The University System of Georgia Annual Financial Report FY 2011 TABLE OF CONTENTS Introductory Section Letter of Transmittal ....................................................................................................... 1 Members of the Fiscal Year 2010 Board of Regents ................................................... 2 Financial Section Independent Auditor's Report ....................................................................................... 4 Management's Discussion and Analysis ...................................................................... 6 Financial Statements (GAAP Basis) Statement of Net Assets.................................................................................... 21 Statement of Revenues, Expenses and Changes in Net Assets .................... 22 Statement of Cash Flows................................................................................... 24 Statement of Fiduciary Net Assets ................................................................... 26 Statement of Changes in Fiduciary Net Assets................................................ 27 Notes to the Financial Statements Note 1 Summary of Significant Accounting Policies......................... 29 Note 2 Deposits and Investments ..................................................... 36 Note 3 Accounts Receivable .............................................................. 43 Note 4 Inventories .............................................................................. 44 Note 5 Notes/Loans Receivable........................................................ 44 Note 6 Capital Assets ......................................................................... 44 Note 7 Deferred Revenue .................................................................. 45 Note 8 Long Term Liabilities .............................................................. 45 Note 9 Significant Commitments....................................................... 46 Note 10 Lease Obligations................................................................... 47 Note 11 Retirement Plans.................................................................... 49 Note 12 Risk Management .................................................................. 54 Note 13 Contingencies ......................................................................... 57 Note 14 Post-Employment Benefits Other Than Pension Benefits.... 57 Note 15 Natural Classifications with Functional Classifications ....... 60 Note 16 Affiliated Organizations .......................................................... 61 Supplementary Information Condensed Financial Statements Condensed Statement of Net Assets by Institution ......................................... 63 Condensed Statement of Revenues, Expenses and Changes in Net Assets by Institution.......................................................................................... 66 Condensed Statement of Net Assets by Affiliated Organization (unaudited) 69 Condensed Statement of Revenues, Expenses and Changes in Net Assets by Affiliated Organization (unaudited) ................................................. 72 Financial Statements (Statutory Basis) Balance Sheet (Non-GAAP Basis)...................................................................... 74 Budget Comparison and Surplus Analysis Report (Non-GAAP Basis)............. 75 Program Revenues and Expenditures by Funding Source (Non-GAAP Basis) .................................................................................. 77 Financial Statement Findings........................................................................................ 86 Acknowledgements...................................................................................................................... 87 INTRODUCTORY SECTION LETTER OF TRANSMITTAL OFFICE OF FISCAL AFFAIRS 270 WASHINGTON STREET, SW ATLANTA, GEORGIA 30334 404-656-2232 January 17, 2012 Chancellor Henry M. "Hank" Huckaby Board of Regents University System of Georgia Dear Chancellor Huckaby: 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, 2011. 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 2011 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, _________________________ John E. Brown Vice Chancellor for Fiscal Affairs and Treasurer Board of Regents of the University System of Georgia University System of Georgia Annual Financial Report FY 2011 1 Members of the 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 that comprise the University System of Georgia, the Skidaway Institute of Oceanography and The Georgia Public Library System. These institutions enrolled 311,442 students in Fall 2010 and employed more than 40,000 faculty and staff to provide teaching and related services to students and the communities in which they are located. Members of the Board include the following: Kenneth R. Bernard, Jr. Larry R. Ellis Rutledge A. "Rusty" Griffin, Jr. Robert F. "Bob" Hatcher C. Thomas Hopkins, Jr., MD W. Mansfield Jennings, Jr. James R. Jolly Donald M. Leebern, Jr. William "Dink" H. NeSmith, Jr. (Vice Chair) Doreen Stiles Poitevint Willis J. Potts, Jr. Neil L. Pruitt, Jr. Wanda Yancey Rodwell Kessel Stelling, Jr. Benjamin J. "Ben" Tarbutton, III (Chair) Richard L. Tucker Larry Walker Philip A. Wilheit, Sr. University System of Georgia Annual Financial Report FY 2011 2 Financial Section University System of Georgia Annual Financial Report FY 2011 3 Russell \il. Hinton STATE AUDIIOR (4041 666-2171 DnpNnTMENT Or AUoITS AND ACCOUNTS "' i,l:ijili;#uite I - I 56 January 17,2012 Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia and Honorable Henry M. Huckaby, Chancellor INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Ladies and Gentlemen: We have audited the accompanying financial statements of the business-type activities and the aggregate remaining fund information ofthe University System of Georgia, anorganzational unit of the State of Georgia, as of and for the year ended June 30,2011 which collectively comprise the System's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe University System of Georgia's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted inthe United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University System of Georgia's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 'We believe that our audit provides a reasonable basis for our opinion. University System of Georgia Annual Financial Report FY 2011 4 As discussed in Note 1, the financial statements of the University System of Georgia are intended to present the financial position and changes in financial position, and where applicable, cash flows of only that portion of the activities ofthe State of Georgia that is attributable to the transactions ofthe University System of Georgia. They do not purport to, and do not, present fairly the financial position and changes in financial position, and where applicable, cash flows ofthe State ofGeorgi4 in conformity with accounting principles generally accepted in the United States of America. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and aggregate remaining fund information of the University System of Georgia as of June 30,2011, and the respective changes in financial position, and where applicable cash flows, thereof for the year ended in conformity with accounting principles generally accepted in the United States of America. Management's Discussion and Analysis is not apart of the basic financial statements but is required supplementary informationrequired by accounting principles generally accepted inthe United States of America. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the University System of Georgia taken as a whole. The accompanying Introductory and Supplementary Information Sections, as listed in the accompanying table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information, except for the portion marked "unaudited" on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Respectfully submitted, RWH:ca State Auditor University System of Georgia Annual Financial Report FY 2011 5 Management's Discussion and Analysis Introduction The mission of the University System of Georgia is to contribute to the educational, cultural, economic and social advancement of Georgia by providing excellent undergraduate general education and 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, 2011. 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 Henry M. "Hank" Huckaby are charged with the leadership of the thirty-five institutions of the University System of Georgia. The University System continues to prosper, as is demonstrated by the following information: FY2011 FY2010 FY2009 STUDENT HEADCOUNT 311,442 301,892 282,978 STUDENT FTE 276,109 266,575 247,168 320,000 310,000 300,000 290,000 280,000 270,000 260,000 250,000 240,000 Enrollment Growth FY2009 FY2010 FY2011 Student Headcount Student FTE University System of Georgia Annual Financial Report FY 2011 6 State Resources The General Appropriations Act of 2011, as amended, appropriated a total of $1,801,721,416 to the University System of Georgia. In addition, House Bill 948, as amended by House Bill 77, appropriated $9,652,634 from Tobacco funds. The following table presents the State Appropriations available to the University System of Georgia from the General Appropriations Act of 2011: STATE APPROPRIATIONS AVAILABLE - GENERAL APPROPRIATIONS House Bill 948 General State Funds $ 1,912,057,897 Tobacco Funds 11,104,093 House Bill 947 General State Funds (110,336,481) Tobacco Funds (1,451,459) Total State Appropriations Available Per Appropriations Act to the University System of Georgia $ 1,811,374,050 The table below presents the FY 2011 allocations by the Board of Regents to the University System of Georgia institutions: ALLOCATIONS BY THE BOARD OF REGENTS Education and General Teaching $ 1,596,748,544 Non-Teaching 118,471,114 Tobacco Funds 9,652,634 Other Activities Regents Central Office $ 5,783,997 Rental Payments - GA Military College 2,393,133 GA Public Telecommunications Commission 13,462,630 GA Public Libraries 33,649,362 Research Consortium 15,140,552 Total Other Activities 70,429,674 Special Initiative Funding 16,072,084 Total Education and General $ 1,811,374,050 Net State Appropriations Available to the University System of Georgia $ 1,811,374,050 University System of Georgia Annual Financial Report FY 2011 7 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 $70,429,674 $9,652,634 $16,072,084 $118,471,114 $1,596,748,544 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 2011. 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 annual financial report 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. 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. University System of Georgia Annual Financial Report FY 2011 8 Finally, the Supplemental Information section includes selected information by institution as well as information on affiliated organizations that have been deemed significant to their respective institutions. This section also includes consolidated financial statements presented on a statutory/budget basis. 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 2011 and 2010. 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, 2011. 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, 2011 were $10.054 billion, as compared to $9.124 billion as of June 30, 2010, for an increase of $930 million, or 10.2%. Current assets as of June 30, 2011 increased by $7 million; non-current assets increased $923 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 $852 million, from $4.149 billion at June 30, 2010 to $5.001 billion on June 30, 2011. 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 two components, non-expendable and expendable. Restricted, non-expendable net assets consist solely of the University System's permanent endowment funds, which are University System of Georgia Annual Financial Report FY 2011 9 available only 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, 2011 is very strong, with total assets of $10.05 billion, total liabilities of $5.0 billion, and net assets of $5.05 billion. These amounts are illustrated below: $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 Statement of Net Assets (in millions) Assets FY2009 Liabilities FY2010 FY2011 Net Assets Assets Increase of $930 Million Total assets of the University System of Georgia in fiscal 2011 were approximately $930 million more than those reported for fiscal 2010. A review of the Statement of Net Assets will reveal that the increase primarily was due to an increase of $903 million in capital assets, net of accumulated depreciation and a $27 million increase in accounts receivable, net. Liabilities Increase of $852 Million Total liabilities for fiscal 2011 were approximately $852 million more than those reported for fiscal 2010. The primary components of this increase were $518 million in lease purchase obligations, $317 million in the net Other Post-Employment Benefit (OPEB) obligation, and $17 million in salaries and benefits payable. University System of Georgia Annual Financial Report FY 2011 10 Net Assets Increase of $78 million The combination of the increase in total assets of $930 million and the increase in total liabilities of $852 million yielded a net increase in total net assets of $78 million, or 1.6%. The increase in total net assets primarily consists of a higher amount in the Invested in Capital Assets, net of related debt category totaling $391 million and an increase of $38 million in restricted net assets. These increases were partially offset by a net decrease of $351 million in unrestricted net assets, which is largely due to OPEB reporting requirements; the net OPEB obligation increased from $699.9 million in FY 2010 to $1,017.4 million in FY 2011. The following chart depicts the level, by category, of net assets: Net Assets (in millions) 100% 80% 60% $4,500 40% $4,692 $5,051 20% $123 $225 0% $(47) $133 $257 $(107) $148 $313 $(459) FY09 -20% FY 10 FY 11 Unrestricted Restricted, non-expendable Restricted, expendable Invested in Capital Assets University System of Georgia Annual Financial Report FY 2011 11 The following table summarizes the University System of Georgia's assets, liabilities and net assets as of June 30, 2011 and June 30, 2010. CONDENSED STATEMENT OF NET ASSETS (in millions) ASSETS Current Assets Capital Assets, Net Other Assets TOTAL ASSETS June 30, 2011 June 30, 2010 % Change $ 1,600 $ 8,208 246 10,054 1,593 7,305 226 9,124 0.4% 12.4% 8.8% 10.2% LIABILITIES Current Liabilities Non-current Liabilities TOTAL LIABILITIES 789 4,212 5,001 775 3,374 4,149 1.8% 24.8% 20.5% NET ASSETS Invested in Capital Assets, net of debt Restricted, Non-Expendable Restricted, Expendable Capital Projects Unrestricted TOTAL NET ASSETS 5,051 148 283 30 (459) $ 5,053 $ Statement of Revenues, Expenses and Changes in Net Assets 4,660 133 258 32 (108) 4,975 8.4% 11.3% 9.7% -6.3% 325.0% 1.6% 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 nonoperating 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 or 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 of Georgia Annual Financial Report FY 2011 12 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." The Statement of Revenues, Expenses and Changes in Net Assets indicates 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 Incom e (Loss) before other revenue, expense, gains, losses or other item s 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, 2011 June 30, 2010 $ 3,731 $ 3,427 6,439 6,033 (2,708) (2,606) 2,399 2,503 (309) (103) 378 229 69 126 4,975 4,801 9 48 4,984 4,849 $ 5,053 $ 4,975 % Change 8.9% 6.7% 3.9% -4% 200.0% 65.1% -45.2% 3.6% -81.3% 2.8% 1.6% $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $$(1,000) Statement of Revenues, Expenses and Changes in Net Assets (in millions) FY2009 FY2010 FY2011 Operating Revenues Capital Gifts, Grants, and Other Increase in Net Assets Non-Operating Revenues, net Operating Expenses University System of Georgia Annual Financial Report FY 2011 13 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) $1,408 $735 $2,007 $715 $1,807 $457 $258 State Appropriations Tuition and Fees Gifts Grants and Contracts Auxiliaries Other State appropriations increased $114 million (6.7%) in fiscal 2011; however, this increase was more than offset by the fact that the award of $280.4 million in Federal Stimulus Stabilization Funds in fiscal 2010 did not continue for fiscal 2011. Grants and contracts revenue increased $188 million (10.3%) in fiscal 2011. This increase is largely attributable to increased Pell grant revenues and increased grant awards. Tuition and fee revenues, net increased $174 million (14.1%) in fiscal 2011 when compared with fiscal 2010. 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 $49 million (7.1%) fiscal 2011 as compared to fiscal 2010. Primary components of this increase included residence halls ($28 million), food services ($9 million), intercollegiate athletics ($8 million), and transportation and parking ($4 million). 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 University System of Georgia Annual Financial Report FY 2011 14 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: Operating Expenses by Functional Classification (in millions) $636 $796 $1,002 $589 $449 $1,278 $1,689 $459 $281 $343 $195 Instruction Auxiliaries Academic Support Patient Care (GHSU) Research Plant Operations Student Services Institutional Support Public Service Scholarships Total operating expenses were $6,439 million in fiscal 2011, an increase of $406 million (6.7%) when compared with fiscal 2010. These increases are primarily attributable to the following functional classifications: Instruction ($102 million); Plant Operations and Maintenance ($77 million); Institutional Support ($64 million) Scholarships and Fellowships ($42 million); Research ($39 million); Auxiliaries ($31 million); Student Services ($26 million); Academic Support ($24 million); and Public Service ($7 million). The amounts were partially offset by a decrease in Patient Care (Georgia Health Sciences University) of $6 million. University System of Georgia Annual Financial Report FY 2011 15 The following depicts the fiscal 2011 operating expenses by natural classification: Operating Expenses by Natural Classification (in millions) $379 $197 $57 $377 $1,413 $4,016 Salaries and Benefits Scholarships Supplies and Other Services Utilities Depreciation Travel As noted above, expenses increased $406 million (6.7%) in fiscal 2011 when compared with fiscal 2010. The increases were substantially attributable to salaries and benefits, including other personal services ($221 million) associated with increased enrollment in the University System of Georgia institutions, supplies and services ($93 million), scholarships ($45 million), depreciation expense ($26 million), utilities ($12 million) and travel ($9 million). 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 and 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 noncapital financing activities, which 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. University System of Georgia Annual Financial Report FY 2011 16 A summary of the Statement of Cash Flows is provided below: 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, 2011 June 30, 2010 $ (1,989) $ (1,966) 2,515 2,579 (559) (401) (2) 16 (35) 228 988 760 $ 953 $ 988 Capital Assets Capital assets, net of accumulated depreciation, at June 30, 2011 and June 30, 2010 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, 2011 $ 311 218 382 4,822 383 1,867 218 7 $ 8,208 June 30, 2010 $ 244 223 360 4,424 364 1,469 213 8 $ 7,305 Increase (Decrease) $ 67 (5) 22 398 19 398 5 (1) $ 903 % Change 27.5% -2.2% 6.1% 9.0% 5.2% 27.1% 2.3% -12.5% 12.4% The University System of Georgia increased $903 million in capital assets, net during fiscal 2011, primarily in the Buildings and Improvements, Capital Lease and Land 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. University System of Georgia Annual Financial Report FY 2011 17 Significant Building and Capital Lease additions that occurred in fiscal 2011 are as follows: FY11 Major Capital Asset Additions Parking Deck, 2% Academic, Library and Bookstores, 11% Residence Halls, 50% Nursing, Health and Science, 10% Sports, Recreation, and Student Centers, 27% Long-Term Debt and Liabilities The University System of Georgia had long-term debt and liabilities in fiscal 2011 of $4.37 billion, excluding related party liabilities and deferred revenue. Non-current liabilities included lease purchase obligations of $3.17 billion, compensated absences of $184.9 million, net OPEB obligation of $1,017.4 million, and other non-current liabilities of $1 million. Of these amounts, $168.5 million was reflected as current liabilities at June 30, 2011. 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 The University System Office is the 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. As noted in the Long-Term Debt and Liabilities section above, the University System of Georgia carries a net OPEB Obligation liability of $1,017.4 million as of June 30, 2011. The Board of Regents continues to evaluate options to reduce this growing liability. For additional information concerning the Retiree Health Benefit Fund, please refer to note 14 in the Notes to Financial Statements. University System of Georgia Annual Financial Report FY 2011 18 Affiliated Organizations System-wide, there were eighteen 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 continued to be challenging both nationally and, consequently, for most states, including Georgia, during fiscal year 2011. In fiscal 2011, the State of Georgia began to have slight increases in revenue collections; however, due to the shortfall in fiscal year 2010, the fiscal year 2011 budget was reduced by 4%. Further, the $280 million in Federal Stimulus Stabilization funds were eliminated. Economic conditions will continue to be challenging in fiscal year 2012 as well, due to an additional 2% reduction in state appropriations and the absence of state appropriation funding for enrollment growth. After fiscal 2012, projections are that the state's economy will begin both to recover and stabilize. Despite the current economic climate and budget reductions, the University System of Georgia has continued to respond proactively to budget reductions through both cost-saving and efficiency measures, and also has continued to succeed in its mission to serve the higher education needs of the citizens of Georgia. One measure of this success is demonstrated by the growth in enrollment to more than 311,000 students in fiscal year 2011. Enrollment is expected to increase in Fiscal 2012 as well. Looking forward, the Board of Regents and Chancellor Huckaby will continue to serve the State of Georgia by providing leadership in higher education as well as excellent stewardship of state and University System resources, and by planning strategically for the future of the University System by focusing on performance, partnerships and value, which are vital to the successful future of the State of Georgia. ___________________________________ John E. Brown Vice Chancellor for Fiscal Affairs and Treasurer University System of Georgia University System of Georgia Annual Financial Report FY 2011 19 FINANCIAL STATEMENTS University System of Georgia Annual Financial Report FY 2011 20 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF NET ASSETS June 30, 2011 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 Non-current Assets Non-current Cash Short-term Investments Investments (Externally Restricted) Other Non-current Assets Investments Notes Receivable, net Capital Assets, net (note 6) Total Non-current 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) Total Current Liabilities Non-current Liabilities (note 8) Lease Purchase Obligations (noncurrent) Deferred Revenue (noncurrent) and Other Noncurrent Liabilities Compensated Absences (noncurrent) Other Liabilities Net OPEB Obligation 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 $ 943,601,436 107,088,548 124,423,419 335,173,853 22,851,111 67,524,296 76,231 $ 1,600,738,894 $ 9,529,853 85,823 68,338,470 450,077 122,938,862 44,694,897 8,207,761,181 $ 8,453,799,163 $ 10,054,538,057 $ 162,939,972 29,064,595 23,627,566 12,740,686 33,119,613 286,515,191 9,105,815 63,519,082 58,923,725 109,476,058 61,787 $ 789,094,090 $ 3,110,506,240 7,898,892 75,399,886 806,477 1,017,399,000 $ 4,212,010,495 $ 5,001,104,585 $ 5,050,972,276 148,460,618 282,980,272 30,158,222 (459,137,916) $ 5,053,433,472 University System of Georgia Annual Financial Report FY 2011 21 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2011 OPERATING REVENUES 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 $ 1,897,562,076 (489,749,288) 15,155,888 641,031,127 47,929,650 245,384,995 418,330,632 127,796,884 4,005,706 275,618,433 81,376,143 133,455,947 71,316,899 49,434,684 95,201,328 28,412,954 Other Operating Revenues Total Operating Revenues 88,540,489 $ 3,730,804,547 OPERATING 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) $ 1,243,091,461 1,675,432,022 1,087,296,461 10,329,246 56,727,336 379,021,763 197,154,544 1,412,772,508 377,116,105 6,438,941,446 (2,708,136,899) University System of Georgia Annual Financial Report FY 2011 22 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2011 NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal Federal Stimulus State Other Gifts Investment Income (endowments, auxiliary and other) Interest Expense (capital assets) Other Nonoperating Revenues/Expenses Net Nonoperating Revenues Income before other revenues, expenses, gains, or loss Capital Grants and Gifts Federal State Other Special Item - Capital Asset Demolition Total Other Revenues and Special Items Increase in Net Assets 1,807,237,832 578,254,914 9,949,558 4,929,186 61,254,340 77,315,465 33,025,627 (162,394,116) (10,829,355) 2,398,743,451 (309,393,448) 20,652,185 304,497,691 54,469,166 (1,065,449) 378,553,593 69,160,145 NET ASSETS Net Assets-beginning of year, as originally reported Prior Year Adjustments Net Assets-beginning of year, restated Net Assets-End of Year 4,974,630,760 9,642,567 4,984,273,327 $ 5,053,433,472 University System of Georgia Annual Financial Report FY 2011 23 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2011 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 Agency Funds Transactions Gifts and Grants Received for Other Than Capital Purposes Principal Paid on Installment Debt Interest Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided by Non-capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments Net Cash Provided (used) by Investing Activities Net Increase/Decrease in Cash Cash and Cash Equivalents - Beginning of year Acquisition of Georgia Museum of Agriculture Cash and Cash Equivalents-Beginning of year (restated) Cash and Cash Equivalents - End of Year University System of Georgia Annual Financial Report FY 2011 $ 1,408,011,491 15,988,834 1,341,274,588 135,649,789 (2,409,779,610) (2,919,906,723) (379,019,261) (9,764,058) 10,982,914 738,493,775 79,192,123 (1,988,876,138) 1,807,237,832 (16,420,269) 719,785,439 (431,230) (6,735) 4,203,281 2,514,368,318 92,158,085 4,449,368 (438,859,074) (69,600,721) (147,094,565) (558,946,907) 6,431,923 14,752,758 (23,091,879) (1,907,198) (35,361,925) 988,491,332 1,882 988,493,214 $ 953,131,289 24 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2011 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (loss) Provided (used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, net Inventories Other Assets Prepaid items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net OPEB Obligation Net Cash Provided (used) by Operating Activities $ (2,708,136,899) 377,116,105 (14,284,492) 9,524,008 38,453 (5,691,958) 1,077,457 29,243,009 (6,614,131) 6,731,767 4,659,543 317,461,000 (1,988,876,138) ** NON-CASH INVESTING, NON-CAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS Fixed assets acquired by incurring capital lease obligations $ Change in fair value of investments recognized as a component of interest income $ Special Item - Demolition of Building $ Amortization of bond issuance costs reducing interest paid $ Change in accrued interest payable affecting interest paid $ 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 $ Interest on Capital Debt Forgiven by VSU Auxiliary Real Estate Foundation, LLC $ Principal on Capital Debt Forgiven by VSU Auxiliary Real Estate Foundation, LLC $ Reduction in Capital Lease Obligation $ 551,359,156 18,820,472 1,065,449 1,707,829 11,684,499 7,507,654 287,460,957 2,055,998 488,460 326,181 University System of Georgia Annual Financial Report FY 2011 25 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND June 30, 2011 ASSETS Cash and Cash Equivalents Receivables Employer TOTAL ASSETS LIABILITIES Accounts payable Benefits payable TOTAL LIABILITIES NET ASSETS Net assets held in trust for other postemployment benefits TOTAL NET ASSETS $ 3,534,978 4,233,927 7,768,905 105,892 7,539,783 7,645,675 123,230 $ 123,230 University System of Georgia Annual Financial Report FY 2011 26 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND Year Ended June 30, 2011 ADDITION S Contributions Employer Plan member Other Total Contributions Investment Income Interest/dividends Less: Investment expense Net Investment Income TOTAL ADDITIONS DEDU C TION S 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 $ 80,261,907 25,770,842 13,592,614 $ 119,625,363 386,488 - $ 386,488 $ 120,011,851 $ 108,809,029 6,611,811 4,590,319 $ 120,011,159 $ 692 122,538 $ 123,230 University System of Georgia Annual Financial Report FY 2011 27 NOTES TO THE FINANCIAL STATEMENTS University System of Georgia Annual Financial Report FY 2011 28 UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2011 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. Legally separate, tax-exempt organizations whose activities primarily support the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 16, Affiliated Organizations, for additional information. 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. University System of Georgia Annual Financial Report FY 2011 29 Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place. Basis of Accounting For financial reporting purposes, the University System of Georgia is considered a specialpurpose government engaged only in business-type activities. Accordingly, the University System's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant 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 University System of Georgia Annual Financial Report FY 2011 30 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 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 understand 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, 2011, GSFIC transferred capital additions valued at approximately $138,885,549 to The University System of Georgia. Deposits Deposits represent good faith deposits from students to reserve housing assignments in institutional residence halls. University System of Georgia Annual Financial Report FY 2011 31 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 $180,630,884 as of July 1, 2010. The ending balance as of June 30, 2011 in accrued liability for compensated absences was $184,875,944, which represents an increase of $4,245,060. 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 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. University System of Georgia Annual Financial Report FY 2011 32 Expendable Restricted Net Assets at June 30, 2011 included the following: Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments Quasi-Endowments Health Insurance Reserve Total Restricted Expendable $ 150,111,469 43,687,713 23,303,150 2,742,133 35,245,466 27,890,341 $ 282,980,272 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 the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets included the following items at June 30, 2011, which are quasirestricted by management. R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted Total Unrestricted Net Assets $ 177,629,943 324,944,353 2,821,116 (964,533,328) $ (459,137,916) 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. University System of Georgia Annual Financial Report FY 2011 33 Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and non-operating 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 Revenues: Non-operating revenue includes activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating 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 Expenses: Operating expense includes activities that have the characteristics of exchange transactions. Non-operating Expenses: 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. Special Items The only special item in fiscal year 2011 related to Valdosta State University. A portion of Converse Hall, a dormitory on the Valdosta State University Campus, was demolished during fiscal year 2011 to make room for a new building. The portion of the building being demolished was of such magnitude that the decision was made to delete a portion of the asset. This deletion resulted in a loss of $1,065,449. University System of Georgia Annual Financial Report FY 2011 34 Restatement of Prior Year Net Assets The following institutions had restatements of prior year balances in FY2011: Institution Georgia Institute of Technology Georgia State University Georgia Southern University Albany State University Georgia College and State University Georgia Southwestern State University University of West Georgia Abraham Baldwin Agricultural College Macon State College Total Effect on Beginning Net Assets $ 33,477 (2,307,867) 2,357,819 827,495 1,733,749 561,743 1,858,316 4,391,660 186,175 $ 9,642,567 Georgia Institute of Technology had a restatement of prior year net assets, increasing the prior year net assets by $33,477. This was due to inconsistencies noted on the Compensated Absences Report, including: (a) bi-weekly employees who accrued more than the maximum number of vacation hours for the year; (b) retired employees, terminated employees, employees on leave and employees who changed benefit eligibility who had current year activity but were not included on the report; and (c) incorrect hourly rates used to calculate leave balances on the report. The Institute thoroughly reviewed the criteria used to create the Compensated Balances Report, created a modified report with more accurate data and updated the financial statements accordingly. Georgia State University had a restatement of prior year net assets, decreasing net assets by $2,307,867. This was due to adjusting capital assets for prior year omissions and overstatements, netting to an increase of $15,432,144 (Building and Building Improvements increased $15,975,060; Facilities and Other Improvements decreased $209,921, and Accumulated Depreciation for Buildings and Other Improvements increased $332,995). In addition, there was an increase to the offsetting lease liability by $17,964,110 and a related expense understatement of $224,099 (Supplies and Other Services). These prior year errors were discovered in fiscal year 2011 and the University updated their financial statements accordingly. The University has implemented controls and procedures with related parties to reduce this risk in the future. Georgia Southern University had a restatement of prior year net assets, increasing net assets by $2,357,819. This restatement was required to remove invalid accumulated depreciation balances as noted in the 2010 audit engagement due to a system error in the asset management module. University System of Georgia Annual Financial Report FY 2011 35 Albany State University had a restatement of prior year net assets, increasing net assets by $827,495. This restatement was related to a revaluation of accumulated depreciation for a capital lease. The University updated its financial statements accordingly and has implemented procedures to avoid misstatements in the future. Georgia College and State University had a restatement of prior year net assets, increasing net assets by $1,733,749. This restatement was related to recording summer revenues and expenses in the incorrect fiscal period. The University made appropriate adjustments to its financial statements and has implemented procedures to ensure recording of summer financial activity in the correct fiscal year. Georgia Southwestern State University had a restatement of prior year net assets, increasing net assets by $561,743. This was related to the addition of Construction in Progress capital assets that met the capitalization threshold. The University updated its financial statements accordingly. University of West Georgia had a restatement of prior year net assets, increasing net assets by $1,858,316. This was due to recording the entire amount of summer tuition and fees as deferred revenue and the related salaries and benefits as a prepaid item in the prior year's report. The University updated its financial statements in accordance with generally accepted accounting principles. Abraham Baldwin Agricultural College had a restatement of prior year net assets, increasing beginning net assets by $4,391,660. On July 1, 2010, the College acquired the assets and operations of the Georgia Museum of Agriculture. Due to this merger, the College's capital assets were increased by $5,786,678, of which $5,477,455 was reporting in fiscal year 2010 and $309,233 were adjustments made when the assets were added; net assets were increased by $26,101. The College also corrected some prior year accumulated depreciation errors for capital leases, which resulted in a net asset decrease of $1,421,119. The College updated its financial statements accordingly. Macon State College had a restatement of prior year net assets, increasing beginning net assets by $186,175. This was due to a $345,519 reclassification of prepaid assets, a $487,502 reduction in the compensated absences liability, a $1,187,683 reduction in construction in progress, and an adjustment in reporting of summer school revenues and expenses of $1,231,875. The College updated its financial statements appropriately, in accordance with generally accepted accounting principles. 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: University System of Georgia Annual Financial Report FY 2011 36 1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. At June 30, 2011, the carrying value of deposits was $464,577,013 and the bank balance was $546,963,835. Of the University System's deposits, $480,546,854 was uninsured. Of these uninsured deposits, $480,459,531 were collateralized with securities held by the financial institution's trust department or agent in the University System's name, and $87,323 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University System's name. 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. University System of Georgia Annual Financial Report FY 2011 37 The University System's investments as of June 30, 2011 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. A gencies - Explicitly Guaranteed U.S. A gencies - Implicitly Guaranteed Co rpo rate B o nds Co rpo rate Debt General Obligatio n B o nds M unicipal Obligatio n M utual B o nd Fund Other Debt Securities Repurchase A greements Other Investments B o nd/Equity M utual Funds B o nd M utual Funds B o nd M utual Funds - Internatio nal Equity M utual Funds Equity Securities - Do mestic Equity Securities - Internatio nal Real Estate Held fo r Investment P urpo ses Real Estate Investment Fund Cash Surrender Value M o ney M arket Investment P o o ls Office o f the State Treasurer Geo rgia Fund 1 Geo rgia Extended A sset P o o l Fair Value $ 27,485,745 36,195,264 305,199,173 5,076,941 7,712,772 1,065,699 5,000 54,440,278 16,902,856 35,877,029 $ 489,960,757 Less Than 1Year $ 7,034,625 387 13,778,607 141,763 127,939 5,000 5,068 35,877,029 $ 56,970,418 Investment M aturity 1-5 Years 6-10 Years $ 9,347,709 31,858,396 3,138,678 135,109 $ 9,937,348 27,787,299 19,413,539 1,686,506 3,154,145 583,817 29,023 8,987,603 1,401,950 $ 53,496,518 $ 63,964,604 M o re Than 10 Years $ 1,166,063 8,407,578 240,148,631 3,248,672 1,292,010 346,773 53,004,237 7,915,253 $ 315,529,217 567,156 15,036,990 25,291 38,497,770 10,919,532 2,383,668 5,733,942 5,455,004 9,887 3,244 208,431,697 6,782,219 $ 783,807,157 The Georgia Fund 1 Investment Pool, managed by the Office of the State Treasurer, 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 59 days at June 30, 2011. The Georgia Extended Asset Pool, managed by the Office of the State Treasurer, 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 $2.00 at June 30, 2011. 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, 2011 is 0.63 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 of Georgia Annual Financial Report FY 2011 38 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 institutional money market mutual funds or other high quality, short term instruments. University System of Georgia Annual Financial Report FY 2011 39 Total Return Fund The Total Return fund is another pool designed to be a vehicle to invest funds that are not subject to state regulations concerning investing in equities. This pool offers the greatest percentage of overall equity exposure, with well over half of the funds typically invested in equities. The equity allocation range shall be between 60% and 70%, with a target of 65% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 30% and 40%, with a target of 35% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality, short term instruments. Diversified Fund The Diversified fund is designed to gain further diversification and increase exposures to assets that have lower correlation to equity and bond markets by utilizing alternative asset classes. In addition, this fund is constructed to build an optimal portfolio where return is increased and risk is reduced. The equity allocation range shall be between 50% and 75% of the portfolio. The fixed income (bond) portion of the portfolio shall be between 20% and 40%. The portfolio may also consist of Hedge Funds, Real Estate and Venture Capital/Private Equity/Post Venture Capital. Hedge Funds The investment approach to this asset class is to use a multi-strategy, multimanager fund of hedge funds. The Board of Regents believes that a fund of fund strategy will provide the best access to a highly diversified pool of hedge fund strategies and managers. Real Estate The Board of Regents' approach to investing in this asset class is to use real estate investment trusts (REITs). REITs are more liquid than owning commercial real estate and diversification can be achieved by purchasing a mutual fund. Venture Capital/Private Equity/Post Venture Capital This asset class is the riskiest and most volatile permitted investment opportunity. This asset should be considered as an additional diversification investment strategy due to the low correlation with stock and bonds. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality, institutional money market mutual funds or other high quality, short term instruments. University System of Georgia Annual Financial Report FY 2011 40 Condensed financial information for the investment pool is as follows: Assets Investments Accrued Interest Net Assets $ 331,263,633 709,287 $ 331,972,920 Additions Pool Participant Deposits Investment Income Fair Value Decreases Less: Investment Expense $ 101,215,266 8,346,875 10,938,255 (517,600) Distribution of Net Assets External Participant Account Balance Internal Participant Account Balance $ 16,864,089 315,108,831 Total Distribution $ 331,972,920 Total Additions Deductions Pool Participant Withdrawals Net Increase (Decrease) $ 119,982,796 $ (37,124,889) $ 82,857,907 Net Assets July 1, 2010 249,115,013 June 30, 2011 $ 331,972,920 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. 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: University System of Georgia Annual Financial Report FY 2011 41 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, 2011, $540,493,612 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 $4,055,590 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: Related Debt Investments U. S. A gencies Co rpo rate B o nds Co rpo rate Debt General Obligatio n B o nds M unicipal Obligatio n M utual B o nd Fund Repurchase A greements U.S.Treasuries Other Debt Securites Fair Value AAA $ 341,394,437 5,076,941 7,712,772 1,065,699 5,000 54,440,278 35,877,029 27,485,745 16,902,856 $ 489,960,757 $ 7,140,915 6,644 6,644 1,065,699 5,000 21,582 6,770,070 $ 15,016,554 AA A BAA $ - 1,050,234 1,560,251 $ - 2,052,954 3,737,162 $ - 1,886,126 1,210 17,551 $ 2,611,695 14,788,959 $ 20,596,626 $ 1,886,126 BB $- 1,066 $ 1,066 BBB $ - 402,073 2,113,897 $ 2,515,970 Unrated $ 334,253,522 80,983 2,006,642 54,398,869 35,877,029 20,715,675 $ 447,332,720 University System of Georgia Annual Financial Report FY 2011 42 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 Amount % of Total Federal National Mortgage Association $ 210,071,343 26.8% Federal Home Loan Mortgage Corporation 92,534,958 11.8% 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, 2011, $2,408,959, or less than 0.31% of total investments, was invested in international equity mutual funds. Note 3 Accounts Receivable Accounts receivable consisted of the following at June 30, 2011: Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Due from Component Units Other Less: Allowance for Doubtful Accounts Net Accounts Receivable $ 42,583,689 22,239,412 122,308,547 30,660,702 132,961,417 126,919,568 477,673,335 18,076,063 $ 459,597,272 University System of Georgia Annual Financial Report FY 2011 43 Note 4 Inventories Inventories consisted of the following at June 30, 2011: Bookstore Food Services Physical Plant Other Total $ 15,263,154 2,163,793 1,891,196 3,532,968 $ 22,851,111 Note 5 Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2011. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University System for amounts cancelled under these provisions. As the University System determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University System has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2011, the allowance for uncollectible loans was $3,049,128. University System of Georgia Annual Financial Report FY 2011 44 Note 6 Capital Assets Changes in capital assets for the year ended June 30, 2011 are shown below: Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Software Total Assets Being Depreciated Restated Beginning Balance June 30, 2010 Additions Reductions Ending Balance June 30, 2011 $ 244,521,564 40,047,382 222,284,254 506,853,200 $ 66,935,005 499,147 166,987,282 234,421,434 $ 37,153 (2,085) 170,911,062 170,946,130 $ 311,419,416 40,548,614 218,360,474 570,328,504 249,087,232 6,243,312,127 287,065,271 1,186,861,801 1,659,855,892 721,491,335 7,201,796 15,526,211 10,370,401,665 9,397,026 536,573,136 31,837,834 115,517,530 474,331,502 35,664,378 99,350 - 1,203,420,756 201,828 10,226,932 4,070,449 43,774,809 3,457,535 9,529,242 17,516 - 71,278,311 258,282,430 6,769,658,331 314,832,656 1,258,604,522 2,130,729,859 747,626,471 7,283,630 15,526,211 11,502,544,110 Less: Accumulated Depreciation Infrastructure Buildings Facilities and Other improvements Equipment Capital Leases Library Collections Capitalized Collections Software Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, net 74,347,370 1,796,116,293 101,639,784 822,195,620 194,461,724 553,603,674 595,114 7,131,522 3,550,091,101 8,044,900 156,575,700 9,173,049 97,394,476 71,716,627 32,903,314 137,121 1,170,918 377,116,105 352,408 5,245,781 1,120,828 43,596,773 2,345,295 9,430,629 4,059 - 62,095,773 82,039,862 1,947,446,212 109,692,005 875,993,323 263,833,056 577,076,359 728,176 8,302,440 3,865,111,433 6,820,310,564 826,304,651 9,182,538 7,637,432,677 $ 7,327,163,764 $ 1,060,726,085 $ 180,128,668 $ 8,207,761,181 Note 7 Deferred Revenue Deferred revenue consisted of the following at June 30, 2011: Prepaid Tuition and Fees Research Other Deferred Revenue Total $ 178,667,657 51,617,635 56,229,899 $ 286,515,191 University System of Georgia Annual Financial Report FY 2011 45 Note 8 Long-Term Liabilities Long-term liability activity for the year ended June 30, 2011 was as follows: Restated Beginning Balance June 30, 2010 Additions Reductions Ending Balance June 30, 2011 Current Portion Leases Lease Obligations $ 2,665,062,401 $ 575,209,604 $ 70,842,040 $ 3,169,429,965 $ 58,923,725 Other Liabilities Compensated Absences Net OPEB Obligation US DOE Settelment (Ft Valley) Notes & Loans Other Liabilities Total 180,630,884 699,938,000 301,372 15,265 962,513 881,848,034 125,650,348 317,461,000 96,838 443,208,186 121,405,288 - 239,585 15,265 133,720 121,793,858 184,875,944 1,017,399,000 61,787 - 925,631 1,203,262,362 109,476,058 - 61,787 - 119,154 109,656,999 Total Long-Term Obligations $ 3,546,910,435 $ 1,018,417,790 $ 192,635,898 $ 4,372,692,327 $ 168,580,724 Note 9 Significant Commitments The University System of Georgia had significant unearned, outstanding construction or renovation contracts executed in the amount of $131,478,329 as of June 30, 2011. In addition, certain institutions executed rental agreements for student housing and other facilities during fiscal year 2011, however, these agreements will not commence until fiscal 2012 or later. The rental agreements are long term in nature, with annually renewable lease terms. The projects and the present values of the minimum lease payments over the life of the rental agreements can be seen on the following page. University System of Georgia Annual Financial Report FY 2011 46 Institution Albany State University Albany State University College of Coastal Georgia Georgia College & State University Georgia Institute of Technology Georgia Institute of Technology Georgia Institute of Technology Georgia Institute of Technology Georgia Southern University Kennesaw State University North Georgia College & State University North Georgia College & State University North Georgia College & State University North Georgia College & State University Savannah State University Savannah State University Savannah State University Savannah State University Savannah State University South Georgia College Commitment Amount $18,535,000 26,985,000 13,365,000 31,400,000 8,690,000 4,765,000 5,400,000 13,815,000 42,770,000 30,215,000 23,325,000 11,085,000 8,780,000 10,565,000 12,304,500 6,625,500 5,385,000 7,150,000 4,205,000 5,945,000 $291,310,000 Project Student Housing Student Housing Campus Center Student Wellness and Recreation Center Dining Hall VLP1/GATV Academy of Medicine Event Center Carbon-Neutral Energy Solutions Laboratory Student Housing Student Housing Dining Hall Student Housing Student Housing Bookstore Student Center Stadium Student Housing Student Housing Student Housing Dining Hall 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 $3.17 billion in capital lease liability as of June 30, 2011. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between fiscal 2012 and 2046. Expenditures for fiscal year 2011 were $231,547,309, of which $147,052,543 represented interest. Total principal reductions on capital leases were $69,777,888 for the fiscal year ended June 30, 2011. Interest rates range from 1.64 percent to 28.36 percent. University System of Georgia Annual Financial Report FY 2011 47 The following is a summary of the carrying values of assets held under capital lease at June 30, 2011: Land Infrastruture Buildings Facilities Equipment Subtotal $ 49,777,279 50,898,342 3,456,559,623 33,258,296 72,983,822 3,663,477,362 Less: Accumulated Depreciation (411,846,253) Total Assets Held Under Capital Lease $ 3,251,631,109 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. Capital lease additions during fiscal 2011 are summarized below: Institution Armstrong Atlantic State University Bainbridge College Clayton State College College of Coastal Georgia Columbus State University Darton State College Darton State College Fort Valley State University Georgia Gwinnett College Georgia Gwinnett College Kennesaw State University Kennesaw State University Macon State College North Georgia College & State Univ. North Georgia College & State Univ. North Georgia College & State Univ. South Georgia College Southern Polytechnic State University University of Georgia University of West Georgia Project Winward Commons Student Wellness Center Clayton Commons Lakeside Village Residence Hall Student Recreation Center Darton Commons I Darton College Student Center Student Center/Stadium Student Housing Student Center Multi-purpose Building Sports/Recreation Complex Residence Hall Cadet Housing Residence Hall Parking Deck Residence Hall Student Housing/Dining Hall East Campus Housing Phase II Bookstore Amount Interest Lease Rate Expiration $ 34,906,798 3.500% 2039 20,448,550 5.540% 2042 30,140,118 4.790% 2042 15,359,771 4.763% 2040 32,124,727 5.535% 2039 10,697,505 5.779% 2041 21,179,284 6.137% 2041 19,451,021 6.139% 2040 102,890,000 4.813% 2040 32,680,000 4.313% 2040 945,631 5.260% 2036 61,958,493 5.500% 2040 11,714,593 6.060% 2040 15,252,793 5.160% 2040 24,815,545 5.160% 2040 17,356,988 5.160% 2040 14,410,000 5.102% 2042 43,888,238 5.558% 2039 49,948,870 5.732% 2040 6,144,038 4.763% 2041 $ 566,312,963 University System of Georgia Annual Financial Report FY 2011 48 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 2012 through 2041. 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. Systemwide real property and equipment operating lease expense for fiscal 2011 was $33,751,842. 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, 2011, are as follows: Year Ending June 30: Year 2012 1 2013 2 2014 3 2015 4 2016 5 2017 through 2021 6-10 2022 through 2026 11-15 2027 through 2031 16-20 2032 through 2036 21-25 2037 through 2041 26-30 2042 through 2046 31-35 Total minimum lease payments Less: Interest Less: Executory costs (if paid) Principal Outstanding Capital Leases Operating Leases $ 223,071,319 226,927,571 230,237,456 231,169,416 283,823,421 1,194,070,504 1,207,615,546 1,153,765,468 853,959,608 382,706,394 4,964,124 5,992,310,827 2,685,332,104 137,548,758 $ 3,169,429,965 $ 31,048,673 9,400,802 5,520,198 5,032,852 7,997,478 10,965,830 9,381,246 6,866,529 1,033,314 212,090 - $ 87,459,012 Note 11 Retirement Plans The University System of Georgia participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia (TRS). These two systems issue separate, publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that the University System of Georgia participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law. University System of Georgia Annual Financial Report FY 2011 49 Employees' Retirement System of Georgia The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing, multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract. On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS 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 the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415. The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects 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. Members 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 the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60. Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for University System of Georgia Annual Financial Report FY 2011 50 distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the University System of Georgia pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these University System of Georgia contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The University System of Georgia is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These University System of Georgia contributions are not at any time refundable to the member or his/her beneficiary. Employer contributions required for fiscal year 2011 were based on the June 30, 2007 actuarial valuation for the old and new plans and were set by the Board of Trustees on September 18, 2008 for GSEPS as follows: Old Plan* New Plan GSEPS 10.41% 10.41% 6.54% * 5.66% exclusive of contributions paid by the employer on behalf of "old plan" members. Members become vested after ten years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits. Teachers Retirement System of Georgia The Teachers Retirement System of Georgia (TRS) is a cost-sharing, multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. University System of Georgia Annual Financial Report FY 2011 51 TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after ten years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid, consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2011 were 5.53% of annual salary. Employer contributions required for fiscal year 2011 were 10.28% of annual salary as required by the June 30, 2009 actuarial valuation. The following table summarizes the University System of Georgia contributions by defined benefit plan for the years ending June 30, 2011, June 30, 2010, and June 30, 2009: Fiscal Year 2011 2010 2009 ERS Required Contribution $ 709,947 $ 654,124 $ 687,652 Percent Contributed 100% 100% 100% TRS Required Contribution $ 143,479,581 $ 135,412,616 $ 128,072,380 Percent Contributed 100% 100% 100% 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 University System of Georgia Annual Financial Report FY 2011 52 benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy The University System of Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2011, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contributed 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. The University System of Georgia and the covered employees made the required contributions of $94,523,335 (9.24%) and $51,160,148 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports that may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description The University System of Georgia participates in the Georgia Defined Contribution Plan (GDCP), which is a single-employer, defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. University System of Georgia Annual Financial Report FY 2011 53 Total contributions made by employees during fiscal year 2011 amounted to $7,845,526, 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 that may be obtained from the ERS offices. Note 12 Risk Management The University System of Georgia offers its employees and retirees access to three different self-insured healthcare plan options. A PPO/PPO Consumer healthcare plan was offered for the entire reporting period, and effective 01/01/2011, a HSA/High Deductible PPO and a HMO are also offered on a self-insured basis. The HSA/High Deductible PPO and HMO were previously insured through Blue Cross Blue Shield of Georgia. The University System of Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. 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 self-insured healthcare plan products. In addition to the selfinsured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser. 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, 2011 and June 30, 2010 is provided below: University System of Georgia Annual Financial Report FY 2011 54 E m pl oy ees : Unpaid Claims and Claim Adjustments (Prior Year IBNR) June 30, 2011 $ 15,654,000 June 30, 2010 $ 21,827,567 Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the Current Year 239,141,227 181,684,842 Payments - Claims and Claim Adjustments Attributable To Insured Events of the Current Year and Prior Years 231,506,052 187,858,409 Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 23,289,175 $ 15,654,000 Ret i r ees : Unpaid Claims and Claim Adjustments (Prior Year IBNR) $ 6,756,000 $ 6,626,917 Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the Current Year 103,337,394 93,786,415 Payments - Claims and Claim Adjustments Attributable To Insured Events of the Current Year and Prior Years 102,553,611 93,657,332 Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 7,539,783 $ 6,756,000 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 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. As of June 30, 2011, four University System of Georgia institutions had projects or events that met one of the five obligating events related to recognition of pollution remediation. 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 University System of Georgia Annual Financial Report FY 2011 55 pollution remediation in the amount of $925,631. The liability was determined using a 5year budget estimate provided by environmental engineers and 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. Pollution remediation liability activity in fiscal 2011 was as follows: Beginning Balance July 1, 2010 Additions Reductions June 30, 2011 Current Portion $ 962,513 $ 96,838 $ 133,720 $ 925,631 $ 119,154 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, covering 30-plus years, also have been identified as potential responsible parties. To date, Augusta State University has not been named in any legal action pursuant to this case. As of June 30, 2011, Augusta State University cannot reasonably estimate a liability for this pollution remediation obligation. Georgia Health Sciences University has no liability for pollution remediation at June 30, 2011. The University does not anticipate any significant remediation outlay in fiscal year 2012. Pollution remediation liability activity in fiscal year 2011 was as follows: Beginning Balance July 1, 2010 Additions Reductions June 30, 2011 Current Portion $ 763 $ 19,562 $ 20,325 $ - $ - Georgia Institute of Technology is responsible for pollution remediation, including asbestos abatement, for all Institute facilities. Asbestos abatement is performed during renovation/construction projects when deemed necessary by Institute management. As of June 30, 2011, the Institute recorded a liability and expense in the amount of $195,387 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. Beginning Balance July 1, 2010 Additions Reductions June 30, 2011 Current Portion $ 298,617 $ 195,387 $ 298,617 $ 195,387 $ 195,387 University System of Georgia Annual Financial Report FY 2011 56 Note 13 Contingencies Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures that may be disallowed by the grantor cannot be determined at this time, although the University System 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, generally are 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, 2011. Note 14 Post-Employment Benefits Other Than Pension Benefits Plan Description The Board of Regents Retiree Health Benefit Fund (the "Plan") is a single-employer, defined benefit, healthcare plan administered by the University System Office. The plan was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance benefits. Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 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 at the following website address: http://www.usg.edu/fiscal_affairs/reporting/annual_fin_rep/ Membership of the plan consisted of the following at June 30, 2011: Retirees and beneficiaries receiving benefits Terminated plan members entitled to but not yet receiving benefits Active plan members Total 18,840 41,779 60,619 University System of Georgia Annual Financial Report FY 2011 57 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 2011 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 2011, the University System of Georgia contributed $80,261,907 to the plan, for current premiums or claims. Plan members receiving benefits contributed $25,770,842 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. The following table shows the components of the University System's annual OPEB cost for fiscal year 2011, the amount actually contributed to the plan, and changes in the University System's net OPEB obligation to the Retiree Health Benefit Fund (dollar amounts in millions): Annual required contribution Interest on net 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 Net OPEB obligation - end of year $ 411.5 31.5 (45.3) 397.7 (80.2) 317.5 699.9 $ 1,017.4 University System of Georgia Annual Financial Report FY 2011 58 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 the current and past two fiscal years were as follows (dollar amounts in millions): Fiscal Year Ended 2009 2010 2011 Annual OPEB Cost $ 346.9 $ 374.3 $ 397.7 Percentage of Annual OPEB Cost Contributed 25.7% 18.7% 20.2% Net OPEB Obligation $ 395.5 $ 699.9 $ 1,017.4 Funded Status and Funding Progress Actuarial Valuation Date 7/1/2008 7/1/2009 7/1/2010 Actuarial Value of Assets (a) $ 290,000 $ 10,566,000 $ 122,538 Actuarial Accrued Liability (AAL) Projected Unit Credit (b) $ 3,258,200,000 $ 3,129,508,000 $ 3,384,099,942 Unfunded AAL (UAAL) (b-a) $ 3,257,910,000 $ 3,118,942,000 $ 3,383,977,404 Funded Ratio (a/b) 0.0% 0.3% 0.0% Covered Payroll (c) $ 2,372,385,000 $ 2,399,532,000 $ 2,432,366,796 UAAL as a Percentage of Covered Payroll ((b-a)/c) 137.3% 130.0% 139.1% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents 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 shortterm 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 is as follows: University System of Georgia Annual Financial Report FY 2011 59 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, 2010 Projected Unit Credit Level Dollar, Closed, 30-year Market Value of Assets 27 years 4.50% 8.25% 4.50% 2027 *Includes an inflation assumption of 2.5%. Please note that the Investment Rate of Return percentage can change. Note 15 Natural Classifications with Functional Classifications The University's operating expenses by functional classification for FY2011 are shown below: Natural Classificatio n Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n To tal Expenses Instructio n $ 829,569,926 283,231,242 396,033,509 566,713 14,736,238 6,845,090 5,748,603 88,813,049 63,012,857 $ 1,688,557,227 Research $ 285,145,850 268,985,804 170,026,724 76,931 22,252,495 3,689,810 3,001,354 190,710,533 58,395,377 $ 1,002,284,878 Functio nal Classificatio n P ublic A cademic Service Suppo rt $ 80,088,815 150,335,273 82,838,764 585,507 5,662,595 1,521,625 2,990,948 119,430,423 5,673,353 $ 36,874,377 197,319,061 89,403,950 428,632 4,757,911 378,474 3,005,129 79,453,229 46,918,734 $ 449,127,303 $ 458,539,497 Student Services $ 2,186,926 141,310,457 53,076,113 26,935 2,920,629 3,427,988 2,221,546 61,640,748 14,590,446 $ 281,401,788 Institutio nal Suppo rt $ 4,723,665 249,807,257 142,362,320 7,831,262 3,684,407 724,396 7,588,926 343,706,413 35,671,778 $ 796,100,424 Natural Classificatio n Faculty Staff B enefits P erso nal Services Travel Scho larships and Fello wships Utilities Supplies and Others Services Depreciatio n To tal Expenses P lant Operatio ns & M aintenance $ 345,456 169,210,661 72,259,467 (8,684,586) 419,080 - 138,146,429 157,038,263 60,626,451 $ 589,361,221 Scho larships & Fello wships $ 71,136 110,322 75,887 488,386 5,388 342,142,509 - 163,949 - $ 343,057,577 Functio nal Classificatio n P atient A uxiliary Care Enterprises (GHSU Only) $ 2,099,711 146,035,959 52,710,625 9,009,466 2,021,665 20,291,871 34,126,006 277,262,757 92,227,109 $ 1,985,599 69,085,986 28,509,102 266,928 325,603 94,553,144 - $ 635,785,169 $ 194,726,362 To tal Expenses $ 1,243,091,461 1,675,432,022 1,087,296,461 10,329,246 56,727,336 379,021,763 197,154,544 1,412,772,508 377,116,105 $ 6,438,941,446 University System of Georgia Annual Financial Report FY 2011 60 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, non-profit 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 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 institution's 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./MCG Health Systems, Inc. (Blended) 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. Armstrong Atlantic State University Educational Properties, Inc. Kennesaw State University Foundation, Inc. Georgia College and State University Foundation, Inc. University System of Georgia Foundation, Inc. Fiscal Year Ending June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 June 30, 2011 December 31, 2010 December 31, 2010 June 30, 2011 June 30, 2011 June 30, 2011 Reporting Basis FASB GASB GASB FASB FASB GASB GASB FASB FASB FASB GASB GASB FASB FASB FASB FASB FASB FASB University System of Georgia Annual Financial Report FY 2011 61 SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS University System of Georgia Annual Financial Report FY 2011 62 UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS BY INSTITUTION June 30, 2011 Institution Noncurrent Cash/ Current Assets Investments Assets Capital Assets Other Assets Total Assets Georgia Institute of Technology $222,754,124 $61,633,344 $1,640,151,974 $10,466,326 $1,935,005,768 Georgia State University 180,603,942 748,613 749,917,821 5,946,446 937,216,822 Georgia Health Sciences University 91,560,500 111,381,749 298,040,506 4,079,487 505,062,242 University of Georgia 355,717,416 65,133,299 1,488,920,020 9,665,095 1,919,435,830 Georgia Southern University 66,274,832 2,619,929 437,330,236 2,661,011 508,886,008 Valdosta State University 34,315,204 12,796,453 323,574,865 26,898 370,713,420 Albany State University 17,327,115 118,266,650 368,424 135,962,189 Armstrong Atlantic State University 22,752,019 2,711,150 158,314,378 11,654 183,789,201 Augusta State University 14,458,310 454,108 103,444,147 602,194 118,958,759 Clayton State University 14,792,696 2,474,733 134,227,724 35,989 151,531,142 Columbus State University 25,738,409 2,639,733 156,471,627 1,098,074 185,947,843 Fort Valley State University 4,973,520 48,638 146,508,164 1,703,963 153,234,285 Georgia College & State University 26,986,456 5,318,782 153,419,993 2,628,030 188,353,261 Georgia Southwestern State Univ. 11,111,949 647,726 80,038,019 1,560,788 93,358,482 Kennesaw State University 83,397,849 2,025,886 344,152,709 483,115 430,059,559 North Georgia College & State Univ. 21,964,865 2,607,584 169,111,615 1,099,853 194,783,917 Savannah State University 17,623,735 4,642,349 112,431,530 836,003 135,533,617 Southern Polytechnic State Univ. 17,342,362 3,229,238 178,540,064 168,154 199,279,818 University of West Georgia 48,593,142 394,687 219,666,634 2,070,138 270,724,601 Abraham Baldwin Agricultural Coll. 8,926,319 - 80,453,616 327,420 89,707,355 College of Coastal Georgia 4,551,040 100,113 65,053,234 4,174 69,708,561 Dalton State College 5,124,033 - 34,678,154 - 39,802,187 Gainesville State College 15,169,342 - 41,744,896 - 56,914,238 Georgia Gwinnett College 13,266,232 - 218,076,047 - 231,342,279 Gordon College 14,819,616 - 74,286,602 - 89,106,218 Macon State College 14,181,698 1,296,329 84,221,174 - 99,699,201 Middle Georgia College 13,837,294 1,087,647 126,723,377 254 141,648,572 Atlanta Metropolitan College 5,716,882 - 11,747,244 - 17,464,126 Bainbridge College 10,013,446 671,536 52,685,705 - 63,370,687 Darton College 7,979,816 - 68,313,502 76,293,318 East Georgia College 5,006,559 - 23,636,191 - 28,642,750 Georgia Highlands College 5,328,733 31,245 39,656,622 - 45,016,600 Georgia Perimeter College 13,298,481 1,042,965 170,789,694 2,211 185,133,351 South Georgia College 2,329,492 150,000 40,916,626 49,273 43,445,391 Waycross College 1,792,478 282,198 9,427,320 - 11,501,996 Skidaway Institute of Oceanography 873,652 - 10,647,512 - 11,521,164 University System Office 394,853,819 8,534,953 42,174,989 1,938,527 447,502,288 Elimination/Consolidation Entries (214,618,483) (93,811,979) (2,688,527) (311,118,989) Total $1,600,738,894 $200,893,008 $8,207,761,181 $45,144,974 $10,054,538,057 University System of Georgia Annual Financial Report FY 2011 63 UNIVERSITY SYSTEM OF GEORGIA CONDENSED STATEMENT OF NET ASSETS BY INSTITUTION June 30, 2011 Liabilities Institution Georgia Institute of Technology Georgia State University Georgia Health Sciences University University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton 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 Liabilities Noncurrent Liabilities $143,100,803 $513,375,223 92,642,981 313,420,634 124,777,121 40,744,042 137,907,211 294,021,487 25,578,898 172,432,419 13,682,895 216,321,251 4,106,919 33,887,062 12,049,562 103,318,147 8,271,929 31,448,353 6,862,335 76,350,974 14,965,082 89,547,160 5,258,094 83,731,557 12,009,993 108,516,771 6,246,724 39,242,892 42,533,352 174,767,473 11,777,097 100,190,164 5,142,478 53,908,018 11,824,815 89,505,680 14,775,926 116,171,687 4,094,846 47,411,998 2,719,147 15,647,814 2,390,913 7,479,050 4,502,278 12,647,761 5,449,698 171,361,198 3,871,293 33,152,317 5,902,398 12,063,474 3,002,079 63,071,141 1,345,732 470,282 4,261,261 20,901,192 4,499,018 32,840,691 2,970,887 159,809 3,019,354 414,772 17,609,643 80,711,681 940,742 31,317,717 675,925 106,070 652,015 79,033 336,953,166 15,712,970 (309,280,520) 1,015,560,531 $789,094,090 $4,212,010,495 Total Liabilities $656,476,026 406,063,615 165,521,163 431,928,698 198,011,317 230,004,146 37,993,981 115,367,709 39,720,282 83,213,309 104,512,242 88,989,651 120,526,764 45,489,616 217,300,825 111,967,261 59,050,496 101,330,495 130,947,613 51,506,844 18,366,961 9,869,963 17,150,039 176,810,896 37,023,610 17,965,872 66,073,220 1,816,014 25,162,453 37,339,709 3,130,696 3,434,126 98,321,324 32,258,459 781,995 731,048 352,666,136 706,280,011 $5,001,104,585 University System of Georgia Annual Financial Report FY 2011 64 UNIVERSITY SYSTEM OF GEORGIA CONSOLIDATED STATEMENT OF NET ASSETS BY INSTITUTION June 30, 2011 Institution Invested in Capital Restricted Assets Unexpendable Net Assets Restricted Expendable Unrestricted Georgia Institute of Technology $1,129,955,922 $53,640,958 $59,463,204 $35,469,658 Georgia State University 434,557,165 51,828 18,020,064 78,524,150 Georgia Health Sciences University 271,894,456 1,717,115 75,054,827 (9,125,319) University of Georgia 1,206,069,542 65,353,422 81,628,148 134,456,020 Georgia Southern University 261,311,963 2,465,814 3,253,853 43,843,061 Valdosta State University 106,759,759 2,700,858 3,547,278 27,701,379 Albany State University 85,127,614 - 386,824 12,453,770 Armstrong Atlantic State University 54,195,464 2,384,475 318,189 11,523,364 Augusta State University 72,328,686 14,000 1,939,206 4,956,585 Clayton State University 57,783,535 1,107,942 18,346 9,408,010 Columbus State University 65,486,913 1,692,466 3,259,989 10,996,233 Fort Valley State University 63,655,069 68,099 1,532,498 (1,011,032) Georgia College & State University 48,917,172 2,788,349 5,260,279 10,860,697 Georgia Southwestern State Univ. 40,989,594 397,321 4,583,606 1,898,345 Kennesaw State University 178,914,458 780,787 642,994 32,420,495 North Georgia College & State Univ. 69,263,356 2,712,268 1,857,510 8,983,522 Savannah State University 58,790,162 4,478,982 1,117,842 12,096,135 Southern Polytechnic State Univ. 87,932,812 1,437,397 1,809,689 6,769,425 University of West Georgia 103,859,942 - 2,660,009 $33,257,037 Abraham Baldwin Agricultural Coll. 32,236,944 - 601,095 5,362,472 College of Coastal Georgia 49,693,463 68,879 52,441 1,526,817 Dalton State College 27,269,485 - 1,961 2,660,778 Gainesville State College 29,194,592 - (1,194) 10,570,801 Georgia Gwinnett College 46,877,559 - 63,245 7,590,579 Gordon College 40,817,170 - - 11,265,438 Macon State College 72,506,581 - 1,485,950 7,740,798 Middle Georgia College 64,121,457 - 1,854,886 9,599,009 Atlanta Metropolitan College 11,747,244 - (2,243) 3,903,111 Bainbridge College 31,889,228 606,955 93,005 5,619,046 Darton College 36,375,266 - - 2,578,343 East Georgia College 23,630,499 37,100 13,509 1,830,946 Georgia Highlands College 39,656,622 31,246 33,571 1,861,035 Georgia Perimeter College 90,918,866 26,074 288,919 (4,421,832) South Georgia College 9,868,417 150,000 113,675 1,054,840 Waycross College 9,427,320 136,240 98,625 1,057,816 Skidaway Institute of Oceanography 10,647,512 - 5,370 137,234 University System Office 26,300,467 3,612,043 42,081,324 22,842,318 Elimination/Consolidation Entries (1,017,399,000) Total $5,050,972,276 $148,460,618 $313,138,494 ($459,137,916) Total Net Assets $1,278,529,742 531,153,207 339,541,079 1,487,507,132 310,874,691 140,709,274 97,968,208 68,421,492 79,238,477 68,317,833 81,435,601 64,244,634 67,826,497 47,868,866 212,758,734 82,816,656 76,483,121 97,949,323 139,776,988 38,200,511 51,341,600 29,932,224 39,764,199 54,531,383 52,082,608 81,733,329 75,575,352 15,648,112 38,208,234 38,953,609 25,512,054 41,582,474 86,812,027 11,186,932 10,720,001 10,790,116 94,836,152 ($1,017,399,000) $5,053,433,472 University System of Georgia Annual Financial Report FY 2011 65 University System of Georgia Condensed Statement of Revenues, Expenses and Changes in Net Assets by Institution For the Year Ended June 30, 2011 Operating Revenues Institution Tuition & Fees, Federal Approp, Net Grants & Contracts Auxiliaries Other Expenses Operating Loss Georgia Institute of Technology Georgia State University Georgia Health Sciences University University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton State University Columbus State University Fort Valley State University Georgia College & State University $199,963,731 189,341,319 38,532,794 285,376,810 97,033,479 54,456,368 14,225,198 26,165,041 25,057,467 22,945,975 34,353,143 8,098,099 39,675,512 $618,379,001 65,789,517 399,821,598 208,460,910 7,506,675 2,861,607 10,118,867 7,341,535 490,760 1,542,879 3,337,305 15,857,139 473,658 $86,470,988 58,559,096 7,535,101 151,288,641 68,072,654 42,383,803 13,038,173 18,603,919 9,431,373 11,785,914 9,471,422 18,492,236 23,760,823 $52,615,406 ($1,138,694,378) 20,015,774 (562,779,506) 9,013,268 (609,953,147) 46,326,766 (1,162,119,784) 5,167,723 (275,627,022) 1,798,547 (160,612,416) 906,806 (76,123,882) 467,815 (87,789,957) 1,490,639 (75,072,485) 2,012,095 (81,601,484) 3,119,022 (101,965,437) 809,697 (81,121,139) 2,190,141 (103,445,490) ($181,265,252) (229,073,800) (155,050,386) (470,666,657) (97,846,491) (59,112,091) (37,834,838) (35,211,647) (38,602,246) (43,314,621) (51,684,545) (37,863,968) (37,345,356) Georgia Southwestern State Univ. Kennesaw State University 9,847,220 106,244,019 3,316,733 6,317,550 9,571,749 40,376,460 520,287 8,179,998 (41,552,905) (280,681,805) (18,296,916) (119,563,778) North Georgia College & State Univ. Savannah State University 24,544,847 9,065,853 282,849 10,432,288 22,184,235 21,414,156 1,049,655 1,033,555 (82,348,708) (75,454,869) (34,287,122) (33,509,017) Southern Polytechnic State Univ. 26,320,329 976,120 13,543,542 1,454,847 (72,305,687) (30,010,849) University of West Georgia 43,730,116 2,841,796 32,294,543 3,567,558 (142,232,454) (59,798,441) Abraham Baldwin Agricultural Coll. 4,308,335 67,372 12,655,028 395,449 (39,754,434) (22,328,250) College of Coastal Georgia 6,195,783 27,497 3,318,791 98,639 (33,834,888) (24,194,178) Dalton State College 7,994,218 2,931,727 2,638,108 74,284 (46,120,403) (32,482,066) Gainesville State College 18,116,293 16 3,641,223 1,041,978 (58,429,252) (35,629,742) Georgia Gwinnett College 13,410,937 107,594 7,184,153 427,525 (68,232,974) (47,102,765) Gordon College 5,506,730 833,866 11,384,646 498,327 (41,139,082) (22,915,513) Macon State College 12,491,832 265,894 4,339,435 1,293,643 (55,774,577) (37,383,773) Middle Georgia College 4,258,875 520,745 11,073,161 344,515 (43,299,888) (27,102,592) Atlanta Metropolitan College 4,911,236 2,514,463 2,627,648 90,034 (30,370,749) (20,227,368) Bainbridge College 5,815,263 2,114,602 501,244 178,960 (32,357,139) (23,747,070) Darton College 10,241,392 2,671,440 2,490,485 302,521 (46,692,556) (30,986,718) East Georgia College 3,254,484 25,087 608,582 33,135 (20,514,584) (16,593,296) Georgia Highlands College 9,062,123 466,339 661,004 285,226 (35,545,281) (25,070,589) Georgia Perimeter College 45,067,999 2,346,821 7,805,011 4,526,019 (168,480,441) (108,734,591) South Georgia College 922,047 155,868 4,997,620 175,254 (21,215,972) (14,965,183) Waycross College 1,277,921 3,465 755,099 28,250 (8,812,302) (6,747,567) Skidaway Institute of Oceanography - 3,642,579 50,173 496,291 (7,883,483) (3,694,440) University System Office - 9,242,521 - 280,481,142 (410,155,840) (120,432,177) Elimination/Consolidation Entries (26,254,391) (193,851) (232,167,712) (58,845,046) (317,461,000) Total $1,407,812,788 $1,367,832,292 $734,816,388 $220,343,079 ($6,438,941,446) ($2,708,136,899) University System of Georgia Annual Financial Report FY 2011 66 University System of Georgia Condensed Statement of Revenues, Expenses and Changes in Net Assets by Institution For the Year Ended June 30, 2011 N o n-Ope ra ting Institution Georgia Institute of Technology Georgia State University Georgia Health Sciences University University of Georgia Georgia Southern University Valdosta State University Albany State University Armstrong Atlantic State University Augusta State University Clayton 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 $221,854,801 188,655,253 139,948,692 383,568,705 76,625,510 45,398,704 18,872,952 27,780,208 24,184,999 22,635,358 31,638,747 20,970,110 28,646,012 11,545,672 73,766,721 21,730,386 17,547,199 20,256,974 42,940,578 12,770,887 12,731,580 13,082,692 19,333,426 31,890,398 10,669,464 18,279,826 15,161,427 7,650,190 8,398,112 14,022,846 6,170,525 13,552,311 52,190,921 6,685,794 3,442,645 2,200,509 140,436,697 1 $1,807,237,832 Other Revenues/ (Expenses) $107,991,666 89,044,488 19,327,823 170,428,701 41,638,022 32,219,081 19,907,004 14,889,936 15,532,905 27,340,365 20,317,659 20,756,991 14,398,087 11,203,395 97,545,924 12,374,249 19,158,768 47,845,057 32,233,137 14,539,542 26,469,971 21,105,707 15,554,592 41,482,360 28,180,019 20,355,664 13,900,619 12,681,416 17,575,699 15,657,282 13,960,056 11,304,444 55,007,199 8,456,117 3,366,835 1,006,054 (2,192,959) (110,547) $1,132,453,328 Interest Expense ($26,462,243) (19,644,073) (1,831,860) (19,065,332) (8,962,966) (9,485,355) (1,527,564) (4,679,546) (1,582,901) (2,354,578) (2,154,629) (4,143,775) (5,156,883) (1,923,215) (10,174,933) (4,924,244) (2,462,084) (4,972,238) (5,776,041) (2,214,566) (449,516) (917,093) (9,492,392) (1,604,755) (6,734) (3,127,933) (855,303) (1,306,580) (1,348) (3,033,512) (1,411,405) (799,065) 110,546 ($162,394,116) University System of Georgia Annual Financial Report FY 2011 67 University System of Georgia Condensed Statement of Revenues, Expenses and Changes in Net Assets by Institution For the Year Ended June 30, 2011 Net Assets Institution Increase/ (Decrease) in Net Net Assets - Assets Beginning of Year Net Assets - Prior Year Beginning of Year Adjustments Restated Net Assets - End of Year Georgia Institute of Technology $122,118,972 $1,156,377,293 $33,477 $1,156,410,770 $1,278,529,742 Georgia State University 28,981,868 504,479,206 (2,307,867) 502,171,339 531,153,207 Georgia Health Sciences University 2,394,269 337,146,810 - 337,146,810 339,541,079 University of Georgia 64,265,417 1,423,241,715 - 1,423,241,715 1,487,507,132 Georgia Southern University 11,454,075 297,062,797 2,357,819 299,420,616 310,874,691 Valdosta State University 9,020,339 131,688,935 - 131,688,935 140,709,274 Albany State University (582,446) 97,723,159 827,495 98,550,654 97,968,208 Armstrong Atlantic State University 2,778,951 65,642,541 - 65,642,541 68,421,492 Augusta State University (467,243) 79,705,720 - 79,705,720 79,238,477 Clayton State University 4,306,524 64,011,309 - 64,011,309 68,317,833 Columbus State University (1,882,768) 83,318,369 - 83,318,369 81,435,601 Fort Valley State University (280,642) 64,525,276 - 64,525,276 64,244,634 Georgia College & State University 541,860 65,550,888 1,733,749 67,284,637 67,826,497 Georgia Southwestern State Univ. 2,528,936 44,778,187 561,743 45,339,930 47,868,866 Kennesaw State University 41,573,934 171,184,800 - 171,184,800 212,758,734 North Georgia College & State Univ. (5,106,731) 87,923,387 - 87,923,387 82,816,656 Savannah State University 734,866 75,748,255 - 75,748,255 76,483,121 Southern Polytechnic State Univ. 33,118,944 64,830,379 - 64,830,379 97,949,323 University of West Georgia 9,599,233 128,319,439 1,858,316 130,177,755 139,776,988 Abraham Baldwin Agricultural Coll. 2,767,613 31,041,238 4,391,660 35,432,898 38,200,511 College of Coastal Georgia 15,007,373 36,334,227 - 36,334,227 51,341,600 Dalton State College 1,256,817 28,675,407 - 28,675,407 29,932,224 Gainesville State College (1,658,817) 41,423,016 - 41,423,016 39,764,199 Georgia Gwinnett College 16,777,601 37,753,782 - 37,753,782 54,531,383 Gordon College 14,329,215 37,753,393 - 37,753,393 52,082,608 Macon State College 1,244,983 80,302,171 186,175 80,488,346 81,733,329 Middle Georgia College (1,168,479) 76,743,831 - 76,743,831 75,575,352 Atlanta Metropolitan College 104,238 15,543,874 - 15,543,874 15,648,112 Bainbridge College 1,371,438 36,836,796 - 36,836,796 38,208,234 Darton College (2,613,170) 41,566,779 - 41,566,779 38,953,609 East Georgia College 3,535,937 21,976,117 - 21,976,117 25,512,054 Georgia Highlands College (213,834) 41,796,308 - 41,796,308 41,582,474 Georgia Perimeter College (4,569,983) 91,382,010 - 91,382,010 86,812,027 South Georgia College (1,234,677) 12,421,609 - 12,421,609 11,186,932 Waycross College 61,913 10,658,088 - 10,658,088 10,720,001 Skidaway Institute of Oceanography (487,877) 11,277,993 - 11,277,993 10,790,116 University System Office 17,012,496 77,823,656 - 77,823,656 94,836,152 Elimination/Consolidation Entries (317,461,000) (699,938,000) (699,938,000) (1,017,399,000) Total $69,160,145 $4,974,630,760 $9,642,567 $4,984,273,327 $5,053,433,472 University System of Georgia Annual Financial Report FY 2011 68 University System of Georgia Condensed Statement of Net Assets by Affiliated Organization (Unaudited) June 30, 2011 Assets Affiliated Organizations 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. MCG Health Systems, Inc. Medical College of Georgia Foundation, Inc. Noncurrent Cash/ Current Assets Investments $38,795,926 $845,101,296 20,706,010 156,234,421 36,188 1,690,084 1,263,304 626,259 31,307,398 15,352,379 25,501,894 197,503,798 41,482,509 6,175,310 158,606,180 12,297,100 723,205 5,816,838 130,942,383 Capital Assets $37,166,123 107,940,177 1,331,003 120,230,110 226,474 5,850,023 49,530,565 4,865,981 189,709,001 2,064,823 Other Assets $705,771,941 161,369,973 200,000 3,766,838 243,080,274 156,752,415 81,069,365 132,676,356 505,342 Total Assets $1,626,835,286 290,016,160 157,801,612 126,950,336 852,733 295,590,074 429,288,672 133,593,165 493,288,637 723,205 139,329,386 Medical College of Georgia Physicians Practice Group Foundation Georgia Health Sciences 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. 61,391,047 11,795,086 2,466,867 33,829,184 102,063,135 50,632,911 76,354,534 45,665,935 10,577,783 2,016,701 27,133,728 83,459 6,402,537 570,982,207 1,957,143 59,011,103 53,309,605 145,500 30,578,612 26,580,926 13,300,054 228,014,546 20,807,182 413,083 34,822,117 1,518,054 9,939,673 11,158,103 12,299,875 19,454,048 284,235,305 793,067 344,172,320 949,506 125,045,374 11,878,545 8,869,404 629,269,548 344,334,699 129,098,062 434,706,626 47,017,585 420,150,832 4,484,261 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. 3,449,517 2,606,862 3,738,248 21,723,584 611,684 1,716,976 3,435,955 21,063,064 15,595,096 1,540,661 6,774,757 10,159,897 26,540,774 1,361 8,610,593 227,338 29,332,353 2,659,389 170,812 1,004,626 214,015,314 31,513,657 23,261 105,991,303 52,470,582 3,450,878 33,285,145 233,575,996 84,110,255 7,409,702 120,527,565 82,618,123 (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. North Georgia College & State University Real Estate 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. Darton Boosters, 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 66,007 1,027,818 1,852,192 2,890,828 50,192 146,809 5,153,616 382,517 9,111,445 2,208,978 13,497,659 1,479,087 5,996,098 14,556,952 41,496,299 861,406 1,500,835 173,039 9,732,595 5,938,748 35,337,649 28,100,176 75,275,457 37,765,866 139,882 97,470,494 1,719,681 25,420 3,661,570 228,482 124,941,460 61,970,118 8,703,861 3,488,565 17,781 53,672,200 4,500 86,060,512 40,089,904 180,466,362 42,768,458 487,105 4,640,477 5,703,709 3,771,180 5,600,227 1,553,934 4,730,865 12,555,514 1,869,069 809,000 1,164,053 755,370 3,386,341 718,106 266,464 474,122 1,916,117 1,433,427 101,346 20,175,219 $1,025,545,526 40,137,358 9,470,153 26,678,448 1,368,392 20,333,013 8,863,760 20,330,031 11,265,375 9,573,857 11,135,065 1,073,778 4,892,533 744,537 1,333,352 2,344,250 5,583,498 1,708,218 47,919,054 $2,521,439,693 27,450,141 233,126 3,148,053 6,198,295 5,800 480,007 415,432 8,695,047 51,679 15,345 76,191,626 5,340,690 73,843,724 $1,315,628,042 60,308,303 40,790,352 57,266,795 57,353,568 72,466,601 387,043 1,087,031 155,969 31,357,890 10,511,315 64,074,344 55,723 8,896,669 10,007 330,658 1,396,704 26,763,697 175,704,641 ` $3,659,372,715 6,201,987 77,554,888 52,052,352 104,711,293 1,568,808 319,848 70,278,092 6,351,185 134,171,176 70,627,540 394,180,938 82,013,411 128,382,907 54,900,982 89,882,078 62,493,140 101,547,894 10,804,737 32,346,222 23,976,858 42,806,616 11,320,315 76,853,469 755,370 4,931,274 23,202,355 1,072,687 2,153,477 81,848,697 39,121,312 1,809,564 317,642,638 $8,521,985,976 University System of Georgia Annual Financial Report FY 2011 69 University System of Georgia Condensed Statement of Net Assets by Affiliated Organization (Unaudited) June 30, 2011 Liabilities Affiliated Organizations 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. MCG Health Systems, Inc. Medical College of Georgia Foundation, Inc. Current Liabilities Noncurrent Liabilities $36,687,875 $419,195,411 16,949,191 189,774,634 115,129,800 8,756,231 109,806,634 448,059 15,781,962 299,507,451 10,808,582 252,335,893 21,756,287 89,534,996 74,381,271 151,548,474 13,391 - 1,094,673 Total Liabilities $455,883,286 206,723,825 115,129,800 118,562,865 448,059 315,289,413 263,144,475 111,291,283 225,929,745 13,391 1,094,673 Medical College of Georgia Physicians Practice Group Foundation Georgia Health Sciences 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. 10,472,130 5,323,764 356,434 6,846,292 31,990,968 2,719,408 61,040,670 678,956 24,160,124 247,477 29,515,088 8,256,432 17,246,167 129,049,908 298,402,713 390,787,568 346,246 39,987,218 5,323,764 8,612,866 24,092,459 161,040,876 2,719,408 359,443,383 678,956 414,947,692 593,723 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. 2,484,347 1,222,608 5,641,110 2,317,253 87,921 2,566,877 2,822,933 5,423,166 187,806,779 79,948,911 - 94,315,484 50,771,850 2,484,347 6,645,774 193,447,889 82,266,164 87,921 96,882,361 53,594,783 (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. North Georgia College & State University Real Estate 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. Darton Boosters, 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. 1,134,418 369,813 22,126,674 271,854 10,821 3,683,634 53,513 5,054,686 1,089,905 35,503,107 2,152,574 7,049,589 2,924,705 2,780,541 1,108,755 4,788,697 279,020 279,499 554,849 1,130,339 3,259,393 3,290,377 260,000 9,944 2,800 1,627,018 277,626 12,139 23,221,889 70,313,483 3,403,018 70,436,450 134,465 61,623,420 121,491,358 44,160,485 331,818,769 49,336,814 121,254,358 44,459,700 54,313,958 55,194,126 73,302,579 2,240,490 8,365,208 32,476,317 62,895,000 23,201,160 75,170,000 35,454,511 288,813,244 71,447,901 3,772,831 92,563,124 406,319 10,821 65,307,054 53,513 126,546,044 45,250,390 367,321,876 51,489,388 128,303,947 47,384,405 57,094,499 56,302,881 78,091,276 279,020 2,519,989 8,920,057 33,606,656 3,259,393 66,185,377 23,461,160 9,944 2,800 76,797,018 35,732,137 12,139 312,035,133 Total $586,000,100 $4,434,527,391 $5,020,527,491 University System of Georgia Annual Financial Report FY 2011 70 University System of Georgia Condensed Statement of Net Assets by Affiliated Organization (Unaudited) June 30, 2011 Net Assets Affiliated Organizations 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. MCG Health Systems, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Georgia Health Sciences 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. Invested in Restricted Capital Assets Nonexpendable $1,355,303 $477,362,704 (23,944,470) 29,728,251 1,331,003 9,771,172 226,474 (47,470,341) (48,350,272) 88,150,117 4,860,143 2,000,000 66,693,844 30,000 2,064,823 114,083,751 9,939,673 69,973 6,579,933 108,766,282 10,470,176 413,083 (104,084,219) 1,224,624 312,021,331 46,180,889 31,052,628 11,063,611 1,361 3,313,292 40,128,107 (4,876,814) 24,080,955 6,942,288 19,832,851 4,626,329 16,115,258 139,882 28,850,864 17,781 1,708,087 2,526,868 28,915,544 1,346,583 62,462 3,447,488 Restricted Expendable $594,787,553 75,441,857 10,610,497 10,260,388 52,910,364 6,322,785 1,259,322 10,745,029 Unrestricted Total Net Assets $97,446,440 $1,170,952,000 2,066,697 83,292,335 41,340,809 42,671,812 (11,994,198) 8,387,471 178,200 404,674 17,510,614 (19,699,339) 73,433,988 166,144,197 9,118,954 22,301,882 199,375,726 267,358,892 709,814 709,814 11,341,110 138,234,713 247,798,448 76,401,640 2,749,528 11,326,203 2,334,476 75,118,483 6,484,808 256,538 38,777,377 74,527,541 3,796,125 62,043,539 3,546,715 98,223,748 331,438 85,058,156 6,554,781 256,538 605,177,089 183,293,823 126,378,654 75,263,243 46,338,629 5,203,140 3,890,538 2,873,335 6,693,313 2,427,644 5,152,823 965,170 619,893 27,592 267,808 (435,751) 812,971 966,531 26,639,371 40,128,107 1,844,091 7,321,781 23,645,204 29,023,340 3,176,541 15,984,268 258,356 3,120,096 6,062,105 403,578 3,379,709 (16,702,695) (460,231) 246,565 (3,304,633) 6,201,987 6,106,987 48,279,521 12,148,169 1,162,489 309,027 4,971,038 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. North Georgia College & State University Real Estate 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. Darton Boosters, 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. 25,420 (71,976) (243,715) (3,973,588) (1,228,152) (34,178,702) 2,187,610 12,655,463 1,500,848 7,621,548 3,982,525 (1,211,096) 1,664,138 415,432 (268,223) 51,679 15,345 1,554,157 (35,454,511) 817,542 4,622,390 13,918,435 11,395,951 24,095,927 24,494,970 2,362,688 11,149,242 6,955,517 5,493,558 9,676,210 3,476,741 2,178,484 6,661,579 902,888 755,370 1,073,778 918,565 3,699,685 2,393,718 1,559,345 1,320,852 5,330,558 6,125,371 8,820,467 6,770,628 329,010 (11,551,885) 8,099,543 (2,083,744) 486,577 2,785,493 9,032,684 3,007,228 3,563,020 3,814,071 3,646,693 5,790,387 1,045,186 491,816 34,257,662 180,786 (49,810) 4,689,411 5,872,325 1,469,139 12,353,427 7,933,367 2,442,185 354,157 7,609,250 2,975,178 978,599 1,114,189 994,511 158,395 119,261 1,024,204 466,886 9,418 32,465 102,578 (1,196,674) 36,291,573 118,819 3,765,759 6,297,672 7,625,132 25,377,150 26,859,062 30,524,023 78,960 7,516,577 32,787,579 6,190,259 23,456,618 10,525,717 29,826,233 15,056,801 9,199,960 8,060,922 10,668,092 755,370 4,931,274 (258,805) 1,062,743 2,150,677 5,051,679 3,389,175 1,797,425 5,607,505 Total $56,014,778 $1,326,401,679 $1,211,543,257 $907,498,771 $3,501,458,485 University System of Georgia Annual Financial Report FY 2011 71 University System of Georgia Condensed Statement of Revenues, Expenses and Changes in Net Assets by Affiliated Organization (Unaudited) For the Year Ended June 30, 2011 Affiliated Organization Revenues O p e r a ti ng 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. MCG Health Systems, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Georgia Health Sciences 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. Grants and Contracts $34,849,000 17,866,440 511,838,870 1,083,000 4,434,225 11,348,240 49,772,554 (1,263,412) 1,545,295 1,685,356 62,955,394 334,630 24,690,585 18,896,288 152,117,565 2,022,822 1,420,112 5,831,509 4,088,335 82,978 663,823 2,111,916 2,697,919 52,403 612,191 8,270,366 1,312,275 200,837 51,353 1,483,648 Rents and Royalties $15,637,000 43,806,790 8,759,167 16,806,288 1,625,527 12,073,436 21,924,061 4,314,840 517,062 102,238,268 143,433 10,126,554 89,977,031 4,727,541 30,119,578 201,215 9,006,858 176,400 1,547,760 10,096,584 1,476,177 1,839,139 556,471 600,287 6,891,366 219,918 50,698 3,230,548 Net Patient Revenue 448,872,489 8,955,146 Other 85,597 148,328 5,482,093 50,848 1,805 108,511 651,192 447,133 633,215 522,270 12,663 443,434 531 719 Expenses ($81,642,775) (49,266,404) (516,731,035) (13,289,091) (6,207,249) (1,400,038) (19,009,008) (51,834,620) (477,038,135) (835,481) (5,106,653) Operating Profit/ (Loss) ($31,156,775) 12,406,826 3,867,002 4,685,794 831 10,673,398 14,263,293 3,420,027 (25,114,218) 709,814 (2,853,387) (110,235,067) (62,866,849) (9,580,555) (28,066,985) (74,528,479) (17,073,139) (168,205,050) (3,451,486) (2,233,079) (7,996,799) 233,783 (290,779) 6,858,665 15,448,552 6,550,690 14,683,285 (780,316) 9,640,073 (114,297) (5,697,940) (3,231,121) (2,301,989) (1,000,170) (1,815,803) (1,129,364) (2,381,259) 133,569 2,404,974 7,877,573 (336,347) 296,113 346,813 2,155,799 (332,418) (2,811,797) (5,746,724) (4,442,019) (394,939) (83,835) (1,407,123) (280,015) (1,643,135) 3,136,592 4,205,056 26,347 18,935 3,307,073 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. North Georgia College & State University Real Estate 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. Darton Boosters, 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. 943,707 3,740,071 1,320,994 3,344,222 5,678,463 103,205 2,637,751 3,179,038 3,171,041 1,125,333 2,403,552 127,620 883,496 110,491 1,252,639 143,055 284,780 783,003 210,467 152,147 248,848 718,198 712,218 95,456 1,533,362 7,320,531 1,264,204 34,017,781 1,313,696 398,872 2,518,489 3,809,241 2,297,569 321,100 68,121 1,985,832 3,376,080 572,882 4,026 220,332 4,022,373 1,343,980 10,514,452 55,748 394,760 111,472 588,541 980 41,919 2,237 105,000 (306,753) (3,234,743) (1,829,248) (30,887,946) (5,505,149) (298,349) (4,098,197) (3,337,884) (116,314) (1,317,444) (518,550) (1,078,004) (1,227,962) (155,885) (1,438,837) (1,877,273) (78,602) (924,091) (542,359) (327,943) (580,730) (3,878,267) (354,999) (75,689) (1,408,574) 692,702 8,220,619 867,422 6,474,057 1,487,010 203,728 1,058,043 3,650,395 3,054,727 2,693,999 1,885,002 (629,284) (275,365) 1,940,438 (144,279) 1,641,862 208,415 431,794 (331,892) (171,770) (111,550) 862,304 1,701,199 19,767 10,744,240 Total $957,959,674 $474,059,558 $457,827,635 $9,888,996 ($1,796,777,471) $102,958,392 University System of Georgia Annual Financial Report FY 2011 72 University System of Georgia Condensed Statement of Revenues, Expenses and Changes in Net Assets by Affiliated Organization (Unaudited) For the Year Ended June 30, 2011 Affiliated Organization No n- O p e r a ti ng Net Assets 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. MCG Health Systems, Inc. Medical College of Georgia Foundation, Inc. Medical College of Georgia Physicians Practice Group Foundation Georgia Health Sciences 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. Revenues $218,937,000 14,895,754 1,625,592 7,273,747 204,582 18,838,897 1,223,801 49,771,387 23,346,358 7,587,819 93,519 653,139 85,746,992 252,767 10,090,085 3,116,975 8,404,515 1,572,229 28,534 10,289 1,386,930 13,231,977 2,315,932 177,360 12,764,858 2,463,233 669,372 1,960,032 534,472 98,696 177,084 6,956 681,897 Increase/ (Decrease) in Net Assets -Beginning Expenses Net Assets of Year ($16,882,225) $170,898,000 $1,000,053,000 (14,450,538) 12,852,042 70,440,293 - 5,492,594 37,179,218 (7,608,037) 4,351,504 4,035,967 831 403,843 (17,179,141) (6,301,161) (13,398,178) (13,084,731) 20,017,459 146,126,738 4,643,828 17,658,054 (8,766,386.00) 15,890,783 251,468,109 709,814 20,492,971 117,741,742 Prior Year Net Assets - Beginning Adjustments of Year Restated 1,000 $1,000,054,000 - 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 Net Assets - End of Year $1,170,952,000 83,292,335 42,671,812 8,387,471 404,674 (19,699,339) 166,144,197 22,301,882 267,358,892 709,814 138,234,713 (1,344,046) (26,656) (53,314) (3,394,448) (13,268,164) (31,344) (9,106,901) (15,968) (1,753,026) 86,811,182 - 327,302 6,227,479 - 335,704 (79,166) - 92,552,343 512,624,746 - 12,306,871 170,986,952 - 16,640,775 109,737,879 4,532,096 70,731,147 - 7,592,855 38,745,774 - 2,105,401 3,097,739 - (101,731) 3,992,269 - 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 85,058,156 6,554,781 256,538 605,177,089 183,293,823 126,378,654 75,263,243 46,338,629 5,203,140 3,890,538 (411,680) (6,641,719) (3,426,970) (3,478,378) (1,519,507) 143,858 3,380,224 14,467,831 (1,447,385) 473,473 9,633,293 3,099,525 822,673 23,259,147 25,660,276 3,291,476 6,848,308 11,536,166 25,923,815 2,475,745 822,673 23,259,147 25,660,276 3,291,476 6,848,308 14,011,911 25,923,815 966,531 26,639,371 40,128,107 1,844,091 7,321,781 23,645,204 29,023,340 (4,166,110) (3,316,283) 389,357 316,897 3,671,064 137,642 203,431 25,891 672,687 5,812,630 5,790,090 44,608,457 12,010,527 959,058 283,136 4,298,351 5,812,630 5,790,090 44,608,457 12,010,527 959,058 283,136 4,298,351 6,201,987 6,106,987 48,279,521 12,148,169 1,162,489 309,027 4,971,038 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. North Georgia College & State University Real Estate 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. Darton Boosters, 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. 210,142 5,219,645 4,330,869 9,889,199 4,290,087 3,263,425 1,108,275 1,814,582 330,792 1,164,738 199,234 1,745,775 2,527,678 779,930 838,270 271,869 59,542 1,148,097 192 18,473 232,500 54,619 200,104 430,613 (5,177,733) (1,954,371) (15,327,415) (3,064,977) (1,488,604) (2,657,941) (2,972,450) (1,948,976) (126,186) (1,590,778) (54,592) (3,100,514) (256,213) (30,150) (3,135,726) (847,558) (9,766,685) 902,844 8,262,531 3,243,920 1,035,841 5,777,097 402,176 677,714 2,807,036 413,069 1,909,761 2,084,236 990,305 2,252,313 1,129,590 639,399 (1,186,783) 267,957 1,323,678 (331,700) (153,297) 90,800 (2,273,422) 908,260 219,871 1,408,168 5,394,828 (637,399) 22,133,230 25,823,221 25,205,623 (323,216) 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 72,895 1,216,040 2,059,877 7,349,803 2,480,915 1,577,554 4,199,337 (458,697) (1) (165,402) (72,370) (24,702) 5,394,828 (637,399) 22,133,230 25,823,221 24,746,926 (323,216) 6,838,863 29,980,543 5,777,190 21,546,857 8,441,481 28,835,928 12,804,488 8,070,370 7,421,523 11,854,875 487,413 3,607,596 72,895 1,216,040 2,059,877 7,325,101 2,480,915 1,577,554 4,199,337 6,297,672 7,625,132 25,377,150 26,859,062 30,524,023 78,960 7,516,577 32,787,579 6,190,259 23,456,618 10,525,717 29,826,233 15,056,801 9,199,960 8,060,922 10,668,092 755,370 4,931,274 (258,805) 1,062,743 2,150,677 5,051,679 3,389,175 1,797,425 5,607,505 Total $530,271,430 ($181,673,415) $451,556,407 $3,048,146,505 $1,755,573 $3,049,902,078 $3,501,458,485 University System of Georgia Annual Financial Report FY 2011 73 UNIVERSITY SYSTEM OF GEORGIA BALANCE SHEET (NON-GAAP BASIS) BUDGET FUNDS June 30, 2011 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories Other Assets Total Assets $ 450,979,715.09 85,148,350.12 126,750,547.40 238,713,370.72 7,927,215.35 48,782,953.90 4,478,803.93 9,860,325.13 $ 972,641,281.64 LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities Total Liabilities $ 5,490,916.72 22,957,985.96 297,463,350.47 66,749,966.40 272,910,048.81 69,098.41 12,232,495.16 $ 677,873,861.93 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 Unreserved: Surplus $ 1,497,767.42 45,213,349.78 55,584,678.43 10,401,669.24 125,074,983.31 12,748,016.06 3,038,239.87 22,205,414.43 8,577,953.55 7,625,666.53 2,799,681.09 Total Fund Balances $ 294,767,419.71 Total Liabilities and Fund Balances $ 972,641,281.64 Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. University System of Georgia Annual Financial Report FY 2011 74 UNIVERSITY SYSTEM OF GEORGIA Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Budget Funds Year Ended June 30, 2011 REVENUES State Appropriations State General Funds Tobacco Funds Non-State Funds Research Funds - Other Research Funds - Federal Stimulus Agency Funds Total Revenue Mandatory and Non-Mandatory Transfers Prior Year Reserves Available for Expenditure Total Funds Available 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 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 Excess of Funds Available over Expenditures FINAL BUDGET ACTUAL VARIANCE $ 1,801,721,416.00 $ 1,801,721,416.00 $ - 9,652,634.00 9,652,634.00 - 2,033,118,157.00 74,652,207.00 2,575,969,894.00 6,495,114,308.00 1,500,000.00 1,870,004,477.15 58,459,572.70 2,273,492,446.18 6,013,330,546.03 39,521,288.83 250,769,803.31 (163,113,679.85) (16,192,634.30) (302,477,447.82) (481,783,761.97) 39,521,288.83 249,269,803.31 6,496,614,308.00 6,303,621,638.17 (192,992,669.83) 12,704,265.00 90,319,893.00 7,633,077.00 63,477,863.00 1,158,134.00 1,539,577.00 3,054,733.00 2,653,432.00 11,433,774.00 3,625,810.00 19,884,886.00 231,784,765.00 40,149,362.00 5,783,997.00 30,441,017.00 13,467,718.00 2,393,133.00 6,106,116.00 9,652,634.00 15,140,552.00 17,572,084.00 5,906,637,486.00 6,496,614,308.00 10,841,215.31 78,911,668.22 6,368,192.38 59,048,802.98 954,801.82 1,266,701.97 2,861,009.20 2,653,432.00 9,551,491.01 3,625,810.00 10,926,821.37 227,389,095.78 39,559,037.11 5,775,270.98 30,441,017.00 13,462,630.00 2,393,133.00 6,094,736.87 9,652,633.32 15,140,473.27 17,388,505.40 5,476,723,562.07 6,031,030,041.06 272,591,597.11 1,863,049.69 11,408,224.78 1,264,884.62 4,429,060.02 203,332.18 272,875.03 193,723.80 1,882,282.99 8,958,064.63 4,395,669.22 590,324.89 8,726.02 5,088.00 11,379.13 0.68 78.73 183,578.60 429,913,923.93 465,584,266.94 University System of Georgia Annual Financial Report FY 2011 75 UNIVERSITY SYSTEM OF GEORGIA Budget Comparison and Surplus Analysis Report (Non-GAAP Basis) Budget Funds Year Ended June 30, 2011 Beginning Fund Balance July 1, 2010 Reserved Unreserved, Undesignated Fund Balance (Surplus) for FY11 Unreserved, Unreserved Fund Balance (Surplus) Returned $ 273,337,414.70 3,041,609.43 (3,041,609.43) Early Return of Surplus in Fiscal 2011 Adjustments Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Other Additions (Deletions) Reserved Fund Balance Carried Over from Prior Year as Funds Available Ending Fund Balance - June 30, 2011 Summary of Fund Balance Reserved Capital Outlay Department Sales & Services Early Retirement Program Indirect Cost Recovery Inventories Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry - Forward Property Reserves Total Reserved Unreserved Surplus Total Fund Balance - June 30, 2011 (1,094,608.16) 3,345,624.57 (1,313,795.94) 0.00 (1,329,009.26) (250,769,803.31) $ 294,767,419.71 $ 1,497,767.42 45,213,349.78 7,625,666.53 55,584,678.43 3,038,239.87 10,401,669.24 125,074,983.31 12,748,016.06 22,205,414.43 8,577,953.55 291,967,738.62 2,799,681.09 $ 294,767,419.71 Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. University System of Georgia Annual Financial Report FY 2011 76 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Advanced Technology Development Center/Economic Development Institute State Appropriation State General Funds Other Funds Total Advanced Technology Development Center/Economic Development Institute Agricultural Experiment Station State Appropriation State General Funds Other Funds Total Agricultural Experiment Station Athens/Tifton Vet Laboratories State Appropriation State General Funds Other Funds Total Athens/Tifton Vet Laboratories Cooperative Extension Service State Appropriation State General Funds Other Funds Total Cooperative Extension Service Forestry Cooperative Extension State Appropriation State General Funds Other Funds Total Forestry Cooperative Extension Forestry Research State Appropriation State General Funds Other Funds Total Forestry Research GA Eminent Scholars Endow TF State Appropriation State General Funds Georgia Radiation Therapy Center Other Funds Georgia Tech Research Institute State Appropriation State General Funds Other Funds Total Georgia Tech Research Institute Marine Institute State Appropriation State General Funds Other Funds Total Marine Institute Marine Resources Extension Center State Appropriation State General Funds Other Funds Total Marine Resources Extension Center Medical College of Georgia Hospital and Clinics State Appropriation State General Funds Public Libraries State Appropriation State General Funds Other Funds Total Public Libraries Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 8,134,317.00 $ 7,808,944.00 $ 7,808,944.00 $ 12,975,000.00 10,475,000.00 12,075,942.00 7,808,944.00 2,666,231.73 21,109,317.00 18,283,944.00 19,884,886.00 10,475,175.73 36,367,589.00 37,552,919.00 73,920,508.00 35,212,885.00 37,552,919.00 72,765,804.00 35,212,885.00 55,107,008.00 90,319,893.00 35,212,885.00 43,992,406.92 79,205,291.92 4,944,522.00 4,944,522.00 4,944,522.00 4,944,522.00 7,633,077.00 7,633,077.00 6,436,249.98 6,436,249.98 30,640,474.00 25,083,929.00 55,724,403.00 29,614,855.00 25,083,929.00 54,698,784.00 29,614,855.00 33,863,008.00 63,477,863.00 29,614,855.00 30,935,018.93 60,549,873.93 563,721.00 400,000.00 963,721.00 535,535.00 400,000.00 935,535.00 535,535.00 622,599.00 1,158,134.00 535,535.00 419,471.23 955,006.23 2,743,045.00 3,950,426.00 6,693,471.00 2,633,323.00 6,950,426.00 9,583,749.00 2,633,323.00 10,070,942.00 12,704,265.00 2,633,323.00 8,846,344.49 11,479,667.49 3,625,810.00 3,625,810.00 3,625,810.00 3,625,810.00 6,111,257.00 148,917,958.00 155,029,215.00 5,866,807.00 223,917,958.00 229,784,765.00 5,866,807.00 225,917,958.00 231,784,765.00 5,866,807.00 221,553,168.94 227,419,975.94 780,985.00 486,281.00 1,267,266.00 749,746.00 486,281.00 1,236,027.00 749,746.00 789,831.00 1,539,577.00 749,746.00 678,799.88 1,428,545.88 1,283,410.00 1,345,529.00 2,628,939.00 1,218,204.00 1,345,529.00 2,563,733.00 1,218,204.00 1,836,529.00 3,054,733.00 1,218,204.00 1,652,730.41 2,870,934.41 31,709,393.00 30,441,017.00 30,441,017.00 30,441,017.00 35,051,419.00 4,522,400.00 39,573,819.00 33,649,362.00 5,222,400.00 38,871,762.00 33,649,362.00 6,500,000.00 40,149,362.00 33,649,362.00 5,911,770.93 39,561,132.93 University System of Georgia Annual Financial Report FY 2011 77 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Prior Year Reserve Carry-Over Funds Available Compared to Budget Program Transfers Total or Adjustments Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Excess (Deficiency) of Funds Available Over/(Under) Expenditures $ -$ 379,662.63 -$ 71,983.34 7,808,944.00 3,117,877.70 $ -$ (8,958,064.30) 7,808,943.93 $ 0.07 $ 3,117,877.44 8,958,064.56 379,662.63 71,983.34 10,926,821.70 (8,958,064.30) 10,926,821.37 8,958,064.63 0.07 0.26 0.33 15,361,376.94 15,361,376.94 - 35,212,885.00 - 59,353,783.86 - 94,566,668.86 4,246,775.86 4,246,775.86 35,212,885.00 43,698,783.22 78,911,668.22 11,408,224.78 11,408,224.78 15,655,000.64 15,655,000.64 433,811.86 433,811.86 - - - 6,870,061.84 - 6,870,061.84 (763,015.16) (763,015.16) 6,368,192.38 6,368,192.38 1,264,884.62 1,264,884.62 501,869.46 501,869.46 3,987,298.50 3,987,298.50 - 29,614,855.00 - 34,922,317.43 - 64,537,172.43 1,059,309.43 1,059,309.43 29,614,855.00 29,433,947.98 59,048,802.98 4,429,060.02 4,429,060.02 5,488,369.45 5,488,369.45 100,559.42 100,559.42 - 535,535.00 - 520,030.65 - 1,055,565.65 (102,568.35) (102,568.35) 535,535.00 419,266.82 954,801.82 203,332.18 203,332.18 100,763.83 100,763.83 1,787,825.33 1,787,825.33 - 2,633,323.00 - 10,634,169.82 - 13,267,492.82 563,227.82 563,227.82 2,633,323.00 8,207,892.31 10,841,215.31 1,863,049.69 1,863,049.69 2,426,277.51 2,426,277.51 - - - - - - - - - 3,625,810.00 - 3,625,810.00 - - 5,866.72 5,866.72 - 5,866,807.00 - 221,559,035.66 - 227,425,842.66 (4,358,922.34) (4,358,922.34) 5,866,807.00 221,522,288.78 227,389,095.78 4,395,669.22 4,395,669.22 36,746.88 36,746.88 72,048.83 72,048.83 - 749,746.00 - 750,848.71 - 1,500,594.71 (38,982.29) (38,982.29) 749,746.00 516,955.97 1,266,701.97 272,875.03 272,875.03 233,892.74 233,892.74 152,801.73 152,801.73 - 1,218,204.00 - 1,805,532.14 - 3,023,736.14 (30,996.86) (30,996.86) 1,218,204.00 1,642,805.20 2,861,009.20 193,723.80 193,723.80 162,726.94 162,726.94 - - 30,441,017.00 - 30,441,017.00 - - - - 33,649,362.00 - 33,647,266.18 2,095.82 2,095.82 - - 5,911,770.93 (588,229.07) 5,911,770.93 588,229.07 - - - 39,561,132.93 (588,229.07) 39,559,037.11 590,324.89 2,095.82 University System of Georgia Annual Financial Report FY 2011 78 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Public Service/Special Funding Initiatives State Appropriation State General Funds State General Funds - Prior Year Total Public Service/Special Funding Initiatives Regents Central Office State Appropriation State General Funds Other Funds Total Regents Central Office Research Consortium State Appropriation State General Funds Tobacco Funds Total Research Consortium Skidaway Institute of Oceanography State Appropriation State General Funds Federal Stimulus Stabilization Funds Other Funds Total Skidaway Institute of Oceanography Teaching State Appropriation State General Funds American Recovery and Reinvestment Act of 2009 Federal Stimulus Stabilization funds State Fiscal Stabilization Fund Stabilization Fund - Education State Grants Other Funds Total Teaching Veterinary Medicine Experiment Station State Appropriation State General Funds Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds Total Veterinary Medicine Teaching Hospital Payments to the Georgia Cancer Coalition State Appropriation Tobacco Funds Payments to Georgia Military College State Appropriation State General Funds Payments to Public Telecommunications Commission, Georgia State Appropriation State General Funds Other Funds Total Payments to Public Telecommunications Commission, Georgia Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 16,854,211.00 $ 16,072,084.00 $ 16,072,084.00 $ 16,072,084.00 - - 1,500,000.00 - 16,854,211.00 16,072,084.00 17,572,084.00 16,072,084.00 5,998,764.00 - 5,998,764.00 5,783,997.00 - 5,783,997.00 5,783,997.00 - 5,783,997.00 5,783,997.00 - 5,783,997.00 15,990,062.00 750,000.00 16,740,062.00 15,140,552.00 - 15,140,552.00 15,140,552.00 - 15,140,552.00 15,140,552.00 - 15,140,552.00 1,374,592.00 - 4,072,620.00 5,447,212.00 1,302,592.00 - 3,550,000.00 4,852,592.00 1,302,592.00 - 4,803,524.00 6,106,116.00 1,302,592.00 - 4,570,618.65 5,873,210.65 1,698,668,785.00 23,186,142.00 - 3,061,614,899.00 4,783,469,826.00 1,596,748,544.00 - 3,597,731,160.00 5,194,479,704.00 1,596,748,544.00 - 4,309,888,942.00 5,906,637,486.00 1,596,748,544.00 - 3,860,260,703.93 5,457,009,247.93 2,763,992.00 2,653,432.00 2,653,432.00 2,653,432.00 471,493.00 9,621,951.00 10,093,444.00 433,774.00 9,621,951.00 10,055,725.00 433,774.00 11,000,000.00 11,433,774.00 433,774.00 10,407,170.01 10,840,944.01 10,354,093.00 9,652,634.00 9,652,634.00 9,652,634.00 2,424,555.00 2,393,133.00 2,393,133.00 2,393,133.00 14,125,833.00 5,088.00 14,130,921.00 13,462,630.00 5,088.00 13,467,718.00 13,462,630.00 5,088.00 13,467,718.00 13,462,630.00 - 13,462,630.00 Budget Unit Totals $ 5,265,467,464.00 $ 5,742,287,023.00 $ 6,496,614,308.00 $ 6,013,330,546.03 University System of Georgia Annual Financial Report FY 2011 79 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Prior Year Reserve Carry-Over Funds Available Compared to Budget Program Transfers Total or Adjustments Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Excess (Deficiency) of Funds Available Over/(Under) Expenditures $ 1,500,000.00 $ (1,500,000.00) $ 16,072,084.00 $ - 1,500,000.00 1,500,000.00 1,500,000.00 - 17,572,084.00 - $ 15,888,505.40 $ - 1,500,000.00 - 17,388,505.40 183,578.60 $ - 183,578.60 183,578.60 - 183,578.60 - - 5,783,997.00 - - - - - 5,783,997.00 - 5,775,270.98 - - - 5,775,270.98 8,726.02 - 8,726.02 8,726.02 - 8,726.02 - - 15,140,552.00 - - - - - 15,140,552.00 - 15,140,473.27 - - - 15,140,473.27 78.73 - 78.73 78.73 - 78.73 178,362.46 294,991.78 473,354.24 (178,362.46) 178,362.46 - 1,302,592.00 - 5,043,972.89 6,346,564.89 240,448.89 240,448.89 1,302,592.00 - 4,792,144.87 6,094,736.87 11,379.13 11,379.13 251,828.02 251,828.02 224,357,453.90 224,357,453.90 100,586.26 - 39,348,719.23 39,449,305.49 1,596,849,130.26 - 4,123,966,877.06 5,720,816,007.32 100,586.26 - (185,922,064.94) (185,821,478.68) 1,596,487,975.71 - 3,880,235,586.36 5,476,723,562.07 260,568.29 - 429,653,355.64 429,913,923.93 361,154.55 - 243,731,290.70 244,092,445.25 - - 2,653,432.00 - 2,653,432.00 - - 1,781.00 2,155,962.21 2,157,743.21 (1,781.00) 1,781.00 - 433,774.00 12,564,913.22 12,998,687.22 1,564,913.22 1,564,913.22 433,774.00 9,117,717.01 9,551,491.01 1,882,282.99 1,882,282.99 3,447,196.21 3,447,196.21 - - 9,652,634.00 - 9,652,633.32 0.68 0.68 - - 2,393,133.00 - 2,393,133.00 - - - - 13,462,630.00 - 13,462,630.00 - - - - - (5,088.00) - 5,088.00 - - - 13,462,630.00 (5,088.00) 13,462,630.00 5,088.00 - $ 250,769,803.31 $ 39,521,288.83 $ 6,303,621,638.17 $ (192,992,669.83) $ 6,031,030,041.06 $ 465,584,266.94 $ 272,591,597.11 University System of Georgia Annual Financial Report FY 2011 80 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Advanced Technology Development Center/Economic Development Institute State Appropriation State General Funds Other Funds Beginning Fund Balance/(Deficit) July 1 Fund Balance Carried Over from Prior Period as Funds Available Return of Fiscal Year 2010 Surplus Prior Period Adjustments $ -$ -$ 379,662.63 (379,662.63) -$ - 507.60 540.52 Total Advanced Technology Development Center/Economic Development Institute 379,662.63 (379,662.63) - 1,048.12 Agricultural Experiment Station State Appropriation State General Funds Other Funds 638.55 15,361,376.94 (15,361,376.94) (638.55) - 47,131.47 11,407.78 Total Agricultural Experiment Station 15,362,015.49 (15,361,376.94) (638.55) 58,539.25 Athens/Tifton Vet Laboratories State Appropriation State General Funds Other Funds 433,811.86 (433,811.86) - - - 685.90 Total Athens/Tifton Vet Laboratories 433,811.86 (433,811.86) - 685.90 Cooperative Extension Service State Appropriation State General Funds Other Funds 3,987,298.50 (3,987,298.50) - 15,145.43 - 1,903.83 Total Cooperative Extension Service 3,987,298.50 (3,987,298.50) - 17,049.26 Forestry Cooperative Extension State Appropriation State General Funds Other Funds 100,559.42 (100,559.42) - 202.35 - - Total Forestry Cooperative Extension 100,559.42 (100,559.42) - 202.35 Forestry Research State Appropriation State General Funds Other Funds 5,385.00 1,782,503.17 (1,787,825.33) (5,385.00) 5,322.16 1,167.31 69.89 Total Forestry Research 1,787,888.17 (1,787,825.33) (62.84) 1,237.20 GA Eminent Scholars Endow TF State Appropriation State General Funds - - - - Georgia Radiation Therapy Center Other Funds - - - - Georgia Tech Research Institute State Appropriation State General Funds Other Funds 10,039.56 5,866.72 (5,866.72) (10,039.56) - 297.45 4,604.85 Total Georgia Tech Research Institute 15,906.28 (5,866.72) (10,039.56) 4,902.30 Marine Institute State Appropriation State General Funds Other Funds 72,048.83 (72,048.83) - 216.00 - - Total Marine Institute 72,048.83 (72,048.83) - 216.00 Marine Resources Extension Center State Appropriation State General Funds Other Funds 152,801.73 (152,801.73) - 966.39 - - Total Marine Resources Extension Center 152,801.73 (152,801.73) - 966.39 Medical College of Georgia Hospital and Clinics State Appropriation State General Funds - - - - Public Libraries State Appropriation State General Funds Other Funds 7,733.01 - - (7,733.01) 1,746.86 - - - Total Public Libraries 7,733.01 - (7,733.01) 1,746.86 University System of Georgia Annual Financial Report FY 2011 81 Other Adjustments UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Early Return of Fiscal Year 2011 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures Ending Fund Balance/(Deficit) June 30 Analysis of Ending Fund Balance Reserved Surplus/(Deficit) Total $ -$ -$ 0.07 $ 507.67 $ - - 0.26 540.78 - - 0.33 1,048.45 -$ - 507.67 $ 540.78 - 1,048.45 507.67 540.78 1,048.45 - - - 47,131.47 - 47,131.47 47,131.47 - - 15,655,000.64 15,666,408.42 15,666,408.42 - 15,666,408.42 - - 15,655,000.64 15,713,539.89 15,666,408.42 47,131.47 15,713,539.89 - - - - - - - - - 501,869.46 502,555.36 502,555.36 - 502,555.36 - - 501,869.46 502,555.36 502,555.36 - 502,555.36 (413.00) - (413.00) - - 14,732.43 - 14,732.43 14,732.43 - 5,488,369.45 5,490,273.28 5,490,273.28 - 5,490,273.28 - 5,488,369.45 5,505,005.71 5,490,273.28 14,732.43 5,505,005.71 - - - 202.35 - 202.35 202.35 - - 100,763.83 100,763.83 100,763.83 - 100,763.83 - - 100,763.83 100,966.18 100,763.83 202.35 100,966.18 - - - 1,167.31 - 1,167.31 1,167.31 - - 2,426,277.51 2,426,347.40 2,426,347.40 - 2,426,347.40 - - 2,426,277.51 2,427,514.71 2,426,347.40 1,167.31 2,427,514.71 - - - - - - - - - - - - - - - - - 297.45 - 297.45 297.45 - - 36,746.88 41,351.73 36,746.88 4,604.85 41,351.73 - - 36,746.88 41,649.18 36,746.88 4,902.30 41,649.18 - - - 216.00 - 216.00 216.00 - - 233,892.74 233,892.74 233,892.74 - 233,892.74 - - 233,892.74 234,108.74 233,892.74 216.00 234,108.74 - - - 966.39 - 966.39 966.39 - - 162,726.94 162,726.94 162,726.94 - 162,726.94 - - 162,726.94 163,693.33 162,726.94 966.39 163,693.33 - - - - - - - - - 2,095.82 3,842.68 - - - - - - 2,095.82 3,842.68 - 3,842.68 - - - 3,842.68 3,842.68 - 3,842.68 University System of Georgia Annual Financial Report FY 2011 82 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Public Service/Special Funding Initiatives State Appropriation State General Funds Tobacco Funds Beginning Fund Balance/(Deficit) July 1 Fund Balance Carried Over from Prior Period as Funds Available Return of Fiscal Year 2010 Surplus Prior Period Adjustments $ 1,571,411.94 - $ (1,500,000.00) $ - (71,411.94) $ - 34,174.63 - Total Public Service/Special Funding Initiatives 1,571,411.94 (1,500,000.00) (71,411.94) 34,174.63 Regents Central Office State Appropriation State General Funds Other Funds 7,165.00 - - (7,165.00) - - - - Total Regents Central Office 7,165.00 - (7,165.00) - Research Consortium State Appropriation State General Funds Tobacco Funds 688.30 - - (688.30) 3,568.18 - - - Total Research Consortium 688.30 - (688.30) 3,568.18 Skidaway Institute of Oceanography State Appropriation State General Funds Federal Stimulus Stabilization Funds Other Funds 831.75 - (831.75) - 178,362.46 (178,362.46) - - 294,991.78 (294,991.78) - - Total Skidaway Institute of Oceanography 474,185.99 (473,354.24) (831.75) - Teaching State Appropriation State General Funds American Recovery and Reinvestment Act Federal Stimulus Stabilization funds State Fiscal Stabilization Fund Stabilization Fund - Education State Grants Other Funds 1,100,529.09 - 226,199,803.09 - - (224,357,453.90) (1,100,529.09) - (1,842,349.19) 2,070,850.64 - (120,934.20) Total Teaching 227,300,332.18 (224,357,453.90) (2,942,878.28) 1,949,916.44 Veterinary Medicine Experiment Station State Appropriation State General Funds 160.00 - (160.00) 1,079.78 Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds 1,781.00 2,155,962.21 (1,781.00) (2,155,962.21) - - - (43,504.03) Total Veterinary Medicine Teaching Hospital 2,157,743.21 (2,157,743.21) - (43,504.03) Payments to the Georgia Cancer Coalition State Appropriation Tobacco Funds 0.20 - (0.20) - Payments to Georgia Military College State Appropriation State General Funds - - - - Payments to Public Telecommunications Commission, Georgia State Appropriation State General Funds Other Funds - - - - - - - - Total Payments to Public Telecommunications Commission, Georgia - - - - Total Operating Activity 253,811,412.74 (250,769,803.31) (3,041,609.43) 2,031,828.63 Prior Year Reserves Note Available for Expenditure Inventories Uncollectible Accounts Receivable Early Retirement Program 3,303,174.03 11,819,055.83 7,445,381.53 - - - - - - - - - Budget Unit Totals $ 276,379,024.13 $ (250,769,803.31) $ (3,041,609.43) $ 2,031,828.63 University System of Georgia Annual Financial Report FY 2011 83 Other Adjustments UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Early Return of Fiscal Year 2011 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures Ending Fund Balance/(Deficit) June 30 Analysis of Ending Fund Balance Reserved Surplus/(Deficit) Total $ - $ (32,809.37) $ 183,578.60 $ 184,943.86 $ 159,637.78 $ 25,306.08 $ 184,943.86 - - - - - - - - (32,809.37) 183,578.60 184,943.86 159,637.78 25,306.08 184,943.86 - (8,726.02) 8,726.02 - - - - - - - - - - - - (8,726.02) 8,726.02 - - - - - - 78.73 3,646.91 - - - - - - 78.73 3,646.91 - 3,646.91 - - - 3,646.91 3,646.91 - 3,646.91 - - - - - - - - - - - - - - - - 251,828.02 251,828.02 251,828.02 - 251,828.02 - - 251,828.02 251,828.02 251,828.02 - 251,828.02 283,428.27 - (2,481,292.35) (2,197,864.08) (1,053,072.77) - (1,053,072.77) 361,154.55 - 243,731,290.70 244,092,445.25 1,662,360.69 - 241,129,064.15 242,791,424.84 240,095,986.58 240,095,986.58 1,662,360.69 - 1,033,077.57 2,695,438.26 1,662,360.69 - 241,129,064.15 242,791,424.84 - - - 1,079.78 - 1,079.78 1,079.78 24,956.75 24,956.75 - - - - - 3,447,196.21 3,428,648.93 3,428,648.93 - 3,447,196.21 3,428,648.93 3,428,648.93 - - - 3,428,648.93 - 3,428,648.93 - - 0.68 0.68 - 0.68 0.68 - - - - - - - - - (2,173,320.33) - - (1,094,608.16) - - 272,591,597.11 - - 271,355,497.25 - - 268,555,816.16 - - 2,799,681.09 - - 271,355,497.25 (264,934.16) - 928,960.23 - 180,285.00 - - 3,038,239.87 - 12,748,016.06 - 7,625,666.53 3,038,239.87 12,748,016.06 7,625,666.53 - 3,038,239.87 - 12,748,016.06 - 7,625,666.53 $ (1,329,009.26) $ (1,094,608.16) $ 272,591,597.11 $ 294,767,419.71 $ 291,967,738.62 $ 2,799,681.09 $ 294,767,419.71 University System of Georgia Annual Financial Report FY 2011 84 UNIVERSITY SYSTEM OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE BUDGET FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Summary of Ending Fund Balance Reserved Capital Outlay Departmental Sales and Services Early Retirement Program Indirect Cost Recoveries Inventories Property Reserves Restricted/Sponsored Funds Technology Fees Tuition Carry-Over Uncollectible Accounts Receivable Unreserved Surplus Total Ending Fund Balance - June 30 Reserved Surplus Total Fund Balance $ 1,497,767.42 $ 45,213,349.78 7,625,666.53 55,584,678.43 3,038,239.87 8,577,953.55 125,074,983.31 10,401,669.24 22,205,414.43 12,748,016.06 - $ 1,497,767.42 45,213,349.78 7,625,666.53 55,584,678.43 3,038,239.87 8,577,953.55 125,074,983.31 10,401,669.24 22,205,414.43 12,748,016.06 - 2,799,681.09 2,799,681.09 $ 291,967,738.62 $ 2,799,681.09 $ 294,767,419.71 University System of Georgia Annual Financial Report FY 2011 85 University System of Georgia Financial Statement Findings June 30, 2011 The auditor is required to communicate to management and those charged with governance deficiencies in internal controls identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the University System of Georgia's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Any identified deficiencies in internal controls that the auditors did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated January 17, 2012. Internal control deficiencies and/or material weaknesses are presented below: Atlanta Metropolitan College FS-561-11-01 Fort Valley State University FS-533-11-01 FS-533-11-02 FS-533-11-03 FS-533-11-04 Georgia Perimeter College FS-571-11-01 FS-571-11-02 Macon State College FS-581-11-01 FS-581-11-02 FS-581-11-03 Skidaway Institute of Oceanography FS-593-11-01 FS-593-11-02 FS-593-11-03 South Georgia College FS-587-11-01 FS-587-11-02 FS-587-11-03 FS-587-11-04 University System Office FS-472-11-01 Detailed information on these findings is available in the individual college or university report for the fiscal year ended June 30, 2011 located at http://www.audits.ga.gov. University System of Georgia Annual Financial Report FY 2011 86 Acknowledgements Published by Office of Fiscal Affairs: John E. Brown, Vice Chancellor, Fiscal Affairs Vikki L. Williamson Theresa Jackson Ben M. Riden, Jr. Bruce Jackson 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 Jeffrey Preston, 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 Henry Spinks, Fort Valley State University Paul Glaser, Gainesville State College Paul Jones, Georgia College and State University Laura Maxwell, Georgia Gwinnett College Dennis Roemer, Georgia Health Sciences University 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 Lynn Hobbs, Middle Georgia College Mac McConnell, North Georgia College and State University Edward Jolley, Savannah State University Wilbur B. Shuler, South Georgia College Bill Prigge, Southern Polytechnic State University Tim Burgess, University of Georgia Jim Sutherland, University of West Georgia Sue Mitchell, Valdosta State University Marcus Latham, Waycross College Natalie Higley, Skidaway Institute of Oceanography Kristi Fuss, University System Office Photography: Courtesy of University System of Georgia Institutions University System of Georgia Annual Financial Report FY 2011 87 Published by the Office of Fiscal Affairs 270 Washington Street, SW Atlanta, Georgia 30334 "Creating a More Educated Georgia" www.usg.edu