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Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
Annual Financial Reports 2002
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Annual Financial Reports 2002

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  • 1. ANNUAL FINANCIAL REPORT Board of Regents of the University System of Georgia For the Year Ended June 30, 2002 “Creating a More Educated Georgia”
  • 2. Board of Regents of the University System of Georgia Annual Financial Report June 30, 2002 Table of Contents Members of the Board of Regents .................................................................................... 1 Letters of Transmittal ...................................................................................................... 2 Map of Institutions ........................................................................................................... 4 Institutions of the University System of Georgia ........................................................... 5 State Resources ............................................................................................................... 6 Management’s Discussion And Analysis ..................................................................... 7 Financial Statements Statement of Net Assets ....................................................................................................12 Statement of Revenues, Expenses and Changes in Net Assets ........................................13 Notes To The Financial Statements Note 1 – Summary of Significant Accounting Policies ..................................................14 Note 2 – Cash and Cash Equivalents, Other Deposits, and Investments........................19 Note 3 – Accounts Receivable........................................................................................22 Note 4 – Inventories........................................................................................................22 Note 5 – Notes/Loans Receivable...................................................................................22 Note 6 – Capital Assets...................................................................................................23 Note 7 – Deferred Revenue.............................................................................................24 Note 8 – Long Term Liabilities ......................................................................................24 Note 9 – Lease Obligations.............................................................................................24 Note 10 – Retirement Plans ..............................................................................................27 Note 11 – Risk Management.............................................................................................28 Note 12 – Contingencies...................................................................................................29 Note 13 – Post Employment Benefits Other Than Pension Benefits................................29 Note 14 – Natural Classifications with Functional Classifications ..................................31
  • 3. BOARD OF REGENTS UNIVERSITY SYSTEM OF GEORGIA June 30, 2002 Hilton H. Howell, Jr. ………….….….Atlanta Wanda Yancey Rodwell………….…Atlanta State-At-Large Fourth District Term Expires January 1, 2004 Term Expires January 1, 2005 Hugh A. Carter, Jr. …………………..Atlanta Elridge W. McMillan …………….…Atlanta State-At-Large Fifth District Term Expires January 1, 2009 Term Expires January 1, 2003 Donald M. Leebern, Jr. ………….…...Atlanta Michael J. Coles …………………Kennesaw State-At-Large Sixth District Term Expires January 1, 2005 Term Expires January 1, 2008 Joel O. Wooten, Jr. …..…………….Columbus Joe Frank Harris ……………….Cartersville State-At-Large Seventh District Term Expires January 1, 2006 Term Expires January 1, 2006 William H. Cleveland ……………..…Atlanta Connie Cater …………………..……Macon State-At-Large Eighth District Term Expires January 1, 2009 Term Expires January 1, 2006 Martin W. NeSmith …………….……Claxton Allene H. Magill ………………...…Dalton First District Ninth District Term Expires January 1, 2006 Term Expires January 1, 2008 John Hunt ………………………..……Tifton Timothy J. Shelnut ………………..Augusta Second District Tenth District Term Expires January 1, 2004 Term Expires January 1, 2007 James D. Yancey ……………….….Columbus Glenn S. White ……………..Lawrenceville Third District Eleventh District Term Expires January 1, 2007 Term Expires January 1, 2005 OFFICERS OF THE BOARD OF REGENTS Hilton H. Howell, Jr. ……………….Chairman William R. Bowes ……….……..Treasurer Joe Frank Harris …………..… Vice Chairman Gail S. Weber …….Secretary to the Board Thomas C. Meredith …………….….Chancellor Annual Financial Report FY2002 1
  • 4. BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA 270 Washington Street, S.W. Atlanta, Georgia 30334 Office of Internal Auditing 404-656-2237 June 20, 2003 Mr. William R. Bowes Vice Chancellor for Fiscal Affairs and Treasurer of the Board Board of Regents University System of Georgia Dear Mr. Bowes: I am submitting the Annual Financial Report of the University System of Georgia for the fiscal year ended June 30, 2002. This submission represents the fifty-fifth annual report that has been compiled to convey the financial operations of the University System. These reports are intended to form a comprehensive and permanent record of the financial operations of the System for the period covered, and to inform all persons concerned or interested. Sincerely, Ronald B. Stark Associate Vice Chancellor for Internal Audits Annual Financial Report FY2002 2
  • 5. BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA 270 Washington Street, S.W. Atlanta, Georgia 30334 Office of Fiscal Affairs 404-656-2232 June 20, 2003 Chancellor Thomas C. Meredith Board of Regents University System of Georgia Dear Chancellor Meredith: In keeping with the by-laws of the Board of Regents, I submit to you the Annual Financial Report of the University System of Georgia for the fiscal year ended June 30, 2002. The officers of the various institutions represented in this report have assured us that every effort has been made to reflect accurately the information considered important to all concerned parties. In the event that this report is not sufficient in detail or if there is additional information desired, this office will be glad to supply such information. Sincerely, William R. Bowes Vice Chancellor for Fiscal Affairs and Treasurer of the Board Annual Financial Report FY2002 3
  • 6. UNIVERSITY SYSTEM OF GEORGIA Annual Financial Report FY2002 4
  • 7. INSTITUTIONS OF THE UNIVERSITY SYSTEM OF GEORGIA RESEARCH UNIVERSITIES Georgia Institute of Technology ........................................................................................................ Atlanta Georgia State University.................................................................................................................... Atlanta Medical College of Georgia..............................................................................................................Augusta University of Georgia .........................................................................................................................Athens REGIONAL UNIVERSITIES Georgia Southern University ........................................................................................................ Statesboro Valdosta State University ................................................................................................................Valdosta STATE UNIVERSITIES Albany State University..................................................................................................................... Albany Armstrong Atlantic State University.............................................................................................. Savannah Augusta State University ..................................................................................................................Augusta Clayton College & State University..................................................................................................Morrow Columbus State University ............................................................................................................Columbus Fort Valley State University ........................................................................................................Fort Valley Georgia College & State University ........................................................................................ Milledgeville Georgia Southwestern State University ......................................................................................... Americus Kennesaw State University ........................................................................................................... Kennesaw North Georgia College & State University ..................................................................................Dahlonega Savannah State University ............................................................................................................. Savannah Southern Polytechnic State University ............................................................................................ Marietta State University of West Georgia ..................................................................................................Carrollton STATE COLLEGES Dalton State College ........................................................................................................................... Dalton Macon State College...........................................................................................................................Macon TWO-YEAR COLLEGES Abraham Baldwin Agricultural College .............................................................................................. Tifton Atlanta Metropolitan College ............................................................................................................ Atlanta Bainbridge College ...................................................................................................................... Bainbridge Coastal Georgia Community College ...........................................................................................Brunswick Darton College................................................................................................................................... Albany East Georgia College .................................................................................................................. Swainsboro Floyd College....................................................................................................................................... Rome Gainesville College......................................................................................................................Gainesville Georgia Perimeter College................................................................................................................ Decatur Gordon College............................................................................................................................Barnesville Middle Georgia College................................................................................................................... Cochran South Georgia College......................................................................................................................Douglas Waycross College .......................................................................................................................... Waycross INDEPENDENT RESEARCH UNIT Skidaway Institute of Oceanography ............................................................................................. Savannah Annual Financial Report FY2002 5
  • 8. State Resources The General Appropriations Act of 2002, as amended, provided a total of $1,743,033,215 to the University System of Georgia, with an additional $31,689,500 from Lottery Funds. In addition, indirect funding from the Department of Administrative Services (DOAS) amounted to $3,583,000 and House Bills 175 and 1001 provided $19,241,857 from Tobacco funds. House Bill 1001 also provided $157,135 from the Governor's Discretionary/Emergency Funds. The amounts were as follows: S TATE APPRO PRIATIO NS AVAILAB LE General Appro priat ions Act of 2002 - House Bill 175 General St at e Funds $1,746 ,990,154 Lot t ery Fun ds 8 ,966,000 T obacco funds 6 ,661,821 Indirect DOAS Fun ding - Com m unicat ions 3 ,583,000 Am ended General Appropriat ions Act of 2002 - House Bill 1001 General St at e Funds (3 ,956,939) Lot t ery Fun ds 2 2,723,500 T obacco funds 1 2,580,036 Governor's Discret ionary/Em ergency Funds 157,135 TO TAL S TATE APPRO PRIATIO NS AVAILAB LE $1,797,704,70 7 ALLO C ATIO NS B Y B O ARD O F REG ENTS Educat ional an d General T eaching $1,378,726,9 80 Governor's Em ergency Funds 157,1 35 Non-T each ing 160,734,6 96 T obacco funds 19,241,8 57 Ot her Act ivit ies Regent s Cent ral Office $8 ,392,229 Inform at ion T echnology 31 ,077,607 Sout hern Regional Educat ion Bo ard 928,525 Ren t al P aym ent s - Georgia M ilit ary Co llege 1 ,434,350 Geo rgia P ublic T elecom m unicat ions Com m ission 19 ,890,163 P ublic Libraries 35 ,834,835 Research Consort ium 29 ,192,944 T ot al Ot her Act ivit ies 126,750,6 53 Special Init iat ive Funding 37,713,8 47 Scholarships 585,0 00 T ot al Educat ional and General 1,723 ,910,168 Lot t ery Funds Equipm ent , T echnology and Const ruct ion T rust Fund 15,000,0 00 Int ernet Connect ion Init iat ive 1,500,0 00 Special Init iat ive Funding 12,889,5 00 Georgia P ublic T elecom m unicat ions Com m ission 2,300,0 00 T ot al Lot t ery Funds 3 1,689,500 Capit al Out lay M ajor Repair/Reh abilit at ion Fun ds 4 2,105,039 TO TAL ALLO C ATIO NS B Y B O ARD O F REG ENTS $1,797,704,70 7 Annual Financial Report FY2002 6
  • 9. UNIVERSITY SYSTEM OF GEORGIA Management’s Discussion and Analysis Introduction The mission of the University System of Georgia is to contribute to the educational, cultural, economic, and social advancement of Georgia by providing excellent undergraduate general education and first-rate programs leading to associate, baccalaureate, masters, professional, and doctorate degrees; by pursuing leading-edge basic and applied research, scholarly inquiry, and creative endeavors; and by bringing these intellectual resources, and those of the public libraries, to bear on the economic development of the State and the continuing education of its citizens. The 34 institutions in the University System are led by Chancellor Thomas C. Meredith and the Board of Regents. The University System continues to thrive as shown by the following statistics: Faculty Students FY2002 9,484 228,326 FY2001 9,321 216,093 FY2000 9,305 212,177 Overview of the Financial Statements and Financial Analysis The University System of Georgia is proud to present its consolidated financial statements for fiscal year 2002. These consolidated statements contain information from the 34 institutions of the University System of Georgia, the Skidaway Institute of Oceanography and the University System Office. Each institution has prepared a separate financial statement that is available on CD. The emphasis of discussions about these statements will be on current year data. There are two financial statements presented: the Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets. The Statement of Cash Flows for each institution is presented in the State of Georgia Department of Audits and Accounts Report for the fiscal year ended June 30, 2002. This discussion and analysis of the University System’s financial statements provides an overview of its financial activities for the year. The University System of Georgia has elected to not restate prior periods for purposes of providing the comparative data for this Management’s Discussion and Analysis. However, in future years, when prior period information is available, a comparative analysis will be presented. Annual Financial Report FY2002 7
  • 10. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the University System as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System of Georgia. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non- current assets will be discussed in the footnotes to the financial statements. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution’s equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution. Statement of Net Assets, Condensed Ju n e 30, 2002 Ass e ts: Current Asset s $882,219,911.18 Capit al Asset s, net 2,796,493,833.99 Ot her Asset s 147,601,152.07 Total As se ts 3,826,314,897.24 Li abi l i ti e s: Current Liabilit ies 442,205,921.79 Non-current Liabilit ies 91,462,164.87 Total Li abi l i ti e s 533,668,086.66 Ne t Ass e ts: Invest ed in Capit al Asset s, net of debt 2,686,793,636.69 Rest rict ed - nonexpendable 112,719,913.68 Rest rict ed - expendable 85,878,163.96 Capit al P roject s 5,055,902.05 Unrest rict ed 402,199,194.20 Total Ne t As se ts $3,292,646,810.58 Annual Financial Report FY2002 8
  • 11. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and non- operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets, Condensed Ju n e 30, 2002 Operat ing Revenues $2,025,367,784.26 Operat ing Expenses 3,846,746,687.93 Operat ing Loss (1,821,378,903.67) Non-operat ing Revenues and Expenses 1,806,959,850.84 Incom e (Loss) Before ot her revenues, expenses, gains or losses (14,419,052.83) Ot her revenues, expenses, gains or losses 168,455,382.72 Increase in Net Asset s 154,036,329.89 Net Asset s at beginning of year, as originally report ed 6,261,096,686.08 Cum ulat ive effect of changes in account ing principle 3,122,486,205.39 Net Asset s at beginning of year, rest at ed 3,138,610,480.67 Net Asset s at End of Year $3,292,646,810.58 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. The cumulative effects of changes in accounting principle are primarily the result of the University System adopting depreciation on capital assets and recognizing compensated absences. Annual Financial Report FY2002 9
  • 12. Statement of Cash Flows The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. The Statement of Cash Flows for each institution is presented in the State of Georgia Department of Audits and Accounts Report for the fiscal year ended June 30, 2002. Capital Assets The University System had many significant capital asset additions during FY 2002 in the net amount of $230,463,832.63. Some of these additions include the following: At Georgia Institute of Technology: A Wood Products Laboratory (2.48 M), an Information Technology Building (2.47 M), 500 Tech Parkway Building (2.71 M), a Structural Engineering and Materials Research Building (6.37 M), an Aerospace Engineering Combustion Lab (7.02 M), a parking deck (10.06 M) and a chiller plant (4.37 M). At Georgia State University: A Student Recreation Center and the Helen M. Aderhold Learning Center (46 M). At the University of Georgia: The Applied Genetic Technology Resource Building (4.9 M) and the Animal Science Arena (13.4 M). At Georgia Southern University: The Nessmith-Lane Continuing Education Building (21.7 M). At Valdosta State University: The Student Recreation Center (8 M). At Armstrong Atlantic State University: A Science Building (21.6 M) At Kennesaw State University: The Clendenin Building (4.3 M) At North Georgia College and State University: Health and Natural Sciences Building (19.6 M) At Southern Polytechnic State University: School of Architecture Building (13.1 M) At Dalton State College: The Roberts Library renovation and addition (5.1 M) At Georgia Perimeter College: The Gwinnett University Center (15 M) and the Learning Resources Center (6.4 M) Annual Financial Report FY2002 10
  • 13. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the notes to the financial statements and the details in each institution’s individual Annual Financial Report. Economic Outlook Fiscal year 2002 marked the beginning of a downturn in state appropriations support for the University System of Georgia that is expected to continue through fiscal year 2005. Despite budget reductions, the University System has benefited from increases in formula-based funding due to unprecedented enrollment growth. The net effect has been to soften the impact of reductions to levels less than experienced by most other state of Georgia agencies. Additionally, increases in tuition revenues as a result of enrollment growth and rate adjustments have produced funding to aid University System of Georgia institutions in meeting enrollment demand. Looking forward, the University System may see additional budget reductions but can anticipate continued enrollment growth and support for formula-based funding. The system is in a strong financial position and does not foresee any conditions or other factors that would be expected to substantially affect its financial position or results of operations. Overall net assets have increased and these results are expected to continue into fiscal year 2003 and beyond. _______________________ William Bowes Vice Chancellor for Fiscal Affairs University System of Georgia Annual Financial Report FY2002 11
  • 14. Statement of Net Assets UNIVERS ITY S YS TEM OF GEORGIA S TATEMENT OF NET AS S ETS June 30, 2002 AS S ETS C u rre n t As se ts Cash and Cash Equivalent s $485,137,011.80 Short -t erm Invest m ent s 146,626,472.40 Account s Receivable, net 179,123,360.71 Invent ories 22,401,364.19 Ot her Asset s 48,931,702.08 T ot al Current Asset s 882,219,911.18 Non -cu rre n t As s e ts Invest m ent s 99,344,945.56 Not es Receivable, net 48,256,206.51 Capit al Asset s, net 2,796,493,833.99 T ot al Non-current Asset s 2,944,094,986.06 TO TAL AS S ETS 3,826,314,897.24 LIAB ILITIES C u rre n t Li abi l i ti e s Account s P ayable and Accrued Liabilit ies 80,071,600.92 Deposit s 30,431,558.13 Deferred Revenue 196,227,802.96 Ot her Liabilit ies 9,156,718.11 Deposit s Held for Ot her Organizat ions 8,726,433.49 Com pensat ed Absences (current port ion) 117,591,808.18 T ot al Current Liabilit ies 442,205,921.79 Non -cu rre n t Li abi l i ti e s Com pensat ed Absences 0.00 Long-t erm Liabilit ies 91,462,164.87 T ot al Non-current Liabilit ies 91,462,164.87 TO TAL LIAB ILITIES 533,668,086.66 NET AS S ETS Invest ed in Capit al Asset s, net of relat ed debt 2,686,793,636.69 Rest rict ed for Nonexpendable 112,719,913.68 Expendable 85,878,163.96 Capit al P roject s 5,055,902.05 Unrest rict ed 402,199,194.20 TO TAL NET AS S ETS $3,292,646,810.58 Annual Financial Report FY2002 12
  • 15. Statement of Revenues, Expenses and Changes in Net Assets UNIVERS ITY S YS TEM OF GEORGIA S TATEMENT of REVENUES , EXPENS ES , and CHANGES in NET AS S ETS for the Year Ended June 30, 2002 REVENUES Operat ing Revenues St udent T uit ion and Fees $629,607,153.81 Less: Sponsored and Unsponsored Scholarships (117,910,646.48) Federal Appropriat ions 16,520,591.24 Federal Grant s and Cont ract s 549,672,870.96 St at e and Local Grant s and Cont ract s 201,027,639.84 Nongovernment al Grant s and Cont ract s 294,451,675.51 Sales and Services of Educat ional Depart m ent s 56,949,445.71 Auxiliary Ent erprises 311,924,141.66 Ot her Operat ing Revenues 83,124,912.01 T ot al Operat ing Revenues 2,025,367,784.26 EXPENS ES Operat ing Expenses Salaries: Facult y 865,774,085.60 St aff 1,026,431,805.70 Benefit s 470,216,883.79 Ot her P ersonal Services 11,575,904.71 T ravel 40,110,370.70 Scholarships and Fellowships 222,987,484.40 Ut ilit ies 124,153,760.44 Supplies and Ot her Services 870,646,465.73 Depreciat ion 214,849,926.86 T ot al Operat ing Expenses 3,846,746,687.93 Operat ing Incom e (loss) (1,821,378,903.67) NO N-O PERATING REVENUES (EXPENS ES ) St at e Appropriat ions 1,797,080,386.78 Gift s 11,430,842.15 Invest m ent Income (endowm ent s, auxiliary and ot her) 23,539,181.53 Int erest Expense (capit al asset s) (3,131,301.87) Ot her Non-operat ing Revenues (21,959,257.75) Net Non-operat ing Revenues 1,806,959,850.84 Incom e before ot her revenues, expenses, gains, or loss (14,419,052.83) St at e Capit al Appropriat ions 103,369,009.35 Capit al Grant s and Gift s 23,949,607.21 Federal Grant s & Cont ract s 23,526,526.07 St at e Grant s & Cont ract s 3,449,499.63 Ot her Grant s and Cont ract s 14,160,740.46 T ot al Ot her Revenues 168,455,382.72 Increase in Net Asset s 154,036,329.89 NET AS S ETS Net Asset s-beginning of year, as originally report ed 6,261,096,686.08 Cum ulat ive effect of changes in account ing principle 3,122,486,205.39 Net Asset s-beginning of year, rest at ed 3,138,610,480.67 Net Asset s-End of Year $3,292,646,810.58 Annual Financial Report FY2002 13
  • 16. UNIVERSITY SYSTEM OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS June 30, 2002 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The University System of Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. Reporting Entity The University System of Georgia is comprised of thirty-four (34) State supported member institutions of higher education in Georgia. The accompanying financial statements reflect the consolidated operations of the University System of Georgia. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions’ budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University System of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, all 34 institutions are considered organizational units of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of their legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. Financial Statement Presentation In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities. The State of Georgia is 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 University System 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 University System’s assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. The University System has elected to not restate its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial information will not be presented for fiscal year 2002. Significant accounting changes made in order to comply with the Annual Financial Report FY2002 14
  • 17. new requirements include (1) adoption of depreciation on capital assets; and (2) recognition of compensated absences. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place. Basis of Accounting For financial reporting purposes, the University System is considered a special-purpose government engaged only in business-type activities. Accordingly, the University System’s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant inter-institution transactions have been eliminated. The University System has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. Investments The University System accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses, and Changes in Net Assets. Accounts 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 University System’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventories Consumable supplies are carried at the lower of cost or market on either the first-in, first-out (“FIFO”) basis. Resale Inventories are valued at cost using the average-cost basis. Annual Financial Report FY2002 15
  • 18. Non-current Cash and Investment Cash and investments that are externally restricted to purchase or construct capital or other non- current assets are classified as non-current assets in the statements of net assets. Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System’s capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) – an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to the University System of Georgia when complete. For the year ended June 30, 2002, GSFIC transferred capital additions valued at $112,977,655.20 to the University System of Georgia. This resulted in a cumulative total of $1,814,173,914.35 as of June 30, 2002. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses, and Changes in Net Assets. The University System of Georgia had accrued liability for compensated absences in the amount of $108,976,770.33 as of 7-1-2001 with a net increase of $8,615,037.68 for FY2002. The ending balance as of 6-30-2002 in accrued liability for compensated absences is $117,591,808.01. Non-current Liabilities Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities Annual Financial Report FY2002 16
  • 19. that, although payable within one year, are to be paid from funds that are classified as non- current assets. Net Assets The University System’s net assets are classified as follows: Invested in capital assets, net of related debt: This represents the University System’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University System may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the University System is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net assets – expendable – Capital Projects: This represents resources for which the University System is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University System, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted net assets also include reserves for contractual obligations for goods and services that have not been received at the end of the fiscal year (encumbrances). The reserve for encumbrances as of June 30, 2002 was $156,940,728.49. When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System’s policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. Income Taxes The University System of Georgia, as a political subdivision of the State of Georgia, is excluded from federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. Annual Financial Report FY2002 17
  • 20. Classification of Revenues The University System has classified its revenues as either operating or non-operating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of sponsored and unsponsored scholarships, (2) sales and services of auxiliary enterprises, net of sponsored and unsponsored scholarships, (3) most federal, state and local grants and contracts and federal appropriations, and (4) interest on institutional student loans. Non-operating revenues: Non-operating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as non-operating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Sponsored and Unsponsored Scholarships Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of sponsored and unsponsored scholarships in the Statement of Revenues, Expenses, and Changes in Net Assets. Sponsored and unsponsored scholarships are the difference between the stated charge for goods and services provided by the University System, and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other federal, state or nongovernmental programs, are recorded as either operating or non-operating revenues in the University System’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University System has recorded contra revenue for sponsored and unsponsored scholarships. Accounting Changes As a result of the adoption of GASB Statement No. 34, the University System was also required to make certain changes in accounting principles, specifically (1) adoption of depreciation on capital assets, and (2) recording of compensated absences. GASB Statement No. 34 requires certain summer semester revenues be recognized between fiscal years rather than the fiscal year in which the semester was predominantly conducted. The University System of Georgia has chosen to continue to record summer revenue in the year in which the semester was predominantly conducted. Net assets at July 1, 2001 were reduced by $3,122,486,205.39 for the cumulative effect of these changes on years prior to fiscal year 2001. Annual Financial Report FY2002 18
  • 21. NOTE 2--CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS State of Georgia Collateralization Statutes and Policies Funds belonging to the State of Georgia (and thus the University System of Georgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, 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. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus the University System of Georgia), the option of exempting demand deposits from the collateral requirements. 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. Annual Financial Report FY2002 19
  • 22. Categorization of Deposits The University Systems cash deposits are categorized by risk as follows: Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University System or by its agent in the University System’s name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution’s trust department or agent in the University System’s name. Category 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 University System’s name, and amounts uncollateralized. Cash Deposits as of June 30, 2002: (for all institutions) Carrying Bank Risk Categories Amount Balances 1 2 3 Cash Deposits $328,781,884.39 $389,079,972.18 $34,037,310.58 $112,219,980.78 $242,822,680.82 Investment Portfolio Accounts 42,261,856.79 41,341,612.67 34,523,359.41 881,280.66 118,885.42 Total Cash Deposits $371,043,741.18 $430,421,584.85 $68,560,669.99 $113,101,261.44 $242,941,566.24 Categorization of Investments The University System’s investments are categorized as to credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University System or its agent in the University System’s name. Category 2 - Uninsured and unregistered, with securities held by the counter party’s trust department or agent in the University System’s name. Category 3 - Uninsured and unregistered, with securities held by the counter party, or by its trust department or agent, but not in the University System’s name. Annual Financial Report FY2002 20
  • 23. At June 30, 2002, the University System’s investments consisted of the following: (for all institutions) Risk C ate gorie s C arrying 1 2 3 Am ount T ype of Investments Common Stock $4,346,530.82 $7,321.92 $0.00 $4,353,852.74 Corporate Bonds 7,780,011.99 11,382.80 0.00 7,791,394.79 U.S. Government Securities and Corporate Obligations 1,826,972.70 735,393.89 0.00 2,562,366.59 T otals $13,953,515.51 $754,098.61 $0.00 $14,707,614.12 Investments Not Subject to Categorizations: Board of Regents Short-T erm Fund 78,953,325.86 T otal Return Fund 67,584,797.73 Balanced Income Fund 578,397.80 Legal Fund 4,419,928.67 Regents Holding Account 202,221.26 Gilbert T rust Fund 1,597,658.00 Bank of American Bond Funds 11,816,193.00 Investment Portfolio Accounts 0.00 Mutual Funds 24,992,876.17 Real Estate 241,927.38 State Investment Pool 189,567,641.91 Investment in GHEAC Loans 600.00 T otal Investments $394,663,181.90 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University System did not own any specific, identifiable investment securities of the pool. Annual Financial Report FY2002 21
  • 24. NOTE 3 – ACCOUNTS RECEIVABLE Consolidated accounts receivable consisted of the following at June 30, 2002. St udent T uit ion and Fees $33,603,406.22 Auxiliary Ent erprises and Ot her Operat ing Act ivit ies 21,166,886.11 Federal, St at e, and P rivat e Funds 114,377,246.47 Ot her 14,251,204.64 Sub T ot al 183,398,743.44 Less Allowance for Doubt ful Account s 4,275,382.73 Net Account s Receivable $179,123,360.71 NOTE 4—INVENTORIES Consolidated inventories consisted of the following at June 30, 2002. Bookst ore $16,410,479.60 Food Services 926,284.58 P hysical P lant 2,183,066.72 Ot her 2,881,533.29 T ot al $22,401,364.19 NOTE 5—NOTES/LOANS RECEIVABLE Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program). These loans comprise substantially all of the loans receivable at June 30, 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 University System for amounts cancelled under these provisions. As the University System determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. The University System has provided an allowance for uncollectible loans, which, in management’s opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2002 the system-wide allowance for uncollectible loans was approximately $120,767.12. . Annual Financial Report FY2002 22
  • 25. NOTE 6--CAPITAL ASSETS The Capital Asset balance at June 30, 2001 was adjusted for accounting changes required in implementing GASB Statements 34 and 35 as disclosed in Note 1. Following are the consolidated changes in capital assets for the years ended June 30, 2002: Adjusted Beginning Ending Balances Balance 7/1/2001 Additions Reductions 6/30/2002 Capital Assets, Not Being Depreciated: Land $108,525,623.43 $344,549.00 $0.00 $108,870,172.43 Construction Work-in-Progress 140,292,977.45 36,785,050.60 136,246,048.27 40,831,979.78 Total Capital Assets Not Being Depreciated 248,818,600.88 37,129,599.60 136,246,048.27 149,702,152.21 Capital Assets, Being Depreciated: Infrastructure 120,596,232.15 8,100,714.82 15,093,667.29 113,603,279.68 Building and Building Improvements 2,899,383,716.46 198,395,572.65 20,673,880.30 3,077,105,408.81 Facilities and Other Improvements 95,156,072.93 1,186,399.30 5,067,333.00 91,275,139.23 Equipment 781,869,877.77 115,696,334.46 38,146,843.91 859,419,368.32 Capital Leases 4,490,796.85 22,431,168.60 26,921,965.45 Library Collections 447,409,526.78 48,402,626.88 20,798,945.94 475,013,207.72 Capitalized Collections 11,090,325.93 23,495.00 72,520.00 11,041,300.93 Less: Accumulated depreciation Infrastructure 51,227,208.24 3,689,807.43 7,659,427.31 47,257,588.36 Buildings 959,542,097.65 75,160,490.14 7,637,493.40 1,027,065,094.39 Facilities and Other improvements 48,863,461.92 3,861,013.90 3,165,088.47 49,559,387.35 Equipment 502,177,119.79 73,717,688.14 26,666,004.31 549,228,803.62 Capital Leases 1,215,891.13 1,247,781.49 2,463,672.62 Library Collections 306,818,555.47 43,172,724.57 18,529,390.18 331,461,889.86 Capitalized Collections 527,094.97 52,573.01 28,115.83 551,552.15 Total Capital Assets, Being Depreciated, Net 2,489,625,119.70 193,334,233.03 36,167,670.94 2,646,791,681.79 Capital Assets, net $2,738,443,720.58 $230,463,832.63 $172,413,719.21 $2,796,493,833.99 Annual Financial Report FY2002 23
  • 26. NOTE 7--DEFERRED REVENUE Consolidated deferred revenue consisted of the following at June 30, 2002. P repaid T uit ion and Fees $98,642,328.73 Research 11,511,106.60 Ot her Deferred Revenue 86,074,367.63 T ot als $196,227,802.96 NOTE 8--LONG-TERM LIABILITIES Consolidated long-term liability activity for the year ended June 30, 2002 was as follows: Be ginning Ending Balance Balance July 1, 2001 Additions Re ductions June 30, 2002 Le ase s Lease Obligations $24,553,453.51 $61,411,169.07 $6,164,366.39 $79,800,256.19 O ther Liabilitie s Compensated Absences 0.00 0.00 0.00 0.00 Other Long T erm Liabilities 10,162,285.21 2,017,941.00 518,317.53 11,661,908.68 T otal 10,162,285.21 2,017,941.00 518,317.53 11,661,908.68 Total Long Te rm O bligations $34,715,738.72 $63,429,110.07 $6,682,683.92 $91,462,164.87 NOTE 9--LEASE OBLIGATIONS The University System of Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property. 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, 2002, were as follows: Annual Financial Report FY2002 24
  • 27. Lease Obligations: (for all institutions) Real P ropert y Capit al Leases Operat ing Leases Year Ending June 30: Year 2003 1 $8,598,288.95 $9,381,628.28 2004 2 7,641,535.54 1,438,988.67 2005 3 7,406,366.12 1,156,734.89 2006 4 7,004,979.22 719,361.21 2007 5 7,128,841.51 371,443.60 2008 t hrough 2012 6-10 36,327,297.88 208,956.68 2013 t hrough 2017 11-15 36,854,437.90 0.00 2018 t hrough 2022 16-20 31,805,447.36 0.00 2023 t hrough 2027 21-25 5,572,560.39 0.00 2028 t hrough 2032 26-30 3,416,666.50 0.00 2033 t hrough 2037 31-35 0.00 0.00 2038 t hrough 2042 36-40 0.00 0.00 T ot al m inim um lease paym ent s $151,756,421.36 $13,277,113.33 Less: Int erest 68,584,798.62 Less: Execut ory cost s (if paid) 1,300,000.00 P rincipal Out st anding $81,871,622.74 CAPITAL LEASES Several of the institutions in the University System of Georgia had capital leases as of June 30, 2002. Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2003 and 2031. System-wide expenditures for fiscal year 2002 were $9,295,668.26 of which $3,131,301.87 represented interest. Total principal paid on capital leases was $6,164,366.39 for the fiscal year ended June 30, 2002. Interest rates ranged from 2.25 percent to 8.36 percent. Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Details for each capital lease is included with the individual institution financial report. Some of the major leases are listed below. The University of Georgia occupies two real properties and holds various equipment items under capital leases. Both of the University of Georgia’s current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In June of 2001, the University of Georgia entered into a capital lease with the UGAREF whereby the University leases a building for a 10-year period that began June 1, 2001 and expires June 30, 2011. In August of 2001, the University of Georgia entered into a second capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expires August 31, 2031. The outstanding liability at June 30, 2002 on these capital leases is $12,580,386.90. Annual Financial Report FY2002 25
  • 28. Georgia State University has two capital leases associated with buildings. In July 2001, Georgia State University entered into a capital lease valued at $34,650,000.00 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (GSUF), whereby the University leases the Student Recreation Center for a twenty-year period that began July 2001 and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328.00 with an effective interest rate of 6.985 percent with the GSUF whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. The outstanding principal liability at June 30, 2002 on these capital leases is $33,824,248.56 and $13,219,875.36 respectively. Each year, the monthly payments for both of these leases will increase by the greater of 2% or the CPI. Georgia Institute of Technology has various capital leases for equipment with an outstanding balance at June 30, 2002 in the amount of $1,252,955.00. Georgia Perimeter College has one capital lease on the Gwinnett University Center. In November 2001, Georgia Perimeter entered into this 22-year lease valued at $15,602,864.32 with an implicit interest rate of 5.15 percent. This lease will expire in 2023. Georgia Southern University has one capital lease with related entities. In March 1995, Georgia Southern University entered into a capital lease of $3,000,000.00 at 5.5 percent with the Georgia State Financing & Investment Commission, a party external to the system, whereby the University leases a building for a thirty-year period that began March 1995 and expires February 2025. The outstanding liability at June 30, 2002 on the capital lease is $2,631,841.60. Valdosta State University has seven capital leases with the Valdosta State University Foundation, a related entity. The largest lease ($1,700,650.00 for the Continuing Education Building) expired June 1, 2002. The other six leases total $1,385,580.00 and will expire between 2004 and 2011. OPERATING LEASES The University System of Georgia’s noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2003 through 2008. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. System-wide, remaining payments on operating leases total $13,277,113.33. Annual Financial Report FY2002 26
  • 29. NOTE 10 - RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description The University System of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the 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 Georgia Department of Audits and Accounts. Funding Policy Employees of the University System of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The University System of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2002, the employer contribution rate was 9.24% for covered employees. Employer contributions at all institutions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2002 100% $105,288,726.51 2001 100% $122,868,172.57 2000 100% $138,521,421.13 REGENTS RETIREMENT PLAN Plan 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. Funding 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 9.62% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Annual Financial Report FY2002 27
  • 30. The institutions of the University System of Georgia and the covered employees made the required contributions of $54,184,927.88 (9.62%) and $28,195,954.11 (5%), respectively. GEORGIA DEFINED CONTRIBUTION PLAN Plan Description The University System of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 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. Contributions 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. Total contributions made by employees during fiscal year 2002 amounted to $4,886,685.59 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. NOTE 11--RISK MANAGEMENT The University System of Georgia has a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. The University System of Georgia 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. Annual Financial Report FY2002 28
  • 31. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University System of Georgia is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. NOTE 12--CONTINGENCIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University System of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against the University System of Georgia if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2002. NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20- 3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or 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 have at least ten years of service with the University System of Georgia are eligible for these Annual Financial Report FY2002 29
  • 32. 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. As of June 30, 2002, there were 1,073 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2002, the institutions of the University System of Georgia recognized as incurred $32,775,531.53 of expenditures, which was net of $13,101,959.92 of participant contributions. Annual Financial Report FY2002 30
  • 33. NOTE 14 – NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The University System’s consolidated operating expenses by functional classification are shown below. Functional Classification Public Academic Student Natural Classification Instruction Research Service Support Services Faculty $549,576,133.75 $156,267,666.37 $62,689,543.18 $12,274,828.90 $1,628,168.43 Staff 182,202,808.07 179,023,928.81 105,105,200.11 133,220,081.92 82,078,094.66 Benefits 162,913,105.50 63,216,581.52 40,785,662.41 36,891,200.51 19,275,692.01 Personal Services 3,304,925.12 3,667,499.25 1,338,349.76 217,947.93 159,639.59 Travel 10,788,449.87 12,647,504.73 5,343,107.23 2,933,592.70 2,335,869.26 Scholarships and Fellowships (1,555,796.09) 1,549,687.68 498,841.91 76,214.62 699,933.70 Utilities 8,057,328.46 1,796,641.49 26,718,387.62 3,029,240.74 1,769,873.75 Supplies and Other Services 335,043,242.90 149,855,143.52 137,974,865.01 73,701,864.64 38,935,621.78 Depreciation (61,527,724.13) 27,420,629.06 6,802,218.71 21,154,836.70 2,761,044.42 Total Expenses $1,188,802,473.45 $595,445,282.43 $387,256,175.94 $283,499,808.66 $149,643,937.60 Functional Classification Plant Institutional Operations Scholarships Auxiliary Unallocated Patient Total Natural Classification Support & Maintenance & Fellowships Enterprises Expenses Care Expenses Faculty $1 ,366,777.1 1 7 $3,633,548.08 $0.00 $1,527,483.29 $66,809,936.43 $865,774,085.60 Staff 177,621 5.30 ,41 97,486,000.04 2,008.00 69,691,268.79 1,026,430,805.70 Benefits 84,620,222.98 29,024,773.91 5,609.00 16,033,497.82 17,451,538.13 470,217,883.79 Personal Services 1,669,747.93 (6,909,602.74) 8,127,397.87 1 ,575,904.71 1 Travel 3,079,458.09 221,954.09 2,570,630.57 189,804.16 40,1 0,370.70 1 Scholarships and Fellowships (2,824,505.62) 325.00 216,589,561.88 7,953,221.32 222,987,484.40 Utilities 8,175,788.64 61,326,310.93 12,933,010.37 347,178.44 1 53,760.44 24,1 Supplies and Other Services (143,232,044.03) 73,776,453.80 233,468.10 1 ,550,042.29 31 (427,61 .54) 1 73,235,419.26 870,646,465.73 Depreciation 126,992,100.93 54,726,678.82 20,995,025.23 15,525,1 7.1 1 2 214,849,926.86 Total Expenses $267,468,961.39 $313,286,441.93 $216,830,646.98 $271 ,577.55 ,381 $15,097,505.58 $158,033,876.42 $3,846,746,687.93 Annual Financial Report FY2002 31
  • 34. Board of Regents of the University System of Georgia Office of Internal Audit 270 Washington Street, SW., Atlanta, Georgia 30334 404-656-2237 www.usg.edu “Creating a More Educated Georgia”

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