The University System of Georgia ANNUAL FINANCIAL REPORT FY2010 Annual Financial Report for the Year Ended June 30, 2010 The University System of Georgia ANNUAL FINANCIAL REPORT TABLE OF CONTENTS USG ANNUAL FINANCIAL REPORT The University System of Georgia ANNUAL FINANCIAL REPORT INTRODUCTORY SECTION Letter of Transmittal 3 Members of the Fiscal Year 2010 Board of Regents 4 University System of Georgia Strategic Plan 5 Institutions of the University System of Georgia 6 FINANCIAL SECTION Independent Auditor's Report 8 Management's Discussion and Analysis 10 Financial Statements (GAAP Basis) Statement of Net Assets 25 Statement of Revenues, Expenses and Changes in Net Assets 26 Statement of Cash Flows 28 Statement of Fiduciary Net Assets 30 Statement of Changes in Fiduciary Net Assets 31 Notes to the Financial Statements Note 1 Summary of Significant Accounting Policies 32 Note 2 Deposits and Investments 38 Note 3 Accounts Receivable 44 Note 4 Inventories 44 Note 5 Notes/Loans Receivable 45 Note 6 Capital Assets 45 Note 7 Deferred Revenue 46 Note 8 Long Term Liabilities 46 Note 9 Significant Commitments 46 Note 10 Lease Obligations 47 Note 11 Retirement Plans 49 Note 12 Risk Management 51 Note 13 Contingencies 54 Note 14 Post Employment Benefits Other Than Pension Benefits 54 Note 15 Natural Classifications with Functional Classifications 58 Note 16 Affiliated Organizations 58 SUPPLEMENTARY INFORMATION Condensed Financial Statements Condensed Statement of Net Assets by Institution 62 Condensed Statement of Revenues, Expenses and Net Assets by Institution 65 Condensed Statement of Net Assets - Affiliated Institutions (Unaudited) 68 Condensed Statement of Revenues, Expenses and Net Assets by Affiliated Organizations (Unaudited) 71 Financial Statements (Statutory Basis) Consolidated Balance Sheet (Non-GAAP Basis) - Budget Funds 73 Consolidated Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) 74 Financial Statement Findings 76 ACKNOWLEDGEMENTS 78 The University System of Georgia ANNUAL FINANCIAL REPORT INTRODUCTORY SECTION USG ANNUAL FINANCIAL REPORT 2 The University System of Georgia ANNUAL FINANCIAL REPORT LETTER OF TRANSMITTAL BOARD OF REGENTS of the UNIVERSITY SYSTEM OF GEORGIA OFFICE OF FISCAL AFFAIRS 270 WASHINGTON STREET, SW ATLANTA, GEORGIA 30334 404-656-2232 February 23, 2011 Chancellor Erroll B. Davis, Jr. Board of Regents University System of Georgia Dear Chancellor Davis: We are pleased to present to you the Annual Financial Report for the Board of Regents of the University System of Georgia for the year ended June 30, 2010. The report provides financial information about the University System of Georgia's operations during the year and presents its financial position at the end of the fiscal year. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal controls established for this purpose, the objective of which is to provide reasonable assurance that the financial statements are free of material misstatements. Further, the officers of the various institutions of the University System of Georgia and its affiliated organizations have assured us that every effort has been made to reflect accurately the information considered important to all concerned parties. State law, federal guidelines, bond covenants and the by-laws of the Board of Regents require that the accounting and financial records of the University System of Georgia be audited each year. The Georgia Department of Audits and Accounts has performed the audit for fiscal 2010 and has issued an unqualified opinion, the most favorable outcome of the audit process. The State Auditor's report is located at the beginning of the financial section. Management's discussion and analysis (MD&A) immediately follows the auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction therewith. Respectfully submitted, _________________________ Usha Ramachandran Vice Chancellor for Fiscal Affairs and Treasurer Board of Regents of the University System of Georgia 3 The University System of Georgia ANNUAL FINANCIAL REPORT INTRODUCTORY SECTION USG ANNUAL FINANCIAL REPORT MEMBERS OF THE FISCAL YEAR 2010 BOARD OF REGENTS The Board of Regents of the University System of Georgia was created in 1931 as a 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 colleges and universities: four research universities, two regional universities, 13 state universities, eight state colleges, and eight two-year colleges. These institutions enroll approximately 302,000 students and employ over 40,000 faculty and staff to provide teaching and related services to students and the communities in which they are located. (Standing left to right) Wanda Yancey Rodwell, Allan Vigil, Benjamin Tarbutton III, James R. Jolly, William NeSmith Jr., Frederick Cooper, Larry Ellis, Donald Leebern, Jr., Richard Tucker, and Kenneth Bernard, Jr. (Seated left to right) James A. Bishop, Doreen Stiles Poitevint, Willis J. Potts (Vice-Chair), Robert F. Hatcher (Chair), Erroll B. Davis Jr. (ex-officio), W. Mansfield Jennings, Jr., Larry Walker, and Felton Jenkins (Not pictured) Kessell Stelling, Jr. 4 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STRATEGIC PLAN It has been three years since the Board of Regents adopted the current University System of Georgia Strategic Plan. This marks the third year of reporting the annual progress on each of the plan's six goals. When the current plan was adopted in August 2007, few anticipated either the length or depth of the national economic recession. This recession has affected Georgia and has tested the state's ability to sustain key areas of public service, including public higher education. The University System has taken its share of budget reductions, which in turn have caused the regents, the chancellor and the 35 institutional presidents to focus closely on the System's core missions of teaching, research, and service. This renewed focus on core missions has benefited from the board's Strategic Plan. The Plan is the framework that enables the board to prioritize the use of available resources. The board's vision in developing and adopting its current Strategic Plan continues to provide the structure and the mechanism to strengthen the USG, even in difficult economic times. STRATEGIC PLAN GOALS 1 STRATEGIC GOAL ONE Renew excellence in undergraduate education to meet students' 21st century educational needs. 2 STRATEGIC GOAL TWO Create enrollment capacity in the University System to meet the needs of 100,000 additional students by 2020. 3 STRATEGIC GOAL THREE Increase the USG's participation in research and economic development to the benefit of a global Georgia. Enhance and encourage the creation of new knowledge and basic research across all disciplines. 4 STRATEGIC GOAL FOUR Strengthen the USG's partnerships with the state's other education agencies. 5 STRATEGIC GOAL FIVE Maintain affordability so that money is not a barrier to participation in the benefits of higher education. 6 STRATEGIC GOAL SIX Increase efficiency, working as a System. 5 The University System of Georgia ANNUAL FINANCIAL REPORT INTRODUCTORY SECTION USG ANNUAL FINANCIAL REPORT INSTITUTIONS OF THE UNIVERSITY SYSTEM OF GEORGIA 6 The University System of Georgia ANNUAL FINANCIAL REPORT FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 77 The University System of Georgia ANNUAL FINANCIAL REPORT 8 The University System of Georgia ANNUAL FINANCIAL REPORT 9 The University System of Georgia ANNUAL FINANCIAL REPORT Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 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 high quality 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. This discussion and analysis is intended to provide a summary of the financial position of the University System of Georgia for the fiscal year ending June 30, 2010. It should allow the user to review how the University System utilized its resources in pursuit of its primary goals of instruction, research and public service. The Board of Regents and Chancellor Erroll B. Davis Jr. are charged with the leadership of the thirty-five institutions of the University System of Georgia. The University System continues to thrive, as is demonstrated by the following statistics: FY2010 FY2009 FY2008 STUDENT HEADCOUNT 301,892 282,978 270,022 STUDENT FTE 266,575 247,168 235,186 310,000 300,000 290,000 280,000 270,000 260,000 250,000 240,000 230,000 220,000 Enrollment Growth FY2008 FY2009 FY2010 Student Headcount Student FTE 10 The University System of Georgia ANNUAL FINANCIAL REPORT STATE RESOURCES The General Appropriations Act of 2010, as amended, appropriated a total of $1,710,617,245 to the University System of Georgia. In addition, House Bill 119, as amended by House Bill 947, appropriated $14,020,073 from Tobacco funds. In June 2010, $27,135,755 was withheld from the total appropriated amount by the Office of the Treasury, effectively reducing the University System of Georgia's fiscal 2010 State budget to $1,697,501,563. The following table presents the State Appropriations available to the USG from the General Appropriations Act of 2010: STATE APPROPRIATIONS AVAILABLE - GENERAL House Bill 119 General State Funds $ 2,063,094,628.00 Tobacco Funds 17,259,466.00 House Bill 947 General State Funds (352,477,383.00) Tobacco Funds (3,239,393.00) Total State Appropriations Available Per Appropriations Act $ 1,724,637,318.00 Less: Appropriations Withheld (27,135,755.00) Net State Appropriations available to the University System of Georgi$a 1,697,501,563.00 The table below presents the FY 2010 allocations by the Board of Regents to the USG institutions: ALLOCATIONS BY THE BOARD OF REGENTS Education and General Teaching $ Non-Teaching Tobacco Funds Other Activities Regents Central Office $ 6,366,451 Rental Payments - GA Military College 2,360,431 GA Public Telecommunications Commission 14,685,203 GA Public Libraries 34,711,574 Research Consortium 23,307,334 Total Other Activities Special Initiative Funding Total Education and General Net State Appropriations available to the University System of Georgia 1,458,664,648 126,184,032 14,020,073 81,430,993 17,201,817 $ 1,697,501,563.00 $ 1,697,501,563.00 11 Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT The following chart illustrates the Board of Regents allocations to Teaching, Non-Teaching, Tobacco Funds, Other Activities and Special Funding Initiatives: Board of Regents Allocations $81,430,993 $14,020,073 $ 17,201,817 $ 126,184,032 The University System of Georgia ANNUAL FINANCIAL REPORT $ 1,458,664,648 Teaching Tobacco Funds Special Funding Initiative Non-Teaching Other Activities OVERVIEW OF THE FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS The University System of Georgia is pleased to present its consolidated financial statements for fiscal year 2010. These statements contain information from the thirty-five 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 upon request. 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. Two fiduciary fund statements also are included with the financial statements noted above: the Statement of Fiduciary Net Assets and the Statement of Changes in Fiduciary Net Assets. These statements provide information regarding the Board of Regents Retiree Health Benefit Fund, which was established in fiscal 2008. The Notes to the Financial Statements immediately follow the consolidated and fiduciary fund statements. They contain essential information that serves both to support and clarify the information presented in the financial statements preceding them. Finally, the Supplemental Information section includes selected information by institution. This section also includes information on affiliated organizations that have been deemed significant to their respective institutions. This discussion and analysis of the University System of Georgia's consolidated financial statements provide an overview of its financial activities for the fiscal year. Further information is provided by comparative data for fiscal 2010 and 2009. 12 The University System of Georgia ANNUAL FINANCIAL REPORT STATEMENT OF NET ASSETS The Statement of Net Assets presents the assets, liabilities and net assets of the University System of Georgia as of June 30, 2010. 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 a fiscal snapshot of the University System. It is prepared under the accrual basis of accounting, whereby revenues and assets are recognized when the services are provided and expenses and liabilities are recognized when others provide the service to the University System, regardless of when cash is exchanged. 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 also are able to determine how much the University System owes vendors, investors and lending institutions. 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 of Georgia. Current assets include resources that are available to support the current operations of the University System and include categories such as cash, cash equivalents, accounts receivable and inventory on hand. Non-current assets include capital and certain investments. Other assets include non-current assets such as endowment corpus, shortterm investments and notes receivable. Total assets as of June 30, 2010 were $9.124 billion, as compared to $8.225 billion as of June 30, 2009, for an increase of $899 million, or 10.9%. Current assets as of June 30, 2010 increased by $294 million; non-current assets increased $604 million. Current liabilities include those items that are expected to become due within the following fiscal year. They include accounts payable, salaries and wages payable and the current portion of capital leases. Non-current liabilities include the non-current portion of capital leases and lease purchases for capital items as well as compensated absences. Total liabilities increased by $725 million, from $3.424 billion at June 30, 2009 to $4.149 billion on June 30, 2010. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the University System's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is further reported in three components, non-expendable, expendable and capital projects. Restricted, non-expendable net assets consist solely of the University System's permanent endowment funds, which are only available for investment purposes. Restricted, expendable net assets are available for expenditure by the institution; however, they 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, which are available to the University System for any lawful purpose. The University System of Georgia's financial position at June 30, 2010 is very strong, with total assets of $9.1 billion, total liabilities of $4.1 billion, and net assets of $4.97 billion. These amounts are illustrated on the following page. 13 The University System of Georgia ANNUAL FINANCIAL REPORT Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT Statement of Net Assets (in millions) $10,000 $8,000 $6,000 $4,000 $2,000 Assets FY2008 Liabilities FY2009 FY2010 Net Assets Assets Increase of $899 Million Total assets of the University System of Georgia were approximately $899 million more than those reported for fiscal 2009. A review of the Statement of Net Assets will reveal that the increase primarily was due to an increase of $243 million in cash and investments, an increase of $83 million in accounts receivable, and a $581 million in capital assets, net of accumulated depreciation, which were partially offset by an $8 million decrease in prepaid items. Liabilities Increase of $725 Million Total liabilities for fiscal 2010 were approximately $725 million more than those reported for fiscal 2009. The primary components of this increase were increases of $48 million in deferred revenue, $8 million in compensated absences, $407 million in lease purchase obligations and $263 million in the net Other Post-Employment Benefit (OPEB) obligation for fiscal 2010. Net Assets Increase of $173 million The combination of the increase in total assets of $899 million and the increase in total liabilities of $725 million yielded a net increase in total net assets of $173.4 million, or 3.6%. The increase in total net assets primarily consists of a higher amount in the Invested in Capital Assets, net of related debt category totaling $173 million and an increase of $61 million in restricted net assets. These increases were partially offset by a net decrease of $60 million in unrestricted net assets, which is a direct result of the OPEB reporting requirements; the net OPEB obligation increased from $437.2 million in FY 2009 to $699.9 million in FY 2010. 14 The University System of Georgia ANNUAL FINANCIAL REPORT The following chart depicts the level, by category, for net assets: 15 The University System of Georgia ANNUAL FINANCIAL REPORT Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT The following table summarizes the University System of Georgia's assets, liabilities and net assets as of June 30, 2010 and June 30, 2009. CONDENSED STATEMENT OF NET ASSETS (in millions) ASSETS Current Assets Capital Assets, Net Other Assets TOTAL ASSETS June 30, 2010 $ 1,593 7,305 226 9,124 June 30, 2009 $ 1,298 6,724 203 8,225 % Change 22.7% 8.6% 11.3% 10.9% LIABILITIES Current Liabilities Non-current Liabilities TOTAL LIABILITIES 775 3,374 4,149 714 2,710 3,424 8.5% 24.5% 21.2% NET ASSETS Invested in Capital Assets, net of debt Restricted, Non-Expendable Restricted, Expendable Capital Projects Unrestricted TOTAL NET ASSETS $ 4,660 133 258 32 (108) 4,975 $ 4,486 123 225 14 (47) 4,801 3.9% 8.1% 14.7% 128.6% 129.8% 3.6% STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS The Statement of Revenues, Expenses and Changes in Net Assets presents the revenues earned and expenses incurred during the year. Activities are reported as either operating or non-operating. All things being equal, a public University's dependency on state appropriations and gifts will result in operating deficits. The Governmental Accounting Standards Board (GASB) requires state appropriations and gifts to be classified as non-operating revenues. The utilization of long-lived assets, referred to as Capital Assets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life. 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 institutions, both operating and non-operating, and the expenses paid by the institutions, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the University System institutions. 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 mission 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 or services for those revenues. State capital grants and gifts and other capital grants and gifts are considered neither operating nor non-operating revenues and are reported after "Income before other revenues, expenses, gains or losses." 16 The University System of Georgia ANNUAL FINANCIAL REPORT The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year, which is represented by an increase in net assets at the end of the year. Some highlights of the information presented on this statement are as follows: CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (in millions) Operating Revenue Operating Expense Operating Loss Non-Operating Revenue and Expense Income (Loss) before other revenue, expense, gains, losses or other items Other revenue, expense, gains, losses and special items Increase in Net Assets Net Assets at beginning of year, as originally reported Prior Year Adjustments Net Assets at beginning of year, restated Net Assets at end of year June 30, 2010 $ 3,427 6,033 (2,606) 2,503 (103) 229 126 4,801 48 4,849 $ 4,975 June 30, 2009 $ 3,165 5,843 (2,678) 2,351 (327) 357 30 4,788 (17) 4,771 $ 4,801 % Change 8.3% 3.3% -2.7% 6.5% -68.5% -35.9% 320.0% 0.3% -382.4% 1.6% 3.6% Statement of Revenues, Expenses and Changes in Net Assets (in millions) 6,300 5,300 4,300 3,300 2,300 1,300 300 (700) FY2008 Operating Revenues Capital Gifts, Grants, and Other Increase in Net Assets FY2009 FY2010 Non-Operating Revenues, net Operating Expenses 17 Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT REVENUES Revenue by source (State appropriations, grants and contracts, tuition and fees, auxiliaries, gifts and other sources) is depicted by the following chart: Revenue by Source (in millions) The University System of Georgia ANNUAL FINANCIAL REPORT $1,234 $686 $1,819 $857 $1,693 $310 $280 $267 State Appropriations Tuition and Fees Gifts Other Grants and Contracts Auxiliaries Federal Stimulus Stabilization State appropriations decreased $327 million (16.2%) in fiscal 2010 due to the continued economic downturn in Georgia, which also was experienced throughout the United States. This decrease was partially mitigated by an award of Federal Stimulus Stabilization Funds of $280.4 million, an increase of $263 million when compared to fiscal 2009. Grants and contracts revenue increased $234 million (12.9%) in fiscal 2010. This increase is largely attributable to increased Pell grant revenues. Tuition and fee revenues, net increased $176 million (16.6%) in fiscal 2010 when compared with fiscal 2009. The tuition and fee increase is attributable to increased enrollment and annual tuition and fee increases, including a mandatory "institutional fee" that was established to partially meet the funding gap created by decreased State appropriations. Auxiliary operations increased by $56 million (8.9%) in fiscal 2010 as compared to fiscal 2009. Primary components of this increase included housing ($25 million), food services ($12 million), intercollegiate athletics ($9 million), health services ($7 million), and transportation and parking ($6 million); these increases were partially offset by a $3 million decrease in other organizations. 18 The University System of Georgia ANNUAL FINANCIAL REPORT The gifts revenue category includes both capital and non-capital gifts. The largest element of gift revenue relates to amounts received from the Georgia State Financing and Investment Commission (GSFIC). Institutions with the University System of Georgia receive gift revenue either through reimbursement or capital asset transfer for approved construction, capital additions or maintenance projects. EXPENSES An illustration of total operating expenses by functional classification is provided as follows: Total operating expenses were $6,033 million in fiscal 2010, an increase of $191 million (3%) when compared with fiscal 2009. These increases are primarily attributable to the following functional classifications: Scholarships and Fellowships ($106 million); Instruction ($28 million); Research ($34 million); Academic Support ($15 million); Student Services ($12 million); Plant Operations and Maintenance ($26 million); and Auxiliaries ($36 million). The amounts were partially offset by decreases in the following classifications: Public Service ($12 million); Institutional Support ($48 million); and Medical College of Georgia (MCG) Patient Care ($6 million). 19 The University System of Georgia ANNUAL FINANCIAL REPORT Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT The following depicts the fiscal 2010 operating expenses by natural classification: Operating Expenses by Natural Classification (in millions) $334 $185 $48 $351 $1,320 $3,795 Salaries and Benefits Scholarships Supplies and Other Services Utilities Depreciation Travel As noted above, expenses increased $191 million (3%) in fiscal 2010 when compared with fiscal 2009. The increases were substantially attributable to increased salaries and benefits, including other personal services ($98 million) associated with increased enrollment in the University System of Georgia institutions, increased scholarships ($103 million), and increased depreciation expense ($28 million). These increases were partially offset by decreased supplies and services expense ($32 million) and decreased utilities expense ($6 million). 20 The University System of Georgia ANNUAL FINANCIAL REPORT 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 is concerned with operating cash flows and reflects the net cash used by the various operating activities of the University System. The second section is related to cash flows from non-capital financing activities. This section reflects the cash received and spent for non-capital financing purposes. The third section summarizes cash flows from capital and related financing activities and contains cash used for the acquisition and construction of capital and related items. The fourth section is comprised of the cash flows from investing activities and includes the purchases, proceeds and interest received from investing activities. The fifth, and final, section reconciles the net cash used to the operating income or loss as reflected on the Statement of Revenues, Expenses and Changes in Net Assets. CONDENSED STATEMENT OF NET CASH FLOWS (in millions) Cash Provided (Used) by: Operating Activities Non-Capital Financing Activities Capital and Related Financing Activities Investing Activities NET CHANGE IN CASH Cash, beginning of year CASH, end of year June 30, 2010 June 30, 2009 $ (1,966) $ (2,025) 2,579 2,447 (401) (464) 16 37 228 (5) $ 760 765 $ 988 $ 760 CAPITAL ASSETS Capital assets, net of accumulated depreciation, at June 30, 2010 and June 30, 2009 were as follows: CAPITAL ASSETS, net of accumulated depreciation (in millions) Land Construction in Progress Infrastructure, Facilities, and Improvements Building and Improvements Equipment Capital Leases Library and other collections Software Capital Assets, net of accumulated depreciation June 30, 2010 $ 244 223 360 4,424 364 1,469 213 8 $ 7,305 June 30, 2009 $ 228 212 347 4,179 355 1,195 208 - $ 6,724 Increase (Decrease) $ 16 11 13 245 9 274 5 8 % Change 7.0% 5.2% 3.7% 5.9% 2.5% 22.9% 2.4% 100.0% $ 581 8.6% The University System of Georgia increased $581 million in capital assets, net during fiscal 2010, primarily in the Buildings and Capital Lease categories. The spending includes classroom buildings, libraries, student services, housing, parking, recreation centers, health services and other facilities necessary to support the mission of the University System of Georgia. 21 Management's Discussion and Analysis FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT Significant Building and Capital Lease additions that occurred in fiscal 2010 are as follows: FY10 Major Capital Asset Additions Student, Recreation, & Health Centers 41% Academic, Research & Public Service Bldgs 12% Dining Halls 5% The University System of Georgia ANNUAL FINANCIAL REPORT Parking Decks 7% Residence Halls 35% LONG-TERM DEBT AND LIABILITIES The University System of Georgia had long-term debt and liabilities in FY 2010 of $3.5 billion, excluding related party liabilities and deferred revenue. Non-current liabilities included lease purchase obligations of $2.65 billion, compensated absences of $181 million, net OPEB obligation of $699.9 million, US DOE Settlement of $0.3 million, and other non-current liabilities of $1 million. Of these amounts, $162.6 million was reflected as current liabilities at June 30, 2010. For additional information concerning long-term debt of the University System of Georgia, please refer to notes 1, 8 and 10 in the Notes to the Financial Statements. RETIREE HEALTH BENEFIT FUND In fiscal 2008, the University System Office established and became custodian of the Board of Regents Retiree Health Benefit Fund. This fund was authorized pursuant to the Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employee health insurance benefits. The University System of Georgia implemented GASB Statements No. 43, Financial Reporting for Post-employment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions in fiscal 2008. Statement No. 45 requires reporting entities with singleemployer OPEB plans to record an annual OPEB obligation for any unfunded annual OPEB cost, as defined in the statement. As a result of this requirement, the University System of Georgia carries a NET OPEB Obligation liability 22 The University System of Georgia ANNUAL FINANCIAL REPORT of $699.9 million as of June 30, 2010. The Board of Regents is actively evaluating options to reduce this growing liability. For additional information concerning the Retiree Health Benefit Fund, please refer to notes 1 and 14 in the Notes to Financial Statements. AFFILIATED ORGANIZATIONS System-wide, there were seventeen affiliated organizations that met one or more criteria for component units of the State of Georgia in compliance with GASB Statement No. 39. These organizations are reported in the supplementary information section and also are reported in the State Comprehensive Annual Financial Report (CAFR) as discretely presented component units for fiscal 2010. ECONOMIC OUTLOOK Fiscal conditions have been challenging for most States, including Georgia, during fiscal year 2010; it is expected that economic conditions will continue to be challenging in fiscal years 2011 and 2012 as well. The decline in overall revenue collections for the State of Georgia resulted in a consequent decrease of $327 million in State Appropriations for the University System of Georgia. These reductions were partially offset by an award of $280 million in Federal Stimulus Stabilization Funds. The Board of Regents and the thirty-five institutions of the University System of Georgia have responded to reductions in State appropriations through a number of cost-saving and efficiency measures. The employees of the University System of Georgia paid a higher overall percentage for health insurance, did not receive pay raises and took at least six furlough days during FY 2010. University System of Georgia students continued to be assessed a special fee to sustain excellence in the classroom. The institutions also have used existing reserves to assist with the revenue shortfall. Other actions necessitated by budget reductions include increased class size, decreased class availability, reductions in hours at campus libraries and laboratories, and fewer staff to assist with advising and financial aid. Despite the economic downturn, the University System of Georgia has continued to thrive and to serve the higher education needs of the citizens of Georgia, as is evinced by the growth in enrollment to more than 300,000 students in Fiscal 2010. An enrollment increase is expected in Fiscal 2011 as well. Due to the exemplary leadership of the Chancellor and the Board of Regents, and the professionalism, hard work and dedication of the faculty and staff of the University System, who continue to demonstrate grace under pressure, quality has been maintained and the mission of teaching, research and service has continued to advance, which is essential to the prosperity of the State of Georgia. ________________________________ Usha Ramachandran Vice Chancellor for Fiscal Affairs University System of Georgia 23 The University System of Georgia ANNUAL FINANCIAL REPORT 24 24 Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF ASSETS JUNE 30, 2010 ASSETS Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, net (note 3) Receivables - Federal Financial Assistance Receivables - Other Inventories (note 4) Prepaid Items Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Short-term Investments Investments (Externally Restricted) Other Noncurrent Assets Investments Notes Receivable, net Capital Assets, net (note 6) Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations (current portion) Compensated Absences (current portion) US DOE Settlement (Fort Valley) (current portion) Notes and Loans Payable (current portion) Total Current Liabilities Noncurrent Liabilities (note 8) Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Net OPEB Obligation Compensated Absences (noncurrent) US DOE Settlement (Fort Valley) (noncurrent) Other Liabilities Notes and Loans Payable (noncurrent) Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of related debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted TOTAL NET ASSETS 25 June 30, 2010 $975,199,582 89,645,689 109,143,436 324,044,678 26,529,034 67,897,123 98,877 1,592,558,419 13,291,750 2,916,295 49,689,980 873,935 113,746,827 45,910,168 7,304,806,687 7,531,235,642 9,123,794,061 156,311,076 19,626,049 15,940,912 15,847,595 29,032,196 300,667,628 12,331,509 62,485,999 58,260,024 103,901,958 239,585 15,265 774,659,796 2,588,838,267 7,586,754 699,938,000 77,249,904 61,787 828,793 - 3,374,503,505 4,149,163,301 4,659,564,125 132,841,369 257,612,795 32,180,642 (107,568,171) $4,974,630,760 The University System of Georgia ANNUAL FINANCIAL REPORT The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 REVENUES June 30, 2010 Operating Revenues Student Tuition and Fees (net of allowance for doubtful accounts) Less: Scholarship Allowances Federal Appropriations Grants and Contracts Federal Federal Stimulus State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues EXPENSES Operating Expenses Salaries: Faculty Staff Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (loss) $ 1,639,126,573 (404,895,396) 16,622,913 592,059,344 28,037,914 243,207,099 397,284,985 125,660,015 3,648,250 246,924,430 82,609,290 124,404,899 67,375,726 48,419,537 87,131,512 28,891,283 100,810,814 3,427,319,188 1,158,421,412 1,602,187,283 1,020,343,964 15,173,767 48,381,887 333,528,052 185,354,635 1,319,821,987 350,656,642 6,033,869,629 (2,606,550,441) 26 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 NONOPERATING REVENUES (EXPENSES) State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts Federal Federal Stimulus State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Special Item - Capital Asset Transfers Total 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 June 30, 2010 1,693,157,533 280,410,317 479,067,506 1,718,160 1,502,535 76,037,280 81,980,790 28,607,657 (129,185,455) (9,475,921) 2,503,820,402 (102,730,039) 634,932 191,118,615 36,661,762 8,376 228,423,685 125,693,646 4,801,209,328 47,727,786 4,848,937,114 $4,974,630,760 27 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 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 Other Receipts (payments) Net Cash Provided (used) by Operating Activities CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus - Stabilization Funds Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Principal Paid on Installment Debt Interest Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Capital Debt Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Cash and Cash Equivalents - End of Year June 30, 2010 $1,264,933,490 16,633,818 1,239,260,001 122,352,844 (2,264,202,920) (2,761,242,206) (334,255,333) (9,064,001) 9,003,179 667,804,209 82,609,713 (1,966,167,206) 1,693,157,533 280,410,317 (20,823,369) 633,092,032 (413,033) (13,216) (5,671,684) 2,579,738,580 123,434,195 (59,024,103) 43,536 (290,246,546) (52,295,958) (123,133,038) (401,221,914) 23,398,190 14,692,629 (22,104,282) 15,986,537 228,335,997 760,155,335 $988,491,332 28 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Adjustments to Reconcile Net Income (loss) to Net Cash Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Prepaid items Notes Receivable, Net Accounts Payable Deferred Revenue Benefits Payable Lease Purchase Obligations Other Liabilities Net OPEB Obligation Compensated Absences Net Cash Provided (used) by Operating Activities ** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS Fixed assets acquired by incurring capital lease obligations Non-capital items acquired by incurring capital lease obligations Change in accounts receivable related to private gifts Change in receivable from State Agency affecting proceeds of capital debt Change in fair value of investments recognized as a component of interest income Special Item - Altamaha Technical College Equipment Transfer Special Item - Note Receivable Transfer Special Item - Bond Defeasance Special Item - Capital Asset Transfer Change in accrued interest payable affecting interest paid Amortization of bond issuance costs reducing interest paid Interest on capital debt paid by State Agency on behalf of University Principal on capital debt paid by State Agency on behalf of University Gifts other than capital assets reducing proceeds of grants & gifts for other than capital assets Gift of capital assets reducing proceeds of capital grants and gifts Loss on Disposal of Buildings Not Fully Depreciated Reduction in Capital Lease Obligation (2,606,550,441) 350,656,642 (69,227,069) (1,395,725) (39,832) (14,365,758) (416,674) 16,063,409 47,923,099 0 0 (993,934) 304,463,000 7,716,077 ($1,966,167,206) $464,107,715 $0 $0 $0 $13,918,274 $8,376 ($3,294,805) ($695) ($104,981,114) ($3,294,805) $0 $2,585,321 ($695) ($104,981,114) $0 $2,585,321 29 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND JUNE 30, 2010 ASSETS June 30, 2010 Cash and Cash Equivalents Receivables Employer Total Receivables $6,878,538 0 Investments, at fair value TOTAL ASSETS 0 6,878,538 LIABILITIES Benefits payable TOTAL LIABILITIES 6,756,000 6,756,000 NET ASSETS Net assets held in trust for other postemployment benefits TOTAL NET ASSETS 122,538 $122,538 30 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2010 ADDITIONS Contributions Employer Plan member Total Contributions Investment Income Net appreciation/(depreciation) in fair value of investments Interest/dividends Less: Investment expense Net Investment Income 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, 2010 $69,888,771 27,198,290 97,087,061 98,878 366,033 464,911 (19,926) 444,985 99,235,047 4,492,887 4,247,987 107,975,921 (10,443,875) 10,566,413 $122,538 31 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 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, an organizational unit of the State 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 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 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. Financial Statement Presentation 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's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows. 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. New Accounting Pronouncements In fiscal year 2010, The University System of Georgia adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally required retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. In addition, The University System of Georgia adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement affect disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 2. Basis of Accounting For financial reporting purposes, the University System of Georgia is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System's financial statements have been presented 32 The University System of Georgia ANNUAL FINANCIAL REPORT 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 System 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 of Georgia 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. These 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 Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University System of Georgia accounts for its investments at fair value. 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 whom reside 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/or significantly increase the value or extend the useful life of the structure 33 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software, 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, 2010, GSFIC transferred capital additions valued at approximately $54,343,103 to The University System of Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in University 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 the end of the fiscal year for financial statement purposes. The liability and expense incurred are recorded at the end of the fiscal year 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 of Georgia had accrued liability for compensated absences in the amount of $173,435,787 as of July 1, 2010. For FY2010, $119,213,767 was earned in compensated absences and employees were paid $111,497,692, for a net increase of $7,716,075. The ending balance as of June 30, 2010 in accrued liability for compensated absences was $181,151,862. 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 System's net assets are classified as follows: Invested in capital assets, net of related debt: Invested in capital assets, net 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 34 The University System of Georgia ANNUAL FINANCIAL REPORT capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section. Restricted net assets - nonexpendable: Nonexpendable, restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted, expendable net assets include resources in which the University System is legally or contractually obligated to spend resources in accordance with restrictions by external third parties. Expendable Restricted Net Assets include the following: June 30, 2010 Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Health Insurance Reserve Total Restricted Expendable $ 136,438,045 44,324,982 22,740,735 4,159,806 32,475,768 17,473,459 $ 257,612,795 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 self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items, which are quasi-restricted by management: June 30, 2010 R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets $ 166,577,422 361,296,959 3,168,863 (638,611,415) $ (107,568,171) 35 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System of Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria: Operating Revenues: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain federal, state and local grants and contracts, and (3) sales and services. Non-operating revenue: Non-operating revenue includes activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Non-expendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Operating Expense: Operating expense includes activities that have the characteristics of exchange transactions. Non-operating Expense: Non-operating expense includes activities that have the characteristics of non-exchange transactions, such as capital financing costs and costs related to investment activity. 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 $5,963,931 in allowances. Special Items Armstrong Atlantic State University College of Coastal Georgia Capital Asset Transfer Total $ 17,025 (8,649) $ 8,376 Armstrong Atlantic State University Armstrong Atlantic State University transferred Equipment to Bainbridge College in early fiscal year 2010. The equipment was transferred at the book value of $17,025. This amount is reported as a Special Item on the Statement of Revenues, Expenses and Changes in Net Assets and Changes in Net Assets and the Statement of Cash Flow. 36 The University System of Georgia ANNUAL FINANCIAL REPORT College of Coastal Georgia College of Coastal Georgia transferred Equipment to Altamaha Technical College effective August 31, 2009. The Equipment was transferred at its historical cost of $18,721 with an accumulated depreciation balance of $10,072, for a net transfer of $8,649. This amount is reported as a Special Item on the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flow. Restatement of Prior Year Net Assets The following institutions had restatements of prior year balances in FY2010: Georgia Institute of Technology $ 7,307,600 Valdosta State University 1,881,233 Albany State University (2,535,263) Gordon College (268,767) Macon State College (701,210) Abraham Baldwin Agricultural College (407,017) University System of Georgia 701,210 University System of Georgia 41,750,000 Total $ 47,727,786 Georgia Institute of Technology In fiscal year 2009, the Institute embarked upon a project (The Building Project) to review cost, depreciation and depreciation methodology for all non-equipment assets. During this process, the cost of building assets was reconciled to the AAA report. The Institute inadvertently reconciled the cost of building assets to the incorrect cost line on the report, thus removing Federal Funding from the cost of all building assets with this type of funding. In fiscal year 2010, the Institute thoroughly reviewed all building assets with Federal Funding and corrected all issues with cost and accumulated depreciation in the beginning balance for capital assets on the financial statement. During fiscal year 2010, in accordance with GASB 51, Accounting and Financial Reporting for Intangible Assets, the Institute identified all intangible assets that met the capitalization threshold and retroactively included their cost and accumulated amortization in the July 1, 2009 beginning balance for capital assets on the financial statement. During the fiscal year 2010 year-end review, the Institute noted a few additional issues with assets that needed to be corrected. These issues included the following: (1) Prior year Construction Work-in-Progress (WIP) that should have been capitalized; (2) an affiliate organization asset mistakenly included in WIP for the Institute; (3) a building asset incorrectly classified as Infrastructure; and (4) a profile correction for an asset erroneously set up for cost and depreciation purposes. All issues with cost and accumulated depreciation for these assets have been corrected in the beginning balance for capital assets on the financial statement. The net effect on the financial statements for Capital Assets Disclosure in the Beginning Balance Column of Note 6 is as follows: (1) the beginning balance for Capital Assets, Not Being Depreciated for Construction Work-in-Progress was restated and reduced by $1,386,863; (2) the beginning balance for Capital Assets, Being Depreciated/Amortized for Infrastructure was restated and reduced by $2,738,281; (3) the beginning balance for Capital Assets, Being Depreciated/Amortized for Buildings was restated and increased by $10,774,021; (4) the beginning balance for Capital Assets, Being Depreciated/Amortized for Software was restated and increased by $1,530,895; (5) the beginning balance for Accumulated Depreciation/Amortization for Infrastructure was restated and reduced by $98,551; (6) the beginning balance for Accumulated Depreciation/Amortization for Buildings was restated and increased by $434,910; 37 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT and (7) the beginning balance for Accumulated Depreciation/Amortization for Software was restated and increased by $535,813. Valdosta State University Valdosta State University has a restatement of prior year net assets increasing beginning net assets by $1,881,233, due to a correction of fiscal year 2009 Construction Work-in-Process that was recorded as an expense in error. Albany State University Albany State University has a restatement of prior year net assets decreasing beginning net assets by $2,535,263.00, due to revaluation of a capital lease and restatement of accumulated depreciation for the capital lease. Gordon College Gordon College has a restatement of prior year net assets decreasing beginning net assets by $268,767, due to a reduction in Construction Work-In-Progress (C.W.I.P.) for the Gordon College Project J-139 (Allied Health/Nursing Building), as project management was transferred to GSFIC during the year. Macon State College Macon State College has a restatement of prior year net assets decreasing beginning net assets by $701,210, which includes $85,506 for capital assets, due to removing the new University System Shared Services Center activity, for which the College is the fiscal agent, and transferring the activity to the University System Office for reporting purposes. Abraham Baldwin Agricultural College Abraham Baldwin Agricultural College has a restatement of prior year net assets, increasing beginning net assets by $407,017, due to the addition of capital assets that were not correctly added to the asset listing in the prior year. University System Office The University System Office has a restatement of prior year net assets, increasing beginning net assets by $701,210. This restatement is related to the prior year operations of the Shared Services Center, which was reported by Macon State College in fiscal year 2009. Due to the financial significance of the Shared Services Center in fiscal year 2010 and projected future significance, this prior year activity has been transferred to the University System Office in fiscal year 2010. The Shared Services Center revenue and expenses for fiscal year 2010 are included in the University System Office's Statement of Revenues, Expenses and Changes in Net Assets. An error was discovered in the methodology for determining the split between retiree and active employee claims expenses, which resulted in an increase in retiree claim costs and decrease in active employee claim costs. The $41,750,000 adjustment to net assets represents that cumulative difference between the Annual Required Contribution (ARC) and the employer contributions since fiscal year 2008. See Note 14 for additional information. 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. 38 The University System of Georgia ANNUAL FINANCIAL REPORT 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, 2010, the carrying value of deposits was $464,021,401 and the bank balance was $536,830,266. Of the University System's deposits, $294,344,672 were uninsured. Of these uninsured deposits, $261,851,088 were collateralized with securities held by the financial institution's trust department or agent in the University System's name, $32,166,747 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name and $326,837 were uncollateralized. B. Investments The University System 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 System's investments as of June 30, 2010 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 Repurchase Agreements Fair Value $ 20,558,049 7,873,784 258,353,702 7,885,154 1,089,127 5,000 29,500,219 33,097,975 $ 358,363,010 LessThan 1 Year $3,189,804 1,786,613 15,579,210 255,381 61,021 5,000 174,234 33,097,975 $ 54,149,238 Investment Maturity 1-5 Years 6-10 Years $8,462,861 1,095 31,399,865 3,156,212 165,411 $7,927,026 1,678,450 17,312,660 3,146,434 862,695 1,228,302 23,738,573 $44,413,746 $ 54,665,838 More Than 10 Years $978,358 4,407,626 194,061,967 1,327,127 4,359,110 $ 205,134,188 Other Investments Bond/Fixed Income Mutual Funds Equity Mutual Funds Equity Securities - Domestic Equity Securities - International Real Estate Held for Investment Purposes Real Estate Investment Fund Cash Surrender Value 2,591,971 49,566,232 39,414,772 87,953 6,071,012 1,775,432 9,517 Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool 316,667,502 6,745,573 $ 781,292,974 39 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 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 46 days at June 30, 2010. 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 $2.03 at June 30, 2010. 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 2010 is 0.97 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 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 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 40 The University System of Georgia ANNUAL FINANCIAL REPORT 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, multi-manager 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. 41 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT Condensed financial information for the investment pool is as follows: Regents Investment Pool Statement of Net Assets June 30, 2010 Regents Investment Pool Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2010 Assets Investments Accrued Interest Net Assets Distribution of Net Assets External Participant Account Balance Internal Participant Account Balance $ 248,460,015 654,998 $ 249,115,013 Additions Pool Participant Deposits Investment Income Interest Fair Value Decreases Total Additions Less: Investment Expense $ 76,012,495 3,640,894 10,391,138 (441,380) $ 89,603,147 $ 13,768,370 235,346,643 $ 249,115,013 Deductions Pool Participant Withdrawals Net Increase (Decrease) Net Assets July 1, 2009 June 30, 2010 $ (9,642,119) $ 79,961,028 169,153,985 $ 249,115,013 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. 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. 42 The University System of Georgia ANNUAL FINANCIAL REPORT 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, 2010, $369,206,783 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 $19,612,891 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. 3. The portfolio shall be well diversified as to issuer and maturity. The University System investments subject to credit quality risk follow: Fair Value AAA AA A B BBB Unrated Related Debt Investments U. S. Agencies Corporate Debt General Obligation Bonds Municipal Obligation Mutual Bond Fund Repurchase Agreements U.S.Treasuries $ 258,353,702 7,885,154 1,089,127 5,000 29,500,219 33,097,975 $ 329,931,177 $ 3,854,060 1,089,127 5,000 369,062 $ 5,317,249 $436,140 369,062 $ 805,202 $ - 1,772,882 225,881 $ 1,998,763 $- $371,813 $ 254,499,642 5,304,320 18,996 28,517,218 33,097,975 $ 18,996 $ 371,813 $ 321,419,155 43 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 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. Investment Federal National Mortgage Association Amount $ 41,190,407 % of Total 5.3% 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, 2010, $87,953, or less than 0.0001% of total investments, was invested in international equity mutual funds. NOTE 3. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2010: Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other Sub Total Less Allowance for Doubtful Accounts Net Accounts Receivable June 30, 2010 $ 44,909,303 28,804,144 109,143,436 25,471,778 241,167,116 449,495,777 16,307,663 $ 433,188,114 NOTE 4. INVENTORIES Inventories consisted of the following at June 30, 2010: Bookstore Food Services Physical Plant Other Total 44 June 30, 2010 $ 14,495,581 1,903,005 6,892,621 3,237,827 $ 26,529,034 The University System of Georgia ANNUAL FINANCIAL REPORT NOTE 5. NOTES/LOANS RECEIVABLE The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2010. 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, 2010 the allowance for uncollectible loans was $2,819,135. NOTE 6. CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2010: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated Restated Beginning Balance July 1, 2009 Special Item Transfer Additions $ 227,984,988 39,425,599 212,196,735 479,607,322 $0 0 0 $ 16,871,764 621,783 176,039,805 193,533,352 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Software Total Assets Being Depreciated 232,075,711 5,849,675,815 272,919,661 1,125,770,172 1,331,173,579 692,487,868 1,511,338 10,917,386 9,516,531,530 0 0 0 (1,696) 0 0 0 0 (1,696) 19,092,276 385,560,071 14,002,375 111,204,586 335,329,720 32,114,312 4,165,469 4,608,825 906,077,634 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Software Total Accumulated Depreciation 67,878,963 1,659,934,067 93,135,206 775,915,618 138,637,779 525,296,468 509,546 4,770,551 3,266,078,198 0 0 0 (10,072) 0 0 0 0 (10,072) 7,437,190 148,107,421 8,272,506 94,426,218 58,823,449 31,143,319 85,568 2,360,971 350,656,642 Total Capital Assets, Being Depreciated, Net 6,250,453,332 8,376 555,420,992 Capital Assets, net $ 6,730,060,654 $ 8,376 $ 748,954,344 Reductions $ 784,857 0 164,894,656 165,679,513 2,080,755 11,963,819 217,195 50,954,650 6,647,407 3,110,845 5,800 0 74,980,471 968,783 8,779,049 30,056 48,704,542 5,124,754 2,836,113 0 0 66,443,297 8,537,174 $ 174,216,687 Ending Balance June 30, 2010 $ 244,071,895 40,047,382 223,341,884 507,461,161 249,087,232 6,223,272,067 286,704,841 1,186,018,412 1,659,855,892 721,491,335 5,671,007 15,526,211 10,347,626,997 74,347,370 1,799,262,439 101,377,656 821,627,222 192,336,474 553,603,674 595,114 7,131,522 3,550,281,471 6,797,345,526 $ 7,304,806,687 45 Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT NOTE 7. DEFERRED REVENUE Deferred revenue consisted of the following at June 30, 2010: Prepaid Tuition and Fees Research Other Deferred Revenue Totals June 30, 2010 $ 188,600,012 51,387,733 60,679,883 $ 300,667,628 The University System of Georgia ANNUAL FINANCIAL REPORT NOTE 8. LONG-TERM LIABILITIES Long-term liability activity for the year ended June 30, 2010 was as follows: Restated Beginning Balance July 1, 2009 Additions Reductions Leases Lease Obligations $ 2,239,558,079 $ 467,843,148 $ 60,302,936 Other Liabilities Compensated Absences Net OPEB Obligation US DOE Settlement (Fort Valley) Notes & Loans Other Liabilities Total 173,435,787 395,475,000 547,780 56,518 958,692 570,473,777 119,213,767 304,463,000 0 0 132,155 423,808,922 111,497,692 0 246,408 41,253 128,334 111,913,687 Total Long Term Obligations $ 2,810,031,856 $ 891,652,070 $ 172,216,623 Ending Balance June 30, 2010 $ 2,647,098,291 181,151,862 699,938,000 301,372 15,265 962,513 882,369,012 $ 3,529,467,303 Current Portion $ 58,260,024 103,901,958 0 239,585 15,265 133,720 104,290,528 $ 162,550,552 NOTE 9. SIGNIFICANT COMMITMENTS The University System of Georgia had significant unearned, outstanding construction or renovation contracts executed in the amount of $183,821,327 as of June 30, 2010. In addition, certain institutions executed rental agreements for student housing and/or other facilities during fiscal 2010; however, these agreements will not commence until fiscal 2011 or later. The rental agreements are long-term in nature, with annually renewable lease terms. The projects and the present value of the minimum lease payments over the life of the rental agreements can be seen below: Institution Kennesaw State University North Georgia College & State University Total Commitment Amount $ 59,000,000 212,722,145 $ 271,722,145 Project Sports Park Student Housing & Parking Deck 46 The University System of Georgia ANNUAL FINANCIAL REPORT Georgia State University entered into a lease agreement, which is not reflected in the schedule above, with Panther Place, LLC in May 2007, for a complex of buildings collectively known as "25 Park Place". The lease agreement commences the day after the lease agreement between Panther Place, LLC, and SunTrust Bank has been terminated but no later than May 31, 2012. After the termination of the SunTrust lease and the University's lease has commenced, the University will have the exclusive right, privilege, and option of renewing or extending the agreement at the expiration of the initial one year term on a year-to-year basis for consecutive one-year periods until June 30, 2037. These amounts above are not reflected in the accompanying basic financial statements. NOTE 10. LEASE OBLIGATIONS The University System of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. Capital Leases The University System of Georgia is obligated under approximately $2.6 billion in capital lease liability as of June 30, 2010. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between fiscal 2010 and 2039. Expenditures for fiscal year 2010 were $189,696,756, of which $127,785,776 represented interest. Total principal reductions on capital leases were $59,751,161 for the fiscal year ended June 30, 2010. Of the $127,785,776 in interest expenditures, approximately $2,159,819 was added to outstanding principal during fiscal 2010. 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, 2010: Land Infrastruture Buildings Facilities Equipment Subtotal Less: Accumulated Depreciation Total Assets Held Under Capital Lease $ 43,924,082 47,725,157 37,156,030 2,707,491,492 498,285 2,836,795,047 (253,979,251) $ 2,582,815,796 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. 47 Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT The University System of Georgia ANNUAL FINANCIAL REPORT Capital lease additions during fiscal 2010 are summarized below: Institution Georgia State University University of Georgia University of Georgia University of Georgia Georgia Southern University Valdosta State University Valdosta State University Valdosta State University Valdosta State University Valdosta State University Valdosta State University Armstrong Atlantic State University Kennesaw State University Georgia College & State University Georgia Perimeter College Georgia Perimeter College University System Office Various - 3rd Party Leases Project Petit Science Center Parking Decks Fraternity Row Housing Medical Partnership Bldg Centenniel Place Georgia and Reade Halls Student Union Building Hopper Hall Student Health Center Oak Street Parking Deck Sustella Parking Deck Student Union Center Housing Campus Theatre Newton Campus - Student Success Center Clarkston Campus - International Center Shared Services Center Equipment, furniture and fixtures Amount $ 74,016,116 17,655,000 12,505,000 15,705,000 56,096,073 30,419,725 60,747,911 27,484,345 12,222,729 24,869,880 21,468,631 23,427,477 242,257 9,326,118 12,900,000 3,000,000 3,578,343 6,614,424 $ 412,279,029 Interest Rate 6.480% 5.000% 6.300% 5.000% 5.256% 4.150% 4.514% 4.554% 4.649% 4.649% 4.649% 5.125% 6.040% 6.250% 4.830% 4.830% 4.000% Lease Expiration 2039 2039 2039 2028 2039 2039 2039 2039 2039 2039 2039 2039 2039 2038 2035 2035 2030 Operating Leases The University System of Georgia's non-cancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2011 through 2034. 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 2010 was $31,159,365. 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, 2010, are as follows: Year Ending June 30: 2011 2012 2013 2014 2015 2016 through 2020 2021 through 2025 2026 through 2030 2031 through 2035 2036 through 2040 2041 through 2045 Total minimum lease payments Less: Interest Less: Executory costs Principal Outstanding Year 1 2 3 4 5 6-10 11-15 16-20 21-25 26-30 31-35 Capital Leases $ 189,661,875 188,588,460 188,704,875 188,832,967 221,605,794 971,756,679 978,709,909 971,312,883 656,861,256 283,903,988 771,617.00 4,840,710,303 2,120,830,081 72,781,931 $ 2,647,098,291 Operating Leases $ 29,016,375 9,391,505 8,734,597 5,598,780 3,841,169 15,029,876 10,720,729 7,902,558 1,642,734 0 0 $ 91,878,323 48 The University System of Georgia ANNUAL FINANCIAL REPORT 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 5.25% 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 2010, the employer contribution rate was 9.74% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year 2010 2009 2008 Percentage Contributed 100% 100% 100% Contribution $ 135,412,616 $ 128,072,380 $ 122,832,156 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. Employees hired on or after July 1, 1982, but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan. 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 49 Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT The University System of Georgia ANNUAL FINANCIAL REPORT 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, 2010 for employees covered by ERS was $6,349,501. The University System of Georgia's total payroll for all employees was $2,760,608,695. For the year ended June 30, 2010 under the old plan, member contributions consist of 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. 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 and GSEPS, 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, 2010, 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 2010 2009 2008 Percentage Contributed 100% 100% 100% Contribution $ 654,124 $ 687,652 $ 602,995 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2010 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 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. 50 The University System of Georgia ANNUAL FINANCIAL REPORT Funding Policy The University System of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2010, the employer contribution was 8.15% for the first six months and 9.24% 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 System of Georgia and the covered employees made the required contributions of $88,167,788 (9.24%) and $49,317,179 (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 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. Total contributions made by employees during fiscal year 2010 amounted to $7,268,961 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 offered its employees and retirees access to two different self-insured healthcare plan options a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The indemnity plan was discontinued effective January 1st, 2010. The University System Office and participating employees and retirees paid premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self- 51 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 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 during the fiscal year, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The prescription drug plan is administered through Medco Health Solutions. Pharmacy drug claims are processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Medco Health Solutions for verification, processing and payment. Medco Health Solutions 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, 2010 and June 30, 2009 is shown below: Employees: 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 June 30, 2010 $ 21,827,567 181,684,842 187,858,409 Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 15,654,000 Retirees: Unpaid Claims and Claim Adjustments (Prior Year IBNR) $ 6,626,917 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 93,786,415 93,657,332 Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 6,756,000 June 30, 2009 $ 24,048,856 204,169,368 206,390,657 $ 21,827,567 $ 6,702,660 91,436,410 91,512,153 $ 6,626,917 52 The University System of Georgia ANNUAL FINANCIAL REPORT Prior year claims incurred and paid have been adjusted in this schedule for a correction in the breakout between Active and Retired employees. Beginning and ending IBNR liabilities are not affected by this correction. See Note 14 for additional explanation. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University System of Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. The University System of Georgia implemented GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations in fiscal 2009. This statement requires recognition of pollution remediation liabilities (if estimable) when a specified obligating event occurs, as defined in the Statement. Five institutions with the University System of Georgia had conditions or projects in progress that met one of the five obligating events as of June 30, 2010. Augusta State University has been notified as a potential responsible party for pollution remediation related to a Superfund site located in North Carolina. Other alleged customers of the facility, dating back 30 plus years, have also been notified as potential responsible parties. To date, the University has not been named in any legal action pursuant to this case. As of June 30, 2009, Augusta State University cannot reasonably estimate a liability for this pollution remediation obligation. The Medical College of Georgia is responsible for asbestos abatement as a small part of the project costs for the renovation of the third floor of the Hamilton Wing in the Research and Education building, renovation of several labs in the Research and Education building, and removal of mastic material in the dental building basement. The College has recorded a liability and expense related to this pollution remediation in the amount of $763. The liability is the remaining amount of project abatement costs at June 30, 2010. The College does not anticipate any significant changes to the expected remediation outlay. The University of Georgia is responsible for pollution remediation at the Milledge Avenue landfill site. The University of Georgia has recorded a liability and expense related to this pollution remediation in the amount of $962,513. The liability was determined using a 5 year budget estimate provided by environmental engineers & consultants. The University of Georgia does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Savannah State University is responsible for mold remediation at Camilla Hubert Hall. The University had recorded a liability and expense related to this pollution remediation in the amount of $86,450 as of June 30, 2009. The liabil- 53 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT ity was determined using the Expected Cash Flow Measurement Technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts. There were no changes, the remediation occurred during the current fiscal year, and there are no expected recoveries that have reduced the liability. Georgia Institute of Technology is responsible for pollution remediation, including asbestos abatement, for all Insti- tute facilities. Asbestos abatement is performed during renovation/construction projects when deemed necessary by Institute management. As of June 30, 2010, the Institute recorded a liability and expense in the amount of $298,617 for asbestos abatement projects in various Institute structures. The liability was determined using the Expected Cash Flow Measurement Technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts. The Institute does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Pollution remediation liability activity in fiscal 2010 was as follows: Pollution Remediation Obligation Beginning Balance July 1, 2009 $ 1,125,797 Additions $ 467,160 Reductions $ 331,064 Ending Balance June 30, 2010 $ 1,261,893 Current Portion $ 433,100 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, 2010. 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 postemployment health insurance benefits. Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, 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 online at: http://www.usg.edu/fiscal_affairs/reporting/annual_fin_rep/. 54 Membership of the plan consisted of the following at June 30, 2010: Retirees and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members Total June 30, 2010 17,471 37,076 54,547 The University System of Georgia ANNUAL FINANCIAL REPORT 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 2010 plan year, the employer rate was approximately 70% of the total health insurance cost for eligible retirees and the retiree rate was approximately 30%. 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 2010, the University System of Georgia contributed $69,888,771 to the plan, for current premiums or claims. Plan members receiving benefits contributed $27,198,290 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. In fiscal 2010, a review and correction of the claims expense breakout between Active and Retired participants was performed by the third party claims administrator. The outcome of this review resulted in an increase to previously reported Employer contributions and Claims/Administrative expenses totaling $21.1 million in FY2009 and $20.4 million in FY2008. Because plan contributions and expenses increased by the same amounts, no restatement was required to the Retiree Health Benefit Fund financial statements. However, the increased Employer contributions in fiscal 2009 and 55 Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT 2008 impacted both the Annual OPEB cost and Net OPEB Obligation amounts reported in the University System Office Annual Financial Report notes in those years. The tables below have been updated for the effect of the increases in Employer contributions in fiscal 2009 and 2008. The following table shows the components of the University System's annual OPEB cost for fiscal year 2010, 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): June 30, 2010 Annual required contribution $ Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Less: Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year (restated) Net OPEB obligation - end of year $ 381.7 17.8 (25.2) 374.3 (69.9) 304.4 395.5 699.9 The University System of Georgia ANNUAL FINANCIAL REPORT The University System's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the Retiree Health Benefit Plan for fiscal years 2008 through 2010 were as follows (dollar amounts in millions): Fiscal Year Ended June 30 Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 2008 2009 2010 $224.9 $346.9 $374.3 38.7% 25.7% 18.7% $ 137.8 $ 395.5 $ 699.9 Funded Status and Funding Progress Actuarial Valuation Date 7/1/07 7/1/08 7/1/09 Actuarial Value of Assets (a) $ - $ 290,000 $ 10,566,000 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $ 1,985,200,000 $ 3,258,200,000 $ 3,129,508,000 Unfunded AAL (UAAL) (b-a) $ 1,985,200,000 $ 3,257,910,000 $ 3,118,942,000 Funded Ratio (a/b) 0.0% 0.0% 0.3% Covered Payroll (c) $ 2,201,804,000 $ 2,372,385,000 $ 2,399,532,000 UAAL as a Percentage of Covered Payroll ((b-a)/c) 90.2% 137.3% 130.0% 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 56 The University System of Georgia ANNUAL FINANCIAL REPORT 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 multi-year 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 July 1, 2009 Projected Unit Credit Level Dollar, Closed, 30-year Market Value of Assets 28 years 4.50% 8.25% 4.50% 2027 *Includes inflation assumption of 2.5% Please note that the Investment Rate of Return percentage can change. 57 The University System of Georgia ANNUAL FINANCIAL REPORT Notes to the Financial Statements FINANCIAL SECTION USG ANNUAL FINANCIAL REPORT NOTE 15. NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The University's operating expenses by functional classification for FY2010 are shown below: Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Instruction $ 783,263,584 276,627,165 370,219,276 3,487,544 12,712,547 5,617,254 5,684,344 70,908,668 58,896,098 Total Expenses $1,587,416,480 Research $ 272,623,648 258,591,990 161,180,609 331,310 19,324,529 3,565,789 2,194,860 192,946,218 52,551,406 $ 963,310,359 Functional Classification FY2010 Public Service Academic Support $ 61,386,788 146,007,093 77,430,842 665,335 5,399,941 1,496,516 17,454,780 126,405,670 6,258,034 $ 30,981,237 184,389,817 82,507,648 1,539,253 3,620,309 405,476 2,702,170 83,667,345 45,113,957 $ 442,504,999 $ 434,927,212 Student Services $ 1,853,074 130,514,096 48,835,822 746,519 2,461,542 3,046,341 1,803,972 55,909,526 9,531,715 $ 254,702,607 Institutional Support $ 4,190,837 247,009,347 136,339,452 7,038,620 2,650,625 1,244,037 10,292,618 283,758,085 39,680,429 $ 732,204,050 Natural Classification Faculty Staff Benefits Personal Services Travel Scholarships and Fellowships Utilities Supplies and Others Services Depreciation Plant Operations & Maintenance $ (34,364) 154,056,034 67,283,432 (7,507,321) 243,577 - 118,529,974 117,694,036 61,378,244 Scholarships & Fellowships $ - 28,119 45,530 376,542 753 300,096,684 - 62,379 - Total Expenses $ 511,643,612 $ 300,610,007 Functional Classification FY2010 Auxiliary Enterprises Unallocated Expenses $ 2,157,779 $ - 136,431,951 - 48,853,047 - 8,495,965 - 1,680,324 - 18,055,955 - 26,449,543 - 285,271,892 - 77,246,759 - $ 604,643,215 $ - MCG only Patient Care $ 1,998,829 68,531,671 27,648,306 287,740 242,374 103,198,168 - $ 201,907,088 Total Expenses $ 1,158,421,412 1,602,187,283 1,020,343,964 15,173,767 48,381,887 333,528,052 185,354,635 1,319,821,987 350,656,642 $ 6,033,869,629 NOTE 16. AFFILIATED ORGANIZATIONS Under Board of Regents policy, each individual institution may establish a separate foundation, or affiliated organization, to provide valuable assistance in fundraising, public outreach and other support for the missions of the respective campus and the University System. Although independent boards govern these foundations, their assets are dedicated for the benefit of the related institution and the University System of Georgia. These affiliated organizations are private nonprofit organizations that report under either Financial Accounting Standards Board (FASB) standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations, or Governmental Accounting Standards Board (GASB) standards, including Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments and Statement No. 35, Basic 58 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. For the organizations reporting under the FASB basis, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. Summarized financial statements for these affiliated organizations are included in the Supplementary Information. Information for obtaining complete financial statements for these organizations can be found within the respective campus' annual financial reports. The following affiliated organizations were considered significant for reporting purposes to the State of Georgia and were considered component units of the State of Georgia. Component Units of the State of Georgia Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation University of Georgia Foundation University of Georgia Athletic Association, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Housing Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Kennesaw State University Foundation, Inc. Georgia College and State University Foundation, Inc. University System of Georgia Foundation, Inc. Fiscal Year End June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 June 30, 2010 December 31, 2009 June 30, 2010 June 30, 2010 June 30, 2010 Reporting Basis FASB GASB GASB FASB FASB GASB GASB FASB FASB FASB GASB GASB FASB FASB FASB FASB GASB 59 The University System of Georgia ANNUAL FINANCIAL REPORT 60 The University System of Georgia ANNUAL FINANCIAL REPORT SUPPLEMENTARY INFORMATION to the FINANCIAL STATEMENTS USG ANNUAL FINANCIAL REPORT 61 The University System of Georgia ANNUAL FINANCIAL REPORT Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS BY INSTITUTION JUNE 30, 2010 Institution Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State Univ. Kennesaw State University North Georgia College & State Univ. Savannah State University Southern Polytechnic State Univ. University of West Georgia Abraham Baldwin Agricultural Coll. College of Coastal Georgia Dalton State College Gainesville State College Georgia Gwinnett College Gordon College Macon State College Middle Georgia College Atlanta Metropolitan College Bainbridge College Darton College East Georgia College Georgia Highlands College Georgia Perimeter College South Georgia College Waycross College Skidaway Institute of Oceanography University System Office Elimination/Consolidation Entries Total Current Assets $ 220,487,917 218,932,952 89,912,220 369,421,730 66,110,870 29,935,140 14,374,824 20,478,350 16,251,956 16,016,876 24,001,674 8,567,218 24,361,575 9,569,338 74,400,162 18,819,573 13,922,771 24,675,095 45,219,847 6,971,749 4,502,969 6,488,491 15,344,771 11,210,946 13,848,000 14,400,942 12,964,188 5,944,700 10,634,352 9,941,839 4,850,039 5,237,867 26,657,615 1,998,729 2,411,239 1,029,520 275,296,772 (142,636,397) $1,592,558,419 Noncurrent Cash/ Investments $ 54,934,882 861,561 93,279,389 57,901,902 2,475,331 11,874,030 2,347,500 376,640 918,001 2,404,246 42,950 5,130,396 552,944 3,809,086 2,443,279 3,728,944 2,731,825 344,143 82,797 1,077,949 940,743 602,605 28,037 1,042,965 150,000 253,845 7,623,524 (78,314,662) $179,644,852 Assets Capital Assets $1,538,480,605 667,178,623 301,645,933 1,384,238,294 436,129,376 321,876,158 121,358,109 126,571,408 103,070,297 99,740,361 128,464,321 126,496,967 155,070,031 79,746,638 249,511,523 118,632,475 116,042,030 101,122,370 210,198,861 75,704,771 34,287,383 31,873,036 43,406,170 71,268,450 61,635,944 71,134,744 128,943,799 12,124,375 29,660,295 37,641,034 19,224,926 39,835,099 162,412,057 27,544,856 9,011,521 10,947,858 52,575,989 $7,304,806,687 Other Assets $10,359,726 5,801,191 4,039,136 10,862,954 3,015,332 28,910 383,777 11,654 582,300 39,497 1,052,920 1,830,194 2,879,884 786,709 447,709 1,116,517 804,539 173,748 2,060,855 335,686 4,182 10,267 107,138 - 5 49,273 2,033,301 (2,033,301) $46,784,103 Total Assets $ 1,824,263,130 892,774,327 488,876,678 1,822,424,880 507,730,909 363,714,238 136,116,710 149,408,912 120,281,193 116,714,735 155,923,161 136,937,329 187,441,886 90,655,629 328,168,480 141,011,844 134,498,284 128,703,038 257,823,706 83,012,206 38,877,331 38,361,527 58,750,941 82,479,396 75,494,211 86,613,635 142,955,868 18,069,075 40,897,252 47,582,873 24,074,965 45,101,003 190,112,642 29,742,858 11,676,605 11,977,378 337,529,586 (222,984,360) $ 9,123,794,061 62 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS BY INSTITUTION continued JUNE 30, 2010 Institution Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State Univ. Kennesaw State University North Georgia College & State Univ. Savannah State University Southern Polytechnic State Univ. University of West Georgia Abraham Baldwin Agricultural Coll. College of Coastal Georgia Dalton State College Gainesville State College Georgia Gwinnett College Gordon College Macon State College Middle Georgia College Atlanta Metropolitan College Bainbridge College Darton College East Georgia College Georgia Highlands College Georgia Perimeter College South Georgia College Waycross College Skidaway Institute of Oceanography University System Office Elimination/Consolidation Entries Total Liabilities Current Liabilities Noncurrent Liabilities Total Liabilities $ 143,846,353 $ 524,039,484 $ 667,885,837 84,613,156 303,681,965 $388,295,121 110,395,883 41,333,985 $151,729,868 142,699,148 256,484,017 $399,183,165 33,161,247 177,506,865 $210,668,112 13,698,630 218,326,673 $232,025,303 3,356,096 35,037,455 $38,393,551 13,278,076 70,488,295 $83,766,371 8,642,646 31,932,827 $40,575,473 5,413,722 47,289,704 $52,703,426 13,460,688 59,144,104 $72,604,792 8,085,229 64,326,824 $72,412,053 12,330,622 109,560,376 $121,890,998 6,394,019 39,483,423 $45,877,442 42,962,754 114,020,926 $156,983,680 9,813,226 43,275,231 $53,088,457 4,288,492 54,461,537 $58,750,029 16,682,743 47,189,916 $63,872,659 18,067,394 111,436,873 $129,504,267 3,301,435 48,669,533 $51,970,968 2,318,595 224,509 $2,543,104 2,184,055 7,502,065 $9,686,120 4,848,438 12,479,487 $17,327,925 4,024,078 40,701,536 $44,725,614 4,122,648 33,618,170 $37,740,818 5,328,226 983,238 $6,311,464 2,538,598 63,673,439 $66,212,037 2,146,243 378,958 $2,525,201 3,766,985 293,471 $4,060,456 4,847,667 1,168,427 $6,016,094 1,914,391 184,457 $2,098,848 2,924,738 379,957 $3,304,695 17,131,166 81,599,466 $98,730,632 837,523 16,483,726 $17,321,249 906,377 112,140 $1,018,517 623,416 75,969 $699,385 240,750,926 18,955,004 $259,705,930 (221,045,833) 697,999,473 $476,953,640 $ 774,659,796 $ 3,374,503,505 $ 4,149,163,301 63 The University System of Georgia ANNUAL FINANCIAL REPORT Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS BY INSTITUTION continued JUNE 30, 2010 Institution Georgia Institute of Technology Invested in Capital Restricted Assets Unexpendable $ 1,016,751,704 $ 47,648,301 Georgia State University 363,951,148 42,476 Medical College of Georgia 274,705,038 1,495,902 University of Georgia 1,139,354,681 58,106,618 Georgia Southern University 255,444,309 2,465,814 Valdosta State University 102,182,637 2,052,958 Albany State University 87,049,434 Armstrong Atlantic State University 55,182,014 2,051,849 Augusta State University 71,513,660 14,000 Clayton College & State University 53,313,362 918,001 Columbus State University 68,322,145 1,652,040 Fort Valley State University 62,889,249 68,099 Georgia College & State University 49,830,192 3,189,665 Georgia Southwestern State Univ. 40,549,903 344,842 Kennesaw State University 134,658,873 659,643 North Georgia College & State Univ. 76,018,761 2,514,667 Savannah State University 61,939,332 3,579,321 Southern Polytechnic State Univ. 53,434,960 1,437,399 University of West Georgia 99,187,844 Abraham Baldwin Agricultural Coll. 26,326,161 College of Coastal Georgia 34,287,383 68,879 Dalton State College 24,475,099 Gainesville State College 30,795,075 Georgia Gwinnett College 30,554,140 Gordon College 27,731,018 Macon State College 71,134,744 Middle Georgia College 66,259,251 Atlanta Metropolitan College 12,124,375 Bainbridge College 29,660,295 538,024 Darton College 37,487,770 East Georgia College 19,208,339 37,100 Georgia Highlands College 39,835,099 28,039 Georgia Perimeter College 81,631,170 29,449 South Georgia College 11,156,440 150,000 Waycross College 9,011,521 136,240 Skidaway Institute of Oceanography 10,947,858 University System Office 30,659,141 3,612,043 Elimination/Consolidation Entries Total $ 4,659,564,125 $ 132,841,369 Net Assets Restricted Expendable $ 67,474,184 9,514,175 72,528,242 74,741,788 3,465,787 3,344,869 386,824 315,387 1,876,093 758,430 3,021,987 1,549,400 4,851,633 1,398,075 2,551,107 1,812,559 1,077,238 1,563,014 2,456,678 825,499 37,550 1,961 5,956 13,053 1,360,826 1,330,389 81,254 12,523 32,851 753,359 121,028 70,808 30,458,910 $ 289,793,437 Unrestricted Total Net Assets $ 24,503,104 $ 1,156,377,293 130,971,407 504,479,206 (11,582,372) 337,146,810 151,038,628 1,423,241,715 35,686,887 297,062,797 24,108,471 131,688,935 10,286,901 97,723,159 8,093,291 65,642,541 6,301,967 79,705,720 9,021,516 64,011,309 10,322,197 83,318,369 18,528 64,525,276 7,679,398 65,550,888 2,485,367 44,778,187 33,315,177 171,184,800 7,577,400 87,923,387 9,152,364 75,748,255 8,395,006 64,830,379 $26,674,917 128,319,439 3,889,578 31,041,238 1,940,415 36,334,227 4,198,347 28,675,407 10,627,941 41,423,016 7,193,686 37,753,782 10,009,322 37,753,393 7,806,601 80,302,171 9,154,191 76,743,831 3,419,499 15,543,874 6,557,223 36,836,796 4,079,009 41,566,779 2,718,155 21,976,117 1,900,319 41,796,308 8,968,032 91,382,010 994,141 12,421,609 1,439,519 10,658,088 330,135 11,277,993 13,093,562 77,823,656 (699,938,000) (699,938,000) $ (107,568,171) $ 4,974,630,760 64 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS BY INSTITUTION FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Revenues Operating Institution Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State Univ. Kennesaw State University North Georgia College & State Univ. Savannah State University Southern Polytechnic State Univ. University of West Georgia Abraham Baldwin Agricultural Coll. College of Coastal Georgia Dalton State College Gainesville State College Georgia Gwinnett College Gordon College Macon State College Middle Georgia College Atlanta Metropolitan College Bainbridge College Darton College East Georgia College Georgia Highlands College Georgia Perimeter College South Georgia College Waycross College Skidaway Institute of Oceanography University System Office Elimination/Consolidation Entries Total Tuition & Fees, Net $ 177,483,251 170,000,895 35,057,042 254,395,648 75,024,715 46,453,440 11,884,154 24,156,884 23,306,149 19,615,429 30,111,461 6,488,217 32,675,762 8,270,333 90,913,006 19,592,350 7,431,966 22,675,330 39,855,050 3,848,877 4,467,898 7,774,072 17,155,084 8,319,355 5,088,814 11,521,261 3,690,242 3,627,237 3,017,528 8,178,363 2,555,335 8,671,768 48,707,712 1,003,617 1,212,932 $ 1,234,231,177 Grants & Contracts $ 564,747,448 61,407,021 379,035,814 181,507,451 7,834,988 3,476,218 7,903,284 6,459,753 302,968 2,178,519 1,073,922 11,173,626 586,863 2,937,232 5,236,327 333,496 9,431,043 451,118 2,245,181 460,006 47,770 2,728,346 1,026 18,052 389,042 605,167 430,829 1,654,731 2,087,485 2,506,547 224,966 2,714,527 272,718 2,316 3,141,959 8,382,332 (13,400,749) $ 1,260,589,342 Auxiliaries $ 86,485,013 52,847,734 7,424,129 144,824,788 63,796,969 40,607,143 11,421,832 14,718,554 9,074,428 10,967,890 8,281,681 17,855,531 23,221,286 8,758,273 39,407,422 16,784,928 19,689,971 9,941,257 30,791,546 11,576,970 1,855,157 4,126,641 4,550,604 894,862 10,446,699 4,072,841 12,454,171 2,375,892 501,675 1,923,510 549,868 587,867 8,387,735 4,019,491 788,031 38,637 (294,349) $ 685,756,677 Other $ 39,431,135 14,876,355 10,229,675 55,536,222 4,729,467 1,560,661 843,860 937,599 1,630,801 2,026,298 3,260,804 6,580,983 2,132,849 627,367 8,614,888 1,312,906 367,535 1,901,027 3,402,926 426,034 273,942 306,177 1,168,606 185,301 187,694 550,701 253,378 81,574 437,076 299,821 38,640 218,340 1,886,819 162,570 4,486 380,470 237,311,706 (157,434,701) $ 246,741,992 Expenses $ (1,065,581,868) (516,954,365) (600,943,395) (1,106,667,243) (248,813,339) (148,920,301) (66,186,892) (82,326,049) (72,645,517) (72,654,507) (93,359,287) (76,558,683) (93,749,472) (39,377,335) (243,650,955) (70,430,941) (66,475,065) (58,189,289) (130,443,784) (37,595,121) (28,009,877) (41,981,511) (52,649,915) (39,671,665) (36,077,527) (53,213,593) (41,459,410) (25,014,271) (25,268,618) (42,882,552) (16,363,741) (32,051,935) (168,919,939) (18,939,242) (9,296,487) (6,739,207) (370,473,530) (133,333,201) $ (6,033,869,629) Operating Loss $ (197,435,021) (217,822,360) (169,196,735) (470,403,134) (97,427,200) (56,822,839) (34,133,762) (36,053,259) (38,331,171) (37,866,371) (50,631,419) (34,460,326) (35,132,712) (18,784,130) (99,479,312) (32,407,261) (29,554,550) (23,220,557) (54,149,081) (21,283,234) (21,365,110) (27,046,275) (29,774,595) (30,254,095) (19,965,278) (36,463,623) (24,630,790) (17,274,837) (19,224,854) (29,974,311) (13,219,898) (22,348,994) (107,223,146) (13,480,846) (7,288,722) (3,178,141) (124,779,492) (304,463,000) $ (2,606,550,441) 65 The University System of Georgia ANNUAL FINANCIAL REPORT Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS BY INSTITUTION continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Non-Operating Institution Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton College & State University Columbus State University Fort Valley State University Georgia College & State University Georgia Southwestern State Univ. Kennesaw State University North Georgia College & State Univ. Savannah State University Southern Polytechnic State Univ. University of West Georgia Abraham Baldwin Agricultural Coll. College of Coastal Georgia Dalton State College Gainesville State College Georgia Gwinnett College Gordon College Macon State College Middle Georgia College Atlanta Metropolitan College Bainbridge College Darton College East Georgia College Georgia Highlands College Georgia Perimeter College South Georgia College Waycross College Skidaway Institute of Oceanography University System Office Elimination/Consolidation Entries Total State Appropriations $ 207,583,762 174,985,105 129,797,176 372,310,666 69,555,517 41,876,536 17,291,479 25,002,899 22,191,957 19,818,176 28,770,505 17,870,376 26,335,916 9,881,424 67,363,053 20,318,199 15,502,685 17,363,494 38,474,634 11,204,035 11,046,460 11,376,109 16,044,898 28,436,272 9,425,455 17,048,144 14,368,356 6,305,778 7,328,940 12,359,784 4,896,404 11,476,317 46,853,579 6,167,512 3,180,681 2,454,136 150,891,111 3 $ 1,693,157,533 Other Revenues/ (Expenses) $ 82,804,942 140,298,333 53,815,654 250,038,269 49,956,578 37,175,565 20,327,351 18,051,705 18,480,309 23,168,588 24,337,899 33,339,943 18,281,329 9,566,649 54,095,908 14,628,842 19,319,781 12,945,791 32,490,725 13,219,658 12,359,572 16,379,083 16,413,349 8,077,072 13,906,254 21,228,089 14,205,078 11,553,057 16,861,336 20,786,061 11,912,820 11,345,842 57,970,277 7,988,702 5,271,991 1,748,075 (5,962,914) (115,554) $ 1,168,272,009 Interest Expense $ (28,336,365) (14,665,641) (1,886,002) (17,253,812) (8,900,886) (8,556,965) (1,605,287) (2,106,450) (1,602,205) (2,122,347) (366,394) (2,540,221) (4,701,455) (1,860,998) (6,890,921) (2,036,165) (2,352,293) (1,497,555) (5,058,222) (2,264,975) (353,560) (295,506) (1,987,433) (1,624,704) (13,216) (3,023,410) (13,619) (8,149) (3,670,371) (737,108) (3,636) (965,135) 115,551 $ (129,185,455) 66 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS BY INSTITUTION continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Net Assets Institution Increase/ (Decrease) in Net Assets Net Assets Beginning of Year Prior Year Adjustments Net Assets Beginning of Year Restated Net Assets - End of Year Georgia Institute of Technology $ 64,617,318 $ 1,084,452,375 $ 7,307,600 $ 1,091,759,975 $ 1,156,377,293 Georgia State University 82,795,437 421,683,769 421,683,769 504,479,206 Medical College of Georgia 12,530,093 324,616,717 324,616,717 337,146,810 University of Georgia 134,691,989 1,288,549,726 1,288,549,726 1,423,241,715 Georgia Southern University 13,184,009 283,878,788 283,878,788 297,062,797 Valdosta State University 13,672,297 116,135,405 1,881,233 118,016,638 131,688,935 Albany State University 1,879,781 98,378,641 (2,535,263) 95,843,378 97,723,159 Armstrong Atlantic State University 4,894,895 60,747,646 60,747,646 65,642,541 Augusta State University 738,890 78,966,830 78,966,830 79,705,720 Clayton College & State University 2,998,046 61,013,263 61,013,263 64,011,309 Columbus State University 2,110,591 81,207,778 81,207,778 83,318,369 Fort Valley State University 14,209,772 50,315,504 50,315,504 64,525,276 Georgia College & State University 4,783,078 60,767,810 60,767,810 65,550,888 Georgia Southwestern State Univ. (1,197,055) 45,975,242 45,975,242 44,778,187 Kennesaw State University 15,088,728 156,096,072 156,096,072 171,184,800 North Georgia College & State Univ. 503,615 87,419,772 87,419,772 87,923,387 Savannah State University 2,915,623 72,832,632 72,832,632 75,748,255 Southern Polytechnic State Univ. 5,591,173 59,239,206 59,239,206 64,830,379 University of West Georgia 11,758,056 116,561,383 116,561,383 128,319,439 Abraham Baldwin Agricultural Coll. 875,484 30,572,771 (407,017) 30,165,754 31,041,238 College of Coastal Georgia 2,040,922 34,293,305 34,293,305 36,334,227 Dalton State College 355,357 28,320,050 28,320,050 28,675,407 Gainesville State College 2,388,146 39,034,870 39,034,870 41,423,016 Georgia Gwinnett College 4,271,816 33,481,966 33,481,966 37,753,782 Gordon College 1,741,727 36,280,433 (268,767) 36,011,666 37,753,393 Macon State College 1,799,394 79,203,987 (701,210) 78,502,777 80,302,171 Middle Georgia College 919,234 75,824,597 75,824,597 76,743,831 Atlanta Metropolitan College 583,998 14,959,876 14,959,876 15,543,874 Bainbridge College 4,965,422 31,871,374 31,871,374 36,836,796 Darton College 3,157,915 38,408,864 38,408,864 41,566,779 East Georgia College 3,581,177 18,394,940 18,394,940 21,976,117 Georgia Highlands College 473,165 41,323,143 41,323,143 41,796,308 Georgia Perimeter College (6,069,661) 97,451,671 97,451,671 91,382,010 South Georgia College (61,740) 12,483,349 12,483,349 12,421,609 Waycross College 1,163,950 9,494,138 9,494,138 10,658,088 Skidaway Institute of Oceanography 1,020,434 10,257,559 10,257,559 11,277,993 University System Office 19,183,570 57,938,876 701,210 58,640,086 77,823,656 Elimination/Consolidation Entries Total (304,463,000) (437,225,000) 41,750,000 (395,475,000) (699,938,000) $ 125,693,646 $ 4,801,209,328 $ 47,727,786 $ 4,848,937,114 $ 4,974,630,760 67 The University System of Georgia ANNUAL FINANCIAL REPORT Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS AFFILIATED INSTITUTIONS (UNAUDITED) JUNE 30, 2010 Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Assoc., Inc. Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Athletic Foundation, Inc. Georgia Southern University Research and Service Foundation, Inc. Valdosta State University Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Albany State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. (Clayton State University) Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. Fort Valley State University Foundation, Inc. Georgia College & State University Alumni Association, Inc. Georgia College and State University Foundation, Inc. Georgia Southwestern Foundation, Inc. Kennesaw State University Foundation, Inc. North Georgia College & State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. University of West Georgia Foundation, Inc. UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. College of Coastal Georgia Foundation, Inc. Dalton State College Foundation, Inc. Gainesville State College Foundation, Inc. Gordon College Foundation, Inc. Macon State College Foundation, Inc. Middle Georgia College Foundation, Inc. Bainbridge College Foundation Darton College Foundation, Inc. East Georgia College Foundation, Inc. Georgia Highlands College Foundation, Inc. Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. University System of Georgia Foundation, Inc. Total Current Assets $ 42,058,556 12,488,503 143,994,477 7,395,839 871,735 31,710,354 27,281,528 45,537,587 172,938,424 7,997,287 63,014,653 13,240,320 2,301,748 34,901,228 88,592,961 46,898,157 73,467,907 39,406,325 8,607,401 2,531,650 2,903,015 2,282,635 1,186,404 5,925,353 795,988 855,230 3,458,652 72,125 1,086,267 4,016,793 3,732,033 55,888 135,349 5,518,688 337,073 1,832,093 3,168,008 19,454,446 1,598,647 4,677,632 3,436,066 3,625,872 6,316,128 5,923,227 3,677,932 12,115,871 2,045,074 361,714 1,351,647 559,783 542,536 375,853 658,588 1,945,498 707,917 93,706 8,170,673 $ 980,237,044 Noncurrent Cash/ Investments $ 449,002,201 - 353,247 - 27,483,476 171,456,198 5,519,931 136,090,745 108,828,098 418,770 53,910 5,038,105 477,953,255 970,261 44,327,778 63,068,566 325,500 21,909,554 - 20,226,197 23,778,458 2,248,370 6,131,068 31,866,322 23,658,196 5,600,623 6,855,032 7,285,120 789,765 1,283,474 163,435 8,355,074 5,043,510 26,121,831 23,435,566 59,808,779 32,724,081 8,455,071 26,533,947 1,104,879 17,990,601 2,269,548 17,547,122 10,462,491 10,054,089 7,239,276 10,384,855 978,169 739,037 821,597 2,626,858 6,512,068 1,491,957 42,990,523 $ 1,966,376,584 Assets Capital Assets $ 36,451,157 102,239,806 1,189,387 112,269,521 272,434 3,834,245 53,406,652 5,272,328 168,246,200 1,819,478 10,127,040 - 13,488,476 201,275,291 22,919,662 62,986,713 414,750 - 1,562,800 6,745,778 43,956,758 1,023,113 32,273,947 139,882 - 27,986,666 99,321,465 - 1,693,805 25,965 3,754,387 228,482 178,168,512 849,916 73,578 53,911,589 3,047,887 6,165,966 12,761 581,957 8,696,383 63,482 - 78,409,519 41,260 - 99,076,024 $ 1,444,025,022 Other Assets $ 910,917,294 94,048,088 79,248 4,791,050 - 247,446,595 162,405,736 70,928,413 1,688,271 488,345 78,694,824 - 11,622,414 13,911,743 247,746,524 1,439,428 163,916,589 1,123,917 872,640 156,331,621 29,385,943 27,144 47,985,127 54,556,204 40,910,325 8,854,406 3,814,330 100,209 - 53,890,267 4,500 94,628,941 40,262,856 116,720,269 43,026,482 26,526,789 58,669,406 3,913,079 80,747,533 563,322 4,097,439 276,033 31,721,908 77,792 64,317,166 - 36,313 39,900 584,889 1,342,785 25,140,902 62,799,947 $ 3,063,474,946 Total Assets $1,438,429,208 208,776,397 145,263,112 124,809,657 1,144,169 310,474,670 414,550,114 127,258,259 478,963,640 119,133,208 152,255,287 13,294,230 7,339,853 537,965,373 304,750,256 114,145,597 447,269,710 41,586,003 194,433,544 5,218,367 2,903,015 30,127,250 225,253,241 38,582,779 6,954,200 112,980,626 81,673,052 5,812,630 48,851,624 48,142,985 107,657,593 1,439,571 298,784 69,457,834 5,411,048 126,337,252 67,094,912 374,152,006 78,199,126 39,659,492 88,712,997 62,555,419 108,102,149 8,756,097 31,488,459 22,854,395 43,833,832 7,678,782 76,635,625 559,783 10,253,401 1,218,272 2,065,074 84,324,660 32,402,147 1,585,663 213,037,167 $ 7,454,113,596 68 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS AFFILIATED INSTITUTIONS (UNAUDITED) continued JUNE 30, 2010 Liabilities Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Assoc., Inc. Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Athletic Foundation, Inc. Georgia Southern University Research and Service Foundation, Inc. Valdosta State University Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Albany State University Foundation, Inc. Noncurrent Current Liabilities Liabilities Total Liabilities $ 45,260,634 $ 393,115,574 $ 438,376,208 17,115,111 121,220,993 138,336,104 108,083,894 - 108,083,894 9,405,698 111,367,992 120,773,690 740,326 - 740,326 19,887,367 303,985,481 323,872,848 10,173,898 258,249,478 268,423,376 18,566,638 91,033,567 109,600,205 66,507,514 160,988,017 227,495,531 - 1,391,466 1,391,466 8,035,966 7,066,751 7,419,019 6,739,742 30,087,626 4,407,718 73,581,571 2,840,229 13,887,016 822,550 57,408,139 - 18,600,885 103,675,678 302,956,992 177,448,789 403,548 65,444,105 7,066,751 7,419,019 25,340,627 133,763,304 4,407,718 376,538,563 2,840,229 191,335,805 1,226,098 2,080,342 1,183,257 9,821,922 1,101,613 5,684,846 189,771,043 34,189,690 2,080,342 6,868,103 199,592,965 35,291,303 Armstrong Atlantic State University Foundation, Inc. AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. 105,892 4,837,400 3,633,703 96,607,060 52,115,534 105,892 101,444,460 55,749,237 (Clayton State University) Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. 1,110,074 401,227 22,649,479 262,011 15,648 41,951,460 3,133,301 72,997,587 218,502 - 43,061,534 3,534,528 95,647,066 480,513 15,648 Fort Valley State University Foundation, Inc. 2,929,714 62,229,769 65,159,483 Georgia College & State University Alumni Association, Inc. 16,220 - 16,220 Georgia College and State University Foundation, Inc. 19,538,767 107,435,884 126,974,651 Georgia Southwestern Foundation, Inc. 836,611 44,125,071 44,961,682 Kennesaw State University Foundation, Inc. 74,658,971 273,669,814 348,328,785 North Georgia College & State University Foundation, Inc. 2,709,029 50,284,474 52,993,503 Southern Polytechnic State University Foundation, Inc. 1,509,738 31,300,890 32,810,628 University of West Georgia Foundation, Inc. 3,234,327 55,498,127 58,732,454 UWG Real Estate Foundation, Inc. 1,075,882 55,702,347 56,778,229 Abraham Baldwin Agricultural College Foundation, Inc. 5,440,033 81,115,259 86,555,292 College of Coastal Georgia Foundation, Inc. 314,616 - 314,616 Dalton State College Foundation, Inc. 332,858 2,319,673 2,652,531 Gainesville State College Foundation, Inc. 3,519,505 6,365,000 9,884,505 Gordon College Foundation, Inc. 1,204,987 34,558,475 35,763,462 Macon State College Foundation, Inc. 257,259 - 257,259 Middle Georgia College Foundation, Inc. 1,710,750 63,070,000 64,780,750 Bainbridge College Foundation - - - Darton College Foundation, Inc. 512,554 6,133,251 6,645,805 East Georgia College Foundation, Inc. 2,232 - 2,232 Georgia Highlands College Foundation, Inc. 5,197 - 5,197 Georgia Perimeter College Foundation, Inc. 1,319,857 75,655,000 76,974,857 South Georgia College Foundation, Inc. 221,412 29,699,820 29,921,232 Waycross College Foundation, Inc. 8,109 - 8,109 University System of Georgia Foundation, Inc. 14,768,798 194,069,032 208,837,830 Total $ 633,959,262 $ 3,771,747,508 $ 4,405,706,770 69 The University System of Georgia ANNUAL FINANCIAL REPORT Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS AFFILIATED INSTITUTIONS (UNAUDITED) continued JUNE 30, 2010 Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Assoc., Inc. Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Athletic Foundation, Inc. Georgia Southern University Research and Service Foundation, Inc. Valdosta State University Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Albany State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. (Clayton State University) Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. Fort Valley State University Foundation, Inc. Georgia College & State University Alumni Association, Inc. Georgia College and State University Foundation, Inc. Georgia Southwestern Foundation, Inc. Kennesaw State University Foundation, Inc. North Georgia College & State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. University of West Georgia Foundation, Inc. UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. College of Coastal Georgia Foundation, Inc. Dalton State College Foundation, Inc. Gainesville State College Foundation, Inc. Gordon College Foundation, Inc. Macon State College Foundation, Inc. Middle Georgia College Foundation, Inc. Bainbridge College Foundation Darton College Foundation, Inc. East Georgia College Foundation, Inc. Georgia Highlands College Foundation, Inc. Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. University System of Georgia Foundation, Inc. Total Invested in Capital Assets $ (102,561) (10,949,347) 1,189,387 478,702 272,434 (37,636,319) (46,600,063) 5,272,328 61,844,155 1,819,478 10,127,040 - - 6,625,988 109,837,449 - 9,964,291 414,750 7,719,080 1,245,376 - 1,573,016 33,439,192 (4,803,621) Restricted Unexpendable $ 449,002,201 28,375,579 - 75,121,679 2,000,000 30,000 95,159,486 - 301,901,618 41,573,277 - 30,722,431 - - 18,571,295 - - 4,553,416 5,596,149 139,882 (1,162,857) - 27,902,417 - - 15,917,313 - 2,240,289 28,292,265 1,345,583 56,206 1,045,913 3,290,184 25,965 4,434,749 (1,948,210) 11,894,518 (237,628) 11,049,577 (3,182,661) 22,927,511 (217,536) 23,347,362 - 2,268,012 12,051,731 10,627,767 1,471,002 - 7,634,246 6,799,351 - 5,433,547 3,893,334 9,623,948 8,298,912 (1,328,715) 2,033,518 - 6,528,588 12,070,229 858,783 - 559,783 2,050,578 1,008,118 63,482 - - 1,281,541 4,376,599 1,417,100 (29,699,820) 2,296,176 - 1,358,770 - - $ 192,274,855 $1,232,200,453 Net Assets Restricted Expendable $ 491,691,026 63,065,273 - 3,700,497 - 10,566,106 47,007,466 774,130 1,332,269 10,531,762 75,373 109,427 184,804,165 66,476,557 2,623,064 6,273,973 9,349,309 2,558,934 - 2,564,977 7,220,900 2,128,525 2,784,946 - 2,912,260 14,109,889 194,839 - 2,547,051 390,689 3,539,336 3,503,661 12,889,476 4,106,876 2,422,420 7,382,055 2,545,218 1,707,186 3,282,013 3,394,136 4,773,917 505,206 509,156 2,505,279 1,056,685 1,043,011 795,173 177,991 105,083 1,035,685 $ 993,072,970 Unrestricted $ 59,462,334 (10,051,212) 35,989,831 (143,232) 131,409 13,672,035 70,597,656 9,611,596 188,261,685 10,231,016 76,684,142 6,152,106 (188,593) 19,292,975 61,149,503 1,688,045 58,143,792 1,334,620 (13,970,650) 187,959 822,673 549,859 (7,778,916) 874,197 Total Net Assets $ 1,000,053,000 70,440,293 37,179,218 4,035,967 403,843 (13,398,178) 146,126,738 17,658,054 251,468,109 117,741,742 86,811,182 6,227,479 (79,166) 512,624,746 170,986,952 109,737,879 70,731,147 38,745,774 3,097,739 3,992,269 822,673 23,259,147 25,660,276 3,291,476 166,367 11,536,166 1,625,407 5,672,748 1,800,398 2,206,303 (15,891,890) (581,364) 226,930 6,848,308 11,536,166 25,923,815 5,812,630 5,790,090 44,608,457 12,010,527 959,058 283,136 (2,584,797) 543,425 (14,123,043) 7,817,620 (6,811,105) (2,031,079) 2,148,432 (81,010) 4,306,188 4,568,042 1,300,748 12,036,633 1,276,842 2,591,650 387,729 (1,583,293) (1,956,379) 95,873 (264,675) 760,931 29,706,568 113,701 3,163,652 $ 630,848,548 4,298,351 5,394,828 (637,399) 22,133,230 25,823,221 25,205,623 6,838,864 29,980,543 5,777,190 21,546,857 8,441,481 28,835,928 12,969,890 8,070,370 7,421,523 11,854,875 559,783 3,607,596 1,216,040 2,059,877 7,349,803 2,480,915 1,577,554 4,199,337 $ 3,048,396,826 70 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS AFFILIATED INSTITUTIONS (UNAUDITED) FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Assoc., Inc. Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Athletic Foundation, Inc. Georgia Southern University Research and Service Foundation, Inc. Valdosta State University Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Albany State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. (Clayton State University) Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. Fort Valley State University Foundation, Inc. Georgia College & State University Alumni Association, Inc. Georgia College and State University Foundation, Inc. Georgia Southwestern Foundation, Inc. Kennesaw State University Foundation, Inc. North Georgia College & State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. University of West Georgia Foundation, Inc. UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. College of Coastal Georgia Foundation, Inc. Dalton State College Foundation, Inc. Gainesville State College Foundation, Inc. Gordon College Foundation, Inc. Macon State College Foundation, Inc. Middle Georgia College Foundation, Inc. Bainbridge College Foundation Darton College Foundation, Inc. East Georgia College Foundation, Inc. Georgia Highlands College Foundation, Inc. Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. University System of Georgia Foundation, Inc. Total Grants and Contracts $ - - 465,722,210 - - - - 48,012,953 - - - - - - - - 1,724,863 5,896,519 613,137 78,451 527,465 $ 522,575,598 Operating Revenues Rents and Net Patient Royalties Revenue Other $ 15,435,519 $ - $ 34,156,205 8,351,685 - 41,400,361 7,502,234 - 3,576 14,947,570 - 220,246 807,238 - 5,583,017 13,391,889 32,312 20,489,333 11,861,984 442,083 427,732 412,979,040 4,198,697 453,840 92,378 1,945,740 1,888,186 104,160,275 - - - 66,587,835 - - 9,104,825 1,290,532 - 18,520,498 - - 86,763,698 - - 30,289,112 28,334,190 189,276 9,208,854 176,400 5,100 2,058,149 6,138,211 1,413,637 1,864,486 - 132,209,120 142,065 - 1,094,660 - 2,400,810 - - 2,534,311 82,978 1,827,450 1,630 - 2,248,924 412,969 574,714 282,192 7,317,650 2,076,128 10,240 429,719 117,659 2,734,692 1,275,185 535,994 6,930,560 2,957,353 1,640,416 432,085 30,432,705 7,350,427 247,581 1,296,993 5,084,440 429,222 15,201,758 115,935 1,577,556 3,301,986 808,929 1,240,261 371,011 1,786,889 548,652 1,291,874 1,877,261 105,244 573,164 3,296,372 327,128 83,595 1,157,733 681,217 239,305 202,569 253,887 2,308,351 1,409,080 848,727 153,185 77,031 1,029,977 $ 198,558,693 $ 517,231,693 $ 502,905,106 Non-Operating Operating Profit/ Expenses (Loss) Revenues $ (96,800,234) $ (47,208,510) $ 176,742,685 $ (49,260,598) 491,448 9,642,594 (472,503,536) 724,484 33,339 (13,489,307) 1,678,509 4,104 (6,148,093) 242,162 - (1,507,739) 11,916,462 (21,251,162) 11,100,155 26,995,112 (48,735,413) (280,377) 1,131,784 (441,273,837) (23,668,368) 47,494,497 (11,511,236) (9,019,278) 13,375,307 (93,177,793) 12,870,668 4,350,635 (65,292,150) 1,295,685 98,830 (9,683,892) (579,067) 859,040 (29,043,324) (9,232,294) 45,109,162 (71,913,258) 14,850,440 216,599 (23,469,224) 6,819,888 5,471,374 (153,312,567) (3,909,673) (5,221,210) (1,770,139) (5,728,997) (3,530,698) (2,166,556) (696,815) (1,792,283) (1,202,971) (1,791,054) (417,216) (2,898,066) (7,281,230) (6,635,069) (417,188) (103,902) (1,869,427) (264,977) (3,592,190) (1,517,956) (23,251,431) (3,780,878) (3,132,027) (5,201,112) (171,792) (2,622,658) (1,442,166) (1,289,979) (1,359,555) (114,165) (764,485) (614,360) (13,777) (977,754) (369,115) (760,421) (2,587,360) (266,702) (93,763) (2,043,428) $(1,712,037,908) $ 7,230,743 2,458,529 (1,853,469) 4,563,801 5,082,304 1,182,182 807,071 29,305 172,622 21,707 1,061,762 4,481,574 4,054,633 18,694,804 1,743,772 223,553 (1,790,653) 2,355,496 210,666 2,582,725 2,322,356 1,103,879 (417,216) 980,013 (1,910,383) 1,963,778 (6,999,038) 457,872 2,758,709 22,771 13,757 2,140,450 619,885 271,017 66,481 6,295,723 2,375,750 554,545 2,837,958 14,531,701 3,256,089 (2,236,304) 5,656,624 2,030,864 833,600 10,429,868 4,063,466 1,521,699 2,500,226 1,488,257 2,307,010 (201,905) 316,147 867,921 3,832,887 480,971 334,959 1,868,340 929,197 (191,321) 1,395,167 3,009,140 4,802,598 69,818 6,168 861,196 118,903 (129,810) 30,900 (303,965) 92,371 1,130,071 735,210 54,992 (16,732) 286,838 (485,986) 2,806,290 29,233,182 $ 412,148,786 $ Expenses (20,657,175) (6,366,595) (7,348,164) - (14,666,625) (12,389,298) (18,287,426) - (1,364,990) (21,361) (844,439) (5,711,187) - (11,201,547) (257,614) (8,299,546) (19,079) - (4,101,901) (5,643,293) (1,580,173) (2,273,219) (1,540,322) (317,169) (4,502,886) (254,940) (6,035) (3,363,590) (8,789,221) (1,855,635) (13,136,220) (2,082,315) (1,522,378) (1,906,686) (2,989,851) (1,967,625) (129,169) (1,563,051) (3,103,314) - (283,210) (1,014,219) (470,835) (2,920,089) (174,752,392) 71 Condensed Financial Statements SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS AFFILIATED INSTITUTIONS (UNAUDITED) continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Net Assets Component Units Georgia Tech Foundation, Inc. Georgia Tech Athletic Association Georgia Tech Research Corporation Georgia Advanced Technology Ventures, Inc. Georgia Tech Alumni Association Georgia Tech Facilities, Inc. Georgia State University Foundation, Inc. Georgia State University Research Foundation, Inc. MCG Health, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Medical College of Georgia Research Institute, Inc. Medical College of Georgia Dental Foundation University of Georgia Foundation University of Georgia Athletic Assoc., Inc. Arch Foundation for the University of Georgia, Inc. University of Georgia Research Foundation, Inc. Georgia Southern University Foundation, Inc. Georgia Southern University Housing Foundation, Inc. Georgia Southern University Athletic Foundation, Inc. Georgia Southern University Research and Service Foundation, Inc. Valdosta State University Foundation, Inc. VSU Auxiliary Services Real Estate Foundation, Inc. Albany State University Foundation, Inc. Armstrong Atlantic State University Foundation, Inc. AASU Educational Properties Foundation, Inc. Augusta State University Foundation, Inc. (Clayton State University) Walter & Emilie Spivey Foundation Clayton State University Foundation, Inc. Columbus State University Foundation, Inc. (Columbus State University) Foundation Properties, Inc. Columbus State University Athletic Fund, Inc. Columbus State University Alumni Association, Inc. Fort Valley State University Foundation, Inc. Georgia College & State University Alumni Association, Inc. Georgia College and State University Foundation, Inc. Georgia Southwestern Foundation, Inc. Kennesaw State University Foundation, Inc. North Georgia College & State University Foundation, Inc. Southern Polytechnic State University Foundation, Inc. University of West Georgia Foundation, Inc. UWG Real Estate Foundation, Inc. Abraham Baldwin Agricultural College Foundation, Inc. College of Coastal Georgia Foundation, Inc. Dalton State College Foundation, Inc. Gainesville State College Foundation, Inc. Gordon College Foundation, Inc. Macon State College Foundation, Inc. Middle Georgia College Foundation, Inc. Bainbridge College Foundation Darton College Foundation, Inc. East Georgia College Foundation, Inc. Georgia Highlands College Foundation, Inc. Georgia Perimeter College Foundation, Inc. South Georgia College Foundation, Inc. Waycross College Foundation, Inc. University System of Georgia Foundation, Inc. Total Increase/ (Decrease) in Net Assets Net Assets Beginning of Year Prior Year Adjustments $ 108,877,000 $ 891,176,000 $ - 3,767,447 66,672,846 - 757,823 36,421,395 - (5,665,551) 9,701,518 - 242,162 161,681 - (2,750,163) (10,648,015) - 25,705,969 120,420,769 - 851,407 16,806,647 - 5,538,703 245,929,406 - 4,356,029 113,385,713 - Net Assets Beginning of Year Restated $ 891,176,000 66,672,846 36,421,395 9,701,518 161,681 (10,648,015) 120,420,769 16,806,647 245,929,406 113,385,713 Net Assets - End of Year $ 1,000,053,000 70,440,293 37,179,218 4,035,967 403,843 (13,398,178) 146,126,738 17,658,054 251,468,109 117,741,742 15,856,313 1,394,515 258,612 35,032,429 9,355,852 12,291,262 (1,512,275) 2,452,718 (2,035,060) 817,297 70,954,869 4,832,964 (337,778) 477,592,317 161,631,100 95,569,642 72,243,422 36,293,056 5,132,799 3,174,972 1,876,975 - 70,954,869 4,832,964 (337,778) 477,592,317 161,631,100 97,446,617 72,243,422 36,293,056 5,132,799 3,174,972 86,811,182 6,227,479 (79,166) 512,624,746 170,986,952 109,737,879 70,731,147 38,745,774 3,097,739 3,992,269 194,329 628,344 1,441,435 21,817,712 17,106,144 (1,548,035) 387,152 1,062,503 564,843 6,283,465 520,172 11,015,994 1,885,913 24,037,902 562,797 5,249,833 53,395 5,736,695 (6,858,335) 51,466,792 (1,744,177) 13,754,704 (232,169) 1,191,227 7,722 275,414 (603,255) 4,901,606 337,498 5,057,330 (117,748) (519,651) 1,536,868 20,596,362 4,651,570 21,785,798 1,338,005 23,867,618 1,342,086 5,496,778 12,586,648 16,929,388 1,032,074 4,745,116 1,827,642 11,748,946 114,242 8,327,239 4,571,639 24,264,289 815,930 11,790,487 1,234,486 6,835,884 1,203,846 6,217,677 4,708,424 7,146,451 75,986 483,797 696,889 2,910,707 (98,910) 1,314,950 (211,594) 2,271,471 115,852 7,246,254 319,367 2,161,548 270,106 1,307,448 (599,785) 4,799,122 $ 266,629,576 $ 2,759,774,488 $ 10,102,167 1,841,821 (614,147) 464,507 7,970,269 363,473 (12,303) 21,992,762 $ 628,344 21,817,712 8,554,132 2,904,324 6,283,465 11,015,994 24,037,902 5,249,833 5,736,695 51,466,792 13,754,704 1,191,227 275,414 4,901,606 5,057,330 (519,651) 20,596,362 21,171,651 23,867,618 5,496,778 17,393,895 4,745,116 19,719,215 8,327,239 24,264,289 12,153,960 6,835,884 6,217,677 7,146,451 483,797 2,910,707 1,314,950 2,271,471 7,233,951 2,161,548 1,307,448 4,799,122 2,781,767,250 $ 822,673 23,259,147 25,660,276 3,291,476 6,848,308 11,536,166 25,923,815 5,812,630 5,790,090 44,608,457 12,010,527 959,058 283,136 4,298,351 5,394,828 (637,399) 22,133,230 25,823,221 25,205,623 6,838,864 29,980,543 5,777,190 21,546,857 8,441,481 28,835,928 12,969,890 8,070,370 7,421,523 11,854,875 559,783 3,607,596 1,216,040 2,059,877 7,349,803 2,480,915 1,577,554 4,199,337 3,048,396,826 72 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements (Statutory Basis) (Non-GAAP) SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BALANCE SHEET (NON-GAAP BASIS) BUDGET FUNDS JUNE 30, 2010 ASSETS Cash and Cash Equivalents Investments Accounts Receivable State Appropriation Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Contracts Payable Accrued Payroll Payroll Withholdings Encumbrance Payable Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities TOTAL LIABILITIES FUND BALANCES Reserved Capital Outlay Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry - Forward Carry-Over "Per State Accounting Office" Early Retirement Program Unreserved Surplus TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES $ 487,569,848.32 73,360,003.99 113,653,404.84 242,060,700.35 8,525,000.00 45,640,956.34 8,867,249.47 8,408,465.48 $ 988,085,628.79 $ 8,708,389.28 - 14,740,873.54 - 274,434,729.49 126,489,137.48 273,797,010.25 45,619.28 13,490,845.34 $ 711,706,604.66 $ 1,404,479.60 36,413,659.58 56,459,807.65 12,989,921.56 112,446,403.24 11,819,055.83 3,303,174.03 21,841,661.29 9,213,870.39 7,445,381.53 3,041,609.43 $ 276,379,024.13 $ 988,085,628.79 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. 73 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements (Statutory Basis) (Non-GAAP) SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2010 REVENUES State Appropriations State General Funds Federal Stimulus Stabilization Fund Tobacco Funds Non-State Funds Research Funds - Other Research Funds - Federal Stimulus Agency Funds Total Revenue Prior Year Reserves Available for Expenditure Total Funds Available ORIGINAL BUDGET FINAL BUDGET ACTUAL VARIANCE $ 2,063,094,628.00 $ 1,710,617,245.00 $ 1,683,481,490.00 $ 92,617,896.00 280,410,317.00 280,410,317.00 17,259,466.00 14,020,073.00 14,020,073.00 1,514,912,621.00 1,880,677,666.00 1,735,070,079.69 - 46,593,863.00 27,292,527.92 1,618,217,100.00 2,255,289,124.00 2,024,216,836.82 $ 5,306,101,711.00 $ 6,187,608,288.00 $ 5,764,491,324.43 $ - 190,134,559.11 $ 5,306,101,711.00 $ 6,187,608,288.00 $ 5,954,625,883.54 $ (27,135,755.00) - (145,607,586.31) (19,301,335.08) (231,072,287.18) (423,116,963.57) 190,134,559.11 (232,982,404.46) EXPENDITURES UGA - Forestry Research UGA - Agricultural Experiment Station UGA - Athens Tifton Vet Labs UGA - Cooperative Extension Service UGA - Forestry Cooperative Extension UGA - Marine Institute UGA - Marine Resources Extension Center UGA - Veterinary Medicine Experiment Station UGA - Veterinary Medicine Teaching Hospital MCG - Student Education Enrichment Program MCG - Georgia Radiation Therapy Center GT - Advanced Technology Development Center/EDI $ 7,082,107.00 $ 10,393,188.00 $ 9,785,549.85 $ 607,638.15 79,073,095.00 91,238,693.00 78,146,621.44 13,092,071.56 4,944,522.00 7,362,088.00 5,595,798.11 1,766,289.89 60,065,569.00 66,211,459.00 61,693,529.31 4,517,929.69 1,043,589.00 1,196,196.00 1,057,092.52 139,103.48 1,377,916.00 1,506,730.00 1,405,031.00 101,699.00 2,810,773.00 3,518,643.00 3,190,347.87 328,295.13 3,155,597.00 2,858,730.00 2,853,114.00 5,616.00 10,160,245.00 10,692,009.00 9,380,064.82 1,311,944.18 - - - - 3,625,810.00 3,625,810.00 3,625,810.00 - 24,761,796.00 21,390,436.00 13,381,493.03 8,008,942.97 GT - Center for Assistive Technology and Environmental Access GT - Georgia Tech Research Institute USO - Public Libraries USO - Regents Central Office USO - MCG Hospitals and Clinics USO - Georgia Public Telecommunications Commission USO - Georgia Military College SKIO - Skidaway Institute of Oceanography-B GSU - Georgia Cancer Coalition Georgia Eminent Scholar Endowment Trust Fund Office of Minority Business Research Consortium Special Funding Initiative Teaching Total Expenditures $ 155,895,062.00 43,040,443.00 6,777,980.00 34,265,312.00 16,398,957.00 2,729,058.00 6,208,946.00 11,509,466.00 26,324,718.00 43,131,266.00 4,761,719,484.00 5,306,101,711.00 227,509,476.00 39,978,706.00 6,382,390.00 31,914,306.00 14,714,031.00 2,364,930.00 5,491,397.00 8,270,073.00 24,057,334.00 22,201,817.00 5,584,729,846.00 $ 6,187,608,288.00 216,756,329.14 39,774,880.84 6,359,286.00 31,850,037.00 14,685,203.00 2,360,431.00 5,113,081.46 8,270,072.80 24,057,049.43 20,675,353.86 5,183,812,507.14 $ 5,743,828,683.62 10,753,146.86 203,825.16 23,104.00 64,269.00 28,828.00 4,499.00 378,315.54 0.20 - 284.57 1,526,463.14 400,917,338.86 $ 443,779,604.38 Excess of Funds Available over Expenditures $ 210,797,199.92 74 The University System of Georgia ANNUAL FINANCIAL REPORT UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUNDS continued FOR THE FISCAL YEAR ENDED JUNE 30, 2010 Beginning Fund Balance July 1, 2009 Reserved 212,460,426.69 Unreserved, Undesignated Fund Balance (Surplus) for FY09 2,620,056.02 Unreserved, Unreserved Fund Balance (Surplus) Returned to Office of Treasury & Fiscal Services Year Ended June 30, 2009 (2,620,056.02) Early Return of Surplus in Fiscal 2010 (1,723,973.90) Adjustments Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Mandatory Transfers Mandatory Transfers - Restricted Non-Mandatory Transfers Other Additions (Deletions) Reserved Fund Balance Carried Over from Prior Year as Funds Available Ending Fund Balance - June 30, 2010 4,214,437.02 (1,221,997.41) (338,039.16) 3,001,795.04 39,323,735.04 (190,134,559.11) $ 276,379,024.13 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 Tuition Carry - Forward Property Reserves Total Reserved Unreserved Surplus Total Fund Balance - June 30, 2010 1,404,479.60 36,413,659.58 7,445,381.53 56,459,807.65 3,303,174.03 12,989,921.56 112,446,403.24 11,819,055.83 21,841,661.29 9,213,870.39 273,337,414.70 3,041,609.43 $ 276,379,024.13 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. 75 The University System of Georgia ANNUAL FINANCIAL REPORT Financial Statements Findings SUPPLEMENTARY INFORMATION USG ANNUAL FINANCIAL REPORT Abraham Baldwin Agricultural College FS-557-10-01 FS-557-10-02 Armstrong Atlantic State University FS-524-10-01 FS-524-10-02 Bainbridge College FS-562-10-01 Fort Valley State University FS-533-10-01 FS-533-10-02 Georgia Perimeter College FS-571-10-01 Georgia Southern University FS-539-10-01 Savannah State University FS-548-10-01 Valdosta State University FS-551-10-01 University System Office FS-472-10-01 FS-472-10-02 Detailed information on these findings is available in the State of Georgia Single Audit Report for Fiscal Year Ended June 30, 2010 located at http://www.audits.ga.gov. 76 The University System of Georgia ANNUAL FINANCIAL REPORT 77 The University System of Georgia ANNUAL FINANCIAL REPORT ACKNOWLEDGEMENTS USG ANNUAL FINANCIAL REPORT 78 The University System of Georgia ANNUAL FINANCIAL REPORT Published by: Office of Fiscal Affairs Usha Ramachandran Vice Chancellor, Fiscal Affairs Vikki L. Williamson Ben M. Riden, Jr. Theresa Jackson Bruce Jackson Office of Media & Publications John Millsaps Associate Vice Chancellor, Media & Publications Sonja Roberts Design/Layout Photography: Courtesy of University System of Georgia Institutions University System of Georgia Chief Business Officers: John Clemens, Abraham Baldwin Agricultural College Larry Wakefield, Albany State University David Carson, Armstrong Atlantic State University Freddie Johnson, Atlanta Metropolitan College Therese Rosier, Augusta State University Shawn McGee, Bainbridge College Corlis Cummings, Clayton State University C. Tom Saunders, College of Coastal Georgia J. Thomas Helton, Columbus State University Scott Bailey, Dalton State College Ronnie A. Henry, Darton College Cliff Gay, East Georgia College Arthur Henderson, Fort Valley State University Paul Glaser, Gainesville State College Peter Shields, Georgia College & State University Laura Maxwell, Georgia Gwinnett College Robert Whitaker, Georgia Highlands College Steve Swant, Georgia Institute of Technology Ron Carruth, Georgia Perimeter College Ronald Core, Georgia Southern University Cody King, Georgia Southwestern State University Jerry Rackliffe, Georgia State University Lee Fruitticher, Gordon College Randy Hinds, Kennesaw State University Nancy Stroud, Macon State College Bill Bowes, Medical College of Georgia Lynn Hobbs, Middle Georgia College Mac McConnell, North Georgia College & State University Edward Jolley, Savannah State University Natalie Higley, Skidaway Institute of Oceanography Wanda E. Lloyd, South Georgia College Patrick B. McCord, Southern Polytechnic State University Tim Burgess, University of Georgia Jim Sutherland, University of West Georgia Traycee Martin, Valdosta State University Marcus Latham, Waycross College 79 "Creating a More Educated Georgia" www.usg.edu Published by the Office of Fiscal Affairs 270 Washington Street, SW Atlanta, Georgia 30334 (404) 656-2232