,319,125.79 GORDON COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GORDON COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 853,831.46 269,726.80 2,426,409.55 310,675.18 Total Assets $ 3,860,642.99 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 121,613.41 2,615,157.87 240,864.97 559,754.99 122,955.37 $ 3,660,346.61 $ 11,920.08 41,118.88 27,594.02 115,520.34 4,143.06 $ 200,296.38 $ 3,860,642.99 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. GORDON COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 12,802,406.00 $ 13,089,350.00 $ 13,089,350.00 $ 3,750,000.00 6,064,580.00 3,750,000.00 6,593,266.00 4,787,924.39 10,016,270.76 $ 22,616,986.00 $ 23,432,616.00 $ 27,893,545.15 $ $ $ $ 56,237.90 $ $ 22,616,986.00 $ 23,432,616.00 $ 27,949,783.05 $ 0 1,037,924.39 3,423,004.76 4,460,929.15 56,237.90 4,517,167.05 $ 16,263.00 22,600,723.00 $ 22,616,986.00 $ 16,263.00 23,416,353.00 23,432,616.00 $ $ 16,263.00 27,967,549.38 27,983,812.38 $ -34,029.33 0 -4,551,196.38 -4,551,196.38 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 25,683.80 15,509.20 9,900.11 -9,900.11 1,961.71 2,104.00 189,067.00 200,296.38 11,920.08 41,118.88 27,594.02 115,520.34 196,153.32 4,143.06 200,296.38 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GORDON COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 16,263.00 $ Original Appropriation 16,263.00 $ 16,263.00 $ $ 16,263.00 $ 0.00 $ 16,263.00 $ 0.00 $ 0.00 $ 0.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 0.00 $ Other Adjustments 0.00 $ Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 12,786,143.00 $ 13,073,087.00 $ 13,073,087.00 $ 9,814,580.00 10,343,266.00 14,804,195.15 $ 22,600,723.00 $ 23,416,353.00 $ 27,877,282.15 $ $ 56,237.90 56,237.90 $ 13,073,087.00 $ 14,860,433.05 27,933,520.05 $ 0.00 $ 4,517,167.05 4,517,167.05 $ 13,288,112.29 $ 14,679,437.09 27,967,549.38 $ (215,025.29) $ (4,336,171.09) (4,551,196.38) $ (215,025.29) 180,995.96 $ (34,029.33) $ 4,065.71 $ 4,065.71 $ 202,665.98 202,665.98 $ (215,025.29) $ 387,727.65 172,702.36 $ 215,025.29 (215,025.29) $ 0.00 $ 168,559.30 $ 168,559.30 $ 4,143.06 $ 4,143.06 $ Total 0.00 Total 172,702.36 172,702.36 22,616,986.00 23,432,616.00 27,893,545.15 56,237.90 27,949,783.05 4,517,167.05 27,983,812.38 (4,551,196.38) (34,029.33) 4,065.71 202,665.98 $ 172,702.36 $ 0.00 $ 168,559.30 $ 4,143.06 $ 172,702.36 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 principle Unexpendable Reserves Uncollectible Accounts Receivable 27,594.02 $ 200,296.38 GEORGIA SOUTHERN UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA SOUTHERN UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 14,752,667.58 982,672.92 1,417,409.46 6,061,846.43 4,242,026.50 63,875.17 Total Assets $ 27,520,498.06 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 799,149.06 14,372,808.39 214,561.90 8,324,024.87 $ 23,710,544.22 $ 647,074.34 1,082,489.76 1,038,445.14 20,763.98 91,965.18 111,000.00 713,849.11 104,366.33 $ 3,809,953.84 $ 27,520,498.06 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. GEORGIA SOUTHERN UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 95,141,112.00 $ 92,485,024.00 $ 92,485,024.00 $ 20,000,000.00 56,641,206.00 21,000,000.00 72,135,581.00 21,240,853.47 69,485,768.10 $ 171,782,318.00 $ 185,620,605.00 $ 183,211,645.57 $ $ $ $ 2,106,151.02 $ $ 171,782,318.00 $ 185,620,605.00 $ 185,317,796.59 $ 0 240,853.47 -2,649,812.90 -2,408,959.43 2,106,151.02 -302,808.41 $ 425,253.00 842,070.00 170,514,995.00 425,253.00 293,850.00 184,901,502.00 425,253.00 293,850.00 182,089,278.36 $ 171,782,318.00 $ 185,620,605.00 $ 182,808,381.36 $ $ 2,509,415.23 0 0 2,812,223.64 2,812,223.64 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Non-Mandatory Transfers 100,000.00 83,320.21 36,797.23 -36,797.23 102,409.40 1,014,809.00 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 3,809,953.84 $ 647,074.34 1,082,489.76 111,000.00 1,038,445.14 20,763.98 91,965.18 713,849.11 $ 3,705,587.51 104,366.33 $ 3,809,953.84 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Carry-Over Total Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 842,070.00 $ 293,850.00 $ 293,850.00 $ 0.00 $ 293,850.00 $ 0.00 $ 293,850.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Research Consortium State Appropriation State General Funds $ 425,253.00 $ 425,253.00 $ 425,253.00 $ 0.00 $ 425,253.00 $ 0.00 $ 425,253.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Teaching State Appropriation State General Funds Other Funds Total Teaching Georgia Eminent Scholars Endowment Trust Fund State Appropriation State General Funds Other Funds Total Georgia Eminent Scholars Endowment Trust Fund Grand Totals - All Programs $ 91,026,142.00 $ 91,265,921.00 $ 91,265,921.00 $ 0.00 $ 91,265,921.00 $ 0.00 $ 91,255,359.57 $ 10,561.43 $ 78,988,853.00 93,135,581.00 90,726,621.57 2,106,151.02 92,832,772.59 -302,808.41 90,333,918.79 2,801,662.21 $ 170,014,995.00 $ 184,401,502.00 $ 181,992,542.57 $ 2,106,151.02 $ 184,098,693.59 $ -302,808.41 $ 181,589,278.36 $ 2,812,223.64 $ 10,561.43 $ 102,409.40 $ -19,644.97 $ 93,325.86 $ 2,498,853.80 0.00 1,014,809.00 3,513,662.80 2,509,415.23 $ 102,409.40 $ 995,164.03 $ 3,606,988.66 $ 0.00 $ 0.00 $ 0.00 3,502,622.33 93,325.86 $ 93,325.86 11,040.47 3,513,662.80 0.00 $ 3,502,622.33 $ 104,366.33 $ 3,606,988.66 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 500,000.00 $ 500,000.00 $ 500,000.00 $ $ 500,000.00 $ 500,000.00 $ 500,000.00 $ $ 0.00 $ 500,000.00 $ 0.00 500,000.00 $ 0.00 $ 0.00 0.00 $ 500,000.00 $ 500,000.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 $ 171,782,318.00 $ 185,620,605.00 $ 183,211,645.57 $ 2,106,151.02 $ 185,317,796.59 $ (302,808.41) $ 182,808,381.36 $ 2,812,223.64 $ 2,509,415.23 $ 102,409.40 $ 995,164.03 $ 3,606,988.66 $ 0.00 $ 3,502,622.33 $ 104,366.33 $ 3,606,988.66 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 91,965.18 111,000.00 $ 3,809,953.84 GEORGIA SOUTHWESTERN STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA SOUTHWESTERN STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 2,923,445.65 200,650.43 40,040.39 295,937.34 175,039.23 35,399.18 Total Assets $ 3,670,512.22 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 92,562.72 578,546.40 36,974.16 2,363,459.01 10,468.90 $ 3,082,011.19 $ 131,732.04 69,841.30 7,849.89 181,964.25 51,549.87 33,175.00 108,268.01 4,120.67 $ 588,501.03 $ 3,670,512.22 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 14,249,851.00 $ 14,338,893.00 $ 14,338,893.00 $ 5,515,279.00 8,897,152.00 6,969,745.00 10,406,836.00 6,901,166.92 10,399,254.33 $ 28,662,282.00 $ 31,715,474.00 $ 31,639,314.25 $ $ $ $ 319,631.07 $ $ 28,662,282.00 $ 31,715,474.00 $ 31,958,945.32 $ $ 21,761.00 28,640,521.00 21,761.00 31,693,713.00 19,442.45 31,412,317.16 $ 28,662,282.00 $ 31,715,474.00 $ 31,431,759.61 $ $ 527,185.71 0 -68,578.08 -7,581.67 -76,159.75 319,631.07 243,471.32 2,318.55 281,395.84 283,714.39 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 36,500.00 34,014.98 1,813.39 -1,813.39 870.07 -10,069.73 588,501.03 131,732.04 69,841.30 33,175.00 7,849.89 181,964.25 51,549.87 108,268.01 584,380.36 4,120.67 588,501.03 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 21,761.00 Original Appropriation 21,761.00 Final Budget 21,761.00 $ 0.00 $ 21,761.00 $ 0.00 $ 19,442.45 $ 2,318.55 $ 2,318.55 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 2,318.55 Program Fund Balances $ 14,228,090.00 $ 14,317,132.00 $ 14,317,132.00 $ 14,412,431.00 17,376,581.00 17,300,421.25 $ 28,640,521.00 $ 31,693,713.00 $ 31,617,553.25 $ $ 319,631.07 319,631.07 $ 14,317,132.00 $ 17,620,052.32 31,937,184.32 $ 0.00 $ 243,471.32 243,471.32 $ 14,318,806.00 $ 17,093,511.16 31,412,317.16 $ (1,674.00) $ 283,069.84 281,395.84 $ (1,674.00) $ 526,541.16 524,867.16 $ (1,056.98) (8,142.68) (9,199.66) $ (14,209.89) (14,209.89) $ (2,730.98) 504,188.59 501,457.61 28,662,282.00 31,715,474.00 31,639,314.25 319,631.07 31,958,945.32 243,471.32 31,431,759.61 283,714.39 527,185.71 (9,199.66) (14,209.89) $ 503,776.16 Transfers (2,318.55) Transfers 2,730.98 (412.43) 2,318.55 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 499,655.49 499,655.49 $ 0.00 $ 4,120.67 4,120.67 $ 0.00 503,776.16 503,776.16 499,655.49 $ 4,120.67 $ 503,776.16 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 51,549.87 33,175.00 $ 588,501.03 GEORGIA GWINNETT COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA GWINNETT COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Other Prepaid Expenditures $ 2,232,786.99 448,513.98 1,990.00 Total Assets $ 2,683,290.97 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Technology Fees Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 7,282.09 1,781,496.89 232,036.01 138,774.92 164 26,876.84 $ 2,186,630.75 $ 69,690.00 311,802.82 115,167.40 $ 496,660.22 $ 2,683,290.97 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. GEORGIA GWINNETT COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 22,762,467.00 $ 23,010,556.00 $ 3,367,500.00 3,148,947.00 $ 26,129,967.00 $ 26,159,503.00 $ $ $ $ $ 26,129,967.00 $ 26,159,503.00 $ $ 11,010,778.00 15,119,189.00 11,010,778.00 15,148,725.00 $ 26,129,967.00 $ 26,159,503.00 $ $ ACTUAL VARIANCE 23,010,556.00 $ 2,278,614.62 25,289,170.62 $ 314,178.93 $ 25,603,349.55 $ 0 -870,332.38 -870,332.38 314,178.93 -556,153.45 11,010,778.00 14,209,494.61 25,220,272.61 $ 383,076.94 0 939,230.39 939,230.39 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Technology Fees Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 0 2,629.16 -2,629.16 113,583.28 496,660.22 69,690.00 311,802.82 381,492.82 115,167.40 496,660.22 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching GEORGIA GWINNETT COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 11,010,778.00 Original Appropriation 11,010,778.00 Final Budget 11,010,778.00 $ $ 11,010,778.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 11,010,778.00 $ 0.00 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 0.00 Total Program Fund Balances Transfers 0.00 $ 0.00 $ 0.00 Program Fund Balances Reserve Surplus Total $ 11,607,506.00 $ 11,999,778.00 $ 11,999,778.00 $ $ 3,511,683.00 3,148,947.00 2,278,614.62 314,178.93 $ 15,119,189.00 $ 15,148,725.00 $ 14,278,392.62 $ 314,178.93 $ 11,999,778.00 $ 2,592,793.55 14,592,571.55 $ 0.00 $ (556,153.45) (556,153.45) $ 12,127,080.42 $ 2,082,414.19 14,209,494.61 $ (127,302.42) $ 1,066,532.81 939,230.39 $ (127,302.42) $ 510,379.36 383,076.94 $ 109,873.89 3,709.39 113,583.28 $ 0.00 $ (17,428.53) 514,088.75 496,660.22 127,302.42 (127,302.42) 0.00 $ 109,873.89 $ 109,873.89 381,492.82 5,293.51 386,786.33 381,492.82 $ 115,167.40 $ 496,660.22 26,129,967.00 26,159,503.00 25,289,170.62 314,178.93 25,603,349.55 (556,153.45) 25,220,272.61 939,230.39 383,076.94 113,583.28 0.00 $ 496,660.22 0.00 381,492.82 $ 115,167.40 $ 496,660.22 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) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 KENNESAW STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 15,785,535.93 3,000,000.00 2,060,708.30 19,859,936.37 3,362,207.53 Total Assets $ 44,068,388.13 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 395,293.69 6,882,917.71 2,602,676.72 30,021,628.19 $ 39,902,516.31 $ 691,592.33 1,066,633.81 803,740.04 271,066.20 614,711.98 718,074.60 52.86 $ 4,165,871.82 $ 44,068,388.13 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. KENNESAW STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 81,828,464.00 $ 82,057,339.00 $ 82,057,339.00 $ 11,698,136.00 95,453,139.00 19,930,912.00 90,480,752.00 18,745,152.07 83,633,009.57 $ 188,979,739.00 $ 192,469,003.00 $ 184,435,500.64 $ $ $ $ 2,166,635.31 $ $ 188,979,739.00 $ 192,469,003.00 $ 186,602,135.95 $ 0 -1,185,759.93 -6,847,742.43 -8,033,502.36 2,166,635.31 -5,866,867.05 $ 263,971.00 459,114.00 188,256,654.00 263,971.00 459,114.00 191,745,918.00 263,971.00 459,114.00 183,149,835.29 $ 188,979,739.00 $ 192,469,003.00 $ 183,872,920.29 $ $ 2,729,215.66 0 0 8,596,082.71 8,596,082.71 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Mandatory Transfers 0 514,635.49 944.95 -944.95 53 -144,258.33 1,066,226.00 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 4,165,871.82 $ 691,592.33 1,066,633.81 803,740.04 271,066.20 614,711.98 718,074.60 $ 4,165,818.96 52.86 $ 4,165,871.82 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. Special Funding Initiative State Appropriation State General Funds Research Consortium State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching KENNESAW STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 459,114.00 Original Appropriation 459,114.00 Final Budget 459,114.00 $ 0.00 $ 459,114.00 $ 0.00 $ 459,114.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 0.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 263,971.00 $ Original Appropriation 263,971.00 $ 263,971.00 $ 0.00 $ 263,971.00 $ 0.00 $ 263,971.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 0.00 $ Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus $ 81,105,379.00 $ 81,334,254.00 $ 81,334,254.00 $ 107,151,275.00 110,411,664.00 102,378,161.64 $ 188,256,654.00 $ 191,745,918.00 $ 183,712,415.64 $ $ 2,166,635.31 2,166,635.31 $ 81,334,254.00 $ 104,544,796.95 185,879,050.95 $ 0.00 $ (5,866,867.05) (5,866,867.05) $ 81,334,254.00 $ 101,815,581.29 183,149,835.29 $ 0.00 $ 8,596,082.71 8,596,082.71 $ 0.00 $ 2,729,215.66 2,729,215.66 $ 53.00 (144,258.33) $ (144,205.33) $ 966,149.51 966,149.51 53.00 $ 3,551,106.84 3,551,159.84 $ (0.14) 0.14 $ 0.00 $ $ 3,551,106.98 3,551,106.98 $ 52.86 $ 52.86 $ Total 0.00 Total 0.00 Total 52.86 3,551,106.98 3,551,159.84 188,979,739.00 192,469,003.00 184,435,500.64 2,166,635.31 186,602,135.95 (5,866,867.05) 183,872,920.29 8,596,082.71 2,729,215.66 $ (144,205.33) $ 966,149.51 3,551,159.84 $ 0.00 $ 3,551,106.98 $ 52.86 $ 3,551,159.84 Actual amounts were prepared on a prescribed basis of accounting that demonstrate compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. Unexpendable Reserves Uncollectible Accounts Receivable 614,711.98 $ 4,165,871.82 MACON STATE COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 MACON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 0 605,187.72 84,909.02 7,356,763.21 188,314.45 Total Assets $ 8,235,174.40 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 576,646.98 114,232.25 943,320.94 10,984.44 4,958,713.77 143,744.63 $ 6,747,643.01 $ 53,430.60 280,888.82 100,370.98 142,177.03 598,985.97 103,363.52 204,406.81 3,907.66 $ 1,487,531.39 $ 8,235,174.40 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. MACON STATE COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 22,686,340.00 $ 22,478,451.00 $ 8,600,000.00 12,615,556.00 10,913,314.00 25,866,145.00 $ 43,901,896.00 $ 59,257,910.00 $ $ $ $ $ 43,901,896.00 $ 59,257,910.00 $ $ 683,825.00 43,218,071.00 648,025.00 58,609,885.00 $ 43,901,896.00 $ 59,257,910.00 $ $ ACTUAL VARIANCE 22,478,451.00 $ 10,168,122.01 25,401,264.55 58,047,837.56 $ 792,222.35 $ 58,840,059.91 $ 0 -745,191.99 -464,880.45 -1,210,072.44 792,222.35 -417,850.09 648,025.00 56,770,986.42 57,419,011.42 $ 1,421,048.49 0 1,838,898.58 1,838,898.58 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Other Additions (Deletions) 0 81,086.91 22,216.71 -22,216.71 3,215.66 -24,077.09 6,257.42 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 1,487,531.39 $ 53,430.60 280,888.82 100,370.98 142,177.03 598,985.97 103,363.52 204,406.81 $ 1,483,623.73 3,907.66 $ 1,487,531.39 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. Special Funding Initiative State Appropriation State General Funds MACON STATE COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 683,825.00 $ 648,025.00 $ 648,025.00 $ 0.00 $ 648,025.00 $ 0.00 $ 648,025.00 $ 0.00 $ 0.00 $ 0.00 Other Adjustments Total Program Fund Balances $ 0.00 Transfers Reserve Program Fund Balances Surplus Total $ 0.00 $ 0.00 $ 0.00 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances Transfers Reserve Program Fund Balances Surplus Total $ 22,002,515.00 $ 21,830,426.00 $ 21,301,164.00 21,215,556.00 36,779,459.00 36,098,648.56 $ $ 43,218,071.00 $ 58,609,885.00 $ 57,399,812.56 $ $ 792,222.35 792,222.35 $ 21,301,164.00 $ 36,890,870.91 58,192,034.91 $ (529,262.00) $ 111,411.91 (417,850.09) $ 21,301,164.00 $ 35,469,822.42 56,770,986.42 $ 529,262.00 $ 1,309,636.58 1,838,898.58 $ 0.00 $ 1,421,048.49 1,421,048.49 $ 3,907.66 (24,769.09) $ (20,861.43) $ $ (16,019.19) (16,019.19) $ 3,907.66 1,380,260.21 $ 1,384,167.87 $ 0.00 $ 0.00 $ $ 1,380,260.21 1,380,260.21 $ 3,907.66 $ 0.00 3,907.66 $ 3,907.66 1,380,260.21 1,384,167.87 43,901,896.00 59,257,910.00 $ 58,047,837.56 $ 792,222.35 $ 58,840,059.91 (417,850.09) $ 57,419,011.42 1,838,898.58 1,421,048.49 $ (20,861.43) $ (16,019.19) $ 1,384,167.87 $ 0.00 $ 1,380,260.21 $ 3,907.66 $ 1,384,167.87 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. Unexpendable Reserves Uncollectible Accounts Receivable 103,363.52 $ 1,487,531.39 MEDICAL COLLEGE OF GEORGIA Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 MEDICAL COLLEGE OF GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories $ 27,113,832.42 34,422,833.10 4,174,859.61 22,159,953.36 7,231,443.00 7,603,386.87 129,989.41 Total Assets $ 102,836,297.77 LIABILITIES AND FUND EQUITY Liabilities Contracts Payable Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Early Retirement Program Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 2,906,076.67 17,899,750.46 1,465,718.64 25,729,048.61 $ 48,000,594.38 $ 153,399.84 1,741,880.35 9,189,588.39 608,011.49 35,506,285.19 144,054.70 127,466.90 7,365,016.53 $ 54,835,703.39 $ 102,836,297.77 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, 2008 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available 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 VARIANCE $ 156,635,429.00 $ 156,678,006.00 $ 156,678,006.00 $ 5,000,000.00 5,000,000.00 5,000,000.00 361,053,550.00 60,098,203.00 372,841,747.00 64,055,599.00 381,853,723.56 57,215,181.59 $ 582,787,182.00 $ 598,575,352.00 $ 600,746,911.15 $ $ $ $ 44,357,297.62 $ $ 582,787,182.00 $ 598,575,352.00 $ 645,104,208.77 $ 0 0 9,011,976.56 -6,840,417.41 2,171,559.15 51,529,399.15 53,700,958.30 $ 3,625,810.00 0 13,292,639.00 314,737.00 565,553,996.00 3,625,810.00 904,658.00 13,447,543.00 314,737.00 580,282,604.00 3,625,810.00 904,658.00 13,448,021.48 314,737.00 579,399,159.94 $ 582,787,182.00 $ 598,575,352.00 $ 597,692,386.42 $ $ 47,411,822.35 0 0 -478.48 0 883,444.06 882,965.58 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Early Retirement Program Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 119,814.32 131,965.19 7,172,101.53 80,148.40 -80,148.40 977,297.77 -977,297.77 Ending Fund Balance - June 30 $ 54,835,703.39 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Early Retirement Program Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Total Reserved Unreserved Surplus Total Fund Balance $ 153,399.84 1,741,880.35 7,365,016.53 9,189,588.39 127,466.90 608,011.49 35,506,285.19 144,054.70 $ 54,835,703.39 0 $ 54,835,703.39 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. MEDICAL COLLEGE OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Georgia Radiation Therapy Center State Appropriation Other Funds Special Funding Initiative State Appropriation State General Funds Tobacco Funds Total Special Funding Initiative Research Consortium State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances 3,625,810.00 Original Appropriation 3,625,810.00 Final Budget 3,625,810.00 Current Year Revenues 0.00 3,625,810.00 Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available 0.00 Variance Positive (Negative) 3,625,810.00 0.00 Expenditures Compared to Budget Variance Actual Positive (Negative) 0.00 Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 0.00 Total Program Fund Balances $ 8,292,639.00 5,000,000.00 $ 13,292,639.00 $ Original Appropriation 8,447,543.00 5,000,000.00 13,447,543.00 $ 8,447,543.00 $ 5,000,000.00 13,447,543.00 $ $ 0.00 $ 8,447,543.00 $ 5,000,000.00 13,447,543.00 $ 0.00 $ 0.00 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 8,448,021.48 $ 5,000,000.00 (478.48) $ 0.00 (478.48) $ 0.00 26,940.69 13,448,021.48 $ (478.48) $ (478.48) $ 26,940.69 Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 0.00 $ Other Adjustments 26,462.21 0.00 26,462.21 Total Program Fund Balances $ 0.00 $ 904,658.00 $ 904,658.00 $ $ 904,658.00 $ 0.00 $ 904,658.00 $ 0.00 $ 0.00 $ (973,934.33) 0.00 $ (973,934.33) Student Education Enrichment Program State Appropriation State General Funds $ Original Appropriation 314,737.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 314,737.00 $ 314,737.00 $ $ 314,737.00 $ 0.00 $ 314,737.00 $ 0.00 $ 0.00 $ Other Adjustments Program Fund Balances 0.00 $ 0.00 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 148,028,053.00 $ 147,011,068.00 $ 147,011,068.00 $ 417,525,943.00 433,271,536.00 435,443,095.15 $ 565,553,996.00 $ 580,282,604.00 $ 582,454,163.15 $ $ 44,357,297.62 44,357,297.62 $ 147,011,068.00 $ 479,800,392.77 626,811,460.77 $ 0.00 $ 46,528,856.77 46,528,856.77 $ 147,017,814.12 $ 432,381,345.82 579,399,159.94 $ (6,746.12) $ 890,190.18 883,444.06 $ (6,746.12) $ 47,419,046.95 47,412,300.83 $ 112,528.03 834,465.61 946,993.64 Other Adjustments Program Fund Balances $ (212,657.09) (212,657.09) $ 105,781.91 48,040,855.47 48,146,637.38 582,787,182.00 598,575,352.00 600,746,911.15 44,357,297.62 645,104,208.77 46,528,856.77 597,692,386.42 882,965.58 47,411,822.35 0.00 (212,657.09) $ 47,199,165.26 Transfers Transfers 478.48 478.48 Transfers 820,085.30 Transfers Transfers 6,746.12 (827,309.90) (820,563.78) 0.00 Reserve Program Fund Balances Surplus 0.00 Reserve Program Fund Balances Surplus 0.00 $ 0.00 0.00 $ 26,940.69 $ 26,940.69 $ Total 0.00 Total 26,940.69 0.00 26,940.69 Reserve Program Fund Balances Surplus $ (153,849.03) $ Total (153,849.03) Reserve Program Fund Balances Surplus $ 0.00 $ Total 0.00 Reserve Program Fund Balances Surplus Total $ 47,199,165.26 47,199,165.26 $ 112,528.03 $ 14,380.31 126,908.34 $ 112,528.03 47,213,545.57 47,326,073.60 47,199,165.26 $ 0.00 $ 47,199,165.26 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. Unexpendable Reserves Early Retirement Program Uncollectible Accounts Receivable Inventories 7,365,016.53 144,054.70 127,466.90 $ 54,835,703.39 MIDDLE GEORGIA COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 MIDDLE GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 3,549,841.75 31,611.56 337,697.13 2,218,785.64 12,998.24 4,401.37 Total Assets $ 6,155,335.69 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 255,367.41 4,575,226.59 162,836.98 175,855.24 5,528.15 $ 5,174,814.37 $ 229,238.49 33,053.03 354,657.59 83,442.19 31,955.49 5,040.39 154,000.00 89,134.14 $ 980,521.32 $ 6,155,335.69 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 18,455,944.00 $ 18,241,937.00 $ 4,394,000.00 7,350,028.00 5,644,667.00 8,813,862.00 $ 30,199,972.00 $ 32,700,466.00 $ $ $ $ $ 30,199,972.00 $ 32,700,466.00 $ $ 523,725.00 29,676,247.00 523,725.00 32,176,741.00 $ 30,199,972.00 $ 32,700,466.00 $ $ ACTUAL VARIANCE 18,241,937.00 $ 5,651,260.36 17,585,090.13 41,478,287.49 $ 237,819.72 $ 41,716,107.21 $ 0 6,593.36 8,771,228.13 8,777,821.49 237,819.72 9,015,641.21 520,943.49 40,479,417.87 41,000,361.36 $ 715,745.85 2,781.51 -8,302,676.87 -8,299,895.36 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Unreserved, Unreserved Fund Balance (Surplus) Returned to Georgia Department of Technical and Adult Education Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Other Additions (Deletions) Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 8,987.60 24,962.82 33,209.40 -33,209.40 -44,250.50 62,746.10 -26,591.10 238,920.55 980,521.32 229,238.49 33,053.03 5,040.39 354,657.59 83,442.19 31,955.49 154,000.00 891,387.18 89,134.14 980,521.32 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching MIDDLE GEORGIA COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus $ 523,725.00 $ Original Appropriation 523,725.00 $ 523,725.00 $ 0.00 $ 523,725.00 $ 0.00 $ 520,943.49 $ 2,781.51 $ 2,781.51 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 2,781.51 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 2,781.51 $ Reserve Program Fund Balances Surplus $ 17,932,219.00 $ 17,718,212.00 $ 17,718,212.00 $ 11,744,028.00 14,458,529.00 23,236,350.49 $ 29,676,247.00 $ 32,176,741.00 $ 40,954,562.49 $ 0.00 $ 237,819.72 237,819.72 $ 17,718,212.00 $ 23,474,170.21 41,192,382.21 $ 0.00 $ 9,015,641.21 9,015,641.21 $ 17,723,000.22 $ 22,756,417.65 40,479,417.87 $ (4,788.22) $ (8,297,888.65) (8,302,676.87) $ (4,788.22) $ 717,752.56 712,964.34 $ (26,591.10) $ 62,746.10 36,155.00 117,731.95 $ 73,892.64 191,624.59 $ 86,352.63 $ 854,391.30 940,743.93 0.00 $ 0.00 0.00 0.00 $ 854,391.30 854,391.30 $ 86,352.63 $ 0.00 86,352.63 $ Total 2,781.51 Total 86,352.63 854,391.30 940,743.93 30,199,972.00 32,700,466.00 41,478,287.49 237,819.72 41,716,107.21 9,015,641.21 41,000,361.36 (8,299,895.36) 715,745.85 36,155.00 191,624.59 $ 943,525.44 0.00 854,391.30 $ 89,134.14 $ 943,525.44 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 31,955.49 5,040.39 $ 980,521.32 NORTH GEORGIA COLLEGE AND STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 NORTH GEORGIA COLLEGE & STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 3,506,183.62 200,663.10 1,355,862.44 894,212.86 47,362.68 Total Assets $ 6,004,284.70 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 179,853.12 2,529,171.00 295,979.08 2,206,900.78 $ 5,211,903.98 $ 159,418.53 73,923.75 7,280.12 217,063.38 138,438.63 41,613.46 150,573.18 4,069.67 $ 792,380.72 $ 6,004,284.70 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 26,501,391.00 $ 26,798,099.00 $ 26,798,099.00 $ 3,190,289.00 16,129,965.00 5,987,458.00 19,574,721.00 5,792,941.30 19,458,527.50 $ 45,821,645.00 $ 52,360,278.00 $ 52,049,567.80 $ $ $ $ 461,834.69 $ $ 45,821,645.00 $ 52,360,278.00 $ 52,511,402.49 $ 0 -194,516.70 -116,193.50 -310,710.20 461,834.69 151,124.49 $ 865,632.00 44,956,013.00 865,632.00 51,494,646.00 865,632.00 51,050,734.69 $ 45,821,645.00 $ 52,360,278.00 $ 51,916,366.69 $ $ 595,035.80 0 443,911.31 443,911.31 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Mandatory Transfers - Restricted Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 40,572.34 157,548.05 5,766.80 -5,766.80 3,107.69 -45 -3,838.16 792,380.72 159,418.53 73,923.75 41,613.46 7,280.12 217,063.38 138,438.63 150,573.18 788,311.05 4,069.67 792,380.72 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching NORTH GEORGIA COLLEGE AND STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 865,632.00 Original Appropriation 865,632.00 Final Budget 865,632.00 $ $ 865,632.00 $ 0.00 $ 865,632.00 $ 0.00 $ 0.00 $ 1,550.39 Actual Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 25,635,759.00 $ 25,932,467.00 $ 25,932,467.00 $ 19,320,254.00 25,562,179.00 25,251,468.80 $ 44,956,013.00 $ 51,494,646.00 $ 51,183,935.80 $ $ 461,834.69 461,834.69 $ 25,932,467.00 $ 25,713,303.49 51,645,770.49 $ 0.00 $ 151,124.49 151,124.49 $ 25,931,758.24 $ 25,118,976.45 51,050,734.69 $ 708.76 $ 443,202.55 443,911.31 $ 708.76 $ 594,327.04 595,035.80 $ 1,512.30 1,512.30 Other Adjustments Total Program Fund Balances $ Other Adjustments 1,550.39 Total Program Fund Balances $ 14,230.14 14,230.14 $ 708.76 610,069.48 610,778.24 45,821,645.00 52,360,278.00 52,049,567.80 461,834.69 52,511,402.49 151,124.49 51,916,366.69 443,911.31 595,035.80 3,062.69 14,230.14 $ 612,328.63 Transfers Transfers 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 1,550.39 $ 1,550.39 Reserve Program Fund Balances Surplus Total $ 608,258.96 608,258.96 $ 708.76 $ 1,810.52 2,519.28 $ 708.76 610,069.48 610,778.24 608,258.96 $ 4,069.67 $ 612,328.63 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 138,438.63 41,613.46 $ 792,380.72 SAVANNAH STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 SAVANNAH STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 1,173,072.93 8,275.65 1,181,567.63 1,932,279.19 37,099.90 55,548.49 Total Assets $ 4,387,843.79 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 235,313.28 2,143,624.84 63,314.16 389,878.60 $ 2,832,130.88 $ 110,832.61 509,384.37 177,751.33 67,283.72 402,170.83 49,863.99 149,648.01 88,778.05 $ 1,555,712.91 $ 4,387,843.79 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. SAVANNAH STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 20,154,108.00 $ 19,262,450.00 $ 19,262,450.00 $ 13,887,286.00 10,801,683.00 13,593,485.00 16,822,900.00 13,539,286.90 16,441,852.02 $ 44,843,077.00 $ 49,678,835.00 $ 49,243,588.92 $ $ $ $ 1,253,482.78 $ $ 44,843,077.00 $ 49,678,835.00 $ 50,497,071.70 $ 0 -54,198.10 -381,047.98 -435,246.08 1,253,482.78 818,236.70 $ 466,038.00 44,377,039.00 466,038.00 49,212,797.00 462,177.49 49,063,722.03 $ 44,843,077.00 $ 49,678,835.00 $ 49,525,899.52 $ $ 971,172.18 3,860.51 149,074.97 152,935.48 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 0 495,762.68 369,564.64 -369,564.64 318,799.63 -230,021.58 Ending Fund Balance - June 30 $ 1,555,712.91 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 110,832.61 509,384.37 49,863.99 177,751.33 67,283.72 402,170.83 149,648.01 $ 1,466,934.86 88,778.05 $ 1,555,712.91 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Carry-Over Total Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 466,038.00 $ 466,038.00 $ 466,038.00 $ 0.00 $ 466,038.00 $ 0.00 $ 462,177.49 $ 3,860.51 $ 3,860.51 $ 0.00 $ 0.00 $ 3,860.51 $ 0.00 $ 0.00 $ 3,860.51 $ 3,860.51 Teaching State Appropriation State General Funds Other Funds Total Teaching $ 18,639,605.00 $ 18,796,412.00 $ 25,737,434.00 30,416,385.00 $ 44,377,039.00 $ 49,212,797.00 $ 18,796,412.00 $ 29,981,138.92 48,777,550.92 $ 0.00 $ 1,253,482.78 1,253,482.78 $ 18,796,412.00 $ 31,234,621.70 50,031,033.70 $ 0.00 $ 818,236.70 818,236.70 $ 18,591,449.81 $ 30,472,272.22 49,063,722.03 $ 204,962.19 $ -55,887.22 149,074.97 $ 204,962.19 $ 762,349.48 967,311.67 $ -120,044.65 $ 208,822.70 88,778.05 $ 0.00 $ 84,917.54 $ 43,727.86 1,014,900.04 43,727.86 $ 1,099,817.58 $ 0.00 $ 0.00 $ 84,917.54 $ 84,917.54 0.00 1,014,900.04 0.00 1,014,900.04 0.00 $ 1,014,900.04 $ 84,917.54 $ 1,099,817.58 Grand Totals - All Programs $ 44,843,077.00 $ 49,678,835.00 $ 49,243,588.92 $ 1,253,482.78 $ 50,497,071.70 $ 818,236.70 $ 49,525,899.52 $ 152,935.48 $ 971,172.18 $ 88,778.05 $ 43,727.86 $ 1,103,678.09 $ 0.00 $ 1,014,900.04 $ 88,778.05 $ 1,103,678.09 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 402,170.83 49,863.99 $ 1,555,712.91 SKIDAWAY INSTITUTE OF OCEANOGRAPHY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 SKIDAWAY INSTITUTE OF OCEANOGRAPHY-A BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 152,199.72 465,146.15 503,421.96 3,000.00 Total Assets $ 1,123,767.83 LIABILITIES AND FUND EQUITY Liabilities Encumbrance Payable Deferred Revenue Total Liabilities Fund Balances Reserved Indirect Cost Recoveries Unreserved Total Fund Balances Total Liabilities and Fund Balances $ 350,560.29 252,641.74 $ 603,202.03 $ 520,565.80 $ 520,565.80 $ 1,123,767.83 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Research Consortium Skidaway Institute of Oceanography Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 2,530,780.00 $ 2,647,780.00 $ 4,113,000.00 1,545,000.00 3,613,000.00 1,345,000.00 $ 8,188,780.00 $ 7,605,780.00 $ $ $ $ $ 8,188,780.00 $ 7,605,780.00 $ $ 0 7,370,710.00 100,000.00 6,470,710.00 818,070.00 1,035,070.00 $ 8,188,780.00 $ 7,605,780.00 $ $ ACTUAL VARIANCE 2,647,780.00 $ 3,592,742.59 1,901,455.25 8,141,977.84 $ 404,244.31 $ 8,546,222.15 $ 0 -20,257.41 556,455.25 536,197.84 404,244.31 940,442.15 100,000.00 6,443,433.25 1,482,223.10 8,025,656.35 $ 520,565.80 0 27,276.75 -447,153.10 -419,876.35 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment 0 0 0.99 -0.99 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Indirect Cost Recovery Total Reserved Unreserved Surplus Total Fund Balance $ 520,565.80 $ 520,565.80 $ 520,565.80 0 $ 520,565.80 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. Research Consortium State Appropriation State General Funds SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 0.00 $ 100,000.00 $ 100,000.00 $ $ 100,000.00 $ 0.00 $ 100,000.00 $ 0.00 $ 0.00 $ Original Appropriation Skidaway Institute of Oceanography State Appropriation State General Funds $ 1,712,710.00 $ Other Funds 5,658,000.00 Total Teaching $ 7,370,710.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 1,712,710.00 $ 4,758,000.00 1,712,710.00 $ 4,847,044.74 $ 1,712,710.00 $ 4,847,044.74 0.00 $ 89,044.74 1,712,710.00 $ 4,730,723.25 0.00 $ 27,276.75 0.00 $ 116,321.49 6,470,710.00 $ 6,559,754.74 $ 0.00 $ 6,559,754.74 $ 89,044.74 $ 6,443,433.25 $ 27,276.75 $ 116,321.49 $ 0.00 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 818,070.00 835,070.00 200,000.00 835,070.00 $ 647,153.10 0.00 $ 404,244.31 835,070.00 $ 1,051,397.41 0.00 $ 851,397.41 835,070.00 $ 647,153.10 0.00 $ (447,153.10) 0.00 $ 404,244.31 $ 818,070.00 $ 1,035,070.00 $ 1,482,223.10 $ 404,244.31 $ 1,886,467.41 $ 851,397.41 $ 1,482,223.10 $ (447,153.10) $ 404,244.31 $ 0.00 8,188,780.00 7,605,780.00 8,141,977.84 404,244.31 8,546,222.15 940,442.15 8,025,656.35 (419,876.35) 520,565.80 0.00 Other Adjustments Total Program Fund Balances 0.00 $ Other Adjustments 0.00 Total Program Fund Balances $ 0.00 $ Other Adjustments 0.00 116,321.49 116,321.49 Total Program Fund Balances 0.00 $ 0.00 $ 0.00 $ 0.00 404,244.31 404,244.31 520,565.80 Transfers Transfers 0.00 0.00 Transfers 0.00 0.00 0.00 Reserve Program Fund Balances Surplus Total $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 116,321.49 116,321.49 $ 0.00 $ 0.00 $ 0.00 116,321.49 116,321.49 Reserve Program Fund Balances Surplus Total $ 404,244.31 404,244.31 $ 520,565.80 $ 0.00 $ 0.00 0.00 $ 0.00 $ 0.00 404,244.31 404,244.31 520,565.80 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. SOUTH GEORGIA COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 SOUTH GEORGIA COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Total Assets $ 0 84,281.57 316,572.15 19,758.39 $ 420,612.11 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 89,610.39 72,620.01 114,283.40 -37,733.65 930 $ 239,710.15 $ 5,893.38 26,194.46 337.39 64,920.39 24,761.00 34,909.56 23,885.78 $ 180,901.96 $ 420,612.11 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 7,592,377.00 $ 7,731,643.00 $ 7,731,643.00 $ 2,569,068.00 3,318,686.00 3,614,068.00 6,262,786.00 3,642,242.93 5,695,951.37 0 28,174.93 -566,834.63 Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures $ 13,480,131.00 $ 17,608,497.00 $ 17,069,837.30 $ $ $ $ 55,879.44 $ $ 13,480,131.00 $ 17,608,497.00 $ 17,125,716.74 $ $ 3,918.00 13,476,213.00 3,918.00 17,604,579.00 3,918.00 16,958,144.93 $ 13,480,131.00 $ 17,608,497.00 $ 16,962,062.93 $ $ 163,653.81 -538,659.70 55,879.44 -482,780.26 0 646,434.07 646,434.07 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 0 19,000.00 15,037.38 -15,037.38 -7,512.85 5,761.00 180,901.96 5,893.38 26,194.46 337.39 64,920.39 24,761.00 34,909.56 157,016.18 23,885.78 180,901.96 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. SOUTH GEORGIA COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Carry-Over Total Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 3,918.00 $ 3,918.00 $ 3,918.00 $ 0.00 $ 3,918.00 $ 0.00 $ 3,918.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Teaching State Appropriation State General Funds Federal Funds Other Funds Total Teaching $ 7,588,459.00 $ 7,727,725.00 $ 2,569,068.00 3,614,068.00 3,318,686.00 6,262,786.00 $ 13,476,213.00 $ 17,604,579.00 $ 7,727,725.00 $ 3,594,502.71 5,743,691.59 0.00 $ 0.00 55,879.44 17,065,919.30 $ 55,879.44 $ 7,727,725.01 $ 3,594,502.71 5,799,571.02 0.01 $ -19,565.29 -463,214.98 17,121,798.74 $ -482,780.26 $ 7,703,839.23 $ 3,592,526.87 5,661,778.83 16,958,144.93 $ 23,885.77 $ 21,541.13 601,007.17 646,434.07 $ 23,885.78 $ 1,975.84 137,792.19 163,653.81 $ 0.00 $ 0.00 -1,751.85 -1,751.85 $ 0.00 $ 0.00 -5,761.00 23,885.78 $ 1,975.84 130,279.34 -5,761.00 $ 156,140.96 $ 0.00 $ 0.00 0.00 0.00 $ 1,975.84 130,279.34 23,885.78 $ 0.00 0.00 23,885.78 1,975.84 130,279.34 0.00 $ 132,255.18 $ 23,885.78 $ 156,140.96 Grand Totals - All Programs $ 13,480,131.00 $ 17,608,497.00 $ 17,069,837.30 $ 55,879.44 $ 17,125,716.74 $ -482,780.26 $ 16,962,062.93 $ 646,434.07 $ 163,653.81 $ -1,751.85 $ -5,761.00 $ 156,140.96 $ 0.00 $ 132,255.18 $ 23,885.78 $ 156,140.96 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. Unexpendable Reserves Uncollectible Accounts Receivable 24,761.00 $ 180,901.96 SOUTHERN POLYTECHNIC STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 SOUTHERN POLYTECHNIC STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 2,479,128.55 282,644.30 9,555,519.61 680,286.91 Total Assets $ 12,997,579.37 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 215,967.03 8,661,629.92 50,442.73 2,521,141.85 $ 11,449,181.53 $ 182,201.71 185,874.55 17,998.76 7,308.08 807,016.06 306,552.62 41,446.06 $ 1,548,397.84 $ 12,997,579.37 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. SOUTHERN POLYTECHNIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET $ 22,047,327.00 $ 22,506,649.00 $ 3,000,000.00 17,244,432.00 4,400,000.00 30,405,236.00 $ 42,291,759.00 $ 57,311,885.00 $ $ $ $ $ 42,291,759.00 $ 57,311,885.00 $ $ 105,945.00 10,613.00 42,175,201.00 105,945.00 10,613.00 57,195,327.00 $ 42,291,759.00 $ 57,311,885.00 $ $ ACTUAL VARIANCE 22,506,649.00 $ 3,925,825.82 25,716,942.85 52,149,417.67 $ 1,425,615.40 $ 53,575,033.07 $ 0 -474,174.18 -4,688,293.15 -5,162,467.33 1,425,615.40 -3,736,851.93 105,944.14 10,603.38 52,526,423.50 52,642,971.02 $ 932,062.05 0.86 9.62 4,668,903.50 4,668,913.98 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 0 615,757.53 9,573.44 -9,573.44 25,952.83 -25,374.57 Ending Fund Balance - June 30 $ 1,548,397.84 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 182,201.71 185,874.55 17,998.76 7,308.08 807,016.06 306,552.62 $ 1,506,951.78 41,446.06 $ 1,548,397.84 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Carry-Over Total Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 10,613.00 $ 10,613.00 $ 10,613.00 $ 0.00 $ 10,613.00 $ 0.00 $ 10,603.38 $ 9.62 $ 9.62 $ 0.00 $ 0.00 $ 9.62 $ 0.00 $ 0.00 $ 9.62 $ 9.62 Research Consortium State Appropriation State General Funds $ 105,945.00 $ 105,945.00 $ 105,945.00 $ 0.00 $ 105,945.00 $ 0.00 $ 105,944.14 $ 0.86 $ 0.86 $ 0.00 $ 0.00 $ 0.86 $ 0.00 $ 0.00 $ 0.86 $ 0.86 Teaching State Appropriation State General Funds Other Funds Total Teaching $ 21,930,769.00 $ 22,390,091.00 $ 22,390,091.00 $ 0.00 $ 22,390,091.00 $ 0.00 $ 22,390,669.26 $ -578.26 $ 20,244,432.00 34,805,236.00 29,642,768.67 1,425,615.40 31,068,384.07 -3,736,851.93 30,135,754.24 4,669,481.76 $ 42,175,201.00 $ 57,195,327.00 $ 52,032,859.67 $ 1,425,615.40 $ 53,458,475.07 $ -3,736,851.93 $ 52,526,423.50 $ 4,668,903.50 $ -578.26 $ 932,629.83 932,051.57 $ 578.26 $ 0.00 578.26 $ 0.00 $ 0.00 $ 578.26 $ 0.00 $ 578.26 $ -191,258.53 741,371.30 -578.26 699,935.72 40,857.32 -191,258.53 $ 741,371.30 $ 0.00 $ 699,935.72 $ 41,435.58 $ 578.26 740,793.04 741,371.30 Grand Totals - All Programs $ 42,291,759.00 $ 57,311,885.00 $ 52,149,417.67 $ 1,425,615.40 $ 53,575,033.07 $ -3,736,851.93 $ 52,642,971.02 $ 4,668,913.98 $ 932,062.05 $ 578.26 $ -191,258.53 $ 741,381.78 $ 0.00 $ 699,935.72 $ 41,446.06 $ 741,381.78 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. Unexpendable Reserves Uncollectible Accounts Receivable 807,016.06 $ 1,548,397.84 GEORGIA INSTITUTE OF TECHNOLOGY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Other Assets $ 0 33,522,496.07 33,727,392.40 12,549,374.18 289,062.83 5,543,577.60 Total Assets $ 85,631,903.08 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities Total Liabilities Fund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 15,004,420.84 26,110,736.00 16,103,589.12 15,295,138.32 9,351,450.23 $ 81,865,334.51 $ 2,929,316.27 347,083.65 1,014,295.59 286,219.08 -1,189,669.34 379,323.32 $ 3,766,568.57 $ 85,631,903.08 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. GEORGIA INSTITUTE OF TECHNOLOGY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 265,179,112.00 $ 275,144,403.00 $ 275,144,403.00 $ 384,344,736.00 329,983,610.00 391,594,736.00 364,286,743.00 358,774,404.00 338,204,390.13 $ 979,507,458.00 $ 1,031,025,882.00 $ 972,123,197.13 $ $ $ $ 26,162,429.46 $ $ 979,507,458.00 $ 1,031,025,882.00 $ 998,285,626.59 $ 0 -32,820,332.00 -26,082,352.87 -58,902,684.87 26,162,429.46 -32,740,255.41 Advanced Technology Development Center/EDI $ Georgia Tech Research Institute Research Consortium Special Funding Initiative Teaching Total Expenditures $ Excess of Funds Available over Expenditures 27,974,712.00 130,786,385.00 9,955,999.00 631,882.00 810,158,480.00 979,507,458.00 $ 29,574,712.00 154,736,385.00 19,621,406.00 931,082.00 826,162,297.00 1,031,025,882.00 $ 27,175,514.08 149,869,704.44 19,621,406.00 931,082.00 812,649,991.31 1,010,247,697.83 $ $ -11,962,071.24 2,399,197.92 4,866,680.56 0 0 13,512,305.69 20,778,184.17 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Non-Mandatory Transfers 273,503.32 955,382.69 0 0 563,596.88 -184,273.56 12,715.76 14,107,714.72 Ending Fund Balance - June 30 $ 3,766,568.57 Analysis of Fund Balance Reserved Capital Outlay Inventories Restricted/Sponsored Funds Uncollectible Accounts Receivable Property Reserves Total Reserved Unreserved Surplus Total Fund Balance $ 2,929,316.27 286,219.08 347,083.65 1,014,295.59 -1,189,669.34 $ 3,387,245.25 379,323.32 $ 3,766,568.57 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Advanced Technology Development Center State Appropriation State General Funds Other Funds Total Advanced Technology Development Center Georgia Tech Research Institute State Appropriation State General Funds Other Funds Total Georgia Tech Research Institute Special Funding Initiative State Appropriation State General Funds Research Consortium State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 15,099,712.00 $ 12,875,000.00 15,099,712.00 $ 15,099,712.00 $ 14,475,000.00 12,042,668.25 0.00 $ 15,099,712.00 $ 0.00 $ 12,042,668.25 (2,432,331.75) 15,099,712.26 $ 12,075,801.82 (0.26) $ 2,399,198.18 (0.26) $ (33,133.57) 16,806.44 8,410.50 $ 27,974,712.00 $ 29,574,712.00 $ 27,142,380.25 $ 0.00 $ 27,142,380.25 $ (2,432,331.75) $ 27,175,514.08 $ 2,399,197.92 $ (33,133.83) $ 25,216.94 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 7,868,427.00 $ 7,868,427.00 $ 7,868,427.00 $ 122,917,958.00 146,867,958.00 142,001,279.33 $ 130,786,385.00 $ 154,736,385.00 $ 149,869,706.33 $ 0.00 $ 7,868,427.00 $ 0.00 $ 7,868,427.00 $ 142,001,279.33 (4,866,678.67) 142,001,277.44 0.00 $ 149,869,706.33 $ (4,866,678.67) $ 149,869,704.44 $ 0.00 $ 4,866,680.56 4,866,680.56 $ 0.00 $ 1.89 1.89 $ 1,294.50 73,237.59 74,532.09 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 631,882.00 $ Original Appropriation 931,082.00 $ 931,082.00 $ 0.00 $ 931,082.00 $ 0.00 $ 931,082.00 $ 0.00 $ 0.00 $ 0.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 9,955,999.00 $ 19,621,406.00 $ 19,621,406.00 $ 0.00 $ 19,621,406.00 $ 0.00 $ 19,621,406.00 $ 0.00 $ 0.00 $ 0.00 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Variance Carry-Over Funds Available Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments $ 225,628,986.00 $ 231,623,776.00 $ 231,623,776.00 $ 0.00 $ 231,623,776.00 $ 0.00 $ 231,623,776.00 $ 0.00 $ 0.00 $ 584,529,494.00 594,538,521.00 542,934,846.55 26,162,429.46 569,097,276.01 (25,441,244.99) 581,026,215.31 13,512,305.69 (11,928,939.30) $ 810,158,480.00 $ 826,162,297.00 $ 774,558,622.55 $ 26,162,429.46 $ 800,721,052.01 $ (25,441,244.99) $ 812,649,991.31 $ 13,512,305.69 $ (11,928,939.30) $ 151,425.68 128,148.61 279,574.29 Other Adjustments $ 0.26 $ 46,268.01 $ 46,268.27 $ $ Other Adjustments $ 115,397.67 $ 115,397.67 $ $ Other Adjustments 0.00 $ Other Adjustments $ 0.00 $ Other Adjustments $ 0.00 $ 13,887,135.88 $ 13,887,135.88 $ Total Program Fund Balances 16,806.44 $ 21,544.94 38,351.38 $ Total Program Fund Balances 1,294.50 $ 188,637.15 189,931.65 $ Total Program Fund Balances 0.00 $ Total Program Fund Balances 0.00 $ Total Program Fund Balances 151,425.68 $ 2,086,345.19 2,237,770.87 $ Transfers Program Fund Balances Reserve Surplus 0.00 $ 0.00 $ 0.00 $ 13,134.44 13,134.44 $ 16,806.44 $ 8,410.50 25,216.94 $ Transfers Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ 0.00 $ 115,399.56 115,399.56 $ 1,294.50 $ 73,237.59 74,532.09 $ Transfers Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ 0.00 $ Transfers Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ 0.00 $ Transfers Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ 1,958,196.58 0.00 $ 1,958,196.58 $ 151,425.68 $ 128,148.61 279,574.29 $ Total 16,806.44 21,544.94 38,351.38 Total 1,294.50 188,637.15 189,931.65 Total 0.00 Total 0.00 Total 151,425.68 2,086,345.19 2,237,770.87 Grand Totals - All Programs $ 979,507,458.00 $ 1,031,025,882.00 $ 972,123,197.13 $ 26,162,429.46 $ 998,285,626.59 $ (32,740,255.41) $ 1,010,247,697.83 $ 20,778,184.17 $ (11,962,071.24) $ 379,323.32 $ 14,048,801.82 $ 2,466,053.90 $ 0.00 $ 2,086,730.58 $ 379,323.32 $ 2,466,053.90 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 1,014,295.59 286,219.08 $ 3,766,568.57 UNIVERSITY OF GEORGIA Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 UNIVERSITY OF GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 137,371,268.33 12,619,453.07 36,604,056.60 3,832,996.75 3,017,703.79 Total Assets $ 193,445,478.54 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 5,133,159.09 61,227,611.71 48,151,087.04 768,469.62 $ 115,280,327.46 $ 2,433,217.90 4,231,941.07 18,552,620.71 1,248,013.66 47,302,633.36 576,499.70 1,487,000.00 2,098,741.90 234,482.78 $ 78,165,151.08 $ 193,445,478.54 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. UNIVERSITY OF GEORGIA BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available 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 VARIANCE $ 483,422,073.00 $ 471,193,907.00 $ 471,193,907.00 $ 293,164,217.00 345,593,939.00 306,514,217.00 408,661,861.00 237,666,986.00 396,771,069.60 $ 1,122,180,229.00 $ 1,186,369,985.00 $ 1,105,631,962.60 $ $ $ $ 64,853,118.80 $ $ 1,122,180,229.00 $ 1,186,369,985.00 $ 1,170,485,081.40 $ 0 -68,847,231.00 -11,890,791.40 -80,738,022.40 64,853,118.80 -15,884,903.60 $ 75,377,483.00 4,882,330.00 58,486,061.00 987,793.00 5,826,331.00 1,731,994.00 2,761,521.00 480,169.00 1,384,244.00 1,240,580.00 958,434,884.00 3,384,254.00 7,202,585.00 86,015,877.00 6,268,386.00 68,438,718.00 1,170,484.00 7,706,916.00 1,786,536.00 4,316,521.00 480,169.00 6,404,587.00 1,648,860.00 986,496,092.00 3,384,254.00 12,252,585.00 80,354,212.99 5,908,662.02 65,093,392.11 1,008,149.45 7,645,793.68 1,420,923.86 3,684,272.67 480,169.00 6,404,587.00 1,648,860.00 907,588,930.13 3,384,254.00 10,068,145.59 $ 1,122,180,229.00 $ 1,186,369,985.00 $ 1,094,690,352.50 $ $ 75,794,728.90 5,661,664.01 359,723.98 3,345,325.89 162,334.55 61,122.32 365,612.14 632,248.33 0 0 0 78,907,161.87 0 2,184,439.41 91,679,632.50 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 1,487,000.00 268,548.95 16,622.11 -16,622.11 674,071.08 -59,197.85 Ending Fund Balance - June 30 $ 78,165,151.08 Analysis of Fund Balance Reserved Capital Outlay Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 2,433,217.90 4,231,941.07 18,552,620.71 1,487,000.00 1,248,013.66 47,302,633.36 576,499.70 2,098,741.90 $ 77,930,668.30 234,482.78 $ 78,165,151.08 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 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Forestry Research State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Research Original Appropriation $ 3,276,331.00 $ 2,000,000.00 550,000.00 $ 5,826,331.00 $ Forestry Cooperative Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Forestry Cooperative Extension Service Original Appropriation $ 687,388.00 $ 200,000.00 100,405.00 $ 987,793.00 $ Agricultural Experiment Station State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Agricultural Experiment Station Original Appropriation $ 42,936,221.00 $ 22,000,000.00 10,441,262.00 $ 75,377,483.00 $ Cooperative Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Cooperative Extension Service Original Appropriation $ 35,391,924.00 $ 13,000,000.00 10,094,137.00 $ 58,486,061.00 $ Marine Extension Service State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Extension Service Original Appropriation $ 1,576,721.00 $ 600,000.00 584,800.00 $ 2,761,521.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 3,276,331.00 $ 3,500,000.00 930,585.00 7,706,916.00 $ 3,276,331.00 $ 3,553,178.63 1,070,782.29 7,900,291.92 $ $ 673,544.71 358,490.09 1,032,034.80 $ 3,276,331.00 $ 4,226,723.34 1,429,272.38 8,932,326.72 $ 0.00 $ 726,723.34 498,687.38 1,225,410.72 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 3,276,331.00 $ 0.00 $ 0.00 $ 8,848.57 $ $ 8,848.57 $ $ 3,438,216.89 931,245.79 61,783.11 (660.79) 788,506.45 498,026.59 2,163.69 788,506.45 500,190.28 7,645,793.68 $ 61,122.32 $ 1,286,533.04 $ 11,012.26 $ 0.00 $ 1,297,545.30 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 687,388.00 $ 350,000.00 133,096.00 1,170,484.00 $ 687,388.00 $ 317,731.81 16,477.69 1,021,597.50 $ $ 29,896.06 38,801.37 68,697.43 $ 687,388.00 $ 347,627.87 55,279.06 1,090,294.93 $ 0.00 $ (2,372.13) (77,816.94) (80,189.07) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 687,388.00 $ 0.00 $ 0.00 $ 145.68 $ $ 145.68 $ $ 287,675.19 33,086.26 1,008,149.45 $ 62,324.81 100,009.74 162,334.55 $ 59,952.68 22,192.80 82,145.48 $ 300.00 445.68 $ 0.00 $ 59,952.68 22,492.80 82,591.16 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 42,936,221.00 $ 25,000,000.00 18,079,656.00 86,015,877.00 $ Final Budget 42,936,221.00 $ $ 42,936,221.00 $ 0.00 $ 23,791,106.14 14,305,679.24 7,974,091.98 709,197.47 31,765,198.12 15,014,876.71 6,765,198.12 (3,064,779.29) 81,033,006.38 $ 8,683,289.45 $ 89,716,295.83 $ 3,700,418.83 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 42,936,221.00 $ 0.00 $ 0.00 $ 72,724.38 $ $ 72,724.38 $ $ 23,249,351.41 14,168,640.58 1,750,648.59 3,911,015.42 8,515,846.71 846,236.13 6,830.63 363.40 8,515,846.71 853,430.16 80,354,212.99 $ 5,661,664.01 $ 9,362,082.84 $ 79,555.01 $ 363.40 $ 9,442,001.25 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 35,391,924.00 $ 19,000,000.00 14,046,794.00 68,438,718.00 $ 35,391,924.00 $ 18,567,741.73 11,571,359.19 65,531,024.92 $ $ 1,914,732.87 240,190.33 2,154,923.20 $ 35,391,924.00 $ 20,482,474.60 11,811,549.52 67,685,948.12 $ 0.00 $ 1,482,474.60 (2,235,244.48) (752,769.88) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 35,391,924.00 $ 18,014,357.14 11,687,110.97 65,093,392.11 $ 0.00 $ 985,642.86 2,359,683.03 3,345,325.89 $ 0.00 $ 2,468,117.46 124,438.55 2,592,556.01 $ 26,629.73 $ 8,349.92 34,979.65 $ $ (828.00) (828.00) $ 26,629.73 $ 2,468,117.46 131,960.47 2,626,707.66 $ $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 1,576,721.00 $ 2,000,000.00 739,800.00 4,316,521.00 $ 1,576,721.00 $ 1,400,996.35 702,918.25 3,680,635.60 $ $ 185,949.68 185,949.68 $ 1,576,721.00 $ 1,586,946.03 702,918.25 3,866,585.28 $ 0.00 $ (413,053.97) (36,881.75) (449,935.72) $ 1,576,721.00 $ 1,404,633.42 702,918.25 3,684,272.67 $ 0.00 $ 595,366.58 36,881.75 632,248.33 $ 0.00 $ 182,312.61 0.00 182,312.61 $ 814.45 $ 65.82 880.27 $ $ 814.45 $ $ 182,312.61 65.82 $ 183,192.88 $ 0.00 $ Reserve Program Fund Balances Surplus Total 0.00 $ 788,506.45 500,190.28 1,288,696.73 $ 8,848.57 $ 0.00 0.00 8,848.57 $ 8,848.57 788,506.45 500,190.28 1,297,545.30 Reserve Program Fund Balances Surplus Total 0.00 $ 59,952.68 22,492.80 82,445.48 $ 145.68 $ 0.00 0.00 145.68 $ 145.68 59,952.68 22,492.80 82,591.16 Reserve Program Fund Balances Surplus Total 0.00 $ 8,515,846.71 853,430.16 9,369,276.87 $ 72,724.38 $ 0.00 0.00 72,724.38 $ 72,724.38 8,515,846.71 853,430.16 9,442,001.25 Reserve Program Fund Balances Surplus Total 0.00 $ 2,468,117.46 131,960.47 2,600,077.93 $ 26,629.73 $ 0.00 0.00 26,629.73 $ 26,629.73 2,468,117.46 131,960.47 2,626,707.66 Reserve Program Fund Balances Surplus Total 0.00 $ 182,312.61 65.82 182,378.43 $ 814.45 $ 0.00 0.00 814.45 $ 814.45 182,312.61 65.82 183,192.88 UNIVERSITY OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Marine Institute State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Marine Institute Original Appropriation $ 964,361.00 $ $ 700,000.00 $ 67,633.00 $ 1,731,994.00 $ Veterinary Medicine State Appropriation State General Funds Original Appropriation $ 3,384,254.00 $ Veterinary Teaching Hospital State Appropriation State General Funds Other Funds Total Veterinary Teaching Hospital Original Appropriation $ 502,585.00 $ 6,700,000.00 $ 7,202,585.00 $ Teaching State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Teaching Original Appropriation $ 391,535,103.00 $ 249,844,079.00 317,055,702.00 $ 958,434,884.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 964,361.00 $ 700,000.00 $ 122,175.00 1,786,536.00 $ 964,361.00 $ 372,941.32 $ 48,194.24 1,385,496.56 $ $ 11,273.94 $ 54,542.13 65,816.07 $ 964,361.00 $ 384,215.26 $ 102,736.37 1,451,312.63 $ 0.00 $ (315,784.74) $ (19,438.63) (335,223.37) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 964,361.00 $ 0.00 $ 0.00 $ 800.00 $ $ 800.00 $ $ 369,274.87 $ 87,287.99 1,420,923.86 $ 330,725.13 $ 34,887.01 365,612.14 $ 14,940.39 $ 15,448.38 30,388.77 $ $ 800.00 $ $ 0.00 $ 14,940.39 $ 15,448.38 31,188.77 $ $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 3,384,254.00 $ 3,384,254.00 $ $ 3,384,254.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 3,384,254.00 $ 0.00 $ 0.00 $ 1,575.25 $ $ 1,575.25 $ $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 502,585.00 $ 11,750,000.00 12,252,585.00 $ 502,585.00 $ 10,042,989.90 10,545,574.90 $ $ 1,103,276.21 1,103,276.21 $ 502,585.00 $ 11,146,266.11 11,648,851.11 $ 0.00 $ (603,733.89) (603,733.89) $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 502,585.00 $ 0.00 $ 0.00 $ $ $ 0.00 $ $ 9,565,560.59 2,184,439.41 1,580,705.52 13,465.19 (17,993.35) 1,576,177.36 10,068,145.59 $ 2,184,439.41 $ 1,580,705.52 $ 13,465.19 $ (17,993.35) $ 1,576,177.36 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 373,878,314.00 $ 249,844,079.00 362,773,699.00 986,496,092.00 $ 373,878,314.00 $ $ 183,891,333.06 358,939,507.79 30,853,721.75 18,377,049.52 916,709,154.85 $ 49,230,771.27 $ 373,878,314.00 $ 214,745,054.81 377,316,557.31 965,939,926.12 $ 0.00 $ (35,099,024.19) 14,542,858.31 (20,556,165.88) $ 373,878,314.00 $ 0.00 $ 181,654,164.45 352,056,451.68 68,189,914.55 10,717,247.32 907,588,930.13 $ 78,907,161.87 $ 0.00 $ 33,090,890.36 25,260,105.63 58,350,995.99 $ 108,075.11 $ 349,215.20 457,290.31 $ $ (289,162.80) (289,162.80) $ 108,075.11 $ 33,090,890.36 25,320,158.03 58,519,123.50 $ $ 0.00 $ Reserve Program Fund Balances Surplus Total 0.00 $ 14,940.39 $ 15,448.38 30,388.77 $ 800.00 $ 0.00 $ 0.00 800.00 $ 800.00 14,940.39 15,448.38 31,188.77 Reserve Program Fund Balances Surplus Total 0.00 $ 1,575.25 $ 1,575.25 Reserve Program Fund Balances Surplus Total 0.00 $ 1,576,177.36 1,576,177.36 $ 0.00 $ 0.00 0.00 $ 0.00 1,576,177.36 1,576,177.36 Reserve Program Fund Balances Surplus Total 0.00 $ 33,090,890.36 25,320,158.03 58,411,048.39 $ 108,075.11 $ 0.00 0.00 108,075.11 $ 108,075.11 33,090,890.36 25,320,158.03 58,519,123.50 Minority Business State Appropriation State General Funds Original Appropriation $ 480,169.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus Total 480,169.00 $ 480,169.00 $ $ 480,169.00 $ 0.00 $ 480,169.00 $ 0.00 $ 0.00 $ $ $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 UNIVERSITY OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Athens and Tifton Veterinary Lab State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Athens and Tifton Veterinary Lab Original Appropriation $ 62,192.00 $ 4,820,138.00 $ 4,882,330.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers 62,192.00 $ 6,120,138.00 86,056.00 6,268,386.00 $ 62,192.00 $ 5,771,956.96 73,161.01 5,907,309.97 $ $ 2,293,261.29 35,099.40 2,328,360.69 $ 62,192.00 $ 8,065,218.25 108,260.41 8,235,670.66 $ 0.00 $ 1,945,080.25 22,204.41 1,967,284.66 $ 61,862.00 $ 5,776,490.08 70,309.94 5,908,662.02 $ 330.00 $ 343,647.92 15,746.06 359,723.98 $ 330.00 $ 2,288,728.17 37,950.47 2,327,008.64 $ (330.00) $ 330.00 0.00 $ $ (330.00) (330.00) $ 0.00 $ 2,288,728.17 37,950.47 2,326,678.64 $ $ 0.00 $ Reserve Program Fund Balances Surplus Total 0.00 $ 2,288,728.17 37,950.47 2,326,678.64 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 2,288,728.17 37,950.47 2,326,678.64 Special Funding Initiative State Appropriation State General Funds Original Appropriation $ 1,240,580.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus Total 1,648,860.00 $ 1,648,860.00 $ $ 1,648,860.00 $ 0.00 $ 1,648,860.00 $ 0.00 $ 0.00 $ $ $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 Research Consortium State Appropriation State General Funds Original Appropriation $ 1,384,244.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus Total 6,404,587.00 $ 6,404,587.00 $ $ 6,404,587.00 $ 0.00 $ 6,404,587.00 $ 0.00 $ 0.00 $ 14,869.61 $ $ 14,869.61 $ $ 0.00 $ 14,869.61 $ 14,869.61 1,122,180,229.00 1,186,369,985.00 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. 1,105,631,962.60 64,853,118.80 1,170,485,081.40 (15,884,903.60) 1,094,690,352.50 91,679,632.50 75,794,728.90 614,873.23 (307,950.75) 76,101,651.38 0.00 $ 75,867,168.60 $ 234,482.78 $ 76,101,651.38 Unexpendable Reserves Uncollectible Accounts Receivable Inventories 576,499.70 1,487,000.00 $ 78,165,151.08 UNIVERSITY SYSTEM OFFICE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 Office of Information & Instructional Technology and Regents Central Office-A BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures $ 17,616,810.87 6,829,486.47 1,172,624.18 1,025,405.13 4,435.91 Total Assets $ 26,648,762.56 LIABILITIES AND FUND EQUITY Liabilities Encumbrance Payable 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 $ 4,996,554.78 4,112,587.49 $ 9,109,142.27 $ 4,255,053.79 863,343.89 8,195,842.15 39,716.59 3,538,743.57 646,920.30 $ 17,539,620.29 $ 26,648,762.56 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. Office of Information & Instructional Technology and Regents Central Office-A BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 156,386,398 $ 165,382,996 $ 165,382,996.00 $ 0 14,722,400 24,835,604 29,601,575 28,350,116 14,737,661.08 27,912,280.63 -14,863,913.92 -437,835.37 Total Revenue $ Prior Year Reserves Available for Expenditure $ Total Funds Available $ 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 195,944,402 $ $ 195,944,402.00 $ 3,062,152 18,069,614 33,181,112 45,537,501 7,683,800 1,500,000 7,904,779 79,005,444 195,944,402 $ 223,334,687 $ $ 223,334,687.00 $ 3,062,152 18,069,614 33,181,112 44,851,896 7,762,975 2,000,000 9,151,732 105,255,206 223,334,687 $ $ 208,032,937.71 $ 14,070,744.18 $ 222,103,681.89 $ 3,062,152.00 18,069,614.00 33,181,112.00 44,657,879.92 8,442,787.75 2,000,000.00 9,144,603.17 86,606,885.20 205,165,034.04 $ 16,938,647.85 -15,301,749.29 14,070,744.18 -1,231,005.11 0 0 0 194,016.08 -679,812.75 0 7,128.83 18,648,320.80 18,169,652.96 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2007 FUND BALANCE JUNE 30 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Restricted/Sponsored Funds Uncollectible Accounts Receivable Property Reserves Total Reserved Unreserved Surplus Total Fund Balance 0 39,716.59 210,614.62 559,262.85 1,993.00 -1,968,440.84 1,757,826.22 $ 17,539,620.29 $ 17,539,620.29 $ 4,255,053.79 863,343.89 8,195,842.15 39,716.59 3,538,743.57 $ 16,892,699.99 646,920.30 $ 17,539,620.29 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. OFFICE OF INSTRUCTIONAL TECHNOLOGY AND REGENTS CENTRAL OFFICE - A STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Georgia Military College State Appropriation State General Funds Georgia Public Telecommunications State Appropriation State General Funds MCG Hospital and Clinics State Appropriation State General Funds Public Libraries State Appropriation State General Funds Other Funds Total Public Libraries Regents Central Office State Appropriation State General Funds Other Funds Total Regents Central Office Research Consortium State Appropriation State General Funds Special Funding Initiative State Appropriation State General Funds Original Appropriation $ 3,062,152.00 Original Appropriation $ 18,069,614.00 $ Original Appropriation $ 33,181,112.00 $ Original Appropriation $ 41,015,101.00 4,522,400.00 $ 45,537,501.00 $ Original Appropriation $ 7,683,800.00 $ 0.00 $ 7,683,800.00 $ Original Appropriation $ 1,500,000.00 $ Original Appropriation $ 7,904,779.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 3,062,152.00 Final Budget 3,062,152.00 $ 0.00 $ 3,062,152.00 $ 0.00 $ 3,062,152.00 $ 0.00 $ 0.00 $ Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments 18,069,614.00 $ 18,069,614.00 $ 0.00 $ 18,069,614.00 $ 0.00 $ 18,069,614.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 33,181,112.00 $ 33,181,112.00 $ 0.00 $ 33,181,112.00 $ 0.00 $ 33,181,112.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 40,329,496.00 4,522,400.00 40,329,496.00 $ 4,395,430.71 0.00 $ 22,773.34 40,329,496.00 $ 4,418,204.05 0.00 $ (104,195.95) 40,298,425.87 $ 4,359,454.05 31,070.13 $ 162,945.95 31,070.13 $ 58,750.00 133,382.40 44,851,896.00 $ 44,724,926.71 $ 22,773.34 $ 44,747,700.05 $ (104,195.95) $ 44,657,879.92 $ 194,016.08 $ 89,820.13 $ 133,382.40 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 7,683,800.00 $ 79,175.00 7,683,800.00 $ 73,319.24 0.00 $ 5,696,782.64 7,683,800.00 $ 5,770,101.88 0.00 $ 5,690,926.88 7,641,783.99 $ 801,003.76 42,016.01 $ (721,828.76) 42,016.01 $ 4,969,098.12 7,762,975.00 $ 7,757,119.24 $ 5,696,782.64 $ 13,453,901.88 $ 5,690,926.88 $ 8,442,787.75 $ (679,812.75) $ 5,011,114.13 $ 0.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 2,000,000.00 $ 2,000,000.00 $ 0.00 $ 2,000,000.00 $ 0.00 $ 2,000,000.00 $ 0.00 $ 0.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments 9,151,732.00 $ 9,151,732.00 $ 0.00 $ 9,151,732.00 $ 0.00 $ 9,144,603.17 $ 7,128.83 $ 7,128.83 $ 57,014.57 Other Adjustments Total Program Fund Balances $ Other Adjustments 0.00 Total Program Fund Balances 0.00 $ Other Adjustments 0.00 Program Fund Balances $ Other Adjustments 0.00 Program Fund Balances 0.00 $ 0.00 $ Other Adjustments 164,452.53 58,750.00 223,202.53 Program Fund Balances 0.00 $ 0.00 $ Other Adjustments 42,016.01 4,969,098.12 5,011,114.13 Program Fund Balances 0.00 $ Other Adjustments 0.00 Program Fund Balances 0.00 $ 64,143.40 Transfers Transfers Transfers Transfers 0.00 Transfers 0.00 Transfers Transfers Reserve Program Fund Balances Surplus 0.00 $ 0.00 $ Total 0.00 Reserve Program Fund Balances Surplus Total $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 58,750.00 58,750.00 $ 164,452.53 $ 164,452.53 $ 164,452.53 58,750.00 223,202.53 Reserve Program Fund Balances Surplus Total $ 4,969,098.12 4,969,098.12 $ 42,016.01 $ 42,016.01 $ 42,016.01 4,969,098.12 5,011,114.13 Reserve Program Fund Balances Surplus Total $ 0.00 $ 0.00 Reserve Program Fund Balances Surplus Total $ 64,143.40 $ 64,143.40 VALDOSTA STATE UNIVERSITY Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 VALDOSTA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 1,823,022.96 8,684,204.36 804,902.26 1,830,272.43 52,187.97 378,503.08 Total Assets $ 13,573,093.06 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 1,500,634.75 7,409,908.50 104,900.22 376,382.98 52,418.27 $ 9,444,244.72 $ 179,476.95 207,556.15 183,936.14 2,445,630.02 56,187.51 338,131.23 645,187.90 72,742.44 $ 4,128,848.34 $ 13,573,093.06 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. VALDOSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 54,732,043.00 $ 53,123,276.00 $ 53,123,276.00 $ 15,489,808.00 33,788,406.00 17,472,050.00 38,995,436.00 14,984,855.86 38,358,491.95 $ 104,010,257.00 $ 109,590,762.00 $ 106,466,623.81 $ $ $ $ 2,823,361.79 $ $ 104,010,257.00 $ 109,590,762.00 $ 109,289,985.60 $ 0 -2,487,194.14 -636,944.05 -3,124,138.19 2,823,361.79 -300,776.40 $ 32,480.00 103,977,777.00 32,480.00 109,558,282.00 33,491.33 106,309,488.99 $ 104,010,257.00 $ 109,590,762.00 $ 106,342,980.32 $ $ 2,947,005.28 -1,011.33 3,248,793.01 3,247,781.68 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers 338,131.23 46,516.33 44,275.82 -44,275.82 62,640.32 9,671.18 724,884.00 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 4,128,848.34 $ 179,476.95 207,556.15 338,131.23 183,936.14 2,445,630.02 56,187.51 645,187.90 $ 4,056,105.90 72,742.44 $ 4,128,848.34 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. VALDOSTA STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Carry-Over Total Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total $ 32,480.00 $ 32,480.00 $ 32,480.00 $ 0.00 $ 32,480.00 $ 0.00 $ 33,491.33 $ -1,011.33 $ -1,011.33 $ 0.00 $ 0.00 $ -1,011.33 $ 0.00 $ 0.00 $ -1,011.33 $ -1,011.33 Teaching State Appropriation State General Funds Federal Funds Other Funds Total Teaching $ 52,986,037.00 $ 53,090,796.00 $ 53,090,796.00 $ 0.00 $ 53,090,796.00 $ 0.00 $ 53,079,682.55 $ 11,113.45 $ 15,489,808.00 17,472,050.00 12,498,852.80 0.00 12,498,852.80 -4,973,197.20 12,498,852.80 4,973,197.20 35,501,932.00 38,995,436.00 40,844,495.01 2,823,361.79 43,667,856.80 4,672,420.80 40,730,953.64 -1,735,517.64 $ 103,977,777.00 $ 109,558,282.00 $ 106,434,143.81 $ 2,823,361.79 $ 109,257,505.60 $ -300,776.40 $ 106,309,488.99 $ 3,248,793.01 $ 11,113.45 $ 0.00 2,936,903.16 2,948,016.61 $ 72,311.50 $ 0.00 0.00 72,311.50 $ -9,671.18 $ 0.00 724,884.00 73,753.77 $ 0.00 3,661,787.16 715,212.82 $ 3,735,540.93 $ 0.00 $ 0.00 0.00 0.00 $ 73,753.77 $ 0.00 0.00 3,661,787.16 0.00 73,753.77 0.00 3,661,787.16 0.00 $ 3,661,787.16 $ 73,753.77 $ 3,735,540.93 Grand Totals - All Programs $ 104,010,257.00 $ 109,590,762.00 $ 106,466,623.81 $ 2,823,361.79 $ 109,289,985.60 $ -300,776.40 $ 106,342,980.32 $ 3,247,781.68 $ 2,947,005.28 $ 72,311.50 $ 715,212.82 $ 3,734,529.60 $ 0.00 $ 3,661,787.16 $ 72,742.44 $ 3,734,529.60 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. Unexpendable Reserves Uncollectibles Accounts Receivable Inventories 56,187.51 338,131.23 $ 4,128,848.34 WAYCROSS COLLEGE Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 WAYCROSS COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 742,515.19 79,057.66 1,153.80 162,545.78 1,935.00 13,957.79 Total Assets $ 1,001,165.22 LIABILITIES AND FUND EQUITY Liabilities Encumbrance Payable 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 Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 624,813.13 2,674.32 177,095.70 6,904.99 $ 811,488.14 $ 33,831.93 4,395.14 119.43 105,942.32 1,494.00 12,790.02 30,676.54 427.7 $ 189,677.08 $ 1,001,165.22 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 4,074,804.00 $ 4,083,611.00 $ 4,083,611.00 $ 1,200,000.00 1,567,722.00 1,299,695.00 1,753,707.00 1,270,131.08 1,682,840.07 $ 6,842,526.00 $ 7,137,013.00 $ 7,036,582.15 $ $ $ $ 140,742.97 $ $ 6,842,526.00 $ 7,137,013.00 $ 7,177,325.12 $ 0 -29,563.92 -70,866.93 -100,430.85 140,742.97 40,312.12 $ 7,388.00 6,835,138.00 7,388.00 7,129,625.00 7,388.00 6,993,130.97 $ 6,842,526.00 $ 7,137,013.00 $ 7,000,518.97 $ $ 176,806.15 0 136,494.03 136,494.03 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Increase (Decrease) in Inventories Ending Fund Balance - June 30 $ Analysis of Fund Balance Reserved Department Sales & Services $ Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved $ Unreserved Surplus Total Fund Balance $ 11,888.21 0 360.84 -360.84 80.91 901.81 189,677.08 33,831.93 4,395.14 12,790.02 119.43 105,942.32 1,494.00 30,676.54 189,249.38 427.7 189,677.08 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. WAYCROSS COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiative State Appropriation State General Funds Original Appropriation $ 7,388.00 Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 7,388.00 7,388.00 $ 0.00 $ 7,388.00 $ 0.00 $ Teaching State Appropriation State General Funds Federal Funds Federal Funds Not Specifically Identified Other Funds Total Teaching Original Appropriation $ 4,067,416.00 $ 1,200,000.00 1,567,722.00 $ 6,835,138.00 $ Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) 4,076,223.00 $ 1,299,695.00 1,753,707.00 7,129,625.00 $ 4,076,223.00 $ 1,179,541.29 1,773,429.86 7,029,194.15 $ 0.00 $ 0.00 140,742.97 140,742.97 $ 4,076,223.00 $ 1,179,541.29 1,914,172.83 7,169,937.12 $ 0.00 $ (120,153.71) 160,465.83 40,312.12 $ 6,842,526.00 7,137,013.00 $ 7,036,582.15 $ 140,742.97 $ 7,177,325.12 40,312.12 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances Transfers Reserve Program Fund Balances Surplus 7,388.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments 0.00 $ Total Program Fund Balances 0.00 $ Transfers 0.00 $ 0.00 $ Reserve Program Fund Balances Surplus 4,075,876.21 $ 1,179,541.29 1,737,713.47 6,993,130.97 $ 346.79 $ 120,153.71 15,993.53 136,494.03 $ 346.79 $ 0.00 176,459.36 176,806.15 $ 80.91 $ 0.00 0.00 80.91 $ 0.00 $ 0.00 (1,494.00) (1,494.00) $ 427.70 $ 0.00 174,965.36 175,393.06 $ 0.00 $ 0.00 0.00 0.00 $ 0.00 $ 0.00 174,965.36 174,965.36 $ 427.70 $ 0.00 0.00 427.70 $ 7,000,518.97 136,494.03 176,806.15 $ 80.91 $ (1,494.00) $ 175,393.06 $ 0.00 $ 174,965.36 $ 427.70 $ Total 0.00 Total 427.70 0.00 174,965.36 175,393.06 175,393.06 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 1,494.00 12,790.02 $ 189,677.08 UNIVERSITY OF WEST GEORGIA Balance Sheet (Non-GAAP Basis) Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Statement of Program Revenues and Expenditures by Funding Source Compared to Budget (Non-GAAP Basis) For the Year Ended June 30, 2008 UNIVERSITY OF WEST GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND Year Ended June 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories $ 11,491,062.09 187,388.74 3,161,492.19 466,428.68 134,832.41 Total Assets $ 15,441,204.11 LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances $ 405,855.60 6,287,520.75 1,128,551.55 5,121,181.35 122,585.99 $ 13,065,695.24 $ 304,357.11 388,712.48 443,074.45 473,219.56 129,803.25 595,280.21 41,061.81 $ 2,375,508.87 $ 15,441,204.11 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, 2008 REVENUES State Appropriations State General Funds Non-State Funds Research Funds Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available EXPENDITURES Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 49,644,625.00 $ 48,576,452.00 $ 48,576,452.00 $ 8,192,406.00 50,054,664.00 15,027,022.00 40,506,275.00 11,750,500.00 39,947,004.59 $ 107,891,695.00 $ 104,109,749.00 $ 100,273,956.59 $ $ $ $ 620,292.99 $ $ 107,891,695.00 $ 104,109,749.00 $ 100,894,249.58 $ 0 -3,276,522.00 -559,270.41 -3,835,792.41 620,292.99 -3,215,499.42 $ 84,040.00 107,807,655.00 84,040.00 104,025,709.00 $ 107,891,695.00 $ 104,109,749.00 $ $ 83,980.59 98,821,084.42 98,905,065.01 $ 1,989,184.57 59.41 5,204,624.58 5,204,683.99 Beginning Fund Balance July 1 Prior Year Reserves NOT Available for Expenditure Inventories Uncollectible Accounts Receivable Unreserved, Undesignated Fund Balance (Surplus) Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2007 Adjustment Prior Year Payables/Expenditures Prior Year Receivables/Revenues 109,660.34 246,614.50 75.06 -75.06 36,481.47 -6,432.01 Ending Fund Balance - June 30 Analysis of Fund Balance Reserved Department Sales & Services Indirect Cost Recovery Inventories Technology Fees Uncollectible Accounts Receivable Tuition Carry - Forward Total Reserved Unreserved Surplus Total Fund Balance $ 2,375,508.87 $ 304,357.11 388,712.48 129,803.25 443,074.45 473,219.56 595,280.21 $ 2,334,447.06 41,061.81 $ 2,375,508.87 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. Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching UNIVERSITY OF WEST GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Original Appropriation Final Budget Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Total Program Fund Balances $ 84,040.00 Original Appropriation 84,040.00 Final Budget 84,040.00 $ 0.00 $ 84,040.00 $ 0.00 $ 83,980.59 $ 59.41 $ 59.41 $ Actual Current Year Revenues Funds Available Compared to Budget Prior Year Total Carry-Over Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Funds Available Over/(Under) Expenditures Prior Period Adjustments $ Other Adjustments 59.41 Total Program Fund Balances $ 49,560,585.00 $ 48,492,412.00 $ 48,492,412.00 $ 58,247,070.00 55,533,297.00 51,697,504.59 $ 107,807,655.00 $ 104,025,709.00 $ 100,189,916.59 $ $ 620,292.99 620,292.99 $ 48,492,412.00 $ 52,317,797.58 100,810,209.58 $ 0.00 $ (3,215,499.42) (3,215,499.42) $ 48,479,140.21 $ 50,341,944.21 98,821,084.42 $ 13,271.79 $ 5,191,352.79 5,204,624.58 $ 13,271.79 $ 1,975,853.37 1,989,125.16 $ 36,481.47 (6,432.01) 30,049.46 $ (246,747.97) (246,747.97) $ 49,753.26 1,722,673.39 1,772,426.65 107,891,695.00 104,109,749.00 100,273,956.59 620,292.99 100,894,249.58 (3,215,499.42) 98,905,065.01 5,204,683.99 1,989,184.57 30,049.46 (246,747.97) $ 1,772,486.06 Transfers Transfers (8,750.86) 8,750.86 0.00 0.00 Reserve Program Fund Balances Surplus Total 0.00 $ 59.41 $ 59.41 Reserve Program Fund Balances Surplus Total $ 1,731,424.25 1,731,424.25 $ 41,002.40 $ 0.00 41,002.40 $ 41,002.40 1,731,424.25 1,772,426.65 1,731,424.25 $ 41,061.81 $ 1,772,486.06 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. Unexpendable Reserves Uncollectible Accounts Receivable Inventories 473,219.56 129,803.25 $ 2,375,508.87