{"response":{"docs":[{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2009-h2010","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2010","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2009/2010"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, GA : Georgia. Dept. of Audits and Accounts, 2010"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2010"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2009-h2010"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2009-h2010"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"GEORGIA INSTITUTE OF \r\nTECHNOLOGY \r\nATLANTA, GEORGIA \r\nREPORT ON AUDIT OF THE FINANCIAL STATEMENTS \r\nFOR THE FISCAL YEAR ENDED \r\nJUNE 30,2010 \r\nGeorgia Audits and Accounts \r\nRussell W=Winton \r\nSWte Auditor : \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS EXH IBlTS A STATEMENT OF NET ASSETS B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS C STATEMENTOFCASHFLOWS D NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULES \r\n1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND \r\n2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND \r\n3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND \r\n4 RECONCILIATION OF SALARIES AND TRAVEL \r\nSECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENOTF AUDITSAND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-1 56 Atlanta, Georgia 30334-8400 \r\nJanuary 1 8 , 2 0 1 1 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia \r\nand Honorable G. P. \"Bud\" Peterson, President Georgia lnstitute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia lnstitute of Technology, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30,2010. These financial statements are the responsibility of the Georgia lnstitute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the 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 Institute'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. \r\nAs discussed in Note 1,the financial statements of Georgia lnstitute of Technology are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Georgia lnstitute of Technology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America. \r\nIn our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia lnstitute of Technology as of June 30, 2010, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\n \r\n Management's Discussion and Analysis is not a part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information. However, we did not audit this information and express no opinion on it. \r\nOur audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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. \r\nRespectfully submitted, \r\n~ u s k e lWl . Hinton, CPA, CGFM State Auditor \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\n \r\nThe Georgia lnstitute of Technology (Georgia Tech) is one of the 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nation's top research universities, with over $565 million expended on sponsored research activities. The University is a national and international leader in scientific and technological research and education. Distinguished by its commitment to improving the human condition through advanced science and technology, Georgia Tech provides a focused, technology-based education for more than 20,000 undergraduate and graduate students. Accredited by the Southern Association of Colleges and Schools (SACS), Georgia Tech has many nationally recognized programs and is the only technological university consistently ranked in US. News and World Report's listing of America's Top Ten public universities. Undergraduate and graduate programs in Georgia Tech's College of Engineeringare currently ranked in the country's Top Five by U.S. Newsand World Repoft Seven undergraduate engineering programs are ranked in the top five and ten graduate engineering programs are ranked in the top ten of their respective disciplines. Georgia Tech is ranked among the top ten universities for the number of engineering degrees awarded to minority students at the Bachelor's, Master's and Doctoral level by Diverse Issues in Higher Education. These impressive national rankings reflect the academic prestige long associated with the Georgia Tech curriculum. Georgia Tech offers degrees through the Colleges of Architecture, Computing, Engineering, Management, Sciences, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\n \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research institution that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the lnstitute provides a cutting edge education for the 21st century. \r\n \r\nThe lnstitute continues to grow as reflected by the faculty and student numbers below and other comparisons that follow. \r\n \r\nFaculty \r\n \r\nStudents (Headcount) \r\n \r\nStudents (FTE) \r\n \r\nFiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 \r\n \r\nOverview of the Financial Statements and Financia/ Analysis \r\nThe Georgia lnstitute of Technology is pleased to present its financial statements for fiscal year 2010, which began July 1,2009, and ended June 30, 2010. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the lnstitute as a whole, with resources classified for accounting and reporting purposes into five net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; restricted-capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets and capitalization and amortization of intangible assets. Comparative data is provided for fiscal year 2 0 1 0 and fiscal year 2009. \r\n \r\n Statement of Net Assets \r\n \r\nThe Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to readers of the financial statements a fiscal snapshot of the Georgia lnstitute of Technology. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements. \r\n \r\nFrom the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. \r\n \r\nFinally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into three categories, nonexpendable, expendable and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. \r\n \r\nStatement of Net Assets, Condensed \r\n \r\nJune 30,2010 \r\n \r\nJune 30,2009 \r\n \r\nAssets Current Assets Capital Assets, Net Other Assets \r\n \r\n65,294,608 \r\n \r\nTotal Assets \r\n \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\n \r\nTotal Liabilities \r\n \r\nNet Assets Invested in Capital Assets. Net of Debt \r\nRestricted - Nonexpendable \r\nRestricted - Expendable \r\nRestricted - Capital Projects \r\nUnrestricted \r\n \r\nTotal Net Assets \r\n \r\n The total assets of the institution increased by $79,136,862. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $58,778,751 in the category of Current Assets and an increase of $16,137,036 in the category of Capital Assets, Net. The balance of the increase is mainly in receivablecategories. \r\nThe total liabilities for the year increased by $7,211,944. The combination of the increase in total assets of $79,136,862 and the increase in total liabilities of $7,211,944 yields an increase in total net assets of $71,924,918. The increase in total net assets is mostly in the categories of Invested in Capital Assets, Net of Debt, in the amount of $30,845,410 and Restricted Capital Projects in the amount of $20,443,973. \r\nStatement of Revenues, Expenses and Changes in Net Assets \r\nChanges in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. \r\nStatement of Revenues, Expenses and Changes in Net Assets, Condensed \r\n \r\nJune 30,2010 \r\n \r\nJune 30,2009 \r\n \r\nOperating Revenues Operating Expenses \r\nOperating Loss Nonoperating Revenues and Expenses Income (Loss) Before Other Revenues, \r\nExpenses, Gains or Losses Other Revenues, Expenses, Gains or Losses Increase in Net Assets Net Assets at Beginningof Year, \r\nas Originally Reported Prior Year Adjustments Net Assets at Beginning of Year, Restated Net Assets at End of Year \r\n \r\n$ -197,435,021 243,583,503 \r\n$ 46,148,482 18,468,836 \r\n$ 1,091,759,975 \r\n \r\n$ -229,667,833 251,100,555 \r\n$ 21,432,722 58,057,023 \r\n$ 1,004,962,630 \r\n \r\n The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows: \r\n \r\nRevenue by Source For the Years EndedJune 30,2010 and June 30,2009 \r\n \r\nJune 30,2010 \r\n \r\nJune 30,2009 \r\n \r\nOperating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other \r\n \r\n$ 177,483,251 564,747,448 23,542,501 86,485,013 15,888,634 \r\n \r\n$ 151,714,908 517,828,642 15,584,108 99,065,680 10,061,076 \r\n \r\nTotal Operating Revenue \r\n \r\nNonoperating Revenue State Appropriations \r\nFederal Stimulus - Stabilization Funds \r\nGrants and Contracts Gifts Investment Income Other \r\n \r\n$ 207,583,762 36,834,145 10,929,167 2,975,439 12,163,449 1,433,906 \r\n \r\n$ 254,937,701 2,280,374 6,732,250 \r\n18,321,576 13,064,514 -16,516,9 13 \r\n \r\nTotal NonoperatingRevenue \r\n \r\nCapital Grants and Gifts State Other \r\n \r\nTotal Capital Grants and Gifts \r\n \r\nTotal Revenues \r\n \r\n Expenses (By Functional Classification) For the Years Ended June 3 0 , 2 0 1 0 and June 30,2009 \r\nJune 30,2010 \r\nOperating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises \r\nTotal Operating Expenses \r\nNonoperating Expenses Interest Expense (Capital Assets) \r\nTotal Expenses \r\n \r\nJune 30,2009 \r\n \r\n The StatBm\u0026ritof Re\\raW'iT'\u0026g,Dpenses and Changes ti1 Net Assets reflects an 'Increase in Operating Revenues, a decrease in NonoperatingRevenues, and a decrease In State Approprlations. Overall, r:~tnua.~fl~t:(?~#LIw.~IIUL!CIJ~.A#..!.(.1~1stm,!n,Idthe graph betow. \r\nGeorgia Institute of TechRevenue \r\n(Warnh rnbns) \r\n \r\na\"' sm . - \r\n \r\n-- \r\n \r\nm- - -- \r\n \r\n. + . .. \r\n \r\n In the Operating Expenses by Object of Expenditure Class graph below, total operating expenses for \r\nthe year were approximately $1,065.8 rnllllon. Slgnfflcant Increases In operating expenses from fiscal year 2009 to flscal year 2010 Include Selarles and Benefits and Travel, Supplles and Other. These categories Increased by $19.9 rnllllon and $22.1 million respectfvely, primarily due to an increase In research operations. Overall operating expenses increased by $41.7 milllon, or 4.1% wer the previousyear. \r\nGeorgia Institute of Technology Operating Expenses by Object of Expenditure Class \r\njdollqps In_mllllorrs) \r\n \r\n$0 \r\nmr! Salariesand Bgnefits Travel, Supplband \r\n \r\nDepreciation \r\n \r\nUtilitlw \r\n \r\nSc holanhips and Fellow hlps \r\n \r\n In the Opemtlng Expenses by Fundtonal Class graph below, Instruction, Research and Public Service expenses increased by $31.0 million, and Plant Operations and Malntenance increased by $9.2 \r\nmillion. Auxiliary Enterprisesexpense decreased by $9.8 millton, T h e e changes resulted In s $41-7 mlllion increase in operating expenses for the year. \r\nGeorgia Institute of Technology Operating Expenses by Functional Class \r\n(dollars In mlllionsj \r\n \r\nInstruction, Remarch, Academie, Student, PlantOperationsand Auxiliary Enterpriw Schol~rshipsand \r\n \r\nand PublicSrvioe and lnstitrrtional \r\n \r\nMaintenance \r\n \r\nF~~lowshipe \r\n \r\nsupport \r\n \r\nviil \r\n \r\n Statement of Cash Flows \r\nThe final statement presented by the Georgia lnstitute of Technology is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. \r\n \r\nCash Flows for the Years Ended June 30,2010, and 2009, Condensed \r\n \r\nJune 30,2010 \r\n \r\nJune 30,2009 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital FinancingActivities Capital and Related FinancingActivities Investing Activities \r\n \r\n$ -106,702,109 258,507,711 -109,563,694 \r\n \r\n$ -133,004,982 278,134,846 -152,7 16,740 \r\n \r\nNet Change in Cash Cash, Beginningof Year \r\n \r\nCash, End of Year \r\n \r\nThe lnstitute had no individually significant additions of Buildings, Infrastructure or Facilities and Other Improvements for fiscal year 2010. \r\nFor additional information concerning Capital Assets, see Notes 1,6,8,9, and 1 0 in the Notes to the Financial Statements. \r\nLong- Term Liabilities \r\nGeorgia lnstitute of Technology had Long-Term Liabilities of $559,279,080 of which $40,277,096 was reflected as current liability at June 30, 2010. \r\nFor additional information concerning Long-Term Liabilities, see Notes 1and 8 in the Notes to the Financial Statements. \r\n \r\n Economic Outlaak \r\nThe lnstitute is expecting significant economic challenges in the next fiscal year. Planning guidelines from the USG Chancellor have been received for a 4% to 8% budget cut from the fiscal year 2 0 1 1 state appropriations which is approximately between $9.2 million and $18.5 million for Resident Instruction and the B Units, which consist of Georgia Tech Research lnstitute (GTRI) and Economic Innovation lnstitute (Ell). These cuts are in addition to the permanent cut of $46.4 million in fiscal year 2010 and $20.8 million in fiscal year 2009, totaling $67.2 million or 24% of the fiscal year 2009 base budget for these units. These cuts, coupled with rapidly rising energy costs, increased debt service costs and the institute's strategic planning efforts in the next fiscal year will necessitate management examine all aspects of the Institute's operations, including the primary missions of instruction, research and public service. While every effort is made to absorb the brunt of economic downturns in the support services area, this may not be possible given the magnitude of the downturn and the impact of the proposed budget cut. \r\nGeorgia Tech received $36.8 million in Federal stimulus funds in the fiscal year 2010 operating budget to help mitigate cuts. However, the lnstitute does not expect t o receive any stimulus funds in fiscal year 2011. \r\nAt the same time, the lnstitute anticipates a bright economic future with the continued growth of sponsored research. Sponsored awards grew to approximately $558 million in fiscal year 2010 which is a 15.4% increase over the previous fiscal year. In fiscal year 2010, sponsored revenue increased by 9.1% to approximately $565 million. The lnstitute expects growth in sponsored research programs to continue in future fiscal years if sufficient funding is available for related facilities and administrative support. \r\nAs part of Georgia Tech's move to an undergraduate market tuition rate, the Board of Regents (BOR) approved a major tuition increase of $500 per semester for students taking more than 6 hours and $300 per semester for students taking 6 hours or less. This is in addition to the 25% tuition increase in fiscal year 2010. Georgia Tech 3rd and 4th year students on the BOR's guaranteed fixed for four tuition plans will see no change in their per-credit-hour tuition rate. Graduate students will see a 25% increase in resident tuition and a 5% increase in nonresident tuition. The lnstitute expects similar tuition increases for fiscal year 2012 as it moves its tuition closer to its peer institutions. All students are assessed an Institutional Fee of $194 per semester, which is set to expire fiscal year 2011. \r\nThe additional revenue generated from the growth in sponsored awards and the increase in tuition should help to mitigate the stagnant or negative growth in other areas at the Institute. \r\nMr. Steven G. Swant Executive Vice President Georgia lnstitute of Technology \r\nDr. G. P. \"Bud\" Peterson President Georgia lnstitute of Technology \r\n \r\n BASIC FINANCIAL STATEMENTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 3 0 . 2 0 1 0 \r\nCurrent Assets Cash and Cash Equ~valents Short-Term Investments Accounts Receivable. Net (Note 3) Federal Financ~aAl ssistance Other Inventories (Note 4) Prepaid Items \r\nTotal Current Assets \r\nNoncurrent Assets Investments Notes Receivable, Net Capital Assets. Net (Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Salar~esPayable Beneflts Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposlts Held for Other Organizations Lease Purchase Obllgat~ons Compensated Absences \r\nTotal Current L ~ a b ~ l ~ t l e s \r\nNoncurrent Liabilities Lease Purchase Obl~gations Deferred Revenue Compensated Absences \r\nTotal Noncurrent L~ab~lities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets. Net of Related Debt Restricted for: \r\nNonexpendable Expendable Capital Projects Unrestricted \r\nTotal Net Assets \r\nThe notes t o the financial statements are an integral part of this statement. \r\n- 2- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENTOF REVENUES, EXPENSESAND CHANGES IN NET ASSETS \r\nYEAR ENDEDJUNE 30,2010 \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nGrants and Contracts Federal Federal s t ~ m u l u s State Other \r\nSales and Servlces of Educational Departments Rents and Royalties Auxil~aryEnterprrses \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Servrces Other Organizatlons Other Operatlng Revenues \r\nTotal Operating Revenues \r\ngPERATlNG EXPENSES \r\nSalaries Faculw Staff \r\nEmployee Benef~ts Other Personal Services Travel Scholarships and Fellowships utllrtles Supplies and Other Servlces Depreciabon \r\nTotal Operating Expenses \r\nOperatlng Income (Loss) \r\nNONOPERATINS REVENUES IEXPENSEa \r\nState Appropriations FederalStimulus -Stabilization Funds Grants and Contracts \r\nFederal Federal Stimulus Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before Other Revenues. Expenses. Gains, or Losses \r\nCapital Grants and Gifts State Other \r\nTotal Other Revenues. Expenses, Gains or Losses \r\nIncrease (Decrease)in Net Assets \r\nNet Assets - Beglnnlng of Year (As Orlglnally Reported) \r\nPrior Year Adjustments \r\nNet Assets - Beginning of Year. Restated \r\nNet Assets - End of Year \r\nThe notes to the financ~asltatements are an Integral part of thls statement \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDEDJUNE 30,2010 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Paymentsto Suppliers Paymentsto Employees Paymentsfor Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loansto Students and Employees Auxiliary EnterpriseCharges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used)by OperatingActrvities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations \r\nFederal Stimulus - Stabilization Funds \r\nAgency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other NonoperatingReceipts \r\nNet Cash Flows Provided (Used)by Noncapital FinancingActiv~ties \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchasesof Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES lnterest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by InvestingActivities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents - Beginningof Year \r\nCash and Cash Equivalents - End of Year \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDEDJUNE 30.2010 \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to ReconcileOperatingIncome to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\nNet Cash Provided (Used) by Operating Activities \r\nNONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of InvestmentsRecognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts \r\n \r\nEXHIBIT \"C\" \r\n \r\nThe notesto the financial statements are an integral part of this statement - 5 - \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNote 1. Summary of SgniWwntAccounting Policies \r\nNature of Operations Georgia lnstitute of Technology serves the state, national and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and throughout the country. \r\nReporting Entity Georgia lnstitute of Technology is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia lnstitute of Technology as a separate reporting entity. \r\nThe Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia lnstitute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia lnstitute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial ReoortingStandards. \r\nLegally separate, tax exempt organizations whose activities primarily support units of 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 for additional information. \r\nFinancial 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 Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows. \r\nGenerally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. \r\nNew Accounting Pronouncements In fiscal year 2010, Georgia lnstitute of Technology adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporting for Intangible Assets. The provisions of this Statement generally required retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. \r\nIn addition, Georgia lnstitute of Technology adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 2. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nBasis of Accounting For financial reporting purposes, the lnstitute is considered a special-purpose government engaged only in business-typeactivities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the following paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. \r\nThe lnstitute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The lnstitute has elected to not apply FASB pronouncements issued after the applicable date. \r\nCash 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 lnvestment Pool and the Board of Regents Short-Term lnvestment Pool. \r\nShort-Term lnvestments Short-Term lnvestments consist of investments of 9 0 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nlnvestments lnvestments 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 lnstitute 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 Diversified Fund and the Georgia Extended Asset Pool are included under Investments. \r\nAccounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\nInventories Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale lnventories are valued at cost using the average-cost basis. \r\nNoncurrent lnvestments Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nCapital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or greater and the useful life meets or exceeds 5 years. Renovations to Buildings, Infrastructure and Facilities and Other Improvements are capitalized as betterments when the expenditure for the renovation meets or exceeds the capitalization threshold of $100,000. The lnstitute uses the parent/child methodology to track the costs of nonresearch buildings. In this instance, the original asset is considered the \"parent\" and any improvements that meet the capitalization criteria above are considered \"children\". The child asset normally takes on the remaining useful life of the parent asset unless it is determined that the child asset increases the useful life of the structure by 25 percent of the original life. In this case, the net book value of the original building is recapitalized along with the eligible improvements as a new asset and the original building asset is retired. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. \r\nDepreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 4 0 to 5 0 years for buildings, 25 to 7 5 years for infrastructure, 20 to 5 0 years for facilities and other improvements, 1 0 years for library books and 5 to 1 0 years for equipment. Nonresearch buildings are generally depreciated over 4 0 to 5 0 years as indicated above. Research buildings are depreciated by building component such as elevators, general structure, HVAC, roof, etc. The useful life of these components is generally between 20 and 5 0 years. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. \r\nAmortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 2 0 years. \r\nTo obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financingand 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. \r\nFor projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the lnstitute when complete. For projects managed by the Institute, the lnstitute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2010, GSFIC transferred capital additions valued at $2,022,346 to Georgia lnstitute of Technology. Of this amount, $248,746 was GSFIC State funded and $1,773,600 was Institutionally funded. \r\nDeposits Deposits represent good faith deposits from students to reserve housing assignments in an lnstitute residence hall. \r\nDeferred 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. \r\n \r\n GEORGIA I N S m U T E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nCompensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Georgia lnstitute of Technology had accrued liability for compensated absences in the amount of $35,336,051 as of July 1,2009. For fiscal year 2010, $22,265,086 was earned in compensated absences and employees were paid $20,050,958, for a net increase of $2,214,128. The ending balance as of June 30, 2010, in accrued liability for compensated absences was $37,550,179. \r\nNoncurrent Liabilities Noncurrent liabilities include (1)liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\nNet Assets The Institute's net assets are classified as follows: \r\nInvested in capitalasse6, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFlC as discussed previously in Note 1- Capital Assets section. \r\nRestricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment \r\nand 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 lnstitute 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. \r\nRestriced net assets - expendable: Restricted expendable net assets include resources in which the \r\nlnstitute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\nExpendable Restricted Net Assets include the following: \r\n \r\nRestricted - E\u0026G and Other Organized Activities $ Federal Loans Institutional Loans Quasi-Endowments \r\n \r\n2,605,447 6,702,553 6,062,633 26,410,906 \r\n \r\nTotal Restricted Expendable \r\n \r\nRestricted net assets - expendable - Gpital Projects: This represents resources for which the lnstitute \r\nis legally or contractually obligated to spend resources for capital projects in accordance with \r\nrestrictions imposed by external third parties. \r\n \r\n GEORGIA INSmUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nUnrestriied net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2010, there was a surplus balance of $122,528.11 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\nUnrestricted Net Assets includes the following items which are quasi-restricted by management. \r\nR \u0026 R Reserve Reserve for Encumbrances Reserve for lnventoty Other Unrestricted \r\nTotal Unrestricted Net Assets \r\nWhen an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. \r\nIncome Taxes Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\nClassification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria: \r\nOperating 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. \r\nNonoperating Revenues Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, RepatZing Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. \r\nOperating Expenses Operating expense includes activities that have the characteristics of exchange transactions. \r\nNonoperating Expenes Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO M E FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nScholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the lnstitute has recorded contra revenue for scholarship allowances. \r\nRestatement of Capital Assets, Not Being Depreciated; Capital Assets, Being Depreciated/Amortized; Accumulated Depreciation/Amortization; and Capital Assets, Net \r\n- GASB 35, Basic Financial Statemem - and Management's Discussion and Analysis for Public Colleges \r\nand Univefiities- an amendment of GASBStatement No. 34, was issued November 1999 and effective for the financial statements of Phase I governments for periods beginning after June 15, 2001. This statement required public entities to maintain fixed asset records in a complete, accurate and detailed manner and generally required depreciation to be reported on all capital assets. Due to the implementation of this pronouncement, the lnstitute initiated a project with American Appraisal Associates (AAA) to conduct a building valuation study to identify the cost, accumulated depreciation and useful life for buildings. At the conclusion of this project, AAA issued a report on all buildings for the items listed above. \r\nIn fiscal year 2009, the lnstitute embarked upon a project (The Building Project) to review cost, depreciation and depreciation methodology for all nonequipment assets. During this process, the cost of building assets was reconciled to the AAA report. The lnstitute inadvertently reconciled the cost of building assets t o the incorrect cost line on the report, thus removing Federal Funding from the cost of all building assets with this type of funding. The Department of Audits and Accounts (DOAA) issued the lnstitute an \"Uncorrected Misstatement\" for this issue during the fiscal year 2009 audit. In fiscal year 2010, the lnstitute thoroughly reviewed all building assets with Federal Funding and corrected all issues with cost and accumulated depreciation in the beginning balance for capital assets on the financial statement. \r\nGASB 51, Accounting and Financial Reporting for IntangibleAssets; was issued July 2007 and effective for financial statements for periods beginning after June 15, 2009. This statement establishes accounting and financial reporting requirements for intangible assets such as easements, water rights, timber rights, patents, trademarks, and computer software to reduce inconsistencies and enhance the accounting and financial reporting of these assets among state and local governments. This statement also establishes guidance specific to intangible assets related to amortization and determination of useful life. In fiscal year 2010, the lnstitute identified all intangible assets that met the capitalization threshold in their particular category and retroactively included their cost and accumulated amortization in the July 1,2009, beginning balance for capital assets on the financial statement. \r\nDuring the fiscal year 2010 year-end review, the lnstitute noted a few additional issues with assets that needed to be corrected. These issues included the following: \r\n1. Prior year Construction Work-in-Progress (WIP)that should have been capitalized; 2. an affiliate organization asset mistakenly included in WIP for the Institute; 3. a building asset incorrectly classified as Infrastructure; and 4. a profile correction for an asset erroneously set up for cost and depreciation purposes. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nAll issues with cost and accumulated depreciation for these assets have been corrected in the beginning balance for capital assets on the financial statement. \r\n \r\nThe net effect on the financial statements for Capital Assets Disclosure in the Beginning Balance Column of Note 6 is as follows: \r\n \r\n1. The beginning balance for Capital Assets, Not Being Depreciated for Construction Work-inProgress will be restated and reduced by $1,386,863. \r\n2. The beginning balance for Capital Assets, Being Depreciated for lnfrastructure will be restated and reduced by $2,738,281. \r\n3. The beginning balance for Capital Assets, Being Depreciated for Buildings will be restated and increased by $10,774,021. \r\n4. The beginning balance for Capital Assets, Being Depreciated for Software will be restated and increased by $1,530,895. \r\n5. The beginning balance for Accumulated Depreciation for lnfrastructure will be restated and reduced by $98,551. \r\n6. The beginning balance for Accumulated Depreciation for Buildings will be restated and increased by $434,910. \r\n7. The beginning balance for Accumulated Depreciation for Software will be restated and increased by $535,813. \r\n \r\nOverall, the beginning balance for Capital Assets, Net, will be restated and increased by $7,307,600. \r\n \r\nNote 2. Deposits and Investmentr \r\n \r\nDeposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: \r\n \r\n1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. \r\n \r\n2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. \r\n \r\n3. 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. \r\n \r\n4. \r\n \r\nIndustrial revenue bonds and bonds of development authorities created by the laws of the \r\n \r\nState of Georgia. \r\n \r\n5. 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 MortgageAssociation. \r\n \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit lnsurance Corporation. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nThe 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. \r\nAt June 30, 2010, the carrying value of deposits was $8,618,996 and the bank balance was $20,756,380. Of the Institute's deposits, $20,685,168 were uninsured. Of these uninsured deposits, $20,685,168 were collateralized with securities held by the financial institution's trust department or agent but not in the Institute's name. \r\nInvestments Georgia Institute of Technology maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. \r\nThe Institute's investments as of June 30, 2010, are presented below. All investments are presented by investment type and debt securities are presented by maturity. \r\n \r\nlnvestment Type \r\n \r\nFair Value \r\n \r\nLess Than \r\n1 Year \r\n \r\nlnvestment Maturity \r\n1 - 5 Years 6 - 10 years \r\n \r\nMore Than \r\n10 Years \r\n \r\nDebt Securities U. S. Treasuries U. S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt \r\n \r\n7,053 3,854,060 2,583,904 \r\n \r\n297 673,583 243,998 \r\n \r\n2,279,858 1,292,621 \r\n \r\n121,580 1,044,216 \r\n \r\n6,756 779,039 \r\n3,069 \r\n \r\nOther Investments Bond/Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes \r\nlnvestment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasuty and Fiscal Services \r\nGeorgia Fund 1 \r\nGeorgia Extended Asset Pool \r\nTotal lnvestments \r\n \r\n799,341 1,074,101 \r\n337,069 \r\n152,084 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nThe Board of Regents lnvestment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents lnvestment Pool is voluntary. The Board of Regents lnvestment Pool is not rated. Additional information on the Board of Regents lnvestment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at h~w://www.audits.state.~a.us/interneVsearchR~ts.html. \r\nThe Georgia Fund 1lnvestment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the lnvestment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1lnvestment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 4 6 days. \r\nThe Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $2.03 at June 30, 2010. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is .97 years. \r\nlnterest Rate Risk lnterest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regent's policy and applicable Federaland State laws. \r\nThe Effective Duration of the Short Term Fund is .77 years. Of the Institute's total investment of $71,563,738 in the Short Term Fund, $71,563,738 is invested in debt securities. \r\nThe Effective Duration of the Diversified Fund is 3.15 years. Of the Institute's total investment of $40,273,352 in the Diversified Fund, $15,546,013 is invested in debt securities. \r\nCustodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Institute's policy for managing custodial credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute. \r\nAt June 30, 2010, $14,249,560 was uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name. \r\nCredit Oualitv Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk for investments is an integral part of its current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies. \r\n \r\n GEORGIA INSTlTUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nThe investments subject to credit quality risk are reflected below: \r\n \r\nCredit Quality Risk \r\n \r\nFair Value \r\n \r\nAAA \r\n \r\nAA \r\n \r\nA \r\n \r\nRelated Debt Investments \r\n \r\nU. S. Agenc~es \r\n \r\n$ \r\n \r\nCorporate Debt \r\n \r\n3,854,060 $ 2,583,904 \r\n \r\n3,854,060 \r\n$ \r\n \r\n436,140 $ 1,772,882 $ \r\n \r\nBAA \r\n \r\nUnrated \r\n \r\n371,813 $ \r\n \r\n3,069 \r\n \r\nConcentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Institute's policy for managing concentration credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the U. S. Treasury or other Federal Government agencies. \r\n \r\nNote 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2010: \r\n \r\nStudent Tuition and Fees Auxiliaty Enterprises and Other OperatingActivities Federal Financial Assistance Other \r\n \r\n$ 2,081,553 1,602,732 \r\n47,309,975 37,787,398 \r\n \r\nLess Allowance for Doubtful Accounts Net Accounts Receivable \r\n \r\n$ 86,793,807 \r\n \r\nNote 4. Inventories Inventories consisted of the following at June 30, 2010: \r\nPhysical Plant Other \r\nTotal \r\n \r\nNote 5. Notes/Loans Receivable \r\nThe Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2010. The Program provides for cancellation of a loan at rates of 10%to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the lnstitute for amounts cancelled under these provisions. As the lnstitute 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 lnstitute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2010, the allowance for uncollectible loans was approximately $94,219. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNote 6, CapitalAssels Following are the changes in capital assets for the year ended June 30,2010: \r\n \r\nBeginning Balance July 1, 2009 (Restated) \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30, 2010 \r\n \r\nCapital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-ln-Progress \r\n \r\n$ \r\n \r\n53,643,001 \r\n \r\n17,737.435 $ \r\n \r\n14,982 \r\n \r\n21.822.218 \r\n \r\n22.234.252 $ \r\n \r\n17,670,742 \r\n \r\n17,752,417 26,385,728 \r\n \r\nTotal Capital Assets, Not Being Depreciated $ \r\n \r\n93,202,654 $ \r\n \r\n22,249,234 $ \r\n \r\n17,670,742 $ \r\n \r\n97,781,146 \r\n \r\nCapital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Sofhvare \r\n \r\n$ \r\n \r\n103,396.529 $ \r\n \r\n1.461.178.007 \r\n \r\n26,494,050 \r\n \r\n368,784,244 \r\n \r\n2,248,699 30,466,868 $ \r\n3,360,454 39,295,898 \r\n \r\n$ 967.101 \r\n14,443,583 \r\n \r\n105,645,228 1.490.677.774 \r\n29,854,504 393,636,559 \r\n \r\nTotal Assets Being Depreciated \r\n \r\n$ 2,060,917,912 $ \r\n \r\n79,906,822 $ \r\n \r\n15,451,048 $ 2,125,373,686 \r\n \r\nLess: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Software \r\n \r\n$ \r\n \r\n18,027,655 $ \r\n \r\n299,872,100 \r\n \r\n8,541,626 \r\n \r\n228,323,533 \r\n \r\n69,168,670 \r\n \r\n535,813 \r\n \r\n3,077,701 33,872,308 $ \r\n937,096 32.553.446 \r\n4,739.851 153,090 \r\n \r\n$ 592,239 \r\n14,496,059 40,364 \r\n \r\n21,105,356 333,152,169 \r\n9.478.722 246,380,920 \r\n73,868,157 688,903 \r\n \r\nTotal Accumulated Depreciation \r\n \r\n$ \r\n \r\n624,469,397 $ \r\n \r\n75,333,492 $ \r\n \r\n15,128,662 $ \r\n \r\n684,674,227 \r\n \r\nTotal Capital Assets, Being Depreciated, Net $ 1,436,448,515 $ \r\n \r\n4,573,330 $ \r\n \r\n322,386 $ 1,440,699,459 \r\n \r\nCapital Assets, Net \r\n \r\nNote 7. Deferred Revenue Current deferred revenue consisted of the following at June 30, 2010: \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\nTotals \r\n \r\n$ 23,646,513 \r\n \r\nLong-Term deferred revenue totaled $5,037,500. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL SATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBlT \"D\" \r\n \r\nNote 8. Long- Term Liabilities Long-Term liability activity for the year ended June 30, 2010, was as follows: \r\n \r\nBeginning Balance July 1, 2009 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30,2010 \r\n \r\nCurrent Portion \r\n \r\nLeases Lease Obligations \r\n \r\n$ 536,437,275 $ 4,098,600 $ 18,806,974 $ 521,728,901 $ 19,230,392 \r\n \r\nOther Liabilities Compensated Absences \r\n \r\n35,336,051 \r\n \r\n22,265,086 \r\n \r\n20,050,958 \r\n \r\n37,550,179 \r\n \r\n21,046,704 \r\n \r\nTotal Long-Term Obligations $ 571,773,326 $ 26,363,686 $ 38,857.932 $ 559,279.080 $ 40,277,096 \r\n \r\nNote 9. Significant Commitments \r\nThe Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $22,640,135 as of June 30, 2010. This amount is not reflected in the accompanying basic financial statements. \r\nNote 10. Lease Obligations \r\nGeorgia lnstitute of Technology is obligated under various operating leases for the use of real property (land, buildings and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2010 and 2038. Expenditures for fiscal year 2010 were $47,143,339 of which $28,336,365 represented interest. Total principal paid on capital leases was $18,806,974 for the fiscal year ended June 30, 2010. Interest rates range from 3.36 percent to 11.0 percent. The following is a summary of the carrying values of assets held under capital lease at June 30,2010: \r\nFacilities and Other Improvements Infrastructure Land Buildings Equipment \r\nTotal Assets Held Under Capital Lease \r\nCertain 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. \r\n \r\n GEORGIA INSTlTWE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nGeorgia lnstitute of Technology had thirteen capital leases with related parties in fiscal year 2010. In November 1997, Georgia lnstitute of Technology entered into a capital lease of $21,560,000 with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations, for the \"Parker H. Petit lnstitute of Bioengineering and Biosciences Building\". The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $16,915,000 and the amount due (principal and interest) in the next fiscal year is $845,750. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $34,335,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - Global Learning Center\". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $29,885,000 and the amount due (principal and interest) in the next fiscal year is $2,265,185. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $56,800,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - College of Management\". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $49,480,000 and the amount due (principal and interest) in the next fiscal year is $3,768,736. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $12,298,200 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - Enterprise Innovation Institute\". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $10,699,640 and the amount due (principal and interest) in the next fiscal year is $807,532. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $21,365,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - Parking Complex\". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $18,755,000 and the amount due (principal and interest) in the next fiscal year is $1,488,663. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $13,010,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - Bookstore\". The lease term is for a 19-year period that began August 2003 and expires July 2022. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $9,835,000 and the amount due (principal and interest) in the next fiscal year is $1,186,294. \r\nIn August 2001, Georgia lnstitute of Technology entered into a capital lease of $4,490,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Technology Square - Retail Complex\". The lease term is for a 19-year period that began August 2003 and expires July 2022. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $3,495,000 and the amount due (principal and interest) in the next fiscal year is $420,806. \r\nIn February 2001, Georgia lnstitute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the \"Campus Recreation Center\". The lease term is for a 30-year period that began February 2 0 0 1 and expires February 2031. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $38,935,000, and the amount due (principal and interest) in the next fiscal year is $3,067,813. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"Dl' \r\n \r\nIn July 2003, Georgia lnstitute of Technology entered into a capital lease of $60,485,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the \"Married Family Housing Building\", including an adjoining parking deck. The lease term is for a 25-year period that began October 2005 and expires June 2030. At June 30, 2010, the remaining long-term debt obligation under the lease was $52,975,000 and the amount due (principal and interest) in the next fiscal year is $4,273,198. \r\nIn July 2003, Georgia lnstitute of Technology entered into a capital lease of $9,835,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the \"Klaus Advanced Computing Center\". The lease term is for a 20-year period that began October 2006 and expires June 2025. At June 30, 2010, the remaining long-term debt obligation under the lease was $8,420,000 and the amount due (principal and interest) in the next fiscal year is $807,688. \r\nIn May 2004, Georgia lnstitute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the \"Molecular Sciences and Engineering Building\". The lease term is for a 29-year period that began September 2006 and expires June 2036. At June 30, 2010, the remaining long-term debt obligation under the lease was $71,210,000 and the amount due (principal and interest) in the next fiscal year is $4,979,500. \r\nIn July 2007, Georgia lnstitute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named \"North Avenue Apartments\", including an adjoining parking deck. The lease term is for a 25-year period that began July 2007 and expires June 2032. At June 30, 2010, the remaining long-term debt obligation under the lease was $73,044,675 and the amount due (principal and interest) in the next fiscal year is $5,280,000. \r\nIn August 2005, Georgia lnstitute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the \"Electrical Sub Station\". The lease term is for a 30-year period that began October 2007 and expires in December 2037. At June 30, 2010, the remaining long-term debt obligation under the lease was $38,531,324 and the amount due (principal and interest) in the next fiscal year is $3,000,000. \r\nGeorgia lnstitute of Technology also has one real property capital lease with an unrelated party. In June 2003, the lnstitute entered into a capital lease of $76,150,584 with the University Financing Foundation Inc., for the \"Technology Square Research Building\". The lease term is for a 29-year period that began June 2003 and expires June 2032. At June 30, 2010, the remaining long-term debt obligation (principal) under the lease was $76,003,552 and the amount due (principal and interest) in the next fiscal year is $4,638,035. The lnstitute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The lnstitute is responsible for most operating costs such as repairs, utilities and insurance for this lease. \r\nThe lnstitute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2018. At June 30, 2010, the remaining long-term debt obligation under these agreements was $23,544,710. The amount due (principal and interest) in the next fiscal year is $8,987,535. \r\nOPERATING LEASES Georgia lnstitute of Technology's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years through 2011. Certain operating leases provide for renewal options for periods from one to 25 years at their fair rental value at the time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. \r\n \r\n GEORGIA INSTlTUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"DM \r\n \r\nDESCRIPTION OF RELATED PARTY LEASES Georgia lnstitute of Technology entered into various real property operating leases with related parties including Georgia Tech Research Corporation (GTRC), Georgia Advanced Technology Ventures (GATV), Inc., and VLP 1,VLP 2 and VLP 3, subsidiaries of GATV. The current agreements are for July 1,2010, through June 30, 2011, with most of the agreements containing a renewal option. Under these agreements, the lnstitute is obligated to pay these related parties a total of $8,870,536 in the next fiscal year. \r\n \r\nGeorgia lnstitute of Technology's fiscal year 2010 expense for rental of real property and equipment under operating leases was $9,766,456. \r\n \r\nFUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30,2010, were as follows: \r\n \r\nReal Pro~ertvand ECluiDment \r\n \r\nCapital \r\n \r\nOperating \r\n \r\nLeases \r\n \r\nLeases \r\n \r\nYear Ending June 30: 2011 2012 2013 2014 2015 2016 - 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2038 \r\n \r\nTotal Minimum Lease Payments $ 880,511,879 $ 11,863,096 \r\n \r\nLess: Interest \r\n \r\n358,782,978 \r\n \r\nPrincipal Outstanding \r\n \r\nNote 11. Retirement Plans \r\nThe Georgia lnstitute of Technology 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. 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 Georgia lnstitute of Technology 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. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nEmployees' 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. \r\nOn 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. \r\nThe 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. \r\nUnder the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 1 0 years of creditable service and attainment of age 6 0 or 3 0 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. \r\nRetirement 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 2 4 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 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. \r\nMember 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 Georgia lnstitute of Technology pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Georgia lnstitute of Technology 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 Georgia lnstitute of Technology 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 Georgia lnstitute of Technology contributions are not at any time refundable to the member or his/her beneficiary. \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nEmployer contributions required for fiscal year 2010 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: \r\nOld Plan* New Plan GSEPS \r\n* 5.66% exclusive of contributions paid by the employer on behalf of old plan members \r\nMembers become vested after 10 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. \r\nTeachers 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. \r\nOn 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. BeginningJuly 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. \r\nTRS 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 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. \r\nNormal 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 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 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. \r\nTRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 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, 2010 were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1,2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007 actuarial valuation. The employer contribution rate will increase to 10.28% effective July 1, 2010. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"DM \r\n \r\nThe following table summarizes the Georgia lnstitute of Technology contributions by defined benefit plan for the years ending June 30, 2010, June 30,2009, and June 30,2008: \r\n \r\nERS \r\n \r\nRequired \r\n \r\nPercent \r\n \r\nContribution Contributed \r\n \r\nTRS \r\n \r\nRequired \r\n \r\nPercent \r\n \r\nContribution Contributed \r\n \r\nRegents Retirement Plan \r\nPlan 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. 47-21-1et.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 TIM-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. \r\nFunding Policy Georgia lnstitute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2010, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\nGeorgia lnstitute of Technology and the covered employees made the required contributions of $22,648,029 (9.24%) and $12,254,411 (5%), respectively. \r\nAIG-VALIC, American Century, Fidelity, and TIM-CREF have separately issued financial reports which may be obtained through their respective corporate offices. \r\nGeorgia Defined Contribution Plan \r\nPlan Description Georgia lnstitute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\nBenefits 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. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBlT \"D\" \r\n \r\nContributions 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. \r\nTotal contributions made by employees during fiscal year 2010 amounted to $735,299 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. \r\nThe Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. \r\nNote 12. Risk Management \r\nThe University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia lnstitute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. \r\nThe Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of Wellpoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the UniversitySystem 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. \r\nA 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. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nGeorgia lnstitute of Technology is responsible for pollution remediation, including asbestos abatement, for all lnstitute facilities. Asbestos abatement is performed during renovation/construction projects when deemed necessary by lnstitute management. As of June 30, 2010, the lnstitute recorded a liability and expense in the amount of $298,617 for asbestos abatement projects in various lnstitute structures. The liability is reflected on the Statement of Net Assets in Accounts Payable and on the Statement of Revenues, Expenses and Changes in Net Assets in Supplies and Other Services. The liability was determined using the Expected Cash Flow Measurement Technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts. The lnstitute does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Pollution remediation liability activity in fiscal year 2010 was as follows: \r\n \r\nBeginning Balance July 1.2009 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30,2010 \r\n \r\nCurrent Portion \r\n \r\nPollution Remediation \r\n \r\nObligations \r\n \r\n$ \r\n \r\n21,507 $ \r\n \r\n298,617 $ \r\n \r\n21,507 $ \r\n \r\n298,617 $ \r\n \r\n298,617 \r\n \r\nNote 13. Contingencies \r\nAmounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia lnstitute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\nAt the request of lnstitute management, on December 15, 2009, Georgia Tech Facilities Inc. (Facilities), a component unit of Georgia Tech (see Note 16), adopted a Declaration of Official Intent to seek the issuance of tax-exempt obligations for the purpose of financing the Academy of Medicine Renovations Project for the benefit of Georgia Tech. This resolution was intended to constitute a \"declaration of official intent\" within the meaning of Treasury Regulation Section 1.150-2. Facilities and Georgia Tech also entered into an Amended Memorandum of Understanding (MOU) dated February 17, 2010. Under the MOU, Facilities agreed to manage the design and renovation of the project as well as proceed with the financing subject to the lnstitute securing Board of Regents approval. The project has been approved by the Board of Regents, with a budget of $5.0 million. The ground lease and rental agreement have not yet been completed, but it is expected that the project will be completed in fiscal year 2011. \r\nOn June 23, 2010, the Board of Regents (BOR) and the lnstitute amended existing agreements with Facilities, the first of which was a 25-year land lease from the BOR to Facilities for the use of the North Avenue Apartments, to include the new North Avenue Apartments Dining facility. At the end of the amended 25-year period, any leasehold improvements will revert to the BOR/lnstitute. The second amendment was a rental agreement between BOR/lnstitute and Facilities for the North Avenue Apartments and is an annual agreement with options to renew on a year-to-year basis. The amended lease amount will approximate $5.9 million annually. \r\nOn June 23, 2010, the Board of Regents (BOR) and the lnstitute entered into an agreement with Facilities which was a 30-year land lease from the BOR to Facilities for the use of the new Carbon Neutral Energy Solutions Lab. At the end of the 30-year period, any leasehold improvements will revert to the BOR/lnstitute. The second agreement was a rental agreement between BOR/lnstitute \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nand Facilities for the new Carbon Neutral Energy Solutions Lab facility. The rental agreement is an annual agreement with options to renew on a year-to-year basis. The lease amount will approximate $1.0 million annually. Given that the intent of the lnstitute is to lease the facility for the entire 30year period, it will be treated as a capital lease once the facility is completed and occupied, which is expected to occur in fiscal year 2012. \r\nLitigation, claims and assessments filed against Georgia lnstitute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30,2010. \r\nNote 14. Post-Emp/oyment Benefiis Other Than Pension Benefits \r\nPursuant 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 that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the UniversitySystem of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. \r\nThe Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The lnstitute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2009 and 2010 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%. \r\nAs of June 30, 2010, there were 1,310 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2010, Georgia lnstitute of Technology recognized as incurred $6,253,357 of expenditures, which was net of $2,872,486 of participant contributions. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNote 15. Natural Classifications with Functional Classifiwtions The Institute's operating expenses by functional classification for fiscal year 2010 are shown below: \r\n \r\nFunctional Classification \r\n \r\nNatural Classification \r\n \r\nInstruction \r\n \r\nResearch \r\n \r\nPublic Service \r\n \r\nAcademic Support \r\n \r\nStudent Services \r\n \r\nSalaries Faculty Staff \r\nEmployee Benefits Other PersonalServices Travel Scholarshipsand Fellowships Utilities Supplies and Other Services Depreciation \r\n \r\n$ 99,079,048 $ 154,200,355 $ 5,661,063 $ 5,628,080 $ \r\n \r\n262,872 \r\n \r\n51,979,717 \r\n \r\n117,101.621 21,435.749 \r\n \r\n18,636,461 \r\n \r\n11,838,067 \r\n \r\n31,821,001 \r\n \r\n49,300,327 \r\n \r\n5,976,470 \r\n \r\n5,713,867 \r\n \r\n2,466.945 \r\n \r\n51,582 \r\n \r\n30.232 \r\n \r\n543.934 \r\n \r\n11,665 \r\n \r\n30,617 \r\n \r\n2,690,836 \r\n \r\n11,599,859 \r\n \r\n969.226 \r\n \r\n448.910 \r\n \r\n214,758 \r\n \r\n370,219 21,567,815 \r\n9,100,160 \r\n \r\n933,224 128,726.854 \r\n30,827.071 \r\n \r\n193,003 9,290.237 1,136,410 \r\n \r\n39,890 11,151,288 \r\n7,071,305 \r\n \r\n32,061 11,125,906 \r\n1,383.828 \r\n \r\nTotal Operating Expenses \r\n \r\n$ 216,660,378 $ 492,719.543 $ 45,206,092 $ 48,701,466 $ 27,355,054 \r\n \r\nNatural Classification \r\n \r\nInstitutional Support \r\n \r\nFunctional Classification \r\n \r\nPlant Operations Scholarships \r\n \r\nand \r\n \r\nand \r\n \r\nAuxiliary \r\n \r\nMaintenance \r\n \r\nFellowships \r\n \r\nEnterprises \r\n \r\nTotal Operating Expenses \r\n \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation \r\n \r\nTotal Operating Expenses \r\n \r\nNote 16, Affiliated Organizations \r\nIn accordance with GASB Statement No. 39, Determining Whether Cetiain Organtzations are Component Units, Georgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined to be legally separate, tax exempt organizations whose activities primarily support Georgia Institute of Technology, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia lnstitute of Technology has not included financial activity for these affiliated organizations in these financial statements. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30,2010 \r\n \r\nEXHIBIT \"D\" \r\n \r\nGeorgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined significant to the State of Georgia for the year ended June 30, 2010, and as such, are reported as discretely presented component units in the ComprehensiveAnnual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia. \r\n \r\n (This page left intentionally blank) \r\n \r\n SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTEOF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30.2010 \r\nASSETS \r\nAccounts Receivable Federal Financial Assistance Other \r\nPrepaid Expenditures Inventories Other Assets \r\nTotal Assets \r\nLIABILITIESAND FUND EOUIW \r\nLiabilities Cash Overdraft Accounts Payable Encumbrances Payable Deferred Revenue Other Liabilities \r\nTotal Liabilities \r\nFund Balances Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds UncollectibleAccounts Receivable Inventories \r\nUnreserved Surplus \r\nTotal Fund Balances \r\nTotal Liabilities and Fund Balances \r\n \r\nSCHEDULE \"1\" \r\n \r\nActual amounts were preparedon a prescribed basis of accounting that demonstrates compliance with budgetarystatutes and regulationsof the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\n GEORGIA INSTITUTE OFTECHNOLOGY SUMMARY BUDGET COMPARISONAND SURPLUSANALYSIS REPORT(NON-GAAPBASIS) \r\nBUDGET FUND YEAR ENDED JUNE 30.2010 \r\n \r\nREVENUES \r\nState Appropriation State General Funds \r\nFederal Funds Other Funds \r\nTotal Revenues \r\nCARRY-OVER FROM PRIOR YEAR \r\nTransfer from Reserved Fund Balance \r\nTotal Funds Available \r\nEXPENDITURES \r\nResearch Consortium Special Funding Initiative Advanced Technology Development Center GeorgiaTech Research Institute Teaching \r\nTotal Expenditures \r\nExcess ofFundsAvailable over EXDenditUreS \r\nReserved Unreserved \r\nADJUSTMENTS \r\nPrior Year Payables/Expenditures Prior Year Receivables/RevenueS Decrease in Inventories UnreservedFund Balance (Surplus) Returned \r\nto Board of Regents- Unlversivsystem Office \r\nYear Ended June 30,2009 Early Return of Surplus in Current FiscalYear Prior Year Reserved Fund Balance Included in FundsAvailable \r\n \r\nBUDGET \r\n \r\nACTUAL \r\n \r\nSCHEDULE nT \r\nVARIANCE FAVORABLE (UNFAVORABLE) \r\n \r\nSUMMARY OF FUND BALANCE Resewed Department Sales and Servlces Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectlble Accounts Receivable Inventories Total Reserved Unreserved Suroius \r\nTotal Fund Balance \r\nActual amounts were prepared on a prescribed basis of acmuntingthat demonstrates compliance with budgetary statutes and regulations of the State of Georgia, wh~chis a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\n soldl?uudBununm~epoadldome 41e~auou2e u~ a u p % u ~ l u n o m10esmsq ensusqe\u003edluoo \r\n \r\nws B s qaum e\u0026oeg 10 \r\n \r\ns q ) o s u o w j n 8 e ~pua seullmshqeBpnq qvm aweqdluoa \r\n \r\nsa%ensuoluopae~!dugunosaelo stseq p o q m s ~ ~DUdO PaleaOJa ale* nunowe IanwV \r\n \r\n--- \r\n \r\nP \r\n \r\nQF08Z629L \r\n \r\n$ 99SSTTSLET \r\n \r\n$ 000 \r\n \r\n$ 9 9 S S t t S L ET \r\n \r\nVES99819L WGI90T \r\n \r\n99WE95ES $ WTZSWV8 \r\n \r\n0 00 $ 000 \r\n \r\n9 9 PEE 9% S S 00TZ8V018 \r\n \r\n-- \r\n \r\n$ 009EV06ETZ \r\n \r\n$ W 9 6 L T 9 L QZ \r\n \r\n$ \r\n \r\n00000916ZT \r\n \r\n00 O W P L 6 ZT \r\n \r\n$ 009EVSTV8 \r\n \r\n$ 0096L98LTT \r\n \r\n$ \r\n \r\n Expendturas Comperes to Budget \r\n \r\nVarlance \r\n \r\nPosltlve \r\n \r\nActual \r\n \r\n(Nega~ve) \r\n \r\nActual FundsAvallable \r\nOuer/(Under) Expendttures \r\n \r\nPrlor Per~od \r\n \r\nOther \r\n \r\nAdjustments Adjustments \r\n \r\nEarly Rernlttance dSurplur \r\n \r\nProgram Fund \r\nBalances \r\n \r\nTransfers \r\n \r\nProgram Fund Balances \r\n \r\nReserve \r\n \r\nSurplus \r\n \r\nTotal Fund Balance \r\n \r\n$ \r\n \r\n6.37s.assoo $ \r\n \r\ni2.649CC $ \r\n \r\n210.377.46014 10.740.49786 \r\n \r\n- -- $ \r\n \r\n216,756,32914 $ 10.753.14686 $ \r\n \r\n0W $ 5.866 72 \r\n5.86672 $ \r\n \r\n10.03956 $ OW \r\n10,03956 $ \r\n \r\nOCQ$ OM) \r\n0 CQ$ \r\n \r\n000 S 0 00 \r\n0 00 S \r\n \r\n10,03956 1 5,866 72 \r\n15.90628 S \r\n \r\n0 W365.930.01 0 W \r\n0 W$ \r\n \r\n0W $ 5.866 72 \r\n \r\n10,03956 $ 0.00 \r\n \r\n10.039.56 5.666.72 \r\n \r\n5.866 72365$.930.01- \r\n \r\nJ \r\n \r\nUnexpendablc Reserves Uncollact~bleAccounts Recevable lnventorles \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATIONOF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30,2010 \r\n \r\nSCHEDULE \"4\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals June 30,2010 June 30,2009 \r\n \r\nCompensated Absences June 30,2010 June 30.2009 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nGeorgia State University \r\n \r\nCamacho, \r\n \r\nAlison \r\n \r\nWest, \r\n \r\nBenjamin \r\n \r\nUnidentified Variance \r\n \r\nSALARIES \r\n \r\n$ \r\n \r\n561,830,433 $ \r\n \r\nTRAVEL 16,495,046 \r\n \r\n SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30,2010 \r\nFINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2008-h2009","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2009","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2008/2009"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, GA : Georgia. Dept. of Audits and Accounts, 2009"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2009"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2008-h2009"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2008-h2009"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"GEORGIA INSTITUTE OF TECHNOLOGY \r\nATLANTA, GEORGIA \r\nREPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 \r\nGeorgia Department of Audits and Accounts Russell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENT'S DISCUSSION AND ANALYSIS \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n2 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n3 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n4 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n7 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\n1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND \r\n \r\n34 \r\n \r\n2 SUMMARY BUDGET COMPARJSON AND SURPLUS ANALYSIS REPORT \r\n \r\n(NON-GAAP BASIS) BUDGET FUND \r\n \r\n35 \r\n \r\n3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING \r\n \r\nSOURCE COMPARED TO BUDGET \r\n \r\n(NON-GAAP BASIS) BUDGET FUND \r\n \r\n36 \r\n \r\n4 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n39 \r\n \r\nSECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 \r\nDecember 3, 2009 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia \r\nand Honorable G. P. \"Bud\" Peterson, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Institute ofTechnology, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2009. These financial statements are the responsibility of the Georgia Institute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the 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 oflnstitute'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. \r\nAs discussed in Note I, the financial statements of Georgia Institute of Technology are intended to \r\npresent the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Georgia \r\n \r\n09ARL-62X \r\n \r\n Institute ofTechnology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State of Georgia, in conformity with accounting principles generally accepted in the United States of America. \r\nIn our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30, 2009, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\nAs discussed in Note 1 to the Financial Statements, Georgia Institute of Technology changed the methodology used to account for capital asset cost and depreciation of non-research buildings. \r\nManagement's Discussion and Analysis is not a part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally of inquiries 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. \r\nOur audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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. \r\nRespectfully submitted, \r\n~;;;;}- CQ ~-~~ \r\nRussell W. Hinton, CPA, CGFM State Auditor \r\nRWH:as 09ARL-62X \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\n \r\nIntroduction \r\n \r\nThe Georgia Institute of Technology, also known as Georgia Tech, is one ofthe 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nation's top research universities, with over $500 million expended on sponsored research activities. The University is a national and international leader in scientific and technological research and education. Distinguished by its commitment to improving the human condition through advanced science and technology, Georgia Tech provides a focused, technology based education for nearly 19,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is the only technological university consistently ranked in U.S. News and World Report's listing of America's Top Ten public universities. The Institute's College of Engineering is consistently ranked in the nation's Top Five by U.S. News and World Report with six schools in this college listed among the country's Top Five in their respective disciplines. Georgia Tech's undergraduate engineering college and graduate engineering college are currently ranked in the country's Top Five by U.S. News and World Report. Georgia Tech is ranked in the Top Ten for universities awarding engineering degrees to minority students at the Bachelor's and Doctoral level by Diverse Issues in Higher Education. These impressive national rankings reflect the academic prestige long associated with the Georgia Tech curriculum. Georgia Tech offers degrees through the Colleges of Architecture, Computing, Engineering, Management, Sciences, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\n \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research institution that \r\nserves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21 st \r\ncentury. The Institute continues to grow as reflected by the faculty and student numbers below and other comparisons that follow. \r\n \r\nStudents Faculty (Headcount) \r\n \r\nStudents (FTE) \r\n \r\nFiscal Year 2009 Fiscal Year 2008 Fiscal Year 2007 \r\n \r\n967 \r\n \r\n19,424 \r\n \r\n970 \r\n \r\n18,747 \r\n \r\n940 \r\n \r\n17,936 \r\n \r\n18,330 17,836 17,027 \r\n \r\nOverview ofthe Financial Statements and Financial Analysis \r\n \r\nThe Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2009, which began July 1, 2008 and ended June 30, 2009. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in \r\n \r\n-i- \r\n \r\n Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into five net asset categories: invested in capital assets, net of related debt; restricted - nonexpendable; restricted - expendable; restricted - capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for fiscal year 2009 and fiscal year 2008. \r\nStatement ofNet Assets \r\nUsing the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to readers of the financial statements a fiscal snapshot of the Georgia Institute of Technology. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements. \r\nFrom the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the Institute. They are also able to determine how much the Institute owes vendors. \r\nFinally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into three categories, nonexpendable, expendable and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable and capital projects restricted net assets are available for expenditure by the Institute but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category, Unrestricted Net Assets, is available for any lawful purpose ofthe Institute. \r\nFollowing is a comparative, condensed version ofthe Institute's Statement ofNet Assets as of June 30, 2009 and June 30, 2008: \r\n-11- \r\n \r\n Statement ofNet Assets, Condensed \r\n \r\nJune 30, 2009 \r\n \r\nJune 30, 2008 \r\n \r\nAssets Current Assets Capital Assets, Net Other Assets \r\n \r\n$ 161,709,166 1,522,343,569 61,073,533 \r\n \r\n$ 186,023,497 1,420,414,332 72,926,737 \r\n \r\nTotal Assets \r\n \r\n$ 1,745,126,268 $ 1,679,364,566 \r\n \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\n \r\n$ 121,907,458 538,766,435 \r\n \r\n$ 112,482,457 529,865,464 \r\n \r\nTotal Liabilities \r\n \r\n$ 660,673,893 $ 642,347,921 \r\n \r\nNet Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Restricted - Capital Projects Unrestricted \r\n \r\n$ 985,906,294 44,328,287 29,850,926 5,248,672 19,118,196 \r\n \r\n$ 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962 \r\n \r\nTotal Net Assets \r\n \r\n$ 1.084.452.375 $ 120371016.645 \r\n \r\nThe total assets increased by $65,761,702 over the previous fiscal year, while total liabilities increased by $18,325,972. A review ofthe Statement ofNet Assets will reveal that the increase in total net assets of $47,435,730 was primarily due to a net increase of $93,012,387 in the category oflnvested in Capital Assets, Net of Related Debt. \r\n \r\nStatement ofRevenues, Expenses and Changes in Net Assets \r\n \r\nChanges in total net assets as presented on the Statement ofNet Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example, state appropriations are nonoperating because they are provided by the Legislature to the institute without the Legislature directly receiving commensurate goods and services for those revenues. \r\n \r\n-111- \r\n \r\n Statement of Revenues, Expenses and Changes in Net Assets, Condensed \r\n \r\nJune 30, 2009 \r\n \r\nJune 30, 2008 \r\n \r\nOperating Revenues Operating Expenses \r\n \r\n$ 794,254,414 1,023,922,247 \r\n \r\n$ 721,356,596 980,433,038 \r\n \r\nOperating Loss \r\n \r\n$ -229,667,833 $ -259,076,442 \r\n \r\nNonoperating Revenues and Expenses \r\n \r\n251,100,555 \r\n \r\n265,273,178 \r\n \r\nIncome (Loss) Before Other Revenues, Expenses, Gains or Losses \r\n \r\n$ 21,432,722 \r\n \r\n$ 6,196,736 \r\n \r\nOther Revenues, Expenses, Gains or Losses \r\n \r\n58,057,023 \r\n \r\n38,889,899 \r\n \r\nIncrease in Net Assets \r\n \r\n$ 79,489,745 \r\n \r\n$ 45,086,635 \r\n \r\nNet Assets at Beginning of Year, as Originally \r\n \r\nReported \r\n \r\n$ 1,037,016,645 \r\n \r\n$ 983,377,609 \r\n \r\nPrior Year Adjustments \r\n \r\n-32,054,015 \r\n \r\n8,552,401 \r\n \r\nNet Assets at Beginning ofYear, Restated \r\n \r\n$ 1,004,962,630 \r\n \r\n$ 991,930.010 \r\n \r\nNet Assets at End ofYear \r\n \r\n$ 11084A521375 \r\n \r\n$ 11037,0161645 \r\n \r\nThe Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase of $72,897,818 in Operating Revenues from the previous year. The increase in Net Assets at End of Year increased $47,435,730 from the previous year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows: \r\n \r\n Revenue By Source For The Years Ended June 30, 2009 and June 30, 2008 \r\n \r\nJune 30, 2009 \r\n \r\nJune 30, 2008 \r\n \r\nOperating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other \r\n \r\n$ 151,714,908 517,828,642 \r\n15,584,108 99,065,680 10,061,076 \r\n \r\n$ 135,149,773 454,744,856 \r\n23,942,293 93,888,891 13,630,783 \r\n \r\nTotal Operating Revenue \r\n \r\n$ 794,254,414 $ 721,356,596 \r\n \r\nNonoperating Revenue State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts Gifts Investment Income Other \r\n \r\n$ 254,937,700 2,280,374 6,732,250 18,321,576 13,064,514 \r\n-16,516,912 \r\n \r\n$ 275,144,403 \r\n5,323,093 14,551,850 -3,371,451 \r\n \r\nTotal Nonoperating Revenue \r\n \r\n$ 278,819,502 \r\n \r\n$ 291,647,895 \r\n \r\nCapital Grants and Gifts State Other Capital Grants and Gifts Special Item - Capital Asset Transfer \r\n \r\n$ 56,790,760 1,266,263 \r\n \r\n$ 21,855,280 9,117,970 7,916,649 \r\n \r\nTotal Capital Grants, Gifts and Special Item \r\n \r\n$ 58,057,023 \r\n \r\n$ 38,889,899 \r\n \r\nTotal Revenues \r\n \r\n$ 1.131.130.939 $ 1,051,894,390 \r\n \r\n-v- \r\n \r\n Expenses (By Functional Classification) For The Years Ended June 30, 2009 and June 30, 2008 \r\n \r\nJune 30, 2009 \r\n \r\nJune 30, 2008 \r\n \r\nOperating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises \r\n \r\n$ 222,446,019 452,655,513 48,569,256 44,367,496 26,636,734 60,428,991 74,415,281 12,353,479 82,049,478 \r\n \r\n$ 214,164,859 422,467,823 47,986,179 44,962,425 26,200,042 44,231,317 85,552,071 10,919,734 83,948,588 \r\n \r\nTotal Operating Expenses \r\n \r\n$ 1,023,922,247 \r\n \r\n$ 980,433,038 \r\n \r\nNonoperating Expenses Interest Expense (Capital Assets) \r\n \r\n27,718,947 \r\n \r\n26,374,717 \r\n \r\nTotal Expenses \r\n \r\n$ 1~051,641,194 $ 1!0061807!755 \r\n \r\n-Vl- \r\n \r\n The Statement of Revenue, Expenses and Changes in Net Assets reflects an increase in operating revenues, a decrease in nonoperating revenues, and an increase in capital gifts and grants. Overall, revenue increased by $79.3 million as illustrated in the graph below. \r\n \r\nGeorgia Institute of Technology Revenue \r\n(dollars in millions) \r\n \r\nD Fiscal Year 2009 $1,131.1 \r\n \r\n Fiscal Year 2008 $1,051.8 \r\n \r\n$600 \r\n \r\n$550 \r\n \r\n$500 \r\n \r\n$450 \r\n \r\n$400 \r\n \r\n$350 \r\n \r\n$300 \r\n \r\n$250 \r\n$200 $150 \r\n \r\n1 \"\"'''~\"~,.,,.. \r\n \r\n$100 \r\n \r\n$50 \r\n \r\n$0 \r\nTuition and Fees \r\n \r\n- - - - - - - - - - - , - - - - - - - - - - - - - - - - - - ...\",....,....,,~,,........_,.,,.....,.,,..,.. ,.....,. \r\n \r\n.... ....... , \r\n \r\n\"'\"'\"\"\"'\"''''''\"'\"\"'\" \r\n \r\nI .\\. \r\n \r\nGifts, Grants and Contracts \r\n \r\nCapital Gifts and Sales, Services, and State Appropriations \r\n \r\nGrants \r\n \r\nOther \r\n \r\nStimulus Stabilization \r\n \r\n-vii- \r\n \r\n Total operating expenses for the year were approximately $1,023.9 million, an increase of$43.5 million, or 4. 7% over the previous year. Significant increases in operating expenses from fiscal year 2008 to fiscal year 2009 include Salaries and Benefits. The Salaries and Benefits category increased by $44.6 million primarily due to an increase in research operations. \r\n \r\nGeorgia Institute of Technology Operating Expenses by Object of Expenditure Class \r\n(dollars in millions) \r\n Fiscal Year 2009 $1,023.9  Fiscal Year 2008 $980.4 \r\n \r\n$700 \r\n \r\n$600 \r\n \r\n$500 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n \r\n$100 \r\n \r\n$0 \r\nSalaries, Benefits and Travel, Supplies and Other Other Personnel Services \r\n \r\nDepreciation \r\n \r\nUtilities \r\n \r\nScholarships and Fellowships \r\n \r\nIn the Operating Expenses by Functional Class graph below, Instruction expenses increased by $8.3 million, Research expenses increased by $30.2 million, and Institutional Support increased by $16.2 million. Plant Operations and Maintenance expenses decreased by $11.1 million. These changes primarily resulted in a $43.5 million increase in operating expenses for the year. \r\n \r\n-viii- \r\n \r\n $800 $700 \r\n \r\n(o fl)\" \r\n~ \r\n6Sl \r\n \r\nGeorgia Institute of Technology Operating Expenses by Functional Class \r\n(dollars in millions) \r\n Fiscal Year 2009 $1,023.9  Fiscal Year 2008 $980.4 \r\n \r\n$600 \r\n \r\n$500 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n \r\n$100 \r\n \r\n$0......___.___ \r\n \r\nInstruction, Research, Academic, Student, and Plant Operations and \r\n \r\nand Public Service Institutional Support \r\n \r\nMaintenance \r\n \r\nAuxiliary Enterprises \r\n \r\nScholarships and Fellowships \r\n \r\nStatement ofCash Flows \r\nThe final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the Institute during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the Institute. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. \r\n \r\n-ix- \r\n \r\n Cash Flows for the Years Ended June 30, 2009 and 2008, Condensed \r\n \r\nStatement of Cash Flows (thousands of dollars) \r\n \r\nJune 30, 2009 \r\n \r\nJune 30, 2008 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities \r\n \r\n$ -133,004,982 278,134,846 -152, 716,740 25,579,897 \r\n \r\n$ -237,262,062 285,398,048 -109,360,010 12,292,080 \r\n \r\nNet Change in Cash Cash, Beginning of Year \r\n \r\n$ 17,993,021 52,021,402 \r\n \r\n$ -48,931,944 100,953,346 \r\n \r\nCash, End ofYear \r\n \r\n$ 70.014.423 \r\n \r\n$ 52,021,402 \r\n \r\nCapital Assets \r\n \r\nThe Institute had one significant capital addition in fiscal year 2009. The Marcus Nanotechnology Building was completed this year, resulting in an addition of $105.8 million. \r\n \r\nFor additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the Notes to the Financial Statements. \r\n \r\nLong-Term Liabilities \r\n \r\nGeorgia Institute of Technology had Long-Term Liabilities of $571,773,326 of which $38,238,141 was reflected as current liability at June 30, 2009. \r\n \r\nFor additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. \r\n \r\nEconomic Outlook \r\n \r\nThe Institute is expecting significant economic challenges in the next fiscal year. Planning guidelines from the USG Chancellor have been received for a 4% to 8% budget cut from the fiscal year 2010 state appropriations which is approximately between $9.4 million and $18.8 million. These cuts are in addition to the $25.5 million, 10% permanent cut in fiscal year 2009. These cuts, coupled with rapidly rising energy costs and increased fixed debt service costs of $5.9 million in the next fiscal year will necessitate management examine all aspects of the Institute's operations, including the primary missions of instruction, research and public service. Enrollment is expected to be stable. While every effort has been made in the past to absorb the brunt of economic downturns in the support services area, this may not be possible given the magnitude ofthe downturn and the impact of the proposed budget cut. \r\n \r\n-x- \r\n \r\n At the same time the Institute anticipates a bright economic future with the continued growth of the sponsored research program. Sponsored awards grew to $483.2 million in fiscal year 2009 which is an 8.5% increase over the previous fiscal year. In the current fiscal year, sponsored revenue increased by $63.1 million or 13.9%. The Institute expects growth in sponsored research programs to continue in future fiscal years. These revenues should help to mitigate the stagnant or negative growth in other areas. Georgia Tech students on the Board of Regents' guaranteed fixed for four tuition plans will see no change in their per-credit-hour tuition rate. This plan has, however, been eliminated for incoming freshman as part of Board approval of an overall package of tuition and fees. The Board approved a major tuition increase of 25% for resident incoming freshman. These students will begin paying this new rate for Fall 2009. Nonresident incoming freshman will pay the same per-credit-hour rate charged for Fall 2008, however will effectively be assessed more under the new flat tuition model of7 or more credit hours. Georgia Tech is well positioned to receive significant Federal stimulus funds through sponsored awards in the upcoming fiscal year. These funds, in addition to revenue generated from the growth in sponsored awards and revenue generated from tuition increases should help to mitigate the stagnant or negative growth in other areas at the Institute. \r\nDr. G. P. \"Bud\" Peterson, President Georgia Institute ofTechnology \r\n-Xl- \r\n \r\n BASIC FINANCIAL STATEMENTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30, 2009 \r\nASSETS \r\nCurrent Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items \r\nTotal Current Assets \r\nNoncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences \r\nTotal Current Liabilities \r\nNoncurrent Liabilities Lease Purchase Obligations Deferred Revenue Compensated Absences \r\nTotal Noncurrent Liabilities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets, Net of Related Debt Restricted for: \r\nNonexpendable Expendable Capital Projects Unrestricted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of this statement. \r\n \r\nEXHIBIT \"A\" \r\n \r\n$ \r\n \r\n70,014,423 \r\n \r\n149,039 \r\n \r\n42,238,430 40,588,768 \r\n359,986 8,358,520 \r\n \r\n$ \r\n \r\n161 709 166 \r\n \r\n$ \r\n \r\n51,010,130 \r\n \r\n10,063,403 \r\n \r\n1,522,343,569 \r\n \r\n$ \r\n \r\n1,583,417,102 \r\n \r\n$ \r\n \r\n1,745,126,268 \r\n \r\n$ \r\n \r\n23,684,556 \r\n \r\n1,427,932 \r\n \r\n272,300 \r\n \r\n1,012,011 \r\n \r\n28,942,403 \r\n \r\n14,812,204 \r\n \r\n3,096,306 \r\n \r\n10,421,605 \r\n \r\n18,806,974 \r\n \r\n19 431,167 \r\n \r\n$ \r\n \r\n121,907,458 \r\n \r\n$ \r\n \r\n517,630,301 \r\n \r\n5,231,250 \r\n \r\n15 904 884 \r\n \r\n$ \r\n \r\n538,766,435 \r\n \r\n$ \r\n \r\n660,673,893 \r\n \r\n$ \r\n \r\n985,906,294 \r\n \r\n44,328,287 29,850,926 \r\n5,248,672 19 118,196 \r\n \r\n$ ===1:::;:::,0:;::;::8::;::::4:=,4::i:::52='-37_5= \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENDED JUNE 30, 2009 \r\n \r\nEXHIBIT\"B\" \r\n \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nGrants and Contracts Federal Federal Stimulus State Other \r\nSales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Operating Revenues \r\nTotal Operating Revenues \r\nOPERATING EXPENSES \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation \r\nTotal Operating Expenses \r\nOperating Income (Loss) \r\nNONOPERATING REVENUES (EXPENSES) \r\nState Appropriations Federal Stimulus Stabilization Funds Grants and Contracts \r\nFederal Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expense \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before Other Revenues, Expenses, Gains, or Losses \r\nCapital Grants and Gifts State Other \r\nTotal Other Revenues, Expenses, Gains or Losses \r\nIncrease (Decrease) in Net Assets \r\nNet Assets - Beginning of Year, Restated \r\nNet Assets End of Year \r\nThe notes to the financial statements are an integral part of this statement. \r\n-3- \r\n \r\n$ \r\n \r\n180,037,396 \r\n \r\n-28,322,488 \r\n \r\n318,127,195 86,954 \r\n12,999,159 186,615,334 \r\n15,584,108 1,066,289 \r\n \r\n52,300,671 1,935,758 \r\n18,184,952 13,173,276 \r\n6,219,014 7,252,009 8 994 787 \r\n \r\n$ \r\n \r\n794 254 414 \r\n \r\n$ \r\n \r\n261,660,462 \r\n \r\n286,540,591 \r\n \r\n110,167,036 \r\n \r\n688,094 \r\n \r\n15,746,039 \r\n \r\n12,353,479 \r\n \r\n39,050,662 \r\n \r\n228,130,476 \r\n \r\n69,585,408 \r\n \r\n$ \r\n \r\n1,023,922,247 \r\n \r\n$ \r\n \r\n-229,667,833 \r\n \r\n$ \r\n \r\n254,937,701 \r\n \r\n2,280,374 \r\n \r\n6,732,250 18,321,576 13,064,514 -27,718,947 -16 516 913 \r\n \r\n$ \r\n \r\n251,100,555 \r\n \r\n$ \r\n \r\n21,432,722 \r\n \r\n$ \r\n \r\n56,790,760 \r\n \r\n1266263 \r\n \r\n$ \r\n \r\n58,057,023 \r\n \r\n$ \r\n \r\n79,489,745 \r\n \r\n1,004,962,630 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used) by Operating Activities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus - Stabilization Funds Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts \r\nNet Cash Flows Provided (Used) by Noncapital Financing Activities \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by Investing Activities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents - Beginning of Year \r\nCash and Cash Equivalents - End of Year \r\n \r\nEXHIBIT\"C\" \r\n \r\n$ \r\n \r\n152,775,488 \r\n \r\n511,184,892 \r\n \r\n15,328,864 \r\n \r\n-375,980, 100 \r\n \r\n-545,899,858 \r\n \r\n-12,353,479 \r\n \r\n-3,342,134 \r\n \r\n2,674,818 \r\n \r\n52,111,151 1,941,808 \r\n18,170,785 13,221,213 \r\n6,216,526 7,146,425 23,798,619 \r\n \r\n$ \r\n \r\n-133,004,982 \r\n \r\n$ \r\n \r\n254,937,701 \r\n \r\n2,280,374 \r\n \r\n-3,250,799 \r\n \r\n25,053,826 \r\n \r\n-886 256 \r\n \r\n$ \r\n \r\n278, 134,846 \r\n \r\n$ \r\n \r\n8,507,497 \r\n \r\n-115,972,801 \r\n \r\n-17,542,135 \r\n \r\n-27, 709,301 \r\n \r\n$ \r\n \r\n-152,716,740 \r\n \r\n$ \r\n \r\n5,000,000 \r\n \r\n21,906,530 \r\n \r\n-1,326,633 \r\n \r\n$ \r\n \r\n25,579,897 \r\n \r\n$ \r\n \r\n17,993,021 \r\n \r\n52 10 2 1 A o 2 \r\n \r\n$ \r\n \r\n70 014 423 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009 \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\nNet Cash Provided (Used) by Operating Activities \r\nNONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts \r\n \r\nEXHIBIT\"C\" \r\n \r\n$ \r\n \r\n-229, 667,833 \r\n \r\n69,585,408 \r\n8,268,265 -38,130 \r\n5,728,984 -667,316 \r\n4,178,156 -626,908 \r\n8,181,678 \r\n2,052,714 \r\n \r\n$ ===-=1=33=,0=0=4=,9=8=2 \r\n \r\nThe notes to the financial statements are an integral part of this statement. \r\n-5- \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS Georgia Institute of Technology serves the state, national and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and throughout the country. \r\nREPORTING ENTITY Georgia Institute of Technology is one of thirty-five (3 5) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity. \r\nThe Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. \r\nLegally separate, tax exempt, organizations whose act1v1t1es primarily support units of 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 for additional information. \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Institute was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. \r\n \r\n-7- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nBASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. \r\nThe Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. \r\nCASH 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. \r\nSHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nINVESTMENTS The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. \r\nACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\n \r\n-8- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nINVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis. \r\nNONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. \r\nCAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or greater and the useful life meets or exceeds 5 years. Renovations to buildings, infrastructure, and facilities and other improvements are capitalized as betterments when the expenditure for the renovation meets or exceeds the capitalization threshold of $100,000. The Institute uses the parent/child methodology to track the costs of nonresearch buildings. In this instance, the original asset is considered the \"parent\" and any improvements that meet the capitalization criteria above are considered \"children\". The child asset normally takes on the remaining useful life of the parent asset unless it is determined that the child asset increases the useful life of the structure by 25 percent of the original life. In this case, the net book value of the original building is recapitalized along with the eligible improvements as a new asset and the original building asset is retired. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. \r\nDepreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 50 years for buildings, 25 to 75 years for infrastructure, 20 to 50 years for facilities and other improvements, 10 years for library books, and 5 to 10 years for equipment. The Institute depreciates research buildings differently than non-research buildings. Nonresearch buildings are generally depreciated over 40 to 50 years as indicated above. Research buildings are depreciated by building component such as elevators, general structure, HVAC, roof, etc. The Institute defines building components and the useful lives of those components based on an independent building valuation study. The useful life of these components is generally between 20 and 50 years. Residual values will generally be 10 percent of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. \r\nTo obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. \r\n-9- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCAPITAL ASSETS For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institute when complete. For projects managed by the Institute, the Institute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2009, GSFIC transferred capital additions valued at $96,856,274 ($48,283,263 GSFIC State funded and $48,573,01 I Institutional funded) primarily for the Marcus Nanotechnology Building to Georgia Institute of Technology. \r\nDEPOSITS Deposits represent good faith deposits from students to reserve housing assignments m an Institute residence hall. \r\nDEFERRED 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. \r\nCOMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $33,283,337 as of July 1, 2008. For fiscal year 2009, $23,326,379 was earned in compensated absences and employees were paid $21,273,665, for a net increase of $2,052,714. The ending balance as of June 30, 2009 in accrued liability for compensated absences was $35,336,051. \r\nNONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\nNET ASSETS The lnstitute's net assets are classified as follows: \r\nInvested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. \r\n- 10 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. \r\n \r\nRestricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\n \r\nExpendable Restricted Net Assets include the following: \r\n \r\nRestricted - E \u0026 G and Other Organized Activities Federal Loans Institutional Loans Quasi-Endowments \r\n \r\n$ 574,275 6,610,662 5,644,938 17,021,051 \r\n \r\nTotal Restricted Expendable \r\n \r\n$ 29.850.926 \r\n \r\nRestricted net assets - expendable - Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. \r\n \r\nUnrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2009, there was a surplus balance of $47,719.59 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\n \r\nUnrestricted Net Assets includes the following items which are quasi-restricted by management. \r\n \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS R \u0026 R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted \r\n \r\n$ 13,307,288 12,474,723 359,985 -7,023,800 \r\n \r\nTotal Unrestricted Net Assets \r\n \r\n$ 19,118,196 \r\n \r\nWhen an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. \r\n \r\nINCOME TAXES Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\n \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: \r\n \r\nOperating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as ( 1) student tuition and fees, net of scholarships allowances, (2) sales and services of auxiliary enterprises, net of scholarships allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans. \r\n \r\nNonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. \r\n \r\nSCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. Auxiliary Intercollegiate Athletics revenue of $1,715,892 is reported net of discounts and allowances of $124,500. \r\n \r\n- 12 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nRESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS During fiscal year 2009, the Institute initiated a project to manage cost and depreciation for Buildings, Facilities and Other Improvements (FOi) and Infrastructure using PeopleSoft Financials. This change was facilitated by the Institute receiving an audit misstatement in fiscal year 2007 for \"Understatement of Depreciation Expense and Accumulated Depreciation\" for Buildings from the Georgia Department of Audits and Accounts (DOAA) and the Institute receiving an audit recommendation in fiscal year 2008 to \"Ensure Capital Assets are Properly Depreciated\" by the Board of Regents (BOR). In its internal audit, the BOR recommended that Georgia Institute of Technology utilize PeopleSoft Financials to manage cost and depreciation of buildings. \r\nDuring the review of cost and depreciation for these assets, the Institute recognized that the methodology being used to calculate asset cost and depreciation for non-research buildings did not follow BOR policy. Thus, during this project, the Institute changed the methodology used to account for cost and depreciation of non-research buildings to the parent/child relationship. \r\nAs a result of this review, it was determined that Capital Assets had been overstated by $28,791,989. Capital Assets, being depreciated had been overstated in prior years by an amount of $21,059,336, with Building assets bearing the entire burden for this overstatement. Building depreciation expense had been understated by $6,595,239, Infrastructure depreciation expense being understated by $1,050,001 and Facilities and Other Improvement depreciation expense being understated by $87,413. To correctly reflect carrying values: \r\n1. The beginning balance for Capital Assets, Being Depreciated for Buildings and Building Improvements was restated and reduced by $21,059,336. \r\n2. The beginning balance for Accumulated Depreciation for Buildings and Building Improvements was restated and increased by $6,595,239. \r\n3. The beginning balance for Accumulated Depreciation for Infrastructure was restated and increased by $1,050,001. \r\n4. The beginning balance for Accumulated Depreciation for Facilities and Other Improvement was restated and increased by $87,413. \r\n5. Net Assets - Invested in Capital Assets, Net of Related Debt will be $28,791,989. \r\nIn addition, Capital Assets Building and Building Improvements and Lease Purchase Obligations were understated due to an omission of capital leases in the amount of $12, 121,223 and $15,383,249, respectively. The Institute restated Beginning Net Assets for this omission. The net effect on Beginning Net Assets is $3,262,026. \r\n \r\n- 13 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nRESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS Note 6 and Note 8 reflects these changes in the Restated Beginning Balance column. These changes are in accordance with generally accepted accounting principles. \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nDEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: \r\n1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. \r\n2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. \r\n3. 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. \r\n4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. \r\n5. 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. \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. \r\nThe 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. \r\nAt June 30, 2009, the carrying value of deposits was $15,762,489 and the bank balance was $26,657,057. Of the Institute's deposits, $26,596,275 was uninsured. Of these uninsured deposits, $23,007,775 was collateralized with securities held by the pledging financial institution's trust department or agent, and $3,588,500 were uncollateralized. \r\n- 14 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS Georgia Institute of Technology maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. \r\n \r\nThe Institute's investments as of June 30, 2009 are presented below. All investments are presented by investment type and debt securities are presented by maturity. \r\n \r\nInvestment Tyge \r\n \r\nFair Value \r\n \r\nDebt Securities U. S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt \r\n \r\n$ 5,790,894 \r\n8,336 4,174,765 2,186,983 \r\n \r\n$ 12,160,978 \r\n \r\nOther Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes \r\n \r\n649,985 291,202 800,484 \r\n341,996 \r\n \r\nInvestment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset \r\nPool \r\n \r\n26,437,285 36,765,485 \r\n27,763,031 149 039 \r\n \r\nLess Than 1 Year \r\n \r\n$ \r\n \r\n92,338 \r\n \r\n108,478 $ 2QQ,816 \r\n \r\nInvestment Maturity \r\n \r\nI 5 \r\n \r\n6 - 10 \r\n \r\nYears \r\n \r\n$ 2,781,192 \r\n297 2,687,945 1,114,603 \r\n$ 6 584 037 \r\n \r\n$ 2,825,385 \r\n383,192 960,746 $ 4 162,323 \r\n \r\nMore than 10 Years \r\n \r\n$ \r\n \r\n91,979 \r\n \r\n8,039 I, 103,628 \r\n3 156 \r\n \r\n$ 1,206 802 \r\n \r\nThe Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/searchRpts.html. \r\n- 15 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nINVESTMENTS The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 41 days. \r\nThe Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $2.04 at June 30, 2009. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is .97 years. \r\nInterest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regents policy and applicable Federal and state laws. \r\nThe Effective Duration of the Short-Term Fund is .72 years. Of the Institute's total investment of $26,437,285 in the Short-Term Fund, $26,437,285 is invested in debt securities. \r\nThe Effective Duration of the Diversified Fund is 6.26 years. Of the Institute's total investment of $36,765,485 in the Diversified Fund, $14,595,898 is invested in debt securities. \r\nCustodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Institute's policy for managing custodial credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute. \r\nAt June 30, 2009, $13,827,332 was uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name. \r\nCredit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk is for investments is an integral part of it's current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies. \r\n- 16 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS The investments subject to credit quality risk are reflected below: \r\n \r\nCredit Quality Risk \r\nRelated Debt Investments U. S. Agencies Corporate Debt \r\n \r\nFair Value \r\n \r\nAAA \r\n \r\nAA \r\n \r\nA \r\n \r\nBAA \r\n \r\nUnrated \r\n \r\n$ 4,174,765 $ 4,174,765 \r\n \r\n2,186,983 \r\n \r\n74,295 $ \r\n \r\n$ 6 361 248 $ 4 242 Q6Q $ \r\n \r\n536,652 $ 1,177 473 $ 536 652 $ 1111413 $ \r\n \r\n395 407 $ 325 4Q2 $ \r\n \r\n3 156 3 156 \r\n \r\nConcentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Institute's investment in a single issuer. The Institute's policy for managing concentration of credit risk is an integral part of it's current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the U.S. Treasury or other Federal Government agencies. \r\n \r\nNOTE 3: ACCOUNTS RECEIVABLE \r\n \r\nAccounts receivable consisted of the following at June 30, 2008: \r\n \r\nStudent Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other \r\n \r\n$ 2,503,704 1,559,401 \r\n42,238,430 1,009,754 \r\n37,816,346 \r\n \r\nLess Allowance for Doubtful Accounts \r\n \r\n$ 85,127,635 2,300,437 \r\n \r\nNet Accounts Receivable \r\n \r\n$ 8228271198 \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nInventories consisted of the following at June 30, 2009: \r\n \r\nPhysical Plant Other \r\n \r\n$ 288,130 71,856 \r\n \r\nTotal \r\n \r\n$=====3===5-9,-98==6 \r\n \r\n- 17 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 5: NOTES/LOANS RECEIVABLE \r\n \r\nThe Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2009. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2009 the allowance for uncollectible loans was approximately $72,158. \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nFollowing are the changes in capital assets for the year ended June 30, 2009: \r\n \r\nCapital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress \r\nTotal Capital Assets, Not Being Depreciated \r\nCapital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections \r\nTotal Assets Being Depreciated \r\nLess: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections \r\nTotal Accumulated Depreciation \r\nTotal Capital Assets, Being Depreciated, Net \r\nCapital Assets, Net \r\n \r\nBeginning Balance July 1, 2008 (Restated) \r\n$ 53,136,446 17,703,927 50,476,943 \r\n$ I00,562,400 1,302,468,280 19,133,500 358,928,865 94,693,201 \r\n$1,875,786,246 \r\n$ 15,068,829 283,264,600 7,880,425 222,668,732 64,477,410 \r\n$ 593,359,996 \r\n$1,282,426,250 \r\n$1 4Q3 743 566 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\n$ 506,555 33,508 \r\n16,909,959 \r\n \r\n$ 44,177,821 \r\n \r\n$ 17,450,022 $ 44,177,821 \r\n \r\n$ 5,572,410 171,971,981 7,360,550 40,241,851 4,855,932 \r\n$ 230,002,724 \r\n \r\n$ 24,036,275 \r\n30,386,472 14 946 \r\n \r\n$ 3,057,377 31,680,246 661,201 29,480,378 4,706,206 \r\n$ 69,585,408 \r\n \r\n$ 15,507,656 \r\n23,825,577 14 946 \r\n$ 39,348,179 \r\n \r\n$ 160,417,316 \r\n \r\n$ 15,089,514 $ 52,267,335 \r\n \r\nEnding Balance June 30, 2009 \r\n$ 53,643,001 17,737,435 23,209,081 \r\n$ 94,589,517 \r\n$ 106,134,810 1,450,403,986 26,494,050 368,784,244 99,534,187 \r\n$2,051,351,277 \r\n$ 18,126,206 299,437,190 8,541,626 228,323,533 69,168,670 \r\n$ 623,597,225 \r\n$1,427,754,052 \r\n$1,522,343,562 \r\n \r\n- 18 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 7: DEFERRED REVENUE \r\n \r\nCurrent deferred revenue consisted of the following at June 30, 2009: \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\n$ 12,367,500 1,416,730 1,027,974 \r\n \r\nTotals \r\n \r\n$ 14.812.204 \r\n \r\nLong-Term deferred revenue totaled $5,231,250. \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nLong-term liability activity for the year ended June 30, 2009 was as follows: \r\n \r\nLeases Lease Obligations \r\nOther Liabilities Compensated Absences \r\nTotal Long-Term Obligations \r\n \r\nBeginning Balance July I, 2008 (Restated) \r\n$ 543,120,674 \r\n33.283,337 \r\n$ 576 404011 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\n$ 10,858,736 $ 17,542, I 35 \r\n \r\n23,326,379 \r\n$ 34185.115 \r\n \r\n21.273.665 \r\n$ 38.815 800 \r\n \r\nEnding Balance June 30, 2009 \r\n$ 536,437,275 \r\n$ 571 773.326 \r\n \r\nCurrent Portion $ 18,806,974 \r\n$ 38 238.141 \r\n \r\nNOTE9: SIGNIFICANT COMMITMENTS \r\n \r\nThe Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $11,404,697 as of June 30, 2009. This amount is not reflected in the accompanying basic financial statements. \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nGeorgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\n \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2009 and 2038. Expenditures for fiscal year 2009 were $45,261,082 of which $27,718,947 represented interest. Total principal paid on capital leases was $17,542,135 for the fiscal year ended June 30, 2009. Interest rates range from 3.36 percent to 11.0 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2009: \r\n \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nCAPITAL LEASES Facilities and Other Improvements Infrastructure Land Buildings Equipment \r\n \r\n$ 338,383 37,560,930 11,457,418 \r\n463,493,599 18,148,104 \r\n \r\nTotal Assets Held Under Capital Lease \r\n \r\n$ 530!298~434 \r\n \r\nCertain 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. \r\n \r\nGeorgia Institute of Technology had thirteen capital leases with related parties in fiscal year 2009. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $17,480,000 and the amount due (principal and interest) in the next fiscal year is $1,424,310. \r\n \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $34,335,000 with the Georgia Tech Foundation, Inc. for the \"Technology Square - Global Leaming Center\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $30,605,000 and the amount due (principal and interest) in the next fiscal year is $2,263,494. \r\n \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $56,800,000 with the Georgia Tech Foundation, Inc. for the \"Technology Square - College of Management\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $50,670,000 and the amount due (principal and interest) in the next fiscal year is $3,769,688. \r\n \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $12,298,200 with the Georgia Tech Foundation, Inc. for the \"Technology Square - Enterprise Innovation Institute\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $10,959,200 and the amount due (principal and interest) in the next fiscal year is $811,128. \r\n \r\n- 20 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES In August 2001, Georgia Institute of Technology entered into a capital lease of $21,365,000 with the Georgia Tech Foundation, Inc. for the \"Technology Square - Parking Complex\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining longterm debt obligation (principal) under the lease was $19,185,000 and the amount due (principal and interest) in the next fiscal year is $1,490,401. \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $13,010,000 with the Georgia Tech Foundation, Inc., for the \"Technology Square - Bookstore\". Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $10,365,000 and the amount due (principal and interest) in the next fiscal year is $1,184,121. \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $4,490,000 with the Georgia Tech Foundation, Inc. for the \"Technology Square - Retail Complex\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $3,685,000 and the amount due (principal and interest) in the next fiscal year is $422,497. \r\nIn February 2001, Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $39,910,000, and the amount due (principal and interest) in the next fiscal year is $3,067,213. \r\nIn May 2004, Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June, 2036. At June 30, 2009 the remaining long-term debt obligation under the lease was $72,585,000 and the amount due (principal and interest) in the next fiscal year is $4,982,625. \r\nIn July 2003, Georgia Institute of Technology entered into a capital lease of $60,485,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the Married Family Housing building, including an adjoining parking deck. The lease term is for a 25-year period that began October 2005 and expires on June 2030. At June 30, 2009 the remaining long-term debt obligation under the lease was $54,555,000 and the amount due (principal and interest) in the next fiscal year is $4,277,935. \r\n \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES In July 2003, Georgia Institute of Technology entered into a capital lease of $9,835,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the Klaus Advanced Computing Center. The lease term is for a 20-year period that began October 2006 and expires on June 2025. At June 30, 2009 the remaining long-term debt obligation under the lease was $8,790,000 and the amount due (principal and interest) in the next fiscal year is $807,863. \r\nIn July 2007, Georgia Institute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named \"North Avenue Apartments\", including an adjoining parking deck. The lease term is for 25 years and expires in June, 2032. At June 30, 2009 the remaining long-term debt obligation under the lease was $74,924,652 and the amount due (principal and interest) in the next fiscal year is $5,280,000. \r\nIn January 2008, Georgia Institute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for an Electrical Sub Station. The lease term is for 30 years and expires in December 2038. At June 30, 2009 the remaining longterm debt obligation under the lease was $39,023,600 and the amount due (principal and interest) in the next fiscal year is $3,000,000. \r\nGeorgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $76,150,584 with the University Financing Foundation for the Technology Square Research Building. The lease term is for a 29year period that began June 2003 and expires June 2032. At June 30, 2009 the remaining longterm debt obligation (principal) under the lease was $76,435,730 and the amount due (principal and interest) in the next fiscal year is $4,502,947. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. \r\nThe Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2018. At June 30, 2009, the remaining long-term debt obligation under these agreements was $27,264,093. The amount due (principal and interest) in the next fiscal year is $8,914,812. \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases with remaining terms of more than one year expire in various fiscal years from 2009 through 2010. Certain operating leases provide for renewal options for periods from one to 25 years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate \r\n \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nOPERATING LEASES funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. \r\n \r\nDESCRIPTION OF RELATED PARTY LEASES In 1994, Georgia Institute of Technology entered into various real property operating leases with related parties including Georgia Tech Research Corporation, (GTRC) Georgia Advanced Technology Ventures (GATV), Inc., and various subsidiaries of GATV. The current agreements are for July 1, 2009 through June 30, 2010 with most of the agreements containing a renewal option. Under these agreements, the Institute is obligated to pay these related parties a total of $7,027,593 in the next fiscal year. \r\n \r\nGeorgia Institute of Technology's fiscal year 2009 expense for rental of real property and equipment under operating leases was $9,607,995. \r\n \r\nFUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2009, were as follows: \r\n \r\nReal Property and Equipment \r\n \r\nCapital \r\n \r\nOperating \r\n \r\nLeases \r\n \r\nLeases \r\n \r\nYear Ending June 30: 2010 2011 2012 2013 2014 2015 - 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2038 \r\nTotal Minimum Lease Payments \r\nLess: Interest \r\nPrincipal Outstanding \r\n \r\n$ 46,199,034 $ 44,913,323 41,584,863 41,817,995 40,194,421 194,152,074 192,968,227 190,121,268 109,782,404 20,460,246 \r\n \r\n9,452,734 \r\n \r\n$ 922,193,855 $ 9,452.734 \r\n \r\n385,756,580 \r\n \r\n$ 536,437.275 \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. \r\n \r\nFunding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\nFiscal Year \r\n \r\nPercentage Contributed \r\n \r\nRequired Contribution \r\n \r\n2009 2008 2007 \r\n \r\n100% 100% 100% \r\n \r\n$ 19,485,389 $ 18,963,675 $ 18,025,456 \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. \r\n \r\nThe ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. \r\n \r\nThe 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 \r\n \r\n- 24 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nPlan Description 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 I, 2009 also have the option to change their membership to the GSEPS plan. \r\nUnder 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. \r\nRetirement 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 I, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. \r\nFunding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2009, for employees covered by ERS was $568,957. The lnstitute's total payroll for all employees was $548,201,053. \r\nMember 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 $4,200. Under the old plan, the Institute pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Institute contributions are included in the members' accounts for refund purposes and are used in the computation of the members' eamable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The Institute is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Institute contributions are not at any time refundable to the member or his/her beneficiary. \r\n- 25 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nFunding Policy Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\nFiscal Year \r\n \r\nPercentage Contributed \r\n \r\nRequired Contribution \r\n \r\n2009 2008 2007 \r\n \r\n100% 100% 100% \r\n \r\n$ \r\n \r\n59,534 \r\n \r\n$ \r\n \r\n59,300 \r\n \r\n$ \r\n \r\n57,305 \r\n \r\nActuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2009 financial report, which may be obtained through ERS. \r\n \r\nREGENTS RETIREMENT PLAN \r\n \r\nPlan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An \"eligible university system employee\" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. \r\n \r\nFunding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution was 8.15% for the first six months and 9.24% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\n \r\n- 26 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nREGENTS RETIREMENT PLAN \r\nFunding Policy Georgia Institute of Technology and the covered employees made the required contributions of $19,731,472 (8.15% or 9.24%) and $11,309,687 (5%), respectively. \r\nAIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\nBenefits 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. \r\nContributions 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. \r\nTotal contributions made by employees during fiscal year 2009 amounted to $731,526 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. \r\nThe Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. \r\n \r\n- 27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\nThe University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. \r\nThe Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. \r\nA 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. \r\nGeorgia 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, 2009, the Institute recorded a liability and expense in the amount of $21,507 for asbestos \r\n- 28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\n \r\nabatement projects in the Boggs Chemistry Building and Weber Space Science and Technology Building. The liability is reflected on the Statement of Net Assets in Accounts Payable and on the Statement of Revenues, Expenses and Changes in Net Assets in Supplies and Other Services. The liability was determined using the Expected Cash Flow Measurement Technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts. The Institute does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Pollution remediation liability activity in fiscal year 2009 was as follows: \r\n \r\nPollution Remediation Obligations \r\n \r\nBeginning Balance July 1, 2008 \r\n$====0 \r\n \r\nNOTE 13: CONTINGENCIES \r\n \r\nAdditions \r\n$ 21507 \r\n \r\nReductions \r\n$====0 \r\n \r\nEnding Balance June 30, 2009 \r\n \r\n$ \r\n \r\n21 507 \r\n \r\nCurrent Portion \r\n \r\nAmounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\n \r\nLitigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2009. \r\n \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\n \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. \r\n \r\n- 29 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\n \r\nThe Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2008 and 2009 plan years, the employer rate was approximately 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%. \r\n \r\nAs of June 30, 2009, there were 1,275 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2009, Georgia Institute of Technology recognized as incurred $6,314,554 of expenditures, which was net of $2,748,805 of participant contributions. \r\n \r\nNOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe Institute's operating expenses by functional classification for fiscal year 2009 are shown below: \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nInstruction \r\n \r\nFunctional Classification \r\n \r\nResearch \r\n \r\nPublic Service \r\n \r\nAcademic Sui:mort \r\n \r\nStudent Services \r\n \r\n$ 103,237,995 51,117,124 32,983,058 50,729 3,115,908 \r\n \r\n$ 144,419,871 I 08,095,273 45,739,306 33,726 10,677,019 \r\n \r\n$ 6,275,218 19,877,443 5,861,203 537,237 883,439 \r\n \r\n$ 5,894,041 19,399,794 5,933,432 9,998 528,780 \r\n \r\n$ 242,780 11,741,454 2,476,031 35,751 150,385 \r\n \r\n2,001,690 20,409,778 9 529 737 $ 222 446 0)9 \r\nInstitutional su,mort \r\n \r\n2,182,105 \r\n \r\n312,473 \r\n \r\n527,708 \r\n \r\n113,336,438 28,171,775 \r\n \r\n13,127,508 1,694,735 \r\n \r\n5,159,725 6,914,018 \r\n \r\n$ 48 562 256 $ 44 361426 \r\n \r\nFunctional Classification \r\n \r\nPlant \r\n \r\nOperations and Scholarships \r\n \r\nAuxiliary \r\n \r\nMaintenance and Fellowships \r\n \r\nEntemrises \r\n \r\n204,619 \r\n10,813,947 971 767 \r\n$ 26,636,134 \r\nTotal Operating Exgenses \r\n \r\n$ 1,485,148 34,679,302 6,809,509 13,899 207,485 \r\n562,241 \r\n9,136,730 7,534,677 \r\n$ 6Q 428 221 \r\n \r\n$ 105,409 23,923,678 6,238,847 2,095 72,579 \r\n22,175,074 \r\n16,129,541 5,768,058 \r\n$ 14 415 281 \r\n \r\n$ 12,353,479 $ 12 353412 \r\n \r\n$ 17,706,523 4,125,650 4,659 110,444 \r\n11,084,752 \r\n40,016,809 9,000,641 \r\n$ 82 Q42 418 \r\n \r\n$ 261,660,462 286,540,591 110,167,036 688,094 15,746,039 \r\n12,353,479 39,050,662 \r\n228,130,476 69,585,408 \r\n$1 Q23 222 24:Z \r\n \r\n- 30 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2009 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: AFFILIATED ORGANIZATIONS \r\nIn accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Georgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined to be legally separate, tax exempt organizations whose activities primarily support Georgia Institute of Technology, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia Institute of Technology has not included financial activity for these affiliated organizations in these financial statements. \r\nGeorgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined significant to the State of Georgia for the year ended June 30, 2009, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia. \r\n \r\n- 31 - \r\n \r\n (This page left intentionally blank) \r\n \r\n SUPPLEMENTARY INFORMATION - 33 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2009 \r\nASSETS \r\nAccounts Receivable Federal Financial Assistance Other \r\nPrepaid Expenditures Inventories Other Assets \r\nTotal Assets \r\nLIABILITIES AND FUND EQUITY \r\nLiabilities Cash Overdraft Accounts Payable Encumbrance Payable Deferred Revenue Other Liabilities \r\nTotal Liabilities \r\nFund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories \r\nUnreserved Surplus \r\nTotal Fund Balances \r\nTotal Liabilities and Fund Balances \r\n \r\nSCHEDULE \"1\" \r\n \r\n$ \r\n \r\n42,238,430.44 \r\n \r\n26,037,671.38 \r\n \r\n8,004,136.12 \r\n \r\n288,129.91 \r\n \r\n8,408,343.40 \r\n \r\n$ ====8=4,=97=6=,7=11=.2=5= \r\n \r\n$ \r\n \r\n10,149,125.28 \r\n \r\n30,292,005.40 \r\n \r\n17,242,867.34 \r\n \r\n16,666,184.47 \r\n \r\n8,886,410.88 \r\n \r\n$ \r\n \r\n83,236,593.37 \r\n \r\n$ \r\n \r\n116,724.55 \r\n \r\n231,765.41 \r\n \r\n1,060,756.60 \r\n \r\n283,151.73 \r\n \r\n47,719.59 \r\n \r\n$ \r\n \r\n1,740,117.88 \r\n \r\n$ ==8=4=,9=7=6'=7=11=.2=5= \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n- 34- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) \r\nBUDGET FUND YEAR ENDED JUNE 30, 2009 \r\n \r\nSCHEDULE \"2\" \r\n \r\nREVENUES \r\nState Appropriation State General Funds \r\nFederal Funds Other Funds \r\nTotal Revenues \r\nCARRY-OVER FROM PRIOR YEAR \r\nTransfer from Reserved Fund Balance \r\nTotal Funds Available \r\nEXPENDITURES \r\nSpecial Funding Initiative Research Consortium Advanced Technology Development Center Georgia Tech Research Institute Teaching \r\nTotal Expenditures \r\nExcess of Funds Available over Expenditures \r\nFUND BALANCE JULY 1 \r\nReserved Unreserved \r\nADJUSTMENTS \r\nPrior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Non-Mandatory Transfer Unreserved Fund Balance (Surplus) Returned \r\nto Board of Regents - University System Office Year Ended June 30, 2008 \r\nPrior Year Reserved Fund Balance Included in Funds Available \r\nFUND BALANCE JUNE 30 \r\n \r\nBUDGET \r\n \r\nACTUAL \r\n \r\nVARIANCE FAVORABLE (UNFAVORABLE} \r\n \r\n$ \r\n \r\n255,703,486.00 $ \r\n \r\n255,317,024.00 $ \r\n \r\n2,280,374.00 \r\n \r\n2,280,374.00 \r\n \r\n840,715,640.00 \r\n \r\n762?90,400.51 \r\n \r\n$ 1,098,699,500.00 $ 1,020,387,798.51 $ \r\n \r\n-386,462.00 0.00 \r\n-77,925,239.49 \r\n-78,311,701.49 \r\n \r\n0.00 \r\n \r\n2,086,730.58 \r\n \r\n$ 1,098,699,500.00 $ 1,022,474,529.09 $ \r\n \r\n2,086,730.58 -76,224,970.91 \r\n \r\n$ \r\n \r\n1,595,892.00 $ \r\n \r\n1,595,892.00 $ \r\n \r\n13,764,992.00 \r\n \r\n13,764,992.00 \r\n \r\n24,624,536.00 \r\n \r\n18,171,307.87 \r\n \r\n180,131,628.00 \r\n \r\n179,150, 116.67 \r\n \r\n878,582,452.00 \r\n \r\n818,087,154.51 \r\n \r\n$ 1,098,699,500.00 $ 1,030,769 463.05 $ \r\n \r\n$ \r\n \r\n-8,294,933.96 $ \r\n \r\n0.00 0.00 6,453,228.13 981,511.33 60 495 297.49 \r\n67,930,036.95 \r\n-8,294,933.96 \r\n \r\n3,387,245.25 379,323.32 \r\n \r\n94,308.12 -46,588.53 \r\n-3,067.35 8,689,884.93 \r\n \r\n-379,323.32 -2,086,730.58 \r\n \r\n$ \r\n \r\n1 740 117.88 \r\n \r\nSUMMARY OF FUND BALANCE \r\nReserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories \r\nTotal Reserved \r\nUnreserved Surplus \r\n \r\n$ \r\n \r\n116,724.55 \r\n \r\n231,765.41 \r\n \r\n1,060,756.60 \r\n \r\n283,151.73 \r\n \r\n$ \r\n \r\n1,692,398.29 \r\n \r\n47 719.59 \r\n \r\nTotal Fund Balance \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n- 35 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET \r\n(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2009 \r\n \r\nSpecial Funding Initiatives \r\nState Appropriation State General Funds \r\n \r\nOriginal Ai:mro~riation \r\n \r\nFinal Budget \r\n \r\nCurrent Year Revenues \r\n \r\nFunds Available Com eared to BudQet \r\n \r\nPrior Year CarQ'.Over \r\n \r\nTotal Funds Available \r\n \r\nVariance Positive (Negative) \r\n \r\n649 361,00 $ \r\n \r\n1 595 892,00 $ \r\n \r\n1 595 892.00 $ \r\n \r\n0.00 $ \r\n \r\n1595892.00 $ \r\n \r\n0,00 \r\n \r\nResearch Consortium State Appropriation State General Funds \r\n \r\n9,209.835,00 \r\n \r\n13 764 992.00 $ \r\n \r\n13 764 992.00 $ \r\n \r\n0,00 $ \r\n \r\n13. 764,992.00 \r\n \r\n0.00 \r\n \r\nAdvanced Technology Development Center \r\n \r\nState Appropriation \r\n \r\nState General Funds \r\n \r\n$ \r\n \r\nOther Funds \r\n \r\nTotal Advanced Technology Development Center \r\n \r\n17,891,736.00 12 875 000,00 \r\n30,766,736.00 \r\n \r\n11,649,536.00 12 975 000.00 \r\n24,624,536.00 \r\n \r\n11,411,678.00 6,714 535,94 \r\n18, 126,213,94 $ \r\n \r\n0,00 0.00 \r\n0.00 $ \r\n \r\n11,411,678.00 6 714 535,94 \r\n18,126,213.94 \r\n \r\n-237,858,00 -6 260 464,06 \r\n-6,498,322,06 \r\n \r\nGeorgia Tech Research Institute State Appropriation State General Funds Other Funds \r\nTotal Georgia Tech Research Institute \r\n \r\n8,052,902.00 133 917 958,00 \r\n141,970.860,00 \r\n \r\n7,278,208.00 172 853 420,00 \r\n180 131 628,00 \r\n \r\n7,129,604.00 172 020 512,67 \r\n179150116,67 \r\n \r\n0.00 $ 0,00 \r\n0.00 \r\n \r\n7,129,604.00 $ 172,020 512.67 \r\n179150 116.67 $ \r\n \r\n-148,604.00 -832 907,33 \r\n-981 511.33 \r\n \r\nTeaching State Appropriation State General Funds Federal Funds American Recovery and Reinvestment Act of 2009 Federal Stabilization Funds Other Funds \r\nTotal Teaching \r\n \r\n253,504,540.00 $ 221,414,858.00 $ 221,414,858,00 $ \r\n \r\n0.00 $ \r\n \r\n221,414,858,00 $ \r\n \r\n0,00 \r\n \r\n0.00 624 362 220,00 \r\n877 866 760.00 \r\n \r\n2,280,374.00 654,887,220.00 \r\n87B 582 452.00 \r\n \r\n2,280,374.00 584,055,351.90 \r\n807 750 583,90 \r\n \r\n0.00 2 086 730,58 \r\n2 086,730.58 \r\n \r\n2,280,374.00 586 142 082.48 \r\n \r\n0.00 -68 745 137.52 \r\n \r\n809,837:314.48 $ -68 745 137,52 \r\n \r\nGrand Totals - All Programs \r\n \r\n1,060,463,552.00 $ 1,09B,699,500.00 $ 1,020,387,798,51 $ 2,086,730.58 $ 1,022,474,529.09 $ -76,224,970,91 \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles, \r\n-36- \r\n \r\n SCHEDULE \"3\" \r\n \r\nExpenditures Compared to Budget \r\n \r\nVariance \r\n \r\nPositive \r\n \r\nActual \r\n \r\n(Negative) \r\n \r\nActual Funds Available \r\nOver/(Under) Expenditures \r\n \r\nPrior Period Adjustments \r\n \r\nOther Adjustments \r\n \r\nProgram Fund \r\nBalances \r\n \r\nTransfers \r\n \r\nProgram Fund Balances \r\n \r\nReserve \r\n \r\nSurplus \r\n \r\nTotal Fund Balance \r\n \r\n1 595 892.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 \r\n \r\n13 764 992.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\no.oo $ ----=o._oo= $ o.oo $--~=o!=.o.,,o= \r\n \r\n11,411,678.00 6,759 629.87 \r\n18,171,307.87 \r\n \r\n237,858,00 6215 370.13 \r\n6,453,228.13 \r\n \r\n0.00 -45 093.93 \r\n-45,093.93 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n45 093.93 \r\n \r\n0.00 \r\n \r\n45,093.93 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n0.00 ___o\"\".\"\"oo=- \r\n \r\no.oo $ ~=-o....o..o. _ _ _ _0...,..,00... \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\no.oo \r\n \r\n0.00 \r\n \r\no.oo $--~-o.,.o.,.o_ \r\n \r\n7,129,604.00 172,020 512.67 \r\n179 150 116.67 \r\n \r\n148,604.00 832 907.33 \r\n981 511.33 \r\n \r\n0.00 \r\n \r\n1,256.02 \r\n \r\n0.00 \r\n \r\n1.B9 \r\n \r\n0.00 \r\n \r\n1 257.91 \r\n \r\n0.00 \r\n \r\n1,256.02 \r\n \r\n0.00 \r\n \r\n1.89 \r\n \r\n0.00 \r\n \r\n1,257,91 \r\n \r\n0.00 \r\n \r\n0.00 \r\n \r\n0.00 ___o\"\"'.\"'oo\"-- \r\n \r\n0.00 ~ - - 0...,..00.., \r\n \r\n1,256.02 1.89 \r\n1 257.91 \r\n \r\n1,256.02 1.89 \r\n1 257.91 \r\n \r\n221,035,534.68 $ \r\n \r\n379,323.32 $ \r\n \r\n379,323.32 $ \r\n \r\n0,00 $ \r\n \r\n0.00 $ 379,323.32 $ -379,323.32 $ \r\n \r\n0,00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 \r\n \r\n2,280,374.00 594 771 245.63 \r\n818,087 154.51 \r\n \r\n0.00 60 115 974,17 \r\n60.495 297.49 \r\n \r\n0.00 .0 629 163.35 \r\n-8 249 840.03 \r\n \r\n0.00 48461.68 \r\n46 461.68 \r\n \r\n0.00 8 598,329.99 \r\n8 598 329.99 \r\n \r\n0.00 15 628.32 \r\n394,951.64 \r\n \r\n0.00 379 323.32 \r\n0.00 \r\n \r\n0.00 348 48996 \r\n348 489.96 \r\n \r\n0.00 46 461.68 \r\n46,461.68 \r\n \r\n0.00 394,951.64 \r\n394 951.64 \r\n \r\n1.030,769,463.05 $ 67,930,036.95 $ -8,294,933.96 $ 47,719.59 $ 8,643,423.92 $ 396,209.55 $ \r\n \r\n0.00 $ 348,489.96 $ 47,719.59 $ 396,209.55 \r\n \r\nUnexpendable Reserves Uncollectible Accounts Receivable Inventories \r\n \r\n1,060,756.60 283 151. 73 \r\n$ 1740117.B8 \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30, 2009 \r\n \r\nSCHEDULE \"4\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals - Payroll June 30, 2009 June 30, 2008 \r\n \r\nCompensated Absences June 30, 2009 June 30, 2008 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nAtlanta Metropolitan College \r\n \r\nJames, \r\n \r\nLaura \r\n \r\nBoard of Regents of the University System of Georgia \r\n \r\nBarnes, \r\n \r\nRosalind \r\n \r\nBearden, \r\n \r\nAlison \r\n \r\nBradley, \r\n \r\nAllison \r\n \r\nBrown, \r\n \r\nJoAnn \r\n \r\nEngelhard, \r\n \r\nDavid \r\n \r\nErvin, \r\n \r\nJuanita \r\n \r\nHughes, \r\n \r\nMichael \r\n \r\nJean-Baptiste, Jimmy \r\n \r\nJean-Baptiste, Rebecca \r\n \r\nJohnson, \r\n \r\nJoy \r\n \r\nJones, \r\n \r\nShelia \r\n \r\nKilpatrick, \r\n \r\nToyna \r\n \r\nMogusa, \r\n \r\nJanet \r\n \r\nNgari, \r\n \r\nMaryclaire \r\n \r\nPaterson, \r\n \r\nPatricia \r\n \r\nPevey, \r\n \r\nMark \r\n \r\nReaves, \r\n \r\nJonathan \r\n \r\nSommer, \r\n \r\nCandice \r\n \r\nStewart, \r\n \r\nJanet \r\n \r\nThomas, \r\n \r\nCheryl \r\n \r\nWhite, \r\n \r\nJehmia \r\n \r\nWolf-Ward, \r\n \r\nTina \r\n \r\nNorth Georgia College and State University \r\n \r\nMonsaas, \r\n \r\nJudith \r\n \r\nDeferred Compensation Plan Dr. Schuster \r\n \r\nUnidentified Variance \r\n \r\nSALARIES \r\n \r\nTRAVEL \r\n \r\n$ \r\n \r\n545,321,527 $ \r\n \r\n15,746,039 \r\n \r\n1,427,932 -1,179,452 \r\n \r\n32,824,943 -30,918, 102 \r\n \r\n63,750 \r\n81,515 2,585 5,639 \r\n41,675 1,540 6,250 \r\n22,458 10,834 20,359 22,795 92,482 2,335 12,420 14,575 25,211 11,308 \r\n1,400 9,243 5,961 30,021 \r\n998 16,180 \r\n3,983 \r\n180,000 \r\n38,688 \r\n \r\n$ \r\n \r\n548,201,053 $ ==1=5,==74=6==,0=3=9 \r\n \r\n SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2009 \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007-bletter","title":"Georgia Institute of Technology, Atlanta, Georgia, management letter, November 19, 2007","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2007-11-19"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, Ga. : Dept. of Audits and Accounts"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, management letter, November 19, 2007"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007-bletter"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007-bletter"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 \r\nNovember 19, 2007 \r\n \r\nRonald E. Watson \r\nDIRECTOR \r\n(404) 656-2180 \r\n \r\nMembers of the Board of Regents of the University System of Georgia \r\nand Honorable G. Wayne Clough, President Georgia Institute of Technology \r\nLadies and Gentlemen: \r\nIn planning and performing our audit ofthe financial statements of Georgia Institute ofTechnology, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2007, in accordance with standards generally accepted in the United States of America, we considered Georgia Institute of Technology's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Georgia Institute of Technology's internal control. Accordingly, we do not express an opinion on the effectiveness of the Georgia Institute of Technology's internal control. \r\nOur consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. Any deficiencies in internal controls that we consider to be significant deficiencies and/or material weaknesses will be communicated to management and those charged with governance within the findings section ofour report on Georgia Institute of Technology's basic financial statements dated November 19, 2007. Additionally, we noted certain matters involving the internal control and other operational matters that are presented for your consideration. This letter does not affect our report dated November 19, 2007 on the financial statements of Georgia Institute of Technology. \r\nWe will review the status of these comments during our next engagement. Our comments and recommendations, all ofwhich have been discussed with appropriate members ofmanagement, are intended to improve the entity's internal control or result in other operating efficiencies. We will be pleased to discuss these comments in further detail at your convenience. Our comments are summarized as follows: \r\n \r\n ACCOUNTING CONTROLS (OVERALL) \r\nInternal Control Process Documentation As a result of our audit, we found a lack of documentation related to management's monitoring of key internal controls and processes identified by management. Management should formalize their documentation and monitoring of key controls over significant accounts, processes and financial statement disclosures that will be relied upon to ensure that Georgia Institute of Technology's financial statements are fairly presented. \r\nSalary and Travel Our examination ofGeorgia Institute ofTechnology's reconciliation ofSalary and Travel expense to the amounts submitted on the continuous audit (CSl) to the Georgia Department of Audits and Accounts, as required by O.C.G.A. 50-6-27, noted the following matters: \r\n Salary expense submitted on the CS 1 wasn't properly reconciled to the financial statements.  Amounts paid for deferred compensation and other fringe benefits were not reported on the \r\nCSL  Employee travel amounts paid through Agency Funds was not reported on the CS 1. \r\nManagement should ensure that salary and travel expense submitted on the CS 1 is accurate and properly reflects the amounts paid to employees. \r\nDepreciation Expense Calculations Our audit testing revealed that depreciation expense for buildings and infrastructure was not calculated according to Georgia Institute ofTechnology's capitalization policy. Management should ensure that depreciation expense for all assets is calculated in accordance with the Institute's policy. \r\nIn the normal course ofthe audit process, the auditor is only required to obtain an understanding of internal control sufficient to plan the audit. This, however, does not imply that the auditor must perform any type oftest or other verification ofthe effectiveness ofthe internal control system. As such, we strongly recommend that management evaluate the effectiveness ofthe entity's system of internal controls. This evaluation should reaffirm management's responsibility for establishing and maintaining an adequate system of internal controls and financial reporting. Strong and effective internal controls are the responsibility ofmanagement and we believe that this practice, conducted on an annual basis, will be ofsignificant benefit in enhancing internal controls and preventing fraud and abuse. \r\n \r\n We believe that the implementation of these recommendations will provide Georgia Institute of Technology with a stronger system of internal accounting controls while also making its operations more efficient. This communication is intended solely for the information and use of management and others within the organization and is not intended to be and should not be used by anyone other than these specified parties. \r\n \r\nRespectfully submitted, \r\n \r\n. \r\n \r\n~Lu~ \r\nRussell W. Hinton, CPA, CGFM State Auditor \r\ncc: Claire Arnold Ron Stark, Associate Vice Chancellor for Internal Audits \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2007-h2008","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2007/2008"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, GA : Georgia. Dept. of Audits and Accounts, 2008"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2007-h2008"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2007-h2008"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS \r\nI \r\nGEORGIA INSTITUTE OF TECHNOLOGY ATLANTA, GEORGIA REPORT ON AUDIT \r\nOF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 \r\nRussell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENT'S DISCUSSION AND ANALYSIS \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n2 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n3 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n4 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n7 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\n1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND \r\n \r\n34 \r\n \r\n2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT \r\n \r\n(NON-GAAP BASIS) BUDGET FUND \r\n \r\n35 \r\n \r\n3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING \r\n \r\nSOURCE COMPARED TO BUDGET \r\n \r\n(NON-GAAP BASIS) BUDGET FUND \r\n \r\n36 \r\n \r\n4 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n39 \r\n \r\nSECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 \r\nDecember 5, 2008 \r\n \r\nHonorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Regents ofthe University System of Georgia \r\nand Honorable Gary B. Schuster, Interim President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Institute ofTechnology, an organizational unit ofthe State of Georgia, as of and for the year ended June 30, 2008. These financial statements are the responsibility of the Georgia Institute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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. \r\nAs discussed in Note 1, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities ofthe State of Georgia that is attributable to the transactions of Georgia Institute ofTechnology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State of Georgia, in conformity with accounting principles generally accepted in the United States of America. \r\n \r\n08ARL-62 \r\n \r\n In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30, 2008, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\nManagement's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it. \r\nOur audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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. \r\nRespectfully submitted, \r\n~~~ Russell W. Hinton, CPA, CGFM State Auditor \r\nRWH:as 08ARL-62 \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY Management's Discussion and Analysis \r\n \r\nIntroduction \r\n \r\nThe Georgia Institute ofTechnology, also known as Georgia Tech, is one ofthe 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nations leading research universities, with over $400 million expended on sponsored research activities and providing a focused, technology based education for nearly 19,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked as one of the top ten public universities in the nation by U. S. News and World Report, with four schools in the College of Engineering listed among the country's top five. Georgia Tech's undergraduate engineering programs are ranked in the Top 10 and the graduate engineering program is consistently ranked in the Top 5. Georgia Tech offers degrees through the Colleges of Engineering, Architecture, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\n \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research institution that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21 st century. The Institute continues to grow as reflected by the faculty and student numbers below and other comparisons that follow. \r\n \r\nFaculty \r\n \r\nStudents {Headcount) \r\n \r\nStudents {FTE) \r\n \r\nFiscal Year 2008 Fiscal Year 2007 Fiscal Year 2006 \r\n \r\n970 \r\n \r\n18,747 \r\n \r\n17,836 \r\n \r\n940 \r\n \r\n17,936 \r\n \r\n17,027 \r\n \r\n878 \r\n \r\n17,135 \r\n \r\n16,299 \r\n \r\nOverview ofthe Financial Statements and Financial Analysis \r\n \r\nThe Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2008, which began July 1, 2007 and ended June 30, 2008. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into five net asset categories: invested in capital assets, net of related debt; restricted - nonexpendable; restricted - expendable; restricted - capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for fiscal year 2008 and fiscal year 2007. \r\n \r\n- 1- \r\n \r\n Statement ofNet Assets \r\n \r\nUsing the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed and net assets available to continue operations in the future. \r\n \r\nThe Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into three categories, nonexpendable, expendable and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the Institute but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category, Unrestricted Net Assets, is available for any lawful purpose of the Institute. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2008 and June 30, 2007: \r\n \r\nStatement of Net Assets, Condensed \r\n \r\nJune 30, 2008 \r\n \r\nJune 30, 2007 \r\n \r\nAssets Current Assets Capital Assets, Net Other Assets \r\n \r\n$ 186,023,497 1,420,414,332 72,926,737 \r\n \r\n$ 171,893,931 1,261,604,842 70,001,585 \r\n \r\nTotal Assets \r\n \r\n$1,679,364,566 \r\n \r\n$1,503,500,358 \r\n \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\n \r\n$ 112,482,457 529,865,464 \r\n \r\n$ 102,305,597 417,817,152 \r\n \r\nTotal Liabilities \r\n \r\n$ 642,347,921 \r\n \r\n$ 520,122,749 \r\n \r\nNet Assets Invested in Capital Assets, Net of Debt Restricted- Nonexpendable Restricted - Expendable Restricted - Capital Projects Unrestricted \r\n \r\n$ 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962 \r\n \r\n$ 851,635,161 53,098,742 30,748,494 49,599,664 -1,704,452 \r\n \r\nTotal Net Assets \r\n \r\n$1,037,016,645 \r\n \r\n$ 283,377,609 \r\n \r\n-11- \r\n \r\n The total assets of the institution increased by $175,864,208. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $158,809,490 in the category of Capital Assets, Net. The balance of the increase is primarily in receivable categories. \r\n \r\nThe total liabilities for the year increased by $122,225,172. The combination of the increase in total assets of $175,864,208 and the increase in total liabilities of $122,225,172 yields an increase in total net assets of $53,639,036. The increase in total net assets is primarily in the category oflnvested in Capital Assets, Net of Debt, in the amount of$41,258,746. \r\n \r\nStatement ofRevenues, Expenses and Changes in Net Assets \r\n \r\nChanges in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. \r\n \r\nStatement of Revenues, Expenses and Changes in Net Assets, Condensed \r\n \r\nJune 30. 2008 \r\n \r\nJune 30. 2007 \r\n \r\nOperating Revenues Operating Expenses \r\n \r\n$ 721,356,596 980,433,038 \r\n \r\n$ 667,930,667 919.242.200 \r\n \r\nOperating Loss \r\n \r\n$ -259,076,442 \r\n \r\n$ -251,311,533 \r\n \r\nNonoperating Revenues and Expenses \r\n \r\n265,273,178 \r\n \r\n259.899.848 \r\n \r\nIncome (Loss) Before Other Revenues, Expenses, Gains or Losses \r\n \r\n$ 6,196,736 \r\n \r\n$ 8,588,315 \r\n \r\nOther Revenues, Expenses, Gains or Losses \r\n \r\n38,889,899 \r\n \r\n51,825,493 \r\n \r\nIncrease (Decrease) in Net Assets \r\n \r\n$ 45,086,635 \r\n \r\n$ 60,413.808 \r\n \r\nNet Assets at Beginning of Year, as Originally Reported \r\n \r\n$ 983,377,609 \r\n \r\n$ 922,963,801 \r\n \r\nPrior Year Adjustments \r\n \r\n8,552.401 \r\n \r\nNet Assets at Beginning of Year Restated \r\n \r\n$ 991,930.010 \r\n \r\n$ 922.963.801 \r\n \r\nNet Assets at End of Year \r\n \r\n$1.037,016.645 \r\n \r\n$ 983,377,609 \r\n \r\n- iii - \r\n \r\n The Statement of Revenues, Expenses and Changes in Net Assets reflects an increase in both Operating and Nonoperating Revenues. Overall, revenue increased by $54.9 million across the board as illustrated in the graph below. \r\nGeorgia Institute of Technology Revenue \r\n(dollars in millions) \r\n \r\nD FY 2008 $1,051.8 \r\n \r\n FY 2007 $996.9 \r\n \r\n$500 $450 -+-- - - -$400 -+-- - - -$350 -+-- - - --\u003c $300 -t---- - - --J $250 -+-- - - - -------1 \r\n \r\n$100 \r\n \r\n$50 \r\n \r\n$0 + - -_L..__j \r\nTuition and Fees \r\n \r\nGifts, Grants and Contracts \r\n \r\nCapital Gifts and Grants \r\n \r\nSales, Services, and Other \r\n \r\nState Appropriations \r\n \r\n- IV - \r\n \r\n The following graph shows year-to-date expenditure changes by object of expenditure: \r\nTotal operating expenses for the year were approximately $980.4 million, an increase of $61.2 million, or 6.7% over the previous year. Significant increases in operating expenses from fiscal year 2007 to fiscal year 2008 include compensation and employee benefits, and utilities. The compensation and employee benefits category increased by $48.4 million primarily due to an increase in research expenditures. Utilities increased from $24.0 million in fiscal year 2007 to $36.4 million in fiscal year 2008. This is largely due to the reclassification of telecommunications expense from supplies to utilities. Telecommunications expense in fiscal year 2007 was $7.7 million and $9.6 million in fiscal year 2008. Thus, if the $7.7 million in telecommunications expenses had been included in utilities for fiscal year 2007, the utilities expense would have been $31. 7 million and the percent increase from fiscal year 2007 to fiscal year 2008 would have only been 14.8%. \r\nIn the Expenses by Functional Class graph, depreciation expense was unallocated between functional classifications in prior fiscal years. In fiscal year 2008, the Natural Classifications with Functional Classifications schedule in Note 15 required the Institute to allocate depreciation among functional classifications. Thus, the unallocated expense for depreciation for fiscal year 2008 is $0. \r\nGeorgia Institute of Technology Operating Expenses by Object of Expenditure Class \r\n(dollars in millions) \r\n \r\n$700 $600 $500 $400 $300 $200 $100 \r\n$0 \r\n \r\n FY 2008 $980.4 \r\n$614.5 $566.1 \r\n \r\nSalaries and Benefits \r\n \r\nTravel , Supplies and Other \r\n \r\n FY 2007 $919.2 \r\n \r\n$57.6 $61.9 Depreciation \r\n \r\n$36.4 $24. 0 \r\n \r\n$10.9 $14.1 \r\n \r\nUtilities \r\n \r\nScholarships and Fellowships \r\n \r\n- V- \r\n \r\n Georgia Institute of Technology Expenses by Functional Class \r\n(dollars in millions) \r\n \r\nD FY 2008 $980.4 \r\n$800 \r\n \r\n FY 2007 $919.2 \r\n \r\n$600 \r\n \r\n$500 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n$100 \r\n$0 +--_.__- \r\nInstruction, Research, and Public Service \r\n \r\nf - - - - - - - - - - ~ ~ - - ~C0').- -~ \"~- _ _ ____,og::__ _ \r\n~ ~ \r\n \r\nkademic, Student, and Institutional Support \r\n \r\nOperations and Maintenance of \r\nPlant \r\n \r\nAuxiliary Enterprises Scholarships and Fellowships \r\n \r\nUnallocated Depreciation \r\n \r\nStatement ofCash Flows \r\nThe final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. \r\n \r\n- Vl - \r\n \r\n Cash Flows for the Years Ended June 30, 2008 and June 30, 2007, Condensed \r\n \r\nJune 30. 2008 \r\n \r\nJune 30. 2007 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities \r\n \r\n$ -237,262,062 285,398,048 -109,360,010 12,292.080 \r\n \r\n$ -180,304,402 274,039,837 -76,013,550 7,841.204 \r\n \r\nNet Change in Cash Cash, Beginning of Year \r\n \r\n$ -48,931,944 100.953.346 \r\n \r\n$ 25,563,089 75,390,257 \r\n \r\nCash, End of Year \r\n \r\n$ 52,021,402 \r\n \r\n$ 100,953.346 \r\n \r\nCapital Assets \r\n \r\nThe Institute had two significant capital additions in fiscal year 2008. The Electrical Sub Station was completed this year, resulting in an addition of $39.7 million. Also, the Institute acquired a complex of buildings collectively called \"North Avenue Apartments\" from Georgia State University for $74.5 million, which includes an adjacent parking facility. \r\n \r\nFor additional information concerning Capital Assets, see Notes 1, 6, 8, 9, and 10 in the Notes to the Financial Statements. \r\n \r\nLong-Term Liabilities \r\n \r\nGeorgia Institute of Technology had Long-Term Liabilities of $561,020,762 of which $36,580,298 was reflected as current liability at June 30, 2008. \r\n \r\nFor additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. \r\n \r\nEconomic Outlook \r\n \r\nThe Institute is expecting significant economic challenges in the next fiscal year. Planning guidelines from the USG Chancellor have been received for a 5% budget cut from the fiscal year 2009 state appropriations which is approximately $14.5 million. These cuts, coupled with rapidly rising energy costs and increased fixed debt service costs of $5.9 million in the next fiscal year will necessitate management examine all aspects of the Institute's operations, including the primary missions of instruction, research and public service. Enrollment is expected to be stable. While every effort has been made in the past to absorb the brunt of economic downturns in the support services area, this may not be possible given the magnitude of the downturn and the impact of the proposed budget cut. \r\n \r\n-vn - \r\n \r\n At the same time the Institute anticipates a bright economic future with the continued growth of the sponsored research program. Sponsored awards grew to $445.4 million in fiscal year 2008 which is a 19.0% increase over the previous fiscal year. In the current fiscal year, sponsored revenue increased by $23.8 million or 5.5%. The Institute expects growth to continue in future fiscal years but at a more normal rate than in fiscal year 2008. These revenues should help to mitigate the stagnant or negative growth in other areas. Dr. Gary B. Schuster, Interim President Georgia Institute of Technology \r\n- Vlll - \r\n \r\n BASIC FINANCIAL STATEMENTS - 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30, 2008 \r\nASSETS \r\nCurrent Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items \r\nTotal Current Assets \r\nNoncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences \r\nTotal Current Liabilities \r\nNoncurrent Liabilities Lease Purchase Obligations Deferred Revenue Compensated Absences \r\nTotal Noncurrent Liabilities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets, Net of Related Debt Restricted for: \r\nNonexpendable Expendable Capital Projects Unrestricted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of this statement. \r\n-2- \r\n \r\nEXHIBIT\"A\" \r\n$ 52,021,402 143,902 \r\n35,946,193 55,149,270 \r\n321,856 42,440,874 $ 186,023,497 \r\n$ 63,530,650 9,396,087 \r\n1,420,414,332 $ 1,493,341,069 $ 1,679,364,566 \r\n$ 19,506,400 1,179,451 307,021 1,930,375 \r\n20,557,187 15,245,362 3,503,959 13,672,404 18,143,084 18,437,214 $ 112,482,457 \r\n$ 509,594,341 5,425,000 14,846,123 \r\n$ 529,865,464 $ 642,347,921 \r\n$ 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962 \r\n$ 1,037,016,645 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENDED JUNE 30, 2008 \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nGrants and Contracts Federal State Other \r\nSales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Operating Revenues \r\nTotal Operating Revenues \r\nOPERATING EXPENSES \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation \r\nTotal Operating Expenses \r\nOperating Income (Loss) \r\nNONOPERATING REVENUES {EXPENSES} \r\nState Appropriations Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expense \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before other Revenues, Expenses, Gains, or Losses \r\nCapital Grants and Gifts State Other \r\nTotal Capital Grants and Gifts \r\nSpecial Item (See Note 16) \r\nTotal Other Revenues, Expenses, Gains or Losses \r\nIncrease (Decrease) in Net Assets \r\nNet Assets - Beginning of Year, Restated \r\nNet Assets- End of Year \r\nThe notes to the financial statements are an integral part of this statement. \r\n-3- \r\n \r\nEXHIBIT\"B\" \r\n \r\n$ 161,887,461 -26,737,688 \r\n287,998,687 17,236,932 149,509,237 23,942,293 1,253,966 \r\n49,248,564 1,902,078 \r\n16,942,378 13,200,396 5,948,091 6,647,384 12,376,817 \r\n$ 721,356,596 \r\n \r\n$ 245,468,028 263,915,877 104,557,932 548,389 16,616,963 10,919,734 36,396,206 244,423,689 57,586,220 \r\n$ 980,433,038 \r\n$ -259,076,442 \r\n \r\n$ 275,144,403 5,323,093 14,551,850 \r\n-26,374,717 -3,371,451 \r\n \r\n$ 265,273,178 \r\n \r\n$ \r\n \r\n6,196,736 \r\n \r\n$ 21,855,280 9,117,970 \r\n \r\n$ 30,973,250 \r\n \r\n$ \r\n \r\n7,916,649 \r\n \r\n$ 38,889,899 \r\n \r\n$ 45,086,635 \r\n \r\n991,930,010 \r\n \r\n$ 11037,0161645 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used) by Operating Activities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts \r\nNet Cash Flows Provided (Used) by Noncapital Financing Activities \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Capital Debt Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by Investing Activities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents- Beginning of Year \r\nCash and Cash Equivalents - End of Year \r\n \r\nEXHIBIT\"C\" \r\n \r\n$ 134,652,521 \r\n447,227,033 23,701,801 \r\n-407,770,465 -507,336,031 \r\n-10,919,734 -3, 131,037 2,456,978 \r\n49,473,232 1,913,535 \r\n16,937,074 13,230,546 \r\n5,950,468 6,650,667 -10,298,650 \r\n$ -237,262,062 \r\n \r\n$ 275, 144,403 \r\n3,362,324 5,323,093 1,568,228 \r\n$ 285,398,048 \r\n \r\n$ \r\n \r\n20,338,415 \r\n \r\n217,000 \r\n \r\n-91,524,603 \r\n \r\n-14,226,388 \r\n \r\n-24, 164,434 \r\n \r\n$ -109,360,010 \r\n \r\n$ \r\n \r\n19,578,480 \r\n \r\n-7,286,400 \r\n \r\n$ \r\n \r\n12,292,080 \r\n \r\n$ -48,931,944 \r\n \r\n100,953,346 \r\n \r\ns~ - . 5.2.,..0..2..1...,,4.,.0,..2 \r\n \r\n-4- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008 \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\nNet Cash Provided (Used) by Operating Activities \r\nNONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Special Item - Capital Asset Transfer Change in Accrued Interest Payable Affecting Interest Paid Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts \r\n \r\nEXHIBIT\"C\" \r\n$ -259,076,442 \r\n57,586,220 -32,756,992 \r\n-29,176 -2,408,183 \r\n-674,059 430,212 838,623 -2,978,538 1,806,273 \r\n$ -237,262,062 \r\n$ 131,777,132 $ ==-,.,5,=0=26..,,6..,3=0 $===7,=91.,.6,1,,.,64..,9.., $ ==-.2.,.52=10=1,,.2.8.=3 $ -10,634,835 \r\n \r\nThe notes to the financial statements are an integral part of this statement. -5- \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS Georgia Institute of Technology serves the state, national and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and throughout the world. \r\nREPORTING ENTITY Georgia Institute of Technology is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity. \r\nThe Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. \r\nLegally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 17 for additional information. \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Institute was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. \r\n \r\n-7- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nBASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. \r\nThe Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. \r\nCASH 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. \r\nSHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nINVESTMENTS The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. \r\nACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\nINVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis. \r\n- 8- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. \r\nCAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 50 years for buildings, 20 to 75 years for infrastructure and land improvements, 10 years for library books, and 5 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. \r\nTo obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. \r\nFor projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institute when complete. For projects managed by the Institute, the Institute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2008, GSFIC transferred capital additions valued at $2,275,680 to Georgia Institute of Technology. The amount remaining on deposit with GSFIC after this transfer is $772,432, all of which was privately funded. \r\nDEPOSITS Deposits represent good faith deposits from students to reserve housing assignments in an Institute residence hall. \r\nDEFERRED 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. \r\n \r\n-9 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCOMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $31,477,064 as of July 1, 2007. For fiscal year 2008, $19,961,337 was earned in compensated absences and employees were paid $18,155,064, for a net increase of $1,806,273. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $33,283,337. \r\nNONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\nNET ASSETS The Institute's net assets are classified as follows: \r\nInvested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. \r\nRestricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. \r\nRestricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS Expendable Restricted Net Assets include the following: \r\n \r\nRestricted - E \u0026 G and Other Organized Activities Federal Loans Institutional Loans Quasi-Endowments \r\n \r\n$ 1,566,009 6,531,565 4,992,207 14,453,860 \r\n \r\nTotal Restricted Expendable \r\n \r\n$ 27,543,641 \r\n \r\nRestricted net assets - expendable - Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. \r\n \r\nUnrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2008, there was a surplus balance of $379,323.32 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\n \r\nUnrestricted Net Assets includes the following items which are quasi-restricted by management. \r\n \r\nR\u0026RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted \r\n \r\n$ 12,095,692 12,842,413 319,012 -22,738,155 \r\n \r\nTotal Unrestricted Net Assets \r\n \r\n$ 2.518,262 \r\n \r\nWhen an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. \r\n \r\nINCOME TAXES Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\n \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: \r\nOperating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans. \r\nNonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. \r\nSCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. \r\nRESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS During fiscal year 2008, the Institute conducted a comprehensive review of building and infrastructure historical costs and the associated depreciation and accumulated depreciation for these assets. As a result of this review, it was determined that depreciation expense had been overstated in prior years by a net amount of $8,552,401, with buildings being overburdened by $9,540,330 and infrastructure being under burdened by $987,929. To correctly reflect carrying values: \r\n1. The beginning balance for accumulated depreciation on buildings will be restated and reduced by $9,540,330. \r\n2. The beginning balance for accumulated depreciation on infrastructure will be restated and increased by $987,929. \r\n \r\n- 12 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nRESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS Note 6 reflects these changes in the Beginning Balance column. This change is in accordance with generally accepted accounting principles. \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nDEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: \r\n1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. \r\n2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. \r\n3. 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. \r\n4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. \r\n5. 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. \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. \r\nThe 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. \r\nAt June 30, 2008, the carrying value of deposits was $537,594 and the bank balance was $14,963,097. Of the Institute's deposits, $14,784,821 were uninsured. Of these uninsured deposits, $11,080,139 were collateralized with securities held by the financial institution's trust department or agent in the lnstitute's name, and $3,704,682 were uncollateralized. \r\n- 13 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS Georgia Institute of Technology maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. \r\n \r\nThe lnstitute's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity. \r\n \r\nInvestment Ty12e \r\n \r\nFair Value \r\n \r\nDebt Securities U. S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt \r\n \r\n$ 5,132,841 \r\n9,837 4,665,180 7,274,305 \r\n \r\n$ 17,082,163 \r\n \r\nOther Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes \r\n \r\n483,522 373,066 1,000,122 \r\n1,458 \r\n \r\nInvestment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset Pool \r\n \r\n29,966,352 44,590,319 \r\n21,466,438 143,902 \r\n \r\n$ 115 101342 \r\n \r\nLess Than 1 Year \r\n$ 100,281 \r\n280 561,356 160,394 \r\n$ 822 311 \r\n \r\nInvestment Maturity \r\n \r\n1- 5 Years \r\n \r\n6 - 10 Years \r\n \r\n$ 3,201,916 \r\n297 2,610,561 1,279,026 \r\n$ 7. 021 800 \r\n \r\n$ 1,740,222 \r\n857,393 830,210 \r\n$ 3 427.,825 \r\n \r\nMore than 10 Years \r\n \r\n$ \r\n \r\n90,422 \r\n \r\n9,260 635,870 5,004,675 \r\n \r\n$ 5,7.40 227. \r\n \r\nThe Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.state.ga.us /intemet/searchRpts.html. \r\n \r\n- 14 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nINVESTMENTS The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 40 days. \r\nThe Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $2.02 at June 30, 2008. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Effective Duration of the Fund is .81 years. \r\nInterest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regents policy and applicable Federal and state laws. \r\nThe Weighted Average Maturity of the Short-Term Fund is 1.99 years. Of the Institute's total investment of $29,966,352 in the Short-Term Fund, $29,846,487 is invested in debt securities. \r\nThe Weighted Average Maturity of the Diversified Fund is 7.84 years. Of the Institute's total investment of $44,590,319 in the Diversified Fund, $13,867,589 is invested in debt securities. \r\nCustodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Institute's policy for managing custodial credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute. \r\nAt June 30, 2008, $12,975,007 were uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name. \r\nCredit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk is for investments is an integral part of it's current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies. \r\n- 15 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS The investments subject to credit quality risk are reflected below: \r\n \r\nCredit Qualitx Risk \r\nRelated Debt Investments U. S. Agencies Corporate Debt \r\n \r\nFair Value \r\n \r\nAAA \r\n \r\nAA \r\n \r\nA \r\n \r\nBAA \r\n \r\nUnrated \r\n \r\n$ 4,665,180 $ 4,665,180 \r\n \r\n7,274,305 \r\n \r\n5,367,939 $ \r\n \r\n$ I I 939 485 $ JO 033 119 $ \r\n \r\n672,645 $ 672 645 $ \r\n \r\n884,552 $ 884 552 $ \r\n \r\n344 494 $ 344 494 $ \r\n \r\n4 675 4 675 \r\n \r\nConcentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Institute's investment in a single issuer. The Institute's policy for managing concentration of credit risk is an integral part of it's current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the U.S. Treasury or other Federal Government agencies. \r\n \r\nNOTE 3: ACCOUNTS RECEIVABLE \r\n \r\nAccounts receivable consisted of the following at June 30, 2008: \r\n \r\nStudent Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other \r\n \r\n$ 3,594,976 1,291,088 \r\n35,946,193 52,593,740 \r\n \r\nLess Allowance for Doubtful Accounts \r\n \r\n$ 93,425,997 2,330,534 \r\n \r\nNet Accounts Receivable \r\n \r\n$ 91,095A63 \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nInventories consisted of the following at June 30, 2008: \r\n \r\nPhysical Plant Other \r\n \r\n$ 289,063 32,793 \r\n \r\nTotal \r\n \r\n$=~3=21-,8=5-6 \r\n \r\n- 16 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 5: NOTES/LOANS RECEIVABLE \r\n \r\nThe Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2008 the allowance for uncollectible loans was approximately $78,433. \r\n \r\nNOTE6: CAPITAL ASSETS \r\n \r\nFollowing are the changes in capital assets for the year ended June 30, 2008: \r\n \r\nBeginning Balance July I, 2007 (Restated} \r\n \r\nCapital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress \r\n \r\n$ 50,647,905 16,914,836 25,679,962 \r\n \r\nTotal Capital Assets, Not Being Depreciated \r\n \r\n$ 93,242.703 \r\n \r\nCapital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections \r\n \r\n$ 55,147,216 \r\n1,214,210,280 14,815,338 \r\n323,998,406 89,878,032 \r\n \r\nTotal Assets Being Depreciated \r\n \r\n$1,698,049,272 \r\n \r\nLess: Accumulated Depreciation: \r\nInfrastructure Building and \r\nBuilding Improvements Facilities and Other Improvements \r\nEquipment Library Collections \r\n \r\n$ 11,831,745 \r\n232,792,327 7,089,530 \r\n207,340,340 62,080,790 \r\n \r\nTotal Accumulated Depreciation \r\n \r\n$ 521,134,732 \r\n \r\nTotal Capital Assets, Being Depreciated, Net \r\n \r\n$1,176,914,540 \r\n \r\nCapital Assets, Net \r\n \r\n$1 2Z0 15Z 243 \r\n \r\nSpecial Item Transfer \r\n \r\n$ \r\n \r\n0 \r\n \r\n$ \r\n \r\n0 \r\n \r\n$ 72,150,026 466,803 \r\n \r\n$ 72,616,829 \r\n \r\n$ 18,964,108 280,578 \r\n \r\n$ 19,244,686 \r\n$ 53,372,143 $ 53 372 143 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\n$ 2,488,541 1,516,994 \r\n37,997,110 \r\n \r\n$ 727,903 13,200.129 \r\n \r\n$ 42,002,645 \r\n \r\n$ 13,928,032 \r\n \r\n$ 45,415,184 \r\n30,157,777 3,851,359 46,369,649 4,830,137 \r\n \r\n$ 5,111,690 \r\n11,439,190 14,968 \r\n \r\n$ 130,624,106 \r\n \r\n$ 16,565,848 \r\n \r\n$ 2,187,083 \r\n26,571,504 422,904 \r\n25,993,141 2,411,588 \r\n \r\n$ 1,658,578 \r\n10,664,749 14968 \r\n \r\n$ 57,586,220 \r\n \r\n$ 12,338,295 \r\n \r\n$ 73,037,886 $ 115 040 531 \r\n \r\n$ 4,227,553 $ 18 155 585 \r\n \r\nEnding Balance June 30. 2008 \r\n$ 53,136,446 17,703,927 50,476,943 \r\n$ 121,317,316 \r\n$ I00,562,400 1,311,406,393 19,133,500 358,928,865 94,693,201 \r\n$1,884,724,359 \r\n$ 14,018,828 276,669,361 7,793,012 222,668,732 64,477,410 \r\n$ 585,627,343 \r\n$1,299,097,016 $1 420 414 332 \r\n \r\n- 17 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 7: DEFERRED REVENUE \r\n \r\nCurrent deferred revenue consisted of the following at June 30, 2008: \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\n$ 12,398,192 1,768,242 1,078.928 \r\n \r\nTotals \r\n \r\n$ 15,245.362 \r\n \r\nLong-Term deferred revenue totaled $5,425,000. NOTE 8: LONG-TERM LIABILITIES \r\n \r\nLong-term liability activity for the year ended June 30, 2008 was as follows: \r\n \r\nLeases Lease Obligations \r\nOther Liabilities Compensated Absences \r\nTotal Long-Term Obligations \r\n \r\nBeginning Balance July I, 2007 \r\n$ 409,969,681 \r\n31,477,064 $ 441,446.745 \r\n \r\nAdditions $ 131,994,132 \r\n19,961,337 $ 151,955.469 \r\n \r\nNOTE9: SIGNIFICANT COMMITMENTS \r\n \r\nReductions $ 14,226,388 \r\n18,155,064 $ 32.381.452 \r\n \r\nEnding Balance June 30, 2008 \r\n$ 527,737,425 \r\n33,283,337 $ 561.020.762 \r\n \r\nCurrent Portion \r\n$ 18,143,084 \r\n18,437,214 $ 36.580.298 \r\n \r\nThe Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $15,855,993 as of June 30, 2008. This amount is not reflected in the accompanying basic financial statements. \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nGeorgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\n \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2008 and 203 7. Expenditures for fiscal year 2008 were $40,601,105 of which $26,374,717 represented interest. Total principal paid on capital leases was $14,226,388 for the fiscal year ended June 30, 2008. Interest rates range from 3.36 percent to 11.0 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: \r\n \r\n- 18 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nCAPITAL LEASES \r\n \r\nFacilities and Other Improvements Infrastructure Land Buildings Equipment \r\n \r\n$ 191,540 39,625,307 11,457,418 \r\n516,156,196 16,026.312 \r\n \r\nTotal Assets Held Under Capital Lease \r\n \r\n$ S83AS61173 \r\n \r\nCertain 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. \r\n \r\nGeorgia Institute of Technology had seven capital leases with related parties in fiscal year 2008. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2008 the remaining long-term debt obligation (principal) under the lease was $18,020,000 and the amount due (principal and interest) in the next fiscal year is $1,425,695. \r\n \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200 with the Georgia Tech Foundation, Inc., for a complex of buildings collectively named \"Technology Square\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2008 the remaining long-term debt obligation (principal) under the lease was $128,636,400, and the amount due (principal and interest) in the next fiscal year is $9,938,499. \r\n \r\nIn February 2001, Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2008 the remaining long-term debt obligation (principal) under the lease was $40,845,000, and the amount due (principal and interest) in the next fiscal year is $3,068,765. \r\n \r\nIn May 2005, Georgia Institute of Technology entered into a capital lease of $70,320,000 with Georgia Tech Facilities, Inc., an affiliated organization, for two structures/buildings: (1) a complex of buildings collectively named \"Married Family Housing\", including an adjoining parking deck; and (2) the underground parking deck for the Klaus Advanced Computing Center. The lease terms are 25 years on the Housing complex and 20 years on the Klaus parking deck. The lease expires in June, 2030. At June 30, 2008 the remaining long-term debt obligation under the lease was $65,235,000 and the amount due (principal and interest) in the next fiscal year is $5,079,853. \r\n \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES In May 2004, Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June, 2036. At June 30, 2008 the remaining long-term debt obligation under the lease was $73,915,000 and the amount due (principal and interest) in the next fiscal year is $4,980,850. \r\nIn July 2007, Georgia Institute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named \"North Avenue Apartments\", including an adjoining parking deck. The lease term is for 25 years and expires in June, 2032. At June 30, 2008 the remaining long-term debt obligation under the lease was $76,720,452 and the amount due (principal and interest) in the next fiscal year is $5,280,000. \r\nIn January 2008, Georgia Institute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for an Electrical Sub Station. The lease term is for 30 years and expires in December 2037. At June 30, 2008 the remaining longterm debt obligation under the lease was $39,485,146 and the amount due (principal and interest) in the next fiscal year is $3,000,000. \r\nGeorgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $64,029,360 with the University Financing Foundation for the Technology Square Research Building. The lease term is for a 23year period that began June 2003 and expires June 2026. At June 30, 2008 the remaining longterm debt obligation (principal) under the lease was $61,338,282 and the amount due (principal and interest) in the next fiscal year is $4,410,189. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. \r\nThe Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2013. At June 30, 2008, the remaining long-term debt obligation under these agreements was $23,542,145. The amount due (principal and interest) in the next fiscal year is $7,965,511. \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases with remaining terms of more than one year expire in various fiscal years from 2007 through 2009. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating \r\n- 20 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nOPERATING LEASES leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases include real estate rentals, copiers and other small business equipment. \r\nDESCRIPTION OF RELATED PARTY LEASES In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space in Arlington, Virginia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $18,788. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $225,456 in the next fiscal year. \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Smyrna, Georgia. The current agreement is for .July 1, 2008 through June 30, 2009 for monthly fees of $105,056. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,670 in the next fiscal year. \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in the Centennial Research Building in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $125,870. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,510,440 in the next fiscal year. \r\nIn 2000, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Fairburn, Ohio. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $16,788. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $201,457 in the next fiscal year. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Orlando, Florida. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $4,134. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $49,611 in the next fiscal year. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc., a related party, for office space in the Centergy One Building located at 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $74,194. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc., $890,322 in the next fiscal year. \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nDESCRIPTION OF RELATED PARTY LEASES In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 1, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., a related party, for office and lab space located at 575 14th Street in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $55,763. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc., $316,931 in the next fiscal year. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 2, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., a related party, for office space located at 650 Ethel Street in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $24,384. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 2, Inc., $292,602 in the next fiscal year. \r\nIn 2004, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Marietta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 with monthly fees of $2,352. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $28,000 in the next fiscal year. \r\nIn 2007, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc., a related party, for office space in the Centergy One Building located at 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $134,660. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc., $1,615,925 in the next fiscal year. \r\nIn 2007, Georgia Institute of Technology entered into a real property operating lease with VLP 3, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., a related party, for office space located at 395 North Avenue in Atlanta, Georgia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $34,736. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 3, Inc., $416,828 in the next fiscal year. \r\nIn 2007, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Quantico, Virginia. The current agreement is for July 1, 2008 through June 30, 2009 for monthly fees of $5,348. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $64,179 in the next fiscal year. \r\nGeorgia Institute of Technology's fiscal year 2008 expense for rental of real property and equipment under operating leases was $9,810,714. \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nFUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows: \r\n \r\nReal Property and Equipment \r\n \r\nCapital \r\n \r\nOperating \r\n \r\nLeases \r\n \r\nLeases \r\n \r\nYear Ending June 30: 2009 2010 2011 2012 2013 2014- 2018 2019 - 2023 2024- 2028 2029 - 2033 2034- 2037 \r\n \r\n$ 45,149,362 $ 44,296,871 42,574,478 39,323,158 39,565,696 194,181,260 194,905,753 172,078,400 109,961,814 28,443,497 \r\n \r\n9,606,316 \r\n \r\nTotal Minimum Lease Payments \r\n \r\n$ 910,480,289 $ 9,606.316 \r\n \r\nLess: Interest \r\n \r\n382,742,864 \r\n \r\nPrincipal Outstanding \r\n \r\n$ 527,737.425 \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. \r\n \r\nFunding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nFunding Policy monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\nFiscal Year \r\n \r\nPercentage Contributed \r\n \r\nRequired Contribution \r\n \r\n2008 2007 2006 \r\n \r\n100% 100% 100% \r\n \r\n$ 18,963,675 $ 18,025,456 $ 17,233,661 \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. \r\n \r\nThe benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an \"old plan\" member subject to the plan provisions in effect prior to July I, 1982. All other members are \"new plan\" members subject to the modified plan provisions. \r\n \r\nUnder both the old plan and new plan, members become vested after IO years of creditable service. A member may retire and receive normal retirement benefits after completion of I0 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. \r\n \r\nRetirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. \r\n \r\n- 24- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. \r\n \r\nThe ERS issues a financial report each fiscal year, which may be obtained through ERS. \r\n \r\nFunding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2008, for employees covered by ERS was $567,198. The Institute's total payroll for all employees was $509,383,905. \r\n \r\nFor the year ended June 30, 2008 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the Institute's pays the remainder on behalf of the employee. \r\n \r\nUnder the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The Institute also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2008, the ERS employer contribution rate for the Institute amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. \r\n \r\nEmployer contributions for the current fiscal year and the preceding two fiscal years are as \r\n \r\nfollows: \r\n \r\nPercentage \r\n \r\nRequired \r\n \r\nFiscal Year \r\n \r\nContributed \r\n \r\nContribution \r\n \r\n2008 \r\n \r\n100% \r\n \r\n$ 59,300 \r\n \r\n2007 \r\n \r\n100% \r\n \r\n$ 57,305 \r\n \r\n2006 \r\n \r\n100% \r\n \r\n$ 43,713 \r\n \r\nActuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. \r\n \r\n- 25 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nREGENTS RETIREMENT PLAN \r\nPlan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An \"eligible university system employee\" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. \r\nFunding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\nGeorgia Institute of Technology and the covered employees made the required contributions of $16,287,458 (8.13% or 8.15%) and $9,998,034 (5%), respectively. \r\nAIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\n \r\n- 26 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nBenefits 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. \r\nContributions 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. \r\nTotal contributions made by employees during fiscal year 2008 amounted to $802,054 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. \r\nThe Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. \r\nNOTE 12: RISK MANAGEMENT \r\nThe University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. \r\n \r\n-27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. \r\nA 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. \r\nNOTE 13: CONTINGENCIES \r\nAmounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\nLitigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2008. \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the \r\n-28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\ngroup health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. \r\nThe Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. \r\nAs of June 30, 2008, there were 1,211 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Georgia Institute of Technology recognized as incurred $6,572,585 of expenditures, which was net of $2,114,450 of participant contributions. \r\n \r\n- 29 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe lnstitute's operating expenses by functional classification for fiscal year 2008 are shown below: \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nInstruction \r\n \r\nFunctional Classification \r\n \r\nResearch \r\n \r\nPublic Service \r\n \r\nAcademic Support \r\n \r\nStudent Services \r\n \r\n$ 95,932,013 49,914,387 32,073,792 39,843 3,306,673 \r\n \r\n$ 134,828,067 98,722,051 44,474,493 21,131 10,663,714 \r\n \r\n$ 6,557,747 14,285,168 4,866,845 438,337 1,044,438 \r\n \r\n$ 5,735,222 18,396,302 6,000,306 7,871 640,015 \r\n \r\n$ 367,927 11,307,441 2,581,732 26,048 300,008 \r\n \r\n2,095,842 \r\n23,198,603 7,603,706 \r\n$ 214 )64 859 \r\n \r\n1,883,664 \r\n108,333,041 23,541,662 \r\n$ 422 467 823 \r\n \r\n321,157 \r\n19,112,633 1,359,854 \r\n$ 47 986 179 \r\n \r\n518,941 \r\n9,214,672 4,449,096 \r\n$ 44 962 425 \r\n \r\n214,169 \r\n10,655,725 746,992 \r\n$ 26200 042 \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nInstitutional Support \r\n \r\nFunctional Classification \r\n \r\nPlant \r\n \r\nOperations and Scholarships \r\n \r\nAuxiliary \r\n \r\nMaintenance and Fellowships Enterprises \r\n \r\nTotal Operating Expenses \r\n \r\n$ 1,710,206 31,129,907 4,491,202 10,469 416,027 \r\n444,692 \r\n234,590 5,794,224 \r\n$ 44 231 317 \r\n \r\n$ 295,148 23,172,196 5,905,474 2,254 95,089 \r\n20,143,243 \r\n30,048,878 5,889,789 \r\n$ 85 552 071 \r\n \r\n$ 10,919,734 $ IO 919 734 \r\n \r\n$ \r\n \r\n41,698 \r\n \r\n16,988,425 \r\n \r\n4,164,088 \r\n \r\n2,436 \r\n \r\n150,999 \r\n \r\n10,774,498 \r\n43,625,547 8,200,897 \r\n$ 83 948 588 \r\n \r\n$ 245,468,028 263,915,877 104,557,932 548,389 16,616,963 \r\n10,919,734 36,396,206 \r\n244,423,689 57,586,220 \r\n$ 980433 038 \r\n \r\nNOTE 16: SPECIAL ITEM \r\n \r\nGeorgia State University, a University System of Georgia institution, transferred its University Village Student Housing Complex to Georgia Institute of Technology effective July 1, 2007. The complex contains approximately 2,000 student housing beds, 790 parking spaces, and site amenities and was renamed the North Avenue Apartments by the Institute. \r\n \r\nGeorgia Institute of Technology provided consideration for the complex totaling $45,455,494. The net book value of the capital asset transfer to Georgia Institute of Technology at July 1, 2007 was $53,372,143. The difference of $7,916,649 is reported as a Special Item - Capital Asset Transfer on the Statements of Revenues, Expenses and Changes in Net Assets and Cash Flows. See Note 6 for additional information. \r\n \r\n- 30 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2008 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 17: AFFILIATED ORGANIZATIONS \r\nIn accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Georgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined to be legally separate, tax exempt organizations whose activities primarily support Georgia Institute of Technology, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia Institute of Technology has not included financial activity for these affiliated organizations in these financial statements. \r\nGeorgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined significant to the State of Georgia for the year ended June 30, 2008, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia. \r\n \r\n- 31 - \r\n \r\n (This page left intentionally blank) \r\n \r\n SUPPLEMENTARY INFORMATION - 33 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2008 \r\nASSETS \r\nAccounts Receivable Federal Financial Assistance Other \r\nPrepaid Expenditures Inventories Other Assets \r\nTotal Assets \r\nLIABILITIES AND FUND EQUITY \r\nLiabilities Cash Overdraft Accounts Payable Deferred Revenue Funds Held for Others Other Liabilities . \r\nTotal Liabilities \r\nFund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Carry-Over \"Per State Accounting Office\" Inventories \r\nUnreserved Surplus \r\nTotal Fund Balances \r\nTotal Liabilities and Fund Balances \r\n \r\nSCHEDULE \"1\" \r\n \r\n$ 33,522,496.07 33,727,392.40 12,549,374.18 289,062.83 5,543,577.60 \r\n$ 85,631,903.08 \r\n \r\n$ 15,004,420.84 \r\n26,110,736.00 16,103,589.12 15,295,138.32 9,351,450.23 \r\n$ 81,865,334.51 \r\n \r\n$ \r\n \r\n2,929,316.27 \r\n \r\n347,083.65 \r\n \r\n1,014,295.59 \r\n \r\n-1, 189,669.34 \r\n \r\n286,219.08 \r\n \r\n379,323.32 \r\n \r\n$ \r\n \r\n3,766,568.57 \r\n \r\n$ 85,631,903.08 \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n- 34- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) \r\nBUDGET FUND YEAR ENDED JUNE 30, 2008 \r\n \r\nSCHEDULE \"2\" \r\n \r\nREVENUES \r\nState Appropriation State General Funds \r\nOther Funds \r\nTotal Revenues \r\nCARRY-OVER FROM PRIOR YEAR \r\nTransfer from Reserved Fund Balance \r\nTotal Funds Available \r\nEXPENDITURES \r\nSpecial Funding Initiative Research Consortium Advanced Technology Development Center/Economic \r\nDevelopment Institute Georgia Tech Research Institute Teaching \r\nTotal Expenditures \r\nExcess of Funds Available over Expenditures \r\nFUND BALANCE JULY 1 \r\nReserved \r\nADJUSTMENTS \r\nPrior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Non-Mandatory Transfer Prior Year Reserved Fund Balance Included in Funds Available \r\nFUND BALANCE JUNE 30 \r\n \r\nBUDGET \r\n \r\nACTUAL \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 275,144,403.00 $ 755,881,479.00 \r\n$ 1,031,025,882.00 $ \r\n \r\n275,144,403.00 $ 696,978,794.13 \r\n972,123,197.13 $ \r\n \r\n0.00 -58,902,684.87 \r\n-58,902,684.87 \r\n \r\n0.00 $ 1,031,025,882.00 $ \r\n \r\n26, 162,429.46 998,285,626.59 $ \r\n \r\n26,162,429.46 -32,740,255.41 \r\n \r\n$ \r\n \r\n931,082.00 $ \r\n \r\n931,082.00 $ \r\n \r\n19,621,406.00 \r\n \r\n19,621,406.00 \r\n \r\n29,574,712.00 154,736,385.00 826,162,297.00 \r\n \r\n27,175,514.08 149,869,704.44 812,649,991.31 \r\n \r\n$ 1,031,025,882.00 $ 1,010,247,697.83 $ \r\n \r\n$ \r\n \r\n0.00 $ -11,962,071.24 $ \r\n \r\n0.00 0.00 \r\n2,399,197.92 4,866,680.56 13,512,305.69 \r\n20 778 184.17 \r\n-11,962,071.24 \r\n \r\n27,391,315.47 \r\n \r\n563,596.88 -184,273.56 \r\n12,715.76 14,107,714.72 -26, 162,429.46 \r\n \r\n$ \r\n \r\n3,766,568.57 \r\n \r\nSUMMARY OF FUND BALANCE \r\nReserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Carry-Over \"Per State Accounting Office\" Inventories \r\nTotal Reserved \r\nUnreserved Surplus \r\nTotal Fund Balance \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n-35- \r\n \r\n$ \r\n \r\n2,929,316.27 \r\n \r\n347,083.65 \r\n \r\n1,014,295.59 \r\n \r\n-1,189,669.34 \r\n \r\n286,219.08 \r\n \r\n$ \r\n \r\n3,387,245.25 \r\n \r\n379,323.32 \r\n \r\n$ \r\n \r\n3,766,568.57 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET \r\n(NON-GMP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 \r\n \r\nSpecial Funding Initiatives State Appropriation State General Funds \r\nResearch Consortium State Appropriation State General Funds \r\n \r\nOriginal Appropriation \r\n \r\nFinal Budget \r\n \r\nCurrent Year Revenues \r\n \r\nFunds Available Compared to Budget \r\n \r\nPrior Year Carry-Over \r\n \r\nTotal Funds Available \r\n \r\nVariance Positive (Negative) \r\n \r\n631 882.00 $ \r\n \r\n931 082.00 $ \r\n \r\n931 082.00 $ \r\n \r\n0.00 $ \r\n \r\n931 082.00 $ \r\n \r\n0.00 \r\n \r\n9 955 999.00 $ \r\n \r\n19 621 406.00 $ 19 621 406.00 $ \r\n \r\n0.00 $ \r\n \r\n19621408.oo $ _ _ _ _ _ _o_.o_o_ \r\n \r\nAdvanced Technology Development Center State Appropriation State General Funds Other Funds \r\nTotal Advanced Technology Development Center \r\n \r\n15,099,712.00 12 875 000.00 \r\n27,974 712.00 $ \r\n \r\n15,099,712.00 $ 14 475 000.00 \r\n29,574,712.00 \r\n \r\n15,099,712.00 12 042 668.25 \r\n27,142,380.25 $ \r\n \r\n0.00 $ 0.00 \r\n0.00 $ \r\n \r\n15,099,712.00 12 042,668.25 \r\n \r\n0.00 -2 432 331.75 \r\n \r\n21,142,380.25 s _ _ _-2._,4_3_2._33_1_.1_5_ \r\n \r\nGeorgia Tech Research Institute State Appropriation State General Funds Other Funds \r\nTotal Georgia Tech Research Institute \r\n \r\n7,868,427.00 122 917 958.00 \r\n130 786,385.00 \r\n \r\n7,868,427.00 $ \r\n \r\n7,868,427.00 \r\n \r\n146 867,958.00 \r\n \r\n142 001 279.33 \r\n \r\n154 736 385.00 $ 149 869 706.33 \r\n \r\n0.00 0.00 \r\n0.00 $ \r\n \r\n7,868,427.00 142 001 279.33 \r\n149 869 708.33 \r\n \r\n0.00 -4 866 678.67 \r\n-4 866 678.67 \r\n \r\nTeaching State Appropriation State General Funds Other Funds \r\nTotal Teaching \r\nGrand Totals - All Programs \r\n \r\n225,628,986.00 584 529 494.00 \r\n$ 810158480.00 \r\n \r\n231,623,776.00 594 538 521.00 \r\n826 162 297.00 \r\n \r\n231,623,776.00 $ \r\n \r\n0.00 \r\n \r\n542,934 846.55 \r\n \r\n26,162 429.46 \r\n \r\n774 558 622.55 $ 26 162 429.46 \r\n \r\n231,623,776.00 569 097 276.01 \r\n800 721 052.01 \r\n \r\n0.00 -25 441 244.99 \r\n-25 441 244.99 \r\n \r\n979,507,458.00 $ 1,031,025,882.00 $ 972,123,197.13 $ 26,162,429.46 $ 998,285,626.59 $ _ _-3_2,.,7_4_0..,2_55_.4_1_ \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accountinQ other than Qenerally accepted accountinQ principles. \r\n \r\n-36- \r\n \r\n SCHEDULE \"3\" \r\n \r\nExpenditures Compared to Budget \r\n \r\nVariance \r\n \r\nPositive \r\n \r\nActual \r\n \r\n(Negative) \r\n \r\nActual Funds Available \r\nOver/(Under) Expenditures \r\n \r\nPrior Period Adjustments \r\n \r\nOther Adjustments \r\n \r\nProgram Fund \r\nBalances \r\n \r\nTransfers \r\n \r\nPr29ram Fund Balances \r\n \r\nReserve \r\n \r\nSurplus \r\n \r\nTotal Fund Balance \r\n \r\n931 082.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ ~ $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 \r\n \r\n19 621 406.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\n0.00 $ \r\n \r\no.oo s ____o_.o_o_s~ s \r\n \r\n0.00 $ \r\n \r\no.oo s ____o_.o_o_ \r\n \r\n15,099,712.26 $ 12 075 801.82 \r\n27,175,514.08 $ \r\n \r\n-0.26 2 399,198.18 \r\n2,399,197.92 \r\n \r\n-0.26 -33133.57 \r\n-33,133.83 \r\n \r\n16.806.44 $ 8 410.50 \r\n \r\n0.26 46 268.01 \r\n \r\n25 216.94 s ___4'\"6.,2.,68_.2_7_ \r\n \r\n16,806.44 \r\n \r\n0.00 $ \r\n \r\n21544.94 ~ \r\n \r\n38,351.38 $ ~ $ \r\n \r\n0.00 $ 13134.44 \r\n13134_44 s \r\n \r\n16,806.44 $ 8 410.50 \r\n \r\n16,806.44 21 544.94 \r\n \r\n25,216.94 s ___3_8._3_51_.3_8_ \r\n \r\n7,868,427.00 142 001 277.44 \r\ns _ ....1._49\"'8\"'6\"'9._7,..04._.4_4_ \r\n \r\n0.00 4 866 680.56 \r\n4 866 680.56 \r\n \r\n0.00 \r\n \r\n1,294.50 \r\n \r\n0.00 \r\n \r\n1,294.50 \r\n \r\n0.00 $ \r\n \r\n0.00 $ 1,294.50 \r\n \r\n1,294.50 \r\n \r\n1.89 \r\n \r\n73 237.59 \r\n \r\n115 397.67 \r\n \r\n188637.15 ~ \r\n \r\n115 399.56 \r\n \r\n73 237.59 \r\n \r\n188 637.15 \r\n \r\n1.89 \r\n \r\n74 532.09 s _ _1_1\"'5.,3.,97_.6_7_ \r\n \r\n189 931.65 ~ $ 115 399.56 $ 74 532.09 \r\n \r\n189 931.65 \r\n \r\n231,623,776.00 581026215.31 \r\n812649991.31 \r\n \r\n0.00 $ 13 512 305.69 \r\n13512305.69 $ \r\n \r\n0.00 -11 928 939.30 \r\n-11928939.30 \r\n \r\n151,425.68 128148.61 \r\n279 574.29 \r\n \r\n0.00 13 887135.88 \r\n13 887135.88 \r\n \r\n151,425.68 \r\n \r\n0.00 $ \r\n \r\n0.00 \r\n \r\n2086345.19 ~ 1958196.58 \r\n \r\n151.425.68 128 148.61 \r\n \r\n151,425.68 2 086 345.19 \r\n \r\n2 237 770.87 ~ $ 1 958196.58 $ 279 574.29 $ 2 237 770.87 \r\n \r\n1,010,247,697.83 $ 20778,184.17 $ -11962071.24 $ 379,323.32 $ 14,048,801.82 $ 2,466,053.90 ~ $ 2,086,730.58 $ 379,323.32 $ 2,466,053.90 \r\n \r\nUnexpendable Reserves Uncollectible Accounts Receivable Inventories \r\n \r\n1,014,295.59 286 219.08 \r\n3 766 568.57 \r\n \r\n-37 - \r\n \r\n (This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30, 2008 \r\n \r\nSCHEDULE \"4\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals - Payroll June 30, 2008 June 30, 2007 \r\n \r\nCompensated Absences June 30, 2008 June 30, 2007 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nBoard of Regents of the University System of Georgia \r\n \r\nBarnes, \r\n \r\nRosalind \r\n \r\nBearden, \r\n \r\nAlison \r\n \r\nBirkes, \r\n \r\nAngela \r\n \r\nBradley, \r\n \r\nAllison \r\n \r\nChalasani, \r\n \r\nKanti \r\n \r\nErvin, \r\n \r\nJuanita \r\n \r\nHughes, \r\n \r\nMichael \r\n \r\nJean-Baptiste, Rebecca \r\n \r\nJohnson, \r\n \r\nJoy \r\n \r\nJones, \r\n \r\nShelia \r\n \r\nKilpatrick, \r\n \r\nToyna \r\n \r\nMast, \r\n \r\nAmy \r\n \r\nPaterson, \r\n \r\nPatricia \r\n \r\nPevey, \r\n \r\nMark \r\n \r\nReaves, \r\n \r\nJonathan \r\n \r\nSommer, \r\n \r\nCandice \r\n \r\nStewart, \r\n \r\nJanet \r\n \r\nThomas, \r\n \r\nCheryl \r\n \r\nWolf-Ward, \r\n \r\nTina \r\n \r\nGeorgia State University \r\n \r\nElliot, \r\n \r\nMichael \r\n \r\nUnidentified Variance \r\n \r\nSALARIES $ 506,730,247 $ \r\n \r\nTRAVEL 16,616,963 \r\n \r\n1,179,451 -937,851 \r\n \r\n30,918,102 -29,240, 190 \r\n \r\n86,085 3,130 \r\n24,654 1,403 \r\n71,641 24,614 36,774 38,532 \r\n8,840 72,712 17,151 89,672 25,313 87,869 \r\n872 50,834 30,328 31,638 45,407 \r\n-7,000 \r\n-6,324 \r\n$ 509,383,905 $ =====1.6.,.=61=6=,9=6=3 \r\n \r\n- 39- \r\n \r\n SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY AUDITEE'S RESPONSE \r\nSUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 \r\n \r\nPRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nFINDING CONTROL NUMBER AND STATUS \r\n \r\nFS-503-07-01 FS-503-07-02 \r\n \r\nPreviously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented \r\n \r\nPRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS \r\n \r\nNo matters were reported. \r\n \r\n SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2008 \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2006/2007"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, Ga. : Dept. of Audits and Accounts"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2006-h2007"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS \r\nI \r\nGEORGIA INSTITUTE OF TECHNOLOGY ATLANTA, GEORGIA REPORT ON AUDIT \r\nOF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007 \r\nRussell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENT'S DISCUSSION AND ANALYSIS \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n2 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n3 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n4 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n6 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\n1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND \r\n \r\n34 \r\n \r\n2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT \r\n \r\n(NON-GAAP BASIS) BUDGET FUND \r\n \r\n35 \r\n \r\n3 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n37 \r\n \r\nSECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 \r\nNovember 19, 2007 \r\n \r\nHonorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Regents ofthe University System of Georgia \r\nand Honorable G. Wayne Clough, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Institute ofTechnology an organizational unit ofthe State of Georgia, as of and for the year ended June 30, 2007. These financial statements are the responsibility of the Georgia Institute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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. \r\nAs discussed in Note 1, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities ofthe State of Georgia that is attributable to the transactions ofGeorgia Institute ofTechnology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America. \r\n \r\n07ARL-62 \r\n \r\n In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30, 2007, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\nManagement's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it. \r\nOur audit was conducted for the purpose offorming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes ofadditional analysis and is not a required part of the basic financial statements. Such information 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. \r\nRespectfully submitted, \r\n~w~ Russell W. Hinton, CPA, CGFM State Auditor \r\nRWH:gp 07ARL-62 \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\n \r\nIntroduction \r\n \r\nThe Georgia Institute of Technology, also known as Georgia Tech, is one of the 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nation's leading research universities, with over $400 million expended on sponsored research activities and providing a focused, technology based education for nearly 18,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked as one of the top ten public universities in the nation by U.S. News and World Report, with four schools in the College of Engineering listed among the country's top five. Georgia Tech's undergraduate engineering programs are ranked in the Top 10 and the graduate engineering program is consistently ranked in the Top 5. Georgia Tech offers degrees through the Colleges of Engineering, Architecture, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\n \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research institution that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21st century. The Institute continues to grow as reflected by the faculty and student numbers below and other comparisons that follow. \r\n \r\nFaculty \r\n \r\nStudents (Headcount) \r\n \r\nStudents \r\n(FTE) \r\n \r\nFiscal Year 2007 Fiscal Year 2006 Fiscal Year 2005 \r\n \r\n925 \r\n \r\n17,936 \r\n \r\n17,027 \r\n \r\n878 \r\n \r\n17,135 \r\n \r\n16,299 \r\n \r\n844 \r\n \r\n16,841 \r\n \r\n16,022 \r\n \r\nOverview ofthe Financial Statements and Financial Analysis \r\n \r\nThe Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2007, which began July 1, 2006 and ended June 30, 2007. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into five net asset categories: invested in capital assets, net of related debt; restricted - nonexpendable; restricted - expendable; restricted - capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for fiscal year 2006 and fiscal year 2007. \r\n \r\n- 1- \r\n \r\n Statement ofNet Assets \r\n \r\nUsing the accrual basis of accounting, the Statement ofNet Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed and net assets available to continue operations in the future. \r\n \r\nThe Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into three categories, nonexpendable, expendable, and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the Institute but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use ofthe assets. The final category, Unrestricted Net Assets, is available for any lawful purpose ofthe Institute. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2006 and June 30, 2007: \r\n \r\nStatement ofNet Assets, Condensed \r\n \r\nJune 30, 2007 \r\n \r\nJune 30, 2006 \r\n \r\nAssets Current Assets Capital Assets, Net Other Assets \r\n \r\n$ 171,893,931 1,261,604,842 70,001,585 \r\n \r\n$ 141,652,175 1,149,606,811 63,439,284 \r\n \r\nTotal Assets \r\n \r\n$1,503,500,358 \r\n \r\n$1,354,698,270 \r\n \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\n \r\n$ 102,305,597 417,817,152 \r\n \r\n$ 82,815,063 348,919,406 \r\n \r\nTotal Liabilities \r\n \r\n$ 520,122,749 \r\n \r\n$ 431,734,469 \r\n \r\nNet Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Restricted - Capital Projects Unrestricted \r\n \r\n$ 851,635,161 53,098,742 30,748,494 49,599,664 -1,704,452 \r\n \r\n$ 814,640,088 47,535,014 26,607,480 15,941,134 18,240,085 \r\n \r\nTotal Net Assets \r\n \r\n$ 983.377.609 \r\n \r\n$ 922.963.801 \r\n \r\n- ii - \r\n \r\n The total assets of the institution increased by $148,802,088, due primarily to an increase of $111,998,031 in capital assets. \r\n \r\nThe total liabilities for the year increased by $88,388,280. This was due primarily to an increase in noncurrent Lease Purchase Obligations of approximately $66.5 million and accounts payable of approximately $15 .5 million. The combination of the increase in total assets of $148,802,088, and the increase in total liabilities of $88,388,280 yields an increase in total net assets of $60,413,808, with most of the net gain in capital assets. \r\n \r\nStatement ofRevenues, Expenses and Changes in Net Assets \r\n \r\nChanges in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example, state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. \r\n \r\nStatement of Revenues, Expenses and Changes in Net Assets, Condensed \r\n \r\nJune 30. 2007 \r\n \r\nJune 30, 2006 \r\n \r\nOperating Revenues Operating Expenses \r\n \r\n$ 667,930,667 919,242.200 \r\n \r\n$ 624,286,380 842,777,843 \r\n \r\nOperating Loss \r\n \r\n$ -251,311,533 \r\n \r\n$ -218,491,463 \r\n \r\nNonoperating Revenues and Expenses \r\n \r\n259,899,848 \r\n \r\n222,812,183 \r\n \r\nIncome (Loss) Before Other Revenues, Expenses, Gains or Losses \r\n \r\n$ 8,588,315 \r\n \r\n$ 4,320,720 \r\n \r\nOther Revenues, Expenses, Gains or Losses \r\n \r\n51,825,493 \r\n \r\n13,145,526 \r\n \r\nIncrease (Decrease) in Net Assets \r\n \r\n$ 60,413,808 \r\n \r\n$ 17,466,246 \r\n \r\nNet Assets at Beginning of Year \r\n \r\n922,963,801 \r\n \r\n905,497,555 \r\n \r\nNet Assets at End of Year \r\n \r\n$ 983,377,609 \r\n \r\n$ 922,963,801 \r\n \r\nThe Statement of Revenues, Expenses and Changes in Net Assets reflects an increase in both Operating and Nonoperating Revenues. Overall, revenue increased by $119.6 million across the board as illustrated in the graph below. \r\n \r\n- l1l - \r\n \r\n Georgia Institute of Technology Revenue \r\n(dollars in millions) \r\n \r\nD FY 2007 $996.9 \r\n \r\n FY 2006 $877.2 \r\n \r\n$500 \r\n$400 $350 $300 --+-~ $250 \r\n \r\nTuition and Fees Gifts, Grants and Capital Gifts and Sales, Services, \r\n \r\nContracts \r\n \r\nGrants \r\n \r\nand Other \r\n \r\nState Appropriations \r\n \r\nThe following graph shows year-to-date expenditure changes by object of expenditure: \r\nTotal operating expenses for the year were approximately $919.2 million, an increase of $76.4 million, or 9.1 % over the previous year. Significant increases in operating expenses from fiscal year 2006 to fiscal year 2007 include compensation and employee benefits, and Supplies and Other Services. The compensation and employee benefits category increased by $33.8 million primarily due to increased research expenditures. Travel, Supplies and Other Services expenses increased from $219.0 million in fiscal year 2006 to $253.1 million in fiscal year 2007. \r\n \r\n- IV - \r\n \r\n Georgia Institute of Technology Operating Expenses by Object of Expenditure Class \r\n(dollars in millions) \r\n \r\no FY 2007 $919.2 \r\n \r\n FY 2006 $842.8 \r\n \r\n$600 \r\n \r\n$500 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n \r\n$100 \r\n \r\n$ 0 --1----'Salaries and Benefits \r\n \r\nTravel, Supplies and \r\nOther \r\n \r\nDepreciation \r\n \r\nUtilities \r\n \r\nScholarships and \r\nFellowships \r\n \r\nGeorgia Institute of Technology Expenses by Functional Classification \r\n(dollars in millions) \r\n \r\nD FY 2007 $919.2 \r\n \r\n FY 2006 $842. 8 \r\n \r\n$700 ,---tff----,Jld-- - - - - - - - - - - - - - - - - - - - - - - - - , \r\n \r\n$600 -t---------.-.....-=- - - - - - - - - - - - - - - - - - - - - - - - - - i \r\n \r\n$500 \r\n \r\n$400 \r\n \r\n$300 $200 $100 \r\n$0 +----'- \r\n \r\n..... ._,.. \r\n \r\nCY0 \r\n \r\n15\"- 69 \r\n \r\npi; -~ ~ \r\n \r\n1~1co \r\nl~ gi \r\n \r\n- V- \r\n \r\n .Statement ofCash Flows \r\n \r\nThe final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. \r\n \r\nCash Flows for the Years Ended June 30, 2007 and June 30, 2006, Condensed \r\n \r\nJune 30, 2007 \r\n \r\nJune 30, 2006 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities \r\n \r\n$ -180,304,402 274,039,837 -76,013,550 7,841,204 \r\n \r\n$ -155,254,972 240,243,152 -82, 136,159 14,740,214 \r\n \r\nNet Change in Cash Cash, Beginning ofYear \r\n \r\n$ 25,563,089 75,390,257 \r\n \r\n$ 17,592,235 57,798,022 \r\n \r\nCash, End ofYear \r\n \r\n$ 100.953.346 \r\n \r\n$ 75,390,257 \r\n \r\nCapital Assets \r\n \r\nThe Institute had three significant capital additions in fiscal year 2007. Two of the three additions were research buildings. The Molecular Science and Engineering Building was completed this year, resulting in an addition of $80.4 million. Also, the Klaus Advanced Computing Building was completed at a cost of $49.7 million, which includes a $9.8 million parking facility. The third significant capital addition in fiscal year 2007 was the $9.6 million addition ofthe museum collection at the Institute of Paper Science and Technology. \r\n \r\nFor additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the Notes to the Financial Statements. \r\n \r\nLong-Term Liabilities \r\n \r\nGeorgia Institute of Technology had Long-Term Liabilities of $441,446,745 of which $29,248,343 was reflected as current liability at June 30, 2007. \r\n \r\n- VI - \r\n \r\n For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. Economic Outlook The Institute is not aware ofany currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results ofoperations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The Institute's overall fmancial position is strong. Even with a relatively flat funded year for state appropriations, the Institute was able to generate a modest increase in Net Assets. The Institute anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the Institute's ability to react to unknown internal and external issues. Dr. G. Wayne Clough, President Georgia Institute ofTechnology \r\n- vii - \r\n \r\n BASIC FINANCIAL STATEMENTS - 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30, 2007 \r\nASSETS \r\nCurrent Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items \r\nTotal Current Assets \r\nNoncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Funds Held for Others Lease Purchase Obligations Compensated Absences \r\nTotal Current Liabilities \r\nNoncurrent Liabilities Lease Purchase Obligations Compensated Absences Deferred Revenue (Note 7) \r\nTotal Noncurrent Liabilities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets, Net of Related Debt Restricted for: \r\nNonexpendable Expendable Capital Projects Unrestricted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of this statement. \r\n-2- \r\n \r\nEXHIBIT\"A\" \r\n \r\n$ 100,953,346 135,224 \r\n28,724,983 29,613,490 \r\n292,680 12,174,208 \r\n$ 171,893,931 \r\n$ 61,279,558 8,722,027 \r\n1,261,604,842 \r\n$ 1,331,606,427 \r\n$ 1,503,500,358 \r\n \r\n$ \r\n \r\n19,456,196 \r\n \r\n937,851 \r\n \r\n168,616 \r\n \r\n877,164 \r\n \r\n23,435,169 \r\n \r\n14,212,988 \r\n \r\n3,659,190 \r\n \r\n10,310,080 \r\n \r\n12,199,221 \r\n \r\n17,049,122 \r\n \r\n$ 102,305,597 \r\n \r\n$ 397,770,460 14,427,942 5,618,750 \r\n$ 417,817,152 \r\n$ 520,122,749 \r\n \r\n$ 851,635,161 \r\n53,098,742 30,748,494 49,599,664 -1,704,452 \r\n \r\n$ 983,377,609 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENDED JUNE 30, 2007 \r\n \r\nEXHIBIT\"B\" \r\n \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nGrants and Contracts Federal State Other \r\nSales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Operating Revenues \r\nTotal Operating Revenues \r\nOPERATING EXPENSES \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation \r\nTotal Operating Expenses \r\nOperating Income (Loss) \r\nNONOPERATING REVENUES (EXPENSES) \r\nState Appropriations Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expenses \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before Other Revenues, Expenses, Gains, or Losses \r\nCapital Grants and Gifts State Other \r\nTotal Other Revenues, Expenses, Gains or Losses \r\nIncrease (Decrease) in Net Assets \r\nNet Assets - Beginning of Year \r\nNet Assets - End of Year \r\nThe notes to the financial statements are an integral part of this statement. \r\n-3- \r\n \r\n$ 150,861,562 -30,308, 134 \r\n271,377,083 14,458,823 \r\n145,131,747 19,984,311 \r\n1,328,641 \r\n40,453,291 1,207,997 \r\n16,549,781 12,327,842 \r\n5,607,789 7,708,794 11 241140 \r\n$ 667,930,667 \r\n \r\n$ 231,263,794 236,894,546 93,697,921 4,262,976 16,646,544 14,117,989 24,009,703 236,484,800 61,863,927 \r\n$ 919,242,200 \r\n$ -251,311,533 \r\n \r\n$ 252,569,542 8,321,310 14,392,690 \r\n-17,133,263 1,749,569 \r\n \r\n$ 259,899,848 \r\n \r\n$ \r\n \r\n8,588,315 \r\n \r\n$ 35,918,570 15,906,923 \r\n$ 51,825,493 $ 60,413,808 \r\n922,963,801 \r\n \r\n$ 983,377,609 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2007 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used) by Operating Activities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts \r\nNet Cash Flows Provided (Used) by Noncapital Financing Activities \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by Investing Activities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents - Beginning of Year \r\nCash and Cash Equivalents - End of Year \r\n \r\nEXHIBIT\"C\" \r\n \r\n$ 120,614,653 \r\n424,582,707 19,958,891 \r\n-368,136,973 -464,300,597 \r\n-14, 117,989 -3,324,660 2,792,599 \r\n40,528,835 1,221,747 \r\n16,552,314 12,344,382 \r\n5,605,106 7,673,394 17,701 189 \r\n$ -180,304,402 \r\n \r\n$ 252,569,542 \r\n7,560,716 8,321,310 5,588,269 \r\n$ 274,039,837 \r\n \r\n$ \r\n \r\n8,888,962 \r\n \r\n-57,603, 151 \r\n \r\n-10,192,611 \r\n \r\n-17,106,750 \r\n \r\n$ -76,013,550 \r\n \r\n$ \r\n \r\n35,000 \r\n \r\n8,292,746 \r\n \r\n-486 542 \r\n \r\n$ \r\n \r\n7,841,204 \r\n \r\n$ \r\n \r\n25,563,089 \r\n \r\n75,390,257 \r\n \r\n$ 100,953,346 \r\n \r\n-4 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2007 \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\nNet Cash Provided (Used) by Operating Activities \r\nNONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Change in Accrued Interest Payable Affecting Interest Paid Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts \r\n \r\nEXHIBIT\"C\" \r\n$ -251,311,533 \r\n61,863,927 4,661,826 9,805 -8,206,888 -532,061 15,792,909 -5,809,273 -353,802 3,580,688 \r\n$ -180,304,402 \r\n$ =====7,..8,.9.2.=6=,8=0=0 $ ===-6,=09=9=,9=4=4 $===2=6=,5=1=3 $ -42,936,531 \r\n \r\nThe notes to the financial statements are an integral part of this statement. -5- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS Georgia Institute of Technology serves the state, national and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and throughout the world. \r\nREPORTING ENTITY Georgia Institute of Technology is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity. \r\nThe Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. \r\nLegally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential components units of the State. See Note 16, Affiliated Organizations, for additional information. \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the lnstitute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. \r\n-6- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nBASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. \r\nThe Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. Georgia Institute of Technology has elected to not apply FASB pronouncements issued after the applicable date. \r\nCASH 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. \r\nSHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nINVESTMENTS The Institute accounts for its investments at fair market value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments andfor External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments. \r\nACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made on sponsored research grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\n \r\n-7- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nINVENTORIES \r\nConsumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis. \r\nNONCURRENTINVESTMENTS \r\nInvestments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets. \r\nCAPITAL ASSETS \r\nCapital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 50 years for buildings, 20 to 75 years for infrastructure and land improvements, 10 years for library books, and 5 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. \r\nTo obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. \r\nFor projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institution when complete. For projects managed by the Institution, the Institution retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2007, GSFIC transferred capital additions valued at $48,910,061 to the Georgia Institute of Technology. \r\nACCOUNTS PAYABLE \r\nAccounts Payable are amounts due to trade vendors for goods and services received but not paid for as of the end of the fiscal year. In fiscal year 2007, the Institute added new controls to better identify outstanding obligations at year end, and as a result, accounts payable was adjusted by $6,247,697 for the year. \r\n \r\n-8- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nDEPOSITS Deposits consist of funds placed with the Institute to reserve housing assignments in an Institution residence hall, Institute controlled funds held for the payment of employee benefits, and other various activities at the Institute. \r\nDEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned and pre-paid rent. \r\nCOMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $27,896,377 as of July 1, 2006. For fiscal year 2007, $19,387,855 was earned in compensated absences and employees were paid $15,807,168, for a net increase of $3,580,687. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $31,477,064. \r\nNONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\nNET ASSETS The lnstitute's net assets are classified as follows: \r\nInvested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. \r\nRestricted 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 \r\n \r\n-9- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. \r\n \r\nRestricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\n \r\nExpendable Restricted Net Assets include the following: \r\n \r\nRestricted - E\u0026G and Other Organized Activities Federal Loans Institutional Loans Quasi-Endowments \r\n \r\n$ 5,420,828 6,507,339 4,516,473 14,303,854 \r\n \r\nTotal Restricted Expendable \r\n \r\n$ 30,748,494 \r\n \r\nRestricted net assets - expendable - Capital Projects: This represents resources for which the Institute is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. \r\n \r\nUnrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2007, there was no surplus to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\n \r\nUnrestricted Net Assets includes the following items which are quasi-restricted by management. \r\n \r\nR\u0026RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted \r\n \r\n$ 12,571,771 26,860,115 319,089 -41,455,427 \r\n \r\nTotal Unrestricted Net Assets \r\n \r\n$ -1,704,452 \r\n \r\n- 10 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNET ASSETS When an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. \r\nINCOME TAXES Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenues as either operating or nonoperating in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: \r\nOperating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. \r\nNonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. \r\nSCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nDEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) cannot be placed in a depository paying interest longer than ten days without the depository \r\n \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nDEPOSITS 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: \r\n1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. \r\n2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. \r\n3. 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. \r\n4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. \r\n5. 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. \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. \r\nThe 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. \r\nAt June 30, 2007, the carrying value of the Institute's deposits was $21,290,280 and the bank balance was $33,822,948. Of the Institute's deposits, $33,517,574 was uninsured. Of these uninsured deposits, $30,476,886 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name, and $3,040,688 were uncollateralized. \r\nINVESTMENTS Georgia Institute of Technology maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws. \r\n- 12 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS The Institute's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. \r\n \r\nInvestment Ty1:1e \r\n \r\nFair Value \r\n \r\nLess Than l Year \r\n \r\nInvestment Maturitx \r\n \r\nl -5 \r\n \r\n6 - 10 \r\n \r\nYears \r\n \r\nYears \r\n \r\nMore than IO Years \r\n \r\nDebt Securities U.S. Treasuries U. S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt \r\n \r\n$ 4,675,972 $ \r\n \r\n386,822 $ 1,972,361 $ 2,231,492 $ \r\n \r\n24,701 4,076,840 2,959,235 \r\n \r\n660,056 1,051,538 \r\n \r\n13,684 2,013,269 1,340,425 \r\n \r\n600,506 561 779 \r\n \r\n85,297 \r\n11,017 803,009 \r\n5 493 \r\n \r\n$ 11,736,748 $ 2,028,416 $ 5,332,132 $ 3 323111 $ \r\n \r\n204 816 \r\n \r\nOther Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes \r\n \r\n472,846 311,842 1,176,216 \r\n1,458 \r\n \r\nInvestment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund l Georgia Extended Asset Pool \r\n \r\n4,937,571 47,580,447 \r\n74,675,564 135,224 \r\n \r\n$ 141,021,216 \r\n \r\nThe Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.state.ga.us/intemet/ searchRpts.html. \r\n \r\nThe Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 \r\n \r\n- 13 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\nINVESTMENTS Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 days. \r\nThe Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $1.99 at June 30, 2007. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Effective Duration of the Fund is .91 years. \r\nInterest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regents policy and applicable Federal and state laws. \r\nThe Weighted Average Maturity of the Short-Term Fund is 2.24 years. Of the Institute's total investment of$4,937,571 in the Short-Term Fund, $4,918,809 is invested in debt securities. \r\nThe Weighted Average Maturity of the Diversified Fund is 8.66 years. Of the Institute's total investment of $47,580,447 in the Diversified Fund, $12,175,836 is invested in debt securities. \r\nCustodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Institute's policy for managing custodial credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute. \r\nAt June 30, 2007, $12,817,575 of the Institute's applicable investments were uninsured and held by the investment's counterparty in the Institute's name. \r\nCredit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk is for investments is an integral part of it's current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies. \r\n \r\n- 14 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: DEPOSITS AND INVESTMENTS \r\n \r\nINVESTMENTS The investments subject to credit quality risk are reflected below: \r\n \r\nRated Debt Investments \r\nU.S. Agencies Corporate Debt \r\n \r\nFair Value \r\n \r\nAAA \r\n \r\n$ 4,076,840 $ 4,076,840 \r\n \r\n2,959,235 \r\n \r\n347,936 $ \r\n \r\n$ 1,036,015 $ 4,424,116 $ \r\n \r\nAA \r\n \r\nA \r\n \r\nBAA \r\n \r\nUnrated \r\n \r\n808,969 $ 1,078,786 $ 808 262 $ I 018186 $ \r\n \r\n330,081 $ 330 081 $ \r\n \r\n393,463 323,463 \r\n \r\nForeign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Institute's policy for managing foreign currency risk is to comply with Regents policy and applicable Federal and state laws in regards to all direct investments. Of the Institute's total investments, $144,622 (.1 % of all reported investments), is invested through an outside trust in an international equity mutual fund. The foreign currency risk associated with this investment is considered minimal. \r\n \r\nNOTE 3: ACCOUNTS RECEIVABLE \r\n \r\nAccounts receivable consisted of the following at June 30, 2007: \r\n \r\nStudent Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other \r\n \r\n$ 1,765,763 1,513,953 \r\n28,724,983 28,154,717 \r\n \r\n$ 60,159,416 \r\n \r\nLess: Allowance for Doubtful Accounts \r\n \r\n1,820,943 \r\n \r\nNet Accounts Receivable \r\n \r\n$ 5813381473 \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nInventories consisted of the following at June 30, 2007: \r\n \r\n- 15 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nPhysical Plant Other \r\n \r\n$ 247,094 45,586 \r\n \r\nTotal NOTE 5: NOTES/LOANS RECEIVABLE \r\n \r\n$===2==9==-2-==68\"\"\"0 \r\n \r\nNotes/Loans Receivable, primarily consisting of student loans made through the Federal Perkins Loan Program (the Program), comprise substantially all of the loans receivable at June 30, 2007. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written of At June 30, 2007 the allowance for uncollectible loans was approximately $59,058. \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nFollowing are the changes in capital assets for the year ended June 30, 2007: \r\n \r\n- 16 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nBeginning Balance July 1, 2006 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30, 2007 \r\n \r\nCapital Assets, Not Being Depreciated: \r\n \r\nLand \r\n \r\n$ \r\n \r\nCapitalized Collections \r\n \r\nConstruction Work-In-Progress \r\n \r\n48,944,106 $ 6,371,820 49,744,890 \r\n \r\n1,703,799 10,543,016 18,055,350 $ \r\n \r\n$ 42,120,278 \r\n \r\n50,647,905 16,914,836 25,679,962 \r\n \r\nTotal Capital Assets Not Being Depreciated \r\n \r\n$ 105,060,816 $ 30,302,165 $ 42,120,278 $ 93,242,703 \r\n \r\nCapital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections \r\n \r\n$ 50,773,872 $ 1,063,441,456 14,388,357 318,183,707 85,308,870 \r\n \r\n4,373,344 155,240,716 $ \r\n426,981 24,784,668 \r\n4,570,404 \r\n \r\n$ 55,147,216 \r\n \r\n4,471,892 1,214,210,280 \r\n \r\n14,815,338 \r\n \r\n18,969,969 323,998,406 \r\n \r\n1242 \r\n \r\n89,878,032 \r\n \r\nTotal Assets Being Depreciated \r\n \r\n$ 1,532,096,262 $ 189,396,113 $ 23,443,103 $ 1,698,049,272 \r\n \r\nLess: Accumulated Depreciation: \r\n \r\nInfrastructure \r\n \r\n$ 9,675,312 $ \r\n \r\nBuilding and Building Improvements \r\n \r\n210,395,002 \r\n \r\nFacilities and Other Improvements \r\n \r\n6,767,147 \r\n \r\nEquipment \r\n \r\n201,419,954 \r\n \r\nLibrary Collections \r\n \r\n59,292,852 \r\n \r\n1,168,504 32,618,472 $ \r\n322,383 24,965,388 \r\n2,789,180 \r\n \r\n$ 680,817 \r\n19,045,002 1242 \r\n \r\n10,843,816 242,332,657 \r\n7,089,530 207,340,340 \r\n62,080,790 \r\n \r\nTotal Accumulated Depreciation \r\n \r\n$ 487,550,267 $ 61,863,927 $ 19,727,061 $ 529,687,133 \r\n \r\nTotal Capital Assets, Being Depreciated, \r\n \r\nNet \r\n \r\n$ 1,044,545,995 $ 127,532,186 $ \r\n \r\n3,716,042 $ 1,168,362,139 \r\n \r\nCapital Assets, Net \r\n \r\n$ 1,142,606 811 $ 151,834,351 $ 45,836,320 $ I 261 604 842 \r\n \r\nIncluded in the Institute's building assets is the Burge Apartment Building. A request has been forwarded to the Board of Regents requesting permission to demolish this structure, but as of the reporting date, no action has been taken on the request. The original cost of the building was $2,443,385, with accumulated depreciation of $1,277,707 leaving a net book value of $1,165,678. \r\n \r\nNOTE 7: DEFERRED REVENUE \r\n \r\nCurrent deferred revenue consisted of the following at June 30, 2007: \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\n$ 11,066,231 2,064,854 1,081,903 \r\n \r\nTotal \r\n \r\n$ 14,212.988 \r\n \r\nLong-Term deferred revenue totaled $5,618,750. \r\n \r\n- 17 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nLong-Term liability activity for the year ended June 30, 2007 was as follows: \r\n \r\nBeginning Balance July 1, 2006 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30, 2007 \r\n \r\nCurrent Portion \r\n \r\nLeases Lease Obligations \r\n \r\n$ 341,235,493 $ 78,926,800 $ 10,192,612 $ 409,969,681 $ 12,199,221 \r\n \r\nOther Liabilities Compensated Absences \r\n \r\n27,896,377 \r\n \r\n19,387,855 \r\n \r\n15,807,168 \r\n \r\n31,477,064 \r\n \r\n17,049,122 \r\n \r\nTotal Long-Term Obligations $ 369,131.870 $ 98.314.655 $ 25,999.780 $ 441446745 $ 29.248.343 \r\n \r\nNOTE9: SIGNIFICANT COMMITMENTS \r\n \r\nGeorgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $13,625,865 as of June 30, 2007. This amount is not reflected in the accompanying basic financial statements. \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nGeorgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\n \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2007 and 2036. Expenditures for fiscal year 2007 were $27,325,875 of which $17,133,263 represented interest. Total principal paid on capital leases was $10,192,612 for the fiscal year ended June 30, 2007. Interest rates range from 3.36% to 11%. The following is a summary of the carrying values of assets held under capital lease at June 30, 2007: \r\n \r\nLand Buildings Equipment \r\n \r\n$ 11,457,418 439,686,312 8,307,166 \r\n \r\nTotal Assets Held Under Capital Lease \r\n \r\n$ 459,450.896 \r\n \r\nCertain 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. \r\n \r\n- 18 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES Georgia Institute of Technology had six capital leases with related parties in fiscal year 2007. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $18,535,000 and the amount due (principal and interest) in the next fiscal year is $1,425,429. \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200 with the Georgia Tech Foundation, Inc., for a complex of buildings collectively named \"Technology Square\". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $131,660,360, and the amount due (principal and interest) in the next fiscal year is $9,941,680. \r\nIn February 2001, Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2007 the remaining long-term debt obligation (principal) under the lease was $41,745,000, and the amount due (principal and interest) in the next fiscal year is $3,072,992. \r\nIn May 2005, Georgia Institute of Technology entered into a capital lease of $70,320,000 with Georgia Tech Facilities, Inc., an affiliated organization, for two structures/buildings: (1) A complex of buildings collectively named \"Married Family Housing\", including an adjoining parking deck; and (2) The underground parking deck for the Klaus Advanced Computing Center. The lease terms are 25 years on the Housing complex and 20 years on the Klaus parking deck. The lease expires in June 2030. At June 30, 2007, the remaining long-term debt obligation under the lease was $67,080,000 and the amount due (principal and interest) in the next fiscal year is $5,080,877. \r\nGeorgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $64,029,360 with the University Financing Foundation for the Technology Square Research Building. The lease term is for a 23year period that began June 2003 and expires June 2026. At June 30, 2007, the remaining longterm debt obligation (principal) under the lease was $62,191,204 and the amount due (principal and interest) in the next fiscal year is $4,273,438. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. \r\n \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES In May 2007, Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June 2036. At June 30, 2007 the remaining long-term debt obligation under the lease was $75,205,000 and the amount due (principal and interest) in the next fiscal year is $4,979,550. \r\nThe Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2012. At June 30, 2007, the total obligation under these agreements was $13,553,117. The amount due (principal and interest) in the next fiscal year is $4,356,677. \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases with remaining terms of more than one year expire in various fiscal years from 2007 through 2009. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases include real estate rentals, copiers and other small business equipment. \r\nDESCRIPTION OF RELATED PARTY LEASES In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation, (GTRC), an affiliated organization, for office space in Arlington, Virginia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of$17,224. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $206,694 in fiscal year 2008. \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Marietta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $105,055. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,260,669 in fiscal year 2008. \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in the Centennial Research Building in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $125,870. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $1,510,440 in fiscal year 2008. \r\n \r\n- 20 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nDESCRIPTION OF RELATED PARTY LEASES In 2000, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Fairburn, Ohio. The current agreement is for July l, 2007 through June 30, 2008 for monthly fees of $16,346. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $196,155 in fiscal year 2008. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Orlando, Florida. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $3,988. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $47,856 in fiscal year 2008. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc., an affiliated organization, for office space in the Centergy One Building located at 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $72,032. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc., $864,384 in fiscal year 2008. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 1, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., an affiliated organization, for office and lab space located at 575 14th Street in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees ranging between $55,763 and $58,279. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc., a minimum of $681,743 in fiscal year 2008. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 2, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., an affiliated organization, for office space located at 650 Ethel Street in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $23,673. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 2, Inc., $284,076 in fiscal year 2008. \r\nIn 2004, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Marietta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 with monthly fees of $2,240. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $26,880 in fiscal year 2008. \r\n \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nDESCRIPTION OF RELATED PARTY LEASES In 2007, Georgia Institute of Technology entered into a real property operating lease with Georgia Advanced Technology Ventures, Inc., an affiliated organization, for office space in the Centergy One Building located at 75 Fifth Street in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $131,611. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Advanced Technology Ventures, Inc., $1,579,332 in fiscal year 2008. \r\nIn 2007, Georgia Institute of Technology entered into a real property operating lease with VLP 3, Inc., a subsidiary of Georgia Advanced Technology Ventures, Inc., an affiliated organization, for office space located at 395 North Avenue in Atlanta, Georgia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $34,140. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 3, Inc., $409,680 in fiscal year 2008. \r\nIn 2007, Georgia Institute of Technology entered into a real property operating lease with GTRC for office space in Quantico, Virginia. The current agreement is for July 1, 2007 through June 30, 2008 for monthly fees of $5,093. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay GTRC $61,116 in fiscal year 2008. \r\nGeorgia Institute of Technology's fiscal year 2007 noncancellable operating lease expenditures for real property was $9,558,054. \r\nFUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: \r\n \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nFUTURE COMMITMENTS \r\nYear Ending June 30: 2008 2009 2010 2011 2012 2013 through 2017 2018 through 2022 2023 through 2027 2028 through 2032 2033 through 2036 \r\n \r\nReal ProQerty and EguiQment CaQital Leases OQerating Leases \r\n \r\n$ 33,130,645 $ 33,260,529 32,408,037 30,685,643 29,435,200 147,651,825 153,243,082 137,226,481 95,970,949 19,926,747 \r\n \r\n9,604,767 \r\n \r\nTotal Minimum Lease Payments \r\n \r\n$ 712,939,138 $ \r\n \r\n9,604,767 \r\n \r\nLess: Interest \r\n \r\n302,969,457 \r\n \r\nPrincipal Outstanding \r\n \r\n$ 409,969.681 \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. \r\n \r\nFunding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nFunding Policy Fiscal Year \r\n \r\nPercentage Contributed \r\n \r\nRequired Contribution \r\n \r\n2007 2006 2005 \r\n \r\n100% 100% 100% \r\n \r\n$18,025,456 $17,233,661 $16,731,285 \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. \r\n \r\nThe benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an \"old plan\" member subject to the plan provisions in effect prior to July 1, 1982. All other members are \"new plan\" members subject to the modified plan provisions. \r\n \r\nUnder both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. \r\n \r\nRetirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. \r\n \r\nIn addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. \r\n \r\n- 24- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nPlan Description The ERS issues a financial report each fiscal year, which may be obtained through ERS. \r\nFunding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2007, for employees covered by ERS was $548,801. The Institute's total payroll for all employees was $472,421,316. \r\nFor the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7. Of these member contributions, the employee pays the first 1.5% and the Institute pays the remainder on behalf of the employee. \r\nUnder the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The Institute also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, the ERS employer contribution rate for the Institute amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. \r\nTotal contributions to the plan made during fiscal year 2007 amounted to $65,537, of which $57,305 was made by the Institute and $8,232 was made by employees. These contributions met the requirements of the plan. \r\nActuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007 financial report, which may be obtained through ERS. \r\nREGENTS RETIREMENT PLAN \r\nPlan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An \"eligible university system employee\" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits \r\n- 25 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nREGENTS RETIREMENT PLAN \r\nPlan Description 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. \r\nFunding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\nThe Institute and its covered employees made required contributions (including some minor adjustments) of $15,775,893 (9.66% or 8.13%) and $8,880,566 (5%), respectively. \r\nAIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\nBenefits 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. \r\n \r\n- 26 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nContributions and Vesting Member contributions are 7.5% of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. \r\nTotal contributions made by employees during fiscal year 2007 amounted to $806,499 which represents 7.5% of covered payroll (with minor adjustments included). These contributions met the requirements of the plan. \r\nThe Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. \r\nNOTE 12: RISK MANAGEMENT \r\nThe University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of \r\n \r\n- 27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\nGeorgia, 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. \r\nA 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. \r\nNOTE 13: CONTINGENCIES \r\nAmounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\nLitigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2007. \r\nAt the request of Institute management, in April 2004, Georgia Tech Facilities Inc. (Facilities), an affiliated organization of Georgia Institute of Technology (see Note 16), adopted a Declaration of Official Intent to seek the issuance of taxable and tax-exempt obligations by the Development Authority of Fulton County for the purpose of financing the Main Campus Electrical Substation Project for the benefit of Georgia Tech. This resolution was intended to constitute a \"declaration of official intent\" within the meaning of Treasury Regulation Section 1.150-2. Facilities and Georgia Tech also entered into a Memorandum of Understanding (MOU). Under the MOU, Facilities agreed to manage the design and construction of the project as well as proceed with the financing subject to the Institute securing Board of Regents approval. The project has been approved by the Board of Regents, with a construction budget of $34 million. The ground lease and rental agreement have been completed and it is expected that the project will be completed in fiscal year 2008. \r\n \r\n- 28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 13: CONTINGENCIES \r\nAt the request oflnstitute management, in March 2007, Georgia Tech Facilities, Inc. (Facilities), an affiliated organization of Georgia Institute of Technology (see Note 16), adopted a Declaration of Official Intent to seek the issuance of tax-exempt obligations by the Development Authority of Fulton County for the purpose of financing the acquisition, renovation and construction of facilities for the use of the Institute to be known as the North Avenue Apartments project. The resolution was intended to constitute a \"declaration of official intent\" within the meaning of Treasury Regulation Section 1.150-2. Facilities and Georgia Tech also entered into a Memorandum of Understanding (MOU). Under the MOU, Facilities agreed to manage the design and construction of the project as well as proceed with the financing subject to the Institute securing Board of Regents approval, which was subsequently received. The ground lease of the project to Facilities and a rental agreement to the Board of Regents for use by Georgia Tech were executed effective July 1, 2007. \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to \r\nlife insurance, the employer covers the total cost for $25,000 of basic life insurance. If an \r\nindividual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. \r\nAs of June 30, 2007, there were 1,216 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Institute of Technology recognized as incurred $6,118,067 of expenditures, which was net of $2,260,011 of participant contributions. \r\n \r\n- 29 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe Institute's operating expenses by functional classification for fiscal year 2007 are shown below: \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nInstruction \r\n \r\nResearch \r\n \r\nFunctional Classification \r\n \r\nPublic Service \r\n \r\nAcademic Su1mort \r\n \r\nStudent Services \r\n \r\nInstitutional Su1mort \r\n \r\n$ 88,800,728 $ 129,790,3 I 7 $ \r\n \r\n47,117,241 \r\n \r\n87,549,205 \r\n \r\n27,696,421 \r\n \r\n38,698,567 \r\n \r\n2,300,505 \r\n \r\n371,145 \r\n \r\n3,074,444 \r\n \r\n10,964,681 \r\n \r\n6,434,470 $ 7,962,024 2,949,650 \r\n960,702 1,165,969 \r\n \r\n5,469,085 $ 18,150,845 5,417,689 \r\n130,759 569,754 \r\n \r\n210,527 $ 10,795,941 2,747,554 \r\n7,733 288,028 \r\n \r\n474,256 28,431,578 7,698,600 \r\n280,788 325,549 \r\n \r\n250,426 28,377,490 \r\n \r\n134,302 89,067,070 \r\n \r\n84,362 24,252,728 \r\n \r\n10,017,306 \r\n \r\n8,915,635 \r\n \r\n11,956 8,438,657 \r\n \r\n$ 197 617 255 $ 356 575 287 $ 43 809 905 $ 39 755 438 $ 22 965,418 $ 45 661 384 \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nPlant Operations and Maintenance \r\n \r\nFunctional Classification \r\n \r\nScholarships and Fellowshi11s \r\n \r\nAuxiliary Entemrises \r\n \r\nUnallocated Ex11enses \r\n \r\nTotal Operating Ex11enses \r\n \r\n$ \r\n \r\n84,411 \r\n \r\n21,734,817 \r\n \r\n5,165,180 \r\n \r\n211,344 \r\n \r\n91,410 \r\n \r\n$ 15,152,895 3,324,260 \r\n166,709 \r\n \r\n$ 231,263,794 236,894,546 \r\n93,697,921 4,262,976 \r\n16,646,544 \r\n \r\n$ 14,117,989 17,897,002 \r\n \r\n5,631,655 \r\n \r\n14,117,989 24,009,703 \r\n \r\n32,562,851 \r\n \r\n2,834 \r\n \r\n34,850,229 6,290,255 $ 55,573,672 \r\n \r\n236,484,800 61,863,927 \r\n \r\n$ 77 747 0)5 $ 14 )20 823 $ 65 416 003 $ 55 573 672 $ 919 242 200 \r\n \r\nNOTE 16: AFFILIATED ORGANIZATIONS \r\n \r\nIn accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Georgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined to be legally separate, tax exempt organizations whose activities primarily support Georgia Institute of Technology, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia Institute of Technology has not included financial activity for these affiliated organizations in these financial statements. \r\n \r\n- 30 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2007 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: AFFILIATED ORGANIZATIONS \r\nGeorgia Tech Athletic Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc., and Georgia Tech Research Corporation have been determined significant to the State of Georgia for the year ended June 30, 2007, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia. \r\n \r\n- 31 - \r\n \r\n (This page left intentionally blank) \r\n \r\n SUPPLEMENTARY INFORMATION - 33 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GMP BASIS) BUDGET FUND JUNE 30, 2007 \r\nASSETS \r\nCash and Cash Equivalents Accounts Receivable \r\nFederal Financial Assistance Other Prepaid Expenditures Inventories \r\nTotal Assets \r\nLIABILITIES AND FUND EQUITY \r\nLiabilities Accounts Payable Deferred Revenue Other Liabilities \r\nTotal Liabilities \r\nFund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over \"Per State Accounting Office\" \r\nTotal Fund Balances \r\nTotal Liabilities and Fund Balances \r\n \r\nSCHEDULE \"1\" \r\n$ 27,971,806.50 28,724,982.86 22,259,167.15 11,405,254.93 247,094.32 \r\n$ 90,608,305.76 \r\n$ 25,755,495.01 15,870,717.3~ 21,590,777.89 \r\n$ 63,216,990.29 \r\n$ 26,835,109.55 516,989.25 955,382.69 273,503.32 \r\n-1, 189,669.34 $ 27,391,315.47 \r\n$ 90,608,305.76 \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n-34- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) \r\nBUDGET FUND YEAR ENDED JUNE 30, 2007 \r\n \r\nSCHEDULE \"2\" \r\n \r\nREVENUES \r\nState Appropriation State General Funds Tobacco Funds \r\nFederal Funds Other Funds \r\nTotal Revenues \r\nEXPENDITURES \r\nAdvanced Technology Development Center/Economic Development Institute \r\nGeorgia Tech Research Institute Research Consortium Special Funding Initiatives Teaching \r\nTotal Expenditures \r\nExcess of Funds Available over Expenditures \r\nFUND BALANCE JULY 1 \r\nReserved \r\nADJUSTMENTS \r\nPrior Year Payables/Expenditures Prior Year Receivables/Revenues Non-Mandatory Transfers Other Additions (Deletions) \r\nFUND BALANCE JUNE 30 \r\n \r\nBUDGET \r\n \r\nACTUAL \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 251,819,542.00 $ 251,819,542.00 $ \r\n \r\n750,000.00 \r\n \r\n750,000.00 \r\n \r\n384,844,736.00 \r\n \r\n327,734,908.12 \r\n \r\n327,592,602.00 \r\n \r\n318,674,244.10 \r\n \r\n$ 965,006,880.00 $ 898,978,694.22 $ \r\n \r\n0.00 0.00 -57,109,827.88 -8,918,357.90 \r\n-66,028, 185.78 \r\n \r\n$ 28,697,215.00 $ 27,980,921.29 $ \r\n \r\n138,720,640.00 \r\n \r\n134,899,475.96 \r\n \r\n17,652,564.00 \r\n \r\n17,639,337.02 \r\n \r\n1,039,086.00 \r\n \r\n1,039,086.00 \r\n \r\n778,897,375.00 \r\n \r\n706,782,937.25 \r\n \r\n$ 965,006,880.00 $ 888,341,757.52 $ \r\n \r\n$ \r\n \r\n0.00 $ 10,636,936.70 $ \r\n \r\n716,293.71 3,821,164.04 \r\n13,226.98 0.00 \r\n72,114,437.75 \r\n76,665, 122.48 \r\n10,636,936.70 \r\n \r\n11,614,106.93 \r\n \r\n117,214.67 -127,186.54 7,234,077.62 -2,083,833.91 \r\n$ 27,391,315.47 \r\n \r\nSUMMARY OF FUND BALANCE \r\nReserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over \"Per State Accounting Office\" \r\n \r\n$ 26,835,109.55 516,989.25 955,382.69 273,503.32 \r\n-1, 189,669.34 \r\n \r\nTotal Fund Balance \r\n \r\n$ 27,391,315.47 \r\n \r\nActual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n- 35- \r\n \r\n {This page left intentionally blank) \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30, 2007 \r\n \r\nSCHEDULE \"3\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals June 30, 2007 June 30, 2006 \r\n \r\nCompensated Absences June 30, 2007 June 30, 2006 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nBoard of Regents of the University System of Georgia \r\n \r\nBarnes, \r\n \r\nRosalind \r\n \r\nBearden, \r\n \r\nAlison \r\n \r\nBirkes, \r\n \r\nAngela \r\n \r\nChalasani, \r\n \r\nKanti \r\n \r\nErvin, \r\n \r\nJuanita \r\n \r\nHughes, \r\n \r\nMichael \r\n \r\nJean-Baptiste, Rebecca \r\n \r\nJones, \r\n \r\nShelia \r\n \r\nKilpatrick, \r\n \r\nToyna \r\n \r\nMast, \r\n \r\nAmy \r\n \r\nPevey, \r\n \r\nMark \r\n \r\nRevak, \r\n \r\nRoxanne \r\n \r\nSommer, \r\n \r\nCandice \r\n \r\nStewart, \r\n \r\nJanet \r\n \r\nThomas, \r\n \r\nCheryl \r\n \r\nWallace, \r\n \r\nErica \r\n \r\nWatlington, \r\n \r\nDaniel \r\n \r\nWolf-Ward, \r\n \r\nTina \r\n \r\nGeorgia State University \r\n \r\nO'Farrell, \r\n \r\nLaura \r\n \r\nKennesaw State University \r\n \r\nPanu, \r\n \r\nAl \r\n \r\nAgency Funds \r\n \r\nUnidentified Variance \r\n \r\nSALARIES $ 468,081,493 $ \r\n \r\nTRAVEL 16,512,098 \r\n \r\n937,851 -660,795 \r\n \r\n29,240,190 -25,913,959 \r\n \r\n106,912 1,366 \r\n76,203 97,314 29,921 104,045 49,692 120,741 27,919 111,366 20,592 4,353 46,605 43,620 33,276 7,268 12,024 48,661 \r\n-21,368 \r\n3,000 \r\n-1861974 \r\n \r\n134,446 \r\n \r\n$ 412i421 1316 $==1=6,=64=6=,5=4=4 \r\n \r\n- 37 - \r\n \r\n SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY AUDITEE'S RESPONSE \r\nSUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007 \r\n \r\nPRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nFINDING CONTROL NUMBER AND STATUS \r\n \r\nFS-503-05-01 FS-503-06-01 FS-503-06-02 \r\n \r\nPreviously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented \r\n \r\nPRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS \r\n \r\nNo findings were reported. \r\n \r\n SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2007 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nREVENUES/RECEIVABLES/RECEIPTS EXPENSES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-503-07-01 \r\n \r\nCondition: \r\n \r\nAccounting procedures ofGeorgia Institute ofTechnology were insufficient to provide adequate controls over reporting ofliabilities, expenses, accounts receivable and revenues. \r\n \r\nCriteria: \r\n \r\nThe Board of Regents of the University System of Georgia's Business Procedures Manual, Section 1.2 states, in part, \"GASB Statement 34 requires that institutions that report as Business Type Activities (BTAs) follow accrual accounting. Under accrual accounting, revenue is recognized when earned and expenses are recognized when accrued\". \r\n \r\nQuestioned Cost: NIA \r\n \r\nInformation: \r\n \r\nA review ofsubsequent year activity disclosed $10,212,285 that should have been recorded as liabilities and expenses in the year under review. Of this amount, $6,143,077 was for Restricted Funds activity. Restricted Funds are predominately accounted for on a reimbursement basis, therefore, accounts receivable and revenues associated with these expenditures would not have been recognized where funds are available from the grantor in the year under review. \r\n \r\nCause: \r\n \r\nManagement of Georgia Institute of Technology failed to implement adequate controls and procedures to (1) ensure proper recognition of revenues and (2) proper recording of expenditures when the liability is incurred in accordance with generally accepted accounting principles. \r\n \r\nEffect: \r\n \r\nThe failure of Georgia Institute of Technology to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting. \r\n \r\nRecommendation: \r\n \r\nManagement of Georgia Institute of Technology should review the accounting procedures in place and implement additional procedures to ensure that financial transactions are recorded in accordance with generally accepted accounting principles. \r\n \r\n- 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2007 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nEXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of Purchasing Cards Significant Deficiency Finding Control Number: FS-503-07-02 \r\n \r\nCondition: \r\n \r\nA review ofpurchasing card transactions revealed that the Georgia Institute ofTechnology failed to implement internal controls to ensure that purchase card expenditures were adequately monitored and in compliance with the Georgia Institute of Technology's guidelines as prescribed in the Georgia Institute of Technology's Procurement Card Manual. \r\n \r\nCriteria: \r\n \r\nPurchasing card transactions must comply with purchasing guidelines established in the Georgia Institute of Technology's (1) Procurement Card Manual and (2) with prescribed credit and transaction limits. \r\n \r\nQuestioned Costs: NIA \r\n \r\nInformation: \r\n \r\nAdequate procedures were not in place to ensure purchasing card expenditures were properly documented, allowable, and reviewed/approved by someone other than the cardholder. Additionally, procedures were not in place to ensure that violations of the purchasing card policy were documented or communicated to the Procurement Department. \r\n \r\nA review of seventy-one purchasing card expenditures revealed the following: \r\n \r\n1) Four instances in which purchases were made for unallowable items. 2) Eleven cardholders were identified as having overspent their single \r\ntransaction limit by improperly dividing transactions into multiple transactions to avoid exceeding the approved single transaction limit. 3) Ofthe eleven cardholders in item 2 above, six cardholders appear to have made purchases greater than their single transaction limit of$5,000 in an effort to circumvent the state's no-bid limit. 4) No documentation could be provided for one transaction selected for testing. \r\n \r\n-2 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2007 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nEXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of Purchasing Cards Significant Deficiency Finding Control Number: FS-503-07-02 \r\n \r\nCause: \r\n \r\nManagement at the Georgia Institute of Technology failed to enforce the transaction limits and guidelines established in the Procurement Card Manual. The Georgia Institute of Technology's policy identifies the responsibilities of each department. The policy states \"departments are responsible for reviewing all transactions to (1) ensure the appropriateness of purchases and funds being utilized (2) verify the completeness of documentation (signed and reconciled statements, detailed receipts, disputed transactions) and (3) identify any policy violations and take appropriate action\". 15 of 16 violations noted in the Information section were not identified by the department reviewer. As a result, the P-Card Administrator and, consequently, the cardholders violating the P-Card policy did not receive written notification of their violations. \r\n \r\nEffect: \r\n \r\nThe purchasing card program was designed to simplify and streamline the purchasing process and lower overall transaction costs for smaller supplies and materials purchases. However, the Georgia Institute ofTechnology has placed itselfin a position in which the benefits ofusing the purchasing cards could be diminished because ofmisuse and failure to follow purchasing card guidelines. \r\n \r\nRecommendation: \r\n \r\nManagement of Georgia Institute of Technology should establish and implement appropriate procedures to ensure that purchasing card guidelines are followed for all purchasing card transactions. \r\n \r\nFEDERAL AWARD FINDINGS AND QUESTIONED COSTS \r\n \r\nNo findings were reported. \r\n \r\n-3- \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2005-h2006","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2005/2006"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, GA : Georgia. Dept. of Audits and Accounts, 2006"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2005-h2006"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2005-h2006"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":" GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET ASSETS B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS C STATEMENT OF CASH FLOWS D NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULES \r\n1 BALANCE SHEET - (NON-GAAP BASIS) BUDGET FUND \r\n2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND \r\n3 RECONCILIATION OF SALARIES AND TRAVEL \r\nSECTION I1 AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\n- TABLE OF CONTENTS - \r\nSECTION I11 CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENOTF AUDITSAND ACCOUNTS \r\n270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 \r\nOctober 18, 2006 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia \r\nand Honorable G. Wayne Clough, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Institute of Technology, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2006. These financial statements are the responsibility of the Georgia Institute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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. \r\nAs discussed in Note 1, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Georgia Institute of Technology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America. \r\n \r\n In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30,2006, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\nManagement's Discussion and Analysis is not a required part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information. However, we did not audit this information and express no opinion on it. \r\nOur audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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. \r\nRespecthlly submitted, \r\n~ u f s e lWl . Hinton, CPA, CGFM State Auditor \r\n \r\n                                                    "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2004-h2005","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2005","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2004/2005"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, GA : Georgia. Dept. of Audits and Accounts, 2005"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2005"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2004-h2005"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2004-h2005"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":null},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2003-h2004","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2003/2004"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, Ga. : Dept. of Audits and Accounts"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2003-h2004"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2003-h2004"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS \r\nI \r\nGEORGIA INSTITUTE OF TECHNOLOGY \r\nATLANTA, GEORGIA REPORT ON AUDIT \r\nOF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 \r\nRussell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENT'S DISCUSSION AND ANALYSIS \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n2 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n4 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n6 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n9 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\nSCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO \r\n \r\nBUDGET - (NON-GAAP BASIS) \r\n \r\n1 \r\n \r\nRESIDENT INSTRUCTION \r\n \r\n45 \r\n \r\n2 \r\n \r\nOTHER ORGANIZED ACTIVITIES \r\n \r\n46 \r\n \r\n3 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n47 \r\n \r\nSECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n Russell W. Hinton \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 \r\nJanuary 28, 2005 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia \r\nand Honorable G. Wayne Clough, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements ofGeorgia Institute ofTechnology, an organizational unit ofthe State of Georgia, and its' aggregate discretely presented component units as ofand for the year ended June 30, 2004, as listed in the table ofcontents. These financial statements are the responsibility ofthe Georgia Institute ofTechnology's management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of Georgia Institute of Technology's discretely presented component units. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for Georgia Tech Athletic Association, Georgia Tech Alumni Association, Georgia Tech Facilities, Inc., Georgia Tech Foundation, Inc. and Georgia Tech Research Corporation is based on the reports of the other auditors. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 and the report of other auditors provide a reasonable basis for our opinions. \r\nAs discussed in Note 1, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes in financial position (including cash flows) of only that portion ofthe business-type activities ofthe State of Georgia that is attributable to the transactions of \r\n04ARL-61 \r\n \r\n Georgia Institute of Technology. They do not purport to, and do not, present fairly the financial position and changes in financial position (including cash flows) of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America. \r\n \r\nIn our opinion, based on our audit and the reports ofother auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology and ofits aggregate discretely presented component units as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States ofAmerica. \r\n \r\nAs discussed in Note 1, the Georgia Institute of Technology adopted the provisions of the Governmental Accounting Standards Board, Statement Number 39, Determining Whether Certain Organizations are Component Units during the year ended June 30, 2004. \r\n \r\nManagement's Discussion and Analysis is not a required part ofthe basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit this information and express no opinion on it. \r\n \r\nOur audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Georgia Institute of Technology's basic financial statements. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied by us in the audit ofthe basic financial statements and, in our opinion, based on our audit, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. \r\n \r\nRespectfully submitted, \r\n \r\nState Auditor \r\n \r\n~ n I \r\n \r\nRWH:gp 04ARL-61 \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\nIntroduction \r\nThe Georgia Institute of Technology, also known as Georgia Tech, is one of the nation's leading research universities, providing a focused, technologically based education to nearly 17,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked as one of the top ten public universities in the nation by U. S. News and World Report. It offers degrees through the Colleges of Architecture, Engineering, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has more than 50 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research Institute that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21 st century. \r\nOverview ofthe Financial Statements and Financial Analysis \r\nThe Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2004, which began July 1, 2003 and ended June 30, 2004. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data with prior fiscal year results are presented in this year's Management's Discussion and Analysis. \r\nStatement ofNet Assets \r\nUsing the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed, and net assets available to continue operations in the future. \r\nThe Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the \r\n- 1- \r\n \r\n Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the Institute but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category, Unrestricted Net Assets, is available for any lawful purpose of the Institute. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2003 and June 30, 2004: \r\n \r\nStatement of Net Assets, Condensed \r\nAssets Current Assets Capital Assets, Net Other Assets \r\nTotal Assets \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\nTotal Liabilities \r\nNet Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Restricted - Capital Outlay Unrestricted \r\nTotal Net Assets \r\n \r\nJune 30, 2004 \r\n$ 141,708,345.03 1,066,511,750.53 61,332,907.17 \r\n$1,269,553,002.73 \r\n$ 75,857,183.45 274,487,956.45 \r\n$ 350,345,139.90 \r\n$ 798,306,374.22 43,493,399.60 23,642,629.32 25,042,987.70 28,722,471.99 \r\n$ 919,207,862.83 \r\n \r\nJune 30, 2003 \r\n$ 124,563,867.96 780,675,509.51 59,027,705.56 \r\n$ 964,267,083.03 \r\n$ 75,141,977.25 75,098,430.74 \r\n$ 150,240,407.99 \r\n$ 716,164,610.33 43,493,399.60 17,862,656.37 36,506,008.74 \r\n$ 814,026,675.04 \r\n \r\nThe total assets of the Institute increased by approximately $305.3 million, due primarily to the addition of the Technology Square complex, the Ford Environmental Science and Technology Building, and a new Campus Recreation Center. Further review of the Statement of Net Assets indicates that approximately $28.7 million in unrestricted net assets and approximately $48.7 million in restricted net assets are available for future operations. \r\n \r\nThe total liabilities for the year increased by approximately $200.1 million. The primary reasons for the increase was the incurrence of approximately $187.4 million in lease obligations associated with the acquisition of Technology Square and the Campus Recreation Center. The combination of the increase in total assets and the increase in total liabilities yields an increase in total net assets of approximately $105.2 million from the prior year. \r\n \r\n- 11 - \r\n \r\n Statement ofRevenues, Expenses and Changes in Net Assets \r\n \r\nChanges in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received, both operating and nonoperating, the expenses paid, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the Institute. Generally speaking, operating revenues are received for providing goods and services, and operating expenses are those incurred to acquire or produce the goods and services provided in return for the operating revenues. Nonoperating revenues are revenues received for which goods and services are not provided. For example, state appropriations are nonoperating because they are provided by the Georgia Legislature without the Legislature directly receiving commensurate goods and services for those revenues. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Revenues, Expenses and Changes in Net Assets as of June 30, 2003 and June 30, 2004: \r\n \r\nStatement of Revenues, Expenses and Changes in Net Assets, Condensed \r\n \r\nJune 30, 2004 \r\n \r\nOperating Revenues Operating Expenses \r\n \r\n$ 565,567,339.32 780,468,418.90 \r\n \r\nOperating Loss \r\n \r\n$ -214,901,079.58 \r\n \r\nNonoperating Revenues and Expenses \r\n \r\n203,871,395.37 \r\n \r\nIncome (Loss) Before Other Revenues, Expenses, Gains or Losses \r\n \r\n$ -11,029,684.21 \r\n \r\nOther Revenues, Expenses, Gains or Losses Extraordinary Item \r\n \r\n140,822,362.39 \r\n \r\nIncrease (Decrease) in Net Assets \r\n \r\n$ 129,792,678.18 \r\n \r\nNet Assets at Beginning of Year, as Originally Reported \r\n \r\n$ 814,026,675.04 \r\n \r\nPrior Period Adjustment \r\n \r\n-24,611,490.39 \r\n \r\nNet Assets at Beginning of Year Restated \r\n \r\n$ 789,415,184.65 \r\n \r\nNet Assets at End of Year \r\n \r\n$ 919,207,862.83 \r\n \r\nJune 30, 2003 $ 501,290,563.05 \r\n756,425,197.83 $ -255, 134,634.78 \r\n228,933,196.57 \r\n$ -26,201,43 8.21 -4,384, 741.33 -38,524,309.04 \r\n$ -69,110,488.58 \r\n$ 855,896,633.72 27,240,529.90 \r\n$ 883,137,163.62 $ 814,026,675.04 \r\n \r\nThe Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year. Total revenues (operating, nonoperating, and other) for the year ended June 30, 2004 were approximately $922 million, up approximately $232.6 million from the prior year total of approximately $689.4 million. The increase in revenue can be attributed primarily to growth in Research Grants and Contracts and Capital Grants and Gifts. Revenue generated by Research Grants and Contracts increased by approximately $45 million, including approximately $37.2 million in Federal grants. Capital Grants and Gifts increased by approximately $137.5 million, \r\n \r\n- 111 - \r\n \r\n including gifts of the Ford Environmental Science and Technology Building valued at approximately $57 million, the Biomedical Engineering Building valued at approximately $23 million, and the Research Administration Building valued at approximately $5 million. Sales, Services and Other Revenues also reflected significant increases over the previous year; however, this is due mainly to the approximately $38.5 million transfer of the State Data Research Center to the Georgia Department of Education in fiscal year 2003. This transfer was an extraordinary item reported in last year's financial statements, and it significantly reduced prior year revenue. \r\nThe graph below displays a comparative view of the sources of revenue for the Institute for the current and prior year: \r\n \r\n$600 $500 $400 $300 \r\n \r\nGeorgia Institute of Technology Revenue \u0026 Extraordinary Item (dollars in millions) \r\n \r\n FY 2004 $922 \r\n \r\n FY 2003 $689.4 \r\n \r\n$100 $0 \r\n \r\nTuition and Fees \r\n \r\nGifts, Grants, and Contracts \r\n \r\nSales, Services, Other State Appropriations and Extraordinary Item \r\n \r\nTotal operating expenses for the year were approximately $780.5 million, an increase of expenses of approximately $24.1 million but still well under the revenue reported. The graph below illustrates that the majority of increased expenses occurred in Salaries and Benefits. \r\n \r\n- IV - \r\n \r\n Georgia Institute of Technology Operating Expenses by Object of Expenditure Classification \r\n(dollars in millions) \r\n FY 2004 $780.5  FY 2003 $756.4 \r\n \r\nSalaries and Benefits Travel, Supplies, and Other \r\n \r\nDepreciation \r\n \r\nUtilities \r\n \r\nScholarships and Fellowships \r\n \r\nThe functional classification graph below shows continued emphasis on Instruction, Research, and Public Service compared to minimal growth in support functions. \r\n \r\n$600 $500 \r\n \r\nGeorgia Institute of Technology Expenses by Functional Classification \r\n(dollars in millions) \r\n FY 2004 $780.5  FY 2003 $756.4 \r\n \r\n$300 \r\n$200 \r\n$100 \r\n$0 \r\nInstruction, Research, and Public Service \r\n \r\nAcademic, Student and Institutional \r\nSupport \r\n \r\nOperations and Maintenance of \r\nPlant \r\n \r\nAuxiliary Enterprises \r\n \r\nScholarships and Unallocated \r\n \r\nFellowships \r\n \r\nDepreciation \r\n \r\n- V- \r\n \r\n Statement ofCash Flows \r\n \r\nThe final statement presented by the Georgia Institute of Technology is the Statement of Cash Flows. This statement presents detailed information about the cash activity of the Institute during the year. The statement is divided into five parts. The first section deals with operating cash flows and shows the net cash used by the operating activities. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. \r\n \r\nCash Flows for the Years Ended June 30, 2004 and June 30, 2003, Condensed \r\n \r\nJune 30, 2004 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities \r\n \r\n$ -169,613,293.86 211,824,207.23 -36,593,637.31 3,512,389.18 \r\n \r\nNet Change in Cash Cash, Beginning of Year \r\n \r\n$ 9,129,665.24 52.188,006. 76 \r\n \r\nCash, End of Year \r\n \r\n$ 61,317,672.00 \r\n \r\nJune 30, 2003 \r\n$ -218,932.673.63 197,798,469.76 -48, 706,088.24 7,139,972.42 \r\n$ -62,700,319.69 114,888,326.45 \r\n$ 52,188,006.76 \r\n \r\nCapital Assets \r\n \r\nThe Institute is continuing an aggressive capital construction program. Major additions in the current year include the Ford Environmental Science and Technology Building, the Campus Recreation Center, and a collection of new buildings known as Technology Square. Included in the Technology Square complex are the Global Learning Center, the College of Management, the Georgia Tech Bookstore, the Economic Development Building, and a parking deck. The total net value of the Capital Asset additions in fiscal year 2004 was over $313 million. \r\n \r\nFor additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the Notes to the Financial Statements. \r\n \r\nLong-Term Debt \r\n \r\nGeorgia Institute of Technology had a total Long-Term Debt of $294,382,928.54 of which $19,894,972.09 was reflected as current liability at June 30, 2004. \r\n \r\nFor additional information concerning Long-Term Debt see Notes 1 and 8 in the Notes to the Financial Statements. \r\n \r\n- VI - \r\n \r\n Component Units \r\nIn compliance with GASB Statement No. 39, Georgia Tech has included the financial statements and notes for all required component units for fiscal year 2004. These units are: Georgia Tech Foundation, Inc., Georgia Tech Athletic Association, Georgia Tech Research Corporation, Georgia Tech Facilities, Inc., and Georgia Tech Alumni Association. Significant investment and long-term liabilities balances for these organizations are as follows: \r\nGeorgia Tech Foundation, Inc. holds investments of approximately $881.3 million, of which approximately $271.4 million is the corpus of the endowment. The Foundation has three bond issues outstanding with balances totaling approximately $224,312,000 (net of discounts). \r\nGeorgia Tech Athletic Association holds investments of approximately $52.3 million. The Association has outstanding long-term debt, net of discounts and premiums, totaling approximately $112,536,503. \r\nGeorgia Tech Facilities, Inc. holds investments of approximately $112.5 million. Facilities, Inc. has four bond issues outstanding with balances totaling approximately $175,840,000. \r\nFurther details are available in Note 1, Summary of Significant Accounts Policies and Note 16, Component Units. \r\nEconomic Outlook \r\nThe Institute's overall financial position is strong. However, reductions in state funding continue to have a negative impact. State appropriations in fiscal year 2004 were approximately $207.8 million, down from approximately $219.2 million in fiscal year 2003. To compensate, the Institute continues to look for ways to reduce costs and generate local revenue to maintain positive momentum and leadership. \r\nThe Institute's research program continues to be a strong source of growth. Sponsored research revenue increased 14% in the current year to a total of approximately $306 million. The success of the Institute's research program is mirrored by the success of its nationally ranked academic programs, which continue to attract outstanding students. \r\nManagement at the Institute will remain watchful in the coming year and be prepared to react to changes in the state and national economy. \r\nRobert K. Thompson Senior Vice President Administration and Finance \r\n- vu - \r\n \r\n BASIC FINANCIAL STATEMENTS - 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30 2004 \r\n \r\nCurrent Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net Federal Financial Assistance Other Notes Receivable Pledges Receivable Prepaid Items Inventories Other Assets \r\nTotal Current Assets \r\nNoncurrent Assets Cash and Cash Equivalents Investments Accounts Receivable Leases Receivable Notes Receivable, Net Pledges Receivable Capital Assets, Net Other Assets \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Contracts Payable Deposits Deferred Revenue Salaries Payable Other Liabilities Funds Held for Others Capital Leases Compensated Absences Current Portion of Long-Term Debt \r\nTotal Current Liabilities \r\nNoncurrent Liabilities Compensated Absences Long-Term Liabilities \r\nTotal Noncurrent Liabilities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets, Net of Related Debt Restricted for: \r\nNonexpendable Expendable Capital Projects Unrestricted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of this statement. \r\n-2 - \r\n \r\nPRIMARY GOVERNMENT \r\n \r\nGEORGIA TECH ATHLETIC \r\nASSOCIATION \r\n \r\n$ \r\n \r\n61,299,367.32 $ \r\n \r\n16,410,420.00 \r\n \r\n8,166,762.32 \r\n \r\n26,479,003.30 41,207,987.27 \r\n \r\n1,174,280.00 \r\n \r\n4,064,377.00 490,847.82 \r\n \r\n4,758,735.00 557,637.00 \r\n502 927.00 \r\n \r\n$ \r\n \r\n141 708 345.03 $ \r\n \r\n23 403 999.00 \r\n \r\n$ \r\n \r\n18,304.68 \r\n \r\n54,048,810.84 $ \r\n \r\n52,270,100.00 \r\n \r\n7,265,791.65 1,066,511,750.53 \r\n \r\n11,993,013.00 109,018,560.00 \r\n3 079 885.00 \r\n \r\n$ 1 127 844 657.70 $ 176 361 558.00 \r\n \r\n$ 1,269,553,002.73 $ 199,765,557.00 \r\n \r\n$ \r\n \r\n5,518,974.14 $ \r\n \r\n3,829,152.00 \r\n \r\n375,911.49 \r\n \r\n17,427,501.71 \r\n \r\n5,309,930.00 \r\n \r\n25,795,926.19 \r\n \r\n745,783.00 \r\n \r\n461,269.94 \r\n \r\n1,203,358.85 \r\n \r\n5,179,269.04 \r\n \r\n4,536,602.20 \r\n \r\n15,358,369.89 \r\n \r\n468,764.00 \r\n \r\n1713481.00 \r\n \r\n$ \r\n \r\n75 857 183.45 $ \r\n \r\n12 067 110.00 \r\n \r\n$ \r\n \r\n10,819,182.34 \r\n \r\n263 668 774.11 $ 110 823 022.00 \r\n \r\n$ \r\n \r\n274 487 956.45 $ 110,823,022.00 \r\n \r\n$ \r\n \r\n350,345,139.90 $ 122,890,132.00 \r\n \r\n$ \r\n \r\n798,306,374.22 $ \r\n \r\n1,443,218.00 \r\n \r\n43,493,399.60 23,642,629.32 25,042,987.70 28 722 471.99 \r\n \r\n11,958,903.00 41,236,048.00 \r\n22,237,256.00 \r\n \r\n$ \r\n \r\n919,207,862.83 $ \r\n \r\n76,875,425.00 \r\n \r\n EXHIBIT\"A\" \r\n \r\nGEORGIA TECH ALUMNI \r\nASSOCIATION \r\n \r\nCOMPONENT UNITS \r\n \r\nGEORGIA TECH FACILITIES, INC. \r\n \r\nGEORGIA TECH FOUNDATION, INC. \r\n \r\nGEORGIA TECH RESEARCH \r\nCORPORATION \r\n \r\n$ \r\n \r\n8,992.00 $ \r\n \r\n337,000.00 $ \r\n \r\n3,043,000.00 $ \r\n \r\n31,590,389.00 \r\n \r\n9,276,000.00 \r\n \r\n1,456,300.00 \r\n \r\n74,770.00 \r\n27,310.00 21,741.00 \r\n \r\n685,000.00 \r\n \r\n3,435,246.00 4,172,573.00 6,222,500.00 \r\n \r\n24,431,450.00 2,227.00 \r\n \r\n$ \r\n \r\n132813.00 $ \r\n \r\n1,022,000.00 $ \r\n \r\n26 149 319.00 $ \r\n \r\n57 480 366.00 \r\n \r\n$ \r\n \r\n1,581,145.00 $ 112,490,000.00 $ \r\n \r\n10,803,000.00 \r\n \r\n30,018,000.00 \r\n \r\n583,764.00 \r\n \r\n37,002,000.00 4 142 000.00 \r\n \r\n881,268,000.00 10,962,512.21 \r\n182,245,285.79 2,230,427.00 5,562,456.00 \r\n44,681,000.00 $ 8 284 000 00 \r\n \r\n3,048,471.00 27 912 384.00 \r\n \r\n$ \r\n \r\n2 164 909.00 $ 194 455 000.00 $ \r\n \r\n1,135,233,681.00 $ \r\n \r\n30 960 855.00 \r\n \r\n$ \r\n \r\n2,297,722.00 $ 195,477,000.00 $ \r\n \r\n1,161,383,000.00 $ \r\n \r\n88,441,221.00 \r\n \r\n$ \r\n \r\n1,033,349.00 $ \r\n \r\n6,729,000.00 $ \r\n \r\n468,433.00 300,000.00 \r\n \r\n685 000.00 \r\n \r\n$ \r\n \r\n1 801 782.00 $ \r\n \r\n7 414 000.00 $ \r\n \r\n13,148,292.00 $ \r\n \r\n30,235,433.00 \r\n \r\n23,187,971.00 \r\n \r\n26,276,925.00 \r\n \r\n260,557.00 3 940 633.00 \r\n40 537 453.00 $ \r\n \r\n56,512,358.00 \r\n \r\n$ 177 211 000.00 $ \r\n \r\n$ 177 211 000.00 $ \r\n \r\n$ \r\n \r\n1,801,782.00 $ 184,625,000.00 $ \r\n \r\n308 027 547.00 308 027 547.00 348,565,000.00 $ \r\n \r\n56,512,358.00 \r\n \r\n$ \r\n \r\n583,763.00 $ \r\n \r\n10,073,000.00 $ \r\n \r\n4,489,148.00 $ \r\n \r\n3,048,471.00 \r\n \r\n-87 823.00 \r\n \r\n1,162,000.00 -383 000.00 \r\n \r\n278,048,767.00 247,591,719.00 \r\n282,688,366.00 \r\n \r\n28,880,392.00 \r\n \r\n$ \r\n \r\n495,940.00 $ \r\n \r\n10,852,000.00 $ \r\n \r\n812,818,000.00 $ \r\n \r\n31,928,863.00 \r\n \r\n-3- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES. EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENDED JUNE 30 2004 \r\n \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nGrants and Contracts Federal State and Local Nongovernmental \r\nSales and Services of Educational Departments Auxiliary Enterprises \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues \r\nTotal Operating Revenues \r\nOPERATING EXPENSES \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Other Operating Expense Payments to or on the Behalf of Georgia Institute of Technology \r\nTotal Operating Expenses \r\nOperating Income (Loss) \r\nNONOPERATING REVENUES (EXPENSES) \r\nState Appropriations Gifts Interest and Other Investment Income Interest Expense (Capital Assets) Other Nonoperating Expense Other Nonoperating Revenues \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before Other Revenues, Expenses, Gains, or Losses \r\nCapital Grants and Gifts State Nongovernmental \r\nTotal Other Revenues \r\nIncrease (Decrease) in Net Assets \r\nNet Assets Net Assets - Beginning of Year, as Originally Reported Prior Period Adjustments - See Note 1 \r\nNet Assets - Beginning of Year, Restated \r\nNet Assets - End of Year \r\nThe notes to the financial statements are an integral part of this statement. \r\n-4 - \r\n \r\nPRIMARY GOVERNMENT \r\n \r\nGEORGIA TECH ATHLETIC \r\nASSOCIATION \r\n \r\n$ 114,880,469.14 -17,831,981.18 \r\n266,014,691.50 13,209,756.87 \r\n100,062,164.27 14,566,614.90 \r\n29,349,295.58 988,181.08 \r\n13,197,812.49 9,381,792.17 4,907,475.95 1,949,466.14 1,681,990.21 \r\n13,209,610.20 $ \r\n$ 565,567,339.32 $ \r\n \r\n23,892,664.00 23,892,664.00 \r\n \r\n$ 200,798,351.06 217,567,088.37 $ 81,206,902.46 2,424,231.95 12,990,735.14 13,177,665.00 16,937,901.40 185,594,823.11 49,770,720.41 \r\n \r\n11,074,698.00 2,110,679.00 145,019.00 2,050,774.00 5,699,284.00 854,265.00 10,584,822.00 3,710,886.00 \r\n \r\n$ 780,468,418.90 $ $ -214,901,079.58 $ \r\n \r\n36,230,427.00 -12,337,763.00 \r\n \r\n$ 207,830,560.00 2,609,886.52 $ 1,098,305.45 \r\n-11,761,466.72 \r\n4,094,110.12 \r\n$ 203 871 395.37 $ \r\n$ -11,029,684.21 $ \r\n \r\n11,496,191.00 8,554,175.00 -5,209,019.00 \r\n14,841,347.00 2,503,584.00 \r\n \r\n$ \r\n \r\n77,482,395.72 \r\n \r\n63,339,966.67 \r\n \r\n$ 140,822,362.39 \r\n \r\n$ 129,792,678.18 $ \r\n \r\n2,503,584.00 \r\n \r\n$ 814,026,675.04 $ -24,611 490.39 \r\n$ 789,415,184.65 $ \r\n \r\n74,371,841.00 74,371,841.00 \r\n \r\n$ 919,207,862.83 $ 76,875,425.00 \r\n \r\n EXHIBIT\"B\" \r\n \r\nGEORGIA TECH ALUMNI \r\nASSOCIATION \r\n \r\nCOMPONENT UNITS \r\n \r\nGEORGIA TECH FACILITIES, INC. \r\n \r\nGEORGIA TECH FOUNDATION, INC. \r\n \r\nGEORGIA TECH RESEARCH \r\nCORPORATION \r\n \r\n$ \r\n \r\n5,533,856.00 $ \r\n \r\n2,457,000.00 $ \r\n \r\n$ \r\n \r\n5,533,856.00 $ \r\n \r\n2,457,000.00 $ \r\n \r\n12,974,000.00 $ 305,659,043.00 12 974,000.00 $ 305,659,043.00 \r\n \r\n$ \r\n \r\n2,677,396.00 \r\n \r\n636,966.00 \r\n \r\n24,906.00 \r\n \r\n231,047.00 \r\n \r\n108,101.00 \r\n \r\n1,849,676.00 137,483.00 $ 4,256.00 \r\n \r\n$ \r\n166,000.00 300,000.00 \r\n \r\n$ \r\n \r\n5,669,831.00 $ \r\n \r\n466,000.00 $ \r\n \r\n$ \r\n \r\n-135,975.00 $ \r\n \r\n1,991,000.00 $ \r\n \r\n1,804,929.00 391,300.00 \r\n \r\n5,058.00 5,356,565.00 2,295,827.00 $ 92,070,321.00 \r\n \r\n615,200.00 7,064,798.00 297,210,831.00 \r\n \r\n101,924,000.00 $ 304,890,829.00 \r\n \r\n-88,950,000.00 $ \r\n \r\n768,214.00 \r\n \r\n$ \r\n \r\n41,949,000.00 \r\n \r\n$ \r\n \r\n403,573.00 $ \r\n \r\n490,000.00 \r\n \r\n123,573,000.00 $ \r\n \r\n54,624.00 \r\n \r\n-4,029,000.00 \r\n \r\n-28,798,000.00 \r\n \r\n15,695,000.00 \r\n \r\n945 000.00 \r\n \r\n$ \r\n \r\n403,573.00 $ -32,337,000.00 $ \r\n \r\n181,217,000.00 $ \r\n \r\n999,624.00 \r\n \r\n$ \r\n \r\n267,598.00 $ -30,346,000.00 $ \r\n \r\n92,267,000.00 $ \r\n \r\n1,767,838.00 \r\n \r\n$ \r\n \r\n267,598.00 $ -30,346,000.00 $ \r\n \r\n92,267 000.00 $ \r\n \r\n1 767 838.00 \r\n \r\n$ \r\n \r\n228,342.00 $ 41,198,000.00 $ \r\n \r\n720,551,000.00 $ 30,161,025.00 \r\n \r\n$ \r\n \r\n228,342.00 $ 41,198,000.00 $ \r\n \r\n720,551,000.00 $ 30,161,025.00 \r\n \r\n$ \r\n \r\n495,940.00 $ 10,852,000.00 $ \r\n \r\n812,818,000.00 $ 31,928,863.00 \r\n \r\n-5 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2004 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used) by Operating Activities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes \r\nNet Cash Flows Provided (Used) by Noncapital Financing Activities \r\nCASH 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 Lease Interest Paid on Capital Debt and Lease \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by Investing Activities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents - Beginning of Year \r\nCash and Cash Equivalents - End of Year \r\n \r\nEXHIBIT\"C\" \r\n$ 103,388,378.51 \r\n359,879,933.14 15,435,357.62 \r\n-297,037,578.05 -417,176,447.93 \r\n-13,177,665.00 -5,086,044.10 5,022,059.43 \r\n27,658,519.01 1,070,613.74 \r\n13,394,089.14 9,417,016.68 4,909,730.20 1,949,466.14 1,786,989.70 18,952,287.91 \r\n$ -169,613,293.86 \r\n$ 207,830,560.00 \r\n1,377,146.47 2,616,500.76 \r\n$ 211,824,207.23 \r\n$ 32,156,340.68 91,523.12 \r\n-52,949,681.10 -4, 130,353.29 \r\n-11 761,466.72 \r\n$ -36,593,637.31 \r\n$ 10,809,975.45 834,176.05 \r\n-8,131,762.32 \r\n$ _~3,_51_2~,38_9_.1_8 \r\n$ _ _.:;9-'--1',=29==66:;.;:5=.2'-'-4 $ 52,188,006.76 \r\n$ 61,317,672.00 \r\n \r\n-6 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2004 \r\n \r\nEXHIBIT\"C\" \r\n \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivables, Net Inventories Prepaid Items Notes Receivables Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\n \r\n$ -214,901,079.58 \r\n49,770,720.41 \r\n-9,201,269.30 23,887.44 \r\n-226,457.89 -60,626.62 \r\n2,190,207.32 1,161,679.35 \r\n933,751.78 695,893.23 \r\n \r\nNet Cash Provided (Used) by Operating Activities \r\n \r\n$ -169,613,293.86 \r\n \r\nNONCASH ACTIVITY NONCAPITAL FINANCING, CAPITAL AND RELATED FINANCING TRANSACTIONS AND INVESTING ACTIVITIES Fixed Assets Acquired by Incurring Capital Lease Obligations Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts Change in Fair Market Value of Investments Recognized as a Component of Interest Income \r\n \r\n$ 187,449,830.42 \r\n \r\n$ -108,666,021. 71 \r\n \r\n$ \r\n \r\n264,129.40 \r\n \r\nThe notes to the financial statements are an integral part of this statement. -7- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS The Georgia Institute of Technology serves the state, national, and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation and the world. \r\nREPORTING ENTITY The Georgia Institute of Technology is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of the Georgia Institute of Technology as a separate reporting entity. \r\nThe 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 Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. \r\nThe Board of Regents of the University System of Georgia (and thus the Georgia Institute of Technology) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for Foundations and affiliated organizations that qualify as component units in the Annual Financial Report for the institution. These statements (Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets) are reported discretely in the Institute's financial statements. For fiscal year 2004, Georgia Institute of Technology is reporting activity for the following component units: \r\n Georgia Tech Foundation, Inc.  Georgia Tech Athletic Association and its subsidiary Alexander-Tharpe Fund  Georgia Tech Facilities, Inc.  Georgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research \r\nCorporation  Georgia Tech Alumni Association \r\nSee Note 16 for additional component unit disclosures. \r\n-9 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Institute also adopted GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. \r\nBASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. \r\nThe Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. Georgia Tech has elected to not apply FASB pronouncements issued after the applicable date. \r\nRESTATEMENT OF LONG-TERM LIABILITIES AND NET ASSETS While improving internal controls for capital asset accounting and while preparing to implement GASB Statement Number 39 (Determining Whether Certain Organizations are Component Units), capital asset holdings of the Institute and its component units were reviewed to insure that they were correctly valued and not mutually claimed. During this review, three adjustments to Institute asset totals were identified that must be corrected by a restatement of beginning net assets, long-term liabilities, and accumulated depreciation. (Note that adjustments to component unit asset totals were also identified and will be reported within the audited financial statements for these organizations for the year ended June 30, 2004.) For the Institute, the result is to decrease net capital assets by $4,236,490.39, and increase current and long-term liabilities by $20,375,000.00. Net assets decreased by $24,611,490.39 in total. Details are as follows: \r\nReduction to Capital Assets - In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute hired an appraisal firm to develop cost and accumulated depreciation totals for buildings and infrastructure. The information provided by the firm included certain \r\n \r\n- 10 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nRESTATEMENT OF LONG-TERM LIABILITIES AND NET ASSETS structures that, while situated on Institute land, belong to the Georgia Tech Athletic Association, a component unit. As a result of this correction, the Institute's capital assets were decreased by $16,899,909.34, and accumulated depreciation was reduced by $3,871,011.37. Net assets were reduced by $13,028,897.97. \r\nCorrection of Building Additions and Liabilities - In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute hired an appraisal firm to develop cost and accumulated depreciation totals for buildings and infrastructure. The information provided by the firm included the Bioengineering and Biosciences Building, which was added to Institute records as a gift, but it should have been recorded as an acquisition via a capital lease. As a result of this action, net assets have been reduced by $20,375,000.00 and current and long-term liabilities have been increased by the same amount. \r\nCorrection of Equipment and Capital Lease Additions - In preparing to implement GASB Statement Number 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities) the Institute implemented new accounting controls and procedures to report equipment procurements both as an expense (for budgetary reporting) and an asset (for GAAP financial reporting). As a result of this action, net assets and capital assets have been increased by $8,792,407.58. \r\nCASH 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. \r\nSHORT-TERM INVESTMENTS Short-Term Investments consist of investments between 90 days and 13 months. These would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nINVESTMENTS The Institute accounts for its investments at fair market value in accordance with GASB Statement No. 31 (Accounting and Financial Reporting for Certain Investments andfor External Investment Pools). Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statements of Revenues, Expenses and Changes in Net Assets. The Board of Regents Total Return Fund is included under Investments. \r\n \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nACCOUNTS RECEIVABLE Accounts receivable consist of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\nINVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. \r\nResale Inventories are valued at cost using the average-cost basis. \r\nNONCURRENT 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. \r\nCAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful life of the asset, generally 40 to 50 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. \r\nTo obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the University 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, the payment of which the full faith, credit and taxing power of the State are pledged. \r\n \r\n- 12 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCAPITAL ASSETS Effective July 1, 2001, the GSFIC retains construction in progress on its books throughout the construction period then transfers the entire project to the Georgia Institute of Technology when complete. For the year ended June 30, 2004, GSFIC transferred capital additions valued at $57,385,877.59 to the Georgia Institute of Technology. \r\nDEPOSITS Deposits consist of funds placed with the Institute to reserve housing assignments in an Institute residence hall, Institute controlled funds held for the payment of employee benefits, and other various activities at the Institute. \r\nDEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent fiscal year. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. \r\nCOMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued Compensated Absences payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. The Georgia Institute of Technology had accrued liability for compensated absences in the amount of $25,481,659.00 as of July 1, 2003. For fiscal year 2004, $16,393,829.76 was earned in compensated absences and employees were paid $15,697,936.53, resulting in a net increase of $695,893.23. The ending balance as of June 30, 2004 in accrued liability for compensated absences was $26,177,552.23. Compensated absences include a current liability of $15,358,369.89. \r\nNONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\nNET ASSETS The Institute's net assets are classified as follows: \r\nInvested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. \r\n- 13 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. \r\n \r\nRestricted net assets - expendable: Restricted expendable net assets represent resources for which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\n \r\nThe Institute's Expendable Restricted Net Assets include the following: \r\n \r\nJune 30, 2004 \r\n \r\nRestricted - E\u0026G and Other Organized Activities Federal Loans Institutional Loans Quasi- Endowments \r\n \r\n$ 5,594,644.91 6,478,233.06 3,307,969.69 8,261,781.66 \r\n \r\nTotal Restricted Expendable \r\n \r\n$23.642.629.32 \r\n \r\nRestricted net assets - expendable - Capital Projects: Restricted expendable net assets for capital projects represent resources for which the Institute is legally or contractually obligated to spend for capital projects in accordance with restrictions imposed by external third parties. \r\n \r\nUnrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, sales and services of educational departments and auxiliary enterprises. These resources are used to fund the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. At June 30, 2004, there was no surplus balance to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\n \r\nThe Institute's Unrestricted Net Assets includes the following items which are quasi-restricted by management: \r\n \r\n- 14 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS \r\n \r\nJune 30, 2004 \r\n \r\nR\u0026RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted \r\n \r\n$13,346,746.30 19,094,986.08 502,096.88 -4,221,357.27 \r\n \r\nTotal Unrestricted Net Assets \r\n \r\n$28.722,471.99 \r\n \r\nWhen an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense toward unrestricted resources, and then toward restricted resources. \r\n \r\nINCOME TAXES The Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\n \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenue as either operating or nonoperating in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: \r\n \r\nOperating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. \r\n \r\nNonoperating revenue: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9 (Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting), and GASB No. 34, such as state appropriations and investment income. \r\n \r\nSCHOLARSHIP ALLOWANCES Student tuition and fee revenue, and certain other revenue from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell \r\n \r\n- 15 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nSCHOLARSHIP ALLOWANCES grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\nSTATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia (and thus Georgia Institute of Technology) 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: \r\n1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia. \r\n2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. \r\n3. 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. \r\n4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. \r\n5. 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, or 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. \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. \r\nAs authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia (and thus Georgia Institute of Technology), the option of exempting demand deposits from the collateral requirements. \r\n \r\n- 16 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nSTATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 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. \r\n \r\nCATEGORIZATION OF DEPOSITS The Institute's cash deposits are categorized by risk as follows: \r\n \r\nCategory 1 - Amounts covered by depository insurance or collateralized with securities (at fair market value) held by the entity or by its agent in the entity's name. \r\n \r\nCategory 2 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution's trust department or agent in the entity's name. \r\n \r\nCategory 3 - Amounts collateralized with securities (at fair market value) held by the pledging financial institution, or by its trust department or agent but not in the entity's name, and amounts uncollateralized. \r\n \r\nGeorgia Institute of Technology At June 30, 2004, the Institute's cash deposits were as follows: \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\nCash Deposits Investment Portfolio \r\nAccounts \r\n \r\n$ 9,508,944.48 $16,517,467.34 $ 204,967.07 $ \r\n \r\n18,304.68 \r\n \r\n18,304.68 \r\n \r\n18,304.68 \r\n \r\n0.00 $16,312,500.27 \r\n \r\nTotal Cash Deposits $ 2 527,242 16 $16,535,712 02 $ 223,2:ZI :Z5 $ \r\n \r\n000 $16 312 500 2:Z \r\n \r\nComponent Units At June 30, 2004, Georgia Tech Athletic Association's cash deposits were as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n$16 410 420 00 $ 5,353,511 00 $ 100,000.00 $====\"'0,,,,0\"\"0 $ 5 253 511 00 \r\n \r\nAt June 30, 2004, Georgia Tech Alumni Association's cash deposits were as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\n$ 8 222 00 $ 71,25:Z 00 $ \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n71,25:Z 00 $ \r\n \r\nooo $====\"o\"\"'.o==o \r\n \r\n- 17 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nCATEGORIZATION OF DEPOSITS \r\n \r\nComponent Units At June 30, 2004, Georgia Tech Facilities, Inc.'s cash deposits were as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n$ 337,000.00 $ 5,421.522 93 $ 100.000 00 $==~0~.0~0 $ 5,321.522 93 \r\n \r\nAt June 30, 2004, Georgia Tech Foundation, Inc.'s cash deposits were as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n$ 3 043.000 00 $ 3 51149838 $ 200 000 00 $'==~0~0~0 $ 3,311.498 38 \r\n \r\nAt June 30, 2004, Georgia Tech Research Corporation's cash deposits were as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n$31 590,389 00 $31,797 970 08 $ 200 000 00 $31.225.000.00 $ 372,970.08 \r\n \r\nCATEGORIZATION OF INVESTMENTS The Institute's investments are categorized as to credit risk within the three categories described below: \r\n \r\nCategory 1 - Insured or registered, with securities held by the entity or its agent in the entity's name. \r\n \r\nCategory 2 - Uninsured and umegistered, with securities held by the counter party's trust department or agent in the entity's name. \r\n \r\nCategory 3 - Uninsured and umegistered, with securities held by the counter party, or by its trust department or agent, but not in the entity's name. \r\n \r\n- 18 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nCATEGORIZATION OF INVESTMENTS \r\n \r\nGeorgia Institute of Technology At June 30, 2004, the Institute's investments consisted of the following: \r\n \r\nTyne of Investments \r\n \r\nCommon Stock \r\n \r\n$ \r\n \r\nCorporate Bonds \r\n \r\nU. S. Government Securities and \r\n \r\nCorporate Obligations \r\n \r\nTotals \r\n \r\n$ \r\n \r\nInvestments Not Subject to Categorizations: Board of Regents Short-Term Fund Total Return Fund Real Estate Office of Treasury and Fiscal Services Georgia Extended Asset Pool Georgia Fund 1 \r\n \r\nTotal Investments \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\nCarrying Amount \r\n \r\n76,532.91 \r\n \r\n$ 1,071,057.16 $ 1,147,590.07 \r\n \r\n$ 2,763,022.20 \r\n \r\n2,763,022.20 \r\n \r\n1311.81 9,335,844.53 \r\n \r\n631,330.30 9,968,486.64 \r\n \r\n77 84412 $12 098 866.73 $ 1,702,387.46 $ 13,879,098.91 \r\n \r\n24,920,703.91 40,168,253.82 \r\n1,458.11 \r\n8,131,762.32 26,838,913.93 \r\n$113,940.191.00 \r\n \r\nFunds invested in an investment pool managed by another governmental entity are not required to be categorized since the Institute did not own any specific, identifiable investment securities of the pool. \r\n \r\nComponent Units At June 30, 2004, Georgia Tech Athletic Association's investments consisted of the following: \r\n \r\nType of Investments \r\n \r\nInvestments Not Categorized as to Credit Risk: Bonds, Stocks, Options and Other Securities \r\n \r\n$ 52,270.100.00 \r\n \r\nAt June 30, 2004, Georgia Tech Alumni Association's investments consisted of the following: \r\n \r\nType of Investments \r\n \r\nInvestments Not Categorized as to Credit Risk: Investment Portfolio Account Mutual Funds \r\n \r\n$ 1,581,145.00 \r\n \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nCATEGORIZATION OF INVESTMENTS \r\n \r\nComponent Units At June 30, 2004, Georgia Tech Facilities, Inc.'s investments consisted of the following: \r\n \r\nType of Investments \r\n \r\nInvestments Not Categorized as to Credit Risk: U.S. Government Securities \r\n \r\n$112,490,000.00 \r\n \r\nAt June 30, 2004, Georgia Tech Foundation, Inc.'s investments consisted of the following: \r\n \r\nType of Investments \r\n \r\nInvestments Not Categorized as to Credit Risk: Bonds, Stocks, Options and Other Securities Partnership Interests Real Estate \r\n \r\n$710,715,000.00 174,711,000.00 5,118,000.00 \r\n \r\nTotal Investments \r\n \r\n$890,544,000.00 \r\n \r\nAt June 30, 2004, Georgia Tech Research Corporation's investments consisted of the following: \r\n \r\nType of Investments \r\n \r\nInvestments Not Categorized as to Credit Risk: Stocks, Warrants and Other Securities \r\n \r\n$ 1,456,300.00 \r\n \r\nNOTE 3: ACCOUNTS RECEIVABLE \r\n \r\nThe Institute's accounts receivable consisted of the following at June 30, 2004. \r\n \r\nStudent Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other \r\n \r\n$ 386,665.32 845,163.54 \r\n26,479,003.30 41,645,349.09 \r\n \r\nLess Allowance for Doubtful Accounts \r\n \r\n$69,356,181.25 1,669,190.68 \r\n \r\nNet Accounts Receivable \r\n \r\n$67.686.990.57 \r\n \r\n- 20 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nThe Institute's inventories consisted of the following at June 30, 2004. \r\n \r\nPhysical Plant Other \r\n \r\n$ 235,115.29 255,732.53 \r\n \r\nTotal \r\n \r\n$ 490,847.82 \r\n \r\nNOTE 5: NOTES/LOANS RECEIVABLE \r\n \r\nNotes/Loans receivable, primarily consisting of student loans made through the Federal Perkins Loan Program (the Program), comprise substantially all of the loans receivable at June 30, 2004. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2004 the allowance for uncollectible loans was $61,426.98. \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nFollowing are the changes in the Institute's capital assets for the year ended June 30, 2004: \r\n \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE6: CAPITAL ASSETS \r\n \r\nBeginning Balance July I, 2003 (Restated) \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30, 2004 \r\n \r\nCapital Assets, Not Being Depreciated: Land Construction Work-In-Progress Capitalized Collections \r\n \r\n$ 29,996,371.64 $ 12,941,263.33 \r\n \r\n$ 42,937,634.97 \r\n \r\n26,278,763.59 62,786,50 I.74 $ 21,344,305.84 \r\n \r\n67,720,959.49 \r\n \r\n3,398,775.00 \r\n \r\n3,398,775.00 \r\n \r\nTotal Capital Assets Not Being Depreciated \r\n \r\n$ 59,673,910.23 $ 75,727,765.07 $ 21,344,305.84 $ 114,057,369.46 \r\n \r\nCapital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections \r\n \r\n$ 37,211,206.29 626,907,045.24 13,893,087.72 281,373,262.01 67,186,386.11 69,969,004.39 \r\n \r\n$ 5,197,780.68 245,280,402.04 308,200.40 31,110,782.74 138,668.77 5,224,034.00 \r\n \r\n$ 2,322,573.74 \r\n17,366,189.00 443,800.58 16,110.00 \r\n \r\n$ 42,408,986.97 869,864,873.54 14,201,288.12 295,117,855.75 66,881,254.30 75,176,928.39 \r\n \r\nTotal Assets Being Depreciated \r\n \r\n$1,096,539,991.76 $287,259,868.63 $ 20,148,673.32 $1,363,651,187.07 \r\n \r\nLess: Accumulated Depreciation: Infrastructure Buildings and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections \r\n \r\n$ 6,884,852.31 148,367,187.46 5,949,142.26 166,267,915.88 3,608,685.29 48,697,099.77 \r\n \r\n$ 839,979.60 16,296,593.34 286,037.10 \r\n25,335,106.86 2,988,282.51 4,024,721.00 \r\n \r\n$ 1,936,366.37 \r\n16,223,355.86 172,965.15 16,110.00 \r\n \r\n$ 7,724,831.91 162,727,414.43 6,235,179.36 175,379,666.88 6,424,002.65 52,705,710.77 \r\n \r\nTotal Accumulated Depreciation \r\n \r\n$ 379,774,882.97 $ 49,770,720.41 $ 18,348,797.38 $ 411,196,806.00 \r\n \r\nTotal Capital Assets, Being Depreciated, \r\n \r\nNet \r\n \r\n$ 716,765,108.79 $237,489,148.22 $ 1,799,875.94 $ 952,454,381.07 \r\n \r\nCapital Assets, Net (Restated - see Note I) $ 776.439 019 02 $313 216 913 29 $ 23 144 181 :ZS $1.066.511,:Z50 53 \r\n \r\nNOTE 7: DEFERRED REVENUE \r\n \r\nDeferred revenue consisted of the following at June 30, 2004. \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\n$ 9,821,822.99 13,522,289.14 2,451,814.06 \r\n \r\nTotals \r\n \r\n$25,795,926.19 \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nThe Institute's Long-Term liability activity for the year ended June 30, 2004 was as follows: \r\n \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nLease Obligations Compensated Absences \r\nTotal \r\n \r\nBeginning Balance July I, 2003 (Restated) \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30. 2004 \r\n \r\nCurrent Portion \r\n \r\n$ 84,885,899.18 $187,449,830.42 $ 4,130,353.29 $268,205,376.31 $ 4,536,602.20 25,481,659.00 16,393,829.76 15,697,936.53 26,177,552.23 15,358,369.89 \r\n \r\n$I IO 367 558.18 $203,843.660.18 $ 19 828 289.82 $294.382.928.54 $ 19,894,972.09 \r\n \r\nNOTE 9: SIGNIFICANT COMMITMENTS \r\n \r\nGeorgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $2,110,528.79 as of June 30, 2004. This amount is not reflected in the accompanying basic financial statements. \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nGeorgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\n \r\nFuture commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: \r\n \r\nYear Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 201 9 2020 through 2024 2025 through 2029 2030 through 2034 \r\nTotal Minimum Lease Payments \r\nLess: Interest \r\nPrincipal Outstanding \r\n \r\nReal Property \r\n \r\nCapital \r\n \r\nOperating \r\n \r\nLeases \r\n \r\nLeases \r\n \r\n$ 18,508,986.60 18,511,401.15 18,573,767.78 18,713,540.81 18,843,147.46 95,818,471.14 100,696,649.79 102,366,805.54 75,397,412.19 31,125,220.97 \r\n \r\n$5,541,209.65 \r\n \r\n$498,555,403.43 $ 5,541,209.65 \r\n \r\n230,350,027.12 \r\n \r\n$268,205,376.31 \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2034. Expenses for fiscal year 2004 were $15,891,820.01 of which $11,761,466.72 represented interest. Total principal paid on capital leases was $4,130,353.29 for the fiscal year ended June 30, 2004. Interest rates range from 4 percent to 11 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2004: \r\n \r\nLand Buildings Equipment \r\n \r\n$ 11,457,418.00 270,507,880.89 \r\n1,133,251.19 \r\n \r\nTotals \r\n \r\n$283,098,550.08 \r\n \r\nCertain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices are exercisable at the expiration of the lease terms. \r\n \r\nGeorgia Institute of Technology had three capital leases with related parties in fiscal year 2004. \r\n \r\nIn November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000.00 for the Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both discretely presented component units. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2004, the remaining long-term debt obligation (principal) under the lease was $19,945,000.00, and the amount due (principal and interest) in the next fiscal year is $1,426,153.76. \r\n \r\nIn August 2001, Georgia Institute of Technology entered into a capital lease of $142,298,200.00 with the Georgia Tech Foundation, Inc. for a complex of buildings collectively named \"Technology Square\". Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2004, the remaining long-term debt obligation (principal) under the lease was $139,900,440.00, and the amount due (principal and interest) in the next fiscal year is $9,838,142.60. \r\n \r\nIn February 2001, Georgia Institute of Technology entered into a capital lease of $44,980,000.00 with the Georgia Tech Foundation, Inc. for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc. is a discretely presented component unit of the Institute. The lease term is for a 30-year period that began May 2001 and expires November 2031. The Institute did not occupy this building until October 2003 so this capital lease was not recorded on the financial statements until fiscal year 2004. At June 30, 2004, the remaining long-term debt obligation (principal) under the lease was $44,220,000.00, and the amount due (principal and interest) in the next fiscal year is $3,065,317.52. \r\n \r\n-24- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nCAPITAL LEASES Georgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $64,029,360.00 with The University Financing Foundation for the Technology Square Research Building. The lease term is for a 23year period that began June 2003 and expires June 2026. At June 30, 2004, the remaining longterm debt obligation (principal) under the lease was $63,779,827.56 and the amount due (principal and interest) in the next fiscal year is $3,888,108.54. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease. \r\nGeorgia Institute of Technology also has various capital leases for equipment with an outstanding balance at June 30, 2004 totaling $360,108.75. \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases with remaining terms of more than one year expire in various fiscal years from 2005 through 2006. 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 include real estate rentals, copiers and other small business equipment. \r\nDescription of Related Party Leases In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $14,815.50. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $177,786.00 in fiscal year 2005. \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $105,055.82. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,260,669.84 in fiscal year 2005. \r\n \r\n- 25 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nOPERATING LEASES \r\nDescription of Related Party Leases In 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $125,870.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,510,440.00 in fiscal year 2005. \r\nIn 2000, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $15,462.71. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $185,552.52 in fiscal year 2005. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $3,732.47. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $44,789.64 in fiscal year 2005. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with the Georgia Applied Technology Ventures, Inc., a related party, for office space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $65,920.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Applied Technology Ventures, Inc. $791,040.00 in fiscal year 2005. \r\nIn 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 1, Inc., a subsidiary of Georgia Applied Technology Ventures, Inc., a related party, for office and lab space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees ranging from $58,027.08 to $83,886.44 per month (Some space is leased on a month to month basis.) The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP 1, Inc. a minimum of $696,324.96 in fiscal year 2005. \r\n \r\n- 26 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nOPERATING LEASES \r\n \r\nDescription of Related Party Leases In 2003, Georgia Institute of Technology entered into a real property operating lease with VLP 2, Inc., a subsidiary of Georgia Applied Technology Ventures, Inc., a related party, for space renewable each year. The current agreement is for July 1, 2004 through June 30, 2005 for monthly fees of $21,664.46. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay VLP2, Inc. $259,973.52 in fiscal year 2005. \r\n \r\nNoncancellable operating lease expenditures in 2004 were $9,567,313.37 for real property. \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or the Georgia Department of Audits and Accounts. \r\n \r\nFunding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\nFiscal Year \r\n \r\nPercentage Contributed \r\n \r\nRequired Contribution \r\n \r\n2004 \r\n \r\n100% \r\n \r\n$16,699,191.29 \r\n \r\n2003 \r\n \r\n100% \r\n \r\n$15,907,134.52 \r\n \r\n2002 \r\n \r\n100% \r\n \r\n$14,821,929.46 \r\n \r\n- 27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nPlan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. \r\nThe benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an \"old plan\" member subject to the plan provisions in effect prior to July 1, 1982. All other members are \"new plan\" members subject to the modified plan provisions. \r\nUnder both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. \r\nRetirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. \r\nIn addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. \r\nThe ERS issues a financial report each fiscal year, which may be obtained through ERS. \r\nFunding Policy As established by State statue, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2004, for employees covered by ERS was $294,073.04. The Institute's total payroll for all employees was $420,789,671.38. \r\n- 28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nFunding Policy Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Institute pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid to the employee. The Institute is also required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the Institute was 5.66% of gross salaries for \"old plan\" members and 10.41 % of gross salaries for \"new plan\" members. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. \r\nTotal contributions to the plan made during fiscal year 2004 amounted to $34,319.12, of which $27,960.92 was made by the Institute and $6,358.20 was made by employees. These contributions met the requirements of the plan. \r\nActuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report, which may be obtained through ERS. \r\nREGENTS RETIREMENT PLAN \r\nPlan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An \"eligible university system employee\" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. \r\nFunding Policy Georgia Institute of Technology makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution was 10.03% of the participating employee's eamable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\n- 29 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nREGENTS RETIREMENT PLAN \r\nFunding Policy The Institute and its covered employees made required contributions (including some minor adjustments) of $15,211,836.05 (10.03%) and $7,579,376.31 (5%), respectively in fiscal year 2004. \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\nBenefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. \r\nContributions and Vesting 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. \r\nTotal contributions made by employees during fiscal year 2004 amounted to $786,931.88 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. \r\nThe Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. \r\n \r\n- 30 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\nThe University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. \r\nA 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. \r\nNOTE 13: CONTINGENCIES \r\nAmounts 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 which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\n- 31 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 13: CONTINGENCIES \r\nLitigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2004. \r\nAt the request oflnstitute management, in April 2004, Georgia Tech Facilities, Inc. (Facilities), a component unit of Georgia Tech (see Note 16), adopted a Declaration of Official Intent to seek the issuance of tax-exempt obligations by the Development Authority of Fulton County for the purpose of financing the Main Campus Electrical Substation Project for the benefit of Georgia Tech. This resolution was intended to constitute a \"declaration of official intent\" within the meaning of Treasury Regulation Section 1.150-2. Facilities and Georgia Tech also entered into a Memorandum of Understanding (MOU). Under the MOU, Facilities agreed to manage the design and construction of the project as well as proceed with the financing subject to the Institute securing Board of Regents of the University System of Georgia approval. If approved by the Board of Regents of the University System of Georgia, the estimated minimum liability for the project would be $34 million. \r\nOn May 17, 2004, the Board of Regents of the University System of Georgia (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 30-year ground lease from the BOR to Facilities for a parcel of land on which a new Molecular Science and Engineering (MSE) Building will be located. At the end of the 30-year period, any improvements located on the ground lease will revert to the BOR/Institute. The second agreement was a lease agreement between BOR/Institute and Facilities for the new MSE Building. The lease is for 30 years with annual options to renew. The lease amount will approximate $5 million annually. Given that the intent of the Institute is to lease the MSE building for the entire 30-year period, it will be treated as a capital lease once the building is completed and occupied, which is expected to occur in calendar year 2007. \r\nOn June 24, 2003, the Board of Regents of the University System of Georgia (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 25 year ground lease from the BOR to Facilities for a parcel of land on which a new family apartment complex and parking deck will be located. At the end of the 25-year period, any improvements located on the ground lease will revert to the BOR/Institute. The second agreement, signed July 17, 2003, was a lease agreement between BOR/Institute and Facilities for the new complex and parking deck. The lease, upon occupancy, is for 25 years with annual options to renew. The annual lease amount will closely approximate the average annual debt service (principal and interest) on the structures but will not exceed $4.5 million. Given that the intent of the Institute is to lease the complex and deck for the entire 25-year period, it will be treated as a capital lease once the buildings are completed and occupied, which is expected to occur in calendar year 2005. \r\n \r\n- 32 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 13: CONTINGENCIES \r\nOn July 17, 2003, the Board of Regents of the University System of Georgia (BOR) and the Institute entered into a series of agreements with Facilities, the first of which was a 20-year facility lease from the BOR to Facilities for the use of the new Klaus parking facility. At the end of the 20-year period, any improvements located on the lease will revert to the BOR/Institute. The second agreement was a rental agreement between BOR/Institute and Facilities for the new parking facility. The rental agreement is for 20 years upon occupancy, with annual options to renew. The lease amount will closely approximate the average annual debt service (principal and interest) on the structure but will not exceed $850,000.00. Given that the intent of the Institute is to lease the complex and deck for the entire 20-year period, it will be treated as a capital lease once the building is completed and occupied, which is expected to occur in calendar year 2006. \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000.00 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. \r\nAs of June 30, 2004, there were 1,078 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2004, Georgia Institute of Technology recognized as incurred $4,841,080.28 of expenditures, which was net of $1,861,878.86 of participant contributions. \r\n \r\n- 33 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe Institute's operating expenses by functional classification are shown below: \r\n \r\nStatement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2004 \r\n \r\nFunctional Classification \r\n \r\nNatural Classification \r\n \r\nInstruction \r\n \r\nResearch \r\n \r\nPublic Service \r\n \r\nAcademic Su1mort \r\n \r\nStudent Services \r\n \r\nInstitutional Su1mort \r\n \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\n$ 79,613,449.91 44,618,121.17 24,117,624.44 1,313,574.39 2,028,971.39 \r\n \r\n$109,145,131.82 82,020,133.01 33,636,789.93 388,097.81 8,726,364.42 \r\n \r\n$ 7,017,717.12 9,477,004.84 3,611,332.85 402,753.05 1,149,135.96 \r\n \r\n$ 3,935,429.89 16,182,930.01 4,448,518.6 I 47,205.36 447,529.95 \r\n \r\n$ 38,686.14 8,8 I4,866.73 I, 753,051.39 58,350.12 218,481.05 \r\n \r\n$ 797,688.43 21,473,249.32 5,752,140.37 73,141.58 254,877.43 \r\n \r\n134,321.07 22,178,451.89 \r\n \r\n190,027.22 104,351,858.05 \r\n \r\n58,991.88 7,558,870.35 \r\n \r\n6,715,748.64 \r\n \r\n9,100,499.40 \r\n \r\n14,248.80 4,658,20 I.I 5 \r\n \r\n$174 004 514.26 $338 458 402.26 $ 29 275 806.05 $31,777 362.46 $ 19 983 934.83 $ 33 023 547.08 \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nEmployee Benefits Other Personal Services Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nPlant Operations and Maintenance \r\n \r\nFunctional Classification \r\n \r\nScholarships and Fellowships \r\n \r\nAuxiliary Enterprises \r\n \r\nUnallocated Depreciation \r\n \r\nTotal Operating Expenses \r\n \r\n$ 250,247.75 22,573,687.61 5, I92,708.55 141,909.64 65,290.99 \r\n \r\n$ 12,407,095.68 2,694,736.32 -800.00 100,083.95 \r\n \r\n$200,798,351.06 217,567,088.37 \r\n81,206,902.46 2,424,231.95 12,990,735.14 \r\n \r\n$13,177,665.00 12,404,600.66 \r\n \r\n4,135,711.77 \r\n \r\n13,177,665.00 16,937,901.40 \r\n \r\n9,055,594.01 \r\n \r\n21,975,599.62 \r\n \r\n185,594,823.11 \r\n \r\n4,672,275.65 $45,098,444.76 49 770 720.41 \r\n \r\n$ 42 684 032 21 $13 177 665.00 $ 45 984 702.99 $ 45 098 444 76 $780,468,418.90 \r\n \r\nNOTE 16: COMPONENT UNITS \r\n \r\nGeorgia Tech Foundation, Inc., (Foundation) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). The Foundation acts primarily as a fundraising organization to supplement the resources that are available to the Institute in support of its programs. The Foundation board of trustees is self-perpetuating and consists of forty-five (45) elected trustees, who are alumni of the Institute and five (5) ex-officio trustees. Although the Institute does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds and invests is restricted for support of the Institute. Because the resources held by the Foundation are used by, or for the benefit of, the Institute, the Foundation is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. \r\n \r\n- 34 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\nThe Foundation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. \r\nDuring the year ended June 30, 2004, the Foundation distributed $50,536,092.41 to the Institute for restricted and unrestricted purposes. Note 10 of this financial report provides information on related party leases between the Foundation and the Institute. Complete financial statements for the Foundation can be requested at the following address: \r\nGeorgia Tech Foundation, Inc. Controller's Office \r\n760 Spring Street, N.W., Suite 400 Atlanta, GA 30308 \r\nGeorgia Tech Athletic Association (Association) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). The Association administers the Institute's intercollegiate athletics program, including fund-raising to support scholarships. The 14-member association board of trustees is appointed predominantly by the President of the Georgia Institute of Technology, and consists of faculty, alumni, students, and friends of the Institute. Although the Institute does not control the timing or amount of receipts and disbursements, all of the Association's resources are restricted to support the intercollegiate athletic program for Georgia Tech. Because the resources are used for the benefit of the Institute, the Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. \r\nThe Association is a private nonprofit organization that reports under GASB standards, the same used by the Institute. The Association's financial information has been condensed, and expenses have been converted from functional to natural classification for presentation within the Institute's financial statements. The Association's fiscal year is July 1 through June 30. \r\nDuring the year ended June 30, 2004, the Association distributed $4,314,549.78 to the Institute for scholarship support and $4,027,688 in other payments that were either expense reimbursements or support for Institute programs. The Institute distributed to the Association, $1,936,857.69 in (net) fees collected from students for support of the intercollegiate athletic program. Complete financial statements for the Association can be requested at the following address: \r\n \r\n- 35 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\nGeorgia Tech Athletic Association 150 Bobby Dodd Way, NW Atlanta, GA 30332-0455 \r\nAttention: Mollie Simmons Mayfield Assistant Director of Athletics \r\nGeorgia Tech Research Corporation and its subsidiary Georgia Tech Applied Research Corporation (referred to in the singular as GTRC in this document) are legally separate, taxexempt component units of the Georgia Institute of Technology (Institute). GTRC functions as the prime contractor for most sponsored research conducted at Georgia Tech and subcontracts with the Institute for faculty and staff services. GTRC's 12-member board of trustees is selfperpetuating and consists of senior Institute administrators, alumni, and supporters of Georgia Tech. GTRC's income and resources are restricted to support research mission objectives of Georgia Tech. Because resources held by GTRC are restricted for use in support of the Institute, GTRC is considered a component unit of Georgia Tech and is discretely presented in the Institute's financial statements. \r\nThe Georgia Tech Research Corporation is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. \r\nDuring the year ended June 30, 2004, GTRC distributed $297,210,831 to the Institute, primarily as reimbursement for research and other sponsored activities conducted on campus. The Institute distributed $3,640,724.81 to GTRC, primarily for related-party rental payments. Note 10 of this financial report provides information on related party leases. Complete financial statements for GTRC can be requested at the following address: \r\nGeorgia Tech Research Corporation Director of Accounting and Reports \r\n505 Tenth Street Atlanta, GA 30332-0415 \r\nGeorgia Tech Facilities, Inc., (Facilities) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). Facilities constructs research and auxiliary buildings and other structures for use by the Institute and then leases the completed buildings/structures to the Institute. The eight-member Facilities board is appointed by the President of the Georgia Institute of Technology and consists of alumni and friends of Georgia Tech. Although the Institute does not control the timing or amount of receipts and disbursements \r\n- 36 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\nfor Facilities, its resources and income are restricted to support the construction activities of Georgia Tech. Because the restricted resources held by Facilities can only be used by, or for the benefit of, the Institute, Facilities is considered a component unit of Georgia Tech and 1s discretely presented in the Institute's financial statements. \r\nThe Georgia Tech Facilities, Inc. is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. \r\nInvestments carried as capital assets valued at $19.945 million, and bonds payable are included in Facilities' financial statements. The corresponding buildings and associated long-term debt are included in the Institute's report. Note 10 of this financial report provides information on related party leases. Complete financial statements for Facilities can be obtained from the following address: \r\nGeorgia Tech Facilities, Inc. Treasurer's Office \r\nLyman Hall, Room 315 Atlanta, GA 30332-0257 \r\nAttention: Joel Hercik \r\nGeorgia Tech Alumni Association (Alumni Association) is a legally separate, tax-exempt component unit of the Georgia Institute of Technology (Institute). The Alumni Association acts primarily as a point of contact with the Institute's alumni, prospective students, and friends for outreach and development. The 43 member Alumni Association board of trustees is selfperpetuating and consists of alumni and friends of the Institute. Although the Institute does not control the timing or amount of receipts from the Alumni Association, the majority of resources or income thereon that the Alumni Association holds and invests are restricted to support the Alumni Association's mission of serving and promoting the alumni of the Institute. Because resources held by the Alumni Association are used by, or for the benefit of, the Institute, the Alumni Association is considered a component unit of the Institute and is discretely presented in the Institute's financial statements. \r\nThe Alumni Association is a private nonprofit organization that reports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. The FASB reports were reclassified to the GASB presentation for external financial reporting purposes in these financial statements. The Foundation's fiscal year is July 1 through June 30. \r\n- 37 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\nDuring the year ended June 30, 2004, the Alumni Association paid $561,610.26 to the Institute primarily for reimbursement of employee insurance costs. The Institute funded $144,353.00 in Alumni Association costs in support of that unit's communication and outreach mission. The Alumni Association also received $3,599,884.00 in funding support from the Georgia Tech Foundation, Inc., another component unit of the Institute. Complete financial statements for the Alumni Association can be requested at the following address: \r\nGeorgia Tech Alumni Association 190 North Avenue Atlanta, GA 30313 \r\nAttention: Controller \r\nInvestments for Component Units The Georgia Tech Foundation, Inc. (GTF) holds investments totaling $881.3 million as of June 30, 2004, of which $271.4 million is the corpus of the endowment. Included in GTF's investments is $52.3 million in assets held and invested for the benefit of the Georgia Tech Athletic Association, Inc. (GTAA). Earnings on GTF's endowment are used to support programs and services of the Georgia Institute of Technology. Earnings on funds held for the benefit of GTAA are used to support the athletic and scholarship programs of that organization. \r\nEndowment corpus is nonexpendable, but the earnings on the investments may be spent in accordance with donor restrictions or in accordance with GTF's spending policy. GTF has established a spending policy in which up to 6% of the twelve quarter average market value of the endowment funds are allocated from the earnings for expenditure. In fiscal year 2004, the Foundation allocated 5.7% of that average. \r\nGeorgia Tech Facilities, Inc. lists investments totaling $112.5 million on its balance sheet; however, this is composed primarily of investments in U. S. Treasury Notes that will be used to construct facilities that will be leased by Georgia Institute of Technology. \r\nGeorgia Tech Foundation, Inc. (Foundation) holds an investment in a long-term capital lease receivable of $182,245,285.79 from the Georgia Institute of Technology (Institute). This is a leveraged lease that is priced to fund the debt used to finance the leased facilities. Given that, there is no profit margin in the agreement, no residual value for the Foundation because the assets transfer to the Institute at the end of the lease, and the related nature of the parties involved in the transaction, the lease receivable is recorded net of future lease receipts and no deferred revenue is recognized. \r\nGeorgia Tech Facilities, Inc. holds an investment in a long-term capital lease receivable of $30,018,000.00 from the Georgia Institute of Technology (Institute). This is a leveraged lease that is priced to fund the debt used to finance the leased facilities. Given that, there is no profit margin in the agreement, no residual value for Georgia Tech Facilities, Inc. because the assets \r\n- 38 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\nInvestments for Component Units transfer to the Institute at the end of the lease, and the related nature of the parties involved in the transaction, the lease receivable is recorded net of future lease receipts and no deferred revenue is recognized. \r\nLong-Term Liabilities for Component Units Georgia Tech Foundation, Inc. has three bond issues outstanding with balances totaling $226,060,000 (not including an unamortized bond discount of $1,748,000). These serial and term bonds include both tax exempt and taxable instruments. The proceeds from the bond issues were used to construct (for the Georgia Institute of Technology) a new Campus Recreation Center and Technology Square, a complex of buildings which includes a bookstore, retail space, a hotel, professional education center, economic development building, parking deck, and an academic building which houses the College of Management. Interest rates on the bonds range from 2.99% to 6.6%. Details of outstanding balances and current year activity for the three bond issues are shown in the statements which follow. \r\nGeorgia Tech Facilities, Inc. has four bond issues outstanding with balances totaling $175,840,000. The proceeds from the bond issues were used to acquire or construct (for the benefit of the Georgia Institute of Technology) the Habersham Building, which houses the Institute's Ivan Allen College, Bioengineering and Biosciences Building, Family Housing Complex, Klaus parking deck, and the Molecular Science and Engineering Building. Interest rates on the bonds range from 2% to 5.25%. Details of outstanding balances and current year activity for the four bond issues are shown in the statements, which follow. \r\nThe Georgia Tech Athletic Association has one bond issue outstanding with a balance of $110,155,000 and one unsecured note payable totaling $1,036,175. The combined balance for the two is $111,191,175. The bonds payable total does not include an unamortized discount of $1,000,908 and an unamortized \"swaption\" premium of $2,346,236 which are included in changes in long-term debt identified below. Proceeds from the bonds and note payable were used to finance the acquisition and/or construction of athletic related facilities. Interest rates on the bonds and note range from 4% to 5.5%. Detail of outstanding balances and current year activity for the long-term debt is shown in the statements, which follow. \r\nChanges in long-term liabilities for component units for the fiscal year ended June 30, 2004 are shown below: \r\n \r\n- 39 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\n \r\nLong-Term Liabilities for Component Units \r\n \r\nBeginning Balance \r\nJuly I, 2003 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30, 2004 \r\n \r\nAmounts Due Within \r\nOne Year \r\n \r\nGeorgia Tech Foundation, Inc. Bonds Payable Series 2001A Series 2002A (Tax Exempt) Series 2002B (Taxable) \r\nGeorgia Tech Facilities, Inc. Bonds Payable Series 1997A Series 1997B Series 2003 Series 2004 \r\nGeorgia Tech Athletic Association Bonds and Note Payable Series 2001 and Note Payable \r\n \r\n$ 44,980,000.00 111,090,000.00 73,190,000.00 \r\n \r\n$ 760,000.00 $ 44,220,000.00 $ 790,000.00 1,835,000.00 I09,255,000.00 l,900,000.00 605,000.00 72,585,000.00 1,3 I 5,000.00 \r\n \r\n10,595,000.00 20,375,000.00 \r\n0.00 $ 70,320,000.00 0.00 75,205,000.00 \r\n \r\n225,000.00 430,000.00 \r\n \r\nl 0,3 70,000.00 19,945,000.00 70,320,000.00 75,205,000.00 \r\n \r\n235,000.00 450,000.00 \r\n \r\n111,828,820.00 2,367,000.00 1,659,317.00 112,536,503.00 1,713,481.00 \r\n \r\nTotal Long-Term Debt \r\n \r\n$372 058,820.00 $147,892,QQQ.0Q $ 5 514 31:Z.OQ $514,436,503.00 $ 6,403,48 I .Q0 \r\n \r\nDebt Service Obligations Annual debt service requirements to maturity for Georgia Tech Foundation, Inc. Series 2001A, 2002A, and 2002B bonds payable are as follows: \r\n \r\nYear Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2032 \r\n \r\nBonds Payable \r\n \r\nPrincigal \r\n \r\nInterest \r\n \r\nTotal \r\n \r\n$ 4,005,000.00 4,180,000.00 4,385,000.00 4,605,000.00 4,825,000.00 28,135,000.00 37,250,000.00 46,015,000.00 54,845,000.00 37,815,000.00 \r\n \r\n$ 12,247,589.03 12,079,973.78 11,879,629.78 11,662,200.03 11,437,490.53 53,148,807.73 44,016,058.85 32,029,819.29 18,404,121.75 3,071,206.75 \r\n \r\n$ 16,252,589.03 16,259,973.78 16,264,629.78 16,267,200.03 16,262,490.53 81,283,807.73 81,266,058.85 78,044,819.29 73,249,121.75 40,886,206.75 \r\n \r\n$226!060!000.00 $209!976!897.52 $436!036!897.52 \r\n \r\nAnnual debt service requirements to maturity for Georgia Tech Facilities, Inc. Series 1997A, l 997B, 2003, and 2004 bonds payable are as follows: \r\n \r\n-40 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2004 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 16: COMPONENT UNITS \r\n \r\nDebt Service Obligations \r\nYear Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2036 \r\n \r\nBonds Payable \r\n \r\nPrincipal \r\n \r\nInterest \r\n \r\nTotal \r\n \r\n$ 685,000.00 2,150,000.00 2,550,000.00 3,920,000.00 4,040,000.00 22,800,000.00 28,945,000.00 37,450,000.00 42,380,000.00 21,660,000.00 9,260,000.00 \r\n \r\n$ 8,044,143.78 8,449,238.78 8,383,616.28 8,309,060.65 8,186,708.76 \r\n38,343,705.64 32,172,876.55 23,698,513.42 13,365,375.00 \r\n5,397,250.00 700,250.00 \r\n \r\n$ 8,729,143.78 10,599,238.78 10,933,616.28 12,229,060.65 12,226,708.76 61,143,705.64 61,117,876.55 61,148,513.42 55,745,375.00 27,057,250.00 9,960,250.00 \r\n \r\n$175.840.000.00 $155.050.738.86 $330.890.738.86 \r\n \r\nAnnual debt service requirements to maturity for the Georgia Tech Athletic Association Series 2001 bonds payable and unsecured note payable are as follows: \r\n \r\nYear Ending June 30: 2005 2006 2007 2008 2009 2010 through 2014 2015 through 2019 2020 through 2024 2025 through 2029 2030 through 2034 \r\n \r\nBonds and Note Payable \r\n \r\nPrincipal \r\n \r\nInterest \r\n \r\nTotal \r\n \r\n$ 1,713,481.00 1,779,482.00 1,855,480.00 1,951,979.00 2,052,978.00 11,832,869.00 15,463,334.00 \r\n20,018,285.00 26,198,287.00 28,325,000.00 \r\n \r\n$ 5,620,572.00 5,554,895.00 5,475,095.00 5,380,006.00 5,279,962.00 \r\n24,823,881.00 21,193,902.00 16,630,655.00 10,785,493.00 \r\n3,032,334.00 \r\n \r\n$ 7,334,053.00 7,334,377.00 7,330,575.00 7,331,985.00 7,332,940.00 36,656,750.00 36,657,236.00 36,648,940.00 36,983,780.00 31,357,334.00 \r\n \r\n$111,191,175.00 $103)76.795.00 $214.967.970.00 \r\n \r\nUnamortized Premium Unamortized Discount \r\n \r\n2,346,236.00 -1,000,908.00 \r\n \r\nTotal Bonds and Notes Payable \r\n \r\n$112.536.503.00 \r\n \r\n- 41 - \r\n \r\n SUPPLEMENTARY INFORMATION - 43 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - (NON-GAAP BASIS) RESIDENT INSTRUCTION \r\nYEAR ENDED JUNE 30. 2004 \r\n \r\nSCHEDULE \"1\" \r\n \r\nREVENUES \r\nState Appropriations Other Revenues Retained \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 189,382,398.00 $ 189,382,398.00 $ \r\n \r\n494,987,455.00 \r\n \r\n422,077,119.27 \r\n \r\n0.00 -72,910,335. 73 \r\n \r\n$ 684,369,853.00 $ 611,459,517.27 $ _ _-7_2.:.;:.,9..;_10:..:.,3c..c3c..:.5_.7..:..3 \r\n \r\nEXPENDITURES \r\nPersonal Services: Education, General and Departmental Services Sponsored Operations \r\nOperating Expenses: Education, General and Departmental Services Sponsored Operations \r\nCapital Outlay Special Funding Initiative Research Consortium \r\n \r\n$ 234,814,822.00 $ 274,083,850.91 $ \r\n \r\n120,527,698.00 \r\n \r\n105,465,998.22 \r\n \r\n149,311,187.00 129,472,302.00 \r\n32,000,000.00 3,393,738.00 \r\n14,850,106.00 \r\n \r\n98,558,842.47 106,665,026.37 \r\n0.00 3,913,740.22 14,833,386.09 \r\n \r\n-39,269,028.91 15,061,699.78 \r\n50,752,344.53 22,807,275.63 32,000,000.00 \r\n-520,002.22 16 719.91 \r\n \r\n$ 684,369,853.00 $ 603,520,844.28 $ _ _8_0:...!.,8.:....4...;.9..:..,0_0_8._7_2 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ \r\n \r\n7,938,672.99 $==:a:7;,;,,9;;,;3;;;8~,6=7=2=.9;;;,,9 \r\n \r\n(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\nSee notes to the financial statements. \r\n \r\n- 45 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - (NON-GAAP BASIS) OTHER ORGANIZED ACTIVITIES \r\nYEAR ENDED JUNE 30. 2004 \r\n \r\nSCHEDULE \"2\" \r\n \r\nREVENUES \r\nState Appropriations Other Revenues Retained \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 18,448,162.00 $ 18,448,162.00 $ \r\n \r\n150,248,002.00 \r\n \r\n129,644,472.49 \r\n \r\n0.00 -20,603,529.51 \r\n \r\n$ 168,696,164.00 $ 148,092,634.49 $ _ _-2_:0..,,_6::.0...3::.,.5.:..2c=9~..5..c1.... \r\n \r\nEXPENDITURES \r\nPersonal Services: Education, General and Departmental Services Sponsored Operations \r\nOperating Expenses: Education, General and Departmental Services Sponsored Operations \r\nAgricultural Research Advanced Technology Development Center/Economic \r\nDevelopment Institute CATEA (formerly CRT) \r\n \r\n$ 27,795,694.00 $ 27,162,142.81 $ \r\n \r\n52,114,736.00 \r\n \r\n52,566,052.10 \r\n \r\n25,990,763.00 26,605,000.00 \r\n1,669,447.00 \r\n \r\n19,982,338.30 21,123,276.35 \r\n1,643,009.12 \r\n \r\n25,570,316.00 8,950,208.00 \r\n \r\n17,802,974.86 5,533,335.32 \r\n \r\n633,551.19 -451,316.10 \r\n6,008,424.70 5,481,723.65 \r\n26,437.88 \r\n7,767,341.14 3,416,872.68 \r\n \r\n$ 168,696,164.00 $ 145,813,128.86 $ _ _2_2\"'-',8_83_,_,_03_5_.1_4 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ \r\n \r\n2,279,505.63 $===2;;,i;,2;;,;7;,,;;9;,5~0~5~.6~3 \r\n \r\n(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\nSee notes to the financial statements. \r\n \r\n-46- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30, 2004 \r\n \r\nSCHEDULE \"3\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals - Payroll June 30, 2004 June 30, 2003 \r\n \r\nCompensated Absences June 30, 2004 June 30, 2003 \r\n \r\nPrepaid Salaries June 30, 2003 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nBoard of Regents of the University System of Georgia \r\n \r\nBarnes, \r\n \r\nRosalind \r\n \r\nBlackwell, Lana \r\n \r\nErvin, \r\n \r\nJuanita \r\n \r\nJones, \r\n \r\nShelia \r\n \r\nKilpatrick, Toyna \r\n \r\nRevak, \r\n \r\nRoxanne \r\n \r\nGeorgia Southern University \r\n \r\nBishop, \r\n \r\nPatricia \r\n \r\nLesaja, \r\n \r\nGoran \r\n \r\nGeorgia State University \r\n \r\nO'Farrell, \r\n \r\nLaura \r\n \r\nSouthern Polytechnic State University \r\n \r\nPace, \r\n \r\nJack \r\n \r\nState University of West Georgia \r\n \r\nOsbeck, \r\n \r\nLisa \r\n \r\nValdosta State University \r\n \r\nDerrick, \r\n \r\nM. Elizabeth \r\n \r\nSALARIES \r\n \r\nTRAVEL \r\n \r\n$ 417,205,851.84 $ 12,990,735.14 \r\n \r\n461,269.94 -280,985.74 \r\n \r\n24,317,280.29 -23,670,839. 76 \r\n \r\n2,491,394.48 \r\n \r\n22,632.06 11,519.77 \r\n2,305.98 60,214.04 14,811.60 10,312.88 \r\n24,000.00 27,000.00 \r\n29,904.00 \r\n24,000.00 \r\n24,000.00 \r\n15,000.00 \r\n$ 420,789,671.38 $ 12,990,735.14 \r\n \r\nSee notes to the financial statements. \r\n \r\n-47 - \r\n \r\n SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY AUDITEE'S RESPONSE \r\nSUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 \r\n \r\nPRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nFINDING CONTROL NUMBER AND STATUS \r\n \r\nFS-503-02-01 FS-503-03-01 \r\n \r\nPreviously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented \r\n \r\n SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2004 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nREVENUE/RECEIVABLES/RECEIPTS Failure to Monitor Sponsored Projects Finding Control Number: FS-503-04-01 \r\n \r\nCondition: \r\n \r\nGeorgia Institute of Technology did not adequately monitor the timeliness of charges and collection efforts on their Sponsored Projects which resulted in funds due the Institute becoming uncollectible. These uncollectible amounts for certain Sponsored Projects in Restricted funds were funded by General Operations (Resident Instruction Fund). \r\n \r\nCriteria: \r\n \r\nThe, Board of Regents of the University System of Georgia's Business Procedures Manuel, Section 10.4.1 (4), as revised, requires that uncollectible accounts must be identified by fund and that \"fund integrity must be maintained at all times with regard to the uncollectible accounts\". Section 10.4.3 also states \"federal receivables resulting from contract or grant activity are to be considered, for write-offpurposes, as disallowed charges. The funding source for disallowed charges is indirect cost recoveries (revenue).\" \r\n \r\nQuestioned Cost: NIA \r\n \r\nInformation: \r\n \r\nAn examination of the uncollectible amounts funded by the Resident Instruction fund disclosed the following: \r\n \r\n1. Two expired project agreements had inadequate collection procedures. \r\n \r\n2. On nine projects collection of membership dues was inadequate to support research expenditures. \r\n \r\n3. Two project agreements had inadequate collection procedures. \r\n \r\n4. Two projects showed funds were due however the Sponsor stated that payment had been made. \r\n \r\n5. Thirty projects had costs rejected because they were incurred or identified after the project termination date. \r\n \r\n6. One project had expenses that were based on anticipated funding that was not realized. \r\n \r\nCause: \r\n \r\nManagement at Georgia Institute of Technology failed to adequately monitor charges to and collections of certain Sponsored Projects within the Restricted funds of the Institute. \r\n \r\n- 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2004 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nREVENUE/RECEIVABLES/RECEIPTS Failure to Monitor Sponsored Projects Finding Control Number: FS-503-04-01 \r\n \r\nEffect: \r\n \r\nAs a result of the weaknesses identified, certain Sponsored Projects reflected accounts receivable which were uncollectible due to inadequate collection procedures and/or disallowed charges. These uncollectible amounts were funded by the General Operations (Resident Instruction Fund) ofthe Institute. However, the funding source for these uncollectibles should be the Indirect Cost Recoveries Fund. \r\n \r\nRecommendation: \r\n \r\nInstitute management should strengthen controls to ensure that charges against Sponsored Projects are made in a timely manner to facilitate prompt billing. Also, accounts receivable related to these charges should be closely monitored to ensure proper collection from Sponsors. \r\n \r\nEXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Follow Travel Policies, Regulations and Procedures Finding Control Number: FS-503-04-02 \r\n \r\nCondition: \r\n \r\nGeorgia Institute of Technology failed to comply with and consistently follow its travel policies, regulations and procedures as outlined in Chapter 6 of the Business and Finance Manual. \r\n \r\nCriteria: \r\n \r\nThe Georgia Institute of Technology's Business and Finance Manual, Chapter 6.2, Travel Authorization Procedures/TAR Form, Travel Authority Request, states that \"University System of Georgia regulations require that a travel authorization form be completed and approved for out-of-state trips or in-state trips not covered under standing authorization prior to the dates of travel\". Chapter 6.13, Travel Reimbursement/TES Form, Certification/Approval of Travel Expense Statements, Paragraph 2, states \"Reimbursement requests should be submitted to Accounts Payable within 10 working days after completion of the trip\". \r\n \r\nQuestioned Cost: NIA \r\n \r\nInformation: \r\n \r\nTest of Controls were performed on the Institute's travel authorization, approval and payment processes. Tests of Controls were performed on twenty five (25) transactions. Additional substantive transactional testing was performed on forty six (46) items resulting in testing of seventy one (71) total transactions. Our testing revealed the following deficiencies: \r\n \r\n-2- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2004 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nEXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Follow Travel Policies, Regulations and Procedures Finding Control Number: FS-503-04-02 \r\n \r\n1. Five (5) instances were noted where Travel Authority Request forms were not properly signed and dated by the employee and/or the supervisor. \r\n \r\n2. Eleven (11) Travel Authority Request forms were dated subsequent to the first date of travel in violation of the \"pre approval\" policy. \r\n \r\n3. Twenty (20) travel expense statements were submitted for \r\n \r\nreimbursement in excess of 30 days after the last date oftravel. Several \r\n \r\nwere submitted more than six months after the date oftravel and one (1) \r\n \r\n \r\n \r\nwas submitted over a year after the travel had occurred. \r\n \r\n4. Calculation errors were noted on two (2) travel expense statements resulting in underpayments of $46.62. \r\n \r\n5. Two (2) travel expense statement had duplicate billings which resulted in overpayments of $272.38. \r\n \r\nCause: \r\n \r\nThe Georgia Institute ofTechnology failed to follow established travel policies and procedures to ensure that travel expenses are authorized prior to the occurrences of travel; that travel reimbursement requests are submitted in a timely manner; and that payments are made according to established guidelines. \r\n \r\nEffect: \r\n \r\nBy not consistently following travel policies, regulations, and procedures, the Georgia Institute of Technology has placed itself in a position where travel expenses incurred could be unauthorized and/or incorrectly reimbursed. \r\n \r\nRecommendation: The Georgia Institute ofTechnology should implement procedures and controls to ensure that all travel policies and procedures are properly followed. \r\n \r\nFEDERAL AWARD FINDINGS AND QUESTIONED COSTS \r\n \r\nNo matters were reported. \r\n \r\n-3 - \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2002-h2003","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2002/2003"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, Ga. : Dept. of Audits and Accounts"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2002-h2003"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2002-h2003"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"STATE OF GEORGIA \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\nI \r\nGEORGIA INSTITUTE OF TECHNOLOGY \r\nATLANTA, GEORGIA REPORT ON AUDIT \r\nOF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 \r\nRussell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENT'S DISCUSSION AND ANALYSIS \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n3 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n5 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n6 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n9 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\nSCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO \r\n \r\nBUDGET - (NON-GAAP BASIS) \r\n \r\n1 \r\n \r\nRESIDENT INSTRUCTION \r\n \r\n33 \r\n \r\n2 \r\n \r\nLOTTERY FOR EDUCATION \r\n \r\n34 \r\n \r\n3 \r\n \r\nOTHER ORGANIZED ACTIVITIES \r\n \r\n35 \r\n \r\n4 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n36 \r\n \r\nSECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n RUSSELL W. HINTON \r\nSTATE AUDITOR \r\n(404) 656-2174 \r\n \r\nDEPARTMENT OF AUDITS AND ACCOUNTS \r\n254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 \r\nMarch 4, 2004 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents ofthe University System of Georgia \r\nand Honorable G. Wayne Clough, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen: \r\nWe have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Institute of Technology, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2003. These financial statements are the responsibility of the Georgia Institute of Technology's management. Our responsibility is to express an opinion on these financial statements based on our audit. \r\nWe conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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. \r\nAs discussed in Note 1, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities ofthe State of Georgia that is attributable to the transactions of Georgia Institute ofTechnology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America. \r\n \r\n03ARL-61 \r\n \r\n In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30, 2003, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. \r\nManagement's Discussion and Analysis is not a required part ofthe basic financial statements but is supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods of measurement and presentation of this supplementary information. However, we did not audit this information and express no opinion on it. \r\nOur audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements ofGeorgia Institute ofTechnology. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, based on our audit, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. \r\nRespectfully submitted, \r\nl(j~ \r\nRu sell W. Hinton State Auditor \r\nRWH:gp 03ARL-61 \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\nIntroduction \r\nThe Georgia Institute of Technology, also known as Georgia Tech, is one of the nation's leading research universities, providing a focused, technologically based education to nearly 17,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is ranked ninth in the nation by U.S. News and World Report. It offers degrees through the Colleges of Architecture, Engineering, Sciences, Computing, Management, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has more than 50 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business. \r\nFounded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research Institute that serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21 st century. \r\nOverview ofthe Financial Statements and Financial Analysis \r\nGeorgia Institute of Technology is pleased to present its financial statements for fiscal year 2003 beginning July 1, 2002 and ending June 30, 2003. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of financial activities for the year. This is the second set of financial statements issued under new reporting guidelines established by Governmental Accounting Standards Board (GASB) Statements 34 and 35. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into four net asset categories: invested in capital assets, net of related debt; restricted-nonexpendable; restricted-expendable; and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Because this is the second year under the new standards, comparative data with the prior fiscal year's results are presented in this year's Management's Discussion and Analysis. \r\nStatement ofNet Assets \r\nUsing the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and resulting net assets of the Institute as of the end of the fiscal year. Assets, by definition, represent measured economic value obtained and controlled by an entity as a result of past transactions and events. This statement identifies the assets available for current operations, debts owed, and net assets available to continue operations in the future. \r\n- 1- \r\n \r\n Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the institution's equity in property, plant and equipment. The next asset category is Restricted Net Assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is Unrestricted Net Assets, which are available for any lawful purpose of the institution. \r\n \r\nThe Statement of Net Assets for the year ended June 30, 2003 indicates that over $36 million in unrestricted net assets and $17 million in restricted net assets are available for future operations. Unrestricted net assets decreased by $65 million during the year, primarily as a result of the transfer of the State Data Research Center to the Georgia Department of Education ($38.5 million), and significant outlays for capital construction activities ($32.9 million). Net Assets Invested in Capital Assets, Net of Related Debt, increased by $22.3 million during the year. See Note 1 in the Notes to the Financial Statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Net Assets as of June 30, 2002 and June 30, 2003: \r\n \r\nStatement of Net Assets, Condensed (dollars in thousands) \r\n \r\nJune 30, 2003 \r\n \r\nJune 30, 2002 \r\n \r\nAssets Current Assets Capital Assets, Net Other Assets \r\nTotal Assets \r\nLiabilities Current Liabilities Noncurrent Liabilities \r\nTotal Liabilities \r\n \r\n$ 124,564 780,676 59,027 \r\n$ 964,267 \r\n \r\n$ \r\n \r\n75,142 \r\n \r\n75,098 \r\n \r\n$ 150,240 \r\n \r\n$ 183,756 695,080 58,701 \r\n$ 937,537 \r\n \r\n$ \r\n \r\n70,890 \r\n \r\n10,750 \r\n \r\n$ \r\n \r\n81,640 \r\n \r\nNet Assets Invested in Capital Assets, Net of Related Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted \r\nTotal Net Assets \r\n \r\n$ 716,165 43,493 17,863 36,506 \r\n$ 814,027 \r\n \r\n$ 693,827 43,973 16,530 101,567 \r\n$ 855,897 \r\n \r\n-11- \r\n \r\n Statement ofRevenues, Expenses and Changes in Net Assets \r\nChanges in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided, at least directly. For example, state appropriations are nonoperating revenues because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues, even though customers paying for those goods and services are receiving the benefits. \r\n \r\nFollowing is a comparative, condensed version of the Institute's Statement of Revenues, Expenses and Changes in Net Assets as of June 30, 2002 and June 30, 2003: \r\n \r\nStatement of Revenues, Expenses and Changes in Net Assets, Condensed (dollars in thousands) \r\n \r\nJune 30, 2003 \r\n \r\nJune 30, 2002 \r\n \r\nOperating Revenues Operating Expenses \r\n \r\n$ 501,291 756,425 \r\n \r\n$ 451,617 663,780 \r\n \r\nOperating Loss \r\n \r\n$ -255,134 \r\n \r\n$ -212,163 \r\n \r\nNonoperating Revenues and Expenses \r\n \r\n228,933 \r\n \r\n240,412 \r\n \r\nIncome (Loss) Before Other Revenues, Expenses, Gains or Losses \r\n \r\n$ -26,201 \r\n \r\n$ \r\n \r\n28,249 \r\n \r\nOther Revenues, Expenses, Gains or Losses Extraordinary Item \r\n \r\n-4,385 -38,524 \r\n \r\n22,090 \r\n \r\nIncrease (Decrease) in Net Assets \r\n \r\n$ -69,110 \r\n \r\n$ \r\n \r\n50,339 \r\n \r\nNet Assets at Beginning of Year, as Originally Reported \r\n \r\n$ 855,897 \r\n \r\n$ 1,244,023 \r\n \r\nCumulative Effect of Changes in Accounting Principle \r\n \r\n-438,465 \r\n \r\nPrior Period Adjustment \r\n \r\n27,240 \r\n \r\nNet Assets at Beginning of Year Restated \r\n \r\n$ 883,137 \r\n \r\n$ 805,558 \r\n \r\nNet Assets at End of Year \r\n \r\n$ 814,027 \r\n \r\n$ 855,897 \r\n \r\n-111- \r\n \r\n Total revenues (operating, nonoperating, other and extraordinary item) for the year ended June 30, 2003 were $689.4 million, down $24.8 million from the prior year total of $714.2 million. State funding was reduced by $9.7 million due to budget cuts from the economic downturn. The reduction in the nonoperating revenue/(expense) category results primarily from the loss on disposal of buildings (razed for new construction) and equipment. The reduction in capital grants and gifts reflects a smaller expenditure of capital funds from the Georgia State Financing and Investment Commission. Strong growth in research revenue can be attributed to the Institute's past strategic investments in facilities and programs, and the excellence of the Institute's faculty. The tuition revenue increase resulted from 6% in-state and 14% out-of-state average increases in tuition and fees charged, coupled with an increase in student enrollment. Taken together, these changes show that the Institute is becoming more reliant on its ability to generate revenue from and for its programs. The graph below reflects the essence of these significant shifts in revenue and funding support, and the \"Economic Outlook\" section at the end of this Management Discussion and Analysis provides further analysis of this trend. \r\nGeorgia Institute of Technology Revenue \u0026 Extraordinary Item \r\n(dollars in millions) \r\n$500 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - , \r\n FY 2002 $714.2  FY 2003 $689.4 \r\n \r\nTuition and Fees \r\n \r\nGifts, Grants and Contracts \r\n \r\nSales, Services, Other and Extraordinary Item \r\n \r\nState Appropriations \r\n \r\n- IV - \r\n \r\n Total expenses for the year were $758.4 million, exceeding revenues by $31 million. By object of expenditure classification, there was a shift in expenses to salaries/benefits and travel/supplies compared to the prior year (see graph below). \r\nGeorgia Institute of Technology Expenses by Object of Expenditure Classification \r\n(dollars in millions) \r\n FY 2002 $663.8  FY 2003 $758.4 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n \r\n$100 \r\n \r\n$0 \r\n \r\nSalaries and Travel, Supplies, Depreciation \r\n \r\nBenefits \r\n \r\nand Other \r\n \r\nUtilities \r\n \r\nScholarships and Fellowships \r\n \r\nThe functional classification graph shows a greater emphasis on Instruction, Research, and Public Service (a growth rate of 19%), compared to flat or minimal growth in support functions. This chart shows that cost cutting during the economic downturn did protect the Institute's core mission as intended. \r\nGeorgia Institute of Technology Expenses by Functional Classification \r\n(dollars in millions) \r\n \r\n FY 2002 $663.8 \r\n \r\n FY 2003 $758.4 \r\n \r\n$600 -.-----r11MfA\".;.._-------------------------, \r\n \r\n$500 4---'~------1 \r\n \r\n$400 \r\n \r\n$300 \r\n \r\n$200 \r\n \r\n$100 \r\n \r\n$0 \r\nInstruction, Research, and Public Service \r\n \r\nAcademic, Student, and Institutional \r\nSupport \r\n \r\nOperations and Maintenance of \r\nPlant \r\n \r\nAuxiliary Enterprises \r\n \r\nScholarships and Fellowships \r\n \r\n-v- \r\n \r\n Statement ofCash Flows \r\nThe last statement in the report is the Statement of Cash Flows. The statement is divided into five sections. The first section deals with operating cash flows and reflects the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related assets. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. Due primarily to significant capital construction activities, the transfer of the State Data Research Center from the Institute to the Georgia Department of Education (reported as an Extraordinary Item), and the decision to invest in slightly longer term, higher yielding investments, the Institute's cash balance decreased by $62.7 million during the year. The Institute's overall cash position remained strong, with over $52 million available at June 30, 2003. \r\n \r\nCash Flows for the Year Ended June 30, 2003, are reflected in a condensed table below. The cash balance for the beginning of the year has been adjusted upwards to reflect a change in cash reporting criteria for highly liquid short-term investments held with the State of Georgia's Local Government Investment Pool and the Board of Regents Short-Term Investment Pool. This reporting change resulted in a change in the beginning cash balance from a cash overdraft of $4 million to a positive balance of $114.9 million. The condensed statement follows: \r\n \r\nStatement of Cash Flows, Condensed (dollars in thousands) \r\n \r\nJune 30, 2003 \r\n \r\nJune 30. 2002 \r\n \r\nCash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities \r\n \r\n$ -218,932 197,798 -48,706 7140 \r\n \r\n$ -165,938 237,917 -66,584 -38,457 \r\n \r\nCash Flow for the Year \r\n \r\nCash and Cash Equivalents - June 30, 2002 Add: Short-Term Investment Pools \r\n \r\n$ \r\n \r\n-4,518 \r\n \r\n119,406 \r\n \r\nCash and Cash Equivalents - Beginning of Year $_----'1\"\"\"'1'-'4\"\"\"',8~8=8 \r\n \r\n$_--=2'-=8.\"'---54.c.....c.4 \r\n \r\nCash and Cash Equivalents - End of Year \r\n \r\n$===52=,-18-8 \r\n \r\n$===-4=5!=!1'=':8 \r\n \r\n- Vl - \r\n \r\n Capital Assets \r\nThe Institute officially added one major structure in this fiscal year, the new Student Health Center at a cost of $6.3 million. However, the Ford Environmental Science and Technology Building was occupied but not officially transferred to the Institute. It should officially be transferred and recorded on the Institute's books early in the next fiscal year. \r\nFor additional information concerning Capital Assets, see Notes 1, 6, 8, 9, and 10 in the Notes to the Financial Statements. \r\nLong-Term Debt \r\nGeorgia Institute of Technology had a total Long-Term Debt of $89,992,558.18 of which $14,894,127.44 was reflected as current liability at June 30, 2003. \r\nFor additional information concerning Long-Term Debt see Notes 1 and 8 in the Notes to the Financial Statements. \r\nEconomic Outlook \r\nWhile the Institute's long-term local revenue outlook is positive, the national and state economic decline continues to negatively impact funding. State funding cuts are required in fiscal year 2004, in addition to those absorbed in fiscal year 2003. The Institute continues to look for ways to reduce costs and capitalize on its strengths and its ability to generate local revenue to maintain positive momentum and leadership. \r\nThese strengths include: \r\n A rapidly growing and well-diversified but strategically focused research program that increased revenue by $30 million in the current year with new awards in fiscal year 2003 at a record high of $292 million, thus well positioning the Institute for the upcoming year. \r\n Nationally recognized programs that enable the Institute to grow by attracting quality students from all over the world as well as Georgia. \r\n Significant new investments in research and instructional facilities, including global life long learning facilities and technology. \r\n An increasing emphasis on technology transfer, economic development, and business/ industry partnerships. \r\n Continuing high levels of financial support from alumni and friends. \r\nThese strengths, coupled with the Institute's strategic plan, investments, and initiatives, and management's determination to maintain the positive momentum of recent years, position the Institute well for the future. \r\nRobert K. Thompson Senior Vice President Administration and Finance \r\n- vu - \r\n \r\n BASIC FINANCIAL STATEMENTS - 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30. 2003 \r\nASSETS \r\nCurrent Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net Prepaid Items Inventories \r\nTotal Current Assets \r\nNoncurrent Assets Cash and Cash Equivalents Investments Notes Receivable, Net Capital Assets, Net (See Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent Liabilities Accounts Payable Contracts Payable Deposits Deferred Revenue Salaries Payable Other Liabilities Deposits Held for Other Organizations Capital Leases Compensated Absences (Current Portion) \r\nTotal Current Liabilities \r\nNoncurrent Liabilities Compensated Absences Long-Term Liabilities \r\nTotal Noncurrent Liabilities \r\nTotal Liabilities \r\nNET ASSETS \r\nInvested in Capital Assets, Net of Related Debt Restricted for: \r\nNonexpendable Expendable Unrestricted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of this statement. \r\n-3- \r\n \r\nEXHIBIT\"A\" \r\n \r\n$ 52.185,992.65 13,064,870.01 54,960,350.93 3,837,919.11 514,735.26 \r\n$ 124,563,867.96 \r\n \r\n$ \r\n \r\n2,014.11 \r\n \r\n51,820,526.42 \r\n \r\n7,205,165.03 \r\n \r\n780,675,509.51 \r\n \r\n$ 839,703,215.07 \r\n \r\n$ 964,267,083.03 \r\n \r\n$ 3,202,027.91 5,692,853.58 17,078,983.11 26,957,605.54 280,985.74 1,753,070.86 5,282,323.07 283,789.98 14,610,337.46 \r\n$ 75,141,977.25 \r\n$ 10,871,321.54 64,227,109.20 \r\n$ 75,098,430.74 \r\n$ 150,240,407.99 \r\n$ 716,164,610.33 \r\n43,493,399.60 17,862,656.37 36,506,008.74 \r\n$ 814,026,675.04 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENDED JUNE 30, 2003 \r\nOPERATING REVENUES \r\nStudent Tuition and Fees Less: Scholarship Allowances \r\nFederal Grants and Contracts State and Local Grants and Contracts Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises \r\nResidence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues \r\nTotal Operating Revenues \r\nOPERATING EXPENSES \r\nSalaries Faculty Staff \r\nOther Personal Services Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation \r\nTotal Operating Expenses \r\nOperating Income (Loss) \r\nNONOPERATING REVENUES (EXPENSES) \r\nState Appropriations Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues \r\nNet Nonoperating Revenues \r\nIncome (Loss) Before Other Revenues, Expenses, Gains, or Losses \r\nCapital Grants and Gifts State Nongovernmental \r\nOther Grants and Contracts Loss on Disposal of Capital Assets \r\nTotal Other Revenues and Losses \r\nExtraordinary Item (See Note 15) \r\nIncrease (Decrease) in Net Assets \r\nNet Assets Net Assets - Beginning of Year, as Originally Reported Prior Period Adjustments - See Note 1 \r\nNet Assets - Beginning of Year, Restated \r\nNet Assets - End of Year \r\nThe notes to the financial statements are an integral part of this statement. \r\n-5- \r\n \r\nEXHIBIT\"B\" \r\n$ 93,226,026.35 -10,956,782.00 228,794,222.43 8,999,258.21 96,480,049.44 11,119,484.38 \r\n29,391,092.70 990,892.21 \r\n13,210,021.97 7,342,859.08 4,397,476.93 1,810,069.96 1,287,940.89 15,197,950.50 \r\n$ 501,290,563.05 \r\n$ 184,656,024.83 206,631,980.17 1,599,093.52 76,664,946.76 11,926,009.10 9,284,014.00 20,912,778.50 200,681,744.11 44,068,606.84 \r\n$ 756,425,197.83 \r\n$ -255, 134,634.78 \r\n$ 219,246,021.00 1,967,883.27 8,259,710.57 -2,029,840.82 1,489,422.55 \r\n$ 228,933,196.57 \r\n$ -26,201,438.21 \r\n$ 2,362,184.02 974,786.98 \r\n6,374,164.60 -14,095,876.93 \r\n$ -4,384,741.33 \r\n$ -38,524,309.04 \r\n$ -69, 110,488.58 \r\n$ 855,896,633.72 27,240,529.90 \r\n$ 883, 137, 163.62 \r\n$ 814,026,675.04 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2003 \r\nCASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) \r\nNet Cash Provided (Used) by Operating Activities \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Extraordinary Item \r\nNet Cash Flows Provided (Used) by Noncapital Financing Activities \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Lease Interest Paid on Capital Debt and Lease \r\nNet Cash Provided (Used) by Capital and Related Financing Activities \r\nCASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments \r\nNet Cash Provided (Used) by Investing Activities \r\nNet Increase (Decrease) in Cash \r\nCash and Cash Equivalents - June 30, 2002 Add: Short-Term Investments Pools \r\nCash and Cash Equivalents - Beginning of Year \r\nCash and Cash Equivalents - End of Year \r\n-6- \r\n \r\nEXHIBIT\"C\" \r\n \r\n$ 82,055,367.38 \r\n325,509,544.56 10,558,702.26 \r\n-322,276,346.07 -391,243, 154.60 \r\n-9,284,014.00 -3,279,960.26 3,318,961.47 \r\n27,762,940.01 992,859.88 \r\n13,088,137.37 7,390,922.89 4,386,981.93 1,808,739.54 2,393,433.90 \r\n27,884,210.11 \r\n$ -218,932,673.63 \r\n \r\n$ 219,246,021.00 \r\n5,486,254.13 11,590,503.67 -38,524,309.04 \r\n$ 197,798,469.76 \r\n \r\n$ \r\n \r\n3,336,971.00 \r\n \r\n-49,268,458.08 \r\n \r\n-744,760.34 \r\n \r\n-2,029,840.82 \r\n \r\n$ -48,706,088.24 \r\n \r\n$ \r\n \r\n8,016,127.63 \r\n \r\n-876, 155.21 \r\n \r\n$ \r\n \r\n7,139,972.42 \r\n \r\n$ -62,700,319.69 \r\n \r\n$ -4,518,302.73 \r\n119,406,629.18 \r\n \r\n$ 114,888,326.45 \r\n \r\n$ 52,188,006.76 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS \r\nYEAR ENDED JUNE 30, 2003 \r\n \r\nEXHIBIT\"C\" \r\n \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: \r\nOperating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash \r\nProvided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivables, Net Inventories Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences \r\nNet Cash Provided (Used) by Operating Activities \r\n \r\n$ -255.134,634. 78 \r\n44,068,606.84 \r\n-12,546,581.65 52,747.69 \r\n2,808,922.37 -1,074,716.32 \r\n352,853.57 714,568.67 1,825,559.98 \r\n$ -218,932,673.63 \r\n \r\nNONCASH ACTIVITY NONCASH INVESTING - NONCAPITAL FINANCING, AND CAPITAL AND RELATED FINANCING TRANSACTIONS Fixed Assets Acquired by Incurring Capital Lease Obligations Changes in Fair Value of Investments Recognized as a Component of Interest Income Changes in Interest Receivable Affecting Interest Received \r\n \r\n$ 64,073,545.12 \r\n$ ===4.8.2.=,0=4=5=.4.4... $===1=60::!:,6=0=5=.7=9 \r\n \r\nThe notes to the financial statements are an integral part of this statement. -7- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS Georgia Institute of Technology 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. \r\nREPORTING ENTITY Georgia Institute of Technology is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity. \r\nThe Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As a component unit of the State of Georgia, the Institute is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38 provides a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. \r\nGenerally 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 school revenues and expenses in the year in which the predominate activity takes place. \r\n-9- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nBASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-institute transactions have been eliminated. \r\nThe Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date. \r\nRESTATEMENT OF PRIOR YEAR NET ASSETS -BEGINNING OF YEAR In the initial year of implementation of GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities, the Institute failed to include residual values on its depreciable capital assets in accordance with asset capitalization policies adopted in the Capital Asset Guide for the University System of Georgia. As a result of the Institute's inclusion of residual values for depreciable capital assets, net assets at July 1, 2002 were increased by $17,152,900.39 for the effects on accumulated depreciation. In addition, the Institute corrected the prior year beginning capital assets values of buildings constructed or renovated using funds contributed by the Atlanta Committee for the Olympic Games. As a result of this and various other minor capital assets adjustments, net assets at July 1, 2002 were increased by $10,087,629.51 for the effects on assets and accumulated depreciation. \r\nCASH 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. \r\nSHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal. \r\nINVESTMENTS The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nINVESTMENTS component of investment income in the statements of revenues, expenses and changes in net assets. The Board of Regents Total Return Fund is included under Investments. \r\nInvestments in the various investment pools maintained by the Institute consist in part, of U. S. Agency Securities and other mortgage-backed securities such as collateralized mortgage obligations and adjustable rate mortgages. These mortgage-backed securities are reported as U. S. Government Securities and Corporate Obligations in the note of custodial credit risk. (See Note 2 on Categorization of Investments.) Investments in the investment pools are transacted by an external investment firm under direction of investment advisory agreement executed between the Institute and the investment management firm. As of June 30, 2003, the Institute had $525,460.44 invested in U.S. Agency Securities and other mortgage-backed securities. \r\nACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. \r\nINVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. \r\nResale Inventories are valued at cost using the average-cost basis. \r\nNONCURRENT 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. \r\nCAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment. \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCAPITAL ASSETS To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. \r\nEffective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Georgia Institute of Technology when complete. For the year ended June 30, 2003, GSFIC transferred capital additions valued at $2,362,184.02 and noncapital additions valued at $6,327,654.93 to Georgia Institute of Technology. \r\nDEPOSITS Deposits represent good faith deposits from students to reserve housing assignments in an Institute residence hall, Institute controlled funds held for the disbursement of employee benefits, and other various activities at the Institute. \r\nDEFERRED 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. \r\nCOMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $23,656,099.02 as of July 1, 2002. For fiscal year 2003, $16,445,422.62 was earned in compensated absences and employees were paid $14,619,862.64 for a net increase of $1,825,559.98. The ending balance as of June 30, 2003 in accrued liability for compensated absences is $25,481,659.00. Compensated absences include a current liability of $14,610,337.46. \r\nNONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. \r\n- 12 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNET ASSETS The Institute's net assets are classified as follows: \r\nInvested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term \"debt obligations\" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. \r\nRestricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The Institute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. \r\nRestricted net assets - expendable: Restricted expendable net assets include resources in which the Institute is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. \r\nUnrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) which must be refunded to the Board of Regents of the University System of Georgia Administrative Central Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2003, there was no surplus balance to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. \r\nUnrestricted Net Assets includes the following items which are quasi-restricted by management. \r\n \r\n- 13 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\n \r\nNET ASSETS \r\n \r\nJune 30, 2003 \r\n \r\nR\u0026RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted \r\n \r\n$ 11,362,500.51 24,217,902.12 599,306.78 326,299.33 \r\n \r\nTotal Unrestricted Net Assets \r\n \r\n$ 36.506.008.74 \r\n \r\nWhen an expense is incurred that can be paid using either restricted or unrestricted resources, the Institute's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. \r\n \r\nINCOME TAXES Georgia Institute of Technology, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. \r\n \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: \r\n \r\nOperating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. \r\n \r\nNonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. \r\n \r\nSCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from \r\n \r\n- 14 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nSCHOLARSHIP ALLOWANCES such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\nSTATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia (and thus Georgia Institute of Technology) 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: \r\n1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia. \r\n2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. \r\n3. 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. \r\n4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. \r\n5. 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, or 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 Bank, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. \r\n6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. \r\nAs authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Georgia Institute of Technology), the option of exempting demand deposits from the collateral requirements. \r\nThe 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. \r\n- 15 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nCATEGORIZATION OF DEPOSITS The Institute's cash deposits are categorized by risk as follows: \r\n \r\nCategory 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the Institute or by its agent in the Institute's name. \r\n \r\nCategory 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the Institute's name. \r\n \r\nCategory 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the Institute's name, and amounts uncollateralized. \r\n \r\nCash Deposits as of June 30, 2003 are as follows: \r\n \r\nCash Deposits \r\n \r\nCarrying Amount \r\n \r\nBank Balances \r\n \r\ns 2 530 763.21 $16.563.633.56 s \r\n \r\nRisk Categories \r\n \r\n2 \r\n \r\n3 \r\n \r\n65.31411 s=====o=.o,,,,.o $16,428,318.72 \r\n \r\nCATEGORIZATION OF INVESTMENTS The Institute's investments are categorized as to credit risk within the three categories described below: \r\n \r\nCategory 1 - Insured or registered, or securities held by the Institute or its agent in the Institute's name. \r\n \r\nCategory 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the Institute's name. \r\n \r\nCategory 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the Institute's name. \r\n \r\nAt June 30, 2003, the Institute's investments consisted of the following: \r\n \r\n- 16 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS \r\n \r\nCATEGORIZATION OF INVESTMENTS \r\n \r\nTyJ:!e oflnvestments \r\n \r\nCommon Stock \r\n \r\n$ \r\n \r\nCorporate Bonds \r\n \r\nU.S. Government Securities and \r\n \r\nCorporate Obligations \r\n \r\nTotals \r\n \r\n$ \r\n \r\nInvestments Not Subject to Categorizations: Board of Regents Short-Term Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate Office of Treasury and Fiscal Services Georgia Extended Asset Pool Georgia Fund 1 \r\n \r\nTotal Investments \r\n \r\nRisk Categories 2 \r\n74,258.31 $ 944,303.54 $ 2,900,008.25 \r\n1,715.97 10,221,944.40 \r\n15,214.28 $14 066 256 12 $ \r\n \r\nCarrying \r\n \r\n3 \r\n \r\nAmount \r\n \r\n0.00 $ 1,018,561.85 2,900,008.25 \r\n \r\n10,223,660.37 \r\n \r\n0.00 $ 14,142,230.47 \r\n \r\n25,035,992.60 37,723,132.67 \r\n-46,294.83 1,458.11 \r\n13,029,870.01 24,568,568.75 \r\n$114 454 251.18 \r\n \r\nFunds invested in an investment pool managed by another governmental entity are not required to be categorized since the Institute did not own any specific, identifiable investment securities of the pool. \r\n \r\nNOTE 3: ACCOUNTS RECEIVABLE \r\n \r\nAccounts receivable consisted of the following at June 30, 2003. \r\n \r\nJune 30, 2003 \r\n \r\nStudent Tuition and Fees Auxiliary Enterprises and Other Operating \r\nActivities Federal, State, and Private Funds Georgia State Financing and Investment \r\nCommission \r\n \r\n$ 762,969.14 \r\n7,402,099.47 47,054,796.93 \r\n1,626. 706.99 \r\n \r\nLess Allowance for Doubtful Accounts \r\n \r\n$ 56,846,572.53 1,886,221.60 \r\n \r\nNet Accounts Receivable \r\n \r\n$ 54.960.350.93 \r\n \r\n- 17 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 4: INVENTORIES \r\n \r\nInventories consisted of the following at June 30, 2003. \r\n \r\nJune 30, 2003 \r\n \r\nPhysical Plant Other \r\n \r\n$ 243,510.86 271,224.40 \r\n \r\nTotal \r\n \r\n$ 514,735.26 \r\n \r\nNOTE 5: NOTES/LOANS RECEIVABLE \r\n \r\nNotes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2003, the allowance for uncollectible loans was approximately $35,000.00. \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nFollowing are the changes in capital assets for the year ended June 30, 2003: \r\n \r\n- 18 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 6: CAPITAL ASSETS \r\n \r\nBeginning Balance July 1, 2002 {Restated} \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding Balance June 30. 2003 \r\n \r\nCapital Assets, Not Being Depreciated: \r\n \r\nLand and Land Improvements \r\n \r\n$ \r\n \r\nConstruction Work-In-Progress \r\n \r\nCapitalized Collections \r\n \r\n29,335,742.64 $ 660,629.00 \r\n \r\n$ \r\n \r\n21,531,327.46 17,530,075.62 $12,782,639.49 \r\n \r\n3,350,335.00 \r\n \r\n48,440.00 _ _ _ _ \r\n \r\n29,996,371.64 26,278,763.59 3,398,775.00 \r\n \r\nTotal Capital Assets Not Being Depreciated \r\n \r\n$ 54,217,405.10 $ 18,239,144.62 $12,782,639.49 $ 59,673,910.23 \r\n \r\nCapital Assets, Being Depreciated: \r\n \r\nInfrastructure \r\n \r\n$ 36,947,445.78 $ 1,023,637.59 $ 759,877.08 $ 37,211,206.29 \r\n \r\nBuilding and Building Improvements 635,795,935.17 15,425,228.02 7,414,208.61 643,806,954.58 \r\n \r\nFacilities and Other Improvements \r\n \r\n13,736,862.72 \r\n \r\n156,225.00 \r\n \r\n13,893,087.72 \r\n \r\nEquipment \r\n \r\n272,822,254.66 25,829,830.96 26,102,891.09 272,549,194.53 \r\n \r\nCapital Leases \r\n \r\n3,354,070.34 64,073,545.12 209,569.35 67,218,046.ll \r\n \r\nLibrary Collections \r\n \r\n65,423,661.05 4,554,104.00 \r\n \r\n8.760.66 69.969.004.39 \r\n \r\nTotal Assets Being Depreciated \r\n \r\n$1,028,080,229.72 $111,062,570.69 $34,495,306.79 $1,104,647,493.62 \r\n \r\nLess: Accumulated Depreciation: Infrastructure Buildings Facilities and Other Improvements Equipment Capital Leases Library Collections \r\n \r\n$ 7,278,035.72 $ 782,503.54 $ 1,175,686.95 $ 6,884,852.31 \r\n \r\n141,444,451.49 13,248,848.99 2,455,101.65 152,238,198.83 \r\n \r\n5,653,616.35 \r\n \r\n295,525.91 \r\n \r\n5,949,142.26 \r\n \r\n160,035,903.15 22,972,830.12 16,740,817.39 166,267,915.88 \r\n \r\n640,635.29 2,987,113.21 \r\n \r\n19,063.21 \r\n \r\n3,608,685.29 \r\n \r\n44,924,075.36 3.781,785.07 \r\n \r\n8,760.66 48,697,099. 77 \r\n \r\nTotal Accumulated Depreciation $ 359.976.717.36 $ 44,068.606.84 $20,399,429.86 $ 383.645.894.34 \r\n \r\nTotal Capital Assets, Being Depreciated, \r\n \r\nNet \r\n \r\n$ 668,103.512.36 $ 66,993.963.85 $14,095,876.93 $ 721,001.599.28 \r\n \r\nCapital Assets, Net \r\n \r\n$ 722.320 91746 $ 85 233.108.47 $26 878 516 42 $ 780 675.509.51 \r\n \r\nNOTE 7: DEFERRED REVENUE \r\n \r\nDeferred revenue consists of the following at June 30, 2003. \r\n \r\nJune 30, 2003 \r\n \r\nPrepaid Tuition and Fees Research Other Deferred Revenue \r\n \r\n$15,762,812.56 7,104,002.10 4,090,790.88 \r\n \r\nTotals \r\n \r\n$26,957,605.54 \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nLong-Term liability activity for the year ended June 30, 2003 was as follows: \r\n \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 8: LONG-TERM LIABILITIES \r\n \r\nBeginning Balance July l, 2002 \r\n \r\nAdditions \r\n \r\nReductions \r\n \r\nEnding \r\nBalance June 30, 2003 \r\n \r\nCurrent Portion \r\n \r\nLeases Lease Obligations \r\n \r\n$ 1,252,955.00 $ 64,073,545.12 $ 815,600.94 $ 64,510,899.18 $ 283,789.98 \r\n \r\nOther Liabilities Compensated Absences \r\n \r\n23,656,099.02 16,445,422.62 14,619,862.64 25,481,659.00 14,610,337.46 \r\n \r\nTotal Long-Term Obligations $ 24 202 054 02 $ 80 518 26114 $ 15 435 463 58 $ 82,222,558 18 $ 14 894 121.44 \r\n \r\nNOTE 9: SIGNIFICANT CONSTRUCTION COMMITMENTS \r\n \r\nGeorgia Institute of Technology had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,393,198.76 as of June 30, 2003. This amount is not reflected in the accompanying basic financial statements. \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nGeorgia Institute of Technology is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. \r\n \r\nFuture commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2003, were as follows: \r\n \r\nYear Ending June 30: 2004 2005 2006 2007 2008 2009 - 2013 2014 - 2018 2019 - 2023 2024-2026 \r\nTotal Minimum Lease Payments \r\nLess: Interest \r\nPrincipal Outstanding \r\n \r\nReal Property \r\n \r\nCapital \r\n \r\nOperating \r\n \r\nLeases \r\n \r\nLeases \r\n \r\n$ 4,131,620.24 4,173,453.63 4,033,038.05 4,143,792.15 4,273,438.63 23,508,091.24 27,517,935.86 32,211,751.52 18,081,516.10 \r\n \r\n$5,789,171.87 \r\n \r\n$122,074,637.42 $ 5,789,171.87 \r\n \r\n57,563,738.24 \r\n \r\n$ 64,510,899.18 \r\n \r\n- 20- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\n \r\nCAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2004 and 2026. Expenses for fiscal year 2003 were $2,774,601.16 of which $2,029,840.82 represented interest. Total principal paid on capital leases was $744,760.34 for the fiscal year ended June 30, 2003. Interest rates range from 5 percent to 11 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2003: \r\n \r\nBuildings Equipment \r\n \r\n$61,361,469.93 2,247,890.89 \r\n \r\nTotal Assets Held Under Capital Lease \r\n \r\n$63.609.360.82 \r\n \r\nCertain 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. \r\n \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2004 through 2005. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. \r\n \r\nDescription of Related Party Leases In 1994, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $14,815.50. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $177,786.00 in fiscal year 2004. \r\n \r\nIn 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $105,055.82. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,260,669.84 in fiscal year 2004. \r\n \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 10: LEASE OBLIGATIONS \r\nOPERATING LEASES \r\nDescription of Related Party Leases In 1995, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $32,248.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $386,976.00 in fiscal year 2004. \r\nIn 2000, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $15,462.71. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $185,552.52 in fiscal year 2004. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $3,732.47. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $44,789.64 in fiscal year 2004. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Tech Research Corporation (GTRC), a related party, for office space renewable each year. The current agreement is for July 1, 2003 through June 30, 2004 for monthly fees of $93,622.00. The agreement does contain a renewal option. Under this agreement, Georgia Institute of Technology is obligated to pay Georgia Tech Research Corporation $1,123,464.00 in fiscal year 2004. \r\nNoncancellable operating lease expenses in 2003 were $12,475,968.17 for real property. \r\nNOTE 11: RETIREMENT PLANS \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\nPlan Description Georgia Institute of Technology participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. \r\n \r\nFunding Policy Employees of Georgia Institute of Technology who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: \r\n \r\nFiscal Year \r\n2003 2002 2001 \r\n \r\nPercentage Contributed \r\n100% 100% 100% \r\n \r\nRequired Contribution \r\n$15,907,134.52 $14,821,929.46 $18,792,120.88 \r\n \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute of Technology participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. \r\n \r\nThe benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an \"old plan\" member subject to the plan provisions in effect prior to July 1, 1982. All other members are \"new plan\" members subject to the modified plan provisions. \r\n \r\nUnder both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nPlan Description Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. \r\nIn addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. \r\nThe ERS issues a financial report each fiscal year which may be obtained through ERS. \r\nFunding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2003, for employees covered by ERS was $695,601.14. The Institute's total payroll for all employees was $392,887,098.52. \r\nUnder the old plan, member contributions consist of 7.41 % of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Institute pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The Institute also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2003, the ERS employer contribution rate for the Institute amounted to 7.26% of covered payroll and included the amounts contributed on behalf of the employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. \r\nTotal contributions to the plan made during fiscal year 2003 amounted to $85,510.28, of which $50,501.97 was made by the Institute and $35,008.31 was made by employees. These contributions met the requirements of the plan. \r\n \r\n-24- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nEMPLOYEES' RETIREMENT SYSTEM OF GEORGIA \r\nActuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2003, financial report which may be obtained through ERS. \r\nREGENTS RETIREMENT PLAN \r\nPlan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan established and administered by the Board of Regents of the University System of Georgia, under which it may purchase annuity contracts for the purpose of providing retirement and death benefits for eligible faculty and principal administrators. 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. \r\nFunding Policy Member contribution requirements are established by the Board of Trustees of the Teachers Retirement System. Employer contributions are established by statute and may be amended only by the General Assembly of the State of Georgia. The employer contributes 10.02% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. \r\nGeorgia Institute of Technology and the covered employees made the required contributions of $13,936,579.28 (10.02%) and $6,953,104.25 (5%), respectively. \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. \r\nBenefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of \r\n- 25 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11: RETIREMENT PLANS \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nBenefits 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. \r\nContributions and Vesting 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. \r\nTotal contributions made by employees during fiscal year 2003 amounted to $788,654.67 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. \r\nNOTE 12: RISK MANAGEMENT \r\nGeorgia Institute of Technology is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Georgia Institute of Technology and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the financial statements of the Board of Regents of the University System of Georgia-Administrative Central Office. All units of the University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents. \r\nThe Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, as an organizational unit of the Board of Regents of the University System of \r\n-26- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12: RISK MANAGEMENT \r\nGeorgia, 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. \r\nA 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. \r\nNOTE 13: CONTINGENCIES \r\nAmounts 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 which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position. \r\nEffective for periods beginning July 1, 2003, Georgia Institute of Technology has entered into a series of agreements to acquire space for the College of Management, bookstore, Distance Learning and Professional Education, and other academic and research space from the Georgia Tech Foundation Funding Corporation. These agreements grant GIT the exclusive right of annual renewal upon designated notification to the landlord prior to the beginning of each fiscal year. For fiscal year 2004, the Institute's obligation will be $17.4 million. \r\nLitigation, claims and assessments filed against Georgia Institute of Technology (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. Employees who are eligible for retirement or disability under the criteria established by the Teachers Retirement System of Georgia and who \r\n-27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nhave at least ten years of service with the University System of Georgia are eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. \r\nAs of June 30, 2003, there were 1,101 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Georgia Institute of Technology recognized as incurred $4,274,159.53 of expenditures, which was net of $1,345,730.46 of participant contributions. \r\nNOTE 15: EXTRAORDINARY ITEM \r\nBy Executive Order dated January 31, 2003, budgetary and programmatic responsibilities for the State Data Research Center were transferred from the Georgia Institute of Technology to the Georgia Department of Education and the Governors Office of Planning and Budget. Unspent appropriations totaling $38,524,309.04 were transferred to the two agencies now responsible for the Center. \r\n \r\n- 28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2003 \r\n \r\nEXHIBIT \"D\" - \r\n \r\nNOTE 16: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe Institute's operating expenses by functional classification are shown below: \r\n \r\nStatement ofOperating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003 \r\n \r\nFunctional Classification \r\n \r\nNatural Classification \r\n \r\nInstruction \r\n \r\nResearch \r\n \r\nPublic Service \r\n \r\nAcademic Suimort \r\n \r\nStudent Services \r\n \r\nSalaries Faculty Staff \r\nOther Personal Services Employee Benefits Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices \r\nDepreciation \r\n \r\n$ 77,018,728.11 43,800,178.99 547,893.68 23,509,080.62 2,061,209.49 \r\n \r\n$ 96,877,369.95 73,979,011.81 326,271.00 29,723,881.75 7,823,901.45 \r\n \r\n$ 7,096,567.70 12,215,348.64 600,058.16 \r\n3,926,398.43 1,075,938.04 \r\n \r\n$ 2,809,661.24 $ 81,820.22 \r\n \r\n15,629,178.84 8,744,821.09 \r\n \r\n10,281.55 \r\n \r\n44,634.31 \r\n \r\n4,059,298.09 1,725,982.25 \r\n \r\n320,847.65 \r\n \r\n209,011.75 \r\n \r\n2,008,241.18 \r\n17,709,650.05 3,510,992.72 \r\n \r\n2,398,684.62 \r\n96,678,751.82 16,547,725.03 \r\n \r\n759,869.76 \r\n26,533,924.77 400,980.41 \r\n \r\n429,668.78 \r\n6,139,645.48 4,512,607.34 \r\n \r\n188,101.97 \r\n7,227,908.03 1,302,164.06 \r\n \r\nTotal Operating Expenses \r\n \r\n$]70 165 274 84 $324 355 521 13 $52 602 085 21 $33 211 188 21 $ 12 524 443 68 \r\n \r\nNatural Classification \r\nSalaries Faculty Staff \r\nOther Personal Services Employee Benefits Travel Scholarships and \r\nFellowships Utilities Supplies and Other \r\nServices Depreciation \r\nTotal Operating Expenses \r\n \r\nInstitutional Suimort \r\n \r\nFunctional Classification \r\n \r\nPlant \r\n \r\nOperations and Scholarships \r\n \r\nAuxiliary \r\n \r\nMaintenance and Fellowshins Entemrises \r\n \r\nTotal Operating Exnenses \r\n \r\n$ 537,007.28 20,204,181.18 68,324.82 \r\n6,453,509.69 243,534.21 \r\n \r\n$ 234,870.33 20,329,774.07 \r\n1,630.00 4,789,771.41 \r\n75,180.16 \r\n \r\n399,226.57 9,753,655.05 \r\n2,987,788.89 18,088,110.49 11,335,862.11 2,152,860.45 \r\n$ ~22243415 $ 55 425 851 26 \r\n \r\n$ 9,284,014.00 $ 2281Ql400 \r\n \r\n$11,729,485.55 \r\n2,477,024.52 116,386.35 \r\n \r\n$184,656,024.83 206,631,980.17 \r\n1,599,093.52 76,664,946.76 11,926,009.10 \r\n \r\n9,284,014.00 4,975,330.57 20,912,778.50 \r\n \r\n25,315,964.58 200,681,744.11 4,305,414.72 44,068,606.84 \r\n \r\n$18 212 606 22 $156 425 121 83 \r\n \r\n-29- \r\n \r\n SUPPLEMENTARY INFORMATION - 31 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - (NON-GAAP BASIS} RESIDENT INSTRUCTION \r\nYEAR ENDED JUNE 30, 2003 \r\n \r\nSCHEDULE \"1\" \r\n \r\nREVENUES \r\nState Appropriations Other Revenues Retained \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 191,556,918.00 $ 191,556,918.00 $ 421,258,678.00 331,790,419.17 \r\n \r\n0.00 -89,468,258.83 \r\n \r\n$ 612,815,596.00 $ 523,347,337.17 $ _ _-8_9.:..,.,4_68....:.,2_5_8_.8_3 \r\n \r\nEXPENDITURES \r\nPersonal Services: Education, General and Departmental Services Sponsored Operations \r\nOperating Expenses: Education, General and Departmental Services Sponsored Operations \r\nCapital Outlay Special Funding Initiative Research Consortium \r\n \r\n$ 259,555,702.00 $ 248,349,728.63 $ \r\n \r\n99,182,658.00 \r\n \r\n93,930,293.97 \r\n \r\n90,134,072.00 100,817,342.00 \r\n39,986,572.00 4,572,463.00 18,566,787.00 \r\n \r\n69,670,753.49 88,775,131.51 18,992,153.67 \r\n5,301,867.46 18,443,255.12 \r\n \r\n11,205,973.37 5,252,364.03 \r\n20,463,318.51 12,042,210.49 20,994,418.33 \r\n-729,404.46 123,531.88 \r\n \r\n$ 612,815,596.00 $ 543,463,183.85 $ _ ___;6;..:.9.!..::,3..:..:52::..,..4..;..1;..;;;2.;..;.1~5 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ -20, 115,846.68 $ ======-2=0,1,.1;,=15_,8=4=6=.6=8 \r\n \r\n(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\nSee notes to the financial statements. \r\n \r\n- 33- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - (NON-GAAP BASIS) LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 2003 \r\n \r\nSCHEDULE \"2\" \r\n \r\nREVENUES \r\nState Appropriations Other Revenues Retained \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 2,742,978.00 $ 5,939,193.00 \r\n \r\n2,742,978.00 $ 0.00 \r\n \r\n0.00 -5,939, 193.00 \r\n \r\n$ 8,682,171.00 $ \r\n \r\n2,742,978.00 $ _ _____:-5c,,,9:,:.:.39=.!'.:..:19:.:.3.:.:.0-=-0 \r\n \r\nEXPENDITURES \r\nEquipment, Technology and Construction Trust Fund \r\nStudent Information System \r\n \r\n$ 2,742,978.00 $ 5,939,193.00 \r\n \r\n2,717,274.87 $ 5,939,193.00 \r\n \r\n25,703.13 0.00 \r\n \r\n$ 8,682,171.00 $ \r\n \r\n8,656,467.87 $ _ ____,;;;;.25;;.:.,7.;.;0:.:.3.;.;.1.:..3 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ -5,913,489.87 $ =====-5_,9;;;.1;.;;3~,4~8~9-.;.;,87;., \r\n \r\n(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\nSee notes to the financial statements. \r\n \r\n- 34- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - (NON-GAAP BASIS) OTHER ORGANIZED ACTIVITIES \r\nYEAR ENDED JUNE 30. 2003 \r\n \r\nSCHEDULE \"3\" \r\n \r\nFUNDS AVAILABLE REVENUES \r\nState Appropriations Other Revenues Retained CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 24,946,125.00 $ 24.946, 125.00 $ 134,650,780.00 118,077,386.58 \r\n \r\n0.00 -16,573,393.42 \r\n \r\n16,085,634.00 \r\n \r\n16,085,634.00 \r\n \r\n0.00 \r\n \r\n$ 175,682,539.00 $ 159,109,145.58 $ _ _-1;.;:.6,c:,5.;,_;73:.!.,3:.:9;.;:.3.:..:;42:. \r\n \r\nEXPENDITURES \r\nPersonal Services: Education, General and Departmental Services Sponsored Operations \r\nOperating Expenses: Education, General and Departmental Services Sponsored Operations \r\nAgricultural Research Advanced Technology Development Center/Economic \r\nDevelopment Institute CATEA (formerly CRT) \r\n \r\n$ 28,381,059.00 $ 27,817,277.54 $ \r\n \r\n47,584,500.00 \r\n \r\n49,439,668.87 \r\n \r\n43,097,880.00 24,029,036.00 \r\n1,740,142.00 \r\n \r\n22,247,629.81 21,209,130.66 \r\n1,740,142.00 \r\n \r\n23,002,628.00 7,847,294.00 \r\n \r\n18,357,369.55 5,074,904.09 \r\n \r\n563,781.46 -1,855,168.87 \r\n20,850,250.19 2,819,905.34 0.00 \r\n4,645,258.45 2,772,389.91 \r\n \r\n$ 175,682,539.00 $ 145,886,122.52 $ _ _2:;.:.9.!.:.,7.;:.96:.,_,4.;_;1.:;.6;,.;.4.;:_8 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ 13,223,023.06 $ ===13;;,i,,;.;22;.;3~,0;;,;2~3~.0=6 \r\n \r\n(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. \r\n \r\nSee notes to the financial statements. \r\n \r\n-35- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\nYEAR ENDED JUNE 30, 2003 \r\n \r\nSCHEDULE \"4\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals - Payroll June 30, 2003 June 30, 2002 \r\n \r\nCompensated Absences June 30, 2003 June 30, 2002 \r\n \r\nPrepaid Salaries June 30, 2003 June 30, 2002 \r\n \r\nAdjustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nFloyd College \r\n \r\nWang, \r\n \r\nLong \r\n \r\nGeorgia State University \r\n \r\nO'Farrell, Laura \r\n \r\nGeorgia Southern University \r\n \r\nZhang, \r\n \r\nJin-yuan \r\n \r\nMiddle Georgia College \r\n \r\nRoubides, Pascal \r\n \r\nState University of West Georgia \r\n \r\nLeavitt, \r\n \r\nAndrew \r\n \r\nMalone, \r\n \r\nKareen R. \r\n \r\nSouthern Polytechnic State University \r\n \r\nDeng, \r\n \r\nShangrong \r\n \r\nValdosta State University \r\n \r\nDeng, \r\n \r\nShangrong \r\n \r\nSALARIES \r\n \r\nTRAVEL \r\n \r\n$ 391,286,901.45 $ 11,926,009.10 \r\n \r\n280,985.74 -171, 125.90 \r\n \r\n23,670,839.76 -21,975,010.70 \r\n \r\n-2,491,394.48 2,148,470.65 \r\n \r\n24,000.00 7,499.00 \r\n15,000.00 24,000.00 \r\n3,000.00 15,000.00 24,000.00 24,933.00 \r\n$ 392,887,098.52 $ 11,926,009.10 \r\n \r\nSee notes to the financial statements. \r\n \r\n- 36- \r\n \r\n SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY AUDITEE'S RESPONSE \r\nSUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 \r\n \r\nPRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nFINDING CONTROL NUMBER AND STATUS \r\n \r\nFS-503-02-01 \r\n \r\nPartially Resolved - See Corrective Action/Responses \r\n \r\nCORRECTIVE ACTION/RESPONSES \r\n \r\nCAPITAL ASSETS Inadequacies in Operation of Property Management System Finding Control Number: FS-503-02-01 \r\n \r\nDuring April 2002, the new Capital Asset Management System was implemented as planned. This new system and the related operating procedures have strengthened the controls over the identification and recording ofequipment additions and dispositions, and the documentation ofchanges to the equipment inventory. This change has strengthened internal accounting controls over the equipment inventory process; however, improvement has not been uniform on the campus. Test samples conducted by the Institute's Capital Assets Accounting Department indicated that additional stafftraining was needed in some departments to insure that the new system is used effectively. This on-going training program has been initiated, and management will continue to monitor progress in this area to complete this corrective action plan. \r\n \r\n SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2003 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nCAPITAL ASSETS Inadequate Capital Asset Records Finding Control Number: FS-503-03-01 \r\n \r\nCriteria: \r\n \r\nThe Institute should maintain its Capital Asset records in accordance with the Board of Regents Capital Asset Guide for the University System of Georgia. Property management records should be maintained such that additions and deletions are properly recorded, adequate documentation is available supporting deletions and transfers, and subsidiary Capital Asset module information supports balances reported in the Institute's general ledger and financial statements. \r\n \r\nCondition: \r\n \r\nThe accounting procedures ofthe Institute were insufficient to provide adequate controls over Capital Assets. \r\n \r\nQuestioned Cost: NIA \r\n \r\nInformation: \r\n \r\nAudit sampling and other procedures were utilized to verify the validity and accuracy of the equipment inventory records as presented for audit. An equipment inventory sample of one hundred fifty (150) items was randomly selected from the subsidiary equipment inventory records. Thirty (30) equipment items reported by the Institute as having been deleted or disposed of during the fiscal year were also selected for testing. Additionally, the listing of small value deletions was tested to verify that items meeting the capitalization threshold, having a value of$5,000 or greater, were not deleted. The results of our testing disclosed the following: \r\n \r\n(1) Two items from our equipment sample were found to be exceptions. One item could not be located. A second item was on the Institute's Capital Asset records but was an equipment item that belonged to the Institute's Research Foundation. \r\n \r\n(2) Twenty two (22) items could not be located to the physical location indicated on the property management.system. \r\n \r\n(3) Adequate documentation could not be provided for two (2) items reported as being disposed of by the institution. \r\n \r\n(4) Three (3) items were deleted incorrectly as part of small value deletions. These items had values greater than $5,000 each. \r\n \r\n- 1- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2003 \r\n \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nCAPITAL ASSETS Inadequate Capital Asset Records Finding Control Number: FS-503-03-01 \r\n \r\nEffect: \r\n \r\nWithout satisfactory accounting controls and procedures in place, the Institute could place itselfin a position where potential misappropriation ofassets could occur. \r\n \r\nCause: \r\n \r\nInstitute management had failed to implement satisfactory controls to properly account for and track equipment inventory additions and deletions. \r\n \r\nRecommendations: The Institute should establish procedures and controls to strengthen internal accounting controls over Capital Assets and to ensure that reconciliations are performed on a timely basis. \r\n \r\n-2 - \r\n \r\n "},{"id":"dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2001-h2002","title":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002","collection_id":"dlg_ggpd","collection_title":"Georgia Government Publications","dcterms_contributor":["Georgia. Department of Audits and Accounts."],"dcterms_spatial":["United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798"],"dcterms_creator":["Georgia. Department of Audits and Accounts"],"dc_date":["2001/2002"],"dcterms_description":["Fiscal year ended June 30, 2000-","Title from cover.","Report year covers fiscal year.","Fiscal year ended June 30, 2004."],"dc_format":["application/pdf"],"dcterms_identifier":null,"dcterms_language":["eng"],"dcterms_publisher":["Atlanta, Ga. : Dept. of Audits and Accounts"],"dc_relation":null,"dc_right":["http://rightsstatements.org/vocab/InC/1.0/"],"dcterms_is_part_of":null,"dcterms_subject":["Georgia Institute of Technology--Auditing--Periodicals.","Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","Auditors' reports--Georgia--Periodicals.","Financial statements--Georgia--Periodicals.","Education, Higher--Georgia--Auditing--Periodicals.","Technical education--Georgia--Auditing--Periodicals.","Education, Higher--Georgia--Finance--Statistics--Periodicals.","Technical education--Georgia--Finance--Statistics--Periodicals.","Georgia Government Documents--Serial"],"dcterms_title":["Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002"],"dcterms_type":["Text"],"dcterms_provenance":["University of Georgia. Map and Government Information Library"],"edm_is_shown_by":["https://dlg.galileo.usg.edu/do:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2001-h2002"],"edm_is_shown_at":["https://dlg.galileo.usg.edu/id:dlg_ggpd_y-ga-ba800-b-pr1-bg45-b2001-h2002"],"dcterms_temporal":null,"dcterms_rights_holder":null,"dcterms_bibliographic_citation":null,"dlg_local_right":null,"dcterms_medium":["state government records"],"dcterms_extent":null,"dlg_subject_personal":null,"iiif_manifest_url_ss":null,"dcterms_subject_fast":null,"fulltext":"\" ; \r\n \r\nGA- \r\n \r\n/lt-800 \r\n \r\n~\\ \r\n \r\n. fi4-1;, \r\n~,.,,.;ioo~ \r\n \r\n' . \r\n \r\n' \r\n \r\n,f \r\n \r\n-, \r\n \r\n,. \r\n \r\nJ \r\n \r\n' J \r\n \r\n. ,STATE OF'GEORGIA \r\n \r\n} \r\n \r\n' \r\n \r\n' \r\n \r\nDEPARTMENT- OF AUDITS ANDACCOUNTS \r\n \r\n\\ \r\n'. \r\n,J \r\n.''. \r\n \r\n\\ \r\n \r\nI \r\n1 \r\n \r\n, , \r\n \r\n\\ \r\n \r\n0.::1 I \r\n \r\n) \r\n \r\n(l \r\n \r\n' ' \r\n \r\nI \r\n \r\n-.GEORGIA INSTITUTE OF TECHNOLO(;Y \r\n \r\n, ' \r\n \r\nATLANTA; GEORGIA \r\n \r\nI \r\n''-' I \r\n REPORT ON AUDiT \r\n \r\nOF THE FINANCIAL STATEMENTS \r\n \r\nFOR THE FISCAL YEAR ENDED JUNE 30, 2002 \r\n \r\n, \r\n \r\nI \r\n \r\nI \r\n \r\n\\ \r\nRussell W. Hinton State Auditor \r\n \r\n GEORGIA INSTITIJTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\n \r\nSECTION I \r\n \r\nFINANCIAL \r\n \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\n \r\nREQUIRED SUPPLEMENTARY INFORMATION \r\n \r\nMANAGEMENTS DISCUSSION AND ANALYSIS \r\n \r\n3 \r\n \r\nBASIC FINANCIAL STATEMENTS \r\n \r\nEXHIBITS \r\n \r\nA STATEMENT OF NET ASSETS \r\n \r\n13 \r\n \r\nB STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS \r\n \r\n14 \r\n \r\nC STATEMENT OF CASH FLOWS \r\n \r\n15 \r\n \r\nD NOTES TO THE FINANCIAL STATEMENTS \r\n \r\n17 \r\n \r\nSUPPLEMENTARY INFORMATION \r\n \r\nSCHEDULES \r\n \r\nSCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO \r\n \r\nBUDGET - (NON-GAAP BASIS) \r\n \r\n1 \r\n \r\nRESIDENT INSTRUCTION \r\n \r\n37 \r\n \r\n2 \r\n \r\nLOTTERY FOR EDUCATION \r\n \r\n38 \r\n \r\n3 \r\n \r\nOTHER ORGANIZED ACI1VITIES \r\n \r\n39 \r\n \r\n4 RECONCILIATION OF SALARIES AND TRAVEL \r\n \r\n40 \r\n \r\nSECTIONII AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITIJTE OF TECHNOLOGY - TABLE OF CONTENTS - \r\nSECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\n \r\n SECTION I FINANCIAL \r\n \r\n R11ssE1 , W. H.-m, \r\nSTATE ALJC'ITOR \r\n1~!6!\u003e6-2174 \r\n \r\nDEPARTl\\1ENT OF AUDITS AND ACCOUNTS \r\n.:!54 \\\\J..,hmgton Strccl 'i \\V. Sunc: 14 AtlJnto Georgia '10314-8400 \r\nDecember 20, 2002 \r\n \r\nHonorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the Uruvers1ty System of Georgia \r\nand Honorable G Wayne Clough, President Georgia Institute of Technology \r\nINDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION \r\nLadies and Gentlemen \r\nWe have audited the accompanying basic financial statements (Exh1b1ts A through D) of Georgia Institute of Technology, an orgaruzatlonal urut of the State of Georgia, as of and for the year ended June 30, 2002 These financial statements are the respons1b1hty of the Georgia Institute of Technology's management. Our respons1b1hty 1s to express an opinion on these financial statements based on our audit \r\nWe conducted our audit in accordance with auditing standards generally accepted in the Umted States of Amenca Those standards reqmre that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of matenal nusstatement. An audit includes exam1rung, on a test basis, evidence supportmg the amounts and disclosures m the financial statements An audit also mcludes assessmg the accounting pnnc1ples used and s1giuficant esllmates made by management, as well as evaluatmg the overall financial statement presentaUon We believe that our audll provides a reasonable basis for our op1mon \r\nAs discussed m Note I, the financial statements of Georgia Institute of Technology are intended to present the financial position and changes m financial pos1t1on (mcludmg cash flows) of only that portion ofthe busmess-type activities ofthe State of Georgia that 1s attnbutable to the transactions of Georgia Institute of Technology They do not purport to, and do not, present frurly the financial pos1t1on and changes m financial pos1Uon (mcludmg cash flows) of the State of Georgia, m conforrmty with accounting pnnc1ples generally accepted m the Umted States of Amenca \r\n \r\n02ARL-61 \r\nL \r\n \r\n In our op1mon, the basic financial statements referred to above present fauly, mall matenal respects, the financial pos1t10n of Georgia Institute of Technology as of June 30, 2002, and its changes m financial pos11ion (mcludmg cash flows) for the year then ended m conformity with accountmg pnnc1ples generally accepted m the Umted States of Amenca \r\nAs descnbed m Note I, Georgia Institute of Technology adopted the prov1S1ons of Governmental Accounting Standards Board (GASB) Statements No 35, Basic Financial Statements - and Management's Discussion and Analysis - for Public Colleges and Universities, as amended by GASB Statement No. 37, Basic Financial Statements - and Management's Dzscuss1on and Ana(vszs for State and Local Governments, and GASB Statement No 38, Certain Financial Statements Note Disclosures, as of July I, 2001, to implement a new financial reportmg model \r\nManagement's D1scuss1on and Analysis 1s not a requued part ofthe basic financial statements but 1s supplementary mformat1on requued by the GASB We have applied certam !united procedures, winch consisted pnnc1pally of mqumes ofmanagement regardmg the methods ofmeasurement and presentation of this supplementary mformatlon However, we did not audit tins mformatlon and express no opm1on on 1t \r\nOur audit was conducted for the purpose of formmg an op1D1on on the basic financial statements taken as a whole The accompanymg supplementary mformatlon (Schedules I through 4) 1s presented for purposes of additional analysis and 1s not a reqwred part of the basic financial statements of Georgia Institute ofTechnology Such mformatlon has been subjected to the aud1tmg procedures applied by us m the audit ofthe basic financial statements and, m our op1mon, based on our audit, 1s fiurly stated mall matenal respects m relation to the basic financial statements taken as a whole \r\nRespectfully submitted, \r\n~ . u_ ~1 k \r\n~ell W. Hmton State Auditor \r\nRWHgp 02ARL-61 \r\n \r\n REQUIRED SUPPLEMENTARY INFORMATION \r\nC - I- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nManagement's Discussion and Analysis \r\nIntroduction \r\nThe Georgta Institute of Technology, also known as Georgia Tech, 1s one of the nation's leadmg research uruvers11Jes, proVIdmg a focused, technologically based education to nearly 17,000 undergraduate and graduate students Georgia Tech has many nationally recogmzed programs, all top-ranked by peers and publications alike, and 1s ranked m the nation's top ten pubhc \r\nuruvers1t1es by U.S. News and World Report It offers degrees through the Colleges of Arclutecture, Engineenng, Sciences, Computmg, Management, and the Ivan Allen College of \r\nLiberal Arts As a leadmg technological un1vers1ty, Georgia Tech has more than 50 mterd1sc1phnary research centers that consistently contnbute vital research and mnovatlon to Amenca's government, mdustry, and busmess \r\nFounded m 1885 to help bwld Georgia's technological mfrastructure, Georgia Tech exceeded the expectalions of its founders by becommg a multi-faceted research un1vers1ty that serves as a source of new technologies and a dnver of economic development With a clear V1s1on of technology and leadership, the Institute proVIdes a cutting edge educalion for the 21\" century \r\nOverview ofthe Financial Statements and Financial Analysis \r\nGeorgia lnslitute of Technology 1s proud to present its financial statements for fiscal year 2002 beginmng July 1, 2001 and endmg June 30, 2002. There are three financial statements presented the Statement of Net Assets; the Statement of Revenues, Expenses and Changes m Net Assets, and, the Statement of Cash Flows Tlus chscuss1on and analysIS of the lnslitute's financial statements proVIdes an overVIew of financial actlVJl!es for the year. The financial statements differ s1gmficantly from pnor years m both the form and the accounting pnnc1ples used Fiscal year 2002 financial statements focus on financial conchlion, financial operatmg performance and cash flows, with resources class1ficd for accounting and reportmg purposes mto \r\nfour net asset categones mvested m capital assets, net of related debt, restncted-nonexpendable, \r\nrestncted-expendable, and unrestncted. Full accrual accounting, mcludmg cap1tahzat1on and deprec1alion of equipment and fixed assets, 1s now reqwred The lnslitute has elected not to restate pnor penods usmg new Generally Accepted Accounting Pnnc1ples (GAAP) mandated by Governmental Accountmg Standards Board (GASB) Statements 34 and 35 due to extensive changes, so no comparative data will be presented this year In fiscal year 2003, when pnor penod mformation 1s available, a comparative analysis Will be presented \r\nStatement ofNet Assets \r\nUsmg the accrual basis of accountmg, the Statement of Net Assets presents the assets, hab1ht1es, and resulting net assets of the Institute as of the end of the fiscal year Assets, by defimtlon, represent measured economic value obtained and controlled by an entity as a result of past transactions and events Tlus statement identifies the assets available to continue the operatJons of the mstltullon, debts owed by the mstJtutJon, and net assets available to contmue operations m the future \r\n-3- \r\n \r\n Net assets arc d1v1ded mto three maJor categones The first category, Invested m Capital Assets Net of Related Debt, identifies the mslltullon's eqmty m property, plant and equipment The next asset category 1s Restncted Net Assets, which 1s d1V1ded mto two categones, nonexpendable and expendable The corpus of nonexpendable restncted resources 1s only available for mvestment purposes Expendable restncted net assets are available for expenditure by the mstltullon but must be spent for purposes as determmed by donors and/or extemaJ entities that have placed time or purpose restncllons on the use of the assets The finaJ category 1s Unrestncted Net Assets, which are available for any lawful purpose of the mstnullon \r\n \r\nThe Instnute's Statement of Net Assets portrays a strong financial picture for the year ended June 30, 2002, with unrestncted net assets of over $101 m1lhon available for future operallons A summary of the Inslltute's assets, hab1ht1es and net assets follows \r\n \r\nStatement of Net Assets, Condensed (thousands of dollars) \r\n \r\nAssets Current Assets Non-Current Assets \r\n \r\n$183,756 753.781 \r\n \r\nTotal Assets \r\n \r\n$937.537 \r\n \r\nLiabilities Current Liab1hlles Non-Current L1ab1hlles \r\n \r\n$ 70,890 10.750 \r\n \r\nTotal Liabilities \r\n \r\n$ 81.640 \r\n \r\nNet Assets Invested m Capital Assets, Net of Related Debt Restncted - Nonexpendable Restncted - Expendable Unrestncted \r\n \r\n$693,827 43,973 16,530 I 01.567 \r\n \r\nTotal Net Assets \r\n \r\n$855.897 \r\n \r\nAs stated earher, no comparallve data will be shown m tlns year's financial report, however, two frequently used financial rallos illustrate the financial health of the lnslitute. First 1s the current ratio, which compares current assets (cash, short term mvestments, accounts receivable, and mventones) to current hab1hlles (accounts payable, accrued hab1ht1es, deposits held for others, and deferred revenue) The purpose oftlns ratio 1s to assess W1 entity's ab1hty to meet near term obhgatlons. The lnslltute's current ratio 1s 2 6 1 winch exceeds the good current ratio \"standard\" of 2 I A second, related ratio 1s the acid test or qmck ratio measunng the rela1Ionsh1p between lughly hqmd assets and current hab1hlles. The Instttute's acid test ratio of 1.9 1 1s s1gmficantly higher than the \"good standard\" of I I. \r\n \r\n-4- \r\n \r\n Statement ofRevenues, Expenses and Changes in Net Assets \r\n \r\nChanges m total net assets as presented on the Statement of Net Assets are based on the activity presented m the Statement of Revenues, Expenses and Changes m Net Assets. The purpose of the statement 1s to present the revenues received by the mstltutlon, both operatmg and nonoperatmg, and the expenses paid by the mstltutlon, operatmg and nonoperatmg, and any other revenues, expenses, gams and losses received or spent by the mshtutlon Generally speakmg, operatmg revenues are received for prov1dmg goods and services to the vanous customers and constituencies of the mshtut1on Operatmg expenses are those expenses paid to acqmre or produce the goods and sefV!ces proVJded m return for the operating revenues, and to carry out the m1ss1on of the mstltuhon. Nonoperatlng revenues are revenues received for winch goods and services are not proVJded, at least directly. For example, state appropnatlons are nonoperatmg revenues because they are proVJded by the Legislature to the 1nst1tut1on without the Legislature directly rece1vmg commensurate goods and serVJces for those revenues even though customers paymg for those goods and services are rece1vmg the benefits. \r\n \r\nTotal revenues for the year ended June 30, 2002 were $714 mlihon Of tins amount, $229 m1lhon (32%) came pnmanly from state appropnatlons (nonoperatmg revenue) and $326 mlihon (46%) came from gifts, grants and contracts Tmhon and fees and sales, serVJces and other revenues accounted for the remammg 22% Operating expenses for the year totaled $663.8 m1lhon Total revenues mcreased m all four maJor categones m fiscal year 2002 over 2001, as did overall expenses, reflectmg the prov1s1on of goods and serVJces m carrymg out the m1ss1on of the Institute The followmg charts display the Inshtute's revenue sources and expenses, by natural class1ficat1on and functional classification \r\n \r\nRevenue \r\n \r\n!Total Revenue: $714,118,625.39 \r\n \r\nSales, Services \u0026 Other 10 8% \r\n \r\nTurtm and Fess 106% \r\n \r\nState Appropnatlons 324% \r\n \r\nGifts, Grants \u0026 Con1racts 46 2% \r\n \r\n-5- \r\n \r\n Operating Expenses by Natural Classlflcatlon \r\n \r\nDeprec1atJon 6 4%1 \r\nUUhttes 2 9%- \r\nScholarshlps and Fellowships 1 0% \r\nTravel, Suppltes and Services 25 4% \r\n \r\nSalanes and Benefits 643% \r\n \r\n!Total Expanses: $663,780,217.81 Operating Expenses by Functional Classlflcatlon \r\n \r\n::. :. .\\I~/. AuXJharyEnterpnses \r\n \r\n. . 59% \r\n \r\n7 \r\n \r\nI \r\n. \r\n \r\nStudent and ,- lnstltut1onal Support \r\n149% \r\n \r\n. \r\n \r\n. \r\n \r\n.... .. \r\n \r\n. \r\n \r\n... \r\n \r\n..,_..,.,: \r\n \r\n. . . . .. \r\n \r\n\\ \r\n \r\nOperation and \r\n \r\n~ Maintenance of Plant \r\n \r\n.. \r\n \r\n73% \r\n \r\nlnstruct1on, Research, and Public Service 709% \r\n-6- \r\n \r\n Statement ofCash Flows \r\n \r\nThe last statement presented 1s the Statement of Cash Flows which presents detailed mformatlon about the cash activity of the mstltutlon dunng the year The statement 1s d1V1ded mto five sections The first section deals with operatmg cash flows and reflects the net cash used by the operatmg activities of the mstltutlon The second section reflects cash flows from non-capital financmg activities This section reflects the cash received and spent for nonoperatmg, nonmvestmg, and non-capital financmg purposes The third section reflects the cash flows from mvestmg activities and shows the purchases, proceeds, and mterest received from mvestmg act1V1tles The fourth section deals with cash flows from capital and related financmg act1v1t1es This section deals with the cash used for the acqu1s1tlon and construction of capital and related assets The fifth section reconciles the net cash used to the operatmg mcome or loss reflected on the Statement of Revenues, Expenses and Changes m Net Assets Overall, the lnstltute's cash position 1s very strong, with over $114 m1lhon available m cash, cash eqwvalents, and hqu1d short term mvestrnents at June 30, 2002 \r\n \r\nCash Flows for the Year Ended June 30, 2002, Condensed (thousands of dollars) \r\n \r\nCash Provided (Used) By: Operating Act1V1tles Non-Capital Fmancmg Actlvltles lnvestmg Activities Capital and Related Fmancmg Act1V1t1es \r\n \r\n$-165,938 237,917 -38,457 -66,584 \r\n \r\nNet Change m Cash Cash, Begmnmg ofYear \r\n \r\n$ -33,062 28.544 \r\n \r\nCash, End of Year Capital Assets \r\n \r\n$ -4.518 \r\n \r\nThe Institute had seven s1gmficant capital asset additions for fac1ht1es m fiscal year 2002 valued at over $35 rmlhon dollars Five of these additions were funded through gifts from the Georgia Tech Foundation \r\n \r\n 676 Manetta Street (Wood Products Laboratory) Buildmg- $2 48 rmlhon  645 Norths1de Dnve (Information Technology) Bu1ldmg - $2 47 milhon  500 Tech Parkway Buildmg- $2.71 milhon  Structural Engmeermg and Matenals Research Building- $6 37 milhon  Aerospace Engmeermg Combustion Lab - $7.02 m1lhon \r\n \r\nThe two other additions were funded by the State through the Georgia State Fmancmg and Investment Comrmss1on (GSFIC). \r\n \r\n State Street parkmg deck - $10 06 milhon  Tenth Street chiller plant - $4 37 milhon \r\n \r\n-7- \r\n \r\n GSFIC also provided fundmg for research eqmpment purchases utilized by vanous programs w1thm the Institute For add1t10nal mformatlon concerrung Capital Assets. see Notes I, 6, 8, and 9 m the notes to the financial statements \r\nEconomic Outlook \r\nThe Instltute's long-term economic outlook 1s good. Over $101 m1lhon m unrestncted net assets are available to fund new and contmumg 1mtlat1ves Restncted expendable assets, which support specific programs, of over $16 5 m1lhon are available Sponsored programs, mcludmg fac1ht1es and adm1mstrat1ve cost recovenes, contmue to grow from past mvestments m human capital and fixed assets Over the past five years the lnstltute's sponsored operations have grown by $57 m1lhon, or 28%, from $204.6 nulhon m fiscal year 1998 to $261.6 rmlhon m the year Just ended \r\nThough the long-term outlook 1s bnght for the Institute, there are challenges to face m the near term S1gmficant among these are the followmg \r\n Revenue collections for the State of Georgia declmed throughout fiscal year 2002 and m the first few months of fiscal year 2003. Due to these revenue shortfalls, the lnstltute's state supported budget was cut 2 4% m fiscal year 2002 For fiscal year 2003, state appropnatlons are bemg released at 97% of the approved fundmg level excludmg 1nstruct1onal budgets Tmtlon was mcreased m fiscal year 2003 to mamtam program services m the face of higher enrollments and mcreases will hkely be necessary ID fiscal year 2004 as well. \r\n Cont1Du1Dg Education revenue declined ID fiscal year 2002 as result of the September 11, 2001 terronst attacks and the economy Early md1cat1ons for fiscal year 2003 are more favorable for a return to pnor levels and the outlook for fiscal year 2004 1s especially favorable given the lnstltute's mvestrnent m new fac1ht1es \r\n The Institute 1s ID the rmdst of a s1gmficant construction program that will add over 1.8 m1lhon square feet of new space m the next two years The debt service on tlns construction will be $7 4 m1lhon m fiscal year 2004 and then approximately $10 m1lhon per year thereafter The net add1t1onal utlhty, mamtenance, and other costs associated with this square footage m fiscal year 2003 1s estimated to be $1 7 m1lhon, mcreasmg to an estimated $5.2 m1lhon m fiscal year 2004 Debt service will be funded from mcreases m program revenues and gifts while mcreases m bu1ldmg services costs will be funded pnmanly from state appropnatlons formula mcreases Given the state of the economy, the Institute contmues to review and revise its fundmg plan as needed The capital mvestments m new fac1ht1es have positioned the Instllute to expand its markets and compete more effectively \r\n The research program 1s qmte strong and well d1vers1fied among governrnent and pnvate sponsors New awards m fiscal year 2002 were a record high of $279 m1lhon, thus the Institute 1s well positioned for the upcom1Dg year \r\n- 8- \r\n \r\n Given the Instltute's strong overall financial condition and exceptional faculty, students and staff, 11 should weather the short term financial challenges n faces Management 1s committed to \r\nmamtammg a strong financial position while pursumg its m1ss1on to define the technological research umvers1ty of the 21 st Century \r\n \r\nG Wayne Clough President Georgia Institute of Technology \r\n \r\nRobert K Thompson Semor Vice President Admm1strauon and Fmance \r\n \r\n-9- \r\n \r\n BASIC FINANCIAL STATEMENTS \r\n- 11 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nSTATEMENT OF NET ASSETS \r\nJUNE 30 2002 \r\nASSETS \r\nCurrent Assets Short-Term Investments Accounts Receivable, Net Federal Financial Assistance Other Prepaid Items lnventones \r\nTotal Current Assets \r\nNoncurrent Assets Cash and Cash Equivalents Investments Notes Receivable, Net Caprtal Assets, Net (See Note 6) \r\nTotal Noncurrent Assets \r\nTotal Assets \r\nLIABILITIES \r\nCurrent 1..JabllIbes Cash Overdraft Contracts Payable Salanes Payable Payroll Withholdings Accounts Payable Deferred Revenue Funds Held for Others Cap,tal Leases Compensated Absences Other 1..Jab1hties \r\nTotaJ Current 1..Jab1l1bes \r\nNoncurrent l.JabIhtJes Capital Leases Compensated Absences \r\nTotal Noncurrent 1..JabIlIbes \r\nTotal l.JabIlIbes \r\nNET ASSETS \r\nInvested in Caprtal Assets Net of Related Debt Restncied for \r\nNonexpendable Expendable Unrestncted \r\nTotal Net Assets \r\nThe notes to the financial statements are an integral part of ttus statement \r\n- 13 - \r\n \r\nEXHIBIT\"A\" \r\n \r\n$ 131,768,619 74 \r\n21,770,978 26 23 002.413 08 \r\n6,646,816 48 567 482 95 \r\n$ 183,756,310 51 \r\n \r\n$ \r\n \r\n92,68065 \r\n \r\n51,353,136 44 \r\n \r\n7,254,187 69 \r\n \r\n695,080,387 56 \r\n \r\n$ 753,780,392 34 \r\n \r\n$ 937,536,702 85 \r\n \r\n$ \r\n \r\n4,610,983 38 \r\n \r\n2,145,248 62 \r\n \r\n171,125 90 \r\n \r\n14,405,556 91 \r\n \r\n2,900,410 81 \r\n \r\n29,216,022 41 \r\n \r\n1, 128,67142 \r\n \r\n604,433 75 \r\n \r\n13,554 779 18 \r\n \r\n2,152,995 66 \r\n \r\n$ 70,890,228 04 \r\n \r\n$ \r\n \r\n648,521 25 \r\n \r\n10 10131984 \r\n \r\n$ 10 749 841 09 \r\ns 81,640,069 13 \r\n \r\n$ 693,827,432 56 43,972,515 42 16,530,086 15 101,566,599 59 \r\n$ 855,896,633 72 \r\n \r\n GEORGIA INSNUTE OF TECHNOLOGY STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET ASSETS \r\nYEAR ENPEP JUNE 30 2002 \r\n \r\nEXHIBIT \"B\" \r\n \r\nOPERATING REVENUES \r\nStudent Turt.Jon end Fees Less Scholarship Allowances \r\nGrants end Contracts Federal \r\nState \r\nLocal Nongovemmentel Renta end Royalbea Sales and Services of EducabOnal Departments Auxlltery Enterprises Residence Halls Bookstore Food SeMCeS Pal'Xln;/T1111nsportatton Health Services ln1ercollegl11te Athlet.Jcs Other Orgaruzabon.s Other Operabng Revenues \r\nTotal Operating Revenun \r\nOPERATING EXPENSES \r\nSel11ne11 Faculty Steff \r\nEmployee Benefits Other P raonal Servlcea T1111vel Scholarstups end Fellowshr.ps UtJlrtJes Supplies and Other Ser,ices OepreclatJon \r\nTotal Operatll'IQ Expenses \r\nOpernng Income (Losa) \r\nNONOPERATING BE\\IENUES (EXPENSES\u003e \r\nState Appropnabonl Grants and Contracts \r\nNongovernmental Gifts Interest and Other Investment Income tntereat Exp11n\u0026e (Capital Asaets) Other Nonoperatmg Rvenun \r\nNet Nonoperatmg Revenues \r\nl:ncome Before Other Revenues, Expenses Ga,ns or Losaes \r\nCaprtal G1111nta and Gifts State Nongovernmental \r\nTotal Other Revenues \r\nlncreese/(Oecreue) m Net Asset:a \r\nNe1Aueh Net Asaeli - Beg,nmng of Y ar es Ong1nally Reported Cumulabve Effed of Changes m Accountmg Pr1naple \r\nNet Assets - Be,gmnmg of Ye r Restated \r\n \r\n$ \r\n \r\n86 \"432,459 90 \r\n \r\n-11 225 743 00 \r\n \r\n191,11630945 9 984 093 66 1 339 489 18 \r\n94 141,503 77 905 164 35 \r\n12 511,27114 \r\n \r\n28 421 586 15 969,688 97 \r\n12 759,317 98 \r\ne 708 243 91 \r\n4 173,571 09 1720,15742 1094,02010 10 568 130 84 \r\n \r\n$ 451 817 244 71 \r\n \r\n$ \r\n \r\n168,292 710 62 \r\n \r\n186 237 398 31 \r\n \r\n66 931 086 32 \r\n \r\n1 489 701 47 \r\n \r\n10,846 868 87 \r\n \r\n6,838 677 67 \r\n \r\n19,304 135 44 \r\n \r\n161513862 78 \r\n \r\n42 325.776 33 \r\n \r\n$ 683 780 217 81 \r\n \r\n$ -212 162 973 10 \r\n \r\n$ 228,954 253 00 \r\n \r\n7,662 617 85 97 775 00 11223553 -73 071 68 \r\n3 638 514 24 \r\n \r\n$ 240 412 323 94 \r\n \r\n$ \r\n \r\n28.249 350 \u00264 \r\n \r\n$ \r\n \r\n16 995 354 53 \r\n \r\n5 093 702 21 \r\n \r\n$ \r\n \r\n22 089 056 74 \r\n \r\n$ \r\n \r\n50 338 407 58 \r\n \r\n$ 1 244 022 756 92 -438 464 530 78 \r\n$ 805 558 226 14 \r\n \r\nNet Assets - End of Y ar The notes to the finanaal statements are an integral part of tht. statement \r\n- 14 - \r\n \r\n$ 855 896 633 72 \r\n \r\n GEORGIA INSTITIJTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENPEP JUNE 30 2002 \r\nCASH FLOWS FROM OPERATING ACTIVTTIES Tuition and Fees Grants and Contracts Sales and Serv1CM or Educational Departments Paymonts to Suppliers Payments to Employees Payments for SCholarshlps and Fellowships \r\n-Loans Issued to Students and Empl0yee5 \r\nColleCbon of Loans to Students and Employees Awol1ary Enterprise ChafgeS \r\nRosodence Hal~ \r\nFood Services Parklng{Tranaportation Health ServlceS Intercollegiate Athleticl Other Orgammtlons Other Recelpts (Payments) \r\nNet cash Prov\\dod (Used) by ()peratlng ,.,,.,,_ \r\nCASH FLOWS FROM NONCAPITAL FINANCING ACTMTIES State App,cpnabons Agency Fun\u003cb Transactions GIiis and Grants Recerved to\u003c Other ttlan Capital Purposes Other Nonoperetrng Recetptl \r\nNet cash Flows Provided (Used) by Noncapltal Finanang Actrvrbes \r\nCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTMTIES Proceeds from Sale of Capital Nsets Purchases of C.Bprtal ~sets Pnnapal Patd on Caprtal Debt and Lease Interest Paid on Capital Debt and Lease \r\nNet cash Provided (Uaed) by Capttal and Ralaled Flnanang AdMtles \r\nCASH FLOWS FROM INVESTING ACTMTIES Interest on lnve9trnents Proceeds rrom Sales and Mlturtties ol lnw.st.1tents (Net) \r\nNet Cash Prov1ded (Used) by Investing AclMbes \r\nNet lncreae/(Deaeaae) m cast, \r\nCssh and Cash EqU!Yalents - June 30, 2001 Less Short-Tenn Investments \r\nC81tl and Cash EquMUents - Beg11n1ng of YNr \r\nC8Sh Ind Cash Eq,.nvalents  End of Year \r\nRECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTMTlE.S \r\nOperet,ng Income (Loss) \r\nAd:lustrnents to Reconale Net Income (Loss) to Net Cash PrOY\u003eded (Uaed) by Operabng Actrvrbes \r\nDapreaatlon Change In Aaaeta and Lilblllbes \r\n'\"\"\"-p-Accounts ReceMlbles Net \r\nN\"\"o't\"e\"s\"R' etteeemtvsables Net Accounts Salanes Payabte Payroll Wrthholdmg and Employer Matr:1-.ng Bene!!ts Deferred Revenue Other Llabltlbes Compensated Absences \r\nNet cash PrtMdod (Used) by Operatlng Actlv,bo1 \r\nThe notes to the ManciaI statements are an Integral part of this statement \r\n- 15  \r\n \r\nEXHIBIT\"C\" \r\n \r\ns \r\n \r\nB6 386,038 68 \r\n \r\n296 127 300 53 \r\n \r\n3 237 651 36 \r\n \r\n-2e0 507 801 68 \r\n \r\n.354 062 627 88 \r\n-6 836,8n e1 \r\n \r\n-2 963 782 54 \r\n \r\n2 724 529 64 \r\n \r\n28,421 586 15 2 882,182 23 12 759,317 88 8 708,243 91 4 173,571 09 1 720 157 42 1 094 020 10 12 1eg G.c1 13 \r\ns -165 938 272 62 \r\n \r\ns 228 954,253 00 \r\n-193 301 08 7 780 382 65 1 378 078 SQ \r\ns 237 917 423 46 \r\n \r\ns \r\n \r\n4 524 87110 \r\n \r\n-70 061 367 28 \r\n \r\n-874,643 38 \r\n \r\n-73 071 58 \r\n \r\ns -86,584,211 25 \r\n \r\ns \r\n \r\n11223553 \r\n \r\n-38 56Q 263 27 \r\n \r\ns .38 457 027 74 \r\n \r\ns -33.082,088 15 \r\n \r\ns 1~g 628,388 92 \r\n-131,084,813 50 \r\n \r\ns \r\n \r\n28,5\"3,785 42 \r\n \r\ns \r\n \r\n 518 302 73 \r\n \r\ns -212 182,973 10 \r\n42,325,ne 33 \r\n8,478 204 88 998,335 75 -747,998 83 -23Q 282 00 \r\n-3 203,409 71 -4,40611 \r\n21e1 635 se \r\n-5 599 818 05 1,2115,564 07 \r\n812 2151 88 \r\ns -185 938 272 82 \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FlNANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNATURE OF OPERATIONS Georgia Inslitute of Technology serves the state, and nat10nal comrnumues byprov1dmg Its students with academic mstruct10n that advances fundamental knowledge, and by d1ssemmatmg knowledge to the people of Georgia and throughout the country \r\nREPORTING ENTITY Georgia Insutute of Technology 1s one of thirty-four (34) State supported member msutuuons of lugher educauon m Georgia wluch compnse the Umvers1ty System of Georgia, an orgamzat10nal umt of the State of Georgia The accompanymg financial statements reflect the operauons of Georgia Institute of Technology as a separate reportmg entity \r\nThe Board of Regents has consutuuonal authonty to govern, control and manage the Umvers1ty System of Georgia This authonty mcludes but 1s not hm1ted to the power to des1giiate management, the ab1hty to s1gmficantly mfluence operalions, the authonty to control 1nst1tullons' budgets, the power to determme allotments of State funds to member mstitutlons and the authonty to prescnbe accountmg systems and adrmmstrauve pohc1es for member mst1tut1ons Georgia Institute of Technology does not have authonty to retam unexpended State appropnatlons (surplus) for any given fiscal year. Accordmgly, Georgi.a Inslitute ofTechnology 1s considered an organ1zalional unit of the Board of Regents of the Umvers1ty System ofGeorgia reportmg enlity for financial reporling purposes because of the significance of its legal, operallonal, and financial relat1onsh1ps with the Board of Regents as defined m Sect.Ion 2100 of the Governmental Accountrng Standards Board (GASB) od1ficat1on of Governmental Accounling and Fmanc1al Reportmg Standards \r\nFINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Fmanc1a/ Statements and Management D1scuss1on and Ana(vsisfor State and Local Governments This was followed rn November 1999 by GASB Statement No 35, Basic Fmanc1a/ Statements and Management's D1scuss1on and Analysis for Public Colleges and Umvers1t1es The State of Georgia 1s required to implement GASB Statement No 34 as of and for the year ended June 30, 2002 As an organ1zat10nal umt of the State of Georgia, the Inslitute 1s also required to adopt GASB Statements No 34 and No 35 as amended by GASB Statements No 37 and No. 38 The financial statement presentation required by GASB Statements No 34 and No 35 as amended by GASB Statements No 37 and No 38 provides a comprehensive, enllty-w1de perspective of the Instltute's assets, hab1hlles, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective prev10usly reqmred \r\nThe Institute has elected to not restate its 200 I financial statements to conform with the new financial statement presentallon, therefore comparal!ve financial rnformal!on WIii not be presented for fiscal year 2002. S1gmficant accountmg changes made rn order to comply with the new reqmrernents mclude (1) adopt10n of deprec1al!on on capital assets; and (2) recogml!on of compensated absences. Generally Accepted Accountmg Pnnc1ples (GAAP) requires that the \r\n- I7 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nFINANCIAL STATEMENT PRESENTATION reportmg of swnmer school revenues and expenses be between fiscal years rather than m one fiscal year Due to the lack ofmatenal1ty, Insutuuons ofthe Uruvers1ty System ofGeorgia will continue to report summer revenues and expenses m the year in which the predommate act1V1ty takes place \r\nBASIS OF ACCOUNTING For financial reportmg purposes, the Institute 1s considered a special-purpose government engaged only in busmess-type activities. Accordmgly, the Insutute's financial statements have been presented usmg the economic resources measurement focus and the accrual basis of accountmg, except as noted in the preceding paragraphs. Under the accrual basts, revenues are recogmzed when earned. and expenses are recorded when an obhgation has been incurred All s1gruficant mtra-msutute transactions have been ehmmated \r\nThe lnstJtute has the option to apply all Fmanc1al Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB The Institute has elected to not apply FASB pronouncements issued after the apphcable date \r\nRESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoptton of GASB Statement No. 34, the lnstJtute was also required to make \r\ncertam changes in accounttng prmc1ples, spectfically (I) adoption of depreciation on capital assets, \r\nand (2) recordmg of compensated absences GASB Statement No. 34 requires certam swnmer semester revenues be recognized between fiscal years rather than the fiscal year m which the semester was predommantly conducted The Umverstty System ofGeorgia has chosen to continue to record summer revenue m the year m winch the semester was predominantly conducted Net assets at July I, 2001 were reduced by $438,464,530 78 for the cumulative effect of these changes. \r\nCASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash Eqmvalents consist of petty cash, demand deposits and lime deposits in authonzed financial mst1tut1ons, and cash management pools that have the general charactensllcs of demand deposit accounts \r\nINVESTMENTS The Institute accounts for its mvestments at fau value m accordance with GASB Statement No 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools Changes m unrealized gam (loss) on the carrymg value ofmvestments are reported as a component of mvestment income m the statements of revenues, expenses, and changes m net assets \r\nInvestments m the vanous investment pools mamtamed by the lnstJtute consist m part, of U S Agency Secunues and other mortgage-backed secunlles such as collateralized mortgage obhgallons and adJustable rate mortgages These mortgage-backed secunlles are reported as U.S. Government Secunlles and Corporate Obhgallons in the note of custodial credit nsk (See Note 2 on \r\n- 18 - \r\n \r\n GEORGIA INSTITIJTE OF TECHNOLOGY \r\nNOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nINVESTMENTS Categonzat1on of Investments) Investments m the mvestment pools are transacted by an external mvestment firm llilder direction ofmvestment adVJsory agreement executed between the Institute and the mvestment management firm As of Jllile 30, 2002, the Institute had $1,503,262 35 mvested m U S Agency Secun!Jes and other mortgage-backed secunt1es \r\nACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fee charges to students and aux1hary enterpnse serVJces provided to students, faculty and staff, the maJonty of each res1dmg m the State of Georgia. Accounts receivable also mclude amounts due from the Federal government, state and local governments, or pnvate sources, m connection with reimbursement ofallowable expenditures made pursuant to the Inst1tute's grant and contracts. Accollilts receivable are recorded net of estimated uncollectlble amollilts \r\nINVENTORIES Consumable supphes are earned at the lower of cost or market on the first-m, first-out (\"FIFO\") basis \r\nResale Inventones are valued at cost usmg the average-cost basis \r\nNON-CURRENT CASH AND INVESTMENTS Cash and mvestments that are externally restncted and cannot be used to pay current hab1ht1es are classified as non-current assets m the statements of net assets \r\nCAPITAL ASSETS Capital assets are recorded at cost at the date of acqws1tlon, or farr market value at the date of donation m the case of gifts For eqmpment, the Institute's cap1tahzat1on pohcy mcludes all items with a llillt cost of $5,000 00 or more, and an est1mated useful hfe of greater than one year Renovations to bu1ldmgs, mfrastructure, and land 1mprovements that exceed $100,000 00 and s1gruficantly mcrease the value or extend the useful hfe of the structure are cap1tahzed Routme repairs and mamtenance are charged to operatmg expense m the year m which the expense was mcurred Deprec1atlon 1s computed usmg the straight-line method over the estimated useful hves of the assets, generally 40 to 60 years for bwldmgs, 20 to 25 years for mfrastructure and land improvements, 10 years for hbrary books, and 3 to 7 years for equipment \r\nTo obtain the total picture of plant add1t1ons m the Uruvers1ty System, 11 1s necessary to look at the actlv1t1es ofthe Georgia State Fmancmg and Investment Comnuss1on (GSFIC) - an orgaruzatJon that 1s external to the System GSFIC issues bonds for and on behalfofthe State ofGeorgia, pursuant to powers granted to 11 m the Const1tut1on ofthe State ofGeorgia and the Act crcatmg the GSFIC. The bonds so issued constitute d1Tect and general obhgat1ons of the State of Georgia, to the payment of which the full faith, credit and taxmg power of the State are pledged. \r\n- 19 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nCAPITAL ASSETS Effective July I, 2001, the GSFIC retains construclion in progress on their books throughout the construclion penod and transfers the entire proJect to Georgia lnslitute of Technology when complete For the year ended June 30, 2002, GSFIC transferred capital add11ions valued at $16,995,354 53 to Georgia Institute ofTechnology The balance ofconstruction in progress retained by GSFIC totaled $29,690,467 30 at June 30, 2002 \r\nDEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certam aux1hary act1VIl!es pnor to the end of the fiscal year but related to the subsequent accounting penod Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. \r\nCOMPENSATED ABSENCES Employee vacalion pay 1s accrued at year-end for financial statement purposes. The hab1hty and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Georgia Institute of Technology had accrued hab1hty for compensated absences in the amount of$22,843,837 13 as of July I, 2001. For Fiscal Year 2002, $14,367,041 07 was earned in compensated absences and employees were paid $I 3,554,779. I 8, for a net increase of $812,261 89. The ending balance as of June 30, 2002 in accrued hab1hty for compensated absences 1s $23,656,099 02 \r\nNON-CURRENT LIABILmES Non-current hab1hlles include (I) hab1hlles that will not be paid w1tlun the next fiscal year, (2) cap1tal lease obhgallons with contractual matuntles greater than one year; and (3) other hab1htJ.es that, although payable within one year, are to be paid from funds that are classified as non-current assets \r\nNET ASSETS The Inslltute's net assets are classified as follows \r\nInvested m capital assets, net of related debt ThIS represents the lnstJ.tute's total investment in capital assets, net of outstandmg debt obhgallons related to those capital as~ets. 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 obhgallons\" as used in this defimllon does not include debt of the GSFIC as discussed above ) \r\nRestricted net assets - nonexpendable Nonexpendable restncted net assets consist of endowment and s1m1lar type funds in which donors or other outside sources have sllpulated, as a condition ofthe gift instrument, that the pnnc1pal 1s 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 \r\n- 20 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nNET ASSETS pnnc1pal The Institute may accumulate as much ofthe annual net income of an institutional fund as 1s prudent under the standard estabhshed by Code Section 44-15-7 of Annotated Code of Georgia \r\nRestricted net assets - expendable. Restncted expendable net assets mclude resources in winch the Institute 1s legally or contractually obhgated to spend resources in accordance with restnctlons imposed by external third parties \r\nUnrestricted net assets Unrestncted net assets represent resources denved from student twt10n and fees, state appropnatlons, and sales and services of educational departments and aux1hary enterpnses These resources are used for transactions relatmg to the educational and general operat10ns of the Institute, and may be used at the d!scretJon ofthe governmg board to meet current expenses for those purposes. Unexpended state appropnat1ons must be refunded to the Board of Regents of the Umvers1ty System of Georgia - Admm1strat1ve Central Office for remittance to the Office ofTreasury and Fiscal Services These resources also mclude aux1hary enterpnses, winch are substantially self-supporting act1V1t1es that provide services for students, faculty and staff \r\nWhen an expense 1s mcurred that can be paid usmg either restncted or unrestncted resources, the InstJtute's pohcy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources \r\nINCOME TAXES Georgia Institute ofTechnology, as a pohtlcal subd1v1s1on ofthe State of Georgia, 1s excluded from Federal income taxes under Section I 15(1) of the Internal Revenue Code, as amended \r\nCLASSIFICATION OF REVENUES The Institute has classified its revenues as either operating or non-operating revenues m the Statement of Revenues, Expenses, and Changes m Net Assets accordmg to the following cntena \r\nOperating revenues Operatlng revenues include actJVltles that have the charactenstlcs ofexchange transactions, such as (I) student tuition and fees, net ofscholarslnp allowances, (2) sales and services of aux1hary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnatlons, and (4) interest on institutional student loans \r\nNon-operating revenues Non-operating revenues mclude act1V1t1es that have the charactenstJcs of non-exchange transactions, such as gifts and contnbutlons, and other revenue sources that are defined as non-operating revenues by GASB No 9, Reporting Cash Flows of Propnetary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No 34, such as state appropnat1ons and mvestment income \r\n \r\n- 21 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \r\nSCHOLARSIDP ALLOWANCES Student tllllion and fee revenues, and certam other revenues from students, are reported at gross with a contra revenue account of scholarslnp allowances m the Statement of Revenues, Expenses and Changes m Net Assets Scholarship allowances are the difference between the stated charge for goods and services provided by the Inslitute, and the amount that 1s pwd by students and/or third parUes makmg payments on the students' behalf Certwn governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operatmg or nonoperatmg revenues m the lnslitute's financial statements To the extent that revenues from such programs are used to sausfy tu11ion and fees and other student charges, the lnslitute has recorded contra revenue for scholarslnp allowances \r\nNOTE 2 CASH AND CASH EQUIVALENTS: OTHER DEPOSITS, AND INVESTMENTS \r\nSTATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belongmg to the State ofGeorgia (and thus Georgia Institute ofTechnology) cannot be placed m a depository paymg mterest longer than ten days without the deposltoryproVJdmg a surety bond to the State. In heu of a surety bond, the depository may pledge as collateral any one or more of the followmg secunlies as enumerated m the Official Code of Georgia Annotated Secl!on 50-17-59. \r\nI Bonds, bill, certificates ofmdebtedness, notes, orotherchrect obhgalions ofthe Uruted States or of the State of Georgia \r\n2 Bonds, bills, cerlificates of mdebtedness, notes, or other obhgalions of the counlies or muruc1pahlies of the State of Georgia \r\n3 Bonds of any pubhc authonty created by the laws of the State of Georgia, prov1dmg that the statute that created the authonty authonzed the use of the bonds for tins purpose \r\n4 Industnal revenue bonds and bonds of development authonlies created by the laws of the State of Georgia \r\n5 Bonds, bills, cerlificates of mdebtedness, notes, or other obhgalions of a subs1d1ary \r\ncorporalion ofthe Uruted States government, winch are fully guaranteed by the Umted States government both as to pnnc1pal and mterest, or debt obhgalions issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal lntcrmcchate Crecht Bank, tbe Central Bank for Cooperalives, the Farm Credit Banks, tbe Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. \r\n6 Guarantee or msurance ofaccounts proVJded by the Federal Deposit Insurance Corporalion \r\n \r\n- 22 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 2 CASH AND CASH EOUlVALENTS, OTHER DEPOSITS, AND INVESTMENTS \r\n \r\nSTATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES As authonzed in the Official Code of Georgia Annotated Secl!on 50-17-53, the State Depository Board has adopted pohc1es winch allow agencies ofthe State ofGeorgia (and thus Georgia Institute of Technology), the opt10n of exempting demand deposits from the collateral reqmrements \r\n \r\nThe Treasurer ofthe Board ofRegents 1s responsible for all details relalive to fwruslung the reqmred depos1toryprotect10n for all umts of the Umvers1ty System of Georgia \r\n \r\nCATEGORIZATION OF DEPOSITS The lnstltute's cash deposits are categonzed by nsk as follows: \r\n \r\nCategory 1 - Amounts covered by depository insurance or collateralized with secuntles (at fair value) held by the Institute or by its agent in the lnst1tutc's name \r\n \r\nCategory 2 - Amounts collateralJZed with secunt1es (at fair value) held by the pledging financial inst1tullon's trust department or agent in the lnslltute's name \r\n \r\nCategory 3 - Amounts collateralIZed with secuntles (at faIT value) held by the pledging financial institution, or by its trust department or agent but not ID the lnstJtute's name, and amounts uncollateral1zed \r\n \r\nCash Deposits as of June 30, 2002 are as follows \r\n \r\nCash Deposits Investment Portfolio \r\nAccounts \r\nTotal Cash Depos,ts \r\n \r\nCarrying \r\nAmount \r\n \r\nBank \r\nBalances \r\n \r\nRisk Catcgoncs \r\n \r\nS-4.611,671 93 S 7,697,588 51 s 184,6!0 99 s \r\n \r\n000 $7.512,97752 \r\n \r\n-124 997 27 -124.997 27 \r\n \r\nI17 02 \r\n \r\ns~ ZJ~ ~~9 ~g S 757~ ~2J 2~ s 1~ z~s ui s_ __,o.,.o.,.o s z512 222 s2 \r\n \r\nCATEGORIZATION OF INVESTMENTS The lnstltute's investments are categonzed as to credit nsk withm the three categones descnbed below \r\n \r\nCategory I - Insured or registered, or secunt1es held by the Inst:ttute or its agent ID the Instltute's name. \r\n \r\nCategory 2 - Uninsured and unregistered, with secunl!es held by the counter party's trust department or agent m the lnstltute's name \r\n \r\n- 23 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 2 CASH AND CASH EQUIVALENTS. OTHER DEPOSITS. AND INVESTMENTS \r\n \r\nCATEGORIZATION OF INVESTMENTS Category 3 - Unmsured and unregistered, with secunues held by the counter party, or by its trust \r\ndepartment or agent, but not m the Inslltute's name \r\n \r\nAt June 30, 2002, the Instttute's mvestments consisted of the followmg \r\n \r\nType of Investments \r\nCotm00nStock Corporate Bonds U S Government Secunues \r\nand Corporate Obhgat1ons \r\nTotals \r\n \r\nRisk ~t~gon~ \r\ns 90,07252 s 840,288 ss s \r\n2,995,775 40 \r\n5 3)3 3) 9 6)7 )5) 4) \r\ns 2~ Ja~ Bl St~ 4~J ~I~ J~ s \r\n \r\nInvestments Not SubJect to CatcgonzatJ.ons Board of Regents \r\nShon-Tenn Fund Total Return Fund Investment Portfolio Accounts Mutual Funds Real Estate State Investment Pools \r\n \r\nTotal Investments \r\n \r\nCanymg \r\n \r\nJ \r\n \r\nAmount \r\n \r\n000 $ 930,361 07 2,99s,ns 40 \r\n \r\n2 622 464 72 0 00 S 13,548,601 19 \r\n \r\n5,025,852 20 37,847,753 30 \r\n80,321 11 1,458 II \r\n)26,742,767 54 \r\n~183 246 753 4S \r\n \r\nFunds mvested m an mvestment pool managed by another governmental enuty are not reqwred to be categonzed smce the Instttute did not own any specific, 1denttfiable mvestment secunttes ofthe pool. \r\n \r\nNOTE 3 ACCOUNTS RECEIVABLE \r\n \r\nAccounts receivable consisted of the following at June 30, 2002 \r\n \r\nStudent Tu1t1on and Fees Auxiliary Enterpnses and Other Operatmg Acttv11tes Federal, State, and Private Funds \r\n \r\n$ 2,146,327 81 2,077,287 39 \r\n42.342,876.23 \r\n \r\n$46,566,491 43 \r\n \r\nLess Allowance for Doubtful Accounts Net Accounts Receivable \r\n \r\n1,793.100 09 \r\n$44,773,391 34 \r\n \r\n-24- \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 4 INVENTORIES \r\n \r\nInventones consisted of the followmg at June 30, 2002 \r\n \r\nPhysical Plant Other \r\n \r\n$ 243,993 36 323.489 59 \r\n \r\nTotal \r\n \r\n$ 567,482.95 \r\n \r\nNOTE 5 NOTES/LOANS RECEIVABLE \r\n \r\nNotes/Loans receivable at June 30, 2002, prunanlycons1st ofstudent loans made through the Federal Perk.ins Loan Program (the Program) The Program provides for cancellauon of a loan at rates of I 0% to 30% per year up to a maximum of I 00% 1fthe parUc1pant complies with certam prov1s1ons The Federal government reimburses the Institute for amounts cancelled under these prov1S1ons As the Institute determmes that loans are uncollectlble and not eligible for reimbursement by the Federal government, the loans are wntten off and assigned to the U S Department of Education The Institute has provided an allowance for uncollecUble loans, wluch, m management's op1mon, 1s sufficient to absorb loans that will ultimately be wntten off \r\n \r\nNOTE 6 CAPITAL ASSETS \r\n \r\nThe balance at July I, 2001 was adjusted for accountmg changes reqmred m 1mplemenung GASS Statements 34 and 35 as disclosed m Note I. Followmg are the changes m capital assets for the year endedJune30,2002 \r\n \r\n- 25 - \r\n \r\n GEORGIA INSTITlITE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 6 CAPITAL ASSETS \r\n \r\nAdJusted Balance July I, 200! \r\n \r\nAdd1t19nc:; \r\n \r\nRcducuons \r\n \r\n,o Balance \r\nJune 2002 \r\n \r\nCapital Assets, Not Being Depreciated Land and Land Improvements Construction Work-In-Progress \r\nCapnahzed Collect1ons \r\n \r\nS 29,335,742 64 4,046,929 18 S 17,484,398 28 \r\n3,350 335 00 \r\n \r\nS 29,335,742 64 21,531,327 46 \r\n3,350,335 00 \r\n \r\nTotal Capital Assets Not Being Depreciated \r\n \r\nS 36 733,006 82 s 17 484 398.28 \r\n \r\ns 54,217,405 JO \r\n \r\nCapital Assets, Being Depreciated Infrastructure Building and Building Improvements Fac1ht1es and Other Improvements \r\nEquipment CapnalLeases Library Collect1ons \r\n \r\nS 32,575,585 78 s 4,3 7 I ,860 00 \r\n \r\ns 36,947,445 78 \r\n \r\n586,532,783 06 13,072.812 42 \r\n253,492,921 64 2,166,913 77 \r\n61 039 HI 63 \r\n \r\n39,303,860 68 S 664,050 30 \r\n25,946.560 50 1,187,156 57 \r\n4, '21 013,00 \r\n \r\n63,571 00 6,983,381 96 \r\n6,69358 \r\n \r\n625,773,072 74 13,736,862 72 \r\n272,456,100 18 3,354,070 34 \r\n65 42H61 05 \r\n \r\n$948 880 358 30 S 75,864 501,05 s 7,053,646 54 SJ OI7,69IJI2 81 \r\n \r\nLess Accumulated Deprccultlon Infrastructure Buildings end Building Improvements Fac1ht1es and Other Improvements \r\nEquipment Capital Leases Library Collect1ons \r\n \r\ns 7,257,534 62 s 829,171 74 \r\n \r\ns 8,086,706 36 \r\n \r\n142,824,776 99 5,930,607 45 \r\n141,384,500 94 \r\n350,589 58 \r\n41 545 655 43 \r\n \r\n14,377,810 22 $ 359,489 12 \r\n23,135,635 I 9 290,045 71 \r\n3 333,624 35 \r\n \r\n42,085 56 4.742,43 I 85 \r\n6 693.58 \r\n \r\n157,160,501 65 6,290,096 57 \r\n159,777.704 28 640.635 29 \r\n44 872 586 20 \r\n \r\nS339,293 665 OJ S 42,325,776 33 s 4 ?21.::10 99 S 376,828J30 35 \r\n \r\nToral Capital Assets, Being Depreciated, Net \r\n \r\nss 5609,586 693 29 s 33 538 724 72 s 2,262 435 s 640,862,982 46 \r\n \r\nCapital Assets, Net \r\n \r\n$646 312 700 11 s 5I023 123 00 S 2 262 435 55 s 695 080 387 56 \r\n \r\nNOTE 7 DEFERRED REVENUE \r\n \r\nDeferred revenue consisted of the followmg at June 30, 2002. \r\n \r\nPrepaid Twtlon and Fees Research Other Deferred Revenue \r\n \r\n$ I 6,266,840 25 9,734,819.54 3.214.362 62 \r\n \r\nTotals \r\n \r\n$29 216 022,41 \r\n \r\nNOTE 8 LONG-TERM LIABILITIES \r\n \r\nLong-term hab1!1ty activity for the year ended June 30, 2002, was as follows \r\n \r\n- 26 - \r\n \r\n GEORGIA INSTITlITE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 8 LONG-TERM LIABILITIES \r\n \r\nLeases Lease Obhgat,ons \r\nOther Liab1 hues Compensated Absences \r\nTotal Long-Tenn ObhgatJons \r\n \r\nBalance \r\nJuly). 200J \r\ns 1,040,441 81 \r\n22 S43 837 13 S~JS~ 22S 2~ \r\n \r\nAdd1uons \r\ns 1,187,156 57 \r\nJ4 367 04J 07 \r\nSI~ ~~j 122~ \r\n \r\nRcducnons \r\ns 974,643 38 \r\n13.554.77918 SI~ ~~2 ~~~ ~~ \r\n \r\nBalance \r\nJune '9 2002 \r\ns 1,252,955 00 \r\n2, 656 099 02 \r\nS2~2Q2Q~~02 \r\n \r\nCurrent Pon1on \r\ns 604,433 75 \r\n13,554.779.JB \r\nSJ~ 1~2 iii ~J \r\n \r\nNOTE 9 SIGNIFICANT CONSTRUCTION COMM:ITMENTS \r\n \r\nGeorgia InstJtute of Technology had s1gruficant unearned, outstanding, construct10n or renovation contracts executed m the amount of$7,025,321.32 as ofJune 30, 2002. This amount IS not reflected m the accompanymg basic financial statements \r\n \r\nNOTE 10 LEASE OBLIGATIONS \r\n \r\nCAPITAL LEASES Capital leases are generally payable in mstallments ranging from monthly to annually and have terms expmng m vanous years between 2003 and 2007 Expenses for fiscal year 2002 were $1,047,715 06 ofwh1ch $73,071.68 represented mterest Total pnnc1pal pmd on capital leases was $974,643 38 for the fiscal year ended June 30, 2002. Interest rates range from 5 percent to 11 percent The followmg 1s a summary of the carrymg values of assets held under capital lease at June 30, 2002. \r\n \r\nEqmpment \r\n \r\n$ 2.7!3.435,05 \r\n \r\nCertaJn capital leases provide for renewal and/or purchase options Generally purchase ophons at bargam pnces of one dollar are exerc1sable at the exprratlon of the lease terms \r\n \r\nOPERATING LEASES Georgia Institute of Technology's noncancellable operating leases haV1ng remmnmg terms of more than one year expire m vanous fiscal years from 2003 through 2008 CertaJD operatmg leases provide for renewal options for penods from one to three years at their fmr rental value at the time of renewal All agreements are cancelable 1f the State of Georgia does not proVIde adequate fundmg, but that 1s considered a remote poss1b1hty. In the normal course of business, operating leases are generally renewed or replaced by other leases Operatmg leases are generally payable on a monthly basis Examples ofproperty under operatmg leases are copiers and other small busmess eqmpment. \r\n \r\nDescription of Related Party Leases In 1994, Georgia Institute of Technology entered mto a real property operatmg lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year \r\n \r\n- 27 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 10 LEASE OBLIGATIONS \r\nOPERATING LEASES \r\nDescription of Related Party Leases The cwrent agreement 1s for July I, 2002 through June 30, 2003 for monthly fees of $15,559 20 The agreement does contain a renewal option Under this agreement, Georgia Insutute of Technology 1s obligated to pay Georgia Tech Research Corporallon $ I97,716.92 m fiscal year 2003 \r\nIn I995, Georgia Institute of Technology entered mto a real property operatmg lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year. The current agreement 1s for July I, 2002 through June 30, 2003 for monthly fees of$105,055 82. The agreement does contain a renewal option. Under this agreement, Georgia lnstitute of Technology 1s obhgated to pay Georgia Tech Research Corporation $1,260,669 84 m fiscal year 2003. \r\nIn 1995, Georgia Institute of Technology entered mto a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year The current agreement 1s for July 1, 2002 through June 30, 2003 for monthly fees of$125,870 00 The agreement does contain a renewal option. Under th.ls agreement, Georgia Institute of Technology 1s obhgated to pay Georgia Tech Research Corporation $386,316 19 in fiscal year 2003 \r\nIn 2000, Georgia Insutute of Technology entered mto a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office space renewable each year The current agreement 1s for July 1, 2002 through June 30, 2003 for monthly fees of$8,325 80 The agreement does contam a renewal option. Under th.ls agreement, Georgia Institute ofTechnology 1s obhgated to pay Georgia Tech Research Corporation $99,909.60 m fiscal year 2003 \r\nIn 2002, Georgia lnstitute of Technology entered mto a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office/warehouse space from July I, 2002 through December 31, 2002 for monthly fees of$3,730.06. The agreement does not contain a renewal option Under th.ls agreement, Georgia Institute ofTechnology 1s obhgated to pay Georgia Tech Research Corporation $44,760.72 m fiscal year 2003 \r\nIn 2002, Georgia Institute of Technology entered mto a real property operating lease with the Georgia Tech Research Corporation, (GTRC) a related party, for office and research space from July I, 2002 through June 30, 2003 for monthly fees of$93,677.00 Under th.ls agreement, Georgia Institute of Technology is obhgated to pay Georgia Tech Research Corporation $1,124,124 00 m fiscal year 2003. \r\nIn 2002, Georgia Institute of Technology entered into a real property operating lease with the Georgia Advanced Technology Ventures, a related party, for office space renewable each year. The current agreement 1s for May I, 2002 through September 30, 2002 for monthly fees of$12,462 92 \r\n- 28 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE IO LEASE OBLIGATIONS \r\n \r\nOPERATING LEASES \r\n \r\nDescription of Related Party Leases The agreement does contain a renewal option Under tlus agreement, Georgia Institute of Technology 1s obligated to pay Georgia Advanced Technology Ventures $37,388.76 m fiscal year 2003 \r\n \r\nNoncancellable operallng lease expenses m 2002 were $10,285,893.10 for real property \r\n \r\nSUMMARY OF LEASE OBLIGATION Future commitments for capital leases (winch here and on the Statement ofNet Assets mclude other mstalhnent purchase agreements) and for noncancellable operatmg leases havmg remammg terms m excess of one year as of June 30, 2002, were as follows \r\n \r\nCapital Leases \r\n \r\nOperatmg Leases \r\n \r\nYear Endmg June 30 2003 2004 2005 2006 2007 \r\nTotal Mmunurn Lease Payments \r\n \r\n$ 675,274.35 $ 5,464,021 27 374,469.06 296,021.20 27,266 54 1,952 00 \r\n$ 1,374,983 15 $ 5 464 021.27 \r\n \r\nLess: Interest \r\n \r\n122,028.15 \r\n \r\nPnnc1pal Outstandmg NOTE 11 RETIREMENT PLANS \r\n \r\nS I 252 955.00 \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nPlan Description Georgia Institute ofTechnology part1c1pates m the Teachers Ret1rement System ofGeorgia (TRS), a cost-shanng mulllple-employer defmed benefit pension plan established by the General Assembly of Georgia for the purpose of prov,dmg retirement allowances and other benefits for teachers of the State ofGeorgia TRS provides service rellrement, d1sab1hty retuement, and survivor's benefits for ,ts members m accordance with State statute The Teachers Re!Jrement System of Georgia issues a separate stand alone financial audit report and a copy can be obtamed from the Georgia Department of Audits and Accounts. \r\n \r\n-29 - \r\n \r\n GEORGIA INSTITlITE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 11 RETIREMENT PLANS \r\n \r\nTEACHERS RETIREMENT SYSTEM OF GEORGIA \r\n \r\nFunding Policy Employees of Georgia Institute ofTechnology who are covered by TRS are reqmred by State statute to contribute 5% of their gross earmngs to TRS. Georgia Institute of Technology makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees m accordance with State statute and as adVJsed by their mdependent actuary For fiscal year 2002, the employer contribution rate was 9 24% for covered employees Employer contributions for the current fiscal year and the precedmg two fiscal years are as follows: \r\n \r\nFiscal Year \r\n \r\nPercentage Contributed \r\n \r\nReqmred Contribution \r\n \r\n2002 2001 2000 \r\n \r\n100/c, 100% 100% \r\n \r\n$14,821,929 46 $18,792,120 88 $19,346,820 05 \r\n \r\nREGENTS RETIREMENT PLAN \r\n \r\nPlan Description The Regents Retirement Plan, a smgle-employer defined contribution plan, 1s an optional retirement plan established and admm1stered by the Board of Regents of the Umvers1ty System of Georgia, under which 1t may purchase annuity contracts for the purpose of proVJdmg retirement and death benefits for eligible faculty and pnnc1pal adm1mstrators Benefits depend solely on amounts contributed to the plan plus mvestrnent earmngs Benefits are payable to part1c1patlng employees or their benefic1anes m accordance with the terms of the annmty contracts. \r\n \r\nFunding Policy Member contribution requirements are established by the Board of Trustees of the Teachers Retirement System Employer contributions are established by statute and may be amended only by the General Assembly ofthe State of Georgia. The employer contributes 9.62% ofthe part1c1patmg employee's eamable compensation Employees contribute 5% of their earnable compensation Amounts attnbutable to all plan contributions are fully vested and non-forfeitable at all times \r\n \r\nGeorgia Institute of Technology and the covered employees made the required contributions of $11,855,993 71(962%) and $6,161,653.21 (5%), respectively \r\n \r\n- 30- \r\n \r\n GEORGIA INSTITTJTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 11 RETIREMENT PLANS \r\nGEORGIA DEFINED CONTRIBUTION PLAN \r\nPlan Description Georgia Institute of Technology participates in the Georgia Defined Contnbution Plan (GDCP) wluch 1s a single-employer defined contnbution plan established by the General Assembly of Georgia for the purpose of proVIding retirement coverage for State employees who are temporary, seasonal, and part-l!me and are not members of a pubhc retirement or pens10n system. GDCP 1s adm1mstered by the Board of Trustees of the Employees' Retirement System of Georgia \r\nBenefits \r\nA member may retrre and elect to receive penod1c payments after attamment ofage 65. The payment \r\nwill be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees Ifa member has less than$ 3,500.00 credited to his/her account, the Board ofTrustees has the opl!on ofreqwnng a lump sum dtstnbul!on to the member m lieu ofmaking penodic payments Upon the death of a member, a lump sum dtstnbutJon equaling the amount credtted to his/her account will be paid to the member's designated beneficiary. Benefit prov1s1ons are established by State statute. \r\nContributions and Vesting Member contnbul!ons are seven and one-halfpercent (7.5%) ofgross salary. There are no employer contnbut1ons ContnbutJon rates are established by State statute Earmngs are credited to each member's account m a manner established by the Board of Trustees. Upon termmation of employment, the amount of the member's account 1s refundable upon request by the member. \r\nTotal contnbutlons made by employees dunng fiscal year 2002 amounted to $659,864 61 winch represents 7.5% of covered payroll. These contnbutlons met the reqwrements of the plan. \r\nNOTE 12 RISK MANAGEMENT \r\nGeorgia Institute ofTechnology 1s a participant m the Board ofRegents ofthe Umvers1ty System of Georgia Health Benefits Plan. which 1s a self-insurance program of health and dental benefits for employees and retirees of the Umvers1ty System of Georgia. Georgia lnstitute ofTechnology and part1c1patlng employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage The Health Benefits Plan 1s included in the financial statements ofthe Board of Regents of the Umvers1ty System of Georgia - AdnumstratJve Central Office All units of the Umvers1ty System of Georgia share the nsk of loss for claims of the Health Benefits Plan The Health Benefits Plan 1s considered a self-sustaining nsk fund that provides health coverage for 1ts members up to a maximum hfetrrne benefit of$2,000,000 00 per person and dental coverage up to an annual maxrmum of$1,000 00 per person The Board of Regents has contracted with Blue Cross Blue Shield ofGeorgia to process claims m accordance with the Health Benefits Plan as estabhshed by the Board of Regents \r\n \r\n- 31 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30. 2002 \r\n \r\nEXHIBIT \"D\" \r\n \r\nNOTE 12 RISK MANAGEMENT \r\nThe Department of Achmmstralive Services (DOAS) has the respons1b1hty for the State of Georgia of making and carrying out dec1s1ons that will m1mm1ze the adverse effects ofacc1dental losses that involve State government assets The State believes 11 1s more economical to manage its nsks internally and set aside assets for claim settlement Accordmgly, DOAS processes claims for nsk of loss to which the State 1s exposed, includmg general hab1lity, property and casualty, workers' compensalion, unemployment compensalion, and law enforcement officers' indernmficalion Linuted amounts of commercial insurance are purchased applicable to property, employee and automobile liab1hty, fidelity and certain other nsks. Georgia Institute of Technology, as an organ1zalional unit of the Board of Regents ofthe Umvers1ty System ofGeorgia, 1s part ofthe State of Georgia reporting enlity, and as such, 1s covered by the State of Georgia nsk management program adrmmstered by DOAS Premiums for the nsk management program are charged to the vanous state orgamzatlons by DOAS to proV1de claims seTV1cing and claims payment \r\nA self-insured program ofprofess1onal liability for its employees was established by the Board of Regents of the University System of Georgia under powers authonzed by the Official Code of Georgia Annotated Secl!on 45-9-1. The program msures the employees to the extent that they are not rrnmune from liability against personal liability for damages ansmg out of the performance of their du!ies or in any way connected therewith The program 1s adrmmstered by DOAS as a SelfInsurance Fund. \r\nNOTE 13 CONTINGENCIES \r\nAmounts 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 wluch are disallowed under grant terms. The amount ofexpenditures wluch may be disallowed by the grantor cannot be determined at this time although Georgia Institute ofTechnologyexpects such amounts, 1f any, to be rrnmaterial to its overall financial pos11ion \r\nL1t1galion, chums and assessments filed against Georgia Institute ofTechnology (an orgamza!ional umt ofthe Board ofRegents ofthe Umvers1ty System ofGeorgia), 1fany, are generally considered to be aclions against the State of Georgia Accordingly, s1giuficant liligalion, 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, 2002. \r\nNOTE I 4 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\nPursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-331, the Board of Regents of the Umvers1ty System of Georgia has established group health and life msurance programs for regular employees ofthe Umvers1ty System ofGeorgia. It 1s the policy ofthe Board ofRegents to permit employees ofthe Umvers1ty System ofGeorgia eligible for retrrement or that become permanently and totally disabled to continue as members of the group health and life \r\n- 32 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS \r\nJUNE 30, 2002 \r\n \r\nEXHIBIT\"D\" \r\n \r\nNOTE 14 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS \r\n \r\ninsurance programs Employees who are ehgible for retirement or d1sab1hty llilder the cntena estabhshed by the Teachers Retirement System ofGeorgia and who have at least ten years ofsen'1ce with the Umvers1ty System of Georgia are ehgible for these post-employment health and hfe insurance benefits Orgamzatlonal llillts of the Board of Regents of the Umvers1ty System of Georgia pay the employer portion for group insurance for affected ind1v1duals \r\n \r\nAs of Jllile 30, 2002, there were 1,075 employees who had reured or were disabled that were rece1vmg these post-employment health and hfe insurance benefits. For the year ended June 30, 2002, Georgia lnslltute ofTechnology recogmzed as incurred $3,404,233 60 ofexpenditures, which was net of$1,471,807 94 ofpart1c1pant contnbutlons \r\n \r\nNOTE 15 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS \r\n \r\nThe lnstltute's operating expenses by funcuonal class1ficat1on are shown below \r\n \r\nStatement ofOperatmg Expenses - Natural vs FLmCbooal Cl.a:ss1ficatwns For the f15eal Year Ended Jtmc 30, 2002 \r\n \r\nFuncbonal Clwafigtmn \r\n \r\nNatural ClPs\\fi\u003eribcm \r\n \r\nIJ\\WCbon \r\n \r\nEnrw:h \r\n \r\nPublic ScMg \r\n \r\nAcadeln1c \r\nSupport \r\n \r\nStudent \r\nSerow \r\n \r\nS.lancs faculty Slllff \r\nEmployee B\u003cnefits Other Personal Services Travel Scholmlups and \r\nFcl\\0\\\\-~hrps Ut1hacs Supplies and Other \r\nServ,ccs \r\nDeprcctabon \r\nTotal Opcraung Expenses \r\n \r\ns s s S 69,482,977 82 S 88,337,502.23 \r\n \r\n7,323,790 44 \r\n \r\n2,602,635 95 \r\n \r\n35,338 89 \r\n \r\n42,315,136 93 62,600,491 33 10,786,169 52 14,118,057 29 \r\n \r\n8.246,712 29 \r\n \r\n17,954,005 54 28,121,821 13 \r\n \r\n3,930.835 64 \r\n \r\n3,921,348 91 \r\n \r\nI,703,040 44 \r\n \r\n525,157 44 \r\n \r\n102,17008 \r\n \r\n738,865 28 \r\n \r\n20,398 64 \r\n \r\n19,967 25 \r\n \r\n1,934,033 28 \r\n \r\n6,782,748 48 \r\n \r\n1,127,691 45 \r\n \r\n323,809 67 \r\n \r\n288,391 49 \r\n \r\n7,146,806 04 \r\n \r\n176,891.29 \r\n \r\n18,17642 \r\n \r\n33,370.277 67 \r\n4 008.5)0 28 \r\n \r\n51,607,674 00 \r\nI3,6,)5 700,69 \r\n \r\n20,307,143 91 \r\n407.283 HI \r\n \r\n5,730,609 53 \r\n4.583,!\u003c45 39 \r\n \r\n9,356,604 09 \r\nI 322,634 04 \r\n \r\nSJZ 736 905 00 $731.384 222 23 s 44 619 9\"i6 47 s 31 JOO 405 JH s 29 222 M 49 \r\n \r\nNatural ctwufic:atmn \r\nSalanes Faculty Staff \r\nEmployee B\u003cnefits Other Pcnonal Sttv\\CCS Travel Scholarships and \r\nFellowsh1ps llhht1cs Supplies and Other \r\nServ\u003eCcs Deprec1at1on \r\nTotal Op=ung Expense, \r\n \r\nlnshtubonal \r\nS\\mport \r\n \r\nf~nmJll ~S)f'\u0026i~ \r\n \r\nPlant \r\n \r\nOpcrabonl and Scholanlnps \r\n \r\nAux1hary \r\n \r\nMamtenancc and Fcllowshn,s Entgpnscs \r\n \r\nTotal \r\nOpentmg \r\nExpensg \r\n \r\ns 367,713 97 19,171,075 36 4,583,610 62 82,90613 238.858 65 \r\n13,390 17 \r\n \r\ns 142,751 32 18,063,033 44 4,327,296 26 68,983 58 \r\n8,274,053 42 \r\n \r\ns 6,838,677 67 \r\n \r\nS 10,936,722 15 \r\n2,389,127 78 23665 \r\n82,352 27 \r\n3,674,818 10 \r\n \r\n$168,292,710 62 186,237,398 31 66,931,086 32 \\.489,701 47 10,846,868 87 \r\n6,838,6TT 67 19,304,13544 \r\n \r\n9 918,194 86 \r\n11,506,I02 99 \r\n \r\n14,398,964 74 \r\n2,171 500 l3 \r\n \r\n16,824,393 98 161,513,862 7R \r\n4 670,499 00 42,325 TIP 33 \r\n \r\ns ~~ BBi B~~ Z~ s ~z ~~ ~B2 2 s~.BJa ~zz ~z s JB ~ZB 1~2 2J ~J ZIW~l7 Bl \r\n \r\n- 33 - \r\n \r\n SUPPLEMENTARY INFORMATION - 35 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF RE\\/ENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - fNON-GAAP BASIS} RESIDENT INSTRUCTION \r\nYEAR ENDED JUNE 30 2002 \r\n \r\nSCHEDULE \"1\" \r\n \r\nREVENUES \r\nState Appropnat,ons Other Revenues Retained \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE) \r\n \r\n$ 193,714,294 00 $ 193,714,294 00 $ \r\n \r\n376,852,107 00 \r\n \r\n317,900,613 86 \r\n \r\n000 -58 951 493 14 \r\n \r\n$ 5701566.401 00 $ 511,614 907 86 $ _ __;:-58c=....:,95;:..1;.:_.4\"\"9.:;.3_;_14.:.. \r\n \r\nEXPENDITURES \r\nP8TSOnal SeMces Educat,on, General and Departmental SeMCes Sponsored Operations \r\nOperating Expenses Educabon, General and Departmental Services Sponsored Operebons \r\nCaprtal Outlay Speaal Funding lrutiabve Office of M1nonty Business Enterprise Research Consortium \r\n \r\n$ 238,876,TT2 00 $ 227,834,127 57 $ \r\n \r\n76,848,518 00 \r\n \r\n80,183,105 10 \r\n \r\n78, TTB,392 00 95,151,482 00 49,209,623 00 \r\n6,524,320 00 487,50000 \r\n24,689,794 00 \r\n \r\n75,732,679 51 91,398,517 OB 10,283,597 97 \r\n6,924,658 39 500,00000 \r\n16,316,307 45 \r\n \r\n11,042,644 43 -3,334,587 10 \r\n3,045,712 49 3,752,964 92 38,926 025 03 -400,338 39 \r\n-12,500 00 8,373,486 55 \r\n \r\nExcess of Revenues over Expendrtures \r\n \r\nS 5701566.401 00 $ 509,172,993 07 S_ __;:6cc1,.::c39:::3:,_,40=-7.:::93::. \r\n \r\n$ \r\n \r\ns_ _ 2 441 914 79 \r\n \r\n~2:.;44;:;:.:1:.,:9:,:1,;:4.:,7.::,9 \r\n \r\n(1) Actual amounts were prepared on a preso,bed basis of accounbng that demonstrates compliance v.,th budgetary statutes and regulabons of the State of Georg.,, which Is a comprehenS1Ve basis of accounbng other than generally accepted accounbng pnnaples \r\n \r\nSee notes to the financ,al statements \r\n \r\n-37 - \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF REVENUES AND,EXPENDITURES COMPARED TO \r\nBUDGET  /NON-GAAP BASISl LOTTERY FOR EDUCATION \r\nYEAR ENDED JUNE 30. 2002 \r\n \r\nSCHEDULE \"2\" \r\n \r\nFUNDS AVAILABLE REVENUES \r\nState Appropriabons CARRY-OVER FROM PRIOR YEAR \r\nTransfer from Reserved Fund Balance \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCE FAVORABLE (UNFAVORABLE) \r\n \r\n$ 4,873,566 00 $ 4,873,566 00 $ \r\n \r\n000 \r\n \r\n20,000,000 00 \r\n \r\n000 \r\n \r\n-20,000,000 00 \r\n \r\n$ 24,873,566 00 $ 4,873,566 00 $ _ __,2:::0::,:,0c::;00::.,,.:;000::.=..:00:=- \r\n \r\nEXPENDlTURES \r\nEquipment, Technology and Constructton Trust Fund \r\nSpecial Funding lntltattVes Student lnformabon System \r\n \r\n$ 4,720,016 00 S 4,814.23813 $ \r\n \r\n153,550 00 \r\n \r\n61.010 65 \r\n \r\n20,000,000 00 \r\n \r\n000 \r\n \r\n-94,22213 92,539 35 20,000,000 00 \r\n \r\nExcess of Revenues over Expenditures \r\n \r\n$ 24,873,566 00 S 4,875,248 78 $ _ _1:.::9::.:,Sc::;98::.,,:::,31~7_,2=.2 \r\n \r\n$ \r\n \r\n-168218 s ____._1.;;;BB=2.;.18::. \r\n \r\n(1) Actual amounts were prepared on a prescnbed basis of accounbng that demonstrates compltance wrth budgetary statutes and regulabons of the State of Georgia, whtch s a comprehensIVe bass of accounting other than generally accepted accounbng pnnaples \r\n \r\nSee notes to the flnanc,al statements \r\n \r\n 38  \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY \r\nSCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO \r\nBUDGET - fNON-GAAP BASISl OTHER ORGANIZED ACTIVITIES \r\nYEAR ENDED JUNE 30. 2002 \r\n \r\nSCHEDULE \"3\" \r\n \r\nFUNDS AVAILABLE \r\nREVENUES State Appropnabons Other RevellUes Retamed \r\nCARRY-OVER FROM PRIOR YEAR \r\nTransfer from Reserved Fund Balance \r\n \r\nBUDGET \r\n \r\nACTUAL (1) \r\n \r\nVARIANCEFAVORABLE (UNFAVORABLE} \r\n \r\n$ 30,366,393 00 $ 30,366,393 00 $ \r\n \r\n135,013,852 00 \r\n \r\n112,135,313 04 \r\n \r\n000 -22,878,538 96 \r\n \r\n28,638,041 00 \r\n \r\n000 \r\n \r\n-28 638 041 00 \r\n \r\n$ 194,018,286 00 $ 142,501,706 04 $ -51,516,579 96 \r\n \r\nEXPENDITURES \r\nPersonal Services Educat,on, General and Departmental Services $ Sponsored Operebons \r\nOperebng Expenses Educabon. General and Departmental Services Sponsored Opera\\JOnS \r\nAgncullurel Research Advanced Technology Development Center Seed Caprtal Fund - ATDC Center for Assrsbve Technology and Environmental \r\nAccess (Formerly CRT, Inc Contract) Student lntormabon System \r\n \r\n26,281,913 00 $ 44,098,803 00 \r\n29,343,740 00 30,645,697 00 \r\n1,832,330 00 22,921,209 00 \r\n3,000,000 00 \r\n7,256,553 00 28,638,041 00 \r\n \r\n24,852,508 95 $ 44,004,207 35 \r\n26,813,377 29 20,969,727 96 \r\n1,799,558 81 19,722,50416 \r\n1,411,981 36 2 836 07718 \r\n \r\n1,429,404 05 94,59565 \r\n2,530,362 71 9,675,969 04 \r\n32,77119 3,198,704 84 3,000,000 00 \r\n5,844,571 64 25,801,963 82 \r\n \r\nExcess of Revenues over Expend:tures \r\n \r\n$ 194.018.286 00 $ 142,409,943 06 $ 51,608,342 94 \r\n \r\n$ \r\n \r\ns_ _ 91 762 98 \r\n \r\n...,;9:,:1,.;7,;;62;;,,,:;:98;;, \r\n \r\n( 1) Actual amounts were prepared on a presaibed bas,s of accounbng tha1 demonstrates c:ompl:ance wrth budgetary s1aMes and regulabons of the State of Georg:a, wh:ch :s a comprehensive bas:s of accounbng other than generally accepted acx:ounbng pnncoples \r\n \r\nSee notes to the finencoal sta1ement\u0026 \r\n \r\n-39- \r\n \r\n GEORGIA INSTITL[[E OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL \r\n, YEAR ENDED JUNE 30. 2002 \r\n \r\nSCHEDULE \"4\" \r\n \r\nTotals per Annual Supplement \r\n \r\nAccruals - Payroll June 30, 2002 June 30, 2001 \r\n \r\nPrepaid Salanes June 30, 2002 June 30, 2001 \r\n \r\nCompensated Absences June 30, 2002 June 30, 2001 \r\n \r\nAdJustments \r\n \r\nShared Services on Jointly Staffed Personnel \r\n \r\nFort Valley State Universrty \r\n \r\nKar, \r\n \r\nAdrtyamoy \r\n \r\nGeorgia College and State University \r\n \r\nD1etnch, Ame \r\n \r\nGleason, Michael L \r\n \r\nYao, \r\n \r\nJeng-Foung \r\n \r\nGeorgia State University \r\n \r\nO'Farrell, Laura \r\n \r\nGeorgia Southern Universrty \r\n \r\nZhang, Jin-yuan \r\n \r\nState University of West Georgia \r\n \r\nLeavitt, Andrew \r\n \r\nMalone, Kareen R \r\n \r\nSouthern Polytechnic State Unrversrty \r\n \r\nDillon, Meighan I \r\n \r\nSALARIES \r\n \r\nTRAVEL \r\n \r\n$ 354,064,464 79 $ 10,846,868 87 \r\n \r\n171,125 90 -166,717 79 \r\n \r\n-2, 148,470 65 1,696,814 27 \r\n \r\n21,975,010 70 -21,220,471 OB \r\n \r\n12,000 00 \r\n24,000 00 12,00000 12,000 00 \r\n3,768 00 \r\n24,584 80 \r\n34,000 00 12,000 00 \r\n24 00000 \r\n \r\nSee notes to the financial statements \r\n \r\n-40  \r\n \r\n SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY AUDITEE'S RESPONSE \r\nSUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 \r\n \r\nPRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\n \r\nFINDING CONTROL NUMBER AND STATUS \r\n \r\nFS-503-01-01 \r\n \r\nPreviously Reported Corrective Action Implemented \r\n \r\n SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS \r\n \r\n GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS \r\nYEAR ENDED JUNE 30, 2002 \r\nFINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS \r\nCAPITAL ASSETS Inadequacies m Operation of Property Management System Fmdmg Control Number. FS-503-02-01 \r\nFor the year under reV1ew, audit sarnphng and other procedures were utlhzed to venfy the vahd1ty and accuracy of the eqmpment mventory records as presented for audit An equipment mventory sample of one hundred fifty ( I 50) items was randomly selected from the subs1d1ary equipment mventory records. Fifty (50) eqmpment items reported by the Institute as havmg been deleted or disposed of dunng the fiscal year were also selected for testmg. Additionally, as ofJuly I, 2001, the Umvers1ty System of Georgia rmplemented a new Capital Asset Gmde. One of1ts many changes was to allow uruts of the Uruverslty System to remove \"small value\" eqmpment from their capital asset records by raising the cap1talizat1on threshold for eqmpment items from $ I ,000.00 to $5,000.00 As part ofour testmg procedures, we examined the hsting of\"small value\" items deleted to venfy that no equipment items meeting or exceedmg the $5,000.00 threshold had been rmproperly deleted \r\nThe results ofour testmg disclosed the followmg: \r\n(I) Two (2) items from our eqwpment sample could not be located \r\n(2) Adequate documentation could not be proV!ded for thirteen (13) items, equalmg $622,895.07, reported as bemg disposed ofby the Institute. \r\n(3) Twenty-three (23) items, equalmg $158,212.26, were deleted incorrectly as part ofsmall value deletions. These items had ind1V1dual item values greater than $5,000.00 each. \r\nThese defic1enc1es occurred because of management's finlure to adequately morutor and mamtain eqwpment mventory records The Institute should strengthen internal accountmg controls over the eqwpment mventory process. \r\n \r\n "}],"pages":{"current_page":1,"next_page":2,"prev_page":null,"total_pages":2,"limit_value":10,"offset_value":0,"total_count":12,"first_page?":true,"last_page?":false},"facets":[{"name":"type_facet","items":[{"value":"Text","hits":12}],"options":{"sort":"count","limit":16,"offset":0,"prefix":null}},{"name":"creator_facet","items":[{"value":"Georgia. Department of Audits and Accounts","hits":11},{"value":"Georgia. Department of Audits and Accounts. Education Division","hits":1}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"subject_facet","items":[{"value":"Auditors' reports--Georgia--Periodicals.","hits":12},{"value":"Education, Higher--Georgia--Auditing--Periodicals.","hits":12},{"value":"Education, Higher--Georgia--Finance--Statistics--Periodicals.","hits":12},{"value":"Financial statements--Georgia--Periodicals.","hits":12},{"value":"Georgia Government Documents--Serial","hits":12},{"value":"Georgia Institute of Technology--Appropriations and expenditures--Periodicals.","hits":12},{"value":"Georgia Institute of Technology--Auditing--Periodicals.","hits":12},{"value":"Technical education--Georgia--Auditing--Periodicals.","hits":12},{"value":"Technical education--Georgia--Finance--Statistics--Periodicals.","hits":12}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"location_facet","items":[{"value":"United States, Georgia, Fulton County, Atlanta, 33.749, -84.38798","hits":11},{"value":"United States, Georgia, 32.75042, -83.50018","hits":1}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"counties_facet","items":[{"value":"Fulton","hits":11}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"year_facet","items":[{"value":"2007","hits":3},{"value":"2000","hits":2},{"value":"2001","hits":2},{"value":"2002","hits":2},{"value":"2003","hits":2},{"value":"2004","hits":2},{"value":"2005","hits":2},{"value":"2006","hits":2},{"value":"2008","hits":2},{"value":"2009","hits":2},{"value":"2010","hits":1}],"options":{"sort":"count","limit":100,"offset":0,"prefix":null},"min":"2000","max":"2010","count":22,"missing":0},{"name":"medium_facet","items":[{"value":"state government records","hits":11},{"value":"publications (documents)","hits":1}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"fulltext_present_b","items":[{"value":"true","hits":11},{"value":"false","hits":1}],"options":{"sort":"count","limit":100,"offset":0,"prefix":null}},{"name":"rights_facet","items":[{"value":"http://rightsstatements.org/vocab/InC/1.0/","hits":12}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"collection_titles_sms","items":[{"value":"Georgia Government Publications","hits":12}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"serial_titles_sms","items":[{"value":"Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended ...","hits":12}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"provenance_facet","items":[{"value":"University of Georgia. Map and Government Information Library","hits":12}],"options":{"sort":"count","limit":11,"offset":0,"prefix":null}},{"name":"call_numbers_sms","items":[{"value":"A800 .R1 G45/","hits":12},{"value":"L138","hits":12},{"value":"A800 .R1 G45 1999-2000","hits":1},{"value":"A800 .R1 G45 2000-2001","hits":1},{"value":"A800 .R1 G45 2001-2002","hits":1},{"value":"A800 .R1 G45 2002-2003","hits":1},{"value":"A800 .R1 G45 2003-2004","hits":1},{"value":"A800 .R1 G45 2004-2005","hits":1},{"value":"A800 .R1 G45 2005-2006","hits":1},{"value":"A800 .R1 G45 2006-2007","hits":1},{"value":"A800 .R1 G45 2006-2007 LETTER","hits":1},{"value":"A800 .R1 G45 2007-2008","hits":1},{"value":"A800 .R1 G45 2008-2009","hits":1},{"value":"A800 .R1 G45 2009-2010","hits":1}],"options":{"sort":"count","limit":100,"offset":0,"prefix":null}},{"name":"class_name","items":[{"value":"Item","hits":12}],"options":{"sort":"count","limit":100,"offset":0,"prefix":null}},{"name":"geojson","items":[{"value":"{\"type\":\"Feature\",\"geometry\":{\"type\":\"Point\",\"coordinates\":[-83.50018, 32.75042]},\"properties\":{\"placename\":\"United States, Georgia\"}}","hits":1},{"value":"{\"type\":\"Feature\",\"geometry\":{\"type\":\"Point\",\"coordinates\":[-84.38798, 33.749]},\"properties\":{\"placename\":\"United States, Georgia, Fulton County, Atlanta\"}}","hits":11}],"options":{"sort":"index","limit":-2,"offset":0,"prefix":null}},{"name":"placename","items":[{"value":"United States, Georgia, Fulton County, Atlanta","hits":11},{"value":"United States, Georgia","hits":1}],"options":{"sort":"count","limit":100,"offset":0,"prefix":null}}]}}