~A A~DO .A I~ 111G-/'7 -----State of GeorfJla----- aerr ~mer. Governor Sin9fe 7\.udit CJ\9'ort 3une 30, 1997 Prepared by GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Oaud"e ~C{)ickers. State.r\ud"itor - - - - - - - - - - - - - - GeorfJia's Su.te 6free - - - - - - - - - - - - - owr r.[}I"Rwlnflir &ott(Fuss qn 1937, the nw oak was lidopted as the offickl tra at the request of the 'Edmund 'Burke Oapter of the 'Daufftters of the A,merlain ~'Yofutlon. qt flourishes afollfJ the coastaC pCalns and on the lsCands where the first settfers made their homes. !Xany famous Georgians. as earfy as Genera[ .:James 'Edward Orfethorpe. were afU to enjoy It s &eauty. v CLAUDE L. ICKERS STATE AUDITOR (404) 656-2174 DEPARTMENT OF A uniTS AND AccouNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 June 12, 1998 To the Citizens ofthe State of Georgia, The Honorable Zell Miller, Governor of Georgia and Members of the General Assembly of Georgia It is my pleasure to submit to you the Single Audit Report of the State of Georgia for the fiscal year ended June 30, 1997. The Single Audit Report of the State of Georgia discloses the results of the fmancial operations of the State of Georgia reporting entity, as well as its compliance with requirements applicable to Federal financial assistance programs administered by the State. Fiscal year 1997 proved to be a challenging year as auditors across the nation adjusted to significant audit changes. These changes were brought about as a result ofthe passage ofthe Single Audit Amendments of 1996 and the implementation of Office of Management and Budget Circulation A-133. This report ifs the culmination of extensive planning, coordination, testing and evaluation by many 1nembers of my staff. We are grateful for all of the support given this office as we corporately strive to promote improvements in accountability and stewardship in state government. State Auditor - - - - - - - - S t a t e of Georfjla - - - - - - - - Toole of Contents Jmc30, 1997 SECTION A- GENERAL PURPOSE FINANCIAL STATEMENTS Page Independent Auditor's Report on General Purpose Financial Statements .................................... A-3 General Purpose Financial Statements Combined Balance Sheet- All Fund Types, Account Groups and Discretely Presented Component Units . 0 0 0 0 0 A-8 Combined Statement ofRevenues, Expenditures and Changes in Fund Balances- All Governmental Fund Types, Expendable Trust Funds and Discretely Presented Component Units . 0 0 0 A-12 Statement ofFunds Available and Expenditures Compared to Budget- Budget Fund 0 0 0 0 0 0 0 A-16 Combined Statement ofRevenues, Expenses and Changes in Fund Equity/Fund Balances- All Proprietary Fund Types, Nonexpendable Trust Funds and Discretely Presented Component Units A-18 Combined Statement ofCash Flows- All Proprietary Fund Types, Nonexpendable Trust Funds and Discretely Presented Component Units A-22 Statements ofPlan Net Assets - Pension Trust Funds and Discretely Presented Component Units 0 0 0 0 0 0 0 0 0 A-24 Statement ofChanges in Plan Net Assets- Pension Trust Funds and Discretely Presented Component Units 0 0 0 A-26 Combined Statement ofChanges in Fund Balances- College and University Funds . 0 0. 0 0 0. 0 0 0. 0 0. 0 0 0 0 0 A-28 Combined Statement ofCurrent Funds Revenues, Expenditures and Other Changes- College a n d University Funds A-32 0 0 0 0 0 0 0 0 0 0. 0 0. 0 0. 0 0. 0 0 0. 0 0 0 0 0 0 0 0 0. 0 0. 0 0. 0 0 0. 0. 0 0 0 0 0 0. 0 0 0 0 0 0 0 Notes to the Financial Statements A-33 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SECTION B- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Schedule ofExpenditures ofFederal Awards . B-5 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 00 0 0 Schedule ofCluster Programs . B-47 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SECTION C- REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS . ............. 0 C-3 SECTION D- REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 . . . . . . . . . . . . . . . . . . . . . 0 0 D-3 SECTION E- AUDITEE'S RESPONSE- SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-3 SECTION F- FINDINGS AND QUESTIONED COSTS Summary ofAuditor's Results F-5 0 0. 0 0 0 0 0. 0 0. 0 0 0. 0 0 0 0 0 0. 0 0 0 0 0 0 0 0 0 0. 0 0 0. 0 0. 0 0 0 0 Table ofContents 0. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0. 0 0 0 0 0 0 0 0 0. 0 0. 0 0. 0 0 0 0 0 0 0 0. 0 0 0 F-9 Findings and Questioned Costs F-11 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 APPENDIX "A" Listing ofOrganizational Units Comprising the State ofGeorgia Reporting Entity. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 AP-3 Section.?\. Genera[ 9?urpose ~inancia[ Statements CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174 DEPARTMENT OF A uniTS AND AccoUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 INDEPENDENT AUDITOR'S REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS The Honorable Zell Miller Governor of Georgia and Members of the General Assembly of the State of Georgia We have audited the accompanying general purpose financial statements ofthe State of Georgia, as listed in the Table of Contents, as of and for the year ended June 30, 1997. These general purpose financial statements are the responsibility of the State's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We did not audit the financial statements of certain organizations which, combined, represent less than 1% ofthe assets and revenues ofthe general fund, 100% ofthe assets and revenues ofthe capital projects funds, 62% ofthe assets and 29% of the revenues of the internal service funds, 68% ofthe assets ofthe fiduciary funds and less than 1% of the expendable trust funds revenues and 100% of the pension trust funds revenues, and 7% of the assets and less than 1% of the liabilities ofthe general fixed assets and general long-term debt account groups, respectively. In addition, we did not audit certain discretely presented component units which represent less than 1% ofthe assets and revenues ofthe component unit governmental fund types, 83% ofthe assets and 95% of the revenues of the component unit proprietary fund types and 98% ofthe assets and 99% ofthe revenues ofthe component unit fiduciary fund types. The financial statements ofthese organizations and component units were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those financial statements, is based solely upon the reports of the other auditors. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. The financial statements ofthe Employees' Retirement System of Georgia, Georgia Lottery Corporation, Georgia Ports Authority, Georgia State Financing and Investment Commission, and Teachers' Retirement System of Georgia were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinion. The State of Georgia's accounting system is decentralized in nature. The management of each organizational unit is responsible for maintaining accounting records pertinent to its operations and each retains complete responsibility and control over their operations, including revenue collections and disbursements. The State's principal accounting system, the Fiscal Accounting and Control System (FACS), is utilized by 66 state organizations. This accounting system allows for the accumulation of financial data, by state organization, on a basis of accounting prescribed or permitted by the budgetary statutes and regulations of the State of Georgia. Constitutional and statutory provisions of the State of Georgia do not provide for a position or organizational unit responsible for the preparation of statewide financial statements. It was necessary for staff of the Department of Audits and Accounts to consolidate financial information presented in individual organization financial statements and to prepare adjusting journal entries necessary for the production of the general pui-pose financial statements. We are therefore not independent with regard to the preparation of accounting entries required to convert the consolidated budgetary financial statements to general purpose financial statements prepared in accordance with generally accepted accounting principles. As discussed in Note 1 to the general purpose financial statements, the State of Georgia did not maintain adequate systems to account for or to depreciate (when required) fixed assets in conformity with generally accepted accounting principles. We were unable to determine the effect of these limitations on the general purpose financial statements. As discussed in Note 1 to the general purpose financial statements, the accounting systems of the State of Georgia did not facilitate recording encumbrances in conformity with generally accepted accounting principles. Contractual obligations for services performed and for goods which have not been delivered at the end ofthe fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. The recognition of encumbrances as expenditures and liabilities is not consistent with generally accepted accounting principles. We were unable to determine the effect of these limitations on the general purpose financial statements. As discussed in Note 1 to the general purpose financial statements, revenues for certain expenditure-driven programs were accrued based on the unexecuted portion of contracts for goods and services. These accruals primarily affected the Intergovernmental and Sales and Services revenue categories. We were unable to determine the effect ofthis departure from generally accepted accounting principles on the general purpose financial statements. As discussed in Notes 9 and 10 to the general purpose financial statements, the State of Georgia did not maintain adequate systems to identify, classify, and report leases as operating or capital leases in conformity with generally accepted accounting principles. We were unable to determine the effect of these limitations on the general purpose financial statements. As discussed in Note 1 to the general purpose financial statements, the State of Georgia maintained certain pension trust funds on essentially the cash basis of accounting. This basis of accounting is not in conformity with generally accepted accounting principles. We were unable to determine the effect ofthis departure from generally accepted accounting principles on the general purpose financial statements. As discussed in Note 1 to the general purpose financial statements, the State's accounting system has limitations in identifying transactions between organizations whose financial activity is included within an individual fund. State accounting policies and procedures allow the recording of revenues, receivables, expenses and payables for such transactions. All such intrafund transactions have not been eliminated as required by generally accepted accounting principles. We were unable to determine the effect of these overstatements on the general purpose financial statements. A-4 The State of Georgia did not maintain adequate systems to determine the accuracy of the amounts of salesbased taxes collected by the Department of Revenue on behalf of local governments and the disbursements of those taxes to local governments. State statutes require that all sales-based taxes be collected by the Department ofRevenue and remitted to the Office ofTreasury and Fiscal Services. Amounts of sales-based taxes collected on behalf of local governments are subsequently returned to local government jurisdictions based on information compiled by the Department of Revenue from sales tax returns. The Department of Revenue did not maintain adequate information systems to properly identify amounts of sales-based taxes collected on behalf oflocal governments. We were unable to determine the accuracy ofthe sales-based taxes retained by the State of Georgia or the accuracy ofthe amounts collected and subsequently disbursed to local governments for sales-based taxes. In our opinion, based on our audit and the reports of other auditors, except for the effects of the matters discussed in the preceding paragraphs, the general purpose financial statements referred to in the first paragraph present fairly, in all material respects, the financial position ofthe State of Georgia as of June 30, 1997, and the results of its operations, the cash flows ofits proprietary fund types and its nonexpendable trust funds, and the changes in fund balances of the State's colleges and universities, for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 2 to the general purpose financial statements, the State of Georgia adopted Statement No. 25 ofthe Governmental Accounting Standards Board (GASB), Financial Reportingfor Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans in fiscal year 1997. In addition, as discussed in Note 4 to the general purpose financial statements, the State implemented GASB Statement No. 28, Accounting and Financial Reportingfor Securities Lending Transactions. In accordance with Government Auditing Standards, we have also issued a report dated June 12, 1998 on our consideration of the State of Georgia's internal control over financial reporting and on our tests of its compliance with certain laws, regulations, contracts and grants. The accompanying Schedule of Expenditures of Federal Awards (Section B) is presented for purposes of additional analysis as required by U.S. Office ofManagement and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, and is not a required part ofthe general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe general purpose fmancial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial statements taken as a whole. Respectfully submitted, ~~ Claude L. Vickers State Auditor May 19, 1998 A-5 (This page intentionallY left blank) --Genera[ Wurpose ~inancia[ Statements--- State of GeorfJia - - - - - - - Combined Balance Sheet All Fund Tvpes, Account Groups and DiscretelY Presmtcd Componmt Units June 30, 1997 Assets and Other Debits Assets: cash and Cash Equivalents cash and cash Equivalents in Nonexpendable Trust Funds Investments Receivables (Net ofAllowances for Uncollectibles) Intergovenunental- Federal Interest and Dividends Notes and Loans Taxes Other Due from Other Funds Due from Primaiy Govenunent Due from Component Units Inventories Prepaid Items Restricted Assets cash and cash Equivalents Investments Receivables Interest and Dividends Loans Advances to Other Funds Advances to Component Units Deferred Compensation Plan Assets Flxed Assets (Net, Where Applicable, of Accumulated Depreciation) Deferred Charges Other Assets Other Debits: Amount Available in Debt Service Fund Amount to be Provided for Retirement of General Long-Term Debt Total Assets and Other Debits Uabllltles, Equity and Other Credits Liabilities: cash Overdraft Accounts Payable and Other Accruals Compensated Absences Payable Claims and Judgments Payable Contracts Payable Salaries/Wrthholding;; Payable Benefits Payable Due to Other Funds Due to Primaiy Govenunent Due to Component Units Accrued Interest Payable Deferred Revenue Capital Leases/Installment Purchases Payable Mortgage Loans under Repurchase Agreements Funds Held for Others Other Liabilities Deposits and Overpayments Advances from Other Funds Advances from Primaiy Govenunent Long-Term Debt Payable (Net ofUnamortized Discounts) Total Liabilities Govenunental Fund Types Special Revenue Debt Service Capilal Projects Primaiy Govenunent Proprietary Fund Types Enterprise Intemal Senice $ 2,628,862,273 $ 600,398,816 1,728,213,699 17,675,652 664,360,025 164,182,456 67,540 41,878,493 72,415,975 1,762,517 $ 668,399 208,653,344 $ $ 1,091,615,474 76,983,949 $ 174,978,124 272,299,546 584,772,437 11,480,997 2,802,452 1,865,404 965,443 13,523,053 10,892,781 32,343,724 470,419 11,177,328 659,846 6,925 161,250 88,523,030 230,662 402,588,254 $ 6,006,746,134 s s s 4,296,320 $ 208,653,344 $ 1,104,061,914 268,518,240 1,315,204,335 s $ 610,639,917 1,540,985,327 568,945,094 453,540,192 28,020,157 1,393,024 158,003,752 40,894,516 349,835 $ 2,106 1,800 $ 3,402,771,814 $ 3,906 $ $ 20,191,665 $ $ 15,779,528 2,349,599 23,716,644 151,931 7,632,640 258,497,047 15,616,910 440,462 13,460,711 120,275 148,196,779 13,117,287 10,618,996 67,317 2,062, 763 581,399 1,335,714 0 $ s 62,207,099 $ 164,256,058 307,474,510 The notes to the financial statements are an integral part ofthis statement A-8 Fiducimy F\mdType Trust and Agency College and University Accmmt Groups General General Fixed Long-Tenn Assets Debt Totals(Memorandmn Only) Primary Government Governmental F\md Types Component Units Proprietary F\md Types Fiducimy F\md Types Totals(Memorandmn Only) Reporting Entity $ 3,449,920,761 $ 473,593,239 $ $ $ 7,112,075,629 $ 19,102 19,102 10,024,517,246 101,798,437 12,578,748,933 707,627 87,700,223 4,311,922 86,595,170 60,475,924 44,639,644 46,110 47,843,318 150,351,575 22,788 26,826,099 9,178,825 1,773,560,970 119,705,434 52,155,240 750,955,195 402,256,636 32,343,724 0 537,959 79,881,920 82,277,434 0 314,206,807 139,913 4,234,572,093 2,707,240,447 208,653,344 4,639,920,336 0 6,925 161,250 314,206,807 7,344,631,456 0 88,662,943 208,653,344 4,639,920,336 2,153,739 $ 274,791 102,219 2,859,426 164,256 233,819 73,906,597 6,069,631 235,116,239 $ 121,609,722 2,050,471 $ 28,871,305,417 7,351,396,078 19,102 41,571,938,863 93,106,069 13,591,857 873,890,791 86,743,653 1,393,024 5,433,251 3,991,821 229,029,590 176,832,155 39,650 1,866,667,039 362,326,881 926,148,250 750,955,195 668,691,870 32,343,724 1,393,024 537,959 85,479,427 86,542,724 134,103,413 370,043,252 134,103,413 370,043,252 6,858,741 581,124,003 6,858,741 581,124,003 6,925 161,250 314,206,807 811,115,756 16,455,000 91,426,657 693,725 8,230,347,534 16,455,000 180,089,600 208,653,344 4,645,989,967 $ 14,028,617,483 $ 5,088,849,340 $ 2,707,240,447 $ 4,848,573,680 $ 35,580,761,237 $ 85,764,478 $ 3,446,003,249 $ 29,279,951,008 $ 68,392,479,972 $ -$ $ 5,518,308 239,920,703 100,463,642 20,110 707,670 5,023,914 20,900,000 3,615,897 23,735 2,657,071,592 6,925 71,566,348 10,940,762 18,961,673 113,283 1,707,821 $ 2,663,348,340 $ 14,000 473,228,043 $ $ $ 20,191,665 $ 897,926,805 203,717,363 311,965,576 697,979 259,195,026 1,570,503,410 574,109,393 622,636,971 32,343,724 0 1,393,024 0 242,780,239 5,319,332 18,322,857 0 2,716,927,781 11,082,114 2,289,220 6,925 0 4,638,839,006 4,640,188,720 0 $ 4,848,573,680 $ 11,921,863,450 $ $ 4,318,785 969,319 36,317 $ 88,686,632 2,694,679 2,472,261 538,791 328,877 183,024 635,000 5,100,312 18,566,782 81,052,557 126,110 30,446,467 281,684,101 8,836,793 15,201,360 161,250 1,461,927,233 11,388,610 $ 1,992,578,040 $ $ 1,850,697 58,985 26,058 20,191,665 992,782,919 315,629,574 259,195,026 1,572,975,671 574,743,486 622,636,971 32,343,724 537,959 1,393,024 18,566,782 324,467,796 23,549,279 30,446,467 2,998,611,882 19,918,907 17,490,580 6,925 161,250 6,1 02,115,953 1,935,740 $ 13,927,765,840 (continued) A-9 State of Georffia - - - - - - - - Combined Balance Sheet All Fund Tvpcs, Account Groups and Discrctelv Presented Component Llnits Cconnnued) June 30, 1997 Primary Government General Equity and other Credits: other Credits: Investment in General Flxed .Assets s -s Equity: Net Investment in Plant Colleges and Universities Contributed Capital Retained Earnings Reserved Unreserved Fund Balances Reserved for Encmnbrances Reserved for Advances Reserved for Inventories Reserved for Debt Service Reserved for Disaster Assistance Reserved for Distance Learning and Telemedicine Reserved for Pension Benefits Reserved for Guaranteed Revenue Debt Conunon Reserve Fimd Reserved for Hazardous Waste Trust Fimd Reserved for Lottery for Education Reserved for Midyear Adjustment Reserved for Motor Fuel Tax FUnds Reserved for Revenue Shortfi!ll Reserved for Underground Storage Trust Fimd Reserved for other Specific Pwposes Unreserved, Designated Designated for Liability Trust Fimd Designated for Future capital Outlay Designated for other Specific Pwposes Unreserved, Undesignated Total Equity s s 4,820,880 168,175 43,899,457 13,496,656 19,825,508 19,029,945 24,132,040 226,140,670 111,313,936 912,617,015 333,941,806 32,524,619 73,243,786 9,704,819 3,085,000 776,030,008 s s 2,603,974,320 Total Equity and other Credits $ 2,603,974,320 $ Governmental Fimd ~ Special Revenue Debt Service capital Projects Proprietary Fimd :!!Ees En~rise Internal Service -s s -s s -$ -s s s 274,506,302 104,262,182 587,211,843 146,011,680 208,653,344 1,311,077 4,292,414 s 4,292,414 4,292,414 $ 1,037,148,472 3,395,266 s s 208,653,344 1,041,854,815 s 208,653,344 1,041,854,815 $ s 104,262,182 1,007, 729,825 s 104,262,182 1,007, 729,825 Total Liabilities, Equity and other Credits $ 6,006,746,134 $ s s s s 4,296,320 208,653,344 1,104,061,914 268,518,240 1,315,204,335 The notes to the financial statements are an integral part ofthis statement. A-10 Fiduciary Fund Type Trust and Agency College and University Account Groups General FD