G'~ (-!l YiQO ,AlB J..oo:.~tl SINGLE AUDIT RERJRT JuNE30~2002 EIN 58-0973190 SINGLE AUDIT REIDRT JuNE 30~ 2002 Prepared by GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS RUSSELL W. HINTON. State Auditor DraWings - Huey J. Theus is employed as the Marketing Director for the Georgia Department of Labor. He is a member of the South Cobb Art Alliance and served as the head of the Art Department at Mount Carmel Christian Church in Decatur, Georgia. His portfolio contains color-lithographed prints, pen and ink drawings and paintings, which have won various awards, including a Georgia State Senate resolution honoring his work. Cover - The Little White House - Franklin Delano Roosevelt bUilt the Little White House in 1932, while governor of New York, prior to being inaugurated as preSident in 1933. He first came to Warm Springs in 1924 hoping to find a cure for the infantile paralysis (polio) that had struck him in 1921. On April 12, 1945, FOR suffered a massive stroke while his portrait was being painted and died a short while later. Today. the "Unfinished Portrait" is a focal point of the Little White House. RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 June 4,2003 To the Citizens of the State of Georgia, The Honorable Sonny Perdue, Governor of Georgia and Members of the General Assembly of Georgia I am honored to present the Single Audit Report ofthe State ofGeorgia for the fiscal year ended June 30,2002. Organizational units comprising the State ofGeorgia reporting entity are listed in Appendix "A" of this report. Federal laws and regulations require that the State undergo an annual audit in conformity with the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget (OMB) Circular A-133, Audits o/States, Local Governments, and Non-Profit Organizations. Accordingly, the Single Audit Report ofthe State ofGeorgia discloses the results ofthe financial operations ofthe State of Georgia reporting entity, as well as its compliance with requirements applicable to Federal financial assistance programs administered by the State. In submitting this report, I would like to express my appreciation to all those who made the completion ofthis audit possible. This report is the culmination ofextensive planning, coordination, cooperation, testing and evaluation by many people. I believe the results of this statewide audit provides the users ofthis report valuable information that will serve to better guide the course ofthe State's future. - - -Respectfully, k).~ Ru ell W. Hinton, CPA, CGFM Sta e Auditor Georgia Table of Contents June 3D, 2002 SECTION A - BASIC FINANCIAL STATEMENTS AND REQillRED SUPPLEMENTARY INFORMATION Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Statement ofNet Assets Statement ofActivities Balance Sheet - Governmental Funds Reconciliation ofthe Balance Sheet - Governmental Funds Statement ofRevenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation ofStatement ofRevenues, Expenditures, and Changes in Fund Balances - Governmental Funds Statement ofNet Assets - Proprietary Funds Statement ofRevenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement ofFiduciary Net Assets - Fiduciary Funds Statement ofChanges in Fiduciary Net Assets Combining Statement ofNet Assets - Component Units Combining Statement ofActivities - Component Units Notes to the Financial Statements Required Supplementary Information Employees' Retirement System ofGeorgia - Schedule ofFunding Progress Budgetary Comparison Schedule - Budget Fund Budgetary Comparison Schedule - Budget-To-GAAP Reconciliation Notes to the Required Supplementary Information AUDITOR'S SECTION SECTION B - REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SECTION C - REPORT ON COMPLIANCE WITH REQillREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 SECTION D - FINDINGS AND QUESTIONED COSTS Summary ofAuditor's Results Financial Statement Findings Federal Awards Findings and Questioned Costs Page A-3 A-7 A-18 A-20 A-22 A-23 A-24 A-25 A-26 A-30 A-32 A-36 A-3 7 A-38 A-42 A-45 A-91 A-92 A- 94 A-96 B-3 C-3 D-5 D-7 D-45 Ckrgia Table of Contents June 30, 2002 AUDITEE'S SECTION SECTION E - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Schedule ofExpenditures ofFederal Awards Schedule ofCluster Programs SECTION F - AUDITEE'S RESPONSES Summary! Schedule ofPrior Year Findings and Questioned Costs Corrective Action Responses to Current Year Findings and Questioned Costs APPENDIX" A" Listing ofOrganizational Units Comprising the State ofGeorgia Reporting Entity E-3 E-47 F-3 F-29 AP-3 RCSSELL \V. HINTON STATE AUDITOR (404) 6562174 254 Washington Street. SW.. Suite 214 Atbnta. Geurgia 30334-K400 INDEPENDENT AUDITOR'S REPORT The Honorable Sonny Perdue Governor of Georgia and Members of the General Assembly of the State of Georgia We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregated discretely presented component units, each major fund, and the aggregated remaining fund information of the State of Georgia as of and for the year ended June 30, 2002 which collectively comprise the State's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the State's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of certain organizations. These organizations reflect the following percentages of total assets and revenues or additions of the indicated opinion units: Opinion Unit Governmental Activities Business-Type Activities Aggregate Discretely Presented Component Units General Fund Georgia State Financing and Investment Commission State Employees' Health Benefit Plan Higher Education Georgia Technology Authority Unemployment Compensation Fund Aggregate Remaining Fund Information Percent of Opinion Unit's Total Assets 15% 10% 70% 10% 100% 100% --- --- --87% Percent of Opinion Unit's Total Revenues/Additions 1% 34% 88% 21% 100% 100% --- --- --- 14% The financial statements of these organizations and component units were audited by other auditors whose reports have been furnished to us, and our opinions, 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 paragraphs, we conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 financial statements are free of material misstatement. The financial statements of the Employees' Retirement System of Georgia, Georgia General Assembly, Georgia Lottery Corporation, Georgia Ports Authority, 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinions. 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 Phoenix System, is utilized, in whole or in part, by 78 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 basic financial statements. We are therefore not independent with regard to the preparation of accounting entries required to convert the consolidated budgetary financial statements to basic financial statements prepared in accordance with accounting principles generally accepted in the United States of America. As discussed in Notes 8 and 9 to the basic 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 accounting principles generally accepted in the United States of America. We were unable to determine the effect of these limitations on the financial statements. As discussed in Note IF to the basic financial statements, the State of Georgia did not maintain adequate systems to document and report cost of state-owned land in conformity with accounting principles generally accepted in the United States of America. We were unable to determine the effect of these limitations on the financial statements. Apparent misappropriations of Georgia Technology Authority assets and other undocumented expenses were discovered in the Telecom Division operations. The possible outcome of these matters, which have been reported to appropriate state officials, is uncertain at this time. Accordingly, no provisions have been made in the financial statements for the resolution of these matters. As discussed in Note 1D to the basic 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 accounting principles generally accepted in the United States of America. We were unable to determine the effect of this departure from accounting principles generally accepted in the United States of America on the financial statements. In our opinion, based on our audit and the reports of other auditors, except for the effects of not maintaining adequate systems to account for leases and land for the governmental activities as described in aforementioned paragraphs, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of the State of Georgia, as of June 30, 2002, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, except for the limitation on the scope of our audit of the Georgia Technology Authority as described in an aforementioned paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Georgia Technology Authority of the State of Georgia, as of June 30, 2002, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. A-4 In our opinion, based on our audit and the reports of other auditors, except for the effects of maintaining certain pension trust funds on essentially the cash basis of accounting for the aggregated remaining fund information as described in an aforementioned paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position of the aggregated remaining fund information of the State of Georgia, as of June 30, 2002, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, based on our audit and the reports of other auditors, financial statements referred to above present fairly, in ail material respects, the financial position of the business-type activities, the aggregated discretely presented component units, the general fund, the Georgia State Financing and Investment Commission, the State Employees' Health Benefit Plan, Higher Education, and the Unemployment Compensation Fund of the State of Georgia as of June 30, 2002, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The financial statements of the general fund reflect accounts payable in the amount of $731,810,094 which represents the State of Georgia's liability for teachers salaries earned before June 30, 2002, but not paid until July and August, 2002. State appropriations for the subsequent fiscal year were available for obligation even though the period to which the appropriation applied had not begun. The recognition of this liability at June 30, 2002, however, is not in accordance with generally accepted accounting principles as promulgated by Governmental Accounting Standards Board (GASB) Statement 33 because the subsequent fiscal year had not begun. We believe, however, the omission of this liability would cause the financial statements of the State of Georgia to be misleading. As discussed in Note 2 to the basic financial statements, the State of Georgia implemented GASB Statement Number 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments; Statement Number 35, Basic Financial Statements -and Management's Discussion and Analysis- for Public Colleges and Universities; Statement No. 37, Basic Financial Statements - and Managements Discussion and Analysis - for State and Local Governments: Omnibus; and Statement Number 38, Certain Financial Statement Note Disclosures. This resulted in changes to the format and content ofthe financial statements. In accordance with Government Auditing Standards, we have also issued a report dated June 4, 2003, on our consideration of the State of Georgia's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunctions with this report in considering the results of our audit. The management's discussion and analysis on pages A-7 through A-16, the schedule of funding progress for the Employees' Retirement System of Georgia on page A-91, and the budgetary comparison schedule and accompanying notes on pages A-92 through A-96 are not required parts of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We did not audit the information and express no opinion on it. A-5 The accompanying Schedule of Expenditures of Federal Awards, located in Section E, is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-I33, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, based on our audit and the reports of other auditors, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. June 4, 2003 and June 9, 2003 as to Note 13b, paragraph 2 ~ ... ~~.~ Respectfully submitted, ~~ll W. Hinton, CPA, CGFM State Auditor A-6 MANAGEMENT'S DISCUSSION AND ANALYSIS Management of the State of Georgia provides this Management's Discussion and Analysis of the State of Georgia's Comprehensive Annual Financial Report (CAFR) for readers of the State's financial statements. This narrative overview and am.lysis of the financial activities of the State of Georgia is for the fiscal year ended June 30, 2002. We encourage readers to consider this information in conjunction with the additional information that is furnished in the letter of transmittal, which can be found in the Introductory Section of this report, and with the State's financial statements, which follow this narrative. Beginning this fiscal year, the State of Georgia is implementing new reporting standards established by the Governmental Accounting Standards Board (GASB). Because these new standards significantly changed the content and structure of the financial statements, this discussion and analysis provides few comparisons with the previous fiscal year. However, in future fiscal years, comparisons will be available to assist the reader in understanding the State's financial position and results of operations. FINANCIAL HIGHLIGHTS - PRIMARY GOVERNMENT Government-Wide The assets of the State exceeded its liabilities at the close of the fiscal year by $21.3 billion (reported as "net assets ''), a decrease of $513 million from the previous year. Of this amount, $5 billion (reported as "unrestricted net assets '') may be used to meet the State's ongoing obligations to citizens and creditors. Component units of the State reported net assets of $2 billion for fiscal year ending June 30, 2002. Fund Level Governmental Funds - As of the close of the current fiscal year, the State's governmental funds reported a combined ending fund balance of $6.5 billion, with $2.5 billion representing the unreserved fund balance and the remaining amount of $4 billion reserved for specific purposes, such as debt service and motor fuel taxes. At the end of the fiscal year, unreserved fund balance for the General Fund was $659 million, or 2.9 percent of total General Fund expenditures. Proprietary Funds - Net assets at the end of fiscal year 2002 totaled $7 billion, which represents an increase of $4 million during the fiscal year. Long-term Liabilities Long-term liabilities totaled $6.6 billion at June 30, 2002. Most of these liabilities consist of (1) the net difference between general obligation debt issuances and payments of outstanding debt during the fiscal year, and (2) the calculated amount for unused accumulated annual leave due employees when they retire or terminate employment, totaling $387 million. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the State of Georgia's basic financial statements. The State's basic financial statements include three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplementary information in addition to the basic financial statements. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview ofthe State of A-7 Georgia's finances, in a manner similar to the private sector. These financial statements provide both short-term and long-term information about the State's financial status, which assists in assessing the State's financial condition at the end of the fiscal year. The statements are prepared using the flow of economic resources measurement focus and the accrual basis of accounting. The government-wide financial statements include two statements: The Statement of Net Assets presents all of the State's assets and liabilities, with the difference between the two reported as "net assets". Over time, increases and decreases in net assets may serve as a useful indicator of whether the State's financial position is improving or deteriorating. The Statement of Activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will not result in cash flows until future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). This statement also presents a comparison between direct expenses and program revenues for each function of the State. Both of the above financial statements report three activities: Governmental Activities - Taxes and intergovernmental revenues principally fund the activities reported within this section. The majority of the State's basic services fall under this activity including general government, education, health and welfare, transportation, public safety, economic development and assistance, culture and recreation, and conservation. Business- Type Activities - These activities normally are intended to recover all or a significant portion of their costs through user fees and charges to external users of goods and services. These business-type activities of the State include the operations of the Unemployment Compensation Contributions and Benefits Fund (by the Georgia Department of Labor), the self-insured State Employees' Health Benefit Plan (by the Georgia Department of Community Health), the programs of the Higher Education Fund (by the Board of Regents of the University System of Georgia and the Georgia Department of Technical and Adult Education) and the operations of the Georgia Technology Authority, which is primarily responsible for the procurement of technology resources, technology enterprise management and technology portfolio management of certain public information maintained in electronic format for the public. Discretely Presented Component Units - These are legally separate organizations for which the State has financial accountability. Financial information for these component units is reported separately from the financial information presented for the primary government. For the most part, these entities operate similar to private sector businesses and the business-type activities described above. The State's most significant discretely presented component units are Georgia Development Authority, Georgia Environmental Facilities Authority, Georgia Housing and Finance Authority, Georgia Lottery Corporation, Georgia Ports Authority, Georgia Public Telecommunications Commission, State Road and Tollway Authority, Stone Mountain Memorial Association, Georgia Student Finance Authority, and the Geo. L. Smith II Georgia World Congress Center Authority. The government-wide financial statements can be found immediately following this discussion and analysis. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The State of Georgia, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements focus on individual parts of the State government, reporting the State's operations in more detail than the government-wide statements. All of the funds of the State of Georgia can be divided into A-8 three categories: governmental funds, proprietary funds, and fiduciary funds. These fund categories use different accounting approaches and should be interpreted differently. Governmental Funds - Most of the basic services provided by the State are financed through governmental funds. These funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the governmental fund financial statements focus on short-term inflows and outflows of spendable resources. They also focus on the balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the government's short-term financing requirements. This approach is known as using the flow of current financial resources measurement focus and the modified accrual basis of accounting. These statements provide a detailed short-term view of the State's finances that assists in determining whether there will be adequate financial resources available to meet the current needs of the State. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's short-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and the governmental activities. These reconciliations are presented on the page immediately following each governmental fund financial statement. The State of Georgia maintains eight individual governmental funds. The State's two major governmental funds are the General Fund and the capital projects fund containing the Georgia State Financing and Investment Commission (GSFIC). Infonnation for each major fund is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances. Data for the remaining six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the fonn of combining statements elsewhere in this report. The basic governmental fund financial statements can be found immediately following the government-wide statements. Proprietary Funds - The State of Georgia maintains two different types of proprietary funds. When the State charges customers for the services it provides, whether to customers outside the State of Georgia reporting entity (enterpriseJunds) or to other organizations within the reporting entity (internal serviceJunds), these services are reported in proprietary funds. The State of Georgia uses internal service funds to account a variety of supportive servIces to all state organizations and, upon request, to local governments within Georgia. Examples of these services include purchasing, surplus property, printing, motor pool and building space management, constructing and maintaining State office buildings, and operating parking facilities. The internal service funds benefit both the governmental functions and the business-type functions, and have been proportionately included within the governmental activities and the business type activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. Like the government-wide financial statements, proprietary fund financial statements use the accrual basis of accounting, thus, no reconciliation is needed between the government-wide financial statements for businesstype activities and the proprietary fund financial statements. The State of Georgia's proprietary funds include four enterprise funds and six internal service funds. Each of the State's enterprise funds is considered a major proprietary fund for presentation purposes. As previously mentioned, the enterprise funds are the Unemployment Compensation Contributions and Benefits Fund (Georgia A-9 Department of Labor), the self-insured State Employees' Health Benefit Plan (by the Georgia Department of Community Health), the programs of the Higher Education Fund (by the Board of Regents of the University System of Georgia and the Georgia Department of Technical and Adult Education) and the operations of the Georgia Technology Authority. Conversely, all six internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal services funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found immediately following the governmental fund financial statements. Fiduciary Funds and Similar Component Units - These funds are used to account for resources held for the benefit of parties outside the state government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of these funds are not available to support the State's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. They use the accrual basis of accounting. The State's fiduciary funds are the Pension Trust Funds (fourteen separate retirement plans for employees), the Investment Trust Funds (which account for the transactions, assets, liabilities and fund equity of the external investment pool), Private-Purpose Trust Funds (which account for assets held by the government in a trustee capacity), and Agency Funds (which account for the assets held for distribution by the State as an agent for other governmental units, other organizations or individuals). Individual fund data for the fiduciary funds and similar component units' can be found in the combining statements elsewhere in this report. The basic fiduciary funds and similar component units' financial statements can be found immediately following the proprietary fund financial statements. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the fiduciary funds and similar component units' financial statements. Required Supplementary Information In addition to this Management's Discussion and Analysis, which is required supplementary information, the basic financial statements are followed by a section of required supplementary information. This section includes (l) a budgetary comparison schedule reconciling the statutory and the generally accepted accounting principles (GAAP) fund balances at fiscal year-end, and (2) pension funding information. Combining Financial Statements The combining financial statements referred to earlier in connection with non-major governmental funds, internal service funds, and fiduciary funds are presented following the required supplementary information. The total columns of these combining financial statements carry to the applicable fund financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS The State's overall financial position and operations for the past year for the primary government are summarized as follows based on the information included in the government-wide financial statements. A-IO Current and Other Non-current Assets Net Capital Assets Total Assets State of Georgia Net Assets as of June 30, 2002 Governmental Activities Business-Type Activities Total Primary Government $ 10,158,110,478 $ 14,515,037,302 24,673,147,780 3,450,118,199 $ 3,226,778,840 6,676,897,039 13,608,228,677 17,741,816,142 31,350,044,819 Non-current Liabilities Other Liabilities Total Liabilities 6,404,252,307 2,828,955,595 9,233,207,902 Net Assets Invested in Capital Assets, net of related debt 9,802,538,431 Restricted 1,399,080,545 Unrestricted 4,238,320,902 Total Net Assets $ 15,439,939,878 $ 239,284,766 606,619,611 845,904,377 6,643,537,073 3,435,575,206 10,079,112,279 3,132,335,897 1,858,882,510 839,774,255 5,830,992,662 $ 12,934,874,328 3,257,963,055 5,078,095,157 21,270,932,540 Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. The State of Georgia's combined assets (governmental and business-type activities) exceeded liabilities by $21.3 billion at the end of fiscal year 2002. The largest portion of the State of Georgia's net assets (61 percent) reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure), less any related debt used to acquire those assets that is still outstanding. The State uses these capital assets to provide services to citizens; consequentially, these assts are not available for future spending. Although the State's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the State's net assets (15 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets may be used at the State's discretion to meet ongoing obligations to citizens and creditors. Internally imposed designations of resources are not presented as restricted net assets. At the end of the current fiscal year, the State is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. Changes in Net Assets The revenues and expenses information, shown in the table on the following page, was derived from the government-wide Statement of Activities and reflects how the State's net assets changed during the fiscal year. The State of Georgia earned program revenues of $16.6 billion and general revenues of $13 billion, totaling $29.6 billion during Fiscal Year 2002. Expenses for the State during Fiscal Year 2002 were $30.1 billion. A-II State of Georgia Changes in Net Assets for the Year Ended June 30, 2002 Revenues: Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues: Taxes Grants and Contributions Unrestricted Investment Income Unclaimed Property Other Total Revenues Expenses: General Government Education Health and Welfare Transportation Public Safety Economic Development and Assistance Culture and Recreatoin Conservation Interest and Other Charges on Long-Term Debt Georgia Technology Authority Higher Education Fund State Employees' Health Benefit Fund Unemployment Compensation Total Expenses Increase (Decrease) in Net Assets Before Transfers and Special Items Transfers Special Item - Contract Settlement Change in Net Assets Net Assets, July 1 - Restated Net Assets, June 30 Governmental Activities Business-Type Activities 3,916,116,562 S 7,397,204,233 534,744,839 12,896,370,809 410,988 74,383,601 40,658,447 5,606,469 24,865,495,948 1,342,660,093 S 3,333,378,946 65,457,496 28,396,024 4,769,892,559 1,133,810,869 7,558,466,707 10,100,531,383 1,458,959,302 1,693,449,110 714,286,586 216,505,961 81,753,497 319,094,008 23,276,857,423 1,588,638,525 (2,181,905,850) (593,267,325) 16,033,207,203 $ 15,439,939,878 $ 217,334,346 4,286,201,112 1,503,455,678 861,474,035 6,868,465,171 (2,098,572,612) 2,181,905,850 (2,900,000) 80,433,238 5,750,559,424 5,830,992,662 $ Total Primary Government 5,258,776,655 10,730,583,179 600,202,335 12,896,370,809 410,988 102,779,625 40,658,447 5,606,469 29,635,388,507 1,133,810,869 7,558,466,707 10,100,531,383 1,458,959,302 1,693,449,110 714,286,586 216,505,961 81,753,497 319,094,008 217,334,346 4,286,201,112 1,503,455,678 861,474,035 30,145,322,594 (509,934,087) (2,900,000) (512,834,087) 21,783,766,627 21,270,932,540 Governmental Activities Governmental activities reduced the State's net assets by $593 million. Furthermore, governmental revenues account for approximately 84 percent of total revenue. Approximately 52 percent of revenue came from taxes, while 32 percent resulted from grants and contributions (including federal aid). Charges for various goods and services provided 16 percent of the revenues. The State's expenses cover a range of services. The largest expenses were for education and health and welfare, which combined accounted for 76 percent of total governmental activity expenses. In fiscal year 2002, governmental activity expenses exceeded program revenues, resulting in the use of$13 billion in general revenues (mostly taxes). A-12 General Revenues Utilized to Fund Governmental Activities Expenses Net of Program Revenues: General Government Education Health and Welfare Transportation Public Safety Economic Development and Assistance Culture and Recreation Conservation Interest and Other Charges on Long-Term Debt Total Governmental Activities Expenses General Revenues: Taxes Grants and Contributions Unrestricted Investment Income Unclaimed Property Other Transfers Decrease in Governmental Activities Net Assets Governmental Activities $ 709,758,587 (6,588,342,722) (2,961,429,562) (520,868,839) (1,247,058,260) (381,926,284) (47,824,333) (72,006,368) (319,094,008) (11,428,791,789) 12,896,370,809 410,988 74,383,601 40,658,447 5,606,469 (2,181,905,850) $ =======(5=9=3=,2=6=7=,3=2=5=) Business-Type Activities Business-type activities increased the State of Georgia's net assets by $80 million. Charges for services accounted for 28 percent of revenues and Higher Education and State Employees' Health Benefit Plan accounted for 84 percent of expense. Overall The State's net assets decreased by $ 512 million during the current fiscal year. The economic information presented later in this discussion and analysis provides insight into the conditions of the State that have caused this to occur. FINANCIAL ANALYSIS OF THE STATE'S INDIVIDUAL FUNDS As noted earlier, the State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the State's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the State's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. A-13 As of the end of fiscal year 2002, the State of Georgia's governmental funds reported combined ending fund balances of $6.5 billion, a decrease of $419 million in comparison with the prior fiscal year. Approximately onethird of this total amount ($2.5 billion) constitutes unreserved fund balance, which is available for spending at the State's discretion. The remainder of fund balance is resenJed to indicate that it is not available for new spending because it has already be committed 1) to liquidate contracts and purchase orders ($1 billion), 2) to pay debt service ($228 million), 3) to provide and maintain an adequate system of public roads and bridges in the State ($823 million) or for a variety of other restricted purposes ($1.9 billion). The General Fund is the chief operating fund of the State. At the end of the current fiscal year, unreserved fund balance of the General Fund was $659 million, while total fund balance reached $4.5 billion. As a measure of the General Fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 2.9 percent of total General Fund expenditures, while total fund balance represents 19.6 percent of that same amount. The fund balance of the State's General Fund decreased by $356 million, primarily as a result of lower tax collections and slowing of the economy. By the end of the year, fund balance had declined 7.3 % from the prior year. The capital projects fund, in total, has a fund balance of $1.8 billion, most of which is designated for future capital outlay. The State has five capital projects funds, with one being considered a major fund for presentation purposes for fiscal year 2002. The major capital projects fund, as mentioned earlier, is the Georgia State Financing and Investment Commission (GSFIC); the total fund balance for GSFIC is $1.7 billion. The total net decrease in fund balance during the current year in the capital projects fund was $156 million. BUDGET FUND BUDGETARY IDGHLIGHTS The final budget exceeded original appropriations by approximately $8.6 billion. Of this increase, $2.4 billion was funded by funds carried forward from the prior year. The State's Supplementary Appropriations Act added $422 million, with the remainder of the funds being federal and other revenues amended into the budget by the State organizations that anticipated earning the funds. During the year, however, funds available were approximately $3.2 billion less than budgetary estimates and expenditures were approximately $4.9 billion less than budgetary estimates, resulting in an excess of funds available over expenditures of approximately $1.7 billion. Proprietary Funds The State's proprietary funds provide the same type of information found in the government-wide financial statements, but in greater detail. Fiduciary Funds At June 30, 2002, assets held in trust for pension and other employee benefits totaled $51.3 billion, which represents a $2.7 billion reduction from June 30,2001. This change reflects a decline in investments of the pension and other employee benefit trusts resulting primarily from the net depreciation in the fair value of investments. CAPITAL ASSETS AND DEBT ADMINISTRAnON Capital Assets The State of Georgia's investment in capital assets for its governmental and business-type activities as of June 30, 2002, amounts to $26.6 billion (net of accumulated depreciation of $8.9 billion), leaving a net book value of $17.7 billion. Investment in capital assets includes land, buildings and building improvements, improvements other than A-14 _.. -_ ..._--- buildings, personal property (machinery and equipment), infrastructure and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the state, such as roads, bridges, streets and sidewalks, drainage systems, lighting systems, and similar items. The most significant change during the year was a change in accounting for capital assets resulting in the inclusion of infrastructure assets and governmental fund depreciation, which heretofore had not been recorded. The inclusion of infrastructure assets increased capital assets by $16.5 billion. The total increase in the State of Georgia's investment in capital assets for the current fiscal year was $897 million, or 5.3 percent (a 5 percent increase for governmental activities and a 6.7 percent increase for businesstype activities). State of Georgia Capital Assets, net of depreciation as of June 30, 2002 Land $ Buildings and Building Improvements Improvements Other Than Buildings Machinery and Equipment Software Library Collections Works of Art and Collections Infrastructure Construction in Progress Total $ Governmental Activities 335,224,453 $ 1,417,261,290 26,213,459 303,666,649 33,446,616 6,239,808 10,742,800,838 1,650,184,189 14,515,037,302 $ Business-Type Activities 138,383,333 $ 2,372,012,599 44,739,681 394,441,539 18,866,006 141,331,791 10,520,262 65,216,199 41,267,430 3,226,778,840 $ Total Primary Government 473,607,786 3,789,273,889 70,953,140 698,108,188 52,312,622 141,331,791 16,760,070 10,808,017,037 1,691,451,619 17,741,816,142 Additional information on the State's capital assets can be found in Note 5 of the notes to the financial statements of this report. Debt Administration At the end of the current fiscal year, the State had total bonded debt outstanding of $6.1 billion. Of this amount, $6 billion comprises debt backed by the full faith and credit ofthe government (general obligation debt), $15,505 represents bonds that are past due, but have not been presented for redemption to date (general state bond debt) and long-term notes payable. The most current bond ratings for Moody's Investors Service, Fitch Investors Service, L.P., and Standard and Poor's Corporation are Aaa, AAA and AAA, respectively. Under the State's Constitution the highest aggregate annual debt may not exceed 10 percent of the previous fiscal year's revenue collections. A-15 General Obligation Bonds General State Bond Debt Contracts Payable Long-Term Notes Total State of Georgia Outstanding Debt as of June 30,2002 Governmental Acthities B usiness-Type Activities Total Primary Government $ 6,058,295,000 $ 15,505 54,670,212 2,631,842 6,115,612,559 $ $ 2,345,608 2,345,608 $ 6,058,295,000 15,505 54,670,212 4,977,450 6,117,958,167 The State of Georgia's total debt increased by $804 million (15.1 percent) during the current fiscal year. The key factor in this increase was a $1.2 billion general obligation bond issuance for the State of Georgia. Additional information on the State of Georgia's long-term debt can be found in Note 10 of the notes to the financial statements of this report. ECONOMIC FACTORS Downturns in the U.S. economy during the current fiscal year had a similar impact on the State. These effects lingered on into fiscal year 2003. For example, on May 7,2003, the Georgia Department of Revenue announced that net revenue collections for the first 10 months of fiscal year 2003 decreased approximately 2.3%, when compared to the same period in fiscal year 2002. This announcement, however, also noted that April 2003 collections increased a modest 1.9% from collections one year ago. A Georgia Department of Labor news release, dated May 2003, listed Georgia's April 2003, unemployment rate at 4.4%, which is a decrease from a rate of 4.8% in April of 2002. This news release, however, also stated that the State's short-term unemployment outlook was not encouraging, especially in the retail trade sector. During its' 2003 session, the General Assembly responded to the decline in State revenues by passing House Bill 121, which authorized Georgia's fiscal year 2003 Amended Budget. The bill included "Austerity Adjustment" line items that reduced total budgeted State funds by approximately $107 million. Governor Sonny Perdue signed this bill into law on May 13,2003. The Governor, before signing the Bill, however, used line-item veto authority and expenditure controls to further reduce the budget by $15.7 million. Requests for Information This financial report is designed to provide a general overview of the State of Georgia's finances for all of Georgia's citizens, taxpayers, customers, and investors and creditors. This financial report seeks to demonstrate the State's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: Georgia Department of Audits and Accounts, 254 Washington Street, Suite 214, Atlanta, Georgia 30334. A-16 BASIC FINANCIAL 9rATEME~ Georgia. Statement of Net Assets June 30, 2002 Assets Cash and Cash Equivalents Investments Accounts Receivable (Net of Allowances for Uncollectibles) Interest and Dividends Notes and Loans Taxes Other Internal Balances Due From Primary Government Due From Component Units Intergovernmental Receivables Inventories Prepaid Items Other Assets Restricted Assets Cash and Cash Equivalents Investments Receivables Loans (Net) Interest and Dividends Other Advances to Component Units Deferred Charges Capital Assets (Net of Accumulated Depreciation) Total Assets Liabilities Accounts Payable and Other Accruals Contracts Payable Claims an Judgments Payable Salaries/Withholdings Payable Benefits Payable Due to Primary Government Due to Component Units Accrued Interest Payable Undistributed Local Government Sales Tax Unclaimed Bonds and Interest Deferred Revenue Funds Held for Others Customer Deposits Liabilities Payable from Restricted Assets Other Liabilities Noncurrent Liabilities: Due within one year Due in more than one year Total Liabilities PRIMARY GOVERNMENT Governmental Activities Business-Type Activities Total Component Units $ 2,128,211,387 S 2.443,230,659 $ 4,571,442,046 $ 475,959,620 5,678,825,314 617,602,520 6,296.427,834 224,816,278 43,442,409 717,275,973 149.416,438 30,113,693 18,911,879 1,266,802,589 50,447,895 67,699,204 4,464,300 46,950,749 197,679,674 (30,113,693) 44,577 85,668,143 29,778,951 59,276,619 43.442,409 46,950,749 717,275,973 347,096,112 0 0 18,956,456 1,352,470,732 80,226,846 126,975,823 4,464,300 10.490,126 951,354,542 108.410,017 3,378,986 6,510,711 7,206,551 6.419,745 58,175,930 0 419,703.476 0 606,453,002 0 709,245,348 0 6,409,850 0 39,271,138 2,499,397 2,499,397 0 18,003,959 14,515,037,302 3,226,778,840 17,741,816,142 879,523,381 $ 24,673,147,780 $ 6,676,897,039 $ 31,350,044,819 $ 4,531,332,660 $ 1,163,657,480 $ 76,542,182 $ 1,240,199,662 $ 130,468,061 53,359,840 8,545,070 61,904,910 7,489,637 353,034,255 353,034,255 11,928,736 45,749,651 57,678,387 3,438,401 855,574,584 191,750,927 1,047,325,511 0 20,434,328 3,378,986 3,378,986 113,380,201 393,753 113,773,954 5,374,232 58,000,000 58,000,000 547,656 547,656 113,225,683 236,590,619 349,816,302 163,646,703 66,272,679 40,314,593 106,587,272 764,658 764,658 0 290,279,329 35,830,837 6,732,816 42,563,653 22,140,346 455,148,236 5,949,104,071 $ 9,233,207,902 $ 81,375,183 157,909,583 845,904,377 $ 536,523,419 6,107,013,654 10,079,112,279 $ 89,436,176 1,760,510,477 2,493,217,690 The notes to the financial statements are an integral part of this statement. A-18 ~1a Statement of Net Assets June 30, 2002 Net Assets Invested in Capital Assets, Net of Related Debt Restricted for: Bond Covenants/Debt Service Construction Disaster Assistance Distance Learning and Telemedicine Guaranteed Revenue Debt Common Reserve Fund Hazardous Waste Trust Fund Loan and Grant Programs Lottery for Education Motor Fuel Tax Funds Pennanent Trusts: Nonexpendable Expendable Underground Storage Trust Fund Unemployment Compensation Benefits Other Purposes Unrestricted Total Net Assets PRIMARY GOVERNMENT Governmental Activities Business-Type Activities Total Component Units $ 9,802,538,431 S 3,132,335,897 $ 12,934,874,328 $ 664, I96.388 6,328,261 47,175,605 35,838,966 373.966,931 823,036,353 20,199,886 6.328.261 20,199,886 47,175,605 35,838,966 373.966,931 823.036.353 32,846,022 31,600,000 22.300,043 71,527,535 41.206.894 4,238,320,902 104,4 I6.029 197,383,520 1.536,782,865 100,210 839,774,255 104,416,029 197,383,520 71,527,535 1,536,782,865 41,307.104 5,078.095. I 57 8,505,191 1,278,667,326 $ 15,439,939,878 $ 5,830,992,662 $ 21,270,932,540 $ 2,038,114,970 The notes to the financial statements are an integral part of this statement. A-19 Gnrgia. Statement of Activities For the Fiscal Year Ended June 30,2002 Functions/Programs Primary Government Governmental Activities: General Government Education Health and Welfare Transportation Public Safety Economic Development and Assistance Culture and Recreation Conservation Interest and Other Charges on Long-Term Debt Total Governmental Activities Business-Type Activities: Georgia Technology Authority Higher Education Fund State Employees' Health Benefit Plan Unemployment Compensation Fund Total Business-Type Activities Total primary government Component Units Development Authority Environmental Facilities Authority Housing and Finance Authority Lottery Corporation Ports Authority Public Telecommunications Commission Road and Tollway Authority Stone Mountain Memorial Association Student Finance Authority World Congress Center Authority Nonmajor Component Units Total Component Units Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ 1,133,810,869 $ 7,558,466,707 10,100,531,383 1,458,959,302 1,693,449,110 714,286,586 216,505,961 81,753,497 319,094,008 23,276,857,423 1,678,008,179 $ 3,542,798 1,333,912,408 405,920,739 324,424,891 41,600,890 123,999,888 4,706,769 3,916,116,562 162,975,535 $ 951,434.026 5,805,189,413 22,768,637 115,303,303 289,811,219 44,681,740 5,040,360 7,397,204,233 2,585,742 15,147,161 509,401,087 6,662,656 948,193 534,744,839 217,334,346 4,286,20 1,112 1,503,455,678 861,474,035 6,868,465,171 $ 30,145,322,594 $ 218,943,726 1,009,852,663 113,863,704 1,342,660,093 5,258,776,655 $ 100,210 1,251,733,230 1,606,088,531 475,456,975 3,333,378,946 10,730,583,179 $ 65,457,496 65,457,496 600,202,335 $ 3,406,899 $ 5,439,028 $ 25,485,649 28,952,830 82,749,908 55,330,906 2,330,458,000 2,326,420,000 96,933,000 104,668,000 35,646,317 3,904,893 113,854,643 21,805,927 9,453,063 11,475,605 70,794,365 7,577,151 76,419,132 49,589,446 204,111,561 85,180,754 $ 3,049,312,537 $ 2,700,344,540 $ $ 34,442,425 24,652,240 8,357,580 3,515,845 105,233 28,751,560 99,824,883 $ 45,106,938 12,219,000 340,333 10,753,769 68,420,040 General Revenues: Taxes Grants and Contributions not restricted to specific programs Unrestricted Investment Income Unclaimed Property Other Payments from the State of Georgia Special Item - Contract Settlement Transfers Total General Revenues,Special Items, and Transfers Change in Net Assets Net Assets - Beginning - Restated Net Assts - Ending The notes to the financial statements are an integral part of this statement. A-20 Governmental Activities Net (Expense) Revenue and Changes in Net Assets Primary Government Business-Type Activities Total Component Units S 709,758,587 S (6,588,342,722) (2,961,429,562) (520,868,839) (1,247,058,260) (381,926,284) (47,824,333) (72,006,368) (319,094,008) (11,428,791,789) S 709,758,587 $ (6,588,342,722) (2,961,429,562) (520,868,839) (1,247,058,260) (381,926,284) (47,824,333) (72,006,368) (319,094,008) (11,428,791,789) 1,709,590 (1,959,157,723) 102,632,853 (272,153,356) (2,126,968,636) (2,126,968,636) 1,709,590 (1,959,157,723) 102,632,853 (272,153,356) (2,126,968,636) (13,555,760,425) (2,032,129) (83,016,544) 2,766,762 4,038,000 (19,954,000) 23,043,511 92,048,716 (2,022,542) 59,701,369 26,724,453 79,425,478 180,723,074 12,896,370,809 410,988 74,383,601 40,658,447 5,606,469 (2,181,905,850) 10,835,524,464 (593,267,325) 16,033,207,203 $ 15,439,939,878 $ 28,396,024 (2,900,000) 2,181,905,850 2,207,401,874 80,433,238 5,750,559,424 5,830,992,662 $ 12,896,370,809 410,988 102,779,625 40,658,447 5,606,469 0 (2,900,000) 0 146,555,529 (512,834,087) 21,783,766,627 21,270,932,540 $ 22,233,024 42,341,172 7,817,686 202,580,614 274,972,496 94,249,422 1,943,865,548 2,038,114,970 A-21 Balance Sheet Governmental Funds June 30. 2002 Assets Cash and Cash Equivalents Investments Receivables (Net of Allowances for Uncollectibles) Taxes Interest and Dividends Other Due from Other Funds Due from Component Units Intergovernmental Receivables Inventories Prepaid Items Advances to Component Units Other Assets General Fund Georgia State Financing and Investment Commission Nonmajor Funds Total $ 1,691,164,002 $ 121,117,191 $ 2,772,970,709 1,731,044,969 717,275,973 41,814,674 136,989,504 34,000,000 16,848,005 1,265,679,589 41,143,901 67,407,921 4,464,300 1,627,735 2,063,874 2,499,397 233,116,673 $ 2,045.397,866 3,718,669 4,507,734,347 654,107 717,275.973 43,442,409 137,643,611 34,000,000 18,911,879 1,265,679,589 41,143,901 67,407,921 2,499.397 4,464,300 Total Assets $ 6,789,758,578 S 1,858,353,166 $ 237,489,449 $ 8,885,601,193 Liabilities and Fund Balances Liabilities: Accounts Payable and Other Accruals Due to Other Funds Due to Component Units Salaries/Withholdings Payable Benefits Payable Contracts Payable Undistributed Local Government Sales Tax Funds Held for Others Deferred Revenue Other Liabilities Total Liabilities Fund Balances: Reserved for Advances Reserved for Debt Service Reserved for Disaster Assistance Reserved for Encumbrances Reserved for Guaranteed Revenue Debt Common Reserve Fund Reserved for Hazardous Waste Trust Fund Reserved for Inventories Reserved for Lottery for Education Reserved for Midyear Adjustment Reserved for Motor Fuel Tax Funds Reserved for Revenue Shortfall Reserved for Tobacco Settlement Funds Reserved for Underground Storage Trust Fund Reserved for Other Speci fie Purposes Unreserved, Designated Designated for Capital Outlay Designated for Liability Trust Fund Designated for Property Tax Relief Designated for Other Specific Purposes Unreserved, Undesignated, Reported in General Fund Capital Projects Funds Total Fund Balances $ 1,139,597,888 $ 16,996,941 3,378,986 11,908,426 855,574,584 8,883,290 58,000,000 66,272,679 121,882,702 3,110,101 $ 2,285,605,597 $ 19,407,670 $ 44,426,987 63,834,657 $ 184,425 $ 1,159,189,983 16,996,941 3,378,986 11,908,426 855,574,584 53,310,277 58,000,000 66,272,679 121,882,702 3,110,101 184,425 $ 2,349,624,679 $ $ 2,499,397 $ 6,328,261 1,092,341,164 47,175,605 35,838,966 45,983,100 373,966,931 140,054,792 823,036,353 700,273,960 185,855,202 71,527,535 322,917,655 12,404,000 249,000,000 170,000 1,792,019,112 397,279,457 $ 4,504,152,981 $ 1,794,518,509 $ $ 228,453,750 1,577,448 2,499,397 228,453,750 6,328,261 1,092,341,164 47,175,605 35,838,966 45,983,100 373,966,931 140,054,792 823,036,353 700,273,960 185,855,202 71,527,535 324,495,103 1,792,019,112 12,404,000 249,000,000 170,000 7,273,826 397,279,457 7,273,826 237,305,024 $ 6,535,976,514 Total Liabilities and Fund Balances The notes to the financial statements are an integral part of this statement. $ 6,789,758,578 $ 1,858,353,166 $ 237,489,449 $ 8,885,601,193 A-22 - - - - - - - ' , ._,.,~. ~. - _ ".~~ .._-_.- - - - - - _.. - .. - . _ ' - - - - - - _n. _ _ _ _._ _._ Reconciliation of the Balance Sheet - Governmental Funds To the Statement of Net Assets June 3D, 2002 Total Fund Balances for Governmental Funds $ Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital Assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. These assets consist of: Land Buildings and Building Improvements Improvements Other Than Buildings Equipment Infrastructure Construction in Progress Works of Art Software Library Books Accumulated Depreciation 311,869,189 1,756,131,658 37,138,632 656,924,145 16,342,241,597 1,650,028,436 5,000,233 66,209,462 3,200,000 (6,556,011,031 ) Certain long-term assets are not current available financial resources and, therefore, are not reported in the funds. (Note 10 ) Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. Certain liabilities are not accrued in governmental funds until they are due and payable, but must be recognized in the Statement of Net Assets. Internal service funds are used by management to charge the costs of certain activities to individual funds. The majority of assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Assets. Certain long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. General Obligation Bonds General State Bonds Capital Leases Compensated Absences Long-Term Notes Contracts Payable Arbitrage Rebate (6,058,295,000) (15,505) (5,911,447) (240,002,333) (2,631,842) (54,670,2 I2) (38,398,397) Net Assets of Governmental Activities $ 6,535,976,514 14,272,732,321 2,631,842 9,608,114 (146,648,593 ) 1,165,564,416 (6,399,924,736) 15,439,939,878 The notes to the financial statements are an integral part of this statement. A-23 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2002 Revenues: Taxes Licenses and Permits Intergovernmental - Federal Sales and Services Fines and Forfeits Interest and Other Investment Income Rents and Royalties Contributions and Donations Penalties and Interest on Taxes Unclaimed Property Lottery Proceeds Other Total Revenues Expenditures: Current: General Government Education Health and Welfare Transportation Public Safety Economic Development and Assistance Culture and Recreation Conservation Capital Outlay Debt Service Principal Interest Accrued Interest on Bonds Retired in Advance Discount on Bonds Retired in Advance Other Debt Service Charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Proceeds from Issuance of General Obligation Bonds Proceeds from Disposition of General Capital Assets Proceeds from Capital Leases Proceeds from Other Financing Arrangements Transfers In Transfers Out Net Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses Fund Balances, July 1 (Restated) General Fund Georgia State Financing and Investment Commission Nonmajor Funds Total $ 12,896,370,809 $ 448,262,755 8,189,311,370 1,678,090,064 257,484,265 172,338,485 15,616,765 214,162,798 6,457,440 40,658,447 726,202,000 75,381,036 $ 24,720,336,234 $ S 72,162,140 15,000,000 4,570 87,166,710 $ $ 357,475 58,159 279 12,896,370,809 448,262,755 8,189,311,370 1,678,090,064 257,484,265 244,858, 10O 15,674,924 229,162,798 6,457,440 40,658,447 726,202,000 75,385,885 415,913 $ 24,807,918,857 $ 839,626,474 $ 7,567,494,226 10,090,828,968 1,716,885,005 1,686,970,829 708,073,548 235,249,403 86,890,618 $ 22,932,019,071 $ $ 761,271,668 6,719,417 767,991,085 $ 12,313 $ 798 538,024 839,638,787 7,567,495,024 10,090,828,968 1,716,885,005 1,686,970,829 708,073,548 235,249,403 86,890,618 761,809,692 449,258,159 314,200,690 1,002,342 (4,428,967) 449,258,159 314,200,690 1,002,342 (4,428,967) 6,719,417 760,583,359 $ 24,460,593,515 $ 1,788,317,163 $ (680,824,375) $ (760,167,446) $ 347,325,342 $ $ 3,965,808 2,354,002 54,670,212 654,202,255 (2,859,870,706) $ (2,144,678,429) $ 1,229,428,392 $ 5,398,422 (710,520,739) 524,306,075 $ $ 853,564,714 1,229,428,392 3,965,808 2,354,002 54,670,212 1,513,165,391 (3,570,391,445) 853,564,714 $ (766,807,640) $ (356,361,266) $ (156,518,300) $ 4,860,514,247 1,951,036,809 93,397,268 $ 143,907,756 (419,482,298) 6,955,458,812 Fund Balances, June 30 $ 4,504, I52,981 $ 1,794,518,509 $ The notes to the financial statements are an integral part of this statement. A-24 , '---""~'~""-' ----, ._--~,-.,.,. ----" 237,305,024 $ 6,535,976,514 ----- Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund BaLances GovernmentaL Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2002 Net Change in Fund Balances - Total Governmental Funds Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported as expenditures in governmental funds. However. in the Statement of Activities, the cost of those assets is is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlay net of losses Depreciation expense Capital outlays reported as expenditures in governmental funds were capitalized and transferred to other funds Revenues reported on the accrual basis in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds until available. Bond proceeds provide current financial resources to governmental funds; however, issuing debt increases long-term liabilities in the Statement of Net Assets. Some capital additions were financed through capital leases. In governmental funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets. the lease obligation is reported as a liability. Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces the long-term liabilities in the Statement of Net Assets. In the current year, these amounts consisted of: Bond Principal Retirement Accrued Interest Capital Lease Payments Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the majority of the internal service funds is reported in governmental activities. Inventories accounted for using the purchases method are reported in the governmental funds, thus reporting an expenditure in the funds. Because some revenues will not be collected in the next year, they are not considered available revenues and are deferred in the governmental funds. Some items reported in the Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds. This adjustment combines the net changes in the following balances: Compensated Absences Long-Term Notes Contracts Payable Arbitrage Rebate Change in Net Assets of Governmental Activities The notes to the financial statements are an integral part of this statement. A-25 $ (419,482.298) 2,006,114.128 (1,161,852,727) 449,200,000 (7,433,506) 4,674,815 844.261,401 (94,385.066) (58,159) (1,229,428,392) (2,354,002) 446,441,309 (76,629,1 19) 2,334.646 4,147,596 (11,376,808) 58,159 (54,670,212) (2,126,380) (68,115,241) $ ====(;";5=93;",;,~26;,,,;7~,3~2=:;5) Georgia Statement of Net Assets Proprietary Funds June 30, 2002 Assets Current Assets: Cash and Cash Equivalents Investments Accounts Receivable (Net of Allowances for Uncollectibles) Due From Other Funds Due From Component Units Intergovernmental Receivables Inventories Prepaid Items Noncurrent Assets: Cash and Cash Equivalents Investments Notes Receivable Capital Assets: Land Buildings and Building Improvements Improvements Other Than Buildings Machinery and Equipment Software Library Collections Works of Art and Collections Infrastructure Construction in Progress Accumulated Depreciation Total Assets Georgia Technology Authority Business-Type Activities - Enterprise Funds State Higher Employees' Unemployment Education Health Benefit Compensation Fund Plan Fund $ 38,410,578 $ 514,705,672 $ 367,267,796 $ 1,521,122,080 20,970,213 144,812,375 298,017,661 4,663,621 16,452,003 44,577 1,874,596 518,798 160,356,143 83,062,059 27,886,990 58,757,821 19,413,006 13,245,018 2,606,074 1,227,916 153,802,271 46,950,749 62,776,789 36,482,688 (48,400,280) 138,383,333 3,474,202,249 115,720,097 962,536,112 496,323,550 10,850,502 111,137,823 41,267,430 (2,175,181,764) $ 133,793,583 $ 4,366,80 I ,328 $ 684,698,463 $ 1,536,973,172 The notes to the financial statements are an integral part of this statement. A-26 - - - _..,,""---- .-.._----_._.- .. _---- Total Governmental Activities Internal Service Funds 5; 2,441,506,126 $ 463,800,249 83,310,138 431,223,967 197,677,788 16,452,003 44,577 85,668,133 29,761,586 59,276,619 9,142,871 2,480,422 9,321,359 291,283 1,227,916 153,802,271 46,950,749 739,867,000 138,383,333 3,474,202,249 115,720,097 1,025,312,901 36,482,688 496,323,550 10,850,502 111,137,823 41,267,430 (2,223,582,044) 23,355,264 305,949,015 4,954,083 24,704,504 1,239,575 155,753 (117,372,902) $ 6,722,266,546 $ 1,518,622,332 A-27 Georgia Statement of Net Assets Proprietary Funds (continued) June 30. 2002 Liabilities Current Liabilities: Accounts Payable and Other Accruals Due to Other Funds SalariesfWithholdings Payable Benefits Payable Accrued Interest Payable Contracts Payable Funds Held for Others Deferred Revenue Customer Deposits Claims and Judgments Payable Compensated Absences Payable - Current Capital Leases/Installment Purchases Payable - Current Notes Payable - Current Other Current Liabilities Noncurrent Liabilities: Deferred Revenue Compensated Absences Payable Capital Leases/Installment Purchases Payable Notes Payable Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted for: Distance Learning and Telemedicine Permanent Trusts: Nonexpendable Expendable Unemployment Compensation Benefits Other Purposes Unrestricted Georgia Technology Authority Business-Type Activities - Enterprise Funds State Higher Employees' Unemployment Education Health Benefit Compensation Fund Plan Fund $ 7,291,917 $ 54,596,614 $ 13,903,496 $ 718.892 34,000,000 82,767 45,663,389 3,495 29,277,958 162,472,969 393,753 2,900,000 5,645,070 40,314,593 200,709,292 35,881,327 190,307 1,200,174 3,090,727 71,996,608 4,906,249 181,425 6,732,816 2,979,162 6,740,914 150,000 67,119,016 78,524,732 2,164,182 231,577 $ 24,679,414 $ 608,700,836 $ 246,492,864 $ 190,307 $ 41,027,556 $ 3,091,308,341 $ -$ 20,199,886 100,210 47,786,517 104,416,029 197,383,520 364,992,602 438,205,599 1,536,782.865 Total Net Assets $ 109,114,169 $ 3,758,100,492 $ Adjustment to reflect the consolidation ofInternal Service Fund activities related to Enterprise Funds. Net Assets of Business-Type Activities 438,205,599 $ 1,536,782,865 The notes to the financial statements are an integral part of this statement. ----,_._------_.. A-28 __ --_ _._--_ __.. .. .._-_....... ------- Total Governmental Activities Internal Service Funds $ 75,982,334 $ 5,027,345 34,718,892 93,582 45,749,651 20,310 191,750,927 393,753 8,545,070 49563 40,314,593 236,590,619 951,095 0 764,658 0 353,034,255 73,196,782 1,845,195 7,996,976 181,425 6,732,816 150,000 70,329,755 85,265,646 2,164,182 2,482,376 $ 880,063,421 $ 364,268,379 $ 3,132,335,897 $ 20,199,886 104,416,029 197,383,520 1,536,782,865 100,210 850,984,718 242,985,292 3,458,400 907,910,261 $ 5,842,203,125 $ 1,154,353,953 $ (11,210,463) $ 5,830,992,662 A-29 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the FiscaL Year Ended June 30, 2002 Georgia Technology Authority Business-Type Activities - State Higher Education Fund Employees' Health Benefit Plan Operating Revenues: Grants and Contributions/Premiums Rents and Royalties Sales and Services Other Total Operating Revenues Operating Expenses: Personal Services Services and Supplies Benefits Claims and Judgments Depreciation Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses): Grants and Contributions Interest and Other Investment Income Interest Expense Other Total Nonoperating Revenues (Expenses) Income (Loss) Before Contributions, Transfers and Special Item Capital Contributions Special Item Transfers: Transfers In Transfers Out Net Transfers Change in Net Assets Net Assets, July 1 (Restated) $ S 968,402,274 $ 1,606,088,531 218,911,804 31,922 1,009,852,663 99,256,895 $ 218,943,726 $ 2,077 ,511,832 $ 1,606,088,531 $ 50,135,401 $ 2,548,013,792 $ 3,255,168 145,532,403 1,494,260,612 456,015,330 1,044,185,180 16,188,931 203,696,742 $ - - -2-1'1-,8-56-,7'3-5- $ 4,245,971,146 $ $-_-:...:..::7..,0.:8:6..,.9:9.~1=-- $ (2,168,459,314) $ 1,503,455,678 102,632,853 $ -$ 184,074,061 $ 1,237,120 12,156,481 (621,157) (3,659,321) (265,710) (38,820,166) 350,253 $ 153,751,055 $ $ 7,437,244 $ (2,014,708,259) $ ---'---'-- $ - - - -3'4-,6-43-,6'3-0- $ 170,864,800 $ $---",-(,2-,-9,0-0,,-0,0-0,)- $ $ 15,002,423 15,002,423 117,635,276 $ 35,412,874 $ 2,066,181,986 $ (15,348,100) (3,364,978) (31,358,156) $ 20,064,774 $ 2,062,817,008 $ (31,358,156) $ 59,245,648 $ 218,973,549 $ 86,277,120 49,868,521 3,539,126,943 351,928,479 Net Assets, June 30 $ 109,114,169 $ 3,758,100,492 $ Adjustment to reflect the consolidation ofintemal Service Fund activities related to Enterprise Funds. Change in Net Assets of Business-Type Activities The notes to the financial statements are an integral part of this statement. A-30 438,205,599 Enterprise Funds Unemployment Compensation Fund Total Governmental Activities Internal Service Funds S 487,123,984 $ 3,061,614,789 $ 116,092,432 0 33,498,347 1,228,764,467 66,967,218 37,920 99,326,737 235,638 $ 487,161,904 $ 4,389,705,993 $ 216,793,635 $ $ 2,601,404,361 $ 2,095,808,345 861,474,035 1,905,659,215 0 219,885,673 $ 861,474,035 $ 6,822,757,594 $ $ (374,312,131) $ (2,433,051,601) $ 45,901,643 83,446,623 18,227,000 97,179,943 20,795,660 265,550,869 (48,757,234) $ $ 184,074,061 $ 102,158,775 130,554,799 (4,280,478) (39,085,876) $ 102,158,775 $ 271,262,506 $ $ (272,153,356) $ (2,161,789,095) $ $ $ 205,508,430 $ $ $ (2,900,000) $ (1,628,502) (113) (43,747,528) (45,376,143) (94,133,377) 2,829,335 $ $ 2,101,594,860 $ 49,310,500 (50,071,234) (46,301,707) $ 0 $ 2,051,523,626 $ 3,008,793 $ (272,153,356) $ 92,342,961 $ (88,295,249) 1,808,936,221 1,242,649,202 $ 1,536,782,865 $ $ 1,154,353,953 (11,909,723) 80,433,238 A-31 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2002 Cash Flows from Operating Activities: Cash Received from Customers Cash Received from Grants and Required Contributions/Premiums Cash Paid to Vendors Cash Paid to Employees Cash Paid for Benefits Cash Paid for Claims and Judgments Cash Paid for Scholarships, Fellowships and Loans Other Operating Items (Net) Net Cash Provided by (Used in) Operating Activities Cash Flows from Noncapital Financing Activities: Transfers from Other Funds Transfers to Other Funds Other Noncapital Items (Net) Net Cash Provided by Noncapita1 Financing Activities Cash Flows from Capital and Related Financing Activities: Capital Contributions Proceeds from Sale of Capital Assets Acquisition and Construction of Capital Assets Principal Paid on Capital Debt Interest Paid on Capital Debt Net Cash Used in Capital and Related Financing Activities Cash Flows from Investing Activities: Purchase ofInvestrnents (Net) Interest and Dividends Received Net Cash Provided by (Used In) Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, July 1 Cash and Cash Equivalents, June 30 The notes to the financial statements are an integral part of this statement. A-32 ... ,-,---- Georgia Technology Authority Business- Higher Education Fund $ 203,547,865 $ 1,035,138,108 978,067,239 (142,251,164) (1,982,455,746) (51,241,943) (2,155,589,871 ) (176,775,810) 261,036,941 $ 10,054,758 $ (2,040,579,139) $ 35,412,874 $ 2,066,292,172 (15,348,100) (854,580) 100,210 107,767,326 $ 20,164,984 $ 2,173,204,918 ---'--'---- $ $ 10,848,889 4,314,563 (5,724,836) (192,060,344) (4,001,013) (7,794,172) (285,061) (3,668,397) (10,010,910) $ (188,359,461) $ (15,195,107) $ 1,237,120 $ ----"(-1-3-',-9-5-7-,"9-8-7-')- $ 223,177,091 17,285,669 240,462,760 $ 6,250,845 $ 184,729,078 32,159,733 331,204,510 $ 38,410,578 $ ===51=5,9=33=,5=88= Type Activities - Enterprise Funds State Employees' Unemployment Health Benefit Compensation Plan Fund Total Governmental Activities Internal Service Funds $ -$ 1,604,441,341 (445,847,045) (3,240,463) (1,051,471,561) $ 485,727,079 (861,330,615) 1,238,685,973 $ 3,068,235,659 (2,570,553,955) (2,210,072,277) (1,912,802,176) (176,775,810) 261,036,941 $ 103,882,272 $ (375,603,536) $ (2,302,245,645) $ 113,719,704 114,556,904 (82,282,144) (44,889,612) (21,364,000) (95,926,010) 1,436 (16,183,722) $ $ 2,641,844 $ 2,641,844 $ $ 2,101,705,046 $ (16,202,680) 110,509,380 $ 2,196,011,746 $ 53,108,902 (50,100,109) 179,959 3,188,752 $ $ $ 10,848,889 $ 2,829,335 4,314,563 16,844 (197,785,180) (7,604,967) (11,795,185) (3,953,458) (113) $ $ $ (198,370,371) $ (4,758,901) $ (202,609,358) $ 15,159,131 $ (187,450,227) $ $ 102,158,775 102,158,775 $ 5,372,626 $ 135,840,695 141,213,321 $ (75,766,167) 54,362,005 (21,404,162) $ (80,926,111) $ (273,444,761) $ (163,390,949) $ (39,158,033) 448,193,907 1,794,566,841 2,606,124,991 122,468,171 $ 367,267,796 $ 1,521,122,080 $ 2,442,734,042 $ 83,310,138 A-33 Statement of Cash Flows Proprietary Funds (continued) For the Fiscal Year Ended June 30, 2002 Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided by (Used in) Operating Activities: Depreciation Expense Other Changes in Assets and Liabilities: Decrease (Increase) in Accounts Receivable Increase in Due From Other Funds Increase in Due From Component Units Increase in Intergovernmental Receivables Increase in Inventories Decrease (Increase) in Prepaid Items Decrease in Notes Receivable Decrease in Other Assets Increase (Decrease) in Accounts Payable and Other Accruals Decrease in Due to Other Funds Increase in SalarieslWithholdings Payable Decrease in Benefits Payable Increase in Claims and Judgments Payable Increase in Contracts Payable Increase (Decrease) in Deferred Revenue Increase in Customer Deposits Increase (Decrease) in Compensated Absences Payable Increase (Decrease) in Other Liabilities Net Cash Provided by (Used) in Operating Activities Noncash Investing, Capital, and Financing Activities: Net Decrease in Fair Value oflnvestrnents Business- Georgia Technology Authority Higher Education Fund $ 7,086,991 $ (2,168,459,314) 16,188,931 203,696,742 3,686,160 (16,452,003) (44,577) (752,128) 4,150,389 4,933,494 (35,396) 78,027 (25,150,248) (827,359) (2,115,858) 1,328,286 98,540 (116,568,602) 18,719,562 (5,903,246) (2,585,441) (1,184,636) (5,015,053) 41,270,898 10,116,492 3,214,968 $ 10,054,758 $ (2,040,579,139) $====-:..-:: $ ===== The notes to the financial statements are an integral part of this statement. A-34 Type Activities - Enterprise Funds State Employees' Unemployment Health Benefit Plan Compensation Fund Total Governmental Activities Internal Service Funds $ 102,632,853 $ (374,312,131) $ (2,433,051,601) $ (48,757,234) (1,380,067) 10,168,285 3,495 (7,286,381 ) (267,123) 11,210 1,008,592 (2,443,417) 143,420 219,885,673 0 (21,835,563) ( 16,452,003) (44,577) (2,443,417) (1,579,487) 2,034,531 1,328,286 98,540 (101,323,403) (35,396) 18,801,084 (13,189,627) 0 0 38,418,334 0 8,943,066 (1,800,085) 20,795,660 640,589 2,300,031 8,009,022 146,032 (545,752) 322,886 793,904 (2,781,022) (97,856) 1,253,933 21,890 945,490 85,795 682,910 $ 103,882,272 $ (375,603,536) $ (2,302,245,645) $ (16,183,722) $ (156,708) $====-::-:: $ (156,708) $ (55,990,507) A-35 Gnrgla. Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2002 Assets Cash and Cash Equivalents Receivables Interest and Dividends Other Investments. at Fair Value Certificates of Deposit Investment Accounts Repurchase Agreements Stocks U, S, Government Securities and Corporate Obligations Real Estate/Mortgages Mutual Funds Pooled Investments Capital Assets Land Buildings Software Machinery and Equipment Accumulated Depreciation Total Assets Pension Trust Investment Trust Private Purpose Trust $ I 10.985,622 $ 2.445.509.938 $ 290,430,439 167.727,102 11.229.120 $ 32,225 67,607,888 784,459,000 20,506,429,276 16,822,229,281 7.496,075 7,608,614 12,515,292,767 2,136,271,315 49,000 414,020 1,525,000 964,278 (150,000) $ 51,283,068,362 $ 4,581,781,253 $ 8,011,273 132,755 (83,992) 19,321,381 $ Agency Total 171,139,195 $ 2,738.863,875 1.821,151 290.430.439 169,580.478 4,396,404 4,396,404 67,607,888 784,459,000 20,506,429,276 222,647,776 16,822,229,281 7,496,075 7,608,614 14,882,223,131 49,000 414,020 1,525,000 1,097,033 (233,992) 400,004,526 $ 56,284,175,522 Liabilities Accounts Payable and Other Accruals Salaries/Withholdings Payable Due to Other Funds Funds Held for Others Deferred Revenue Compensated Absences Payable Total Liabilities Net Assets Held in Trust for: Pension Benefits Poo 1 Participants Other Purposes $ 16,461,008 $ 133,173 1,123,010 5,682 $ 17,722,873 $ $ $ $ 16,461,008 66 133,239 1,123,010 400,004,526 400,004,526 5,682 97,179 97,179 0$ 97,245 $ 400,004,526 $ 417,824,644 $ 51,265,345,489 $ $ 4,581,781,253 $ 19,224,136 $ 51,265,345,489 4,581,781,253 19,224,136 Total Net Assets $ 51,265,345,489 $ 4,581,781,253 $ 19,224,136 $ 0 $ 55,866,350,878 The notes to the financial statements are an integral part of this statement. A-36 Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Fiscal Year Ended June 30, 2002 Pension Trust Investment Trust Private Purpose Trust Total Additions: Contributions!Assessments Employer Plan Members Other Contributions Fines and Bond Forfeitures Insurance Company Premium Taxes Other Fees Interest and Other Investment Income Dividends and Interest Net Appreciation (Depreciation) in Fair Value of Investments Less: Investment Expense Net Gain (Loss) on Disposal of Investment Securities Pool Participant Deposits Other Transfers from Other Funds Miscellaneous Total Additions $ 961.325,420 $ 483,451,904 17.557,273 15,230,901 2,000,897 1.674.930.741 (3,753.385,920) (40,636,244) (17,259,745) 2.693,635 1,030,887 $ (653,060,251) $ $ 107,693.322 4,409,643 (971,726) 5,933.037.864 6,044,169, I 03 $ $ 63,446,506 96JJ25,420 546,898,410 17.557.273 15.230.901 2,000,897 1.419.204 1,784,043.267 (3,748.976,277) (41.607,970) (17.259,745) 5.933,037,864 4,311 2,693,635 1.035,198 64.870,021 $ 5,455,978,873 Deductions: General and Administrative Expenses Benefits Pool Participant Withdrawals Refunds Total Deductions $ 29,418,470 $ $ 1,938,747,402 5,578,286,227 55,238,771 $ 2,023,404,643 $ 5,578,286,227 $ 2,081,836 $ 78,681,701 31,500,306 2,017,429,103 5,578,286,227 55,238,771 80,763,537 $ 7,682,454,407 Change in Net Assets Held in Trust for: Pension Benefits Pool Participants Other Purposes Net Assets, July 1 (Restated) $ (2,676,464,894) $ $ 465,882,876 53,941,810,383 4,115,898,377 -$ ( 15,893,516) (2,676,464,894) 465,882,876 (15,893,516) 35,117,652 58,092,826,412 Net Assets, June 30 $ 51,265,345,489 $ 4,581,781,253 $ 19.224,136 $ 55.866,350,878 The notes to the financial statements are an integral part of this statement. A-37 Gevrgia. Combining Statement of Net Assets Component Units June 30, 2002 Assets Current Assets: Cash and Cash Equivalents Investments Receivables Acconnts (Net) Interest and Dividends Due from Primary Govemmellt Intergovernmental Receivables Inventories Prepaid Items Other Current Assets Noncurrent Assets: Investments Receivables (Net) Notes and Loans Other Restricted Assets Cash and Cash Equivalents Investments Receivables Loans (Net) Interest and Dividends Other Deferred Charges Capital Assets: Land Buildings and Building Improvements Improvements Other Than Buildings Machinery and Equipment Software Works of Art and Collections Infrastructure Construction in Progress Accumulated Depreciation Other Noncurrent Assets Total Assets Development Authority Envirollmental Facilities Authority Housing and Finance Authority Lottery Corporation Ports Authority 45.690 3,284 1,906,573 172.575.906 137.759.902 3,535,565 5,408.143 1.940,336 20.426.1 08 7,711,039 492.573 87.193,071 673.762,191 7,193,563 44,648 63,292,072 133,472.625 116,114,516 24,813,767 709,245,348 6,409,850 15,263,261 800.000 3,865,000 3,483,570 89,148,618 (19,663) 2,548,029 1,004,748,620 (3,946,261 ) 5,223,438 1,106,666,906 15.372.498 (5,264,498) 60,629.000 21.249,290 6.442,300 22,499,000 3,981,000 500.000 210,774,000 3,288,000 245,000 28,000 12,414,410 6,112,000 3,609,058 2,758,942 2,130,000 14,110,000 188,000 (13,772,000) 288,648,000 $ 110,759,000 114,869,000 125,904,000 141,060,000 137,321,000 31.796,000 (254,544,000) 1,664,000 487.475,000 The notes to the financial statements are an integral part of this statement. A-38 Public Telecommunications Commission Road and Tollway Authority Stone Mountain Memorial Association Student Finance Authority World Congress Center Authority l'\onmajor Component Units Tota] 11,980,746 2,521,065 641.241 19,435 16,716.219 11,905.108 1.401.776 8,247 176.917 17,007,735 21.571 5,944 33,919 285.425,509 341.541,787 1,278,948 26,127,162 54,227,788 (48,645,735) 49,150,651 39,271,138 1,740,698 10.415,915 5,063,23 I 2.484.921 4,154,039 1,135,841 (6,848,876) 48,232.525 763.649,088 7,183,097 72,769,183 21,924,038 26,904,789 121,823 204,165 (48,846,984) 241.087 97,747,284 1.568.355 3,081,294 735.993 2.465.264 284.203 151,654 217,417 56,926,655 4,191,655 1,818,175 (3.415,869) 68,024,796 20.912.151 345,035 5,106,815 437.120 1,829,145 39,713,0]9 6,860,830 26,564,506 37,282,886 209,402,736 35,797,675 10,796,939 (78,646,479) 316,402,379 73.010,698 $ 43.304.014 355.034.589 124.816.278 7,726.055 217,573 1,154.447 6,359,057 3,456,052 321.434 102.298,017 10.490,126 3,378,986 6,510,71 I 7.206.551 6.419.745 245,417 5,505,530 120,925,031 951,3 54.542 6,112,000 419,703,476 606.453,001 709.245.348 6.409,850 39,271,138 18.003,959 10,884,801 94,279,389 5,390,588 20,565,317 79,225 10,731,213 5,023,297 (28,359,816) 21,434 178,604,647 532,697,356 191.501,212 277,165,265 188,000 201,048 149,188,064 37,023.462 (487,045,683) 57,930,513 259,671,318 $ 4,531,332,660 A-39 Georg1a. Combining Statement of Net Assets Component Units (continued) June 30, 2002 Liabilities Current Liabilities: Accounts Payable and Other Accruals Due to Primary' Government Salaries/Withholdings Payable Accrued Interest Payable Contracts Payable Deferred Revenue Compensated Absences Payable Current Capital Leasesllnstallment Purchases Payable - Current Notes and Loans Payable - Current Revenue Bonds Payable - Current Grand Prizes Payable - Current Other Cnrrent Liabilities Current Liabilities Payable from Restricted Assets: Accrued Interest Payable Deferred Revenue Bond Anticipation Notes Payable - Current Revenue Bonds Payable - Current Other Noncurrent Liabilities: Deferred Revenue Compensated Absences Payable Capital Leases/Installment Purchases Payable Notes and Loans Payable Revenue/Mortgage Bonds Payable Grand Prizes Payable Advances from Primary Government Customer Deposits Other Noncurrent Liabilities Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted for: Bond Covenants/Debt Service Construction Loan and Grant Programs Other Purposes Unrestricted Total Net Assets Development Authority Environmental Facilities Authority Housing and Finance Authority Lottery Corporation Ports Authority 803.413 5,031,924 3,228,1 53 103.537 1,513,563 10,178,114 25.856.159 999 3.765.018 125,945,560 5.680.000 20.382.857 76,221.000 15,046,000 8.000 1,955.113 35.285 328,245 7.440.000 273.000 1,900,000 33,489,301 61,361,203 821,925,366 186,170,000 225,000 1,233,357 5,226,000 24,571,000 13,598,030 52,922,668 82,064,570 $ 997,875,959 $ 1.564,000 279,009,000 $ 3,248,000 46,435,000 -$ 36,225,950 24.985 5,010,573 22,300,043 895,348,449 4,202,309 $ 104,588,638 2,656,000 $ 380,736,000 6,368,000 500,000 6,483,000 53,936,000 36.225.950 922,684,050 $ 108,790,947 9,639,000 $ 441,040.000 The notes to the financial statements are an integral part of this statement. A-40 Public Telecommunications Commission Road and Tollway Authority Stone Mountain Memorial Association Snldent Finance Authority World Congress Center Authority Nonmajor Component Units Total 22.970 553,814 492.100 1.903.1 II 1.007.89 I 16.744.468 6.153 41.446.212 8.053.536 603.716 2,207,325 10.674.562 3.218.583 259.888,788 5.845.000 230.037 414,555,449 5.783,036 $ 761.670,679 685.550 3.541.746 95.651 577,737 8,849,492 9,000,000 1.598.840 2.302.478 3.914 277.324 16,873.786 121.525 5,112.359 5.310,000 1,367.121 2,499,397 6,822,344 $ 178,300.000 20,026,069 $ 6,860,830 279,487 216,808,824 17.830.567 $ 4.379 2.809,862 49,637 1.239.784 333,405 120.961 34,402 150.649 799.800 144,913 281,182 23,799,541 $ 130.468.061 20.434.328 3.438.401 5,374,232 7.489.637 163.646.703 947.030 2.024.072 55.785,538 15,633.536 15.046,000 22,140,346 15.786.921 3.218,583 259.888.788 11,155,000 230.037 225.000 4.003.994 2,352.238 38,996,483 1.500,713,018 186,170,000 2,499,397 6,860.830 18,689.517 2,493,217,690 28,877,727 414,150 14,075,738 16,405,071 $ 15.302 80,260,111 $ 2,593,961 (14,441,964) 10,664,829 45,404,766 31,023,757 21,452.147 31,600,000 62.991 15,454,660 117,416,467 $ 7,528.050 110,927.260 664,196,388 32,846,022 31,600,000 22,300,043 8.505,191 1,278,667,326 $ 43,367.615 $ 1,978,409 $ 90.924,940 $ 47,998,727 $ 99.593,555 $ 235,871,777 $ 2,038,114,970 A-41 Georg1a Combining Statement of Activities Component Units For the Fiscal Year Ended June 30, 2002 Expenses Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues Net (Expenses) Revenue General Revenues: Taxes Unrestricted Investment Income Payments from the State of Georgia Other Total General Revenues Change in Net Assets Net Assets, July 1 (Restated) Net Assets, JUlle 30 Development Authority $ 3,406,899 Environmental Facilities Authority Housing and Finance Authority 25,485,649 $ 82,749,908 Lottery Corporation 2,330,458,000 $ Ports Authority 96,933,000 $ 5,439,028 28,952,830 $ 34,442,425 45,106,938 55,330,906 $ 24,652,240 2,326,420,000 $ 104,668,000 12,219,000 $ 5,439,028 108,502,193 $ 79,983,146 $ 2,326,420,000 116,887,000 2,032,129 $ 83,016,544 (2,766,762) $ (4,038,000) $ 19,954,000 $ 29,238 $ 1,702,408 $ 12,968,431 2,135,948 $ 29,238 3,838,356 12,968,431 2,061,367 $ 86,854,900 $ 10,201,669 34,164,583 835,829,150 98,589,278 $ 8,757,000 81,000 8,838,000 $ 4,800,000 $ 4,839,000 1,431,000 3,091,000 4,522,000 24,476,000 416,564,000 $ 36,225,950 $ 922,684,050 $ 108,790,947 $ 9,639,000 $ 441,040,000 The notes to the financial statements are an integral part of this st:-lement A-42 Public Teleconununications Commission 35.646.317 Road and Tollway Authority 113.854.643 Stone Mountain Memorial Association 9.453.063 $ Student Finance Authority 70.794.365 World Congress Center Authority 76,419.132 ~onmajor Component Units 204,111.561 Total 3,049,312.537 $ 3.904.893 $ 21,805,927 8,357.580 340.333 $ 12.602.806 21.805.927 $ (23.043.511 ) $ (92,048,716) $ 11,475,605 11,475,605 $ 2,022,542 7,577,151 $ 3,515.845 11,092.996 $ (59,701,369) 49.589.446 105,233 49,694,679 (26,724.453) $ 85.180.754 $ 28.751.560 10.753,769 124,686,083 (79,425.4 78) 2,700,344,540 99.824.883 68.420.040 2.868.589.463 (180,723,074) 191.924 22.205,363 334 10.014,276 39271.138 767,630 4,141 210.108 51,068,332 22,397.621 $ 49,285.414 $ 771,771 $ 51,278.440 $ (645,890) $ (42,763,302) 2,794,313 (8.422,929) 44,013,505 44,741,711 88,130,627 56.421.656 18.683.678 2.826,048 46,072 21.555.798 $ (5,168,655) 104,762,210 3,549,346 $ 3.443,109 90,035,781 2.459.191 99.487.427 $ 20,061,949 215,809,828 22.233.024 42,34\.172 202,580,614 7,817,686 274,972.496 94,249.422 1,943,865,548 $ 43,367,615 $ 1,978.409 $ 90,924,940 $ 47,998.727 $ 99,593,555 $ 235,871,777 $ 2,038,114,970 A-43 (This page intentionally left blank) Notes to the FinanciaL Statements Index Note 1 Summary of Significant Accoonting Policies Note 2 Accounting Changes Note 3 Deposits and Investments Note 4 Receivables Note 5 Capital Assets Note 6 Risk Management Note 7 Construction and Other Significant Commitments Note 8 Operating Leases Note 9 Capital Leases Note 10 Long-Term Liabilities Note 11 Interfund Balances Note 12 Nonmonetary Transactions Note 13 Contingencies Note 14 Subsequent Events Note 15 Retirement Systems Note 16 PosternployITlent Benefits Note 17 Deficit Fund BalancelNet Assets A45 Page A-46 A-57 A-59 A-67 A-68 A- 71 A- 72 A-72 A-75 A-76 A-78 A-80 A-81 A-81 A-82 A-87 A-87 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies A. Basis of Presentation With the exception of the departures from generally accepted accounting principles (GAAP) disclosed in the following paragraphs, the financial statements ofthe State of Georgia have been prepared in conformity with GAAP as applied to government units. The Govemmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and fmancial reporting principles, which are set forth in the GASB's Codification of Governmental Accounting and Financial Reporting Standards (GASB Codification). During fiscal year ended June 30, 2002, the State implemented the following new accounting standards issued by the GASB: Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysisfor State and Local Governments; Statement No. 35, Basic Financial Statements - and Management's Discussion and Analysis -for Public Colleges and Universities; Statement No. 37, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments: Omnibus; and Statement No. 38, Certain Financial Statement Disclosures. The new standards also require reformatting ofthe fmancial statements and restating of beginning balances. B. Financial Reporting Entity In evaluating how to define the govemment for fmancial reporting purposes, management has considered both the organizations that comprise the primary government and potential component units. The primary government consists of all the organizations that compose the legal entity of the State of Georgia. All agencies, departments, authorities, commissions, courts, councils, boards, universities, colleges, retirement funds, associations and other funds that are not legally separate are, for fmancial reporting purposes, considered part of the primary government. In addition, included within the primary government are organizations which are legally separate but so intertwined with the primary government that they are, in substance, part of the primary government. organization for which the primary government is fmancially accountable and other organizations for which the primary government is not accountable, but for which the nature and the significance of the relationship with the primary government are such that exclusion would cause the financial statements to be misleading or incomplete. Financial accountability is the ability to appoint a voting majority of an organization's governing board and to impose will upon the organization or to have exist the potential for the organization to provide specific financial benefits or impose specific financial burdens on the primary government. In addition, organizations that are fiscally dependent upon the primary government were considered as potential component units. As required by GAAP, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities are, in substance, part of the government's operations and therefore data from these units are combined with that ofthe primary government. The blended component units are as follows: Georgia Building Authority (Hospital) (Capital Projects Fund) is a body corporate and politic. The authority is responsible for the construction and management of hospitals, health care facilities, dormitories and housing accommodations for the use of patients, officers and employees under the control of any State agency. The Board consists of four State officials designated by statute and one member appointed by the Governor. Georgia Building Authority (Markets) (Capital Projects Fund) is a body corporate and politic. The authority is responsible for the construction and management offarmers' markets. The Board consists of four State officials designated by statute and one member appointed by the Governor. Georgia Building Authority (Penal) (Capital Projects Fund) is a body corporate and politic. The authority was created for the purpose of constructing and managing penal institutions, penitentiaries, prisons and prison institutes, detention and corrections institutions, rehabilitation facilities and county correctional institutions. The Board consists of four State officials designated by statute and one member appointed by the Governor. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in Section 2100 ofthe GASB Codification ofGovernmental Accounting and Financial Reporting Standards. This Section defines a component unit as a legally separate Georgia Education Authority (University) (Capital Projects Fund) is a body corporate and politic. The authority is charged with the overall responsibility of the construction and management of housing accommodations, classrooms, laboratories, libraries, dormitories and instructional, A-46 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 1. Summary of Significant Accounting Policies (continued) administrative and recreational facilities for students, faculty, officers and employees of any institution under control of the Board ofRegents. The Board consists offive State officials designated by statute and one member appointed by the Governor. Georgia Technology Authority (Enterprise Fund) is an instrumentality of the State of Georgia and a public corporation. The authority is responsible for the procurement oftechnology resources, technology enterprise management and technology portfolio management, as well as the centralized marketing, provision, sale and leasing, or execution of license agreements, for access on line or in volume, of certain public information maintained in electronic format to the public. State officials appoint the eleven members of the authority. Any funds in excess of those needed for the corporate purposes of the authority are required to be transferred to the General Fund. Georgia Building Authority (Internal Service Fund) is a body corporate and politic. The purpose of this authority is to construct and manage buildings and facilities intended for use as office space, public parks and public parking facilities, the executive mansion and laboratories. The Board consists of four State officials designated by statute and one member appointed by the Governor. Georgia Correctional Industries Administration (Internal Service Fund) is a public corporation, which utilizes inmates in the manufacturing of products for sale to State agencies and others. The Governor appoints one Board member from each congressional district in the State, as well as appointing five additional members from the State at large. Employees' Retirement System of Georgia (Pension Trust Fund) is a single-employer, public employee retirement system established to provide benefits for employees of the State. The system is governed by a seven member Board of Trustees, three of which are State officials designated by statute, and one who is appointed by the Governor. The system administers five blended defined benefit pension plans: the Employees' Retirement System Fund, the District Attorneys' Retirement Fund, the Georgia Judicial Retirement System, the Legislative Retirement System, and the Superior Court Judges Retirement Fund. The State provides a substantial amount offunding for these retirement systems in the form of employer contributions and administrative expenses. Georgia Military College (Higher Education Fund) is a body corporate and politic. This institution is dedicated to providing a high-quality military education to the youth of the State. The Board consists of the mayor of the City of Milledgeville, and one trustee elected from each of the six municipal voting districts of the City of Milledgeville, as required by statute. Discrete presentation entails reporting component unit financial data in columns separate from the financial data of the primary government. The discretely presented component units are as follows: Georgia Education Authority (Schools) is a body corporate and politic. The authority is responsible for the construction of buildings and facilities intended for use as school buildings, classrooms, laboratories, libraries and instructional, administrative and recreational facilities for students, faculty, officers and employees of any institution under control of a county or city board of education or governing body of any independent district or system. The Board consists of six State officials designated by statute and one member appointed by the Governor. Georgia Public Telecommunications Commission is a body corporate and politic. This commission is a public charitable organization created for the purpose ofproviding educational, instructional and public broadcasting services to citizens of Georgia. The budget of the commission must be approved by the State. The Board consists of nine members appointed by the Governor. Georgia Regional Transportation Authority is a body corporate and politic. The purpose of the authority is to manage land transportation and air quality within certain areas of the State. The Governor appoints the fifteen members of the authority. Georgia Agricultural Exposition Authority is a body corporate and politic. This authority is responsible for provision of a facility for the agricultural community, for public events, exhibits and other activities and for promotion and staging of a statewide fair. The Governor appoints the nine Board members. The Authority has a separate management report, but separate audited fmancial statements are not required or issued for it. Georgia Agrirama Development Authority is a body corporate and politic. The purpose of this authority is to utilize all funds for the purpose of beautifying, improving, developing, maintaining, administering, managing and promoting an agricultural museum in or around A-47 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) Tifton, Georgia; this museum is designated as the State Museum of Agriculture. Of the fifteen members of the Board, four are State officials designated by statute and the Governor appoints eight members. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Georgia Development Authority is a body corporate and politic. The authority was created to assist agricultural and industrial interests by providing credit and servicing functions to better enable farmers and businessmen to obtain needed capital funds. The Board consists of three State officials designated by statute and four members appointed by the Governor. Georgia Environmental Facilities Authority is a body corporate and politic. The authority provides assistance to local governments in constructing, extending, rehabilitating, repairing, replacing and renewing environmental facilities by providing fmancial and technical assistance. The Board consists of three State officials designated by statute and eight members appointed by the Governor. Georgia GolfHall ofFame Authority is a body corporate and politic. The authority was created to construct, operate and manage a facility and related attractions to house the Georgia Golf Hall of Fame. The authority is governed by the fifteen members appointed by State officials to the Golf Hall of Fame Board. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Georgia Higher Education Assistance Corporation is a public authority, body corporate and politic. The corporation was created to improve the higher educational opportunities of eligible students by guaranteeing educational loan credit to students and to parents of students. The corporation is governed by the Board of Commissioners of the Georgia Student Finance Commission. The Board consists of four State officials designated by statute and eleven members appointed by the Governor. Georgia Highway Authority is a body corporate and politic. This authority was created to build, rebuild, relocate, construct, reconstruct, surface, resurface, layout, grade, repair, improve, widen, straighten, operate, own, maintain, lease and manage roads, bridges and approaches. The three members of the Authority are State officials designated by statute. The Authority has a separate management report, but separate audited fmancial statements are not required or issued for it. Georgia Housing and Finance Authority is a body corporate and politic. The authority is responsible for facilitating housing and housing fmance, and fmancing for health facilities and health care services throughout the State. The Governor appoints the sixteen members of the Board. Georgia International and Maritime Trade Center Authority is a body corporate and politic. The authority was created to develop and promote the growth of the State's import and export markets through its ports and other transportation modes. State officials appoint eight of the twelve members of the Board. Georgia Lottery Corporation is a public body, corporate and politic. The corporation operates lottery games to provide continuing entertainment to the public and maximize revenues, the net proceeds ofwhich are utilized to support improvements and enhancements for educational purposes. The corporation is governed by a board of directors composed of seven members, all of which are appointed by the Governor. The State is legally entitled to residual resources of the corporation. Georgia Music Hall ofFame Authority is a body corporate and politic whose purpose is to construct, operate and maintain the Music Hall of Fame, as well as promoting music events at the facility and throughout the State. The Governor appoints the sixteen members of the Board. The Authority has a separate management report, but separate audited fmancial statements are not required or issued for it. Georgia Ports Authority is a body corporate and politic. The purpose of the authority is to develop and improve the harbors or seaports of the State for the handling of waterborne commerce and to acquire, construct, equip, maintain, develop and improve said harbors, seaports and their facilities. The Board consists of twelve members, all of which are appointed by the Governor. Georgia Rail Passenger Authority is a body corporate and politic. This authority is responsible for construction, fmancing, operation and development of rail passenger service and other public transportation projects. The Board includes one member appointed by the Governor from each congressional district, as well as two appointed members from the State at large. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Georgia Seed Development Commission is a body corporate and politic and an instrumentality and public corporation of the State whose purpose is to purchase, process, and resell breeders' and foundation seeds. The commission consists often members who are accountable as A-48 Notes to the FinanciaL Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) trustees. Of the ten members serving on the Board, six members are State officials or are appointed by State officials. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Georgia Student Finance Authority is a body corporate and politic. This authority was created for the purpose of improving higher educational opportunities by providing educational scholarship, grant and loan assistance. A substantial amount of funding is provided to the authority by the State. State officials comprise four of the fifteen members of the Board, and the Governor appoints the remaining eleven. Geo. L. Smith II Georgia World Congress Center Authority is a body corporate and politic and an instrumentality and public corporation of the State. The authority is responsible for acquiring, constructing, equipping, maintaining and operating the Worid Congress Center to promote trade shows, conventions and political, musical, educational, entertainment, recreational, athletic or other events. The Governor appoints the fifteen members of the Board. Georgia Sports Hall ofFame Authority is a body corporate and politic. This authority was created to construct and maintain a facility to house the Georgia Sports Hall ofFame to honor those who have made outstanding and lasting contributions to sports and athletics, and to operate, advertise and promote the Sports Hall of Fame. State officials appoint the eighteen members of the Board. The Georgia State Financing and Investment Commission must approve the issuance ofbonds. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Jekyll Island State Park Authority is a body corporate and politic and an instrumentality and public corporation of the State. The authority was created to operate and manage resort recreational facilities on Jekyll Island. The Board consists of one State official designated by statute and eight members appointed by the Governor. The Authority has a separate management report, but separate audited fmancial statements are not required or issued for it. Lake Lanier Islands Development Authority is a body corporate and politic and an instrumentality and public corporation of the State. The purpose of the authority is to manage, preserve and protect projects on Lake Lanier Islands. The Board consists of one State official designated by statute and eight members appointed by the Governor. The Authority has a separate management report. but separate audited financial statements are not required or issued for it. North Georgia Mountains Authority is a body corporate and politic and an instrumentality and public corporation of the State responsible for the construction and management of recreation, accommodation and tourist facilities and services. The Governor appoints the nine members of the Board. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. OneGeorgia Authority is a body corporate and politic and an instrumentality and public corporation of the State. The purpose of the authority is to promote the health, welfare, safety and economic society of the rural citizens ofthe State through the development and retention of employment opportunities in rural areas and the enhancement of the infrastructures that accomplish that goal. The six members of the Authority are State officials designated by statute. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Sapelo Island Heritage Authority is a body corporate and politic. The purpose of the authority is the preservation of the cultural and historic values of Hog Hammock Community located on Greater Sapelo Island. The Board consists offour State officials designated by statute and one member appointed by the Governor. The State has assumed the obligation to provide financial support for real property acquisition. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. Southwest Georgia RailroadExcursion Authority is a body corporate and politic and an instrumentality and public corporation of the State. The authority was created for the purposes of construction, fmancing, operation, and development of rail passenger excursion projects utilizing any state owned railway in southwest Georgia. The thirteen member Board is appointed by officials of counties and municipalities within the service area. The Georgia State Financing and Investment Commission must approve the issuance of bonds. The Authority has a separate management report, but separate audited financial statements are not required or issued for it. State Road and Tollway Authority is a body corporate and politic and an instrumentality and public corporation of the State. The authority was created to construct, operate and manage a system of roads , bridges and tunnels and facilities A-49 Notes to the Financial Statements For the Year Ended June 3D, 2002 Note 1. Summary of Significant Accounting Policies (continued) related thereto. The Board consists of three State officials designated by statute and two members appointed by State officials. Stone Mountain Memorial Association is a body corporate and politic and an instrumentality and public corporation of the State. The Authority is responsible for the preservation and protection of Stone Mountain as a Confederate memorial and public recreational area. The Board consists ofone State official designated by statute and eight members appointed by the Governor. Superior Court Clerks' Cooperative Authority is a body corporate and politic and an instrumentality and public corporation ofthe State created to provide a cooperative for the development, acquisition and distribution of record management systems, information, services, supplies and materials for superior court clerks ofthe State. Ofthe seven members of the Board, the Governor appoints three. The nature of this organization is such that it would be misleading to exclude it from the reporting entity. Fiduciary component units are required by GAAP to be reported as fiduciary funds ofthe primary government rather than as discrete component units. In accordance with GAAP, fiduciary funds and component units that are fiduciary in nature are excluded from the government-wide fmancial statements. Georgia Class Nine Fire Department Pension Fund (Pension Trust Fund) is a multiple-employer, defmed benefit pension plan established for the purpose of paying retirement and death benefits to volunteer firefighters ofthe State of Georgia. The Board of Trustees of the Georgia Firefighters' Pension Fund also serves as the Board of Trustees of this pension fund. Benefit provisions and vesting requirements are established by State statute. Georgia Firefighters' Pension Fund (Pension Trust Fund) is a multiple-employer, defmed benefit pension plan established for the purpose of paying retirement, death and disability benefits to the firemen of the State of Georgia. The Board of Trustees consists of two State officials designated by statute and three members appointed by the Governor. Benefit provisions and vesting requirements are established by State statute. Judges ofthe Probate Courts Retirement Fund ofGeorgia (Pension Trust Fund) is a multiple-employer, defined benefit pension plan established for the purpose of paying retirement, death and disability benefits to the judges of the Probate Courts of the State of Georgia. The Board consists of one State official designated by statute and six members appointed by the Governor. Benefit provisions and vesting requirements are established by State statute. Peace Officers' Annuity and Benefit Fund of Georgia (Pension Trust Fund) is a multiple-employer, defined benefit pension plan established for the purpose of paying retirement, death and disability benefits to the peace officers ofthe State of Georgia. The Board ofCommissioners ofthe Annuity and Benefit Fund consists of two State officials designated by statute and four members appointed by the Governor. Benefit provisions and vesting requirements are established by State statute. Public School Employees Retirement System (Pension Trust Fund) is a single-employer, defined benefit pension plan established for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The Employees' Retirement System Board of Trustees and two other Governor's appointees not on the Employees' Retirement System Board administer this retirement fund. Sheriffs' Retirement Fund of Georgia (Pension Trust Fund) is a multiple-employer, defined benefit pension plan established for the purpose of paying retirement, death and disability benefits to the sheriffs of the State of Georgia. The Board consists of one State official designated by statute and five members appointed by the Governor. Benefit provisions and vesting requirements are established by State statute. Superior Court Clerks' Retirement Fund of Georgia (Pension Trust Fund) is a multiple-employer, defined benefit pension plan established for the purpose of paying retirement, death and disability benefits to the Superior Court Clerks ofthe State of Georgia. The Board consists of one State official designated by statute and six members appointed by the Governor. Benefit provisions and vesting requirements are established by State statute. Teachers Retirement System of Georgia (Pension Trust Fund) is a cost-sharing multiple-employer plan created by an act of the Georgia General Assembly to provide retirement, service, disability and survivors' benefits for qualifying teachers. The Board of Trustees is comprised of ten members, eight of which are State officials or are appointed by State officials. The State provides a substantial amount of funding to this retirement system in the form of employer contributions. A-50 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) The State's significant discretely presented component units issue their own separate audited financial statements. These financial statements can be obtained from their respective administrative offices or from the Georgia Department of Audits and Accounts, 254 Washington Street, S.W., Atlanta, Georgia 30334. c. Government-Wide and Fund Financial Statements Government Wide Financial Statements The Statement of Net Assets and Statement of Activities display information about the primary government and its component units. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. Governmental activities, which normally are fmanced through taxes, intergovernmental revenues, and other non-exchange revenues are reported separately from business-type activities, which are fmanced in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from its discretely presented component units. The Statement of Net Assets presents the reporting entity's non-fiduciary assets and liabilities, with the difference reported as net assets. The Statement of Activities demonstrates the degree to which the direct expenses ofa given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not meeting the definition of program revenues are instead reported as general revenue. Fund Financial Statements Separate fmancial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide statements. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund fmancial statements. All remaining governmental and proprietary funds are aggregated and reported as nonmajor funds. D. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements and the proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting with the exception ofthe following individual pension trust funds which are reported essentially on the cash basis: Class Nine Fire Department Pension Fund Firefighters' Pension Fund Judges of the Probate Courts Retirement Fund Peace Officers' Annuity and Benefit Fund of Georgia Sheriffs' Retirement Fund of Georgia Under the accrual basis ofaccounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Principal revenue sources that are susceptible to accrual include income taxes, sales and use taxes, federal grants and shared revenues. Expenditures generally are recorded when the related fund liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due or when amounts have been accumulated in the debt service fund for payments to be made early in the subsequent fiscal year. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Revenues and expenses not meeting this defmition are reported as nonoperating revenues and expenses. As allowed by GASB Statement No. 20, the State's proprietary funds follow FASB Statements and Interpretations issued on or before November 30, 1989, A-51 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) Accounting Principles Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. The State reports the following major governmental funds: The General Fund is used to account for all financial transactions not required to be accounted for in another fund. These transactions relate to resources obtained and used for services traditionally provided by a state government. The Georgia State Financing and Investment Commission accounts for the construction ofprojects for state agencies fmanced through the issuance of public debt, including educational facilities for county and independent school systems. The State reports the following major enterprise funds: The State Employees' Health Benefit Plan is a selfinsured program of health benefits for the employees of units of government of the State of Georgia, units of county government and local education agencies located within the State of Georgia. The Georgia Technology Authority is primarily responsible for the procurement of technology resources, technology enterprise management and technology portfolio management, as well as the centralized marketing, provision, sale and leasing, or execution of license agreements, for access on line or in volume, of certain public information maintained in electronic format to the public. The Unemployment Compensation Fund accounts for the collection ofemployers' unemployment insurance tax and the payment of unemployment insurance benefits. The Higher Education Fund accounts for the operations of State colleges and universities and State technical colleges. Additionally, the State reports the following fund types: Governmental Fund Types: Debt Service Funds - Used to account for the payment of principal and interest on general long-term debt. The primary government debt service fund is the General Obligation Debt Sinking Fund, which is administered by the Office of Treasury and Fiscal Services. The Debt Sinking Fund is responsible for the accumulation of resources for the payment of principal and interest on general obligation bonds. Capital Projects Funds - Used to account for the acquisition or construction of capital facilities. Permanent Funds - Used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that benefit the State or its citizenry. Proprietary Fund Types: Internal Service Funds - Used to account for the fmancing of goods or services provided by one department or agency to other State departments or agencies, or to other governmental entities, on a costreimbursement basis. The predominant participant in internal service fund activity is the primary government. Fiduciary Fund Types: Pension Trust Funds -Used to account for the Employees' Retirement System in the primary government and the eight individual retirement plans that meet the defmition of a component unit of the State. Investment Trust Funds - Used to account for external portions of government-sponsored investment pools. Private Purpose Trust Funds - Used to report resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments. Agency Funds - Used to report assets and liabilities for deposits and investments entrusted to the State as an agent for others. Discretely Presented Component Units: The combining component unit financial statements are presented in order to provide information on each of the major component units included in the component unit's column ofthe government-wide statements. The component unit fmancial statements are reported using the economic resources measurement focus and the accrual basis of accounting. The information is presented in order to be consistent with the government-wide statements, and is less detailed than the presentation in each component unit's separately issued fmancial statements. The component units follow all GASB pronouncements, and all FASB pronouncements issued on or before November 30, 1989, except those that conflict with a GASB pronouncement. A-52 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) E. Budgets The annual budget ofthe State of Georgia is prepared on the modified accrual basis utilizing encumbrance accounting with the following exceptions: federal and certain other revenues are accrued based on the unexecuted portion of long-term contracts; and intrafund transactions are disclosed as revenues and expenditures. The budget represents departmental appropriations recommended by the Governor and adopted by the General Assembly prior to the beginning of the fiscal year. Annual appropriated budgets are adopted at the departmental level. The appropriated budget covers most governmental funds included in the State reporting entity but excludes the capital projects funds and certain debt service funds that are not subject to appropriation. The budget includes certain proprietary funds, the Higher Education Fund, and the administrative costs of operating certain public employee retirement systems. All unencumbered annual appropriations lapse at fiscal year end unless otherwise specified by constitutional or statutory provisions. Supplementary and amended appropriations may be enacted during the next legislative session by the same process used for original appropriations. Encumbrances are used to indicate the intent to purchase goods or services. Liabilities and expenditures are recorded upon issuance of completed purchase orders. Goods or services need not have been received for liabilities and expenditures to be recorded. F. Assets, Liabilities, and Net Assets/Fund Balances Cash and Cash Equivalents Cash and cash equivalents include currency on hand and demand deposits with banks and other financial institutions. Cash and cash equivalents also include short-term, higWy liquid investments with maturity dates within three months of the date acquired, with the exception of the Higher Education Fund, which reports all time deposits as cash. Investments Investments are defmed as those fmancial instruments with terms in excess of three months from the date of purchase and certain other securities held for the production of revenue. The investment policy of the State ofGeorgia is to maximize the protection of State funds on deposit while accruing an advantageous yield on those funds in excess of those required for current operating expenses (Official Code of Georgia Annotated [OCGA] 50-17-51). The State Depository Board may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office ofTreasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses are required to be deposited with the Director of the Office ofTreasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63). Such cash is managed in a pooled investment fund to maximize interest earnings. The pooled investment funds "Georgia Fund I" and "Georgia Extended Asset Pool" are also available on a voluntary basis to organizations outside of the State reporting entity. Authorized pool investments are limited to the following in accordance with State statutes: I) Obligations of the State of Georgia or of other states; 2) Obligations issued by the United States government; 3) Obligations fully insured or guaranteed by the United States government or a United States government agency; 4) Obligations of any corporation of the United States government; 5) Prime banker's acceptances; 6) Repurchase Agreements; 7) Obligations of other political subdivisions ofthe State; and 8) Commercial paper issued by domestic corporations. Authorized investments are subject to certain restrictions. Pooled cash and cash equivalents and investments are grouped into portfolios for investment purposes according to the operating needs of the State of Georgia and other pool contributors. The Primary Liquidity Portfolio is a stable net asset value investment pool that follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (SEC) as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal. Net asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participants' shares sold and redeemed at A-53 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) the pool's share price, $1.00 per share. Investments are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances, corporate obligations and repurchase agreements. The Secondary Liquidity Portfolio consists ofcertificates of deposit with average investment duration of .17 years. The Georgia Extended Asset Pool is part of the Extended Term Portfolio. It is a variable net asset value investment pool that follows Standard and Poor's criteria for AAAf rated funds. The pool is not registered with the SEC as an investment company. The pool's primary objective is the prudent management of public funds on behalf of the State of Georgia and local governments seeking income higher than money market rates. Net Asset Value (NAV) is calculated daily to determine current share price. NAV is calculated by taking the closing fair value of securities owned plus other assets and subtracting liabilities. The remainder is then divided by the total number of shares outstanding to compute NAV per share (current share price). The pool distributes earnings (net ofmanagement fees) on a monthly basis and determines participant's shares sold and redeemed based on the current share price, which at June 30, 2002, was $2.02 per share. Investments consist generally of securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, bankers' acceptances and repurchase agreements. The average investment duration at June 30, 2002, was 1.31 years. The Extended Term Portfolio includes three other funds: two consisting generally of repurchase agreements and certain U. S. Government Securities with average investment durations at June 30, 2002, of 1.39 and 1.69 years; and a third fund consisting generally ofrepurchase agreements and certain U.S. Government Securities which include mortgagebacked securities such as collateralized mortgage obligations and adjustable rate mortgages. These mortgage-backed securities are reported as U. S. Government Securities in the disclosure of custodial credit risk (see Note 3). Investments in this third fund are transacted by an external investment management finn under direction of an investment advisory agreement executed between the Office of Treasury and Fiscal Services and the investment management firm. The agreement directs the investment firm to utilize the Merrill Lynch 1-3 year Treasury Index in managing the average duration of the overall portfolio, excluding cash, to within plus or minus six months of the duration of the Index. The average investment duration for this fund on June 30,2002, was 1.59 years. The agreement also places limitations on individual security purchases and holdings. As of June 30, 2002, the State had $70,273,395 invested in U. S. agency mortgage-backed securities. Other organizations of the State of Georgia reporting entity invest in a variety of financial activities. These investments may include brokered certificates of deposit, commercial paper, convertible bonds, corporate bonds, notes and obligations, foreign bonds, investment agreements, mortgages, municipal bonds, mutual funds, real estate, real estate mortgages and notes, real estate investment trust limited partnerships, repurchase agreements, short-term investments, stocks, and U. S. Treasury bonds, notes, and bills. Investments of other organizations are stated at fair value at June 30, 2002. The Commissioner of the Department of Agriculture is directed by statute to require dealers in certain agricultural products and livestock to make and deliver to the Department a surety or cash bond to secure the faithful accounting for and payment to producers of the proceeds of agricultural products or livestock handled or sold by the dealer. Cash bonds are required to designate the Department as trustee of the funds and may take the form of certificates of deposit, letters of credit, money orders or cashiers' checks. At June 30, 2002, the Department held surety bonds in the amount of$20,8l2,926, and cash bonds in the amount of $14,023,403. These bonds are not recorded on the Combined Balance Sheet. Securities are held pursuant to statutes that require licensed insurance companies to deposit securities with the Department ofInsurance prior to issuance of a certificate of authority to transact insurance by the Commissioner of Insurance. These securities remain in the name of the licensed insurance company as long as the company has a pending claim in the State of Georgia or until a proper order of a court of competent jurisdiction has been issued to the receiver, conservator, rehabilitator, or liquidator of the insurer or to any other properly designated official or officials who succeed to the management and control of the insurer's assets. The purchase and redemption of such securities is allowed as long as the required levels of deposits are maintained. At June 30, 2002, securities valued at $204,712,471 were held by the Department ofInsurance. These securities are not recorded on the Combined Balance Sheet. Construction contracts awarded by the Department of Transportation usually include provisions to withhold a percentage of the payments until the project reaches a specified state of completion. Georgia law requires that these funds be deposited in a state or national bank chartered A-54 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) within this State. The State controls only the release of these funds; the assets in the accounts are considered to be the property of the contractor. Therefore, no assets and liabilities for these escrow accounts have been included in these financial statements. AtJune 30, 2002, $2,103,127 in escrow deposits was administered by the Department of Transportation. Receivables Receivables in the State's governmental funds pertain primarily to Federal revenues and revenues applicable to charges for services. Receivables in all other funds have arisen in the ordinary course of business. Receivables are recorded when either the asset or revenue recognition criteria (See Note I-D) have been met. Estimates of allowances for uncollectible receivables have not been made for the majority of receivables included within the financial statements. Due To/From Other Funds Equally offsetting asset and liability accounts are used to account for amounts owed to a particular fund by another fund for short-term obligations on goods sold or services rendered. Advances Noncurrent portions oflong-term interfund loans receivable are reported as advances and are offset equally by a fund balance reserve account that indicates that they do not constitute expendable available fmancial resources and therefore are not available for appropriation. Inventories Inventories of supplies and materials are determined by physical count and/or perpetual inventory records and are valued at cost, weighted average cost, moving average cost, or lower ofweighted average cost or market, using the firstinlfirst-out (FIFO) method, depending on the individual organization's preference. The costs ofgovernmental fundtype inventories are recorded as expenditures when consumed rather than when purchased for larger agencies and agencies with material inventories. Other agencies may use either the purchase or consumption method. Under the purchase method, a portion of the fund balance is reserved for inventories to indicate that it is not available for appropriation. Organizations under the consumption method normally reserve a portion of fund balance equal to the average monthly inventories on hand for the fiscal year. USDA Donated Food Inventories are shown at a value established by the U. S. Department of Agriculture. Donated food inventories are equally offset by an amount to indicate that they do not constitute "available expendable resources" even though they are a component of net current assets. The fund balance reserve is based on values established by the U. S. Department of Agriculture. Prepaid Items Payments made to vendors and local government organizations for services that will benefit periods beyond June 30, 2002, are recorded as prepaid items. Restricted Assets Certain proceeds of enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Capital Assets Capital assets of governmental funds are recorded as expenditures at the time of purchase and capitalized in the governmental activities column of the government-wide Statement of Net Assets. Capital assets of the State's proprietary funds and component units are capitalized in the fund in which they are utilized. Capital assets are stated at historical cost or, in some instances, estimated historical cost. Donated capital assets are stated at fair market value at the time of donation. All land and non-depreciable land improvements are capitalized regardless of cost. Buildings and Improvements Other Than Buildings are capitalized when the cost or value exceeds $100,000. Machinery and Equipment is capitalized when costs or value exceeds $5,000. The State's bridges and roadways included in the state highway system are capitalized regardless of cost. All other infrastructure assets are capitalized when project costs exceed $1,000,000, except for infrastructure assets reported by the Higher Education Fund, which are capitalized when costs are greater than $100,000. The cost ofnormal maintenance and repairs that do not add to the value of the asset or materially extend assets lives is not capitalized. The State holds certain assets such as works of art, historical documents, and artifacts that have not been capitalized or depreciated because the collections are protected and preserved for exhibition, education, or research and are considered to have inexhaustible useful lives. Major outlays for construction of bridges and roadways in the state highway system are capitalized as projects are constructed. All other major construction projects are capitalized when projects are completed. Interest incurred A-55 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) during construction is not capitalized in governmental funds. Interest incurred during the construction ofproprietary fund assets is included in the capitalized value of the asset, with the exception of construction projects funded through the Stone Mountain Memorial Association (discretely presented component unit). All depreciable capital assets are depreciated on the straightline basis over the following useful lives: Infrastructure Buildings and Building Improvements Improvements Other Than Buildings Machinery and Equipment Software Library Collections 10-100 years 5-40 years 15-50 years 3-20 years 3-10 years 10 years Due to the lack of complete and accurate inventory records applicable to State-owned land, and the lack of historical cost values for certain parcels of land, the amount reported as land does not represent a comprehensive valuation of the assets owned by the State of Georgia. Certain capital assets acquired through capital leases in prior years have not been recorded on the fmancial statements at the net present value of the minimum lease payments as is required by GAAP. Compensated Absences Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employee's length of continuous State service with a maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or termination ofemployment. Funds are provided in the appropriation offunds each fiscal year to cover the cost of annual leave of terminated employees. The State's obligation for accumulated unpaid annual leave is reported as a liability in the governmentwide and proprietary fund fmancial statements. Employees earn ten hours of sick leave each month with a maximum accumulation ofninety days. Sick leave does not vest with the employee. Unused accumulated sick leave is forfeited upon retirement or termination of employment. However, certain employees who retire with one hundred and twenty days or more of forfeited annual and sick leave are entitled to additional service credit in the Employees' Retirement System of Georgia. No liability is recorded for nonvesting accumulating rights to receive sick pay benefits. Deferred Revenue In the government-wide statements, proprietary fund statements, and fiduciary fund statements, deferred revenue is recorded when cash or other assets are received prior to being earned. In the governmental fund statements, deferred revenue is recorded when revenue is either unearned or unavailable. Mortgage Loans Under Repurchase Agreements At June 30, 2002, mortgage loans totaling $13,598,030 have been transferred and assigned to lenders under repurchase agreements by the Georgia Development Authority (Component Units). The agreements give the lenders the option to have the Authority repurchase the mortgage loans for an amount equal to the then outstanding balance of principal and interest due during a specified period of time. In addition, the Authority guarantees the principal and interest payment by the borrower to the lender within thirty (30) days of the due date. Any payment not received within thirty (30) days is considered advanced to the borrower and paid to the lender by the Authority. The Authority then charges the borrower interest on these advances for the period outstanding at a penalty rate agreed upon at the loan origination date. Long-Term Obligations Long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities column or business-type activities column on the government-wide statement of net assets and on the proprietary fund statement ofnet assets in the fund financial statements. Bond discounts, premiums and issuance costs are deferred and amortized over the life ofthe bonds using a method that approximates the effective interest method or the straight-line method. Bonds payable are reported net of the unamortized bond premium or discount and, when applicable, the deferred amount on refunding. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund fmancial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other fmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Net Assets Net assets are reported as invested in capital assets, net of related debt, restricted or unrestricted. "Invested in capital assets, net of related debt" consists of capital assets, net of A-56 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 1. Summary of Significant Accounting Policies (continued) accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets consist of net assets that do not meet the definition of the two preceding categories. Unrestricted net assets often are designated, indicating they are not available for general operations. Such designations have internally imposed constraints on resources. but can be removed or modified. Fund Balances In the fund fmancial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally segregated by outside parties for use for a specific purpose. Designations of fund balance represent tentative plans for future use of fmancial resources. Unreserved, undesignated fund balance is the amount of fund balance remaining from operations of the current and prior years, net of amounts established as reserved and designated. F. Interfund Activity and Balances As a general rule, the effect of interfund activity has been eliminated from the government-wide fmancial statements with the exception of activities between governmental activities and business-type activities. In the fund financial statements, transfers represent flows of assets without equivalent flows of assets in return or a requirement for repayment. In addition, transfers are recorded when a fund receiving revenue provides it to the fund which expends the resources. Transfers and balances between funds are made to accomplish various provisions of law. Interfund payables and receivables have been eliminated from the statement of net assets except for amounts due between governmental and business-type activities. These amounts are reported as internal balances on the statement of net assets. G. Fiscal Reporting Periods The fiscal year end for the primary government and component units is June 30, except for the Stone Mountain Memorial Association, whose fiscal year end is December 31. On the government-wide Statement of Net Assets, amounts due to/from component units do not reconcile due to this difference in fiscal year ends. Note 2. Accounting Changes As mentioned in Note 1, the State implemented several new accounting standards during the fiscal year: GASB Statement Nos. 34, 35 and 37 establish newfmancial reporting standards for governments and public higher education institutions. The new requirements represent significant changes in the financial reporting model used by state governments and public institutions, including numerous changes to the reporting funds and financial statement formats. In addition, the former fixed asset and long-term debt account groups have been eliminated. The data previously reported in these account groups are now reported in the government-wide statements. As a result of the fund reclassifications, numerous adjustments were required to the prior period balances. GASB Statement No: 38 requires that certain note disclosures accompany fmancial statements prepared in conformity with GASB Statement No. 34. The provisions of the new reporting standards have been incorporated into the fmancial statements and accompanying notes. The following tables summarize the changes in fund equities as previously reported on the Combined Balance Sheet. These changes resulted primarily from the implementation of these GASB Statements. A-57 Georgia. Notes to the Financial Statements June 30, 2002 Note 2. Accounting Changes (continued) GOVERNMENTAL FUNDS AND ACTIVITIES Major Funds: General Fund Georgia State Financing and Investment Commission Nonmajor Funds: Debt Service Fund Capital Projects Funds Permanent Fund Total Governmental Funds Adoption of GASB Statement No. 34 Capital Assets, net of depreciation Infrastructure (DOT), net of depreciation Long-Term Liabilities Other Liabilities Inventory Adjustment Revenue Recognition Internal Service Funds Less: Amount shown in Business-Type Activities TOTAL GOVERNMENTAL FUNDS AND ACTIVITIES PROPRIETARY FUNDS AND BUSINESS-TYPE ACTIVITIES Major Funds: Georgia Technology Authority Higher Education Fund State Employees' Health Benefit Plan Unemployment Compensation Fund Nonmajor Funds: Internal Service Funds Plus: Amount shown in Business-Type Activities TOTAL PROPRlETARY FUNDS AND BUSINESS-TYPE ACTIVITIES FIDUCIARY FUNDS Pension Trust Funds Private Purpose Trust Funds Investment Trust Funds Trust and Agency Funds TOTAL FIDUCIARY FUNDS General Fixed Assets Account Group General Long-Term Debt Account Group TOTAL PRlMARY GOVERNMENT DISCRETELY PRESENTED COMPONENT UNITS Adoption ofGASB Statement No. 34 Capital Assets, net of depreciation Long-Term Liabilities Other Adjustments TOTAL DISCRETELY PRESENTED COMPONENT UNITS ,------,,-.," June 30, 2001 As Previously Reported Fund Reclassifications Other June 30, 2001 (Restated) 5,190,624,353 $ 1,643,231,446 (47,581,351) $ (282,528,755) $ 307,805,363 4,860,514,247 1,951,036,809 135,253,964 8,640,292 6,977. 750,055 13,500 (47,567,851) 135,253,964 8,640,292 13,500 25,276,608 $ 6,955,458,812 2,947,654,790 (5,548,544,874) 1,269,592,252 85,646,354 10,487,444,433 (36,271,432) (105,946,695) (2,334,646) 8,150,519 (26,943,050) (699,260) 3,033,301,144 10,487,444,433 (5,584,816,306) (105,946,695) (2,334,646) 8,150,519 1,242,649,202 (699,260) 6,977,750;055 $ (1,378,865,683) $ 10,434,322,831 $ 16,033,207,203 $ 41,733,201 $ $ 8,135,320 $ 49,868,521 6,143,390,243 600, I 53, 187 (3,204,416,487) 3,539,126,943 352,047,498 (119,019) 351,928,479 1,808,936,221 1,808,936,221 1,269,592,252 (1,269,592,252) 699,260 0 699,260 $ 7,806,763,194 $ 1,139,497,156 $ (3,195,700,926) $ 5,750,559,424 $ $ 53,928,971,587 $ 35,358,957 4,115,898,377 18,613,001,487 (18,613,001,487) 12,838,796 $ (241,305) 53,941,810,383 35,1 17,652 4,115,898,377 0 $ 18,613,001,487 $ 39,467,227,434 $ 12,597,491 $ 58,092,826,412 $ 3,531,963,532 $ (3,531,963,532) $ (5,565,331,816) $ 5,565,331,816 $ $ 0 $ 0 $ 31,364,146,452 $ 41,261,227,191 $ 7,251,219,396 $ 79,876,593,039 $ 43,284,700,133 $ (41,265,401,816) $ $ 2,019,298,317 4,626,082 (451,457) (65,117,887) (6,739,640) (7,749,867) (60,491,805) (7,191,097) (7,749,867) $ 43,284,700,133 $ (41,261,227,191) $ (71,857,527) $ 1,943,865,548 A-58 ,----- Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments A. Deposits Funds belonging to the State 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 anyone or more ofthe following securities as enumerated in OCGA 50-17-59: I) Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2) Bonds, bills, notes, certificates of indebtedness or other obligations ofthe counties or municipalities ofthe State of Georgia. 3) Bonds of any public authority created by the laws ofthe 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 ofindebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in OCGA 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia the option of exempting demand deposits from the collateral requirements. Primary Government At year-end, the carrying amounts of the State's deposits were $629,816,874, and the bank balances were $1,486,923,089. The amounts of these bank balances are classified into three categories of credit risk: (1) cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the State or by its agent in the State's name, (2) cash collateralized with securities held by the pledging financial institution's trust department or agent in the State's name and (3) uncollateralized bank accounts. The State's deposits were classified as follows at June 30, 2002: Risk Category I 2 3 Bank Balance $ 394,180,751 151,458,636 941,283,702 $ ==~1:=,4=8::;6,=92=3f:,0=89= A-59 Notes to the FinanciaL Statements For the Year Ended June 3D, 2002 Note 3. Deposits and Investments (continued) Component Units At year-end, the component units' deposits were classified as follows: Risk Categories 2 3 Bank Balance Funds Held by Primary Government Carrying Amount Environmental Facilities Authority $ 1,039,010 $ $ $ 1,039,010 $ 309,628,751 $ 7,900,620 Georgia Housing and Finance Authority 42,435,620 85,063,531 127,499,151 15,80 I,442 127,769,554 State Road and Tollway Authority 104,997 6,034,731 6,139,728 28,016,974 6,304,726 All Other Component Units 24,416,125 23,250,170 30,175,573 77,841,868 147,997,050 54,229,988 $ 67,995,752 $ 23,250,170 $ 121,273,835 $ 212,519,757 $ 501,444,217 $ 196,204,888 B. Investments Investments are stated at fair value, and are summarized and classified as to risk in the following three categories: (l) insured or registered, or securities held by the State or its agent in the State's name, (2) uninsured or unregistered, with securities held by the counterparty's trust department or agent in the State's name or (3) uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the State's name. The carrying amounts and risk categories applicable to the State's investments are listed below: A-60 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments (continued) Primary Government Type of Investment Commercial Paper Investment Accounts Municipal Bonds Repurchase Agreements Stocks U.S. Government Securities and Corporate Obligations Unclassified Real EstatefMortgages Mutual Funds Other Unemployment Compensation Funds Pooled with the U.S. Treasury Total Investments Risk Categories 2 $ 14,152.886 S 196,917,237 $ 67,607,887 5,000 5,074,655,618 27 ,685,172,398 63,725,298 31,400,556.960 247,693,878 $ 64,242,150,749 $ 508,336,413 $ 3 Carrying Amount $ 211,070,123 67,607,887 5,000 5,074,655,618 27,748,897,696 699,636 699,636 $ 31,648,950,474 64,751,186,798 8,320,002 17,672,237 25,012.103 1,521,107.081 $ ====6::6f:,3::2:=3,::29::8:f,2:2:1= A-61 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments (continued) Component Units Proprietary Fund Types Georgia Housing and Finance Authority Lottery Corporation State Road and Tollway Authority Type of Investment Risk Categories 2 3 Carrying Amount Corporate CMO $ 13,067,139 $ $ $ 13,067,139 Mortgage-Backed Securities 43,364,441 43,364,441 U.S. Government Securities and Corporate Obligations $ 32354.926 88,786,506 $ 32,354,926 $ =====,0,= $ ==8=8=,7=8::::6,:::50=6= U.S. Government Securities and Corporate Obligations $ 155,764,000 $ = = = = = $ 55,010,000 $ ==2::::10=,7=7::::4,=00:::0= Repurchase Agreements $ 323,765,571 $ $ $ 323,765,571 U.S. Government Securities and Corporate Obligations 297,436,610 $ 621,202,181 $ 297,436,610 $ $ ====6=21=,=20=2=,1=8=1= All Other Component Units Repurchase Agreements $ Stocks U.S. Government Securities and Corporate Obligations $ 530,721 $ 260 9,864,358 10,395,339 $ 32,220,567 $ $ 56,132,601 88,353,168 $ 6,112,080 6,112,080 $ 32,751,288 260 72,109,039 104,860,587 Unclassified Other 3,310,000 $ ==10::::8=,1::::7::::0,=58=7= A-62 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments (continued) c. Investments Lending Program The State is presently involved in a securities lending program with major brokerage firms. The State lends equity and fixed income securities for varying terms and receives a fee based on the loaned securities' value. During a loan, the State continues to receive dividends and interest as the owner of the loaned securities. The brokerage firms pledge collateral securities consisting of U. S. Government and agency securities, mortgage-backed securities issued by aU. S. Government agency, and U. S. Corporate bonds. The collateral value must be equal to at least 102% to 110% of the loaned securities value, depending on the type of collateral security. Securities loaned totaled $21,699,039,683 at June 30, 2002, and the collateral value was equal to 104.6%. The loaned securities are classified as category 1 investments based on the custodial arrangements for the collateral securities. Loaned securities are included in the accompanying Statement ofNet Assets since the State maintains ownership. The related collateral securities are not recorded as assets on the Statement ofNet Assets, and a corresponding liability is not recorded, since the State does not pledge or trade the collateral securities. A-63 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments (continued) D. Investment Pools Separate reports on the State's external investment pools are not issued. Condensed financial statements, inclusive ofexternal and internal participants for the fiscal year ended June 30, 2002, and related categorization of investments are as follows: Georgia Fund I Statement orNet Assets June 30. 2002 Cash and Cash Equivalents Investments Net Assets $ 4,581,757,232 3,658,999,734 =========== $ 8,240,756,966 Distribution of Net Assets External Participant Account Balances $ 4,355,623,915 Internal Participant Account Balances 3,885,133,051 ========= $ 8,240,756,966 Georgia Fund I Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2002 Additions Pool Participant Deposits Investment Income Less: Investment Expense Total Additions $ 20,038,611,489 206,024,092 (1,442,538) $ 20,243,193,043 Deductions Pool Participant Withdrawals Net Increase Net Assets 20,679,585,134 $ (436,392,091 ) July 1,2001 8,677,149,057 June 30, 2002 $ ===8=,24=0:::,7=5:::6,=96=6= Because the State does not maintain separate bank accounts for Georgia Fund 1, a separate risk categorization for the Fund's deposits cannot be presented. The carrying amount of Georgia Fund I deposits as of June 30, 2002, was $44,563,662. This amount is included in the categorization of deposits of the Primary Government. Investments ofGeorgia Fund I are categorized below. These amounts are included in the categorization of investments of the Primary Government. Type of Investment Risk Categories 2 3 Carrying Amount Commercial Paper $ $ 166,714,419 $ $ 166,714,419 Repurchase Agreements 3,014,571,273 3,014,571,273 U.S. Government Securities and Corporate Obligations 5,014,907,612 $ 8,029,478,885 $ 166,714,419 $ 5,014,907,612 0 $ 8,196,193,304 A-64 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 3. Deposits and Investments (continued) D. Investment Pools Georgia Extended Asset Pool Statement of Net Assets June 30, 2002 Cash and Cash Equivalents Investments s 146,709,848 1,047,290,682 S ==1=1'=94=,0,=0=0,=53=0= Distribution of Net Assets External Participant Account Balances $ Internal Participant Account Balances 226,157,339 967,843,191 $ ==1=1'=94=,0=0::::0,=53::0= Georgia Extended Asset Pool Statement of Changes in Net Assets For the Fiscal Year Ended June 30, 2002 Additions Pool Participant Deposits $ 272,690,547 Investment Income Total Additions 48,274;013 s 320,964,560 Deductions Pool Participant Withdrawals ),006,934 Net Increase $ 311,957,626 Net Assets July 1,2001 882,042,904 June 30, 2002 $ ====1=,=19=4=,0=0=0=,5=3=0= Investments of Georgia Extended Asset Pool are categorized below. These amounts are included in the categorization of investments of the Primary Government. Type of Investment Risk Categories 2 3 Carrying Amount Commercial Paper $ $ 26,285,978 $ $ 26,285,978 Repurchase Agreements 146,709,848 146,709,848 U.S. Government Securities and Corporate Obligations 1,021 ,004,704 $ 1,167,714,552 $ ====== 26,285,978 $ $ 1,021,004,704 1,194,000,530 A-65 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 3. Deposits and Investments (continued) D. Investment Pools Regents Investment Pool Statement orNet Assets June 30, 2002 Cash and Cash Equivalents Interest Receivable Net Assets $ 125,452,768 811,729 $ =====1:::26=,2::6=4,=49:::7= Distribution of Net Assets External Participant Account Balances Internal Participant Account Balances $ 20,207,451 106,057,046 $ 126,264,497 ==:::::i::=:::::i::== Regents Investment Pool Statement or Changes in Net Assets For the Fiscal Year Ended June 30, 2002 Additions Investment Income Interest 5,153,962 Fair Value Decreases Less: Investment Expense (6,302597) (466,276) Total Additions $ _ _..(.;.;,1,6,;;.;1;,.;.4;.;.,9.;;.,11;;.;,.) Deductions Pool Participant Withdrawals $ 42,944,485 Capital Transactions ( 16,093,052) Total Deductions 26,851,433 Net Decrease $ (28,466,344) Net Assets July 1,2001 June 30, 2002 154,730,841 $ ==1=2=6,=2=64=,4=9=7= Because the State does not maintain separate bank accounts for Regents Investment Pool, a separate risk categorization for the Pool's deposits cannot be presented. The carrying amount of Pool deposits as ofJune 30, 2002, was $4,301,796. This amount is included in the categorization of deposits of the Primary Government. Investments of Regents Investment Pool are categorized below, These amounts are included in the categorization of investments of the Primary Government. Type of Investment Corporate Bonds $ Repurchase Agreements Risk Categories 2 $ 16,990,805 $ 80,000 Carrying 3 Amount $ 16,990,805 80,000 Stocks U.S. Government Securities and Corporate Obligations $ 54,909,126 54,909,126 49,982,770 0$ 121,962,701 $ =====0=$ 49,982,770 121,962,701 A-66 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 4. Receivables Receivables as ofJune 30, 2002, consisted ofthe following: Gross Receivables Allowance For Uncollectibles Allowance For Possible Loan Losses Allowance For Service Repavments Deferred Loan Fees Net Total Receivables Governmental Activities: General Fund $ 2,178,199,817 $ (16,440,077) $ $ $ - $ 2,161,759,740 Georgia State Financing and Invesunent Commission 1,627,735 1,627,735 Nonmajor Governmental 654,107 654,107 Total Governmental Funds $ 2,180,481,659 $ (16.440,077) $ $ $ $ 2,164.041,582 Internal Service Funds 9,440.985 (300,000) 9,140,985 Long-Tenn Lease Receivable 2,631.842 2.631,842 Receivables from Fiduciary Funds L123,000 L123,000 Total Governmental Activities $ 2,193.677,486 $ (16,740,077) $ $ $ 2,176,937.409 Business-type Activities: Georgia Technology Authority $ 4,663.621 $ $ $ $ $ 4.663,621 Higher Education Fund 295.633,216 (5.264,265) 290,368.951 State Employees' Health Benefit Plan 23,570.562 (4,157,556) 19,413,006 Unemployment Compensation Fund 34,008.011 (18.156,919) 15,851,092 Internal Service Funds 1,886 1,886 Total Business-type Activities $ 357.877,296 $ (27.578,740) $ $ $ $ 330,298,556 Component Units $ 1.875,895327 $ (6328,049) $ (2,000384) $ (35,678,532) $ (196,630) $ 1.831,691,732 A-67 Notes to the FinanciaL Statements For the Year Ended June 30, 2002 Note 5. Capital Assets Primary Government Capital asset activity for the year ended June 30, 2002, was as follows: Governmental Acthities: Capital Assets Not Being Depreciated: Land Works of Art and Collections Construction in Progress Total capital assets, not being depreciated Balance (Restated) July I, 2001 Increases Decreases Balance June 30, 2002 $ 315,266,194 $ 6,229,798 J ,164,480,295 $ 1,485,976,287 $ 22,368,600 $ 10,010 965,331,178 987,709,788 $ (2,410,341) $ (479,627,284) (482,037,625) $ 335,224,453 6,239,808 1,650,184,189 1,991,648,450 Capital Assets Being Depreciated: Infrastructure Buildings hnprovements Other Than Buildings Machinery and Equipment Software Library Collections Total Capital Assets Being Depreciated $ 15,951,774,892 $ 2,044,379,972 35,941,211 732,615,409 66,209,462 3,200,000 $ 18,834,120,946 $ 1,325,213,903 $ 33,256,555 6,151,504 105,732,873 1,470,354,835 $ (934,747,198) $ (15,555,854) (157,399,944) (1,107,702,996) $ 16,342,241,597 2,062,080,673 42,092,715 680,948,338 66,209,462 3,200,000 19,196,772,785 Less Accumulated Depreciation For: Infrastructure Buildings hnprovements Other Than Buildings Machinery and Equipment Software Library Collections Total Accumulated Depreciation $ (5,460,490,459) $ (1,073,697,498) $ (599,676,546) (45,765,298) (14,263,445) (1,615,811) (396,742,277) (54,212,706) (25,388,967) (7,373,879) (3,200,000) $ (6,499,761,694) $ (1,182,665,192) $ 934,747,198 $ 622,462 73,673,293 1,009,042,953 $ (5,599,440,759) (644,819,382) (15,879,256) (377,281,690) (32,762,846) (3,200,000) (6,673,383,933) Total Capital Assets Being Depreciated, Net $ 12,334,359,252 $ 287,689,643 $ (98,660,043) $ 12,523,388,852 Governmental activity capital assets, net $ 13,820,335,539 $ 1,275,399,431 $ (580,697,668) $ 14,515,037,302 A-68 Notes to the FinanciaL Statements For the Year Ended June 30, 2002 Note 5. Capital Assets (continued) Primary Government Business-type Activities: Capital Assets Not Being Depreciated: Land Works of Art and Collections Construction in Progress Total capital assets, not being depreciated Capital Assets Being Depreciated: Infrastructure Buildings Improvements Other Than Buildings Machinery and Equipment Software Library Collections Works of Art and Collections Total Capital Assets Being Depreciated Less Accumulated Depreciation For: Infrastructure Buildings Improvements Other Than Buildings Machinery and Equipment Software Library Collections Works of Art and Collections Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net Business-type activity capital assets, net Balance (Restated) July 1,2001 Increases Decreases Balance June 30, 2002 $ 137,245,942 S 1,137,391 S 9,817,296 10,000 4,444,898 36,822,532 $ 151,508,136 $ _ _..-;3;.7.~,.9;.6.:9;..,;9;;2.;3;.... S $ 138,383,333 9,827,296 41,267,430 S 189,478,059 $ 105,258,507 S 5,879,316 $ 3,281,011,949 195,055,959 114,279,547 1,782,531 902,950,446 168,164,090 36,482,688 471,148,457 26,571,411 1,022,206 1,000 $ 4,912,153,800 $ _ _..3.;9;.7,;,.4.~5.;4..:,;3..0.;7.;....S $ (1,865,659) (341,981) (45,121,324) (1,396,318) (48,725,282) $ 111,137,823 3,4 74,202,249 115,720,097 1,025,993,212 36,482,688 496,323,550 1,023,206 5,260,882,825 $ (42,753,896) $ (1,018,780,009) (65,260,838) (570,110,047) (10,320,144) (331,950,980) (306,047) - ...... $ (2,039,481,961) $ ~.;..;.-'-~ $ _--.,;;;.:2.;;,.8.,;7.=2.,..6..7;..1;;,.8;;.3;;9.;,_ $ ========= $ 3,024,179,975 $ (3,167,728) $ (84,267,963) (6,061,632) (95,445,588) (7,296,538) (24,397,373) (24,193) (220,661,015) $ 176,793,292 $ 214,763,215 $ $ 858,322 342,054 34,003,963 1,356,593 36,560,932 $ (12,164,350) $ (12,164,350) $ (45,921,624) (1,102,189,650) (70,980,416) (631,551,672) (17,616,682) (354,991,760) (330,240) (2,223,582,044) 3,037,300,781 3,226,778,840 As noted in the Summary ofSignificant Accounting Policies (Note 1), the State does not maintain complete and accurate inventory records applicable to State-owned land, nor are there historical cost values for certain parcels of land; therefore, the table above does not represent a comprehensive valuation ofthe assets owned by the State of Georgia. A-69 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 5. Capital Assets (continued) Primary Government Current period depreciation expense was charged to functions of the primary government as follows: General government Education Health and Welfare Transportation Public Safety Economic Development Culture and Recreation Conservation Capital Outlay $ 7,641,907 1,917,807 16,365,997 1,087,620,714 36,428,802 9,643,750 143,251 54,451 2,036,048 $ 1,161,852,727 Component Units Capital asset activity for the year ended June 30, 2002, was as follows: Balance (Restated) July 1,2001 Increases Decreases Balance June 30, 2002 Capital Assets Not Being Depreciated: Land Works of Art and Collections Construction in Progress Total capital assets, not being depreciated Capital Assets Being Depreciated: Infrastructure Buildings Improvements Other Than Buildings Machinery and Equipment Software Total Capital Assets Being Depreciated Less Accumulated Depreciation For: Infrastructure Buildings Improvements Other Than Buildings Machinery and Equipment Software Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net Component Units capital assets, net $ 150,221,245 $ 201,048 55,815,637 $ 206,237,930 $ $ 129,687,064 $ 532,736,485 174,046,166 281,569,531 $ 1,118,039,246 $ $ (55,386,526) $ (141,028,745) (63,993,353) (197,968,313) $ (458,376,937) $ $ 659,662,309 $ $ 865,900,239 $ 28,383,402 $ 41,707,014 70,090,416 $ 19,501,000 $ 5,562,857 17,539,056 10,894,051 188,000 53,684,964 $ (3,418,335) $ (12,541,425) (5,926,315) (22,020,482) (43,906,557) $ 9,778,407 $ 79,868,823 $ $ (60,499,189) (60,499,189) $ 178,604,647 201,048 37,023,462 215,829,157 $ (5,601,986) (84,000) (15,298,317) (20,984,303) $ 149,188,064 532,697,356 191,501,222 277,165,265 188,000 1,150,739,907 $ 2,740,733 30,000 12,467,078 15,237,811 $ (5,746,492) $ (66,245,681) $ (58,804,861) (150,829,437) (69,889,668) (207,521,717) (487,045,683) 663,694,224 879,523,381 A-70 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 6. Risk Management A. Public Entity Risk Pool The Department of Community Health internally administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county government and local education agencies located within the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units of government participating in the plan, and appropriations by the General Assembly of Georgia. The Department of Community Health has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the State Employees' Health Benefit Plan as established by the Department of Community Health. A reconciliation of total claims liabilities for fiscal years ended June 30, 2002, and 2002, is shown below: Unpaid Claims and Claim Adjustments July 1 Incurred Claims and Claims Adjustment Expenses Provisions for Insured Events of the Current Year Payment' - Claims and Claim Adjustment Expenses Attributable to Insured Events of the Current Year and of Prior Years Fiscal Year Ended June 30. 2002 $ 169.759.350 1.044,185,180 (1.051.471,561) Fiscal Year Ended June 30. 2001 193.156.776 902.398.771 (925,796,197) Unpaid Claims and Claim Adjustments June 30 $ 162.472.969 $ 169,759.350 B. Board of Regents Employee Health Benefits Plan The Board of Regents of the University System of Georgia maintains a program of health and dental benefits for its employees and retirees. This plan is funded jointly through premiums paid by participants covered under the plan and employer contributions paid by the Board ofRegents and its organizational units. All units of the University System of Georgia share the risk ofloss for claims of the plan. The Board of Regents has contracted with Blue Cross Blue Shield to process all claims in accordance with medical coverage guidelines as established by the Board ofRegents. A reconciliation of total claims liabilities for fiscal years ended June 30, 2002, and 2001, is shown below: Unpaid Claims and Claim Adjustments July I Incurred Claims and Claims Adjustment Expenses Provisions for Insured Evenrs of the Current Year Payments - Claims and Claim Adjustment Expenses Attributable to Insured Events of the Current Year and of Prior Years Fiscal Year Ended June 30. 2002 Fiscal Year Ended June 30, 2001 $ 35.179.138 $ 28.400,000 170,457.218 183,300.197 (176,358.398) (176,521.059) Unpaid Claims and Claim Adjustments June 30 $ 29,277.958 $ ===35:.;:17::9.::13::8= C. Other Risk Management The Department ofAdministrative 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 A-71 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 6. Risk Management (continued) assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS services 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. Premiums for the risk management program are charged to the State agencies by DOAS to provide claims servicing and claims payment. A reconciliation of total claims liabilities for fiscal years ended June 30, 2002, and 200 I, is shown below: Unpaid Claims and Claim Adjustments July I Incurred Claims and Claims Adjustment Expenses Provisions for Insured Events of the Current Year Payments - Claims and Claim Adjustment Expenses Attributable to Insured Events of the Current Year and of Prior Years Fiscal Year Ended June 30. 2002 $ 351,780,322 97,179,943 (95.926,010) Fiscal Year Ended June 30. 2001 436,113,210 40.708,467 ( 125,041.355) Unpaid Claims and Claim Adjustments June 30 $ 353.034,255 $ 351.780,322 At June 30, 2002, the Department of Transportation had contractual commitments of $2,073,594,611 for construction of various highway projects. Funding of these future expenditures is expected to be provided from federal grants, motor fuel tax funds and general obligation bond proceeds. Note 8. Operating Leases A. Lessee The State leases land, office facilities, office and computer equipment, and other assets. These leases are considered for accounting purposes to be operating leases. Although lease terms vary, many leases are subject to appropriation from the General Assembly to continue the obligation. Other leases generally contain provisions that, at the expiration date of the original term ofthe lease, the State has the option of renewing the lease on a year-to-year basis. Certain organizations within the State's reporting entity do not maintain adequate systems for recording lease commitments in accordance with GAAP. Totallease payments for the State's governmental activities, business-type activities, and component units were $68,090,707, $24,926,584, and $5,703,623, respectively for the year ended June 30, 2002. Future minimum commitments for operating leases as of June 30, 2002, are listed below. Amounts are included for renewable leases for which the option to renew for the subsequent fiscal year has been exercised. Note 7. Construction and Other Significant Commitments Primary Government The Georgia State Financing and Investment Commission has entered into agreements with various State departments and agencies for the expenditure ofbond sale proceeds and cash supplements (provided by the department or agency involved) to acquire and construct capital projects. At June 30, 2002, the undisbursed balance remaining on these agreements approximates $1,677,931,895. A-72 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 8. Operating Leases (continued) Fiscal Year Ended June 30 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 2048-2052 2053-2057 2058-2062 Total Minimum Commitments Governmental ActivitIes Business-Type ActivitIes Component Units $ 77.814,458 $ 20,860,825 $ 5,305,983 21,753,695 4,673,681 4,653,157 21,317,834 2,349,682 4,501,415 19,646,392 558,623 4,311,620 18,024,326 67,562 3,361,590 48,413,882 13,132 17,869,448 16,360,773 13,132 5,497,689 15,050,265 13,132 16,414,158 13,132 17,898,708 13,132 41,940 41,940 41,940 41,940 41,940 41,940 $ 272,946,131 $ 28,576,033 $ 45,500,902 A-73 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 8. Operating Leases (continued) B. Lessor The State leases certain of its facilities for use by others for terms varying from I to 65 years, with the majority ofleases controlled by the State Properties Commission. These leases are accounted for as operating leases; revenues for services provided and for use of facilities are recorded when earned. Total revenues from rental of facilities for the State's governmental actiVIties and component units were $40,583,728, and $20,868,793, respectively for the year ended June 30, 2002. Minimum future revenues and rentals to be received under operating leases as of June 30, 2002, are as follows: Fiscal Year Ended June 30 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 2048-2052 Govenunental Activities Component Units s 13,058,980 $ 13,034,614 13,186,402 13,440,534 13,048,184 60,686,668 39,531,834 32,652,443 3.040,429 3,040,429 3,040,429 3,040,428 2,664,193 23,900 8,289,420 6,557,420 6,211,420 4,615,420 8,840,100 12,771,487 12,952,713 11 ,503,100 1,600 1,600 1,600 1,600 Total Minimum Commitments $======== 213,489,467 $ 71,747,480 A-74 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 9. Capital Leases The State acquires certain property and equipment through multi-year capital leases with varying tenns and options. The majority of these agreements contain fiscal funding clauses in accordance with OCGA 50-5-64 which prohibits the creation of a debt to the State of Georgia for the payment of any sums under such agreements beyond the fiscal year of execution if appropriated funds are not available. If renewal of such agreements is reasonably assured, however, capital leases requiring appropriation by the General Assembly are considered noncancellable for financial reporting purposes. As noted in the Summary of Significant Accounting Policies (Note I), capital lease transactions have not been consistently recorded in confonnity with GAAP. Capital assets in prior years have not been recorded at the net present value of the minimum payments nor has the long-tenn liability applicable to capital leases been consistently recorded. Also, the State does not record expenditures and other financing sources in the governmental fund types when capitalized leases are entered into as required by GAAP. At June 30, 2002, future commitments under capital leases were as follows: Fiscal Year Ended June 30 2003 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032 Governmental Activities Business-Type Activities Component Units $ 2,593.201 S 12,883,415 $ 2,198,022 2,369.109 10,725,964 1,735,105 1,228,635 9,925,828 719,833 358,087 9,538,716 26,390 86,197 7,148,254 4,985 3,811 36.361,531 36,854,438 31,805,447 5,572,560 3,416,666 Total Capital Lease Payments $ Less: Interest 6,639,640 $ (728,193) 164,232,819 $ (70,970,197) 4,684,335 (308,025) Present Value of Capital Lease Payments $ ====5::,9=1::1,=4=47= $ ===9;,;;3,:;,2;:6;;2;,;;,6;:22;:: $ ====4=,3=76~,~31=0= A-75 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 10. Long-Term Liabilities Primary Government Changes in long-tenn liabilities for the fiscal year ended June 30, 2002 is shown in the table below: Balance July 1, 2001 Balance Amounts Due (Restated) Increases Decreases June 30, 2002 Within One Year Governmental activities: Compensated Absences Payable Capital Lease Obligations Contracts Payable Notes and Loans Payable General State Bond Debt General Obligation Bonds Payable Other 237,067,594 $ 9,088,745 2,690,001 15,505 5,311.335,000 36,272,018 132,783.269 $ 2.354.002 54.670,212 1.196.160.000 7,959,473 (125,520.959) $ (5,531.300) (58,159) (449.200,000) (5,833,094) 244.329.904 $ 5,911.447 54,670,212 2,631,842 15,505 6,058,295,000 38.398.397 $ 5,596,468,863 $ 1.393,926,956 $ (586.143,512) $ 6,404,252.307 $ 36,903.185 2.061.320 13.936.324 61.402 15.505 396,820,000 5'50,500 455,148,236 Business-type activities: Compensated Absences Payable Capital Lease Obligations Notes and Loans Payable Other $ 129,786,063 37,322,839 266,918 96,765,400 $ 68.341,974 2.155,441 150,000 (83,024,926) $ (12,402.191) (76,751) 143,526,537 93,262,622 2.345,608 150,000 $ 167,375,820 $ 167,412.815 $ (95,503,868) $ 239,284,767 $ 73.196,782 7.996,976 181.425 81J75,I83 The governmental funds in which the leases are recorded will liquidate the capital lease obligations for governmental activities, The compensated absence liabilities will be liquidated by the applicable funds that account for the salaries and wages of the related employees, All General State Bonds of the State of Georgia are past due, but have not been presented for redemption, This obligation will be liquidated if and when the past due outstanding bonds and coupons are presented. Unredeemed General State Bonds at June 30, 2002, were $15,505 with accumulated interest of $11,475. The State issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both general State and proprietary activities, to provide loans to local governments for water and sewer systems, to construct educational facilities for local school systems, and to refund general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the State. General obligation bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government General Government Refunding 1.25% - 7.70% $ 4.25% - 6.30% $ 5,582,665,000 475,630,000 6.058,295,000 A-76 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 10. Long-Term Liabilities (continued) Annual debt service requirements to maturity for general obligation bonds are as follows: Year Principal 2003 $ 396,820,000 $ 2004 433,815,000 2005 448,325,000 2006 467,680,000 2007 468,035,000 2008-2012 2,017,710,000 2013-2017 1,288,060,000 2018-2022 537,850,000 Interest 334,982,464 $ 312,053.355 286,729,431 260,365,680 233,657,603 788,152,421 292,106,682 55,118,805 Total 731,802,464 745,868,355 735,054,431 728,045,680 70 1,692,603 2,805,862,421 1,580,166,682 592,968,805 $ 6,058,295,000 $ 2,563,166,441 $ 8,621,461,441 Component Units Changes in long-term liabilities for the year ended June 30, 2002, was as follows: Compensated Absences Payable Capital Lease Obligations Notes and Loans Payable Prizes Payable Revenue/Mortgage Bonds Payable Other Balance July \, 2001 (Restated) 4,654,557 $ 6,037,898 48,879,894 205.674,000 1,157,381.451 30,358,748 Increases 2,425,900 $ 207.846 107.606,830 503,487,183 9,593,325 Decreases (2.129,433) $ 0.869,434) (61.704,703 ) (4,458,000) (133.367,080) (7,927,070) Balance Amounts Due June 30, 2002 Within One Year 4.951.024 $ 947.030 4,376,310 2,024.072 94,782,021 55,785,538 201,216.000 15,046,000 1,527,501,554 26,788,536 32,025,003 3,750,259 $ 1,452,986,548 $ 623,321,084 $ (211,455,720) $ 1,864,851,912 104,341,435 The State Road and Tollway Authority issued bond anticipation notes during fiscal year 2002. Subsequent to June 30, 2002, the State Road and Tollway Authority liquidated a portion of the temporary notes with proceeds from the issuance of transportation revenue bonds, and as a result, reported a long-term note in the amount of $41,446,212. The Georgia Development Authority reported two longterm notes payable to banks with a combined outstanding balance at June 30, 2002 of $40,938,648. One note issecured by LIBOR mortgage loans financed through the note, is payable in semi-annual payments of$384,615 that includes interest at LIBOR plus one percent, and has an outstanding balance at June 30, 2002, of$8,076,923, The other note is secured by various fixed rate mortgage loans financed through the note, bears interest at a rate of 6.8% per annum, and has an outstanding balance at June 30, 2002, of $32,861,725. Housing and Finance Authority for financing the purchase of single family mortgage loans for eligible persons and families of low and moderate income within the State of Georgia; and revenue bonds issued by the State Road and Tollway Authority for the financing of certain construction projects within the State's highway system. The significant revenue and mortgage bonds outstanding at June 30, 2002 consists of the following: Interest Rates Bonds Outstanding Unamortized Premium Deferred Amount for Refunding Net Georgia Housing and Finance Authority State Road and Tollway Authority 2.00% - 9.25% 5.50% - 6.00% $ 821,870,175 $ 421,420.000 55,191 10,525,569 821,925,366 $ (3,491,584) 428,453.985 Revenue/mortgage bonds outstanding at June 30, 2002, consisted of: mortgage bonds issued by the Georgia A-77 Notes to the Financial Statements For the Year Ended June 30,2002 Note 10. Long-Term Liabilities (continued) Annual debt service requirements to maturity: Georgia Housing and Finance Authority Vear Principal Interest Total State Road and Tollway Authority Principal Interest Toral 2003 S 2004 2005 2006 2007 2008-2012 2013-2017 2018-2022 2023-2027 2028-2032 2033-2036 Future Accretion Capital Appreciation Bonds 34,633,000 19,615,000 21,589,000 23,258,000 27,437,000 141,592,000 161,016.000 158,329,000 143,569.000 106,988.000 3,200,175 (19.356.000) 44,203,000 S 43,244.000 42,269,000 41,21MOO 40,007,000 179,086,000 140,676,000 98,150,000 55.175,000 15.610,000 89,000 78.836.000 S 62.859,000 63.858,000 64,474.000 67.444,000 320.678.000 301,692.000 256,479.000 198,744.000 122.598.000 3,289.175 14,400.000 $ 18,295.000 19.025.000 19,820,000 20,760.000 120.215,000 104,110,000 104,795,000 19.356.000 23.560,544 S 20,257,147 19,520,553 18.698,514 17.766.962 72,213.089 43.879.354 13,588,569 37.960,544 38,552.147 38,545,553 38.518,514 38.526.962 192,428,089 147.989.354 118.383,569 $ 821,870.175 $ 719,081,000 $ 1,540,951,175 $ 421,420,000 $ 229,484.732 $ 650,904.732 Various series of bonds under Resolution I and 3 at Georgia Housing and Finance Authority include capital appreciation bonds that require no payments of principal or interest until maturity. Capital appreciation bonds accrete to their maturity values at effective yields ranging from 7.10% to 11.25%. Note 11. Interfund Balances Due TolFrom Other Funds at June 30, 2002, consist of the following: Receivable Fund General Fund Georgia Technology Authority Georgia Technology Authority Georgia Technology Authority Georgia Technology Authority Internal Service Funds Internal Service Funds Internal Service Funds Payable Fund State Employees' Health Benefit Plan General Fund Higher Education Fund Internal Service Fund Fiduciary Funds General Fund Higher Education Fund Fiduciary Funds Due From $ 34,000,000 $ 15,704,881 653,530 93,582 10 1,292,060 65,362 1,123,000 $ 52,932,425 $ Due To 34,000,000 15,704,881 653,530 93,582 10 1,292,060 65,362 1,123,000 52,932,425 Interfund receivables and payables are recorded for billing for services provided between agencies and risk management liabilities. All interfund receivables and payables are considered short tenn in nature. A-78 Notes to the Financial Statements For the Year Ended June 30,2002 Note 11. Interfund Balances (continued) Interfund transfers at June 30, 2002, consist of the following: Receiving Fund Paying Fund General Fund General Fund General Fund General Fund General Fund Georgia State Financing and Investment Commission Nonmajor Governmental Funds Nonmajor Governmental Funds Nonmajor Governmental Funds Georgia Technology Authority Higher Education Fund Higher Education Fund Internal Service Funds Fiduciary Funds Georgia State Financing and Investment Commission Georgia Technology Authority Higher Education Fund State Employees' Health Benefit Plan Internal Service Funds General Fund General Fund Georgia State Financing and Investment Commission Higher Education Fund Internal Service Funds General Fund Georgia Technology Authority General Fund General Fund To From $ 597,363,212 $ 597,363,212 11,765,100 11,765,100 2,826,954 2,826,954 31,358,156 31,358,156 10,888,833 10,888,833 5,398,422 739,869,163 5,398,422 739,869,163 113,157,527 538,024 35,412,874 2,062,598,986 3,583,000 49,310,500 2,693,635 113,15 7,527 538,024 35,412,874 2,062,598,986 3,583,000 49,310,500 2,693,635 $ 3,666,764,386 $ 3,666,764,386 Transfers are used to move revenues from the fund that statutes require to collect them to the fund that statutes require to expend them and to use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations, A-79 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 12. Nonmonetary Transactions Primary Government The State of Georgia received donated goods for its use and for distribution to other qualifying organizations outside Program Agriculture, U.S. Department of Food Distribution Program Temporary Emergency Food Assistance Program Health and Human Services, U.S. Department of Childhood Immunization Grant Preventive Health Services - Sexually Transmitted Disease Control Grants Project Grants and Cooperative Agreements for Tuberculosis Control Programs the State reporting entity under the following programs: Value of Inventory Received Value of Inventory Reported at June 30, 2002 $ 34,013,482 $ $ 7,839,456 $ 2,108,175 2,218,855 $ 17,770,925 $ $ 268,923 $ $ 131,835 $ The value of donated commodities received and distributed is not reported as revenues and expenses on the combined statement of revenues, expenditures and changes in fund balances. Information is not available to determine the items used within the State and the items distributed to (or held for) other qualifying organizations outside the State reporting entity. In addition, the Georgia Department of Administrative Services operates the Donation ofFederal Surplus Personal Property program for the purpose of distributing surplus properties made available by the General Services Administration to eligible institutions, organizations and agencies. The value of surplus property received and distributed is not reported as revenues and expenses on the combined statement of revenues, expenditures and changes in fund balances, and the inventory on hand at June 30, 200 1, is not reported on the combined balance sheet. The changes in Federal surplus personal property inventory during the fiscal year ended June 30, 2002, were as follows: Balance July 1,2001 $ 2,812,197 Additions Property Received 12,553,749 $ 15,365,946 Deductions Property Donated and Other Distributions 11,061,383 Balance June 30, 2002 $ 4,304,563 A-80 Notes to the Financial Statements For the Year Ended June 30,2002 Note 12. Nonmonetary Transactions (continued) The Federal government provides food stamps to lowincome households. The amount of food stamps a household receives depends on the household's size and financial circumstances. The Georgia Department of Human Resources is responsible for determining eligibility for participation in the food stamp program within the State. During the year under review, the total value of food stamps distributed as approved by the Department was $593,187,975. Note 13. Contingencies A. Grants and Contracts Amounts received or receivable from grantor agencies are subject to audit and review by grantor agencies, principally the Federal government. This could result in a request for reimbursement by the grantor agency for any expenditures which are disallowed under grant terms. The State believes that such disallowances, if any, will be immaterial to its overall financial position. B. Litigation The State is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine governmental operations. The ultimate disposition of these proceedings is not presently determinable. However, the ultimate disposition of these proceedings would not have a material adverse effect on the financial condition of the State, with the following exceptions: Primary Government A civil suit was filed against the Department of Education and the Office ofTreasury and Fiscal Services to compel the Defendants to change the calculation and distribution of school transportation funding to the DeKalb County School District. The Plaintiffs allege that the State Board of Education's attendance zone/routing survey system of calculating State fmancial aid is contrary to the applicable statute and violates a State Board of Education policy directing supplemental flat grants for children attending schools other than that of their geographic assignment pursuant to M-to-M or magnet school programs. Plantiffs were seeking an entitlement of $63,000,000. Previous similar federal litigation was resolved in favor of the State. On September 17, 2002, the Superior Court of Fulton County entered an order concluding that the state board zonal routing system of calculating state financial aid is violative of the applicable statute and has ordered payment of$104,550,528 to DeKalb County. The State appealed the trial court's decision to the Georgia Supreme Court. On June 9, 2002, the Georgia Supreme Court ruled in favor of the defendants, but the time for filing motion for re-hearing has not expired. A suit has been filed against the Georgia State Financing and Investment Commission involving a third-party action by the construction manager for the Georgia World Congress Center phase IV expansion project for indemnity from the caissons and pilings subcontractor's claim based upon differing site conditions. The presently-asserted claim is for approximately $2,500,000, but similar yet-unasserted claims may bring the total for claims and proposed change orders to approximately $19,000,000. The parties are currently in negotiation, and the Georgia State Financing and Investment Commission expects to settle all claims. A company engaged in general construction and construction management services has filed a claim arising out of the design and construction of the Columbus Performing Arts Center. The plaintiff is suing the Georgia State Financing and Investment Commission, the Project architect, and the Project structural engineer, asserting various claims for negligence and breach of contract. The plaintiff asks for relief of $8,925,521, plus costs and attorneys' fees. The Georgia State Financing and Investment Commission is reviewing the complaint. C. Guaranteed Loans Component Units The Federal Government, through the Guaranteed Student Loan Programs of the U.S. Department of Education, fully reinsured loans guaranteed through September 30, 1993, until the State's rate of annual losses (defaults) exceeded five percent (5%). In the event of future adverse loss experience, the State could be liable for up to (1) twenty percent (20%) of the outstanding balance of loans in repayment status at the beginning of each year which were disbursed prior to October 1, 1993, and (2) twenty-two percent (22%) of the outstanding balance of loans in repayment status at the beginning of each year which were disbursed on or after October 1, 1993. Note 14. Subsequent Events Primary Government General Obligation Bonds Issued The State issued General Obligation Bonds in the amount of $295,955,000 on August 1,2002 (Series 2002e and 2002 D); and in the amount of $240,670,000 on November 1, 2002 (Series 2002E and 2002F). Proceeds from these bonds will be used for the purpose of financing various capital outlay projects. 81 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 15. Retirement Systems Georgia Defined Contribution Plan Plan Description The Georgia Defined Contribution Plan ("GDCP") is a single-employer, defined contribution plan established by the Georgia General Assembly in July 1992 for the purpose ofproviding retirement allowances for State employees who are not members of a public retirement or pension system. GDCP is administered by the Employees' Retirement System (ERS) Board of Trustees. ERS issues a publicly available financial report that includes the financial statements and disclosures applicable to GDCP. The report may be obtained at the ERS offices. Membership As of June 30, 2002, participation in GDCP was as follows: Active plan members Terminated employees entitled to benefits but not yet receiving benefits Total Employers 32,540 70,225 102,765 310 Summary of Significant Accounting Policies The financial statements of GDCP are prepared on the accrual basis of accounting. Contributions from the members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. District Attorneys' Retirement Fund Plan Description The District Attorneys' Retirement Fund ("DARF") is a single-employer, defined benefit pension plan established by the Georgia General Assembly in 1949 for the purpose of providing retirement benefits to the district attorneys of the State of Georgia. DARF is directed by its own Board of Trustees. The Boards of Trustees for ERS and DARF entered into a contract for ERS to administer the plan effective July 1, 1995. ERS issues a publicly available financial report that includes the financial statements and disclosures applicable to DARF. The report may be obtained at the ERS offices. Benefits Persons appointed as district attorney emeritus shall receive an annual benefit of $15,000 or one-half of the State salary received by such person as a district attorney for the calendar year immediately prior to the person's retirement, whichever is greater. Summary of Significant Accounting Policies The financial statements of DARF are prepared on the accrual basis of accounting. Contributions from the employer and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Funding Policy Member contributions were five percent (5.0%) of their annual salary plus an additional two and one-half percent (2.5%) for the spousal coverage benefit if elected. The State paid member contributions of five percent (5.0%) of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an asneeded basis to fund current benefits. Employees' Retirement System of Georgia Plan Description Employees' Retirement System of Georgia ("ERS") is a single-employer, defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS issues a publicly available financial report that includes the applicable fmancial statements and required supplementary information. The report may be obtained at the ERS offices. A-82 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 15. Retirement Systems (continued) On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan ("SRBP") of ERS. SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code ("IRC") as a portion of ERS. The purpose of the SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1,1998, all members and retired former members in ERS are eligible to participate in the SRBP whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415. Benefits The benefit structure of ERS was significantly modified on July 1, 1982. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provlslOns. Under both the old and new plans, a member may retire and receive normal retirement benefits after completion of ten (10) years of creditable service and attainment of age sixtyfive (65). Additionally, there are certain provisions allowing for retirement after twenty-five (25) years of creditable service regardless of age. Retirement benefits paid to members are based upon the monthly average of the member's highest twenty-four (24) consecutive calendar months multiplied by the number of years of creditable service multiplied by the applicable benefit factor. Post-retirement cost-of-living adjustments are also made to members' benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Summary of Significant Accounting Policies The fmancial statements ofERS are prepared on the accrual basis of accounting. Contributions from the employer and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales pnce. Funding Policy Member contributions under the old plan are four percent (4.0%) of annual compensation up to $4,200 plus six percent (6.0%) of annual compensation in excess of$4,200. Under the old plan, the State pays member contributions in excess of one and one-fourth percent (1.25%) of annual compensation. Under the old plan, these State contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan are one and one-fourth percent (1.25%) of annual compensation. The State is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. Annual Pension Cost The required contribution for 2002 was determined as part of the June 30, 200 I, actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) seven percent (7%) investment rate of return, (b) projected salary increases due to inflation of three and onehalf percent (3.5%) per year, and (c) projected salary increases due to seniority/merit raises offive and two-tenths percent (5.2%) to nine percent (9.0%) per year. The actuarial value of assets was determined using techniques that smooth the effects ofshort-term volatility in the market value of investments over a five-year period. ERS' actuarial funding excess is being amortized as a level percentage of projected payroll on an open basis. The employer contributions are projected to liquidate the actuarial accrued funding excess within forty (40) years based upon the actuarial valuation at June 30, 2001. Three-Year Trend Information for ERS (in thousands): Fiscal Year Ended June 30 1999 2000 2001 Annual Pension Cost (APC) 304,461 302,332 315,505 Percentage ofAPC Contributed 100% 100% 100% Net Pension Obligation 0 0 0 A-83 Notes to the FinanciaL Statements For the Year Ended June 30,2002 Note 15. Retirement Systems (continued) Georgia Judicial Retirement System Plan Description The Georgia Judicial Retirement System ("GJRS") is a system created to serve the members and beneficiaries ofthe Trial Judges and Solicitors Retirement Fund, the Superior Court Judges Retirement System and the District Attorneys' Retirement System (collectively the "Predecessor Retirement Systems"). As ofJune 30,1998, any person who was an active, inactive or retired member or beneficiary of the Predecessor Retirement Systems was transferred to GJRS in the same status effective July 1,1998. All assets of the Predecessor Retirement Systems were transferred to GJRS as of July 1,1998. GJRS is a multiple-employer cost-sharing defined benefit pension plan established by the Georgia General Assembly for the purpose of providing retirement allowances for trial judges and solicitors of certain courts in Georgia, and their survivors and other beneficiaries, superior court judges of the State of Georgia, and district attorneys of the State of Georgia. GJRS is administered by the ERS Board of Trustees and three (3) other trustees not on the ERS Board. ERS issues a publicly available financial report that includes the fmancial statements and required supplementary information applicable to GJRS. The report may be obtained at the ERS offices. Benefits The normal retirement for GJRS is age sixty (60) with sixteen (16) years of creditable service; however, a member may retire at age sixty (60) with a minimum often (10) years of creditable service. Retirement benefits paid to members are computed as sixtysix and two-thirds percent (66 2/3%) of annual salary plus one percent (I %) for each year of credited service over sixteen (16) years, not to exceed twenty-four (24) years. Early retirement benefits paid to members are computed as the pro rata portion of the normal retirement benefit, based on service not to exceed sixteen (16) years. Death, disability, and spousal benefits are also available. Summary of Significant Accounting Policies The fmancial statements of GJRS are prepared on the accrual basis of accounting. Contributions from the employer and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Funding Policy Members are required to contribute seven and one-half percent (7.5%) oftheir annual salary plus an additional two and one-half percent (2.5%) if spousal benefit is elected. Employer contributions are actuarially determined and approved and certified by the GJRS Board ofTrustees. The State's contributions to GJRS for the years ending June 30, 2002, and 2001 were (in thousands) $1,576 and $1,113, respectively, and were equal to the required contributions for each year. Legislative Retirement System Plan Description Organization and Purpose Legislative Retirement System ("LRS") is a singleemployer, defined benefit plan established by the Georgia General Assembly in 1979 for the purpose of providing retirement allowances for all members of the Georgia General Assembly. LRS is administered by the ERS Board ofTrustees. ERS issues a publicly available financial report that includes the applicable fmancial statements and required supplementary information. The report may be obtained at the ERS offices. Benefits A member's normal retirement is after eight (8) years of creditable service and attainment of age sixty-five (65), or eight (8) years of membership service (4 legislative terms) and attainment of age sixty-two (62). A member may retire early and elect to receive a monthly retirement benefit after completion of eight (8) years of membership service and attainment of age sixty (60); however, the retirement benefit is rt:duced by five percent (5.0%) for each year the member is under age sixty-two (62). Upon retirement, the member will receive a monthly service retirement allowance of $32 multiplied by the number of years of creditable service reduced by age reduction factors, if applicable. Death, disability, and spousal benefits are also available through the plan. A-84 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 15. Retirement Systems (continued) Summary of Significant Accounting Policies The fmancial statements ofLRS are prepared on the accrual basis of accounting. Contributions from the employer and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Funding Policy Member contributions are eight and one-halfpercent (8.5%) of annual salary. The State pays member contributions in excess of four and three-fourths percent (4.75%) of annual compensation. Employer contributions are actuarially determined and approved and certified by the Board. Annual Pension Cost The required contribution for 2002 was determined as part of the June 30, 2001, actuarial valuation using the unit credit actuarial cost method. The actuarial assumptions included (a) seven percent (7%) investment rate of return, and (b) three percent (3%) annual post-retirement cost-of-living adjustment. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value ofinvestments over a five-year period. LRS' actuarial funding excess is being amortized using the level dollar method on an open basis. Three-Year Trend Information for LRS (in thousands) Fiscal Year Ended June 30 1999 2000 2001 Annual Pension Cost (APC) 84 22 Percentage ofAPC Contributed 108% 436% N/A Net Pension Obligation 0 0 0 Superior Court Judges Retirement Fund Plan Description The Superior Court Judges Retirement Fund ("SCJRF") is a single-employer, defmed benefit pension plan established by the Georgia General Assembly in 1945 for the purpose of providing retirement benefits to the superior court judges of the State of Georgia. SCJRF is directed by its own Board of Trustees. The Boards of Trustees for ERS and SCJRF entered into a contract for ERS to administer the Plan effective July 1, 1995. ERS issues a publicly available fmancial report that includes the financial statements and disclosures applicable to SCJRF. The report may be obtained at the ERS offices. Benefits The normal retirement for SCJRF is age sixty-eight (68) with nineteen (19) years of creditable service with a benefit of two-thirds the salary paid to superior court judges. A member may also retire at age sixty-five (65) with a minimum of ten (10) years of creditable service with a benefit of one-half the salary paid to superior court judges. Death, disability, and spousal benefits are also available. Summary of Significant Accounting Policies The fmancial statements of SCJRF are prepared on the accrual basis of accounting. Contributions from the employer and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Funding Policy Member contributions are five percent (5.0%) oftheir salary plus an additional two and one-half percent (2.5%) for the spousal coverage benefit ifelected. The State pays member contributions offive percent (5.0%) of the member's annual salary. Additional employer contributions are not actuarially determined but are provided on an as-needed basis to fund current benefits. A-85 Notes to the Financial Statements For the Year Ended June 30, 2002 Note 15. Retirement Systems (continued) 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 (Higher Education Fund), under which it may purchase annuity contracts for the purpose ofproviding retirement and death benefits for eligible faculty and principal administrators. Benefits Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Member contributions are five percent (5.0%) of the earnable compensation, as established by the Board of Trustees of the Teachers' Retirement System. Employer contributions are 9.62% of the participating employee's earnable compensation. Employer contributions are established by statute and may be amended only by the General Assembly of the State of Georgia. Amounts attributable to all plan contributions are fully vested and non-forfeitable. In 2002, employer and employee contributions were (in thousands) $47,063 and $24,357, respectively. Teachers' Retirement System of Georgia Plan Description The Teachers' Retirement System of Georgia ("TRS") is a cost-sharing multiple-employer plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration ofTRS. TRS issues a publicly available fmancial report that includes the applicable financial statements and required supplementary information. The report may be obtained at the TRS offices. On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan ofthe Georgia Teachers ("SRBP"). SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code ("IRC") as a portion ofTRS. The purpose of the SRBP is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. Benefits A member is eligible for normal service retirement after thirty (30) years of creditable service, regardless of age, or after ten (10) years of service and attainment of age sixty (60). A member is eligible for early retirement after twentyfive (25) years of creditable service. Normal retirement (pension) benefits paid to members are equal to two percent (2.0%) of the average of the member's two (2) highest paid consecutive years of service multiplied by the number of years of creditable service up to forty (40) years. Early retirement benefits are reduced by the lesser of one-twelfth (1/12) of seven percent (7.0%) for each month the member is below age sixty (60), or by seven percent (7.0%) for each year or fraction thereof by which the member has less than thirty (30) years of service. It is also assumed that certain cost-of-living adjustments, based on the CPI, will be made in future years. Retirement benefits are payable montWy for life. Death, disability and spousal benefits are also available. Summary of Significant Accounting Policies The financial statements ofTRS are prepared on the accrual basis of accounting. Contributions from the employers and members are recognized in the period in which the members provide services. Benefit and refund payments are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales pnce. Funding Policy TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Member contributions are five percent (5%) of annual salary, and employer contributions are 9.24%, as required by the annual actuarial valuation. The State's contributions to TRS for the years ending June 30, 2002 and 2001 were (in thousands) $119,391 and $145,705, respectively, and were equal to the required contributions for each year. A-86 Notes to the Financial Statements For the Year Ended June 30. 2002 Note 16. Posternployment Benefits In addition to the pension benefits described in Note 16, the State of Georgia provides postretirement health care benefits through the State Health Benefit Plan to retirees pursuant to Title 45, Chapter 18 of the OCGA. An individual eligible for these benefits must have been a full time employee at the time of retirement of either the State of Georgia or a county social service agency and must be receiving monthly retirement benefits from either the Employees' Retirement System of Georgia or a county employees' retirement system. The State Health Benefit Plan is a public entity risk pool funded by employee and employer contributions. Employees and retirees subject to the Plan contribute amounts determined by the State Personnel Board for various health insurance plans. The various agencies of the State contribute to the health insurance fund based upon amounts recommended by the State Personnel Board and set forth in the Appropriations Act. The State Health Benefit Plan is funded on a "pay-as-you-go" basis. Expenses of the Plan include provisions for incurred but not reported claims. As of June 30, 2002, there were 63,263 employees who had retired and were receiving postretirement health care benefits through the State Health Benefit Plan. For the fiscal year ended June 30, 2002, the State recognized expenditures of $197,736,814, which was net of retiree contributions of $104,054,697. Pursuant to the general powers conferred by OCGA Section 20-3-31, the Board of Regents of the University System of Georgia (college and university funds) has established group health and life insurance programs for regular employees of the University System. It is the policy of the Board of Regents to permit employees of the University System 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 and who have at least ten years of service with the University System are eligible for these postemployment health and life insurance benefits. The University System pays the employer portion for group insurance for affected individuals. For the fiscal year ended June 30, 2002, the University System recognized expenditures of $32,535,828, which was net of participant contributions of$12,164,027. Note 17. Deficit Fund Balance/Net Assets The following organizations had deficit balances at June 30, 2002. Primary Government Internal Service Funds Workers' Compensation Fund - At June 30, 2002, the Fund had an unrestricted net assets deficit of $29,403,450. Component Units Superior Court Clerks' Cooperative Authority - At June 30, 2002, the Authority had an unrestricted net assets deficit of$28l,736. A-87 (This page intentionaLLy Left bLank) REQUIRED SuPPLElvfENTARY INFOR1vfATION (This page intentionally left blank) --_ _-_.- _ - - ----_.__ Required Supplementary Information For the Fiscal Year Ended June 30, 2002 Employees' Retirement System of Georgia Schedule ofFunding Progress (dollars in thousands) Actuarial Valuation Date 6/30/99 6/30/00 6/30/01 Actuarial Value of Plan Assets (a) $ 9,848,723 10.999.901 11,750,624 Actuarial Accrued Liability ("AAL") Entry Age (b) $ 9,695,614 10,573,408 11,557,255 Unfunded AAL/(Funding Excess) (b-a) $ (153, I09) (426,493) (193,369) Funded Ratio (alb) Annual Covered Payroll (c) 101.6% $ 104.0% 101.7% 2,152,072 2,304,289 2,397,169 Unfunded AAL/(Funding Excess) as a Percentage of Covered Payroll I(b-a)/cl (7.1%) (18.5%) (8.1%) A-91 Required Supplementary Information Budgetary Comparison Schedule Budget Fund For the Fiscal Year Ended June 30, 2002 Funds Available (inflows) Revenues: State Appropriation Regular Lottery Proceeds Tobacco Settlement Funds Federal Revenues Other Revenues Retained Total Revenues Carry-Over from Prior Year: Transfer from Fund Balance Budgeted Amounts Original Final Actual Amounts Variance Positive (Negative) $ 14,755,609.988 $ 550,000,000 149,000,025 5,889,708,413 4.653,713,307 $ 25,998,031,733 $ 15,000,602,752 $ 703,080,431 172,645,061 8,872,997.131 7,487,205,264 32,236,530,638 $ 14,995,434,403 $ 703.080,431 172,645,061 7,826,114,439 6,474,680,931 30,171,955,265 $ (5,168,349) o o (1,046,882,692) (1,012,524,332) (2,064,575,373) 2,376,323,708 1,241,820,781 (1,134,502,927) Total Funds Available $ 25,998,031.733 $ 34.612,854,347 $ 31,413,776.046 $ _ _(:....3:....,1.:..99,--,.:..07_8.:..,3_0-,-0) Expenditures (outflows) Administrative Services, Department of $ Agricultural Exposition Authority Agriculture, Department of Agrirama Development Authority Audits and Accounts, Department of Banking and Finance, Department of Building Authority Community Affairs, Department of Community Health, Department of Corrections, Department of Defense, Department of Education, Department of Employees' Retirement System - Administrative Expense Fund Financing and Investment Commission, Georgia State Forestry Commission General Assembly General Obligation Debt Sinking Fund Governor, Office of the Guaranteed Revenue Debt Common Reserve Fund Human Resources, Department of Industry, Trade and Tourism, Department of Insurance, Department of Investigation, Georgia Bureau of Judicial Branch Juvenile Justice, Department of Labor, Department of Law, Department of Motor Vehicle Safety, Department of Natural Resources, Department of Pardons and Paroles, State Board of Personnel Board, State - Merit System of Personnel Administration Public Safety, Department of Public School Employees' Retirement System Public Service Commission Public Telecommunications Commission Regents of the University System of Georgia, Board of 288,935,872 $ 6,881,794 55,494,347 \'856,837 30,832,595 11,547,248 43,849,826 163,926,550 5,948.622,226 967.018,287 33,498,322 6,736,374,937 6,749,343 0 44,622,176 35,789,123 575,708,563 52,601,167 0 2,732,681,007 64,103,337 18,161,809 98,280,628 139,232,474 298,305,079 354,059,794 37,454,547 0 188,511,722 52,691,248 13,474,982 144,550,338 13,499,104 13,469,232 37.218,516 3,751,359,414 76,188,000 $ 7,019,301 64,360,272 1,964,720 29,616,070 11,045,266 55,431,681 236,088,809 8,943,915,847 1,051,309,554 38,025,766 7,128,619,386 10,445,256 0 47,462,091 38,031,989 739,869,163 94,308,796 0 3,113,006,409 63,175,936 17,811,703 151,437,246 145,462,121 331,244,637 436,065,627 45,632,839 110,730,679 296,725,768 51,543,432 17.483,070 137,358,722 12,238,226 8,958,930 40,429,654 4,356,033,084 71,590,814 $ 6,948,788 64,192,038 1,534,549 28,835,258 10,870,940 47,864,260 221,976,972 8,106,971,126 968,064.108 36,652,251 7,019,165,018 9,479,408 28,617,127 47,283,758 30,544,260 739,869,163 70,639,128 0 2,941,176,392 62,523,541 16,514,477 142,602,874 144,464,795 306,659,018 379,957,866 45,320,250 106,993,439 287,495,951 51,448,774 15,279,516 126,819,614 12,238,226 8,616,680 32,953,096 3,658,254,588 4,597,186 70,513 168.234 430,171 780,812 174.326 7,567,421 14,111,837 836,944,721 83,245,446 1,373,515 109,454,368 965,848 (28,617,127) 178,333 7,487,729 0 23,669,668 0 171,830,017 652,395 1,297,226 8,834,372 997,325 24,585,619 56,107,761 312,589 3,737,240 9,229,817 94,658 2,203,554 10,539,108 0 342,250 7,476,558 697,778,496 A-92 Required Supplementary Information Budgetary Comparison Schedule Budget Fund For the Fiscal Year Ended June 30, 2002 Budgeted Amounts Original Final Actual Amounts Variance Positive (Negative) Revenue. Department of School Readiness. Office of Secretary of State Soil and Water Conservation Commission Student Finance Commission Teachers' Retirement System - Expense Fund Technical and Adult Education, Department of Technology Authority Transportation. Department of Veterans Service. Department of Workers' Compensation, State Board of $ 366.878.758 $ 386,660,995 $ 362.294.474 $ 24,366,521 373.481.513 372.848.034 317,516.256 55,331.778 35.111.406 42,321.423 38.931.417 3,390,006 4.097.104 4,466,026 4.456,843 9,183 305.916.757 406,401.783 402.046,757 4,355,026 14.508.437 25.612.722 22.521.539 3,091,183 353.004,339 473,694,761 435,526.533 38,168,228 0 244,645.694 225.221,343 19,424,351 1.537.772.665 4,700,924.493 2.035,308,430 2,665,616,063 33,149,393 33,743,677 33, I05,942 637.735 12,748,917 12,494,689 12,482,772 11.917 Total Expenditures Excess of Funds Available over Expenditures $ 25,998,031,733 $ 34,612,854,347 $ 29,739,830,367 $ 4,--,8_73--,-,0_2_3,--,9_80_ $ 1.673,945,679 $ ==~1~,6::,:73~,9~4=5~,6=79~ A-93 Required Supplementary Information Budgetary Comparison Schedule Budget-To-GAAP Reconciliation For the Fiscal Year Ended June 30, 2002 Sources/Inflows of Resources Actual amounts (budgetary basis) "Total Funds Available" from the budgetary comparison schedule Differences - budget to GAAP: Revenues of nonbudgeted funds included within the State's reporting entity, and shown in General Fund for financial reporting purposes. Revenues of budgeted funds included in the Budget Fund, but removed from the General Fund for financial reporting purposes. Budgeted Carry-Over Funds from Prior Year Fund Balances shown as Funds Available in Budget Fund, but removed for fmancial reporting purposes. Transfers from other funds are inflows of budgetary resources but are not revenues for financial reporting purposes. Receivables and revenues accrued based on encumbrances reported for supplies and equipment ordered but not received are reported in the year the order is placed for budgetary purposes, but in the year the supplies are received for GAAP reporting Accrual of taxpayer assessed receivables and revenues Proceeds from the sale of land and equipment are budgetary resources but are recorded as other fmancing sources under GAAP. State appropriation revenues are budgetary resources,but are netted with the State's treasury disbursements for GAAP purposes Budget Fund reserves federal financial assistance, but these funds are not earned at year end, and are shown as deferred revenue for GAAP purposes Intrafund revenues are budgetary revenues, but are not revenue for GAAP reporting purposes Fund balance adjustments are a budgetary resource, but are not current year revenues for GAAP reporting purposes. Change in revenue accrual for nonbudgetary medicaid claims Change in revenue accrual for nonbudgetary food stamp program Change in revenue accrual for nonbudgetary upper payment limit Change in pooled investments to show at fair value Other net accrued receivables and revenues Total revenues as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds General Fund $ 31,413,776,046 15,105,711,916 (4,044,917,427) (1,241,820,781 ) ( 193,268,399) (445,889,138) (184,651,691) (3,965,808) (15,871,159,895) (46,306,640) (422,806,982) (79,768,113) 79,354,539 593,187,975 63,160,672 (181,858) (118,182) $ 24,720,336,234 A-94 Required Supplementary Information Budgetary Comparison Schedule Budget-To-GAAP Reconciliation For the Fiscal Year Ended June 30, 2002 Uses/Outflows of Resources Actual amounts (budgetary basis) "Total Expenditures" from the budgetary comparison schedule Differences - budget to GAAP: Expenditures of Nonbudgeted Funds included within the State's reporting entity, and shown in General Fund for financial reporting purposes. Expenses of Budgeted Funds included in the Budget Fund, but removed from the General Fund for fmancial reporting purposes. Transfers to other funds are outflows of budgetary resources but are not expenditures for GAAP reporting purposes. Encumbrances for supplies and equipment ordered but not received are reported in the year the order is placed for budgetary purposes, but in the year the supplies and equipment are received for GAAP reporting. Intrafund expenditures are budgetary expenditures, but are not expenditures for GAAP reporting purposes Fund balance adjustments are a budgetary resource, but are not current year expenses for GAAP reporting purposes. Change in expenditure accrual for nonbudgetary medicaid claims Change in expenditure accrual for nonbudgetary food stamp program Change in expenditure accrual for nonbudgetary teacher salaries Change in expenditure accrual for nonbudgetary upper payment limit Capital lease acquisitions are not outflows of budgetary resources, but are recorded as current expenditures and other fmancing sources for GAAP reporting Other net accrued liabilities and expenditures Total Expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds General Fund $ 29,739,830,367 47,189,573 (6,060,222,931 ) (750,702,672) (141,965,338) (422,806,982) (225,713,893) 140,474,125 593,187,975 (140,738,724) 83,721,253 2,354,002 67,412,316 $ 22,932,019,071 A-95 Notes to Required Supplementary Information For the Fiscal Year Ended June 30, 2002 Budgetary Process The Official Code of Georgia Annotated (OCGA), Title 45, Chapter 12, Article 4 sets forth the process for the development and monitoring of an appropriated budget for the State of Georgia. Not later than September 1 of each year, the head of each executive branch budget unit must submit estimates of the fmancia1 requirements for the subsequent fiscal year to the Office ofPlanning and Budget, which operates under the direction ofthe Governor. Budget estimates relative to the legislative and judicial branches of State government are provided to the Office ofPlanning and Budget for the purpose of estimating the total financial needs of the State, but are not subject to revision or review by the Office of Planning and Budget. The Governor, through the Office of Planning and Budget, examines the estimates and may investigate and revise executive branch submissions as necessary. Upon the completion and revisions of the estimates, the Governor must prepare and submit a budget report to the General Assembly within five days of the date on which the General Assembly convenes. The Governor possesses the responsibility and authority to establish the revenue estimate for the corresponding fiscal year. The General Assembly, after adopting such modifications to the Governor's budget report, as it deems necessary, enacts the General Appropriations Act for the subsequent fiscal year. Each General Appropriations Act enacted, along with amendments as are adopted, continues in force and effect for the next fiscal year after adoption. In accordance with the Constitution of the State ofGeorgia, Article III, Section IX, Paragraph 4, the General Assembly is prohibited from appropriating funds for any given fiscal year which, in the aggregate, exceeds the amount of unappropriated surplus funds expected to have accrued at the beginning of the subsequent fiscal year together with the total estimated amount of receipts from existing revenue sources, less refunds, anticipated to be collected in the subsequent fiscal year. The Constitution further authorizes the passage of additional Supplementary Appropriation Acts for specific purposes, provided sufficient unappropriated funds are available or additional revenue measures have been enacted. Federal funds received by the State are continually appropriated in the exact amounts and for the purposes authorized and directed by the awarding federal agency. Internal transfers within a budget unit and between objects of functional or activity budget units are subject to the condition that no State funds shall be transferred for the purpose of initiating a new program area not currently having a State funds appropriation. The Governor, through the Office of Planning and Budget, requires each budget unit, other than those of the legislative and judicial branches, to submit an annual operating budget based on the activities and functions set forth in the Appropriations Act. Budget units submit quarterly allotment requests, which must be approved in conjunction with quarterly work programs prior to release of appropriated funds. Further monitoring of budget unit activities is accomplished by review of expenditure reports, which are submitted quarterly to the Office of Planning and Budget. Budget units (i.e., agencies, commissions) of the State are responsible for budgetary control oftheir respective portion of the total State appropriated budget. The legal level of budgetary control is at the departmental level. Due to the complex nature of the State appropriated budget, a separate budgetary report entitled, "Report of the State Auditor of Georgia," is published each year. This report includes a listing of State organizations (appropriation units) which incurred expenditures in excess of amounts budgeted by object class. The appropriated budget covers the maJonty of the governmental funds included within the State of Georgia reporting entity, but excludes the debt service fund and capital projects funds, which are not subject to appropriation. The budget does include certain proprietary funds, the higher education funds, and the administrative costs of operating various public employee retirement systems. Budgetary Presentation The accompanying budgetary comparison schedule for the Budget Fund presents comparisons of the legally adopted budget with actual data prepared on the budgetary basis of accounting utilized by the State. The Budget Fund, a compilation of the budget units of the State, differs from the funds presented in the basic financial statements. The Budget-to-GAAP reconciliation immediately following the budgetary comparison schedule identifies the necessary adjustments to convert the Budget Fund into governmental funds, proprietary funds, and fiduciary funds, as required by generally accepted accounting principles (GAAP). For the year ended June 30, 2002, no budget units had expenditures in excess of appropriations plus carry-over of prior year funds. A-96 RlSSELL \V. HI,TITY IDE"TIFYING NUMBER M01'iETARY EXPENDITURES NONMONETARY EXPE1'iDITURES Health and Human Services. Li. S. Department of Occupational Safety and Health Research Grants Through Association of Teachers of Preventwe Medicine Through Georgia Tech Applied Research Corporation Through University of Georgia Research Foundation Immunization Grants Direct Alcohol National Research Service A'.I.'ards for Research Training Through: University of Georgia Research Foundation Alcohol Research Programs Through Georgia Tech Research Corporation Through: University of Georgia Research Foundation Drug Abuse Scientist Development Awards. Research SCientist Development Awards, and Research Scientist Awards Direct Drug Abuse National Research Sen-ice Awards for Research Training Through Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through" University of Georgia Research Foundation Drug Abuse Research Programs Direct Through Georgia Tech Research Corporation Through" Medical College of Georgia Research institute Through University of Georgia Research Foundation Mental Health Research Career/Scientist Development Avvards Direct Mental Health National Research Service AVo'ards for Research Training Direct Through: Georgia Tech Research Corporanon Centers for Disease Control and Prevention Investigations and Technical Assistance Direct Through" AsSOCiation of Teachers of Preventive Medicine Through University of Georgia Research Foundation Nurse Practitioner and Nurse-Midwifery Education Programs Direct Comparative Medicine Direct Through Medical College of Georgia Research Institute Through UniverSIty of Georgia Research FOWldation 93262 93.268 93,272 93273 93.277 93278 93279 93281 93282 ALA02 OH373701 5T32AA0747314 Vanous F32DAI416501 Vanous 93283 93298 93306 BLH02 CLH52 1965UGDHHS9514 RRll733 5.339 (R) 5.422 (R) 265,146 (R) 275.907 6,075,923 (R) 155.988 (R) 35.156 (R) 700,331 (R) 735,487 82,629 16.488 (R) 14.819 26.195 (R) 57.502 553,897 (R) 427.051 (R) 378,857 (R) 1.165,093 (R) 2,524,898 44,417 93,007 23.917 116,924 5,598,299 61,492 (R) 232,530 (R) 48.090 5,940,411 264,316 454.955 (R) 14.457 16,990 (R) 486,402 17,770,925 (4) E - 33 Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 CFDA NUMBER PASS-THROUGH ENTITY IDENTIFYING NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES Health and Human Services, U. S. Department of Health Professions Student Loans, Including Primal)' Care Loans/Loans for Disadvantaged Students (SFA) Direct Ad...anced Education Nurse Traineeships Direct Basic Nurse Education and Practice Grants DIrect Nursmg Research Direct Nursmg Student Loans (SFA) Direct Biomedical Technology Direct Through GeorgIa Tech Research Corporation Through: University of Georgia Research Foundation Mnority Biomedical Research Support Direct Through: New Mexico State University Grants for Graduate Training in Family Medicine Direct Cancer Cause and Prevention Research Direct Through Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through: University of Georgia Research Foundation Cancer Treatment Research Direct Through Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through: University of Georgia Research Foundation Cancer BIology Research Through: Medical College of Georgia Research Institute Through" Thomas Jefferson University Through University of Georgia Research Foundation Cancer Research Manpower Through: University of Georgia Research Foundation Cancer Control Through: Medical College of Georgia Research Institute Abandoned Infants Direct Promoting Safe and Stable Families Direct Through: County of Clarke/Athens 93342 93.358 93359 93361 93.364 93J71 93375 93379 93393 93.395 93396 93398 93.399 93551 93.556 Vanous CLK04 Various 5 VOl CA91295-02 CLH48 5 RO I CA 64462-06 CA68073B 200202900500 -667.014 (3) 343.920 (R) 283 88.056 (R) 24.185 (3) 14.538 (R) 34336 (R) 787.220 (R) 836.094 166,087 22,267 (R) 188354 -6,641 184,350 (R) 1,843 (R) 32,755 234,577 (R) 453,525 9,486 95,516 (R) 225,022 (R) 388.869 (R) 718,893 299,450 (R) 186,422 (R) 132,008 (R) 617,880 20,977 (R) 58.960 (R) 48,921 7,931,317 (R) 42,221 (R) 7.973,538 2.427.510 (3) 1.252.069 (3) E - 34 Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30,2002 CFDA NUMBER PASS-THROUGH EI'.TITY IDENTIFYING NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES Health and Human Services, U. S. Department of Temporary ASSistance for Needy Families Direct Through: Goodv.ill Industnes of the Coastal Empire Child Support Enforcement Direct Refugee and Entrant Assistance State Administered Programs Direct LowIncome Home Energy Assistance DIrect Community Servlces Block Giant Direct Community Services Block Grant - Discretlonary Awards Direct Through: National Collegiate AthletIc Association CommWlity Sen-ices Block Grant Discretionary Awards Commumty Food and Nutntlon Direct Child Care and Development Block Grant (Ceq Direct Through Georgia Child Care CouncIl Through Kids Advocacy Coalinon Through United Way of Metro Atlanta Refugee and Entrant Assistance DiscretIonary Grants DIrect Repatriation Program Direct Refugee and Entrant Assistance - Targeted Assistance Direct Through: University of Georgia Research Foundation State Court Improvement Program Direct Community-Based Family Resource and Support Grants Direct Family Violence Prevention and Services/Grants for Battered Women's Shelter - Discretionary Grants Direct Through: Association of Teachers of Preventive Medicme Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CCC) Direct Grants to States for Access and Visitation Programs Direct 93558 93563 93566 93568 93.569 93.570 93.571 93.575 93.576 93.579 93584 93.586 93.590 93.592 93.596 93.597 Various CU35 01-497 ClH71 315.944.437 22.405 315.966,842 91,828.299 6.708.018 19,733.480 16,508,395 49,731 177.430 227,161 112,455 79,361,482 98,405 21,472 175,587 (R) 79,656,946 717,468 275 L717,94 1 7,303 (R) 1,725,244 121,045 609,698 -5,076 30,108 (R) 25,032 99,212,730 96,352 E - 35 Schedule of Expenditures of Federal Awards For the fiscaL Year Ended June 30, 2002 CFDA NUMBER PASS-THROUGH ENTITY IDENTIFYING NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES Health and Human Services. U. S. Department of Head Start Direct Through Ninth District Opportunity. Incorporated Through Sumter Head Stan Through University of Georgia Research Foundation Adoption Incentive Payments Direct Developmental Disabilities Basic Support and Advocacy Grants Direct Through: Georgia Council on Development Disabilities Developmental Disabilities Projects of National Sigmficance Direct Developmental Disabilities University Affiliated Programs Direct Children's Justice Grants to States Direct Child Welfare Services State Grants Direct Social SefVlces Research and Demonstration Direct Through: University of Georgia Research Foundation Child Welfare Services Training Grants Direct Adoption Opportunities Direct Foster Care - Title IVE Direct Adoption Assistance Direct Social Sef'\.;ces Block Grant Direct Child Abuse and Neglect State Grants Direct Through: University of Georgia Research Foundation Child Abuse and Neglect Discretionary Activities Direct Family Violence Prevention and Services/Grants for Battered Women's Shelters - Grants to States and Indian Tribes Direct Independent Living Direct State Children's Insurance Program Direct 93.600 93603 93630 93631 93,632 93.643 93.645 93,647 93,648 93,652 93.658 93659 93667 93.669 93670 93671 93674 93767 Vanous 417-9391824 90YE0034/0 1 000121 2,415,800 (R) 134,389 6,622 -1,263 (R) 2,555,548 1.266,886 1,939,098 (R) 638 (R) 1,939,736 194,549 (R) 25,544 (R) 264,736 7,684,360 77,985 (R) 59,898 (R) 137,883 73,675 (R) 54,279 69,168,349 31,156,230 68,914,904 393,877 2,910 (R) 396,787 11,784 2,376,876 2,640.189 99,733,655 E - 36 ----,,,----_.,,,._-- Schedule of Expenditures of Federal Awards For the fiscaL Year Ended June 3D, 2002 CFDA NUMBER PASS-THROUGH ENTITY IDENTIFYING NUMBER MONETARY EXPENDITURES NO;\,MONETARY EXPENDITURES Health and Human Services. C. S. Department of Medicaid Infrastructure Grants To Support the Competitive EmplOyment of People with DisabIlities Direct Medicare - Hospital Insurance Direct Medicare - Supplementary Medical Insurance Direct Stare Medicaid Fraud Conrrol UOIts (Me) Direct State Survey and Certificanon of Health Care PrO\-lders and Suppliers (Me) Direct Medical Assistance Program (Me) Direct Health Care Financing Research. Demonstrations and Evaluations Direct Scholarships for Students of Exceptional Financial Need (SFA) DIrect Cell Biology and Biophysics Research Direct Through Georgia Tech Research Corporation Through: University of Georgia Research FoundatIon Health Careers Opportunity Program Direct Through Morehouse School of Medicine Through Regents of the University System of Minnesota BaslciCore Area Health Education Centers Direct Heart and Vascular Diseases Research Through: Georgia Tech Applied Research Corporation Through: GeorgIa Tech Research CorporatIon Through Medical College of Georgia Research Institute Through University of Georgia Research Foundation Lung Diseases Research Direct Through Medical College of Georgia Research Institute Through University of Georgia Research FoundatIon Blood Diseases and Resources Research Direct Through Georgia Tech Research Corporation Through Medical College of GeorgIa Research Institute Through University of Georgia Research Foundation 93768 93773 93.774 93775 93.777 93778 93779 93820 93821 93.822 93.824 93837 93.838 93839 Various BLGI8 ALA04 Vanous Various 227.4&8 4,140,323 8.379.662 2.972.445 2,740,789 3,936,035.565 533,894 9,062 945,548 (R) 372.112 (R) 6983,783 (R) 8.301,443 277,636 36,911 15,238 (R) 329,785 1,139,183 39,779 (R) 438,537 (R) 6.519,886 (R) 196,081 (R) 7,194,283 277,664 (R) 232,746 (R) 169,440 (R) 679,850 88,325 (R) 193,945 (R) 4,195,079 (R) 1,129 (R) 4,478.478 E - 37 Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 CFDA NUMBER PASS-THROUGH E",ITV IDENTIFYING NUMBER MONETARY EXPENDITURES SONMONETARY EXPENDITVRES Health and Human Services! U. S. Department of Arthritis. Musculoskeletal and Skin Diseases Research Through Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through University of Georgia Research Foundation Diabetes, Endocrinology and Metabolism Research Through Georgia Tech Research CorporatIon Through: University of Georgia Research foundation Digestlve Diseases and Nutrition Research Direct Through Medical College of Georgta Research Institute Through University of Georgia Research Foundation Kidney Diseases, Urology and Hematology Research Through Medical College of Georgia Research Institute Through: University of Georgia Research Foundation Extramural Research Programs m the Neurosciences and Neurological Disorders Direct Through" Clark Atlanta University Through Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through Umversity of Georgia Research Foundation Through University of Louisville Research Allergy, Immunology and Transplantation Research Through" Georgia Tech Research Corporation Through: Medical College of Georgia Research Institute Microbiology and Infectious Diseases Research Direct Through Emory University Through' Medical College of Georgia Research Institute Through Neural Signals., Inc Through: University of North Carolina Through University of Georgia Research Foundation Pharmacology, Physiology, and Biorelated Chemistry Research Direct Through Georgia Tech Research Corporation Through University of Georgia Research Foundation Genetics and Developmental Biology Research and Research Training Direct Through' Georgia Tech Research Corporation Through Medical College of Georgia Research Institute Through University of Georgia Research Foundation 93.846 93.847 93848 93849 93.853 93855 93856 93859 93862 Vanous Various Vanous ALX56 AL735 Various BLA62 ALX49 BLF34 BLF40 Various Various Various 12.488 (R) 78.703 (R) 34,682 (R) 125,873 139,773 (R) 560,040 (R) 699,813 392.529 (R) 883,544 (R) 391,113 (R) 1,667,186 459,403 (R) 177,322 (R) 636,725 879,634 (R) 17,591 (R) 137.966 (R) 47,035 (R) 1.549.465 (R) 14,218 (R) 24.277 (R) 2,670,186 695,983 (R) 1,199,834 (R) 1,895.817 997,868 (R) 70,496 (R) 517,576 (R) 70,426 (R) 201,467 (R) 3,920,545 (R) 5,778,378 380,822 (R) 498,517 (R) 2,201,451 (R) 3,080,790 11,660 (R) 77,088 (R) 279,811 (R) 1,372,308 (R) 1,740,867 E - 38 Georgia Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 eFDA MeMBER PASS-rnROUGH E:'ITm' IDENTIFYING 'IIl'MBER MONETARY EXPENDITURES NONMO'liETARY EXPENDITl'RES Health and Human Sen'ices. U. S. Department of Population Research Direct Through Medical College of Georgia Research Institute Through University of Georgia Research Foundation Center for Research for Mothers and Children Direct Through Georgta Tech Research Corporation Through Medical College of Georgia Research Institute Through" University of Georgta Research Foundation Through Yale UniverSity Aging Research Direct Through" Georgia Tech Research Corporation Through" Umversity of Georgia Research Foundation Vision Research DIrect Through: Medical College of Georgia Research Institute Minority Access to Research Careers Through: University of Georgia Research Foundation Grants for Residency Training in General Internal MediCine and/or General Pediatrics Direct Physician ASSlstant Training in Primary Care Direct Resource and Manpov.er Development in the Environmental Health Sciences Direct Through: University of Georgia Research Foundation Grants for Faculty Development in Family Medicine Direct Predoctoral Training In Primary Care (Family Medicine, General Internal MediCine/General Pediatrics) Direct Rural Health Medical Education Demonstration Projects Direct Rural Health Outreach and Rural Network Development Program Direct Grants to States for Operation of Offices of Rural Health Direct I-UV CaTe Formula Grants Direct Grants to Provide Outpatient EaTty Intervention Services with Respect to mv Disease Direct 93864 93865 93866 93867 93.880 93884 93886 93894 93895 93896 93.906 93912 93.913 93.917 93.918 Various Vanous CLH43 Various GM20095-02 Vanous 19,952 (R) 340,952 (R) 45342 (R) 406,246 3205.978 (R) 90,452 (R) 493246 (R) 1,640,719 (R) -2391 (R) 5,428.004 610,200 (R) 796,100 (R) 688,651 (R) 2,094.951 222,725 (R) 1,990,663 (R) 2,113,388 26,481 (R) 191,910 39,260 32,914 (R) 49,634 (R) 82,548 145,069 186.181 180,463 185,462 47,989 30,355,676 706,097 E - 39 Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 CFDA NUMBER PASS-THROUGH ENTITY IDENTIFYING NUMBER MONETARY EXPE!'iDmRES NONMO!'iETARY EXPENDITURES Health and Human Sen'ices. U. S. Department of Cooperative Agreements for StateBased Comprehensive Breast and Cervical Cancer Early DetectlOn Programs Direct Scholarships for Health Professions Students from Disadvantaged Backgrounds (SFA) Direct Healthy Start Initiative Direct Center for Medical RehabilItation Research Through: University of Georgia Research Foundation Fogarty International Research Collaboration Award Direct Through Georgia Tech Research Corporation Through: University of Georgia Research Foundation CooperatIve Agreements to Support Comprehensive School Health Programs to Prevent the Spread ofHIV and Other Important Health Problems Direct mv Prevention Actnrities - Health Department Based Direct HIV Demonstration, Research, Public and Professional Education Projects Direct Through: University of Illinois at Chicago Eptdemiologic Research Studies of Acquired Immunodeficiency Syndrome (AIDS) and Human ImmunodeficIency Virus (HIV) Infection in Selected Population Groups Through: University of Georgia Research Foundation Human ImmWlOdeficiency Virus (HIV)/Acquired Immunodeficiency Virus Syndrome (AIDS) Surveillance Direct Assistance Program for Chronic Disease Prevention and Control Direct Demonstration Grants to States with Respect to Alzheimer's Disease Direct Block Grants for Community Mental Health Services Direct Block Grants for Prevention and Treatment of Substance Abuse Direct Through: University of Georgia Research Foundation Special Minority Initiatives Direct Health Administration Trameeships and Special Projects Program Direct 93.919 93925 93926 93929 93934 93.938 93.940 93.941 93943 93944 93.945 93951 93.958 93.959 93960 93.962 Various Various ALX57 Various Various 3.932.628 198.149 (R) 281.528 208,603 (R) 45.788 (R) 30 (R) 13.400 (R) 59.218 142,626 6.493.385 917.219 206,270 (R) 1,123.489 921,751 (R) 552,900 1.020,361 -446 11.786,096 50,337,918 17.497 50,355,415 115.137 18.473 E - 40 Georgia Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 CFDA NUMBER PASS-THROVGH ENTITY IDENTIFYING 'IIlIMBER MONETARY EXPENDITURES NONMONETARY EXPENDITl'RES Health and Human Sen-ices, U. S. Department of Preventive Health Services - Sexually Transmined Diseases Control Grants Direct 93977 Mental Health Dlsaster Assistance and Emergency Mental Health Direct 93982 Academic Administrative COlts in Primary Care Direct 93984 Cooperative Agreements for StateBased Diabetes Comrol Programs and Evaluation of Surveillance Systems Direct 93.988 Semor Internatlonal Fellowships Through: Medical College of Georgia Research Institute 93.989 Preventive Health and Health Services Block Grant Direct 93,991 Maternal and Child Health Servlces Block Grant to the States Direct 93994 Other Federal Assistance DIrect Through American Council on Education Through City of Albany Through' Emory University Through Family Matters Consulting. Incorporation Through Georgia Association for Pnmary' Health Care Through Georgia Tech Applied Research Corporation Through Georgia Tech Research Corporation Through Metro Atlanta Council on Alcohol Through National ASSOCiation of Equal Opportunity in Higher Education Through NatlOnal Collegiate Athletic Association Through' Science Applications Intemational Group Through University of GeorgIa Research Foundation Through: U. S. Ukraine Foundation Through' Virginia Tech Through World Learning, Incorporated 93 XXX AL790 ALW09 Various US-UF-C-CPP-O 1-008 CR-I9295-425215 AGENCY TOTAL Corporation for National and Community Service Retired and Senior Volunteer Program Direct State Commissions Direct Learn and Serve America School and Community Based Programs Direct Learn and Serve America ~ Higher Education Direct Through: Georgia Tech Research Corporation 94002 94003 94004 94.005 AmeriCorps Direct Through The Georgia Commission for National/Community Service 94006 OFHNUNN029MULCT E - 41 3,505,063 -15.627 67.627 208.932 1,090 5,089.375 16,826,278 462,660 58,770 65,789 157,274 151,405 983 101,539 2,696,536 13,879 2,624 82,167 3,694 6,086,487 19,421 4,024 17,168 (R),(3) (R) (R) (R) (R) (R) (R) (R) (R) (R) (R) 9,924.420 5,151,079,181 268.923 300,270 (3) 300,270 22,151,532 110,045 (R) 284,716 378,893 4,968 11,359 (R) 16,327 5,835,084 19,722 (R) 5,854,806 Georgia. Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2002 CFDA NUMBER PASS-THROUGH EI'TITY IDENTIFYING NUMBER Corporation for National and Community Service Planning and Program Development Grants Direct Training and Technical ASSIstance Direct Foster Grandparent Program (FGCC) Direct Senior Companion Program (FGCC) DIrect AGENCY TOTAL Social Security Administration Social Secunty - Disability Insurance (DlISSI) Direct AGENCY TOTAL GRAND TOTAL EXPENDITURES OF FEDERAL AWARDS 94007 94009 94011 94.016 96.001 MONETARY EXPENDITURES NONMONETARY EXPENDITURES 292.103 (R) 146,024 256.778 (R) 266.461 (R) 7,606.153 46,343,803 46)43,803 9,591,578,419 2,458)22,260 E - 42 Notes to the ScheduLe of Expenditures of FederaL Awards For the Fiscal Year Ended June 30, 2002 PURPOSE OF THE SCHEDlJLE Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments. and Non-Profit Organizations, requires a Schedule of Expenditures of Federal Awards reflecting total expenditures for each Federal fmancial assistance program as identified in the Catalog of Federal Domestic Assistance (CFDA). SIGNIFICA.~T ACCOUNTING POLICIES Reporting Entity - The accompanying schedule includes all Federal financial assistance programs administered by the State of Georgia for the fiscal year ended June 30, 2002. Refer to Appendix "A" for a comprehensive listing of organizational units comprising the financial reporting entity. Basis of Presentation - The accompanying Schedule ofExpenditures ofFederal Awards is presented in accordance with OMB Circular A-133. A. Federal Financial Assistance - Pursuant to the Single Audit Act Amendments of 1996 and OMB Circular A-133, Federal financial assistance is defined as assistance that non-Federal entities receive or administer in the form of grants, loans, loan guarantees, property (including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other assistance, but does not include amounts received as reimbursements for services rendered to individuals for Medicare and Medicaid. B. Major Programs - The Single Audit Act Amendments of 1996 and OMB Circular A-133 established a risk-based approach for defining Major Federal financial assistance programs. This approach resulted in 15 of 26 Type A programs and 1 Type B program being selected as major programs for the State of Georgia. For the fiscal year ended June 30, 2002, a Type A program is defined as any Federal program which exceeded $30,000,000 in expenditures/disbursements/issuances. Basis of Accounting - The Schedule ofExpenditures ofFederal Awards is prepared using the basis of accounting as described in Note 1 of the Notes to the Financial Statements of the Basic Financial Statements (See Section A of this Report). Expenditures and Expenses - When a state organization receives Federal monies and redistributes such monies to another state organization, (i.e., pass-through funds from the primary recipient to a subrecipient), the Federal assistance is reported in both the primary recipient's and the subrecipient's accounts. This method ofreporting expenditures/expenses results in an overstatement of the aggregate level of Federal expenditures/expenses. Therefore, net Federal expenditures/expenses is reported in the schedule. OTHER Thefollowing Notes provide additional pertinent information regarding Federalfinancial assistance. (1) Expenditures for these programs includes Federal, state and/or other fimds. In addition, the Unemployment Insurance program (CFDA NO. 17.225) includes Federal expenditures of $162,834,903 and State expenditures of $734,698,415. (2) During the fiscal year ended June 30, 2002, the Georgia Department of Human Resources received $52,206,247 in cash rebates from infant formula manufacturers on sales of formula to participants in the Special Supplemental Food Program for Women, Infants, and Children (WIC) (CFDA NO. 10.557). Rebate contracts with infant formula manufacturers are authorized by 7 CFR 246.16(m) as a cost containment measure. Rebates represent a reduction of expenditures previously incurred for WIC benefit costs. The rebate contract allowed the Department to serve approximately 90,244 additional persons per month during fiscal year 2002. E - 43 Notes to the ScheduLe of Expenditures of FederaL Awards For the fiscaL Year Ended June 30, 2002 (3) Federally funded loan programs incurred the following current fiscal year monetary and nonmonetary expenditures: eFDA NlJMBER GRANT PROGRAM MONETARY NEW FEDERAL CAPITAL FEDERAL REIMBURSEMENT ADMINISTRATIVE COSTS NONMONETARY LOANS OUTSTANDING AT 06130102 LOANS MADE DURING YEAR 23011 66458 66468 84032 84.038 84.226 93.342 93.364 93 XXX 93 XX-X Appalachian State Research, Technical Assistance, and Demonstration Projects (**) Capitalization Grants fOT State Revolving Funds Capitalization Grants for Drinking Water State Revolving Funds Federal Family Education Loans (..... ) Federal Perkins Loan Program. Federal Capital Contributions Income Contingent Loan Program Health Professions Student Loans. Including Primary Care Loans/Loans for Disadvantaged Students Nursing Student Loans Pharmacy Loans (*"') Veterinary Medicine Loans (**) 0$ 21.405.596 $ 10.858,782 0$ -206.421 0S -667,014 $ 20,514 -97,780 -96,660 0$ 0$ 0$ 43,751.176 S 479.420 0$ 0$ 690 0$ 0$ 46,116 $ 344.910 $ 374.372 0$ 324,468 0$ 0$ 2.980 .762 $ 0$ 1.307.609 $ 294,233,327 $ 25,381.147 $ 1,430.571.000 $ 37,786,341 134,233 2,427.510 $ 1,252,069 116.907 $ 183,363 200.000 7.019,406 4,837,266 234.575.370 6,336,084 -135 13.636 300,506 (**) The monetary amount for this program does not equal the monetary amount shown in the schedule. Numerous grants and contracts have been combined for reporting purposes. (4) Certain programs administered by the Federal government provide goods and services to organizational units of the State in lieu of monetary assistance. An analysis, for major programs, of nonmonetary assistance and the values assigned by the Federal government during the year under review is reflected below: CFDA NO. 10.550 10.551 93.268 The reported amounts, incurred by two organizational units of the State, represent the U. S. Department of Agriculture assigned value of the donated commodities for the Food Distribution Program. The Federal government provides food stamps to low-income households. The amount offood stamp benefits a household receives depends on the household's size and financial circumstances. The Georgia Department of Human Resources is responsible for determining eligibility for participation in the Food Stamp Program. For the year under review, the total value of food stamp benefits distributed as approved by the Department was $593,138,530. The amount reported represents the U. S. Department of Health and Human Services assigned value of immunizations f0r vaccine-preventable diseases to eligible individuals. E - 44 Georgia Notes to the Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30,2002 (5) Cluster programs are detailed on the Schedule ofCluster Programs and identified as follows on the Schedule ofExpenditures ofFederal Awards: (AC) (CCC) (CNC) (CHCC) (DI/SSI) (EFAC) (ESC) (ESCC) (FTC) (FWC) (FSC) (FGCC) (HPCC) (HSC) (MC) (R) (SEC) (SFA) (TRIO) (WIA) Aging Child Care Child Nutrition Consolidated Health Centers Disability Insurance/SSI Emergency Food Assistance Employment Service CDBG - Entitlement and (HUD-Administered) Small Cities Federal Transit Fish and Wildlife Food Stamp Foster Grandparent/Senior Companion Highway Planning and Construction Highway Safety Medicaid Research and Development Special Education Student Financial Aid TRIO WIA (6) Circular A-133 requires the Schedule ofExpenditures afFederal Awards to include, to the extent practical, an identification of the total amount provided to subrecipients from each Federal program. Major programs expenditures presented in the schedule account for approximately 66% of total Federal expenditures for the State ofGeorgia, Provided below is the amount of major programs awards provided to subrecipients: CFDA NUMBER 14.239 66.458 66.468 66.470 84.048 93.558 GRANT PROGRAM Food Stamp Cluster HOME lovestment Partnerships Program Highway Planning and Construction Cluster Capitalization Grants for State Revolving Funds Capitalization Grants for Drinking Water State Revolving Fund Hardship Grants Program for Rural Communities Vocational Education - Basic Grants to States Temporary Assistance for Needy Families Research and Development Cluster Total AMOUNT PROVIDED TO SUBRECIPIENTS $ 118 2,356,130 1.181.280 20,130,573 10,858,782 691,109 13,415,082 2,148,877 31,75I.770 $ 82,533,721 E - 45 (This page intentionaLLy Left bLank) ~CHEDULE OF CLUSTER PR~RAlv1S (This page intentionaLLy Left bLank) ,----- "---", --- Georgia. Schedule of Cluster Programs For the Fiscal Year Ended June 30, 2002 Aging Cluster (AC) Special Programs for the Aging - Title ilL Part B Grants for Supportive Services and Senior Centers Special Programs for the Aging - Title 1II, Part C Nutrition Services Child Care Cluster (CCC) Child Care and Development Block Grant Child Care Mandatory and Matching Funds of the Child Care and Development Fund Child Nutrition Cluster (CNC) School Breakfast Program National School Lunch Program Special Milk Program for Children Summer Food Service Program for Children Consolidated Health Centers Cluster (CHCC) Health Centers Grants for Migrant and Seasonal Farmworkers Disability Insurance/SSI Cluster (DIISSI) Social Security - Disability Insurance Emergency Food Assistance Cluster (EFAC) Emergency Food Assistance Program (Administrative Costs) Emergency Food Assistance Program (Food Commodities) Employment Service Cluster (ESC) Employment Service Disabled Veterans' Outreach Program (DVOP) Local Veterans' Employment Representative Program CDBG - Entitlement and (HUD-Administered) Small Cities Cluster (ESCC) Community Development Block GrantslEntitiement Grants Community Development Block Grants/Small Cities Program CFDA NUMBER MONETARY EXPENDITURES :,\,ONMONETARY EXPE:,\,DITURES 93.044 $ 93.045 $ 6,960,229 13,315,062 20,275,291 93575 $ 93.596 $ 79,656,946 99,212.730 178,869.676 10.553 $ 10.555 10.556 10.559 $ 67,085,394 227,812,973 19,559 10,321,612 305,239,538 93.246 $ 1,061,906 96.001 $ 46,343,803 10.568 $ 10.569 $ 17.207 $ 17801 17.804 $ 778,548 267,903 $ 1,046,451 $ 14,108,236 1,842,142 1,199,619 17,149,997 7,680,653 7,680,653 14.218 $ 14219 $ -372 1,737,631 1,737,259 E - 49 GEDrgia. ScheduLe of CLuster Programs For the Fiscal Year Ended June 30, 2002 Federal Transit Cluster (FfC) Federal Transit - Capital Improvement Grants Federal Transit - Formula Grants Fish and Wildlife Cluster (FWC) Sport Fish Restoration Wildlife Restoration Food Stamp Cluster (FSC) Food Stamps State Administrative Matching Grants for Food Stamp Program Foster Grandparent/Senior Companion Cluster (FGCC) Foster Grandparent Program Senior Companion Program Highway Planning and Construction Cluster (HPCC) Highway Planning and Construction Highway Safety Cluster (HSC) State and Community Highway Safety Medicaid Cluster (MC) State Medicaid Fraud Control Units State Survey and Certification of Health Care Providers and Suppliers Medical Assistance Program Research and Development Cluster (R) Other Federal Assistance Agricultural Research - Basic and Applied Research Plant and Animal Disease, Pest Control, and Animal Care Wildlife Services Grants for Agricultural Research, Special Research Grants Cooperative Forestry Research Payments to Agricultural Experiment Stations Under the Hatch Act Grants for Agricultural Research Competitive Research Grants Higher Education Challenge Grants Biotechnology Risk Assessment Research CFDA NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES 20.500 $ 20.507 $ 227,179 12,509,528 12,736,707 15.605 $ 15.611 $ 5,330,562 5,367,183 10,697,745 10.551 10.561 $ $ $ 59,610,012 59,610,012 $ 593,138,530 593,138,530 94.011 $ 94016 $ 256,778 266,461 523,239 20.205 $ 874,910,211 20.600 $ 16,595,981 93.775 $ 93.777 93.778 $ 2,972,445 2,740,789 3,936,035,565 3,941,748,799 04. XXX $ 10.001 10.025 10.028 10.200 10.202 10.203 10.206 10.217 10.219 100 905,863 156,928 13,445 3,677,391 797,434 4,614,367 2,579,503 139,641 -2 E - 50 Georgia Schedule of Cluster Programs For the Fiscal Year Ended June 30, 2002 CFDA NlJMBER MO"lETARY EXPENDITURES Research and Development Cluster (R) Funds for Rural America - Research, Education, and Extension Activities Initiative for Future Agriculture and Food Systems Integrated Programs Cooperative Extension Service Summer Food Service Program for Children (CNC) Commodity Supplemental Food Program Forestry Research Cooperative Forestry Assistance Soil and Water Conservation Scientific Cooperation Program Other Federal Ass istance ITA Special Projects Economic Development - Technical Assistance Trade Adjustment Assistance Sea Grant Support Coastal Zone Management Estuarine Research Reserves Climate and Atmospheric Research Pacific Coast Salmon Recovery - Pacific Salmon Treaty Program Marine Research - Regional Programs Center for Sponsored Coastal Ocean Program - Coastal Ocean Program Measurement and Engineering Research and Standards Other Federal Assistance Aquatic Plant Control Collaborative Research and Development Basic and Applied Scientific Research Military Medical Research and Development Basic Scientific Research International Education - U.S. Colleges and Universities Community Economic Adjustment Basic, Applied, and Advanced Research in Science and Engineering Air Force Defense Research Sciences Program Mathematical Sciences Grants Program Research and Technology Development Other Federal Assistance Community Development Block GrantslEntitlement Grants (ESCC) Community Outreach Partnership Center Program Other Federal Assistance Fish and Wildlife Management Assistance Cooperative Endangered Species Conservation Fund Wildlife Conservation and Appreciation Assistance to State Water Resources Research Institutes Earthquake Hazards Reduction Program U.S. Geological Survey - Research and Data Acquisition Historic Preservation Fund Grants-In-Aid National Historic Landmark Outdoor Recreation - Acquisition, Development and Planning National Center for Preservation Technology and Training Other Federal Assistance Law Enforcement Assistance - FBI Advanced Police Training 10.224 $ 10.302 10.303 10.500 10559 10565 10.652 10.664 10.902 10.961 10.XXX II 113 11.303 11.313 11.417 11.420 11.431 11.438 11.464 11.478 11.609 I1.XXX 12.100 12.114 12.300 12.420 12.431 12.550 12600 12.630 12.800 12.901 12910 12.XXX 14.218 14.511 14 XXX 15.608 15.615 15.617 15.805 15.807 15.808 15.904 15.912 15.916 15.923 15.XXX 16.300 36,760 482,952 556,384 10,262,326 13,085 -71 875.018 337,258 6.178 24,509 2,630,038 48,169 I 838.461 998,693 47,319 44,408 25.477 263,298 126,656 161,031 6.419,306 5,741,382 91,508 9,591,879 194,532 150,636 163,112 85,522 386,096 6,032,016 14,642 2,490,494 85,077,565 -372 939 273,138 9,816 11,642 63,150 160,011 105,135 257,588 54,229 3,000 23,647 1,829 1,186,126 71,857 NO"lMO"lETARY EXPENDITURES E - 51 Schedule of Cluster Programs For the Fiscal Year Ended June 30, 2002 CFDA NUMBER MONETARY EXPENDITURES Research and Development Cluster (R) National Institute for Juvenile Justice and Delinquency 16.542 Prevention $ National Institute of Justice WEB. DuBois Fellowship Program 16.566 Other Federal Assistance 16.XXX Job Training Partnership Act 17.250 Other Federal Assistance 17.XXX College and University Partnerships Program 19.405 College and University Affiliations Program 19.406 Other Federal Assistance 19 XXX Other Federal Assistance 20.XXX Other Federal Assistance 2 LXXX Other Federal Assistance 39. XXX Aerospace Education Services Program 43001 Technology Transfer 43002 Other Federal Assistance 43.XXX Promotion of the Arts - Grants to Organizations 45.024 and Individuals Promotion of the Humanities - Federal/State Partnership 45.129 Promotion of the Humanities - Challenge Grants 45.130 Promotion of the Humanities - Education Development and 45.162 Demonstration Other Federal Assistance 45.XXX Engineering Grants 47.041 Mathematical and Physical Sciences 47049 Geosciences 47.050 Computer and Information Science and Engineering 47.070 Biological Sciences 47.074 Social, Behavioral, and Economic Sciences 47.075 Education and Human Resources 47.076 Polar Programs 47.078 Other Federal Assistance 47.XXX Business Development Assistance to Small Business 59,005 Small Business Development Center 59.037 Other Federal Assistance 59.XXX Other Federal Assistance 64 XXX Water Quality Management Planning 66.454 Nonpoint Source Implementation Grants 66.460 Environmental Protection - Consolidated Research 66.500 Surveys, Studies, Investigations and Special Purpose Grants 66606 Training and Fellowships for the Environmental 66.607 Protection Agency Pollution Prevention Grants Program 66.708 Pesticide Environmental Stewardship - Regional Grants 66.714 Other Federal Assistance 66. XXX Office of Science Financial Assistance Program 81.049 Conservation Research and Development 81.086 Renewable Energy Research and Development 81.087 Office of Science and Technology for Environmental Management 8Ll04 University Nuclear Science and Reactor Support 81114 Science and Engineering Training to Support Diversity-Related Programs 81116 Other Federal Assistance 8 LXXX Undergraduate International Studies and Foreign Language Programs 84016 International Research and Studies 84.017 125260 23,592 IILl43 62.182 1,230,725 -850 144,576 2.408,611 2,777,911 -17 2.111.98 I 140,543 5,000 13,607,768 24,891 41,701 2,018 15,417 385,840 13,296,055 5,864,423 3,520,323 8,254,047 5,453,785 2,010,625 5,133,319 151,367 11,853,913 155 2,386,091 172,134 1,420,996 1,139 63,065 1,992,801 166,613 99,123 26,090 7,879 1,685,205 3,098,069 216,241 48,049 1,586 24,821 45,898 17,297,892 80,205 87,984 NONMONETARY EXPENDITURES E - 52 Georgia. ScheduLe of CLuster Programs For the fiscaL Year Ended June 30. 2002 Research and Development Cluster (R) International: Overseas - Group Projects Abroad International: Overseas - Doctoral Dissertation Special Education - Innovation and Development Special Education - Grants to States (SEC) Higher Education - Institutional Aid Federal Work-Study Program (SFA) TRIO - Student Support Services (TRIO) TRIO - Talent Search (TRIO) TRIO - Upward Bound (TRIO) TRIO - Educational Opportunity Centers (TRIO) Fund for the Improvement of Postsecondary Education Rehabilitation Long-Term Training National Institute on Disability and Rehabilitation Research Graduate Assistance in Areas of National Need Rehabilitation Services Demonstration and Training - Special Demonstration Programs Rehabilitation Training - State Vocational Rehabilitation Unit In-Service Training Eisenhower Professional Development State Grants National Institute on Student Achievement, Curriculum, and Assessment Eisenhower Regional Mathematics and Science Education Consortia Special Education - Research and Innovation to Improve Services and Results for Children with Disabilities Special Education - Personnel Preparation to Improve Services and Results for Children with Disabilities Special Education - Technology and Media Services for Individuals with Disabilities Teacher Quality Enhancement Grants Learning Anytime Anywhere Partnerships Preparing Tomorrow's Teachers to Use Technology Early Childhood Educator Professional Development Other Federal Assistance National Historical Publications and Records Grants Nation Family Caregiver Support Program Health Disparities Grants in Minority Health Food and Drug Administration - Research Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Maternal and Child Health Federal Consolidated Programs Biological Response to Environmental Health Hazards Biometry and Risk Estimation - Health Risks from Environmental Exposures Oral Diseases and Disorders Research Centers for Research and Demonstration for Health Promotion and Disease Prevention Injury Prevention and Control Research and State and Community Based Programs International Cooperative Biodiversity Groups Program Human Genome Research Research Related to Deafness and Communication Disorders Human Health Studies - Applied Research and Development Research and Training in Alternative Medicine CFDA NUMBER MONETARY EXPENDITURES :'IIONMONETARY EXPENDITURES 84.021 $ 84.022 84.023 84.027 84.031 84.033 84.042 84.044 84.047 84.066 84.116 84.129 84.133 84.200 84.235 84.265 84.281 84.305 84.3 I9 84.324 84.325 84.327 84.336 84.339 84.342 84.349 84.XXX 89.003 93.052 93.100 93.103 93.104 93.110 93.1 13 93.115 93.121 93.135 93.136 93.168 93.172 93.173 93.206 93.213 25,623 612 45,805 219.434 2,725,625 778.850 249.267 678,755 1,047,754 406.284 50,941 130.453 546,833 273,974 159,41 I 17,842 1,466,230 328,668 35,749 333,210 614,907 237,414 755,194 26,301 418,017 84,544 3,645,786 7,223 71,544 50,931 548,048 56,565 17,344 270,700 15,548 661,687 314,545 1,178,444 112,910 332,568 811,070 10,442 311,170 E - 53 Schedule of Cluster Programs For the Fiscal Year Ended June 30, 2002 CFDA NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES Research and Development Cluster (R) National Research Service Awards - Health Services Research 93.225 Training $ Research on Healthcare Costs, Quality and Outcomes 93.226 Consolidated Knowledge Development and Application (KD&A) Program 93230 Abstinence Education 93.235 Mental Health Research Grants 93242 Occupational Safety and Health Research Grants 93262 Immunization Grants 93.268 Alcohol National Research Service Awards for 93272 Research Training Alcohol Research Programs 93273 Drug Abuse National Research Service Awards 93.278 for Research Training Drug Abuse Research Programs 93.279 Centers for Disease Control and Prevention - Investigations 93283 and Technical Assistance Comparative Medicine 93.306 Advanced Education Nurse Traineeships 93358 Nursing Research 93.361 Biomedical Technology 93.371 Minority Biomedical Research Support 93.375 Cancer Cause and Prevention Research 93.393 Cancer Treatment Research 93395 Cancer Biology Research 93.396 Cancer Research Manpower 93398 Cancer Control 93399 Promoting Safe and Stable Families 93.556 Child Care and Development Block Grant (Ccq 93.575 Refugee and Entrant Assistance - Targeted Assistance 93.584 Family Violence Prevention and Services/Grants for Battered 93592 Women's Shelter - Discretionary Grants Head Start 93.600 Developmental Disabilities Basic Support and 93.630 Advocacy Grants Developmental Disabilities Projects of National Significance 93631 Developmental Disabilities University Affiliated Programs 93.632 Social Services Research and Demonstration 93.647 Child Welfare Services Training Grants 93.648 Child Abuse and Neglect State Grants 93.669 Cell Biology and Biophysics Research 93821 Health Careers Opportunity Program 93.822 Heart and Vascular Diseases Research 93.837 Lung Diseases Research 93838 Blood Diseases and Resources Research 93.839 Arthritis, Musculoskeletal and Skin Diseases Research 93.846 Diabetes, Endocrinology and Metabolism Research 93.847 Digestive Diseases and Nutrition Research 93.848 Kidney Diseases, Urology and Hematology Research 93.849 Extramural Research Programs in the Neurosciences and 93.853 Neurological Disorders Allergy, Immunology and Transplantation Research 93.855 Microbiology and Infectious Diseases Research 93.856 87,874 187,416 23,243 19.610 3,885.515 275,907 49,167 155,988 735.487 42,683 2,524,897 294,023 471,945 14,611 88,056 836,094 22,267 420,769 709,407 617,879 20,977 58,960 123,195 175,587 7,303 30,108 8,821 339,233 56,975 25,544 137,883 73,675 2,910 8,301,442 15,238 7,194,283 679,850 4,478.478 125,874 699,813 1,667,186 636,725 2,263,960 1,895,817 5,758,599 E - 54 Schedule of Cluster Programs For the Fiscal Year Ended June 30, 2002 Research and Development Cluster (R) Pharmacology, Physiology, and Biorelated Chemistry Research Genetics and Developmental Biology Research and Research Training Population Research Center for Research for Mothers and Children Aging Research Vision Research Minority Access to Research Careers Resource and Manpower Development in the Environmental Health Sciences Scholarships for Health Professions Students from Disadvantaged Backgrounds (SFA) Center for Medical Rehabilitation Research Fogarty International Research Collaboration Award HIV Demonstration. Research, Public and Professional Education Projects Epidemiologic Research Studies of Acquired Immunodeficiency Syndrome (AIDS) and Human Immunodeficiency Virus (HIV) Infection in Selected Population Groups Other Federal Assistance Retired and Senior Volunteer Program Leam and Serve America - Higher Education AmeriCorps Planning and Program Development Grants Foster Grandparent Program (FGCC) Senior Companion Program (FGCC) Special Education Cluster (SEC) Special Education - Grants to States Special Education - Preschool Grants Student Financial Aid Cluster (SFA) Federal Supplemental Educational Opportunity Grants Federal Family Education Loans Federal Work-Study Program Federal Perkins Loan Program Federal Capital Contributions Federal Pell Grant Program Federal Direct Loan Health Professions Student Loans, Including Primary Care Loans/Loans for Disadvantaged Students Nursing Student Loans Scholarships for Students of Exceptional Financial Need Scholarships for Health Professions Students from Disadvantaged Backgrounds CFDA "'liMBER MONETARY EXPENDITllRES NONMO",ETARY EXPENDITl'RES 93.859 $ 93.862 93.864 93.865 93.866 93.867 93.880 93894 93.925 93929 93.934 93.941 93943 3,080.789 1,740,866 406.246 5,428.004 1,748.844 2,213.388 26.481 82.547 59.063 208,603 59.218 206,270 93.XXX 94.002 94.005 94.006 94.007 94.01 I 94.016 $ 921,751 9,530,399 110,045 11,359 19,722 196,262 251.040 86.818 349,704,441 84.027 $ 84.173 $ 158.294,639.00 9,926,030.00 168,220,669.00 84.007 $ 84.032 84.033 84.038 84.063 84.268 93.342 93364 93.820 93.925 $ 7,509,066 45,111,030 $ 8,992,787 597.466 169,858,406 269,509,158 -667,014 24,185 9,062 198,149 501,142,295 $ 1,430,571,000 37,786.341 2,427,510 1,252,069 1,472,036,920 E - 55 Schedule of Cluster Programs For the fiscaL Year Ended June 30, 2002 TRIO Cluster (TRIO) TRIO - Student Support Services TRIO - Talent Search TRIO - Upward Bound TRIO - Educational Opportunity Centers McNair Post-Baccalaureate Achievement WIA Cluster (WIA) WIA Adult Program WIA Youth Activities WIA Dislocated Workers eFDA NUMBER MONETARY EXPENDITURES NONMONETARY EXPENDITURES 84042 $ 84044 84047 84.066 84.217 $ 2,020,865 1,416,136 2,963,259 965,941 410,681 7,776,882 17.258 $ 17.259 17.260 $ 258,857 1,305,523 147,696 I,712,076 E - 56 S;;UMMARY ScHEDULE OF PRIOR YEAR FINDINGS AND QuESTIONED ~ (This page intentionally left blank) Summary ScheduLe of Prior Year Findings and Questioned Costs For the FiscaL Year Ended June 30, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS COMMENTS PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Department ofAdministrative Services FS-40 I-00-0 I Further Action Not Warranted FS-40 1-00-02 See Georgia Technology Authority FS-40 I-0 I-0 1 Unresolved See Comments - Page F-ll Department ofInsurance FS-408-0 1-0 1 Previously Reported Corrective Action Implemented FS-408-0 1-02 Previously Reported Corrective Action Implemented FS-408-0 1-03 Previously Reported Corrective Action Implemented Department ofEducation FS-414-00-06 Further Action Not Warranted FS-414-0 1-0 1 Partially Resolved See Comments - Page F-11 FS-414-0 1-02 Partially Resolved See Comments - Page F-l1 Department ofHuman Resources FS-427-00-01 Further Action Not Warranted FS-427-01-01 Previously Reported Corrective Action Implemented FS-427-01-02 Previously Reported Corrective Action Implemented Judicial Branch FS-430-0 1-0 1 Previously Reported Corrective Action Implemented FS-430-0 1-04 Previously Reported Corrective Action Implemented Department ofLabor FS-440-0 1-02 Unresolved See Comments - Page F-14 FS-440-0 1-03 Unresolved See Comments - Page F-15 Department ofNatural Resources FS-462-00-01 Further Action Not Warranted FS-462-0 1-0 1 Partially Resolved See Comments - Page F-15 Department ofPublic Safety FS-466-0 1-04 Previously Reported Corrective Action Implemented FS-466-0 1-05 Partially Resolved See Comments - Page F-16 Department ofCorrections FS-467-00-01 Further Action Not Warranted FS-467-0 1-0 1 Partially Resolved See Comments - Page F-16 FS-467-01-02 Previously Reported Corrective Action Implemented Office ofSchool Readiness FS-414-00-04 Previously Reported Corrective Action Implemented FS-469-0 1-0 1 Previously Reported Corrective Action Implemented Board ofRegents of the University System ofGeorgia FS-472-01-02 Further Action Not Warranted FS-472-01-03 Further Action Not Warranted Department ofRevenue FS-474-00-01 Further Action Not Warranted FS-474-00-02 Further Action Not Warranted FS-474-00-03 Further Action Not Warranted FS-474-01-01 Previously Reported Corrective Action Implemented FS-474-01-02 Partially Resolved See Comments - Page F-17 FS-474-01-03 Unresolved See Comments - Page F-17 F-5 Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS Georgia Student Finance Commission FS-476-0 1-0 I Previously Reported Corrective Action Implemented FS-476-01-02 Previously Reported Corrective Action Implemented FS-476-01-04 Previously Reported Corrective Action Implemented FS-476-01-07 Partially Resolved FS-476-0 1-09 Previously Reported Corrective Action Implemented Department o/Transportation FS-484-00-02 Previously Reported Corrective Action Implemented FS-484-0 1-01 Previously Reported Corrective Action Implemented Georgia Institute o/Technology FS-503-0 1-01 Previously Reported Corrective Action Implemented University 0/Georgia FS-518-0 1-0 1 Previously Reported Corrective Action Implemented FS-518-0 1-02 Previously Reported Corrective Action Implemented Albany State University FS-521-01-01 Previously Reported Corrective Action Implemented Clayton College and State University FS-528-00-01 Further Action Not Warranted FS-528-0 1-0 1 Partially Resolved Fort Valley State University FS-533-0 1-05 Unresolved Georgia Southern University 539-96-01 Partially Resolved FS-539-00-01 Previously Reported Corrective Action Implemented FS-539-01-01 Previously Reported Corrective Action Implemented Kennesaw State University 543-96-01 Previously Reported Corrective Action Implemented Savannah State University FS-548-0 1-0 I Partially Resolved Atlanta Metropolitan College 561-96-01 Unresolved 561-96-02 Unresolved Floyd College FS-573-97-02 Unresolved Georgia Military College FS-590-00-02 Further Action Not Warranted FS-590-01-01 Previously Reported Corrective Action Implemented West Georgia Technical College FS-819-00-02 Further Action Not Warranted FS-819-0 1-02 Previously Reported Corrective Action Implemented Atlanta Technical College FS-823-00-01 Further Action Not Warranted FS-823-0 1-0 1 Previously Reported Corrective Action Implemented Augusta Technical College FS-824-97-02 Partially Resolved COMMENTS See Comments - Page F-17 See Comments - Page F-18 See Comments - Page F-19 See Comments - Page F-20 See Comments - Page F-20 See Comments - Page F-23 See Comments - Page F-23 See Comments - Page F-24 See Comments - Page F-24 F-6 Georgia. Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS DeKalb Technical College FS-830-00-01 Further Action Not Warranted FS-830-0 1-0 1 Partially Resolved Appalachian Technical College FS-840-00-0 1 Previously Reported Corrective Action Implemented Georgia Public Telecommunications Commission FS-977-01-01 unresolved Georgia Technology Authority FS-40 1-00-02 Previously Reported Corrective Action Implemented Northlvest Georgia Regional Educational Service Agency FS-8504-00-0 I Further Action Not Warranted FS-8504-0 1-0 1 Previously Reported Corrective Action Implemented North Georgia Regional Educational Service Agency FS-8524-00-03 Previously Reported Corrective Action Implemented FS-8524-0 1-02 Previously Reported Corrective Action Implemented AIetropolitan Regional Educational Service Agency FS-8564-0 1-0 I Unresolved West Georgia Regional Educational Service Agency FS-8604-00-01 Further Action Not Warranted FS-8604-0 1-0 1 Unresolved Oconee Regional Educational Service Agency FS-8664-00-01 Further Action Not Warranted FS-8664-0 1-0 I Unresolved Chattahoochee-Flint Regional Educational Service Agency FS-8724-00-01 Further Action Not Warranted FS-8724-0 1-0 1 Unresolved Heart o/Georgia Regional Educational Service Agency FS-8764-00-01 Further Action Not Warranted FS-8764-0 1-0 I Unresolved First District Regional Educational Service Agency FS-8804-00-01 Further Action Not Warranted FS-8804-01-01 Further Action Not Warranted COMMENTS See Comments - Page F-25 See Comments - Page F-26 See Comments - Page F-27 See Comments - Page F-27 See Comments - Page F-28 See Comments - Page F-28 See Comments - Page F-28 See Comments - Page F-28 F-7 Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 3D, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS Department 0/ Education FA-414-00-01 Further Action Not Warranted FA-414-00-04 Further Action Not Warranted FA-414-0 I -0 1 Partially Resolved FA-414-01-02 Unresolved FA-414-01-03 Unresolved Department o/Technical and Adult Education FA-415-99-02 Further Action Not Warranted * Department o/Community Health FA-419-01-01 Previously Reported Corrective Action Implemented Department 0/Human Resources FA-427-00-01 Further Action Not Warranted FA-427-00-02 Further Action Not Warranted FA-427-00-03 Further Action Not Warranted FA-427-00-04 Further Action Not Warranted FA-427-0 1-01 Further Action Not Warranted FA-427-01-02 Further Action Not Warranted FA-427-01-03 Further Action Not Warranted FA-427-01-04 Previously Reported Corrective Action Implemented Office o/School Readiness FA-414-00-04 Further Action Not Warranted FA-469-01-01 Partially Resolved Department o/Transportation FA-484-01-01 Previously Reported Corrective Action Implemented * Georgia Institute o/Technology FA-503-01-02 Previously Reported Corrective Action Implemented FA-503-01-03 Previously Reported Corrective Action Implemented FA-503-01-04 Previously Reported Corrective Action Implemented FA-503-01-05 Previously Reported Corrective Action Implemented * University 0/Georgia FA-518-0 1-0 1 Previously Reported Corrective Action Implemented FA-518-01-02 Previously Reported Corrective Action Implemented Albany State University FA-521-00-03 Partially Resolved FA-521-0 1-0 1 Unresolved Augusta State University FA-527-99-01 Previously Reported Corrective Action Implemented FA-527-01-01 Previously Reported Corrective Action Implemented Columbus State University FA-530-00-01 Previously Reported Corrective Action Implemented Fort Valley State University 533-96-14 Further Action Not Warranted 533-96- 15 Further Action Not Warranted 533-96-16 Further Action Not Warranted 533-96-18 Further Action Not Warranted 533-96-19 Further Action Not Warranted F-8 COMMENTS See Comments - Page F-1 I See Comments - Page F-12 See Comments - Page F-12 See Comments - Page F-13 See Comments - Page F-13 See Comments - Page F-13 See Comments - Page F-13 See Comments - Page F-14 See Comments - Page F-14 See Comments - Page F-14 See Comments - Page F-16 See Comments - Page F-18 See Comments - Page F-18 Summary ScheduLe of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS FA-533-98-02 Further Action Not Warranted FA-533-98-03 Further Action Not Warranted FA-533-98-04 Further Action Not Warranted FA-533-98-05 Further Action Not Warranted FA-533-98-06 Further Action Not Warranted FA-533-98-07 Further Action Not Warranted FA-533-98-08 Further Action Not Warranted FA-533-98-09 Further Action Not Warranted FA-533-99-01 Further Action Not Warranted FA-533-99-02 Further Action Not Warranted FA-533-99-03 Further Action Not Warranted FA-533-99-04 Further Action Not Warranted FA-533-99-05 Further Action Not Warranted FA-533-99-06 Further Action Not Warranted FA-533-99-07 Further Action Not Warranted FA-533-99-08 Further Action Not Warranted FA-533-00-01 Further Action Not Warranted FA-533-00-02 Further Action Not Warranted FA-533-00-03 Further Action Not Warranted FA-533-00-04 Further Action Not Warranted FA-533-00-05 Further Action Not Warranted FA-533-01-01 Unresolved FA-533-01-02 Previously Reported Corrective Action Implemented FA-533-01-03 Previously Reported Corrective Action Implemented FA-533-01-04 Previously Reported Corrective Action Implemented FA-533-01-05 Unresolved FA-533-01-06 Unresolved Savannah State University FA-548-99-07 Previously Reported Corrective Action Implemented FA-548-00-0 1 Previously Reported Corrective Action Implemented FA-548-00-03 Previously Reported Corrective Action Implemented FA-548-00-04 Further Action Not Warranted FA-548-00-06 Previously Reported Corrective Action Implemented FA-548-0 1-0 1 Previously Reported Corrective Action Implemented FA-548-0I-02 Partially Resolved FA-548-0 1-03 Previously Reported Corrective Action Implemented FA-548-0 1-04 Unresolved FA-548-01-05 Partially Resolved FA-548-01-06 Partially Resolved FA-548-01-07 Partially Resolved Southern Polytechnic State University FA-550-00-04 Partially Resolved Atlanta Metropolitan College 561-96-01 Unresolved 561-96-02 Unresolved 561-96-04 Partially Resolved FA-561-0 1-0 1 Previously Reported Corrective Action Implemented F-9 COMMENTS See Comments - Page F-19 See Comments - Page F-19 See Comments - Page F-19 See Comments - Page F-20 See Comments - Page F-21 See Comments - Page F-21 See Comments - Page F-21 See Comments - Page F-22 See Comments - Page F-23 See Comments - Page F-23 See Comments - Page F-23 See Comments - Page F-24 Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 FINDING CONTROL NUMBER AUDITEE RESPONSE/STATUS Okefenokee Technical College FA-818-01-01 Previously Reported Corrective Action Implemented Augusta Technical College FA-824-98-01 Previously Reported Corrective Action Implemented FA-824-99-01 Previously Reported Corrective Action Implemented Chattahoochee Technical College 827-95-03 Partially Resolved 827-96-03 Partially Resolved FA-827-97-03 Partially Resolved DeKalb Technical College FA-830-98-0 I Previously Reported Corrective Action Implemented Savannah Technical College FA-841-98-0 I Previously Reported Corrective Action Implemented FA-84 I-98-02 Partially Resolved * Georgia Higher Education Assistance Corporation FA-918-0 1-0 I Previously Reported Corrective Action Implemented FA-918-0 1-02 Previously Reported Corrective Action Implemented FA-918-0 1-03 Previously Reported Corrective Action Implemented North Georgia Regional Educational Service Agency FA-8524-00-03 Unresolved FA-8524-0 1-0 I Unresolved FA-8524-0 1-02 Previously Reported Corrective Action Implemented COMMENTS See Comments - Page F-24 See Comments - Page F-24 See Comments - Page F-25 See Comments - Page F-25 See Comments - Page F-25 See Comments - Page F-26 See Comments - Page F-26 See Comments - Page F-26 See Comments - Page F-27 *Audit Follow-up was performed by Other Auditors. F-IO Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS DEPARTMENT OF ADMINISTRATIVE SERVICES Finding Control Number: FS-401-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System We concur with the finding. Transfer of assets between DOAS (40100) to GTA (98000) and the new DOAS (40300) has been substantially completed, pursuant to the Governor's Executive Order of May 24, 2001 which states in part "That the responsibility for providing information technology and telecommunications services to state agencies be transferred to the Georgia Technology Authority including all associated positions, equipment and resources effective July 1,2001". The entire Asset Management Group with responsibilities over General Fixed Asset Inventory has also been transferred to GTA effective July 1, 2001. The GTA Asset Management Group has completed the initial reconciliation of assets to be maintained by DOAS including those assets that have been surplused and not removed from inventory. Note, assets remaining with DOAS 40100 will be physically inventoried and then transferred to the new business unit Agency 40300. Any assets unaccounted for will remain in the old business unit Agency 40100 to be disposed as appropriate. DOAS is currently conducting an agency-wide inventory of assets that are remaining in the old reporting unit of 40100. As the assets are verified, a new asset ID is assigned in the new DOAS Agency 40300 along with a new location address and custodian. It is anticipated that the physical inventory of the new reporting unit (40300) will be completed by December 31,2002. DEPARTMENT OF EDUCATION Finding Control Number: FS-414-01-0l EXPENDITURES/LIABILITIESIDISBURSEMENTS Information Systems Not Accessible to Employees and Not Properly Documented We concur with this finding. Department personnel have discussed with personnel from the Legislative Budget Office the deficiencies sited in the finding and requested funds to develop additional software programs and operator manual so department personnel can operate the QBE allotment and payment system independent of the contractors that developed the system. Finding Control Number: FS-414-01-02 GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System See our corrective action/responses to finding number FA-414-01-01 in the Prior Year Federal Awards Findings and Questioned Costs. Finding Control Number: FA-414-01-01 EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System 1) Reconciliation of equipment for this department is conducted by the following: All purchase orders (PO) are screened for proper accountability in PeopleSoft's Asset Management for alI equipment purchases for the Department. All incorrect expense account numbers are emailed to the initiator of the PO for correction: the Agency Procurement Officer is carbon copied (cc:) on the email. A copy of the PO's lines and distribution are printed by PrintScreen on the computer. If equipment is under $1,000.00 and is not accounted for on Asset Management, a green Property of Decal is mailed to the property manager of the unit that initiated the PO. If the equipment is $1,000.00 or greater, or if under $1,000.00 but is deemed to be accounted for, the copy will be kept until the signed PO is received in this office for generating the DE Form 0513, Receipt of F-ll Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Equipment form. This equipment will have the DOE barcode decal affixed. When the DE Form 0513 is received from the unit that generated the PO, it is entered into the DOE Property System with the costs that are reflected on the PO. These costs are checked against the PO's Receiving Report when received in this office prior to sending to DOE Accounting Services for payment. 2) References #00183061, Dell Computer Corp, PO 41400-652-0000026777, showed $44,022.00 on Query OAP005 and Report AM506 indicated $48,857.75. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The twenty-nine Dell Optiplex GX400 Computers, that were originally acquired on 06/26/2001 at $1,684.75 each, was later changed to $1,518.00 each by Dell Invoice received in this office on 07/0612001 enroute to Accounting Services, for a total of $44,022.00 on Asset Management which agrees with Query OAP005. No audit exception exists. Reference #00158803, Apple Computer Corp, PO 41400-053-0000026141, showed $12,204.00 on Query OAP005 and Report AM506 indicated $10,612.00. Asset Management AM506 shows only the Acquired Cost: not Adjusted Cost. There was no change in Cost within Asset Management. However, the PO Price changed for Line Item 1-1, 2-1, and 3-1, due and Apple Invoice in this office on 04/0612001 enroute to Accounting Services, reducing original cost from $1,368.00 to $1,169.00 at Line Item 1-1, $4,047.00 at Line Item 2-1, and $6,192.00 to $5,396.00 at line Item 3-1, for a total of $10,612.00. The audit exception exists with Accounting Services not applying the discounts to their payment to Apple Computer Corp. No audit exception exists in Asset Management. Physical Inspection: 1) Failure by unit property manager to properly account for their inventory whether the item was moved by an employee of the unit or Technology Services without a paper trail to DOE Property Control. 2) Failure by unit property manager to properly account for their inventory whether the item was moved by an employee of the unit or Technology Services without a paper trail to DOE Property Control. 3) A unit property manager who fails to properly inventory equipment can result in equipment being indicated as "missing". Most often, this occurs when inventories are completed quickly. Finding Control Number: FA-414-01-02 SUBRECIPIENT MONITORING Approval for Improper Expenditures We concur with this finding. We agree with the recommendation that the United States Department of Education review this matter to determine the manner in which the questioned costs should be resolved. We have been pursuing this avenue since September 2001. A letter of supporting information was sent to the United States Department of Education, dated September 4, 2001, regarding the issues raised in the audit finding. We have subsequently spoken with representatives of the United States Department of Education and are anxiously awaiting a response from this agency. Finding Control Number: FA-414-01-03 SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period We concur with this finding. The Department of Education is responsible for tracking and reviewing the audits oflocal units of administration (LUA), a term used to identify boards of education. Because LUAs receive a majority of their funding from the state, the Georgia Department of Audits and Accounts is required by state law to audit the LUAs. Currently, the LUAs are audited after state agencies, commissions, etc., and for that reason and due to the large number of LUAs audited, the Department of Audits and Accounts has been unable to complete the audits in the time period F-12 Auditee's Response Summary ScheduLe of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30,2002 AUDITEE'S COMMENTS required by OMB Circular A-133. The U.S. Department of Education is aware of this problem and realizes that the Department of Audits and Accounts is working towards a viable resolution to the finding in the near future. Effective January 2002, the Department of Audits and Accounts reorganized in an effort to address this matter and has adopted a plan to meet OMB Circular A-133 deadlines for fiscal year 2004 LUA audits. DEPARTMENT OF COMMUNITY HEALTH Finding Control Number: FA-419-01-01 REPORTING Reports not Properly Reconciled to the Accounting Records Medicaid Cluster Program Medical Assistance Program (CFDA 93.778) State Children's Health Insurance Program (CFDA 93.767) Questioned Cost: $526,974.00 The Georgia Department of Community Health developed and implemented procedures to review and reconcile the quarterly HCFA-64 and HCFA-21 reports to the quarterly amounts in the schedule offederal awards. DEPARTMENT OF HUMAN RESOURCES Finding Control Number: FA-427-00-01 ELIGIBILITY Deficiencies in File Maintenance Temporary Assistance for Needy Families (CFDA 93.558) Questioned Cost: $12,573 .00 Subsequent to the fiscal year under review, the U. S. Department of Health and Human Services (HHS) was paid back for the questioned costs cited in the finding. Finding Control Number: FA-427-00-02 ELIGIBILITY Deficiencies in File Maintenance Child Care Cluster Child Care and Development Block Grant (CFDA 93.575) Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CFDA 93.596) Questioned Cost: $11,768.00 Subsequent to the fiscal year under review, the U. S. Department of Health and Human Services (HHS) was paid back for the questioned costs cited in the finding. Finding Control Number: FA-427-00-03 ELIGIBILITY Deficiencies in File Maintenance Food Stamps (CFDA 10.551) State Administrative Matching Grants for Food Stamp Program (CFDA 10.561) Questioned Cost: $12,946.00 The Federal agency never requested this payment, so no payment was made. Discussions were held between the DHR Funds Management reporting staff and the U.S. Department of Agriculture (USDA). USDA was to bill the Department if repayment was to be required. No billing was received from USDA. F-13 Auditee's Response Summary ScheduLe of Prior Year Findings and Questioned Costs For the fiscaL Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: FA-427-01-01 ELIGIBILITY Deficiencies in File Maintenance Temporary Assistance to Needy Families (CFDA 93.558) Questioned Cost: $ 13,107.00 Subsequent to the fiscal year under review, the U S. Department of Health and Human Services (HHS) was paid back for the questioned costs cited in the finding. Finding Control Number: FA-427-01-02 ELIGIBILITY Deficiencies in File Maintenance Child Care Cluster Child Care and Development Block Grant (CFDA 93.575) Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CFDA 93.596) Questioned Cost: $1,387.00 Subsequent to the fiscal year under review, the U S. Department of Health and Human Services (HHS) was paid back for the questioned costs cited in the finding. Finding Control Number: FA-427-01-03 ELIGIBILITY Deficiencies in File Maintenance Food Stamp Cluster Food Stamps (CFDA 10.551) State Administrative Matching Grants for Food Stamp Program (CFDA 10.561) Questioned Cost: $13,585.00 The Federal agency never requested this payment, so no payment was made. Discussions were held between the DHR Funds Management reporting staff and the US. Department of Agriculture (USDA). USDA was to bill the Department if repayment was to be required. No billing was received from USDA. DEPARTMENT OF LABOR Finding Control Number: FS-440-01-02 CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures We concur with this finding. While the Department's internal procedures required reconciliation after receipt of bank statements and closing of accounts for the month, they did not establish a timeline or due date for completion. The administrative reviews that should have insured completion were negatively impacted by the enormous workloads required for the transfer of the Rehabilitation Services Division of the Department of Human Resources to the Department of Labor effective July 1, 2001. This transfer effectively doubled the size of the Department of Labor and its financial operations, but the work required was accomplished with existing Labor staff. This financial workload has continued to exist through the first half of FY2002 since few financial staff was transferred from the Department of Human Resources. The Department is now addressing this need by increasing staff to adequately support the higher workloads. We feel that this is alsopart of the corrective action needed. In addition, internal controls have been revised to ensure reconciliation of all bank statements are completed by designated accounting personnel within 15 days of receiving the statements and the closing of accounts books for the month. The reconciliations will be presented to the Finance Director for approval. F-14 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS At the time of the reconciliation all variances will be identified and the appropriate journal entry will be recorded in the department's accounting records. However, if variances are bank errors, correspondence to the bank notifying them of the error will be attached to the bank reconciliation. Finding Control Number: FS-440-01-03 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System We concur with this finding. Because the Department had recognized the need for an improved management tool to assist in maintaining equipment inventories in accordance with the provisions of State laws and regulations, we developed and implemented a system using automated reports from the Financial Accounting and Reporting System (FARS) and the Property Management System. Subsequently, after further clarification of what was needed to successfully address this finding, we found this approach to be insufficient to fully reconcile general ledger expenditure accounts with equipment inventories. Our corrective action to provide a proper reconciliation between equipment additions to inventories recorded by the Property Management System and equipment expenditure accounts on the general ledger (SA251O Trial Balance) will be as follows: 1) For State GAAP account codes 016-643-100 Equipment Purchases Greater than $999 (FARS ObjectiSubobject 5010) and 019-643-100 Computer Equipment Purchases Greater than $999 (FARS ObjectiSubobject 5235) which appear on the SA251 0 Report, create a file of class 5 expenditure records by document number, document line number, and dollar amount from the FARS detail transaction file. 2) Create a file of equipment inventory records that meet the statutory definition of $1 000 or more from the Property Management System by document number and dollar amount. 3) Match the records of these two files by document number and produce a comparative report that displays document numbers and amounts. Where the amounts agree, reconciliation has occurred. Where the amounts do not agree, we shall reconcile the differences, which should result from price changes, freight charges, and discounts, by using ad hoc reports. 4) Make corrections to the Property Management System equipment inventory records where original cost amounts don't agree with the SA2510 equipment expenditure accounts. 5) Reconcile the SA2410 equipment expenditure accounts to the SA2510 equipment expenditure accounts; the differences should be resources on order. DEPARTMENT OF NATURAL RESOURCES Finding Control Number: FS-462-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System We concur with this finding. Steps are underway to ensure that all surplus items are removed from the equipment inventory records when the documentation is received and that all inventory items have the proper decal and are recorded in the property management system in accordance with State laws and regulations. In the past year we have reassigned the responsibility of inventory management to another associate within the department. The department is in the process of conducting complete inventories at all office sites throughout the state and making appropriate entries into the asset management system from these inventories. This process (the complete inventories) was started in June 2000. We anticipate all inventories will be complete and the property management system will be accurate and up to date before the end ofFY 2003. F-15 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the FiscaL Year Ended June 30, 2002 AUDITEE'S COMMENTS DEPARTMENT OF PUBLIC SAFETY Finding Control Number: FS-466-01-05 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System The Property Management System maintains information correctly. The information going into the system must be entered correctly however. The Department placed considerable effort to ensure the assets identified in the Property Management System are carried at the correct amount and can be located appropriately. DEPARTMENT OF CORRECTIONS Finding Control Number: FS-467-01-01 EXPENDITURES/LIABILITIESIDISBURSEMENTS Inadequate Accounting Procedures Health Services has developed Accounting Procedures for the processing of vendor payments. These written procedures were implemented April 2, 2002 and will be updated November 1, 2002. Changes will include: tighter controls over authorization of payments, random checks to ensure accuracy of drug invoices (drugs submitted for reimbursement and mathematical accuracy of claim) and review of Journal Vouchers by supervisory personnel. In addition, a copy of the GDC Drug Formulary has been provided to the Administrative Operations Coordinator and Assistant Administrator. The Drug Formulary will be referenced in the written procedures. Health Services continues to work with the vendors and staff in processing of payments to ensure that supporting documentation and computations are reviewed according to the established Accounting Procedures. Health Services will continue to produce and implement a more efficient reconciliation process. Health Services and the Budget Office are working together to track payments and to ensure payments to the vendors are made according to the contractual agreements. OFFICE OF SCHOOL READINESS Finding Control Number: FA-469-01-01 SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received and Not Followed-up on Deficiencies Within the Required Time Period We concur with this finding. The Office of School Readiness is responsible for tracking and reviewing the audits of its subrecipients most of which are local units of administration (LUA), a term used to identify boards of education. Because LUAs receive a majority of their funding from the state, the Georgia Department of Audits and Accounts is required by state law to audit the LUAs. Currently, the LUAs are audited after state agencies, commissions, etc., and for that reason and due to the large number of LUAs audited, the Department of Audits and Accounts has been unable to complete the audits in the time period required by OMB Circular A-133. The U.S. Department of Agriculture is aware of this problem, and realizes that the Department of Audits and Accounts is working towards a viable resolution to the finding in the near future. Effective January 2002, the Department of Audits and Accounts reorganized in an effort to address this matter and has adopted a plan to meet OMB Circular A-133 deadlines for fiscal year 2004 LUA audits. F-16 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS DEPARTMENT OF REVENUE Finding Control Number: FS-474-01-02 REVENUE/RECEIVABLES/RECEIPTS Deficiencies in the State Revenue Collections Fund (Overall) The Department implemented a PeopleSoft revenue collections system on July I, 2001. I) Deficiency number 1 - Previously reported corrective actions implemented 2) Deficiency number 2 - Previously reported corrective actions implemented 3) Deficiency number 3 - Previously reported corrective actions partially resolved. Policies and procedures have been put into place during the current fiscal year. The Sales Tax Division subsidiary ledgers are now being reconciled to the PeopleSoft general ledger. We are currently working with other divisions to address the reconciliation deficiency and similar policies and procedures will be implemented. 4) Deficiency number 4 - The Department recognizes its deficiencies in this area and we are looking into a more feasible and agreeable resolution to the problem. 5) Deficiency number 5 - Policies and procedures have been put into place during the subsequent fiscal year. Mail cash and EFT collections are reconciled daily to the general ledger. Finding Control Number: FS-474-01-03 REVENUE/RECEIVABLES/RECEIPTS Deficiencies in the Income Tax Division Subsidiary Records We concur with this finding. However, the feasibility, practicality and financial responsibility of capturing withholding information for approximately 3 million (+) individual tax returns with present resources would be a shift in the strategic direction of the Department of Revenue. Previously, the Department did a limited manual sampling of comparing business W-2 information to individual tax returns. This sampling indicated extremely low non-compliance. The Department has agreed, within budget restraints, to expand this pilot program to a limited systematic matching of electronic W-2 information to individual filings. GEORGIA STUDENT FINANCE COMMISSION Finding Control Number: FS-476-01-07 GENERAL LEDGER Failure to Reconcile General Ledger to Grant and Scholarships Subsystems The Georgia Student Finance Commission investigated all variances identified in the fiscal year 200 I audit report and made corrections as appropriate by June 30, 2002. In addition, the Scholarships and Grants Division and the Accounting Services Division will place into operations a procedure to ensure that the amounts awarded to students by the institutions and the amounts recorded in the "disbursements by institution" subsystem reconcile to the amounts recorded on the general ledger at the end of the award year. This procedure will be in place and operating as of June 30, 2003. F-17 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the fiscaL Year Ended June 30, 2002 AUDITEE'S COMMENTS ALBANY STATE UNIVERSITY Finding Control Number: FA-521-00-03 SPECIAL TESTS AND PROVISIONS Deficiencies In Student Financial Aid Refund Process Student Financial Aid Cluster Program Questioned Cost: $1,188.75 Management has implemented procedures to ensure that refunds are calculated for all "unofficial withdrawals". Additionally, the U. S. Department of Education was contacted regarding resolution of this finding. Finding Control Number: FA-521-01-01 CASH MANAGEMENT Excessive Cash Balances Student Financial Aid Cluster Program Management will implement procedures to ensure that cash draws do not exceed the University's immediate need. CLAYTON COLLEGE AND STATE UNIVERSITY Finding Control Number: FS-528-01-01 GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Deficiencies in Accounting Procedures Beginning in January 2002, the University replaced employees in the following positions: Director of Business Services, Accounting Manager, Project Coordinator - Accounts Payable, Accountant I, and Budget Analyst. The University, interrupted by conversion to PeopleSoft financial systems, began restoring accounting procedures to ensure appropriate internal control. The University took specific action as follows: General Fixed Assets/Property Management During fiscal year 2002 the University contracted with American Appraisal Association, Inc. to perform a physical inventory and tag equipment to facilitate future inventory control. Conversion to PeopleSoft Financial Systems during fiscal year 2002 and the use of American Appraisal Association values and inventory lists as revised/corrected by University personnel in the conversion completed adjustment of the book value of the inventory. The physical inventory process completed by American Appraisal Association, under contract with the University was insufficient to reconcile the University's reported equipment value to reported values from prior years. The University will complete action as follows to complete reconciliation of the physical equipment inventory to prior year reports: l) The University will complete a thorough comparison of the inventory detail prior to and after conversion to PeopleSoft to complete identification and analysis of variances. 2) The University will complete a physical inventory to validate inventory listings. 3) The University will identify and document variances and attempt to reconcile inventory amounts to prior year reports. 4) The University will make appropriate adjustments to correct reported inventory where required. Target date for completion is June 30, 2003. F-18 Auditee's Response Summary ScheduLe of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS FORT VALLEY STATE UNIVERSITY Finding Control Number: FS-S33-01-0S GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequate Equipment Inventory Records The Office of Auxiliary Services has worked with American Appraisals Associates in the process of completing the current physical inventory of equipment for the conversion to PeopleS oft Financial. The campus inventory staff has completed another physical equipment inventory, making adjustments to the inventory and adding missing decals. Following are control measures implemented by the University to ensure accountability and the use of proper procedures in transferring or disposing of inventory items: 1) Perfonn random monthly inspections of inventory 2) Require institutional fonns to be completed and approved prior to inventory transfers or disposals 3) Designate an individual in each department to maintain the inventory in his or her area 4) Ensure all surplus equipment is properly stored until it is disposed Finding Control Number: FA-S33-01-01 CASH MANAGEMENT Excess Cash Balances When taking into account all Federal Programs that owe funds to the University a deficit balance of Federal funds should exist. Finding Control Number: FA-S33-01-0S REPORTING Expenditures in Excess of Authorization The Pell Grant Program expenditures are being reconciled to identify the student awards that must be increased to justify the expenditure of$9,976.75 over the total Pell Grant for Fiscal Year 2001. The University has responded to the U. S. Department of Education on the audit finding (see letter to the U. S. Department of Education, dated September 25,2002) and will take action based on final determination of the finding. Finding Control Number: FA-S33-01-06 REPORTING Reports Not Reconciled The University has set up procedures for reconciling all financial aid programs, for Fiscal Year 2002, within the three systems: Banner Financial, Banner Student Accounts and the Accounting System. Representatives from all three areas are working together on the reconciling process. The reconciling process for Fiscal Year 2001 will take place during Fiscal Year 2003. The University has responded to the U. S. Department of Education on the audit finding (see letter to the U. S. Department of Education, dated September25, 2002) and will take action based on final determination of the finding. F-19 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 3D, 2002 AUDITEE'S COMMENTS GEORGIA SOUTHERN UNIVERSITY Finding Control Number: 539-96-01 REVENUES/RECEIVABLES/RECEIPTS Student Accounts Receivable Not Supported by Financial Aid Georgia Southern University is following the Board of Regents Policy, Section 704, on collecting fees at student registration and ensuring that allowable exceptions to the Board of Regents' Policy have supporting documentation. Student fee deferments are only granted to students whose fees are guaranteed by an agreement with an outside agency and whose student fees will be paid from approved financial aid. Procedures to collect outstanding accounts receivable balances have been implemented. Georgia Southern University will continue its collection efforts on the outstanding student accounts receivable balances. In addition, to assist in the collection of the accounts, Georgia Southern University has placed a financial record hold on the academic records of students who have outstanding accounts receivable balances. SAVANNAH STATE UNIVERSITY Finding Control Number: FS-548-01-01 ACCOUNTING CONTROLS (OVERALL) Inadequate Separation of Duties Internal control and separation of functions are being addressed in the reorganization of the Office of Student Accounts and Cashiering. The reorganization was completed on December 1, 2002. The University is in the process of preparing a Cash Operations Manual. The following are excerpts from this manual that address the University's stance on this issue. The format of the manual states the University's policy followed by an outlined procedure to ensure adherence to the policy. The expected completion date of this manual is January 31, 2003. Upon completion it will be distributed to all University staff involved in the cash handling process. Separation of Duties Separation of duties is the one internal control which most effectively assures the secure handling of cash. This is attained by having a different individual receive cash, prepare the transmittal, and reconcile the ledger sheets. This allows each person to serve as a control over the others, catching mistakes and preventing the misappropriation of funds. In a small office where separation of duties is difficult, it is imperative that the supervisor review cash operations each day. Finding Control Number: FA-548-01-02 ALLOWABLE COSTS/COST PRINCIPLES Excessive and Improper Expenditures Higher Education - Institutional Aid (CFDA 84.031) We do not concur with this finding. Funds were expended for Image Building activities as approved by the Department of Education. The DOE in its letter of December 7, 2001, has authorized that expenditures incurred due to obligations made prior to June 27, 2001, are allowable. Our office is currently corresponding with the DOE Audit Resolution Department to assist with determinations on these findings. We have submitted several financial records requested by the DOE in support of the questionable expenditures cited in the findings. We anticipate a determination will be reached before the end of the current Fiscal Year June 2003. F-20 ----..._. --_._--- ---_._._-_._--- Georgia Auditee's Response Summary ScheduLe of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: FA-S48-01-04 ELIGIBILITY SPECIAL TESTS AND PROVISIONS Deficiencies in Internal Controls Student Financial Aid Cluster Program Internal control and separation of functions are being addressed in the reorganization of the Office of Student Accounts and Cashiering. The reorganization was completed on December 1,2002. The internal control issue relating to the distribution of checks was addressed in the separation of the Cashier's Office and the Office of Student Accounts. Procedures have been put in place to segregate the duties and limit access to the checks. The theft of funds is still being investigated by the Georgia Bureau of Investigation. The University is in the process of preparing a Cash Operations Manual. The following are excerpts from this manual that address the University's position on this issue. The format of the manual states the University's policy followed by an outlined procedure to ensure adherence to the policy. The expected completion date of this manual is January 31, 2003. Upon completion, it will be distributed to all University staff involved in the cash handling process. Separation of Duties Separation of duties is the one internal control which most effectively assures the secure handling of cash. This is attained by having a different individual receive cash, prepare the transmittal, and reconcile the ledger sheets. This allows each person to serve as a control over the others, catching mistakes and preventing the misappropriation of funds. In a small office where separation of duties is difficult, it is imperative that the supervisor review cash operations each day. Safeguarding of Assets Cash is prone to theft or misplacement. Accordingly, it is important to have internal controls in place to safeguard these assets so that access is limited to authorized personnel only. Finding Control Number: FA-S48-01-0S EQUIPMENT AND REAL PROPERTY Inadequacies in Operation of Property Management System Higher Education - Institutional Aid (CFDA 84.031) I) The University maintains an equipment inventory numbering system that identifies pieces of equipment as Federally funded. With the conversion to the PeopleSoft Asset Management software, we are allocating a field to house the program number. Unfortunately, the software is still not functioning properly to date. We are expecting completion of this project by June 2003. 2) We do not concur with this finding. Equipment mentioned are part of the Title III funded Achievement Lab at the Library and the NROTC Building. Finding Control Number: FA-548-01-06 SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program The University has implemented the following process to ensure refunds and repayments are processed correctly and in a timely manner. F-21 Georgia Auditee's Response Summary ScheduLe of Prior Year Findings and Questioned Costs For the fiscaL Year Ended June 30, 2002 AUDITEE'S COMMENTS Codes were set up in the Banner Student System to identify those students that have never attended class. This code is used to capture students that have unofficially withdrawn from the University. A report is generated from this code by the Registrar and disseminated to the various offices for processing. Students that officially withdraw from the University complete a withdrawal form in the Office of the Vice President for Academic Affairs. This form is then circulated to the various offices for processing. Once the Registrar's Office enters the code and effective date, fees are assessed again which adjusts the charges to the student's account if necessary. The Office of Student Accounts perfonns a calculation to determine if the student has excess funds remaining on their account. This credit balance is analyzed to determine if the funds should be refunded to the student or sent back to the grantor. A refund request is processed to cut a check, if the funds are due to the student. An adjustment fonn is forwarded to the appropriate office to reverse the aid and return the funds, if due back to the grantor. Finding Control Number: FA-548-01-07 PERIOD OF AVAILABILITY Deficit Fund Balances Student Financial Aid Cluster Program Fiscal Year 2000 and 2001 are reconciled for both PELL and Direct Lending Programs. We are working very hard to find an easy way ofreconciling our books with that of the Federal government records for Fiscal Year 1998 and 1999. It has become difficult and time consuming to find records for transactions that occurred prior to the conversion to Banner. Two staff members are working on this project. It is projected that the reconciliation process will be completed by the end of Fiscal Year 2003. The following steps are used in the reconciliation process: 1) Generate financial aid disbursement record from Banner. 2) Generate expenditure history record from accounting (CUFA) system. 3) Generate LOC 732 in the case of Direct Loan and Year to Date Pell government records. 4) Copy these data into flat files and convert it to Excel spreadsheet. 5) Process a three-way match of these records using student social security numbers and/or names. 6) Verify the discrepancies in these three records. Make the necessary adjustments. Some of the errors we identified so far are: a) Adjustments of one Fiscal Year were posted into another year (debit or credit). b) Corrections were not sent to the DOE on time and therefore, loans were not booked. In such circumstances, the loans become institutional loans. The Cashier's Office will establish a receivable account and will attempt to collect. c) Students never attended school but the financial aid was not adjusted, which results in sending back the money to the government. Etc ... F-22 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS SOUTHERN POLYTECHNIC STATE UNIVERSITY Finding Control Number: FA-550-00-04 SPECIAL TESTS AND PROVISIONS Failure to Reconcile Program Reports William D. Ford Federal Direct Loan Program (CFDA 84.286) The University has reconciled the open program years for the William D. Ford Federal Direct Loan Program as follows: 1997-1998 1998-1999 1999-2000 2000-2001 Closed by the LOC (Loan Origination Center) $26,189.44, remaining loans to be booked by the LOC $110,329.75, remaining loans to be booked by the LOC $23,323.00, remaining loans to be booked by the LOC All borrower's additions, adjustments and/or corrections have been identified and reported to the Loan Origination Center (LOC) since February 2002; therefore there is no further action to be taken by the University at this time. In June 2002, the Department of Education suspended electronic transfer of data for prior years; thus requiring the LOC to manually process each borrower's records. This manual process is both labor intensive and time consuming. Once all transactions have been recorded by the LOC, the University will then receive permission from the Department of Education to request reimbursement in the amount of$159,842.19 as noted above. ATLANTA METROPOLITAN COLLEGE Finding Control Number: 561-96-01 FUND EQUITIES REPORTING Deficit Fund Balance In addition to previous unsuccessful efforts made by the College to have the fiscal year 1994 Pell Grant Program deficit in the amount of $34,363.31 funded; on August 15, 2002, the College once more contacted the U. S. Department of Education for resolution and closure to the finding, but no response has been forthcoming. As a result of this and also, based on the length of time this finding has been outstanding, the College will move the deficit balance during the 2003 fiscal year, out of the Sponsored Operations fund group in to the General Operations fund group. Following that, the College will make one more final attempt at collecting the funds directly from the students who were paid these funds and if unsuccessful, the College will then write off the deficit as bad debt at the end of the 2003 fiscal year. Finding Control Number: 561-96-02 FUND EQUITIES REPORTING Deficit Fund Balance In addition to previous unsuccessful efforts made by the College to have the fiscal year 1995 Pell Grant Program deficit in the amount of $64,595.20 funded; on August 15, 2002, the College once more contacted the U. S. Department of Education for resolution and closure to the finding but no response has been forthcoming. As a result of this and also, based on the length of time this finding has been outstanding, the College will move the deficit balance during the 2003 fiscal year, out of the Sponsored Operations fund group in to the General Operations fund group. Following that, the College will make one more final attempt at collecting the funds directly from the students who were paid these funds and if unsuccessful, the College will then write off the deficit as bad debt at the end of the 2003 fiscal year. F-23 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: 561-96-04 REPORTING Incorrect Student Payment Summary Report In addition to previous unsuccessful efforts made by the College to have the 1996 excess Pell Grant expenditures in the amount of $41,529.14 fully funded; on August 15, 2002, the College once more contacted the U. S. Department of Education for resolution and closure to the finding but no response has been forthcoming. As a result of this and also, based on the length of time this finding has been outstanding, the College will move the deficit balance during the 2003 fiscal year, out of the Sponsored Operations fund group in to the General Operations fund group. Following that, the College will make one more final attempt at collecting the funds directly from the students who were paid these funds and if unsuccessful, the College will then write off the deficit as bad debt at the end ofthe 2003 fiscal year. FLOYD COLLEGE Finding Control Number: FS-573-97-02 FUND EQUITIES Deficit Restricted Funds We concur with this finding. The private funding agency has provided funding in the current year earmarked for Nursing. The receivable resulted from nursing scholarships in a prior year. A portion of the current funding will be used to satisfy the prior year receivable. AUGUSTA TECHNICAL COLLEGE Finding Control Number: FS-824-97-02 REVENUES/RECEIVABLES/RECEIPTS Inadequate Accounting Control Procedures The College continues to monitor student receivables. Outstanding receivables are reviewed. Letters are sent to individuals. Student records are not released if a student owes an outstanding balance. Outstanding receivables continue to be pursued. CHATTAHOOCHEE TECHNICAL COLLEGE Finding Control Number: 827-95-03 REPORTING Incorrect Student Payment Summary Report Final reconciliation of the adjustments to be made on the Student Payment Summary Report has been prepared and will be sent to the U. S. Department of Education by June 30, 2003, following procedures in Dear Colleague letter P-97-2. Finding Control Number: 827-96-03 REPORTING Incorrect Student Payment Summary Report The final step of the adjustment process has not been implemented. A final reconciliation of the student accounts must be completed and then sent to the U. S. Department of Education following the guidelines of Dear Colleague letter P-972 by June 30, 2003. F-24 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: FA-827-97-03 REPORTING Incorrect Student Payment Summary Report Amount: $3,612.00 The College must have the student awards certified by the state auditors before submission to the U. S. Department of Education for adjustment. Arrangements will be made to have the certification performed in order to submit the adjustments before June 30, 2003, following the provisions in Dear Colleague letter P-97-2. DEKALB TECHNICAL COLLEGE Finding Control Number: FS-830-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in the Operation of Property Management System DeKalb Technical College has established procedures to ensure that equipment inventories are maintained in accordance with State laws and regulations. These procedures involve weekly, as well as monthly, monitoring of assets acquired. In addition, a monthly reconciliation is performed to further assure that the inventories are properly maintained. SAVANNAH TECHNICAL COLLEGE Finding Control Number: FA-841-98-02 ALLOWABLE COSTS/COST PRINCIPLES Improper Overtime Payments Vocational Education - Basic Grants to States (CFDA 84.048) Questioned Costs: $5,872.00 The Georgia Department of Technical and Adult Education (DTAE) issued us a letter stating that no further action was required by Savannah Technical College. The letter dated January 11,2000, from the Assistant Commissioner ofDTAE Administrative Services has been provided to our auditors. As requested by our auditors, DTAE sent a letter dated March 17, 2000, to the U. S. Department of Education (USDOE) concerning final resolution of this finding. No response has been received from USDOE. Our DTAE office notified USDOE again in March 2002, regarding this unresolved finding. As of yet, no resolution has been made. GEORGIA HIGHER EDUCATION ASSISTANCE CORPORATION Finding Control Number: FA-918-01-01 REPORTING Data Submitted to ED not supported by the Records In this particular case, the Corporation's records were changed to reflect paid in full for this borrower based on information provided by the lender. The Corporation continues to work diligently with all its lenders to improve reporting. The Corporation requires all its lenders to report NSLDS data monthly and it utilizes this data to update the Corporation's database. The U.S. Department of Education's (ED) data quality benchmark for the Corporation's reporting on lender held loans is 95%. In April 2002, the Corporation exceeded that goal and has done so each month thereafter achieving for November 2002 data quality of 98.5%. NSLDS reporting is also a lender program review compliance item for the Corporation's lender reviewer. F-25 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: FA-918-01-02 REPORTING Data Submitted to ED not supported by the Records Procedures are in place to ensure that ED Form 2000 is reviewed for correctness prior to submission. Finding Control Number: FA-918-01-03 REPORTING Loan Not Properly Assigned The Corporation reviewed and corrected all loans with "0%" interest rates in its portfolio and assigned those loans meeting the mandatory assignment criteria to ED. GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION Finding Control Number: FS-977-01-01 REVENUES/RECEIVABLES/RECEIPTS Control over Third Party Tower Rental Georgia Public Broadcasting (GPB) does not concur with this finding. The Executive Director of the Georgia Technology Authority (GTA) in a letter dated January 31,2001, instructed GPB to refrain from efforts to establish new operating leases for non-GPB owned antenna equipment mounted on the transmitter towers. The GTA anticipated including the operation and maintenance of GPB's broadcast towers in the original Converged Communications Outsourcing Project (CCOP). In July 2002 the GTA restructured the CCOP Request for Proposal, and GPB's digital transition was not included as part of the revised bid process. Consequently, GPB became responsible for the maintenance and operations of all of its transmitter towers but not until after FY 2002 had ended. GPB had no alternative during the last half of FY 2001 and all of FY 2002 but to comply with GTA guidelines and suspended all contract negotiations that had been in progress during the early months ofFY 2001. Georgia Public Broadcasting should not be held responsible for this audit finding since the organization was compelled to comply with the directives of the GTA. NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FA-8524-00-03 ALLOWABLE COSTS/COST PRINCIPLES Improper Indirect Cost Expenditures Vocational Education - Basic Grants to States (CFDA 84.048) Amount: $36,608.00 We do not concur with this finding. North Georgia RESA provided enumerable services to Vocational-Technical Education in the areas of State Administration, Leadership, and the Georgia Vocational Staff Development Consortium. The agreed upon and approved rate for providing these services to Vocational-Technical Education was 6.9% of the total grant for State Administration and Leadership, and 7.45% for the Georgia Vocational Staff Development Consortium. The agreed upon rates are documented by signed DE0448 grant budgets. These grant budgets were approved by the RESA official, the Vocational-Technical Education official and the Grants Accounting official. This finding is currently under review by the U.S. Department of Education at the request of the Georgia Department of Education, Vocational-Technical Education Department. F-26 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 30, 2002 AUDITEE'S COMMENTS Finding Control Number: FA-8524-01-01 ALLOWABLE COSTS/COST PRINCIPLES Improper Indirect Cost Expenditures Vocational Education - Basic Grants to States (CFDA 84.048) Amount: $12,628.77 North Georgia RESA provided enumerable services to Vocational-Technical Education in the areas of State Administration, Leadership, and the Georgia Vocational Staff Development Consortium. The agreed upon and approved rate for providing these services to Vocational-Technical Education was 6.9% of the total grant for State Administration and Leadership, and 7.45% for the Georgia Vocational Staff Development Consortium. The agreed upon rates are documented by signed DE0448 grant budgets. These grant budgets were approved by the RESA official, the VocationalTechnical Education official, and the Grants Accounting official. Paragraph three of the audit finding states that, "The GDOE approved rate of 8.56% would have been permitted if the RESA carried out all of the program services and administrative functions for these three program activities instead of merely acting as fiscal agent." In reference to the Georgia Vocational Staff Development Consortium for FYO I, RESA was responsible for all program services and administrative functions. The Executive Director of GVSDC was contracted by RESA. Employees were hired and housed by North Georgia RESA. The website was housed and maintained by RESA. Contracts with staff development providers were entered into on behalf of the consortium by RESA. All financial information for the consortia was maintained by RESA and provided to the board of directors of GVSDC. Currently the Georgia Department of Education has requested a review of this finding by the U.S. Department of Education. METROPOLITAN REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8564-01-01 GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group There was not an available Fixed Asset Accounting program to include fixed assets into the General Ledger. WEST GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8604-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group It is the decision of the Board of Control that West Georgia RESA not address finding control number FS-8604-0 1-0 1 at the present time. The Board encourages the Department of Education to provide leadership and appropriations for RESA's in maintaining the General Fixed Assets Account Group. West Georgia RESA will continue to seek resources to accomplish this task. F-27 Auditee's Response Summary Schedule of Prior Year Findings and Questioned Costs For the Fiscal Year Ended June 3D, 2002 AUDITEE'S COMMENTS OCONEE REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8664-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group The management of a General Fixed Assets Account Group is not an accessible accounting procedure at the present time due to this function being inoperative in our accounting system that is provided and maintained by the Georgia Department of Education (GDOE). With future upgrades to our system this should be a feasible accounting function that would bring our accounting procedures into conformity with Generally Accepted Accounting Principles. However, Oconee Regional Educational Service Agency (RESA) does have an inventory procedure in place to be accountable for all equipment owned by the Agency which includes date acquired, acquisition cost, location, and description. CHATTAHOOCHEE-FLINT REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8724-01-01 GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group We concur with this finding. At the present time we do not intend to address this issue. HEART OF GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8764-01-01 GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group Due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff, the Board has decided not to pursue the recording of general fixed assets on the financial statements. FIRST DISTRICT REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8804-01-01 GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Failure to Maintain General Fixed Assets Account Group Auditor was provided a list of capital assets and a depreciation schedule. F-28 CbRRECTIVE AcrION RESFDNSES TD CuRRENT YEAR FINDINGS AND QuESTIONED 0=Ts (This page intentionally left blank) Georgia Corrective Action Responses to Current Year Findings and Questioned Costs TabLe of Contents For the Fiscal Year Ended June 30, 2002 ENTITY CODE ORGANIZATIONAL UNIT 403 414 419 427 440 466 467 469 472 474 486 503 509 512 518 521 524 528 530 533 548 554 572 573 823 830 918 927 980 8564 8604 8664 8724 8764 Administrative Services, Department of Education, Department of.. Community Health, Department of Human Resources, Department of. Labor, Department of Public Safety, Department of Corrections, Department of School Readiness, Office of Regents of the University System of Georgia, Board of.. Revenue, Department of.. Treasury and Fiscal Services, Office of.. Colleges and Universities Georgia Institute of Technology Georgia State University Medical College of Georgia University of Georgia Albany State University Armstrong Atlantic State University Clayton College and State University Columbus State University Fort Valley State University Savannah State University State University of West Georgia East Georgia College Floyd College Technical Colleges Atlanta Technical College DeKalb Technical College Higher Education Assistance Corporation, Georgia Road and Tollway Authority, State Technology Authority, Georgia Regional Educational Service Agencies Metropolitan Regional Educational Service Agency West Georgia Regional Educational Service Agency Oconee Regional Educational Service Agency Chattahoochee-Flint Regional Educational Service Agency Heart of Georgia Regional Educational Service Agency PAGE NO. F-32 F-32 F-39 F-39 F-44 F-47 F-4 7 F-48 F-49 F-50 F-51 F-52 F-53 F-53 F-54 F-54 F-55 F-56 F-57 F-57 F-60 F-67 F-68 F-68 F-68 F-69 F-70 F-70 F-71 F-73 F-74 F-74 F-74 F-75 F-31 Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 DEPARTMENT OF ADMINISTRATIVE SERVICES Finding Control Number: FS-403-02-01 CAPITAL ASSETS Inadequacies in Operation of Property Management System During the year under review, the Department of Administrative Services operated as two separate business units, the old DOAS (entity code 40100) and the new DOAS (entity code 40300) within the statewide accounting system. This was the result of the Governor's Executive Order of May 24, 2001 which states in part "That the responsibility for providing information technology and telecommunications services to state agencies be transferred to the Georgia Technology Authority including all associated positions, equipment and resources effective July l, 200 1". To this end, all assets in DOAS 40100 had to be inventoried, physically tagged as DOAS 40300 or GTA (entity code 98000), manually deleted by DOAS 40100, and added to entities DOAS 40300 and GTA 98000. Transfer of assets between DOAS (entity code 40100) to GTA (entity code 98000) and the new DOAS (entity code 40300) has been substantially completed at this time and will be complete by the end of FY03. Through FY02 and FY03, DOAS has relied heavily on assistance from the GTA Asset Management Group in tagging, locating and transferring assets to both GTA 98000 and the new DOAS 40300. It should be noted that the entire Asset Management Group with responsibilities over Capital Asset inventory transferred from DOAS to GTA effective July1, 2001. At the time of the transfer, DOAS 40100 maintained three separate inventory systems with approximately 20,000 assets totaling $80 million in value with the majority of these assets being transferred to GTA 98000. DOAS has focused on the new DOAS 40300 and has continued to rely on assistance from GTA Asset Management for the successful transfer of assets from DOAS 40100 to GTA 98000 and DOAS 40300. The division of responsibility for asset management between DOAS and GTA did result in confusion during the Department of Audits review of DOAS assets for FY02. The Department of Audits worked with both GTA and DOAS to find assets assigned to DOAS. As a result of the split, the Department of Audits noted in its finding that twenty-one (21) items totaling $553,703.40 could not be located. In a follow-up meeting with the Department of Audits, DOAS was provided a detail list of twenty-one (21) assets totaling $547,703.40 that made up these items. Upon further review by DOAS it was noted that GTA Asset Management as a part of the transfer of assets had tagged DOAS 40100 assets with DOAS 40300 asset decal numbers and at the time of the review by the Department of Audits these assets had not been transferred to the new DOAS 40300 asset management system. DOAS has subsequently traced eighteen (18) of these assets totaling $525,844.90, verified the asset decal number and transferred the assets from DOAS 40100 to DOAS 40300 or has surplused the asset via assistance from GTA. The review of assets also makes note of three (3) items of equipment were located which were not included in the equipment inventory records. Review of these items discloses that these assets had been tagged by the GTA Asset Management Group with DOAS 40300 tags. These assets were listed on the DOAS 40100 equipment inventory records and had not been transferred to DOAS 40300 at the time of the Department of Audit's review. Since the transfer of assets is substantially complete as of this time, DOAS believes that full control and responsibility of the asset management function for DOAS now solely rests with the new DOAS 40300. DOAS wishes to express its' appreciation to the GTA Asset Management Group and the Department of Audits in the assistance provided for the successful transfer and reconciliation of assets from DOAS 40100 to GTA 98000 and the new DOAS 40300. Contact Person: Charles Petty, Director of Fiscal Services Phone: (404) 657-9430; Fax: (404) 656-6279; E-mail: chpetty@doas.ga.gov DEPARTMENT OF EDUCATION Finding Control Number: FS-414-02-02 EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Contracting Practices We concur with this finding. The DOE is in the process of re-examining its current procedures, and will make any necessary changes. In addition, the department will be Ie-training its staff who handle contract matters. F-32 Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 Contact Person: Scott Austensen, Deputy State Superintendent of Finance and Business Operations Telephone: (404) 656-0816: Fax: (404) 656-0816; E-mail: saustensen@doe.kI2.ga.us Finding Control Number: FS-414-02-03 EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Grant Approval Practice We concur with this finding. The correct amount paid to Richmond County Board of Education for the reading program was $1,010,500.00. This amount was funded with FY 2002 Title I administrative funds. The question was raised about board approval by the Supervisor of the Grants Accounting Unit and he was told by the Associate State Superintendent in charge of the Federal Accountability Unit that the payment was an adjustment to an existing grant that had board approval and the adjustment did not require additional approval. The current State Superintendent is requiring all grant allotments, whether new, amended, or adjusted be approved by the State Board before any payments are made to prevent a reoccurrence of this problem. The purchase of the reading program will also be reviewed by the department Title I personnel to ensure that the purchase met Title I requirements and that appropriate children are being served by the reading program. Contact Person: Grant Rowe, Director Telephone: (404) 656-2497; Fax: (404) 657-5512; E-mail: growe@doe.kI2.ga.us Finding Control Number: FS-414-02-04 EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequacies in Information System Operations, Changes to Applications, Security and Audit Trail Maintenance We concur with this finding. GAORS 1. a) Configuration and Change Management Presently there is an application and process available that documents and controls requests for system changes to the GAORS system as well as all other applications at DOE. This application is the 1/S Request for Services. It is an automated system that creates and tracks all requests from their creation through their final disposition. These requests are initiated by the user community for all their requested modifications and enhancements to the applications. The 1/S Manager, Program Managers, and DBAs can initiate requests for all other system changes. The first step in this process is the creation of the IS request. This first must be approved by the IS Manager. After approval, the Program Manager for the specified system assigns the requests to the appropriate developer. The developers assigned to the request review and analyze the specifications described in the IS request by the initiator. They then make the described modifications and enhancements needed to satisfy the request. Modifications and enhancements are made first in the development environment and unit tested by the developer to ensure compliance with the request and that the changes lead to no inadvertent negative behavior in the existing application. After unit testing is complete, the Program Manager forwards the request to the DBA for code migration to the test system. Once the code is in test system, and after DBA and developer signoff on the changes, selected requests then are sent to the QA staff for system testing. Once the QA staff has tested the application and given its approval to the modifications, a notification is sent to the initiator of the request for user testing of the changes. The developer is not involved in the user-testing process, unless the user requests additional resource support for the testing. Once the initiator is satisfied with the changes, the request will be sent to the Program Manager for production authorization. After approval by the Program Manager and IS Manager, the request is sent to the DBA for compilation and migration of the changes to production. Notifications are then sent to all involved parties documenting the production move. The IS Request for Services process is being enhanced to include the use of an IS Request number in the remarks section of changed code. This will improve traceability of requests to actual code changes. The new development process for the QBE system is using the Rational Unified Process (RUP), which provides a new source code library system that will be used in conjunction with its change management tool. This will provide a more robust configuration management process. All new application development and all application redevelopment will use this new process. F-33 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 b) Quality Assurance and Testing The user community tests all modifications to the GAORS application. No changes are put into production unless the user places a formal request for that change through the liS Request for Services application. In addition, this migration will not occur until the developer has performed unit testing and requested the changes be moved to the test system. Finally, the user is responsible for testing the changes made at their requests and for authorizing the code for production use. At this time, users are not required to develop any formal testing documents, such as testing scripts and documented data. The DOE, with the addition of QA and testing personnel, is addressing the issue of formalizing the test process. This QA testing process was first used in the Student Record Data Collections System. DOE is in the process of rolling out a comprehensive QA function that will be responsible for creating and documenting test cases, testing the enhancements and modifications to the applications, and collecting the results. These results will be used by Project Managers to determine the effectiveness of the Development process. c) Permissions The appropriate changes have been instituted to ensure that only the developer and administrator responsible for the application can access the application source code. The IT LAN administrator controls this process. 2. Database Controls Information has been provided the auditor by the DBA and no further feedback has been received. Auditing The GAORS application currently performs auditing on three forms, the Grants Master, Completion Report and the D147 report. This audit function tracks the user id, timestamp, and modifications made to these forms. This audit capability will be expanded to cover the entire application and is being analyzed to determine the impact and effort required to implement these modifications. Once the scope of this effort is determined, a report will be given to senior management for review and approval. Contact Person: Billie Sherrod, Chief Information Officer Telephone: (404) 657-0810; Fax: (404) 656-0978; E-mail: bsherrod@doe.k12.ga.us Finding Control Number: FS-414-02-05 CAPITAL ASSETS Inadequacies in Operation of Property Management System We concur with this finding. The following is the FY 2002 audit findings for equipment and real property management for the department: 1) Equipment additions were not reconciled to the general ledger expenditure accounts. The Department of Education will reconcile the Asset Management Module to the General Ledger. To facilitate this new process we have contacted GTA who is arranging a training team to work with DOE employees Ronald Thomas (DOE Property Manager) and Farisa James (DOE Accountant) to begin the process for reconciliation to the General Ledger from PeopleSoji inception. GTA has already provided the necessary Queries to begin the process. 2) Equipment inventory records for additions were updated incorrectly. Testing of current year additions revealed nine (9) additions that had been updated onto the equipment inventory records incorrectly by the amount of$8,012.60. F-34 Georgia Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 All of the details under line item #2 were improperly evaluated. Each property transaction has an original cost and an adjusted cost. The auditors used Query AM506 which indicated the original cost, but the Query AM421 indicates the adjusted value. If the correct Query had been used the Asset Management and Accounts Payable comparisons would have matched. Reference.' Item 1. PO' 052-0000026820, showed $53,384.08 on Quel}' AP005 and Report AM506 indicated $54, /92.68. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Quel}' AM42/ indicates an adjusted cost of$53,384.08. No variance exists. Reference. Item 2. PO: 652-0000027426, showed $/2,237.00 on Query AP005 and Report AM506 indicated $/2,881.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Quel}' AM42/ indicates an adjusted cost of$/2,237.00. No variance exists. Reference: Item 3. PO' 652-0000027495, showed $/2,237.00 on Quel}' AP005 and Report AM506 indicated $/2,88/.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM42/ indicates an adjusted cost of$/ 2,237.00. No variance exists. Reference: Item 4. PO: 652-0000027495, showed $/7,938.00 on Query AP005 and Report AM506 indicated $/8,882.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM42/ indicates an adjusted cost of$/7,938. 00. No variance exists. Reference.' Item 5. PO: 054-000002755/, showed $6,805.00 on Query AP005 and Report AM506 indicated $9,695.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM42 / indicates an adjusted cost of$9,745.00. The PO Activity Summary shows AP payments of $6,805.00 on 091/2/200/ and $2,940.00 on /0//7/200/,/or a total of$9, 745.00 paid. No variance exists. Reference: Item 6. PO: 652-0000027876, showed $/2,237.00 on Query AP005 and Report AM506 indicated $/2,881.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM421 indicates an adjusted cost of$12,237.00. No variance exists. Reference: Item 7. PO: 652-0000027886, showed $12,237.00 on Query AP005 and Report AM506 indicated $12,881.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM421 indicates an adjusted cost of$12,237.00. No variance exists. Reference: Item 8. PO: 652-0000027921, showed $12,237.00 on Query AP005 and Report AM506 indicated $/2,88/.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM42/ indicates an adjusted cost of$12,237.00. No variance exists. Reference: Item 9. PO: 052-0000028840, showed $9,999.00 on Query AP005 and Report AM506 indicated $10,/49.00. Asset Management Report AM506 shows only the Acquired Cost: not Adjusted Cost. The Query AM421 indicates an adjusted cost of$9,999.00. No variance exists. In addition, one hundred eighty-three (183) equipment items were selected from certain locations to test the accuracy of the Department's property management records. These items contained a value of $2,537,182.14 out of a population of $15,296,340.10 and were selected for the purpose of locating the equipment as recorded in the inventory records. The following deficiencies were noted: The items in this section were identified as Ill1ssmg and the auditor did not request a review of the supporting documentation from the Property Manager. As listed the proper form DE 0082 for Lost, Damaged, Destroyed or Stolen items was and is on file to support the missing items. Still these items account for $43,887.50 of lost inventory. 1) Eight (8) items totaling $43,887.50 could not be located. F-35 Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 Reference: Item 1. Tag Number 000013058. Mountain Filesafe. This item was indicated on the FY 2001 and FY 2002 Physical InventOlY report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for each inventory period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 2. Tag Number 000030579, Compaq Prosigma. This item was indicated on the FY 2001 and FY 2002 Physical InventOlY report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for each inventOlY period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 3. Tag Number 00003773504, Compaq External Tape Drive. This item was indicated on the FY 2002 Physical Inventory report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for this inventOlY period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 4. Tag Number 000038076, Dell Latitude Laptop. This item was indicated on the FY 2001 and FY 2002 Physical InventOlY report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for each inventory period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 5. Tag Number 00003809105, Compaq External Tape Drive. This item was indicated on the FY 2002 Physical Inventory report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for this inventory period by Mr. Allan Meyer. No discrepancy exists. Reference;' Item 6. Tag Number 00003823601, Compaq External Tape Drive. This item was indicated on the FY 2002 Physical Inventory report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for this inventory period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 7. Tag Number 00003823610, Compaq External Tape Drive. This item was indicated on the FY 2002 Physical Inventory report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completed for this inventory period by Mr. Allan Meyer. No discrepancy exists. Reference: Item 8. Tag Number 00003823741, Compaq External Tape Drive. This item was indicated on the FY 2002 Physical Inventory report as being missing. A DE Form 0082, Report ofLost, Damaged, Destroyed, or Stolen Property, was completedfor this inventory period by Mr. Allan Meyer. No discrepancy exists. 2) Two (2) items were found in locations other than the location indicated in the equipment inventory records. The following two items have been identified as missing by the Internal Technology department on 02/11/2003. These two findings were the failure by the unit manager to properly account for their inventory without the proper paper trail to DOE Property Control. Reference: Item 1. Tag Number 00004147405, Internal 35170 Drive. This shows as an internal item to tag number 000041474 which shows as being located in the Server Room, Suite 1558 East Tower. A request was made to Mr. Tim Reynolds on 02/11/2003 for verification ofthis equipment. Mr. Reynolds referred Ms. Cathy Shaw to verifY this equipment on 02/12/2003. A request was made to Ms. Cathy Shaw on 02/17/2003 to verifY the equipment at the above location. A DE Form 0082, Report of Lost, Damaged, Destroyed, or Stolen Property, was received on 02/18/2003, signed by Ms. Cathy Shaw, indicating that this equipment is missing. Reference: Item 2. Tag Number 0000042589, Infocus LP750 Projector. This shows a Property Transfer form received in this office on March 28, 2002, signed by Ms. Pam Adamson, unit 2110, GLC as losing signature on 1l/15/2001 and signed by Ms. Jane Royall, unit 6580, GLC, as gaining signature on 1l/14/2001. On 02/12/2003, Property Control office received a property transfer form signed by Cathy Shaw for both GLC/Education Technology and Internal Technology, moving the equipmentfrom 065800GLC to 0652002060. Failure by unit property manager to properly account for their inventory whether the item was moved by an employee ofthe unit or Technology Services without a paper trail to DOE Property Control. F-36 Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 3D, 2002 Also, during the physical inspection testing, four (4) items of equipment were located in our test location, which were not included in the equipment inventory records for the particular location. The first three items were removed from an existing rack within the server room and decaled as stand-alone item on 06/02/02 per Ms. Cathy Shaw and are on the Asset Management listing. Reference: Item 1. Tag Number 000038244, 35170 DLT External. Added to AM on 06/05/2002 by Ron Thomas. No discrepancy exists. Reference: Item 2. Tag Number 000038238, 35170 DLT External. Added to AM on 06/17/1999 by Frank Ford, GTA-AM. No discrepancy exists. Reference: Item 3. Tag Number 000038270, 35/70 DLT External. Added to AM on 06/05/2002 by Ron Thomas. No discrepancy exists. This school bus is in service at the Academy for the Blind in Macon Georgia and has been on the Asset Management Module since 11/0112001. Reference: Item 4. Tag Number 0000047550, School Bus. Added to AM on 1110112001 by Ron Thomas. No discrepancy exists. In the future the Property Manager will conduct a physical inventory to verify equipment location and existence. We will be drafting a plan to conduct a portion of the physical inventory each month to completely verify each area to include the three State Schools within one year and repeat the verification on the same plan each year. Also each Program Manager will be presented a list of all of the equipment with decal numbers one time annually, and required to verify within 30 days and provide their signature of acceptance to the Property Manager. This procedure for physical inventories by the Program Managers have been in-place with the department since fiscal year 1994 onward to include through fiscal year 2002. Contact Person: David Childers, Purchasing Manager Telephone: (404) 657-2195; Fax: (404) 657-6821; E-mail: dchi1ders@doe.k12.ga.us Finding Control Number: FA-414-02-01 EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System See Response to FS-414-02-05 Contact Person: David Childers, Purchasing Manager Telephone: (404) 657-2195; Fax: (404) 657-6821; E-mail: dchilders@doe.kI2.ga.us Finding Control Number: FA-414-02-02 EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Expenditures Title VI - Innovative Education Program Strategies (CFDA 84.298) We do not concur with this finding. The Title VI innovative funds guidelines were met by the five contracts identified in the audit. The department feels the funds were spent in support of local school system programs and activities, which meets Title VI regulations. The department ask U.S. Department of Education personnel to review the contracts to verify that they are within guidelines and regulations. Copies of the contracts were sent to Ms. Lynette Kee. Ms. Kee is a Title V (former Title VI) program coordinator with the U.S. Department of Education. She has agreed to review the contracts for compliance with Title VI regulations and guidelines. F-37 Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 Contact Person: Grant Rowe, Director Telephone: (404) 656-2497; Fax: (404) 657-5512; E-mail: growe@doe.k12.ga.us Finding Control Number: FA-414-02-03 EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Contracting Practices State Funds Title II - Dwight D. Eisenhower Professional Development Program (CFDA 84.281) Title VI - Innovative Education Program Strategies (CFDA 84.298) See Response to FS-414-02-02 Contact Person: Scott Austensen, Deputy State Superintendent of Finance and Business Operations Telephone: (404) 657-3544; Fax (404) 565-0816; E-mail: saustensen@doe.k12.ga.us Finding Control Number: FA-414-02-04 EXPENDITURES/LIABILITIESIDISBURSEMENTS Improper Contracting Practices Vocational Educational- Basic Grants to States (CFDA 84.048) Title II - Dwight D. Eisenhower Professional Development Program (CFDA 84.281) Title VI - Innovative Education Program Strategies (CFDA 84.298) Questioned Cost: FY 2002 - $ 82,493.50 Questioned Cost: FY 2003 - $ 581,394.00 We concur with this finding. This matter has been turned over to the US DOE for their review. In addition, the Georgia Attorney General's office is looking at this matter. DOE will follow whatever guidance is issued from these two agencies. The department will examine its policies and train staff accordingly. Contact Person: Scott Austensen, Deputy State Superintendent of Finance and Business Operations Telephone: (404) 657-3544; Fax: (404) 565-0816; E-mail: saustensen@doe.k12.ga.us Finding Control Number: FA-414-02-05 SUBRECIPIENT MONITORING Inappropriate Issuance of Management Decision Vocational Education - Basic Grants to States (CFDA 84.048) We concur with this finding. The finding addresses concerns that were identified in prior year audits of four technical colleges. The Georgia Department of Education (GaDOE) is Georgia's eligible agency as defined in the Carl D. Perkins Vocational and Technical Education Act of 1998. Because of additional information that has been provided regarding the prior year audits, GADOE will re-open consideration of the concerns and in consultation with the Georgia Department of Audits, the United States Department of Education, and the Georgia Department of Technical and Adult Education, determine appropriate actions needed to resolve the issues at hand. Contact Person: James Hogg, Director Telephone: (404) 657-8317; Fax: (404) 651-8984; E-mail: jhogg@doe.k12.ga.us Finding Control Number: FA-414-02-06 SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period We concur with this finding. The Department of Education is responsible for tracking and reviewing the audits of local units of administration (LUA). However, the Department of Audits is required by state law to audit the LUAs, because LUAs receive the majority of their funding from the state. In addition to the LUA audits, the Department of Audits has the responsibility to audit all state agencies, commissions, etc. The LUAs are audited after the state agencies, commissions, F-38 Auditee's Corrective Action Plans For the Fiscal Year Ended June 3D, 2002 etc. Because the LUAs are audited last and the large number of LUAs to be audited, the Department of Audits cannot complete the audits in the time period required by OMB Circular A-133. The U.S. Department of Education is aware of the problem, and realizes there is not currently a viable solution to the finding. The LUA audits are normally completed within a 15-18 month time period. The department has a six-month resolution period to resolve findings in the LUA audits after being received from the Department of Audits. Contact Person: Grant Rowe, Director Telephone: (404) 656-2497; Fax: (404) 657-5512; E-mail: growe@doe.k12.ga.us DEPARTMENT OF COMMUNITY HEALTH Finding Control Number: FA-419-02-01 ALLOWABLE COSTS/COST PRINCIPLES Pharmacy Benefit Claims Management has developed procedures to review pharmacy claims periodically to ensure that Express Scripts, Inc. is processing claims properly. Express Scripts has implemented specific procedures to ensure pharmacy claims are reviewed for proper payment. Contact Person: John Hankins, Director ofIntemal Audits and Program Evaluation Telephone: (404) 657-7880; E-mail: jhankins@dch.state.ga.us DEPARTMENT OF HUMAN RESOURCES Finding Control Number: FS-427-02-02 GENERAL LEDGER Inadequate Accounting Procedures We concur with this finding. The Department of Human Resources (DHR) grant accounting staff have now been instructed to record grant awards as soon as they are received. However, since this instruction was not given to staff until April 2003, it is likely that some grant awards received in SFY03 were also recorded many days after receipt. The Department will make a greater effort with the funding agencies to have the grant awards routed properly. We have developed a letter to go with the grant award application that indicates to the funding agency that the grant award notice be sent to the Commissioner's office. Once received in the Commissioner's office, copies will be routed to the Office of Financial Services, Office of Planning and Budget Services, and the appropriate Division. In addition, when grant awards are sent to a different address than above, we will contact the granting agency to ask that any future awards for the grant be sent to the appropriate address. We will continue to monitor program codes when recognizing revenues to obtain any missing grant awards as quickly as possible. In the past, DHR has not recorded grant award documents in the ledger for future periods. In response to this finding, DHR will begin this year to record revenues in the June fiscal period in advance of the receipt of grant awards if we expect to receive them in the subsequent quarter. Though funding is not available, this treatment is consistent with the accounting adjustments made by the Department of Audits in past years. In addition, the programmatic accountants in our Funds Management Section will monitor the program codes on a quarterly basis. They will resolve issues of missing grant awards during this reconciliation period. Contact: John Sartain, Director of Financial Services Phone: (404) 656-7999; Fax: (404) 651-9337; E-mail: jfsartain@dhr.state.ga.us F-39 Auditee's Corrective Action Plans For the FiscaL Year Ended June 30, 2002 Finding Control Number: FS-427-02-03 EMPLOYEE COMPENSAnON Inadequacies in Maintenance of Attendance and Leave Records We concur with this finding. Fulton County DFCS will ensure greater compliance with existing internal control plans regarding leave records and employee time sheets. This will be accomplished by having the accounting and personnel offices validating these reports: time sheets on a monthly basis and leave balances on a biannual basis. These two items will be emphasized in existing training for Fulton County DFCS employees. The trainings consist of new worker orientation and monthly/quarterly unit meeting at the various Fulton County DFCS locations. Contact: Alan Davis, Director of Fiscal Services, DFCS Phone: (404) 463-7275; Fax: (404) 657-3270; E-mail: dadavis@dhr.state.ga.us Finding Control Number: FS-427-02-04 CAPITAL ASSETS Inadequacies in Operation of Property Management System We concur with this finding. Office of Facilities and Support Services (OFSS) and the Office of Financial Services (OFS) have developed a plan to address this audit finding. Key elements include: Distribution of a memorandum dated October 1, 2002 that explained how equipment should be charged in the general ledger and in the Asset Management module of PeopleSoft. Included in this memo is a matrix to make it easier for staff to determine the appropriate classification in both the general ledger and the asset management modules. A copy of this memo is attached. Prompt reconciliation between OFSS and OFS of items that OFSS does not accept into the asset management module from the purchasing module. Requirement of appropriate documentation (purchase order or invoice) on all equipment inventory forms. Continued education of staff on the above requirements and expectations. Monthly reconciliation of the general ledger and asset management module beginning May 2003. Contact: Bill Harris, Director of Office of Facilities and Support Services Phone: (404) 656-4427; Fax: (404) 656-0709; E-mail: wlharris@dhr.state.ga.us Finding Control Number: FA-427-02-01 ELIGIBILITY Deficiencies in File Maintenance Temporary Assistance to Needy Families (CFDA 93.558) Questioned Cost: $ 4,610.00 We concur with this finding. The areas cited in the FY 2002 audit findings for the TANF and Food Stamp programs will be addressed by the sharing of results of this audit with county supervisors at their fourth quarter area supervisors' meeting that is conducted by program consultants. County Eligibility Supervisors will be reminded of the importance of ensuring that TANF and Food Stamp eligibility requirements are adhered to as they do case record reviews. County Eligibility Supervisors will be directed to provide in house ESSS Policy Manual refresher training on all required documentation and information required for complete and accurate case records by August 31, 2003. Counties with problem cases identified in this audit will receive additional training to address the cited deficiencies. F-40 Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 Contact: Howard Willis, Director of Economic Support, DFCS Phone: (404) 657-3702; Fax: (404) 657-3785; E-mail: howillis@dhr.state.ga.us Finding Control Number: FA-427-02-02 ELIGIBILITY Deficiencies in File Maintenance Food Stamp Cluster Food Stamps (CFDA 10.551) State Administrative Matching Grants for Food Stamp Program (CFDA 10.561) Questioned Cost: $ 3,405.00 We concur with this finding. The areas cited in the FY 2002 audit findings for the TANF and Food Stamp programs will be addressed by the sharing of results of this audit with county supervisors at their fourth quarter area supervisors meeting that is conducted by program consultants. County Eligibility Supervisors will be reminded of the importance of ensuring that TANF and Food Stamp eligibility requirements are adhered to as they do case record reviews. County Eligibility Supervisors will be directed to provide in house ESSS Policy Manual refresher training on all required documentation and information required for complete and accurate case records by August 31, 2003. Counties with problem cases identified in this audit will receive additional training to address the cited deficiencies. Contact: Howard Willis, Director of Economic Support, DFCS Phone: (404) 657-3702; Fax: (404) 657-3785; E-mail: howillis@dhr.state.ga.us Finding Control Number: FA-427-02-03 SUBRECIPIENT MONITORING Inadequate Monitoring of Subrecipients HlV Care Formula Grants (93.917) We concur with this finding. Procedures are now in place to effectively monitor subrecipients. Site visit tools for administrative audit of Ryan White II programs were designed and implemented in June 2002. Using these tools, site visits have been conducted to 9 out of 17 subrecipient sites as of April 1, 2003. A comprehensive site visit tool is being developed and will be used in the remaining sites, so that administrative, medicaVnursing care and other audits and quality assurance efforts can be conducted simultaneously and a training and technical assistance plan for the subrecipient can be developed. Contact: Barbara Wallace, Team Leader Phone: (404) 651-7370; Fax: (404) 463-6729; E-mail: bpwallace@dhr.state.ga.us Finding Control Number: FA-427-02-04 MATCHING, LEVEL OF EFFORT, EARMARKING Failure to Establish Quality Management Program HlV Care Formula Grants (93.917) We concur with this finding. Nursing guidelines for the management of HIV and AIDS are near completion, and a draft for clinical review by the HIV Medical Advisory Group (an identified group of experts and stakeholders) and the Division of Public Health will be available by April 15, 2003. The contents of the guidelines are consistent with Public Health Service recommendations for the treatment of HIV disease. A monitoring tool to assess the level of care was developed in October 2002. Site visits using this tool have been conducted to 10 districts, and have identified areas of excellence as well as areas of concern. Results have been communicated with care providers, and a plan of action to address areas of deficiency has been agreed where needed. F-41 Auditee's Corrective Action Plans For the fiscaL Year Ended June 30, 2002 Contact: Barbara Wallace, Acting Director of HIV Section in Public Health Phone: (404) 657-3119; Fax: (404) 657-3134; E-mail: bpwallace@dhr.state.ga.us Finding Control Number: FA-427-02-05 ELIGIBILITY Deficiencies in Eligibility Database/File Maintenance mv Care Formula Grants (93.917) We concur with this finding. Two major areas of deficiency were noted. 1) Absence of electronic data that could provide accurate and complete information on all recipients of the program. At the time of the report, the HIV Section used EPI 6 as its database. This database has severe limitations in that it does not collect service utilization data, overwrites data thus deleting historical information, and tracks information by client status (active or closed) rather than by service category. When 2001 records were pulled for the audit, these records included closed cases with outdated information, since there was no need to recertify or update closed case information. In January 2003, the HIV Section switched to Ryan White CAREWare. This database was developed by HRSA and can collect and provide information on client demographics and service utilization. District implementation of CAREWare is already well underway, and has enabled all Districts to successfully use the CAREWare program to complete their 2002 reports. 2) Absence of complete eligibility documentation in some files. Eligibility documentation rrnssmg included HIV positive status, income level, Medicaid emollment status, Georgia residency, CD4 counts, third party insurance information, appropriate date of application versus date of service, emollment application, evidence of proper review and approval of the file, evidence of six-monthly recertification. Action: Clients are initially screened at the local level for Ryan White services, and much of the missing information is in fact available in the client's local level file. However, the ADAP application in use at the time of the Report did not require all this information to be submitted to the State HIV Section. The issue of incomplete documentation at state level is being addressed in several stages. The HIV Section has been using a checklist and template memo for two years to identify missing information in ADAP application forms and return these forms to the organization making the application. The organization applying on behalf of the client is required to complete the missing information and reapply. This checklist is currently in use for all new applicants. However, staff shortages in the state office and at subrecipient level, as well as the inability of the state's data system to indicate a need for recertification, led to inadequate recertification documentation being held at state level. In addition, Grady Infectious Disease Program formerly used an application form that did not include necessary eligibility information. Use of the state form is now required of all subrecipients and, as explained above; CAREWare will prompt recertification in future. In March 2003, the HIV Section drafted a revised ADAP application with supporting documentation forms, instructions for completing the application, and a policy document giving details on the ADAP application policy and process. These forms are currently undergoing internal review. The application will require information on HIV positive status, CD4 count, income level with appropriate verification, Medicaid emollment status and eligibility assessment, Georgia residency with appropriate documentation, third party insurance information. The checklist and template letter will continue to be used to return incomplete application forms for further documentation. The new application also contains a section for DHR use that documents proper approval by the ADAP coordinator or designee. Use of this application form will be required of all organizations applying for Ryan White II ADAP services in Georgia, including Grady Infectious Disease Program. The Ryan White CAREWare database has been customized to include a "recertification due date" field. This will enable the HIV Section to generate reports on a routine basis to identify clients whose application requires recertification. The F-42 Georgia Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 previous database did not allow for this type of query. As recertification occurs, past records of clients with incomplete documentation will be brought into compliance. Discussions about matching ADAP applications and current clients against the Medicaid roster are currently underway, led by the Division of Public Health's Medicaid liaison. Matching will allow the HIV Section to identify ADAP applicants who are ineligible because they are already enrolled in Medicaid, and will also enable the Section to identify ADAP enrollees who subsequently enroll in Medicaid. Although a tentative solution has been identified, progress has been slowed by Medicaid's switch to a new database as of April 1. This action item will proceed as quickly as Medicaid's systems allow. It should be noted that in some cases, Medicaid benefits may be temporary due to pregnancy or limited due to spend down status, so ADAP coverage may still be required. Finding: Deficiencies in Eligibility Database/File Maintenance - HICP Incomplete eligibility determination findings were similar to those for ADAP, including incomplete documentation of eligibility criteria, Medicaid enrollment, review and approval of the file, and annual recertification. Although this information was generally held in the files of the organization applying for HICP on the client's behalf, it was not provided consistently to the State office in support of the application. Action: A checklist and template memo is already in use, as noted above for ADAP. A revised HICP application form and policy document will be developed based on the new ADAP application form currently in draft. CAREWare will notify HIV Section staff of recertification due dates. The match against the Medicaid roster will be implemented as soon as possible after the new Medicaid data system is in place. It should be noted that in some cases Medicaid benefits may be limited due to spend down status or temporary Medicaid coverage during pregnancy, so it may be necessary to pay the client's insurance premiums to ensure full health care coverage. Contact: Barbara Wallace, Acting Director of HIV Section in Public Health Phone: (404) 657-3119; Fax: (404) 657-3134; E-mail: bpwallace@dhr.state.ga.us Finding Control Number: FA-427-02-06 ALLOWABLE COSTS/COST PRINCIPLES Improper Health Insurance Continuation Program (HICP) Payments HIV Care Formula Grants (93.917) We do not concur with this finding. The payment of family premiums, vision and dental premiums are allowable under the HICP. The letter provided to the auditors was from FY 2000 and was a notification to clients when they were set up on the program. This changed in FY 2001 and the FY 2001 letter reflected this. In addition, the Ryan White CARE Act Title II Manual states that the family premium is allowable. It also states that health insurance services that include comprehensive primary care and the full range of HIV treatments. In discussion with our federal partner, they indicate this includes the dental insurance. Our Federal partner has issued a letter to us dated April 28, 2003 that states all these insurance coverages are allowable. Contact: Barbara Wallace, Acting Director of HIV Section in Public Health Phone: (404) 657-3119; Fax: (404) 657-3134; E-mail: bpwallace@dhr.state.ga.us F-43 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 Finding Control Number: FA-427-02-07 ALLOWABLE COSTS/COST PRINCIPLES Inadequacies in Collection of Overpayments of Health Insurance Continuation Program (HICP) Premiums HIV Care Formula Grants (93.917) We concur with this finding. The HIV Section makes every effort to collect refunded insurance premiums. The revised HICP application will include a pro-rated refund agreement, signed by the client, that further emphasizes that any refunds are due to DHR. Attempts to collect refunded premiums continue to be documented in the client records. Procedure for collections ofrefunds will be reviewed with the Office of Financial Services and changes made where appropriate. Contact: Barbara Wallace, Acting Director of HIV Section in Public Health Phone: (404) 657-3119; Fax: (404) 657-3134; E-mail: bpwallace@dhr.state.ga.us DEPARTMENT OF LABOR Finding Control Number: FS-440-02-01 GENERAL LEDGER Inadequate Accounting Procedures We concur with the finding. Department procedures have been reviewed to provide adequate internal controls to ensure that all deposits and bank accounts are maintained on the general ledger. The funds have been recorded on the general ledger as of the January 2003 accounting period. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FS-440-02-02 CASH AND CASH EQUIVALENTS Inadequate Accounting Procedures We concur with the finding. Internal controls have been revised to ensure all bank reconciliations are completed in a timely manner by designated accounting personnel within 15 days of receiving the statements and closing of the books for the month. As of March 2003, bank reconciliation for the payroll account, accounts payable, operating account, and benefit accounts have been performed; unidentified variances have been resolved and corrected for the operating account and the benefit account. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FS-440-02-03 CASH AND CASH EQUIVALENTS CAPITAL ASSETS Protection of Assets We concur with the finding. Department procedures were reviewed to ensure that all funds are deposited on a timely basis, the general ledger is accurately maintained, and capital asset records are appropriately updated. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us F-44 .._-_ _-_ ---- Auditee's Corrective Action Plans For the fiscaL Year Ended June 3D, 2002 Finding control Number: FS-440-02-04 GENERAL LEDGER Inadequate Accounting Procedures (Overall) We concur with the finding. Department procedures have been revised to ensure that general ledger is accurately maintained, reconciliations are performed in a timely manner, and variances between general ledger and subsidiary ledgers are resolved.. Additionally, the Department will ensure that each budget is maintained separately and accurately on the general ledger. Internal controls will be revised and updated to ensure periodic analysis of funds balances at the program and budget unit level. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FS-440-02-05 REVENUE/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Accounting Procedures We concur with the finding. Internal controls have been revised to ensure that reconciliations are completed in a timely manner by designated accounting personnel within 15 days of the closing of the account books for the month. Additionally, the Department will ensure that any variances noted are resolved in a timely manner to ensure that subsidiary ledgers accurately represent the financial activity and balances recorded in the general ledger. As of April 2003, the general ledger balances have been corrected and accurately represent the financial activity for the month. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FS-440-02-06 REVENUE/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Accounting Procedures We concur with the finding. Department will ensure that the general ledger is accurately maintained and monitored on a monthly basis. In addition, Department internal controls will be revised to ensure that journal entries are properly documented; detail records supporting the general ledger are complete, accurate, and reliable. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johntWilliams@dol.state.ga.us Finding Number: FS-440-02-07 EMPLOYEE COMPENSAnON GENERAL LEDGER Inadequate Accounting Procedures We concur with the finding. The Department will establish procedures to ensure that the employee compensation reconciliation process is being performed in a timely basis. Controls will be put in place to prevent this from reoccurring. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johntWilliams@dol.state.ga.us F-45 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 Finding Number: FS-440-02-08 GENERAL LEDGER Ending Balances in Balance Sheet Clearing Accounts We concur with the finding. The Department will ensure that the general ledger is accurately maintained and monitored. The clearing account will be reviewed to zero out balances. Controls will be put in place to prevent this from reoccurring. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FS-440-02-09 CAPITAL ASSETS Inadequacies in Operations of Property Management System We concur with the finding. Controls will be put in place to ensure that equipment inventories are maintained in accordance with State Laws and regulations. We have developed and implemented a system using automated reports from the Financial Accounting Reporting System (FARS) and the Property Management System. Our corrective actions to provide a proper reconciliation between equipment additions to inventories recorded by the Property Management System and the equipment expenditure accounts on the general ledger (SA251 0 Trial Balance) will be as follows: 1) For State GAAP account codes 016-643-100 Equipment Purchases Greater than $5,000.00 (FARS Object/Subobject 5010) and 019-643-100 Computer Equipment Purchases Greater than $5,000.00 (FARS Object/Sub-object 5235) which appear on the SA2510 Report, create a file class 5 expenditure records by document number, document line number, and dollar amount from the FARS detail transaction file. 2) Create a file of equipment inventory records that meets the statutory definition of $5,000.00 or more from the Property Management System by document number and dollar amount. 3) Match the records of these two files by document and produce a comparative report that displays document numbers and amounts. Where the amounts agree, reconciliation is complete. Where the amounts do not agree, we shall reconcile the differences, which should result from price changes, freight changes, and discounts, by using ad hoc reports. 4) Make corrections to the Property Management System equipment inventory records where original cost amounts do not agree with SA251 0 equipment expenditure accounts. 5) Reconcile the SA2410 equipment expenditure accounts to SA2510 equipment expenditure accounts; the differences should be resources on order. 6) Reconcile the subsidiary to general ledger expenditures account on a monthly basis. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us Finding Control Number: FA-440-02-01 CASH MANAGEMENT Improper Fund Requests Disability Insurance/SSI Cluster Program (96.001) Questioned Cost: $36,316.32 We concur with the finding. Internal control procedures were reviewed to ensure that the cash draw downs of the Disability Insurance/SSI Cluster Program are made based on immediate cash needs. Controls will be put in place to prevent this from re-occurring. F-46 Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 As of April 2003, the $36,316.32 has been returned to the US Department of Treasury. Contact Person: John T. Williams, Acting Director of Accounting Telephone: (404) 656-3188; Fax: (404) 651-6843; E-mail: johnt.Williams@dol.state.ga.us DEPARTMENT OF PUBLIC SAFETY Finding Control Number: FS-466-02-01 GENERAL LEDGER Inadequacies in Control Over Manual Journal Entries We concur with this finding. The Accounts Receivable Module was not in balance at year-end due to the use of journal vouchers for corrections at fiscal year-end. These corrections should have been done through the Accounts Receivable Module, since journal voucher entries are not reflected in the individual modules. We needed to make numerous corrections at year-end after the AIR module had been closed. After the AIR and AlP modules ha\e been closed, journal vouchers are the only option available to make necessary corrections. Please note that the journal vouchers done at yearend during the "998" period were reversed at the beginning of FY03, and also entered properly into the Accounts Receivable Module. Procedures have now been developed and are currently being implemented to ensure that the AIR Module is balanced to the General Ledger on a monthly basis. Additionally, internal controls have been developed to ensure that supporting documentation is maintained for all adjustment and reconciling items. Contact Person: Terry Landers, Chief Financial Officer Telephone: (404) 624-7850; Fax: (404) 624-7837; E-mail: tlanders@dps.state.ga Finding Control Number: FS-466-02-04 CAPITAL ASSETS Inadequacies in Operation of Property Management System We concur with this finding. The Georgia Public Safety Training Center is attached for administrative purposes only. The Department of Public Safety cannot directly dictate their internal procedures and controls. The GPS Training Center has initiated considerable effort to find and correct property discrepancies. Of the 10 items that were listed, most were actually located but were missing the decal to verify that they were the actual item. All exceptions have been corrected and procedures are being put in place at GPS Training Center to help prevent these errors in the future. Contact Person: Terry Landers, Chief Financial Officer Telephone: (404) 624-7850; Fax: (404) 624-7837; E-mail: tlanders@dps.state.ga DEPARTMENT OF CORRECTIONS Finding Control Number: FS-467-02-01 EXPENDITURES/LIABILITIESIDISBURSEMENTS Inadequate Accounting Procedures We concur with the above finding. Corrective action has been taken, however. Written policies and procedures have been developed and implemented by the Office of Health Services (OHS) to address all accounting operations including, but not limited to audit findings. These written procedures will be reviewed and updated periodically based upon changes in contracts and accounting procedures. Specific corrective actions are as follows: 1) All Administrative Operations positions within the OHS were filled effective August 1,2002 (for a 12 month period surrounding the referenced audit period, one of the two Administrative Operations positions was vacant). This has enabled OHS to properly segregate employee duties and is reflected in the written procedures previously referenced. FA7 Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 2) Spreadsheets to support vendor payments have been reviewed and approved by appropriate Division employees. This finding specifically referenced the mechanism for tracking reimbursement for psychotropic medication. Accordingly, approved drug reimbursement spreadsheets were initiated in FY03 in order to address this concern. 3) The referenced Division employee worksheets are no longer used in OHS. All vendor invoices and supporting documentation, however, are now extended and footnoted to ensure accuracy. Verification is documented by employee signature. 4) Payments to vendors are now correctly tracked through Peoplesoft accounting systems with budget and expenditures being reconciled monthly. 5) OHS now maintains an up-to-date list of GDC employees authorized to approve supporting documentation submitted by the vendor along with invoices. 6) Invoices referencing medical services are now reviewed by employees who have been properly trained and oriented. In addition, with reference to the processing of drug reimbursement invoices, a copy of the GDC Drug Formulary has been provided to the Administrative Operations Coordinator for reference. Further, as questions arise, additional medical expertise within OHS has been made available to reviewers. 7) The Peoplesoft problems that the Medical College of Georgia encountered in the last six months ofFY02 have been corrected. Expenditures are now reported monthly by line item. Journal vouchers within OHS allocate expenditures by facility with an end-of-year reconciliation process planned, based on actual MCG expenditures by site. Contact Person: Michael Spradlin, Administrator, Office of Health Services Telephone: (404) 656-6224; Fax: (404) 651-6414; E-mail: spradmOO@dcoLstate.ga.us OFFICE OF SCHOOL READINESS Finding Control Number: FA-469-02-01 SUBRECIPIENT MONITORING Subrecipient Audit Reports Not Received Within the Required Time Period OSR concurs with this finding. The Office of School Readiness is responsible for tracking and reviewing the audits of its subrecipients most of which are local units of administration (LUA), a term used to identify boards of education. Because LUAs receive a majority of their funding from the state, the Georgia Department of Audits and Accounts is required by state law to audit the LUAs. Currently, the LUAs are audited after state agencies, commissions, etc., and for that reason and due to the large number of LUAs audited, the Department of Audits and Accounts has been unable to complete the audits in the time period required by OMB Circular A-133. The U.S. Department of Agriculture is aware of this problem, and realizes that the Department of Audits and Accounts is working towards a viable resolution to the finding in the near future. Effective January 2002, the Department of Audits and Accounts reorganized in an effort to address this matter and has adopted a plan to meet OMB Circular A-133 deadlines for fiscal year 2004 LUA audits. Contact Person: Tanya Astin, Internal Auditor Telephone: (404) 656-6293; Fax: (404) 463-0976; E-mail: Tanya.Astin@mail.osLstate.ga.us or Audit Contact Person: Margie Landers, Director of Finance and Human Resources Telephone: (404) 463-5031; Fax: (404) 463-0976: E-mail: Margie.Landers@mail.osLstate.ga.us F-48 Georgia Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA Finding Control Number: FS-472-02-02 ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls We concur with this finding. During FY 2002, the University System of Georgia was in the process of converting 32 institutions and sites from the College University Financial Accounting (CUFA) system to PeopleSoft. The last group of institutions to implement the new software came on line in May 2002. Although this effort included the development of year-end closing procedures and training of institutional users, it was complicated by adjustments needed to meet new requirements mandated by the Governmental Accounting Standards Board (GASB), particularly as they concerned the accounting and reporting of capitalized assets. The University System of Georgia has now developed and implemented new monthly closing procedures and has refined year-end procedures to meet new requirements. For FY 2003, institutions wiII be required to meet closing deadlines which wiII be consistent with those used prior to the implementation of PeopleSoft and ensure that financial data is ready for audit review in accordance with schedules established by the State of Georgia Department of Audits. Year-end closing procedures have been revamped and institutional training wiII commence in May to ensure that each institution is fully knowledgeable and capable of meeting deadlines. Contact Person: William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer Telephone: (404) 657-7581; Fax: (404) 657-7433; E-mail: william.bowes@usg.edu Finding Control Number: FS-472-02-03 GENERAL LEDGER Inadequacies in Control Over Subsidiary Ledgers We concur with this finding. The University System of Georgia is reviewing the conversion effort to correct any improper posting of transactions and will enforce business procedures that require institutions to post transactions to the appropriate subsidiary ledger. This will ensure that these ledgers can be reconciled with the general ledger for review by state auditors. This effort is underway. In addition, the University System of Georgia wiII work with the state auditors to identify and correct the problems associated with the interface between the BANNER student information system and the PeopleSoft financial software system to ensure that appropriate detail is captured to record receivables which will reconcile with the PeopleSoft general ledger. The USG will work with the state auditors to develop appropriate queries and reports to facilitate the process of reconciling subsidiary ledgers with the general ledger. These changes will be supported by adjustments in business procedures for University System of Georgia institutions that wiII mandate regular reconciliation of financial records. Contact Person: William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer Telephone: (404)657-7581; Fax: (404)657-7433; E-mail: william.bowes@usg.edu Finding Control Number: FS-472-02-04 BUDGET PREPARATION/EXECUTION Overexpenditure of Budget Unit Object Class Resident Instruction, "A" Budget We concur with this finding. The Georgia Institute of Technology's original budget for the Office of Minority Business Enterprise was $500,000 in FY 2002. Subsequent to the distribution of these funds to a vendor at the completion of their contract, the budget was reduced as a state austerity measure by 2.5%, or $12,500. This austerity measure was approved by the General Assembly in the 2002 session, which ended in March 2002. In the future, the institution will hold back a percentage of the original budget monies to cover any budget reductions that might occur and would cause the institution to exceed its budget authority. F-49 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 Atlanta Metropolitan College had an overexpenditure of $165.81 for Office of Minority Business Enterprise and the Medical College of Georgia had an overexpenditure of $27,906.00 for the Student Education Emichment Program. These issues were discussed with the two institutions and they are developing procedures to more closely monitor their budget operations and expenditure class coding to prevent the expenditure of funds in excess of budget approval. Contact Person: William R. Bowes, Vice Chancellor for Fiscal AffairslTreasurer Telephone: (404) 657-7581; Fax: (404) 657-7433; E-mail: william.bowes@usg.edu Finding Control Number: FS-472-02-05 BUDGET PREPARAnON/EXECUTION Overexpenditure of Budget Unit Object Class Regents Central Office and Other Organized Activities, "B" Budget We concur with this finding. The Regents Central Office's original budget for the Regents Opportunities Grant program was $600,000 in FY 2002. Subsequent to the distribution of these funds to institutions in August 2001 for granting of scholarships under the program, the budget was reduced as a state austerity measure by 2.5%, or $15,000. This austerity measure was approved by the General Assembly in the 2002 session, which ended in March 2002. Since further budget reductions have occurred in this program for FY 2003, the Regents Central Office has taken steps to recover allocated funds from institutions. If necessary, institutions also will be asked to recover any funds distributed to students that would cause the Regents Central Office to exceed its budget authority and have those funds returned. Contact Person: William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer Telephone: (404) 657-7581; Fax: (404) 657-7433; E-mail: william.bowes@usg.edu Finding Control Number: FS-472-02-06 BUDGET PREPARATION/EXECUTION Overexpenditure of Budget Unit Object Class Lottery for Education, "D" Budget We concur with this finding. The overexpenditure on the Internet Connectivity Initiative was a result of a miscoding of class code during the conversion from CUFA to PeopleSoft that was not identified prior to year-end closing. This has since been corrected and procedures have been developed to ensure proper coding of expenditures to avoid this problem in the future. The Technology Equipment Initiative at the University of Georgia Law School and the Georgia Public Library Service equipment overexpenditures concern Lottery funds that were allowed to be carried forward. The funds were incorrectly reported in FY 02 as prior year funds in Plant/Capital Funds by the University of Georgia and prior year funds in the "B" Budget for the Georgia Public Library Service instead of the appropriate classification. This issue has been addressed with the University of Georgia and the Georgia Public Library Service and procedures put in place to ensure appropriate reporting of any prior year funds in the future. Contact Person: William R. Bowes, Vice Chancellor for Fiscal Affairs/Treasurer Telephone: (404) 657-7581; Fax: (404) 657-7433; E-mail: william.bowes@usg.edu DEPARTMENT OF REVENUE Finding Control Number: FS-474-02-01 REVENUE/RECEIVABLES/RECEIPTS Deficiencies in the State Revenue Collections Fund (Overall) We concur with this finding. F-50 Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 1) The Department developed and began using the PeopleSoft Revenue Accounting System as of July 1, 2001. The purchase of PeopleSoft by the State was done without the Department of Revenue collection processes and accounting in mind. As a result, the development of this system was done solely by us without assistance from the Phoenix group. Beginning in calendar year 2002 and continuing during fiscal year 2003, edits were put into place to reduce the risk of erroneous journal voucher postings. The Department of Revenue is currently working with the Georgia Technology Authority to initiate an interface of all mail cash and EFT deposits directly to the accounts receivable module of the statewide Phoenix accounting system. 2) The Department's subsidiary ledger systems are independent and do not interface with the PeopleSoft Accounting System. During the Fiscal Year 2003 we have developed some policies and procedures to ensure our main sub-ledger (Mail Cash) ties in with the general ledger. Additionally, the Sales Tax Division subsidiary ledgers are now being reconciled to the PeopleSoft general ledger. Weare currently working with other divisions to address the reconciliation deficiency and similar policies and procedures will be implemented. 3) The Department recognizes its deficiencies in this area and we are looking into a more feasible and agreeable resolution to the problem. 4) Policies and procedures have been put into place during fiscal year 2003. Mail cash and EFT collections are reconciled daily to the general ledger. 5) Policies and procedures have been put into place during the current fiscal year to reconcile receipts by program to distributions by program remitted to the State treasury. Weare currently working with the treasury to initiate a direct interface between the two agencies. Contact Person: Jeremie S. Peterkin, Controller Telephone: (404) 417-2213; Fax: (404) 417-2101; E-mail: jpeterkin@gatax.org. Finding Control Number: FS-474-02-02 REVENUE/RECEIVABLES/RECEIPTS Deficiencies in the Income Tax Division Subsidiary Records We concur with this finding. However, the feasibility, practicality and financial responsibility of capturing withholding information for approximately 3 million (+) individual tax returns with present resources would be a shift in the strategic direction of the Department of Revenue. Previously, the Department did a limited manual sampling of comparing business W-2 information to individual tax returns. This sampling indicated extremely low non-compliance. The Department has agreed, within budget restraints, to expand this pilot program to a limited systematic matching of electronic W-2 information to individual filings. Contact Person: Jerernie S. Peterkin, Controller Telephone: (404) 417-2213; Fax: (404) 417-2101; E-mail: jpeterkin@gatax.org. OFFICE OF TREASURY AND FISCAL SERVICES Finding Control Number: FA-486-02-01 CASH MANAGEMENT Failure to Adhere to Terms of the Cash Management Improvement Act Agreement Cash Management Improvement Act (CMIA) We concur with this finding. The Office of Treasury and Fiscal Services will contract with an outside vendor to verify the accuracy of interest calculations and clearance patterns claimed by state agencies. Contact Person: Steve Caffarelli, Assistant Director Telephone: (404) 656-2168; Fax: (404) 656-9048; E-mail: scaffar@otfs.state.ga.us F-51 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 GEORGIA INSTITUTE OF TECHNOLOGY Finding Control Number: FS-503-02-01 CAPITAL ASSETS Inadequacies in Operation of Property Management System We concur with this finding and corrective actions have been taken or initiated to address the weaknesses identified. In March 2002, the Institute implemented a new Asset Management system with much improved controls, processes, and reports to manage equipment assets and reconcile accounts used for equipment procurement. The following steps will be taken to address the weaknesses identified above: 1) Utilize the features of the new Asset Management system, which provide on-line access for campus Property Coordinators to enter all changes associated with an asset's disposition, in place of the previous system that relied upon the submission of equipment changes by paper. . 2) As part of the annual equipment inventory, the Institute's Capital Assets Accounting Department will sample unit equipment to verify the accuracy and completeness of the Institute's records. These steps along with continued diligence by management address the weaknesses noted in the audit. Contact Person: Hemy Spinks, Controller Telephone: (404) 894-6272; Fax: (404) 894-9135; E-mail: hemy.spinks@business.gatech.edu Finding Control Number: FA-503-02-01 REPORTING Reports Not Submitted in a Timely Manner Research and Development Cluster We concur with this finding and recommendation. Prior to June 30, 2003, a review will be performed to consider the possible need to improve the following efforts currently being made to ensure that all required contractual deliverables are submitted to the contracting agencies in a timely fashion: I) The Office of Sponsored Programs (OSP) reviews all RFPs and solicitations to identify all contractual deliverable requirements, which are reviewed with the proposed Project DirectorlPrincipal Investigator (PDIPI) prior to proposal submission. Ifneeded, this review is completed again, prior to acceptance of the agreement. 2) As soon as a new sponsored project is received, OSP reviews the agreement and prepares (for the PD/PI) a listing, including the dates that items are due, of all contractually required deliverables. This deliverable schedule is presented to the PD/PI for review, and they are asked to sign-off on a copy of the schedule to indicate concurrence. This record is then retained in the permanent contract file. 3) OSP prepares and distributes for all campus units a monthly report of deliverables due the following month to contracting agencies under all sponsored research projects. 4) OSP expanded efforts to provide a list of all project deliverable information to each PDIPI and all levels of management within a unit via a web-based query tool. 5) OSP also prepares and distributes to all campus units a quarterly report of overdue deliverables for all sponsored research projects. This is a list of all required deliverable items not known by OSP to be satisfied or submitted to the sponsoring agency. The report is copied to members of upper administration, including Deans, School Chairs and Lab/Center Directors. 6) OSP initiates special follow-up action by way of memos directly to PD/PI's for any deliverable items(s) that are approximately 60 or more days overdue, with special attention given to oldest items. F-52 --_.... ._-_ ----_ ---_ ----- Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 7) Campus newsletter articles have been issued to emphasize the importance of timely deliverable submission or the need to seek timely relief (extension of due date) from sponsors for required deliverables. Contact Person: G. Duane Hutchison, Director, Office of Sponsored Programs Telephone: (404) 894-4819; Fax: (404) 894-7002; E-mail: duane.hutchison@osp.gatech.edu Finding Control Number: FA-503-02-02 REPORTING Reports Not Prepared for the Appropriate Period and/or Submitted at an Appropriate Date Research and Development Cluster We concur with this finding and recommendation. Prior to June 30, 2003, a review will be performed to consider what the Office of Sponsored Programs (OSP) can do to improve the efforts currently being undertaken to ensure that all required contractual deliverables are prepared for the appropriate period and/or submitted to the contracting agencies at an appropriate date. With regard to one of the deliverables associated with this finding, the following information is provided: 1) A-56l7, Status Report (OSP deliverable #249) It has been determined that the submitting unit made a typographical error when the Date Mailed was entered on the Research Report Approval Sheet provided to OSP. The correct Date Mailed should have been 1120/02 instead of 11120/01. In reality, this report was prepared for the appropriate period and submitted on time. Contact Person: G. Duane Hutchison, Director, Office of Sponsored Programs Telephone: (404) 894-4819; Fax: (404) 894-7002; E-mail: duane.hutchison@osp.gatech.edu GEORGIA STATE UNIVERSITY Finding Control Number: FA-509-02-01 ELIGIBILITY Student Direct Loan Disbursements Exceed Loan Limit Student Financial Aid Cluster Program Questioned Cost: $2,024.00 We concur with this finding. Corrective action had already been implemented. The Student Financial Aid office has started utilizing a new processing system provided by SCT Banner that prevent future instances. Current procedures incorporate the ability of the new system to check aggregate loan limits at the time of awarding. Accordingly, if a student has reached the aggregate limit, the system will not package a loan and produces an error code that identifies this as the reason. Prior to SCT Banner, this was a manual process. Contact Person: David Bledsoe, Director Financial Aid Telephone: (404) 651-1581; Fax: (404) 651-1419; E-mail: fiadrb@langate.gsu.edu MEDICAL COLLEGE OF GEORGIA Finding Control Number: FS-512-02-06 CAPITAL ASSETS Inadequate Capital Assets Records We concur with this finding. The July 1,2001 equipment inventory balance will be corrected to reflect the June 30, 2001 equipment inventory balance by May 16, 2003. The College will take the necessary steps to ensure that June 30, 2002 fiscal year ending inventory balances agree with the July 1, 2002 beginning inventory balances. Beginning March 2003, the Asset Management module is being reconciled to the Capital Ledger on a monthly basis. This business process will ensure that the College's Asset Management module reconciles to the Capital Ledger at June 30, 2003. F-53 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30. 2002 During fiscal year 2002, the College recorded periodicals the same whether electronic license or hard copy. For fiscal year 2003, the College has implemented a process to record the capitalization of hard copy periodicals. Contact Person: Gordon Prettelt, Interim Comptroller Telephone: (706) 721-2903; Fax: (706) 721-1648; E-mail: Gprettelt@mcg.edu UNIVERSITY OF GEORGIA Finding Control Number: FA-518-02-01 REPORTING Financial Reports Not Properly Filed University staff members responsible for preparing financial reports have been reminded to carefully review the financial reporting requirements of each project. Computerized lists are generated to assist staff in assuring timely filing of Financial Reports. Contact Person: Tracy Walters, Director of Contracts and Grants Department Telephone: (706)542-6889; E-mail: twaltOl@arches.uga.edu ALBANY STATE UNIVERSITY Finding Control Number: FS-521-02-02 CASH AND CASH EQUIVALENTS INVENTORIES REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIESIDISBURSEMENTS Inadequate Accounting Procedures Cash and Cash Equivalents We concur with this finding. The University has created and filled a position that is assigned to work exclusively on the bank reconciliations. Additionally, closer monitoring of the bank reconciliation process will take place and procedures will be reviewed and revised as necessary to ensure accounts are accurately reconciled to the general ledger in a timely manner, with proper documentation of any necessary adjustments. Contact Person: Kenneth Dyer, Vice President for Fiscal Affairs Telephone: (229) 430-4608; Fax: (229) 430-2763; E-mail: kendyer@asurams.edu Inventories We concur with this finding. The University will revise already established procedures to provide for the systematic and consistent mark-up of resale inventory and to ensure the timely inputting of resale inventory information into the pointof-sale system. The University's new computerized point-of-sale system is being enhanced such that management can ensure adequate monitoring of inventory costs throughout the fiscal year. Contact Person: Lori Washington-Burnett Telephone: (229) 430-4609; Fax: (229) 430-2763; E-mail: lburnett@asurams.edu Revenues/Receivables/Receipts We concur with this finding. The balance noted is an accumulation of a balance from previous fiscal years. The University will continue the practice of assigning certain accounts for collection by outside firms. Additionally, the University will continue to reserVe funds for those accounts determined to be uncollectible. Contact Person: Lorraine Leary, Student Accounts Manager Telephone: (229) 430-4615; Fax: (229) 430-4696; E-mail: lleary@asurams.edu F-54 Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 3D, 2002 Expenditures/Liabilities/Disbursements We concur with this finding. The University will review and revise its procedures as necessary such that both the Procurement and Inventory Management units will ensure that supporting documentation will be maintained and made readily available for all operating leases. Contact Person: Liz Dotson. Director of Administrative Services Telephone: (229) 430-4607: Fax: (229) 430-3085: E-mail: ldotson@asurams.edu Finding Control Number: FS-521-02-06 CAPITAL ASSETS Inadequate Capital Asset Records We concur with this finding. The University has implemented procedures to strengthen the internal controls over the University's capital assets. The Asset Management Module will accurately reflect all University assets along with the any applicable depreciation. The procedures will ensure that all assets maintained on subsidiary capital asset reports will be located at its assigned location with the appropriate decals affixed. Additionally, capital assets will be added to and removed from the equipment inventory records in a timely manner. Contact Person: Liz Dotson, Director of Administrative Services Telephone: (229) 430-4607; Fax: (229) 430-3085; E-mail: ldotson@asurams.edu Finding Control Number: FA-521-02-01 CASH MANAGEMENT Excessive Cash Balances We concur with this finding. The University will implement procedures to ensure that funds are not made in advance of immediate cash needs. The University will closely monitor cash draws to ensure that they are commensurate with the respective program needs in an effort to prevent excess cash balances. Contact Person: Janice H. Jones, Director of Budgets and Contracts Telephone: (229) 430-6438; Fax: (229) 430-2763; E-mail: jhaywood@asurams.edu Finding Control Number: FA-521-02-02 ELIGIBILITY Deficiencies in Student Financial Aid Disbursement Process Questioned Costs: $21,785.13 We concur with this finding. The University has implemented procedures to ensure that financial aid is properly calculated and disbursed to eligible students. Additionally, internal controls have been implemented to preclude the awarding and disbursing of financial aid assistance in excess of a student's financial need. The University has not received any correspondence from the U.S. Department of Education since submission of the audit report containing the audit findings. Contact Person: Kathleen Caldwell, Director of Financial Aid Telephone: (229) 430-4650; Fax: (229) 430-3936; E-mail: kcaldwel@asurams.edu ARMSTRONG ATLANTIC STATE UNIVERSITY Finding Control Number: FS-524-02-04 CAPITAL ASSETS Inadequate Capital Asset Records We agree with the four items listed in the finding. With regard to item 3, we did attempt to reconcile these items. It appeared some expense items under $5,000 were capitalized which caused the actual ledger to exceed the assets in the F-55 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 capital ledger. Concerning item 4, we did prepare a schedule supporting equipment items not covered in the Asset Management module but it was not 100% reconcilable. Contact Person: Dan Harrell, Director of Business Services Telephone: (912) 927-5255; Fax: (912) 921-2366; E-mail: harrelda@mail.armstrong.edu CLAYTON COLLEGE AND STATE UNIVERSITY Finding Control Number: FS-528-02-03 CASH AND CASH EQUIVALENTS GENERAL LEDGER CAPITAL ASSETS Deficiencies in Accounting Procedures We concur with the finding. Corrective action has been accomplished or is planned to remediate deficiencies in accounting procedures: Cash and Cash Equivalents The University increased staffing levels as required, and has instituted procedures to ensure that delinquent operating account reconciliation is completed, and that subsequent reconciliation is completed in a timely manner. As of February 2003, operating account reconciliations are current. Prior to June 30, 2003, all required adjustments will be identified, documented, and booked appropriately to the general ledger. General Ledger Unlocated variances between salary and travel payments reported to the State Department of Audits, and balances posted to the general ledger occurred in part from the University's conversion to the GeorgiaFIRST financial reporting system. The University continues to develop reconciliation methodology consistent with the new system, and has developed procedures to ensure completion of the reconciliation of continuous audit reporting. Capital Assets The University has instituted procedures to ensure that monthly depreciation and additions/deletions to the institution's library collection are posted appropriately to the general ledger, and as required to subsidiary ledgers. Required adjustment to post library collection value and umecorded depreciation will be processed prior to June 30, 2003. In response to prior year audits, the University reported that equipment values reported were irreconcilable, and that an outside appraisal firm would be employed to evaluate the equipment inventory and re-establish an appropriate book value. That process failed to adequately prove the equipment inventory value. To re-establish with confidence an accurate valuation of the equipment inventory, the University will conduct a complete and thorough physical inventory of small value and capital equipment, and will attempt to reconcile current book values to values reported under the legacy accounting system, and to the exception reports provided by the outside appraisal firm. Even in the event that the values are again proven irreconcilable, the value proven by the physical inventory will establish and prove the inventory value for reporting purposes, and to which subsequent years activity is reconciled. The University will develop and institute procedures by which to maintain the asset inventory. Contact: J. Blake Lanier, Director of Business Services Telephone: (770) 961-3602; Fax: (770) 961-3769; E-mail: blakelanier@mail.clayton.edu F-56 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 COLUMBUS STATE UNIVERSITY Finding Control Number: FS-530-02-01 CAPITAL ASSETS Inadequacies Capital Asset Records Columbus State University concurs with the above stated audit finding for the fiscal year ending June 30, 2002. 1) In November 2002, the institution began conducting a physical inventory of all the institution's assets. That process has now been completed. 2) Corrections were made to the inventory records and to the Asset Management Module. 3) To ensure all personnel working with the Asset Management Module were proficient in their tasks and knowledge, the institution sought the advise and instruction of Erika Chanin, Asset Management coordinator from the GeorgiaFirst team. Contact Person: Lougene Brown, Comptroller, 2445 University Avenue, Columbus, Georgia 31907 Telephone: (706) 568-2003; E-mail: brown_lougene@colstate.edu FORT VALLEY STATE UNIVERSITY Finding Control Number: FS-533-02-06 GENERAL LEDGER Failure to Comply with Board of Regents' Requirements The University had not made many of the journal entries by the closing of the books and records in order to adhere to the requested cut-off date; however, subsequent to that date, the BOR was provided with the necessary information to make adjustments to the fiscal reports to properly reflect the activity of FVSU for the fiscal year ending June 30, 2002. Contact Person: Barbara W. Humphrey, Acting Vice President for Business and Finance Telephone: (478) 825-6400; Fax: (478) 825-6089; E-mail: humphryb@mail.fvsu.edu Finding Control Number: FS-533-02-12 CAPITAL ASSETS Inadequacies in Operation of Property Management System and Equipment Inventory Records The University did not prepare a corrective action plan to address this audit finding. Contact Person: Barbara W. Humphrey, Acting Vice President for Business and Finance Telephone: (478) 825-6400; Fax: (478) 825-6089; E-mail: humphryb@mail.fvsu.edu Finding Control Number: FA-533-02-01 ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Questioned Costs: $24,489.00 We do not agree with the findings and submit the following: At Fort Valley State University, Satisfactory Academic Progress (SAP) is evaluated on all students at the end of the Spring Semester every year to determine progress for the previous academic year and eligibility for the following period of emollment (POE). F-57 ~rgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 We submit the following relative to the three students who were cited III this finding for noncompliance with the University's published Satisfactory Academic Progress (SAP) policies: SFA-ROS-21 This student was determined to be ineligible at the end of POE 200102 while seeking the first Masters degree and was required to appeal in order to continue to receive federal aid. The appeal was denied. The Student was required to self-pay for POE 200105 and successfully complete that POE with a minimum three (3) credit hours attempted and a grade of "B" or better. The student met this requirement. Aid was reinstated for POE 200108 on the condition that the student continue to complete every remaining POE meeting the federal completion rate and grade point average requirement for graduate students. Aid was denied for POE 200202. The student has not exceeded 72 attempted credit hours at the graduate level. Accompanying documentation is on file for review. The questioned cost of $6,306.00 should be removed. SFA-ROS-49 This student was evaluated at the end of POE 200102 seeking a second Masters Degree. For this reason, the student was allowed an additional thirty-six (36) hours to complete the second degree. It was determined that SAP was being met and aid was awarded. Please review the accompanying documentation. This questioned cost of$8,250.00 should be removed. SFA-ROS-55 This student was evaluated at the end of POE 200102 seeking the first bachelor degree and was determined to be eligible to continue receiving federal aid as SAP requirements were met. This student completed an Appeal at the end of the previous academic year because completion rate requirements were not being met. Aid was awarded for the 2001-2002 academic year. The student withdrew on 2/28/02. The advisor explained at exit counseling there was no additional federal aid eligibility due to total hours attempted. The questioned cost of $4,664.00_should be removed. New Satisfactory Academic Progress (SAP) procedures require monitoring of those students close to reaching maximum time frame limits. For those students, financial aid awards are made for the eligible POE only. Appeals can be made to the Director of Financial Aid for consideration. Every case is reviewed on its own merit. We challenge the findings concerning two students that exceeded the aggregate limit in Direct Loans for a dependent undergraduate. SFA-ROS-30 Due to a PLUS loan denial, this student requested and was awarded additional UNSB funds in the amount of $1,200.00 during the 2000-2001 academic years to attend summer school. When determining remaining eligibility within the Federal Loan Program, students forced to borrow additional Unsubsidized Loan funds resulting from a parent being denied a PLUS loan, should not be penalized. When remaining loan eligibility was determined for the 2001-2002 academic year, the additional unsubsidized loan amount of $1,200.00 was subtracted from the total aggregate amount. This left subsidized eligibility of $4,832.00. This was the total amount awarded for the academic year. The questioned cost of $1,182.00 should be removed. SFA-ROS-47 During the 1999-2000 this student requested, and was granted, a Dependency Override having met the existing Professional Judgment requirements in place at that time. Unsubsidized aid in the amount of $4,998.00 was awarded that year. Subsequent requests for a Dependency Override were denied because a new Director was hired and new requirements were in place. When reviewing remaining eligibility for this student in the 2001-2002 academic year, the student was not penalized for amounts borrowed in the Unsubsidized loan program due to the previous Dependency Override granted. NSLDS reports the aggregate amount borrowed by the student to be $28,041.00. The questioned cost of $2,291.00 should be removed or reduced to $43.00 which is the actual amount overawarded. Procedures are in place in the Financial Aid Office to review NSLDS when the aggregate loan limit comment appears in the ISIR record. If the student is not a transfer student, we review the student's award history for denied PLUS loan information or, as in this case, circumstances created as the result of granting a dependency override. Every case is reviewed on its own merit and, as the advocate for students; we work to provide the assistance needed, within guidelines that will not penalize students for decisions made before revised procedures are put in place. F-58 __ _-- ._-_ . _--_ ., .. .. ......_---~ Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 We challenge one finding involving two students that received Direct Subsidized Loans in excess of their financial need. SFA-ROS-ll The student was overawarded by $120.00 when the Subsidized Stafford loan was certified and disbursed. However, the Governor's Scholarship of $787.00 was awarded to the student on February 12, 2002, which was well after the second disbursement of the loan had been disbursed. For this reason, the questioned cost should be reduced to the actual amount of the overaward. The discussion on need based and non-need based scholarships as they effect our determining an overaward has been thoroughly reviewed in the Financial Aid Office. It has been determined that while a scholarship can be awarded based on merit and not need, the award must be considered when determining subsidized eligibility. The FAO is developing an Overaward Worksheet as a training tool for Advisors to become more familiar with the change in concept for the scholarships received. This tool will serve to eliminate such overawards. The report's recommendation to contact the U.S. Department of Education will be done after we receive your final report. We look forward to the results of your review after the challenges to these initial findings are reviewed. Contact: Russelle Keese, Director of Financial Aid Telephone: (478) 825-6300; Fax: (478) 825-6976; E-mail: keeser@fvsu.edu Finding Control Number: FA-533-02-02 REPORTING Expenditures in Excess of Authorization Student Financial Aid Cluster Program The information reflected in BANNER for Financial Aid differs significantly from what is reported in this finding. According to information the Financial Aid Office provided the Auditor on October 16, 2002, the Federal Pell Grant Program Account reflected a Federal authorization of $4,348,180.51 per the Statement of Account Inquiry Form in BANNER (REISSOA). The Aid Year Specific Information Form (RFIBUDG) reflects system awards in the amount of $4,367,884.00. This is a difference of $19,703.49 for that date. Currently, our system reflects the same federal authorization with $4,361,867.00 on RFIBUDG. This is a difference of $13,686.49. We have acknowledged problems with duplicate reporting to Mr. David Bamiki with the U.S. Department of Education for the 2001-2002 award year that will bring $7,112.00 back to the University. The difference of $6,575.00 is reflected in the GAPS Award Balances Report. This finding states problems with the University's Accounting records, and errors in the Ledger have been acknowledged by the Accounting area. Documentation for the above is being sent for your review as it pertains to reconciliation activity in the Financial Aid Office. Contact: Russelle Keese, Director of Financial Aid Telephone: (478) 825-6300; Fax: (478) 825-6976; E-mail: keeser@fvsu.edu Finding Control Number: FA-533-02-03 REPORTING Reports Not Reconciled Student Financial Aid Cluster Program The Financial Aid Office meets weekly with the Accounting area and monthly with Registrar, Information Technology and Admissions. This has helped to resolve several discrepancies and also brings the University into compliance with regulations as they pertain to reconciling monthly. Contact: Russelle Keese, Director of Financial Aid Telephone: (478) 825-6300; Fax: (478) 825-6976; E-mail: keeser@fvsu.edu F-59 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 SAVANNAH STATE UNIVERSITY Finding Control Number: FS-548-02-01 CASH AND CASH EQUIVALENTS REVENUES/RECElVABLES/RECEIPTS EXPENSES/LIABILITIESIDISBURSEMENTS GENERAL LEDGER CAPITAL ASSETS Inadequate Separation of Duties 1) Cash receipting functions were not separated from cash disbursement and general ledger functions. We do not concur with this finding. According to the auditors this finding specifically relates to the current Bursar. During the audit period the current Bursar served in the following capacities with the outlined responsibilities: Controller July 2001 - October 2001 The Controller's responsibilities included the design and implementation of financial systems and management reports, preparation of financial reports, and supervision of various areas of accounting. Special Projects Coordinator October 2001 - June 2002 The Special Projects Coordinator responsibilities included reconciling Banner-clearing accounts, reconciling/auditing travel and advances, and preparing various journal entries as directed. In late 2002 the supervision of the Student Accounts unit was added to the responsibilities of this position. Based on the above outlined duties Gob descriptions are on file), it is the University's position that there is no inadequate separation of duties involving Janice Allen, which relates to the cash receipting, cash disbursement, and general ledger functions. Additionally, it appears that the back-up documentation for this finding was based on information obtained from a cashier. The University believes that this information should have been verified by the Point of Contact, observation, and/or job descriptions. 2) Cash collection functions and maintenance of detail accounts receivable records were not separated from general ledger functions. We do not concur with this finding. During the registration period, which could run for 3 to 5 days, various staff members from various departments are assigned as temporary cashiers. The University has the following procedure in place to ensure the safeguarding of assets. Procedure: Individuals serving as supervisors during registration verify the temporary cashiers' presence, all totals (cash, checks, money orders, and credit cards) and signs off on the Daily Cash Receipts Form. For future reference the temporary cashier will retain a copy of this form. 3) Deposit preparation functions were not separated from cash receipts functions. We concur with this finding. As a part of the end of day balancing procedure cashiers prepared deposit slips. This was done due to limited resources; however the following procedure is in place to ensure the safeguarding of assets. Procedure: Cashiers verify each others Daily Cash Receipts Form, Bank Deposit Slip, and closes out each other's cashiering session. Under no circumstances will a cashier close out his/her own session. The closed session number is written on the top of the Daily Cash Receipts Form. The completed deposits are placed into the bank deposit bag. The bank deposit bag is picked up and delivered to the bank by security. 4) Banner receivable and accounts receivable functions were not separated from the check disbursement functions. F-60 --_ ..._-- - - - _ _ ... --_. Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 We do not concur with this finding. Banner receivable and accounts receivable functions were handled by student accounts. The check disbursement function was handled by accounting. 5) Supervisory access level to the various functions within the accounts payable, accounts receivable, human resources, capital assets and general ledger modules of Georgia First System were not separated. We concur with this finding. This was the result of implementing PeopleSoft in May of 2002. The Implementation Committee, with the assistance of Empower Solutions (consultants), decided on the users' security levels. It was understood that due to limited manpower to thoroughly separate functions, staff would have to do two or three functions, thereby crossing over security levels. The Committee's decisions at that time started out minimally based its understanding of each user's function. As expected, business operations slowed down due to the unfamiliarity of the software but the very minimal security levels exacerbated the situation. Access to certain information and functions to proceed with the job was severely hampered; users' access levels were then expanded. In fact, even the Board recommended turning off certain restrictions; one of which was budget control, just to get through the daily business functions and attend to year-end closing and new-year opening. The access levels for certain users who were the lead trainers and "experimenters" for the various modules and reports was a necessity designed to facilitate operations, not to circumvent internal controls. Currently, the University feels there is sufficient understanding and knowledge of the software to be able to reclassify security levels to meet internal control standards. As of March 2003 Business and Finance was reorganized under functional lines and concomitantly, the security levels have been revised, a copy of which is attached. The University reserves the right to further revise security levels when deemed necessary for a smooth operation. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu Finding Control Number: FS-548-02-08 CAPITAL ASSETS Inadequate Capital Assets Records 1) Did not reconcile by asset category the ending book balances at June 30, 2001 to the adjusted beginning balance as of July 1, 2001. We concur with this finding. The University experienced problems with the Asset Management module; the auditor's year-end figures will be used as a beginning point for our reconciliation for this current fiscal year. 2) The University did not reconcile the property records to the capitals ledger. We concur with this finding. The University experienced problems with the Asset Management module; the auditor's year-end figures will be used as a beginning point for our reconciliation for this current fiscal year. 3) The University was unable to provide a listing of equipment which included .... We partially concur with this finding. The University was able to provide a listing for all the attributes except the funding source used to purchase federal items. This attribute will be included in the Asset Management module for the current fiscal year. To improve the overall management of the University's property, the office of Central Receiving and Records management is in the process of revising the University's procedure for property management. The process will be completed by May 31,2003. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu F-61 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 Finding Control Number: FA-548-02-01 ACTIVITIES ALLOWED OR UNALLOWED Improper Activity Higher Education - Institutional Aid (CFDA 84.031) Questioned Cost: $7,185.07 We do not concur with this finding. Working papers confirmed that by way of telephone conversation with the Program Officer for the U.S. Department of Education, on 2/26/03, that the amounts encumbered in FY 200 1 for the University's Image Building Activity were allowable. The total expenditure for Image Building Activities was $53,335.93, of which $46,170.86 was considered a finding in FY 2001. These expenditures and encumbrances including the $7,165.07 that is now considered to be a finding were commitments made by the University on or before June 27, 2001, as evidenced by requisitions prepared on or before that date. No additional commitments for services were made after 6/27/01. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu Finding Control Number: FA-548-02-02 ALLOWABLE COSTS/COST PRINCIPLES Deficiencies in Internal Controls Higher Education - Institutional Aid (CFDA 84.031) 1) We do not concur with this finding. The payments for meals for the two workshops were reasonable and in compliance with OMB Circular A-21 Section c (3). Title III funded activity and sub~activity directors, Program Coordination staff, university administrators and selected staff from Business and Finance was invited to the FY 2002 Title III orientation workshop. The meal was prepared based on the total number of employees expected to attend the orientation. A similar situation arose in the Professional Development activity. It is standard operating procedure of the SSU Training Academy, a Title III funded program, to poll staff to obtain an estimated number of participants for upcoming workshops. Information obtained addresses the following issues: a) The estimated number of participants to ensure that the University does not exceed the agreed upon maximum with the trainer. b) The estimated room size necessary to conduct the training session. The workshop in question was held for all employees of Plant Operations. The anticipated attendance of 60 represented the total number of employees in Plant Operations. (The documents submitted earlier with regards to the attendance roster referenced another workshop held during that week. We have the listing of participants on file for the November 15,2001 Plant Operations workshop). In the future, the University will refine its methods to more precisely forecast attendance at Title III sponsored events. 2) We concur with this finding. The University will ensure that adequate documentation is provided for all expenditures by re-engineering the Voucher Auditing position. (The job description is on file.) 3) We concur with this finding. The employee has refunded the University and an adjustment has been made to correct the error. The reengineered Voucher Auditing position will review vouchers to identify errors in processing before checks are signed and released. 4) We do not concur with this finding. The University's Accounts Payable procedure required that Vendors send invoices in duplicate (original and one copy) to the Controller's office. If invoices are mailed to other offices on campus, departments are required to forward the documents to the Controller's office immediately. However, in F-62 Georgia Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 situations where original invoices cannot be located, copies of invoices may be used to effect payment. Such payments will only be made after Accounts Payable personnel verify that they are not duplicate payment. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu Finding Control Number: FA-548-02-03 ALLOWABLE COSTS/COST PRINCIPLES Improper Expenditures Higher Education - Institutional Aid (CFDA 84.031) Questioned Cost: $1,112.00 We do not concur with this finding. In the University's opinion these are allowable expenditures as per 34 CFR 608.4 (a), and (b). Tide III funds were not used to supplement expenditures for activities that are related to carrying out an approved program. Savannah State University, at the directive of the University System of Georgia, implemented PeopleSoft HRMS and most recently, People Soft Financials. The result was extensive training for this new software. As part of the training, it was necessary to re-evaluate current operating procedures, skill sets and forms utilized. As a result of feedback from all employees involved in the training, members of the HR Department and Payroll collectively developed forms that were formatted to coincide with skills acquired in training. Thus for documents modified as a result of the training, the cost associated was viewed as training related expenses. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu Finding Control Number: FA-548-02-04 ELIGIBILITY SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program Questioned Cost: $3,990.81 1) Unearned Title IV funds were not applied to the appropriate student financial aid program for one student, resulting in questioned cost of$234.82. We do not concur with this finding. Cited Student The University was responsible for returning $337.82. An unsubsidized loan in the amount of $234.00 was returned on June 5, 2001 and $103.00 was returned on February 21, 2002. All funds were returned on the school's behalf. Nine students were disbursed Title IV funds greater than the amounts earned resulting in additional questioned cost of $3,755.99. All of the students identified in the sample fell in the Fall 2000 and Spring 2001 timeframe. These students were reviewed and audited by the U. S. Department of Education. Savannah State University has satisfied any liability within the subsequent year. According to the Federal Blue Book (34 CFR 668.164), if a student is to return loan funds, he or she repays the amount according to the terms of the promissory note he or she signed. The school is not obligated to return these funds on the student's behalf. The auditor identified ten students totaling the questioned costs of$3,755.99. F-63 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 1) We do not concur with this finding. First Cited Student (Fall 2000) The University initially used the incorrect rate to determine the withdrawal percentage. As a result, we returned $1,559.01 to Stafford Loans. Upon reviewing the calculation at the request of the Department of Education during their review, it was noted that the University should have only retuned $718.88. Since the school returned excess funds in the amount of$840.13, this will reduce the student's return portion by this amount. As cited above, the University is not obligated to return loan funds on behalf of the student. Savannah State University has no further financial obligation on this account. We could not determine how the auditor arrived at the return amount of$I,460.55. 2) We do not concur with this finding. Second Cited Student (Fall 2000) The University's responsibility was to return $1,165.23 back to the Department of Education. The School returned this amount. The amount of $336.39 identified by the auditor was the student's portion and should be paid back according to the terms of the loan agreement by the student. The school has no further financial obligation on this account. 3) We do not concur with this finding. Third Cited Student (Spring 2001) The University's responsibility was to return $1,112.85 back to the Department of Education. The School returned this amount. The amount of $21. 58 identified by the auditor was the student's portion to return. 4) We do not concur with this finding. Fourth Cited Student (Spring 2001) The University's responsibility was to return $868.71 back to the Department of Education. The University returned $1,156.40 instead. The amount of$35.32 identified by the auditor was the student's portion. 5) We do not concur with this finding. Fifth Cited Student (Spring 2001) The University's responsibility was to return $1,024.72 to the Department of Education. The School returned this amount. The amount of$283.04 identified by the auditor was the student's portion. 6) We do not concur with this finding. Sixth Cited Student (Spring 2001) The University's responsibility was to return $337.82. The Institution returned these funds. The amount of $409.09 identified by the auditor was the student's portion and should be repaid according to the terms of the promissory note. 7) We do not concur with this finding. Seventh Cited Student (Spring 2001) The University's responsibility was to return $971.04. The Institution returned these funds. The amount of $112.98 identified by the auditor was the student's portion. 8) We do not concur with this fmding. Eighth Cited Student (Spring 2001) F-64 Georgia Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 The University's responsibility was to return $678.37. The Institution returned these funds. The amounts of $170.63 and $58.03 identified by the auditor were the student's portion. 9) We do not concur with this finding. Ninth Cited Student (Spring 2001) The University's responsibility was to return $717.25. The Institution returned these funds. The amount of $96.78 identified by the auditor was the student's portion. 10) We do not concur with this finding. Tenth Cited Student (Spring 2001) The University's responsibility was to return $1,040.50. The Institution returned these funds. The amount of $771.60 identified by the auditor was the student's portion. 2) Unearned Title IV funds were not applied to the appropriate student financial aid programs within 30 days as required. We concur with this finding. During the year under review, the University implemented a policy for withdrawals to address the return of funds in a timelier manner. The policy is on file. According to a representative from the Department of Education, the 30-day time limit does not apply to unclaimed return checks. 3) Refund checks were cancelled and reissued after 60 or more days. According to the Federal Blue Book (Reference 34 CFR 668.165) a school must pay a credit balance directly to a student with fourteen (14) days. We are in compliance with this regulation since the checks have been cut and made available for the student. The University contacted a representative from the Department of Education to verify if a time limit existed to return funds to the Department for outstanding checks. We were informed that the school should continue to try to reach the student on outstanding checks. The funds do not have to be returned until after the term has expired. The funds belong to the student and we should make every effort to deliver them to the student. I) We concur with finding. First Noted Student At the time the refund check was cut, the student was due the credit balance on the account. Check date was 8/25/01. Housing and meal charges were posted on 9/11/01. However, the check was not voided until 12/05/01. 2) We do not concur with this finding. Second Noted Student This refund check cut in the amount of $3,483.74 was issued on 1/15/02 and voided on 1/17/02. However, it was reissued on 1/18/02 and voided again on 1/22/02. A replacement check was cut on 1/22/02 and issued to the student. We would not determine why the auditor stated the check was cut for the wrong amount. All entries appear to be correct and timely. 3) We do not concur with this finding. Third Noted Student A refund check in the amount of$1,196.12 was cut on 1/15/2002 and voided on 1/18/02. A second refund check was cut on 1/18/02 in the amount of$3,396.12 and voided on 1/22/02. A replacement check was cut on 1/22/02 in the amount of $3,396.12. The check was voided and replaced in a timely manner. F-65 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30,2002 4) We do not concur with this finding. Fourth Noted Student According to our records, the school was notified that the student withdrew on 2/14/02. This was after the refund check was cut on 1/18/02. The check was never issued to the student and was subsequently voided on 2/6/02. All transactions appear to be timely since they all fell within the same term. 5) We do not concur with this finding. Fifth Noted Student A refund check in the amount of $1,398.51 was cut on 1/18/02 and voided on 1/28/02. A replacement check was cut on 2/14/02 in the amount of $750.51. This amount reflects an adjustment made to the student's account to reduce his loan disbursement. All transactions were done in a timely manner. 6) We do not concur with this finding. Sixth Noted Student A refund check in the amount of $1,672.02 was cut on 1/18/02 and cancelled on 1/22/02. A replacement check was cut on 1/22/02. All transactions were done in a timely manner. 7) We concur with this finding. Seventh Noted Student Original check was cut on 8/25/02 but voided on 2/20/02. A replacement check was cut on 2/28/02. The University has implemented a procedure to handle this situation. 8) We concur with this finding. Eighth Noted Student Original check was cut on 8/25/01 but voided on 1/9/02. Replacement checks were issued on 1/18/02 and 1/22/02. The University has implemented a procedure to handle this situation. 9) We concur with this finding. Ninth Noted Student Original check was cut on 1/18/01 and voided on 6/8/01. A replacement check was cut on 8/25/01. The University has implemented a procedure to handle this situation. 10) We concur with this finding. Tenth Noted Student Checks were not voided and replaced in a timely manner. The University has implemented a procedure to handle this situation. 11) We concur with this finding. Eleventh Noted Student Checks were not voided and replaced in a timely manner. The University has implemented a procedure to handle this situation. Procedure: The Cashier makes a list of all checks that have not been picked up after the disbursement date. This list is given to Student Accounts to determine what action should be taken. Information is forwarded to the Cashier to either inform the student that the check is available or to void the check. If the F-66 Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 student does not retrieve the check in a timely manner (as stated in the letter or verbal correspondence), the check is voided. Student Accounts is responsible for voiding the check in Banner and the Cashier is responsible for forwarding the checks to Accounting for further action. An adjustment sheet is prepared by Student Accounts to inform Financial Aid of the appropriate adjustment to be made to the student's account to return the funds. 4) Three refund checks were reissued before the first refund check was cancelled. We do not concur with this finding. Under the CUFA Accounting System, checks were backdated for end of the month during the monthly closing period. In reference to the three checks cited by the auditor, these checks were voided in September, 2001 and reissued in that same month. However, the check disbursements made through CUFA reflected the month end date of 8/31/02. On the student's account, the checks were not reissued before the original checks were cancelled. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu Finding Control Number: FA-548-02-05 EQUIPMENT AND REAL PROPERTY MANAGEMENT Failure to Maintain a Property Management System Higher Education - Institutional Aid (CFDA 84.031) We concur with this finding. The University is in the process of updating equipment records to ensure compliance as stated in OMB Circular A-II0 Subpart C 34. The University will follow property management standards as required in Subpart C 34 (t). The office of Central Receiving and Records management is in the process of revising the University's Procedure for property management. The process will be completed by May 31, 2003. Contact Person: Elaine Campbell, Controller Telephone: (912) 303-1776; Fax: (912) 353-3188; E-mail: campbele@savstate.edu STATE UNIVERSITY OF WEST GEORGIA Finding Control Number: FS-554-02-04 CAPITAL ASSETS Inadequacies in Capital Asset System The University's assets were converted as a result of the GASB requirements implemented in 2002. It was necessary for the University to do an asset inventory, which was accomplished under a University System contract, by American Appraisal Associates (AAA). We received the asset detail from AAA in August of2002, too late for reconciliation on June 30th . In addition, the University of West Georgia found significant errors in the asset inventory when the detail was supplied to us, and in fact, since the final release of the report we have been working back through their detail and our records to identify variances and correct information. The reconciliation will take time to resolve. F-67 GEorgia. Auditee's Corrective Action PLans For the fiscaL Year Ended June 3D, 2002 EAST GEORGIA COLLEGE Finding Control Number: FS-572-02-02 CAPITAL ASSETS Inadequate Capital Assets Records We concur with this finding. Capital Assets have been reconciled and errors in capitalization thresholds that were included in the conversion data from American Appraisals Associates have been corrected. Assets that were included in error or not included in the data from the independent appraisal report have been corrected and added or deleted as necessary. The College's Asset Management module now agrees with the Capital Ledger. FLOYD COLLEGE Finding Control Number: FS-573-02-04 CAPITAL ASSETS Inadequate Controls Over Capital Assets We concur with this finding. Reports supporting the requested information have been identified and key personnel have become more familiar with the Asset Management module. Reconciliation of the inventory will be conducted annually. Contact Person: Wayne Jones, Comptroller Telephone: (706) 295-6344; Fax: (706) 295-6610; E-mail: wjones@f1oyd.edu ATLANTA TECHNICAL COLLEGE Finding Control Number: FS-823-02-01 CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLESIRECEIPTS EXPENDITURES/LIABILITIESIDISBURSEMENTS INVENTORIES CAPITAL ASSETS Inadequate Accounting Procedures We concur with this finding. 1) Cash and Cash Equivalents a) Monthly preparation of bank reconciliation ensures reconciling items are being cleared in a timely manner for all accounts. b) We have changed our banking procedures to ensure timely notification. c) Procedure has been implemented to limit control over access to the activation key as well as the signature plate. 2) Revenue/Receivables/Receipts a) Procedures are now in place to ensure we have adequate documentation of all receivables and that write offs are explained. b) The processes used in the Financial Aid Office has been changed to facilitate the reconciliation process. A quarterly reconciliation procedure has been implemented for BannerJPeopleSoft. Daily receipts from the Banner system can be verified as entered on the daily PeopleSoft Accounting Entry Information Report and the Cash Receipts Journal Report. c) As noted in 2b above, daily revenue is recorded in Banner and posted in PeopleSoft. Daily receipts are recorded by date and entered in the appropriate accounting period. F-68 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 d) Procedures used for handling mail have been expanded to incorporate a detail log of checks received. 3) Expenditures/Liabilities/Disbursements Procedures are in place to verify the three-way match (purchase order, invoice, receiving report) prior to issuance of all checks. 4) Inventories A quarterly inventory reconciliation for resale items has been implemented. A budget line item has been incorporated to record the cost of sales. 5) Capital Assets Effective procedures are in place for ensuring new equipment items are tagged and recorded appropriately on inventory. An annual physical inventory system has been implemented and progress is being made toward improving the accuracy of equipment inventory. Contact Person: Marion Davis-Barnett, Vice President of Administrative Services Telephone: (404) 756-3711; Fax: (404) 756-0932; E-mail: mbarnett@admin1.atlanta.tec.ga.us DEKALB TECHNICAL COLLEGE Finding Control Number: FS-830-02-01 CASH AND CASH EQUIVALENTS INVENTORIES GENERAL LEDGER CAPITAL ASSETS Deficiencies in Accounting Procedures We concur with this finding. Cash and Cash Equivalents a) The monthly bank accounts for Fy'02 have now been reconciled. The Comptroller has divided the responsibilities for each bank account and reconciliation; and has taken steps to assure that all bank accounts are reconciled in a timely manner, b) Procedures have been put into place by the Comptroller to assure that adequate controls and procedures related to Bookstore buy-back cash (referred to here as petty cash) are followed. Inventories Procedures are now in place to take a Bookstore inventory on a quarterly basis; along with more timely entry into the PeopleSoft General Ledger system. General Ledger The Comptroller has reaffirmed procedures to ensure that posting errors to the local service account do not take place. Capital Assets The local inventory is being reconciled with the PeopleSoft Asset management inventory. An audit by an outside company will be performed this year and any resultant adjustments made to ensure that the local inventory is reconciled to the PeopleSoft Asset Management inventory. Contact Person: John Buell, Comptroller Telephone: (404) 297-9522, ext. 2123; Fax: (404) 298-3614; E-mail: buellj@dekalbtech.org F-69 Auditee's Corrective Action PLans For the fiscaL Year Ended June 30, 2002 GEORGIA HIGHER EDUCATION ASSISTANCE CORPORATION Finding Control Number: FS-918-02-01 GENERAL LEDGER Inadequate Accounting Procedures The instances noted occurred in fiscal 2001 and were corrected in fiscal 2002. Procedures are currently in place to prevent issues like these from reoccurring. Contact Person: Herman Cox, Assistant Director of Accounting Services Telephone: (770) 724-9108; Fax: (770) 724-9101; E-mail: hermanc@mail.gsfc.state.us Finding Control Number: FA-918-02-02 REPORTING Inaccurate Data Submitted to ED The instances noted occurred in fiscal 2001 and were corrected in fiscal 2002. Procedures are currently in place to prevent issues like these from reoccurring. Contact Person: Herman Cox, Assistant Director of Accounting Services Telephone: (770) 724-9108; Fax: (770) 724-9101; E-mail: hermanc@mail.gsfc.state.us STATE ROAD AND TOLLWAY AUTHORITY Finding Control Number: FS-927-02-01 ACCOUNTING CONTROLS Inadequate Controls Over Cruise Card Information We concur with this finding. We have implemented new procedures to assure the cruise card patrons' confidential information is restricted to those designated individuals who have a need to process the changes of the credit card information to patrons' accounts. The fax machine is monitored during the day by the supervisor of that department. At the close of business, the machine is turned off to prevent the receipt of cruise card patron confidential information while a supervisor is not present. To assure the cruise card patrons' applications are secured and only accessible by designated employees, the applications are entered into the system once they have been received, then stored in a locked file cabinet which is only accessible by a supervisor or a manager. Contact Person: Terry Rogers, Tollway Administrator Telephone: (404) 760-5892; Fax: (404) 266-3045; E-mail: trogers@georgiatolls.com Finding Control Number: FS-927-02-02 REVE}..'UES/RECEIVABLES/RECEIPTS Deficiencies in the Collection and Recording of Cash Tolls (F.J. Torras Causeway) We concur with this finding. The State Road and Tollway Authority (the "Authority") expects the results ofa study of the F.J. Torras Causeway to be delivered in the latter part of May, 2003. This study evaluates a number of alternatives including the installation of collection systems similar to those at the GA 400 Extension or the removal of the toll altogether. The Authority is also evaluating the impacts of HB 503 which issues a decal for passage over the Causeway issued with the license tag decal to residents of Glynn County. Contact Person: John Leonard, Interim Executive Director Telephone: (404) 463-8770; Fax: (404) 463-8769; E-mail: jleonard@georgiatolls.com F-70 ---.- ,--_.-.--_..- ---_.,,--_. Auditee's Corrective Action PLans For the fiscaL Year Ended June 30,2002 Finding Control Number: FS-927-02-03 REVENUESiRECEIVABLES/RECEIPTS Inadequate Accounting Procedures We concur with this finding. To assure the credit card processing function is safeguarded, several procedures were implemented. At present, the Authority stopped all refunds made to credit cards. Refund checks are issued when the patron's credit card has expired or changed. This will preempt any refunds to credit cards which are not on the system as the patron's credit card of record. The computerized system is being enhanced to limit a credit card refund to a patron's credit account of record. The system enhancements should be in place by September 2003. Contact Person: Guy Johnson, Accounting Director Telephone: (404) 760-5887; Fax: (404) 266-3045; E-mail: gjohnson@georgiatolls.com Finding Control Number: FS-927-02-04 EXPENDITURES/LIABILITIESIDISBURSEMENTS Inadequate Accounting Procedures We concur with this finding. The State Road and Tollway Authority proposes an independent review of the processes of the Georgia Department of Transportation to document their project invoicing procedures. The results of this review will allow the Authority to establish written policies and procedures to ensure payments are made for approved transportation projects. Contact Person: Dan Guimond, Treasurer Telephone: (404) 463-8765; Fax: (404) 463-8769; E-mail: dguimond@georgiatolls.com GEORGIA TECHNOLOGY AUTHORITY Finding Control Number: FS-980-02-01 EXPENSES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Procedures GTA concurs with the finding with a few clarifications. Item #1 - The Authority has implemented procedures so that documentation for any vendor invoice is maintained and reviewed by both the Telecommunications and Financial divisions in a consistent manner. Examples of supporting documentation reviewed and kept may include vendor timesheets, vendor quotes, vendor scope of work descriptions and vendor invoices as well as GTA originated requests for work, approvals to proceed, change order documentation, completion acceptance and customer billing. GTA has corrected the weakness of allowing the vendor to bill block hours. Block time is no longer allowed to be ordered or billed under the current contract. All service requests are for defined projects with clear, concise statements of work to be performed for specific customers. Item #2 - GTA has implemented multiple signature requirements across the Telecommunications and Financial divisions that will insure that the processes are consistently followed for customer orders, internal and external cost proposals, application of administrative overhead and assessment of service order fees to insure that only authorized work is performed appropriately by vendors and accurately invoiced to the state. The level of detail provided in customer proposals is normally done at a summary level. However, if the customer requests additional detail it is provided. This detail may include specific materials and their quantities, labor hours specified by skill level and administrative overhead costs. The process begins with a written request for work submitted by a customer agency. The request must be reviewed and countersigned by managers in two sections indicating acknowledgement of a formal request. This counter signature requirement follows each documentation stage of the project. For example, countersignatures are required for: F-71 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 Site visit requests Validation of vendor quote and scope of work Memorandums to proceed Project completion and acceptance of work performed Invoice validation and approval for payment Internal review of proj ect file for closure Prior to payment of the vendor invoice in Accounts Payable, the GTA Billing Office reviews certain project documentation before submitting its release of payment approval. No invoices are paid until these steps have been acknowledged in writing. Bulk materials do not exist as a valid line item in the contract and are not allowed to be ordered or invoiced as such. All material components used must be individually listed and costed on the vendor invoice. Only two situations exist where the vendor will provide materials under the existing contract. Repair - Cable plant repair is typically outside aerial or underground facilities or riser transport between floors. Breeches of these facilities usually cause widespread outages that must be addressed on an emergency basis. They can involve backhoes, expensive splice closures and conduit repair. These are not services that are in the best interest ofthe state to provide in-house. Specific large projects with well-defined and documented scope to include a timeline and logistics that preclude a separate materials provisioning approach due to a significant increased risk to the project. Use of this "turnkey" provision must be approved by the CNO or her Executive Analyst. Item # 3 - Procedures have been implemented to cross reference vendor invoices to projects in the billing system so that this information can be compared. A request has been submitted to the Financial System Services group to add functionality to the PRISM billing system to add query capability on the GTA job #. The profitability of any particular project is maintained on a project-by-project basis within the Telecommunications Division. All direct costs are accumulated on each and every project and passed to customer agencies with specific product and service detail, cost and appropriate mark up. This includes direct labor for technicians and materials. Materials may be purchased specifically for a project or pulled from shelf stock. In either case, an itemized materials list is kept in the project file. All other overhead is captured in the administrative fee for each project. GTA's formal naming convention has been in place since the inception of the state providing cabling services in the 90s, but was not followed in the time period audited by certain individuals in the Atlanta Region. The multiple signature process across divisions that has been implemented will not allow for the naming convention to be distorted. GTA's Accounts Payable has implemented the use of the GTA Project Job number by entering it in Phoenix as a cross reference to the project in GTA's billing system. Procedures for cable and/or wiring projects were documented on March 4, 1999 and since that time, additional flowcharting of these procedures has taken place. Most recently this process was re-examined for accuracy and to require additional validation points in January, 2003. Training was provided for all affected GTA staff in February, 2003. The most current changes to this procedure have been fully flow-charted and are currently in use in both the Telecommunications and Financial Divisions ofGTA. Contact Person: Sherrie Southern, Director of Financial Systems Telephone: (404) 463-2344; Fax: (404) 463-5089; E-mail: ssouthem@gta.ga.gov Finding Control Number: FS-980-02-02 CAPITAL ASSETS Inadequacies in Operation of Asset Management Module We concur with this finding. However, there are issues with the responsibility of the corrective actions. Financial Systems concur with the system related errors and is responsible for providing the Asset Management Module for use by 70+ state F-72 Auditee's Corrective Action Plans For the Fiscal Year Ended June 30, 2002 entItles. It is not the responsibility of Financial Systems to control either how an entity uses the system or if the entity completes the reconciliation process. Financial Systems provides assistance and recommendations for the reconciliation process only. The response to this finding describes several events put in place for Financial Systems in supporting the Asset Management Module and several events in process. Notified Department of Audits in August 2002 to make them aware of issues identified and to request assistance. Financial Systems task force established to address issues. Task force included hiring of a consultant with expertise in AM reconciliation and the PeopleSoft AM module. Also included Department of Audits. Panel changes implemented in AM module to stop erroneous entries by users. AM reconciliation procedures analyzed, modified and provided to users. Procedures for running scripts by Financial Systems staff implemented with proper approval and testing required prior to running. Mass change process stopped until detailed analysis is completed. Journal lines deleted erroneously reinstated as part of data clean up. Over $300 million in out of balance conditions corrected in data clean up process to date. Transfers created out of balance condition due to one-line entries. Data clean up related to transfers completed. System corrected to eliminate one-line entries on transfers of assets. Department of Audits query joined two tables to verify ledger data. However, the two tables were not correctly joined resulting in erroneous query results. Documentation provided to Department of Audits identifying acrual remaining out of balance amounts of$282,588.68. $282,588.68 out of balance conditions remaining. Data clean up in process. Contact Person: Sherrie Southern, Director of Financial Systems Telephone: (404) 463-2344; Fax: (404) 463-5089; E-mail: ssouthern@gta.ga.gov METROPOLITAN REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8564-02-01 CAPITAL ASSETS Failure to Maintain Capital Assets We concur with this finding. All assets and inventories are maintained in the appropriate software provided by the DOE designed for iliat purpose. Appropriate controls are in effect to maintain all assets and inventories. At the end of the FY03 fiscal year, the capital assets will be maintained within the formal accounting records in compliance with accounting principles. Contact Person: Charlene Williams, Accounting Manager Telephone: (404) 352-2697; E-mail: charlene@mresa.org F-73 Auditee's Corrective Action PLans For the Fiscal Year Ended June 3D, 2002 WEST GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8604-02-01 CAPITAL ASSETS Failure to Maintain Capital Assets West Georgia RESA concurs with this finding as stated in the FY02 Audit report. Weare in the process of implementing Capital Assets/Property Management into the accounting records. We should have this fully implemented with the FY2003 Financial Report. Contact Person: Larry Davis, Executive Director Telephone: (770) 583-2528; Fax: (770) 583-3223 OCONEE REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8664-02-01 CAPITAL ASSETS Failure to Maintain Capital Assets We concur with this finding. The following information shows our corrective action plan for all audit findings and improper or questioned costs: The management of capital assets is presently being put into place at Oconee RESA. With access to software provided by GDOE, Oconee RESA will have the proper accounting function that will bring our accounting procedures into conformity with Generally Accepted Accounting Principles. Oconee RESA has always maintained an inventory database to record capital assets owned by Oconee RESA with date acquired, acquisition cost, estimated replacement cost, location and description. Date ofImplementation: Presently preparing installation of FASGov software and input of information to be complete by June 30, 2003. Contact Person: Frieda Brinson, Business Manager Telephone: (478) 552-5178; ext 227; Fax: (478) 552-0446; E-mail: fbrinson@doe.k12.ga.us CHATTAHOOCHEE-FLINT REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8724-02-01 CAPITAL ASSETS Failure to Maintain Records for Capital Assets We concur with this finding. We have contracted with the Valuation Advisory Group, Inc. to handle our Fixed Assets Account. This group is scheduled to be in our office the week of May 12 - 16 to work on this. We have an inventory of equipment by individual office prepared for him. We will determine at this time whether to go with a $1000 or $5000 Inventory Threshold. The above mentioned actions should eliminate this finding in the FY03 Audit and future audits. Contact Person: Meredith Walker, Executive Director Telephone: (229) 937-5341; Fax: (229) 937-5754 F-74 Auditee's Corrective Action PLans For the Fiscal Year Ended June 30, 2002 HEART OF GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY Finding Control Number: FS-8764-02-01 CAPnAL ASSETS Failure to Maintain Records for Capital Assets Due to current staffing limitations and budgetary considerations prohibiting the hiring of additional administrative staff, the Board has been unable to pursue the recording of capital assets on the financial statements. We have contacted the Glick Consulting Group and were told that at this point the Heart of Georgia RESA is not required to maintain these records. As funding becomes available, the Heart of Georgia RESA will attempt to maintain the capital assets inventory within the accounting records. Contact Person: June D. Bradfield, Eds.S., Executive Director Telephone: (478) 374-2240; Fax: (478) 374-2240 F-75 Listing of OrganizationaL Units Comprising the State of Georgia Reporting Entity For the Fiscal Year Ended June 30, 2002 ORGANIZATIONAL UNIT Administrative Services, Department of Agricultural Exposition Authority, Georgia Agriculture, Department of Agrirama Development Authority, Georgia Audits and Accounts, Department of (*) Aviation Hall of Fame, Georgia Banking and Finance, Department of Building Authority, Georgia Regular (*) Hospital (*) Markets (*) Penal (*) Community Affairs, Department of Community Health, Department of (*) Correctional Industries Administration, Georgia Corrections, Department of Defense, Department of Development Authority, Georgia (*) Education, Department of Education Authority, Georgia Schools (*) University (*) Environmental Facilities Authority, Georgia (*) Financing and Investment Commission, Georgia State (*) Forestry Commission, State Games Commission, Georgia State General Assembly, Georgia (*) Golf Hall of Fame Authority, Georgia Golf Hall of Fame, Georgia Governor, Office of the Higher Education Assistance Corporation, Georgia (*) Higher Education Savings Plan, Georgia (*) Highway Authority, Georgia Housing and Finance Authority, Georgia (*) Human Resources, Department of Industry, Trade and Tourism, Department of Insurance, Department of International and Maritime Trade Center Authority (*) Investigation, Georgia Bureau of Jekyll Island State Park Authority Judicial Branch Juvenile Justice, Department of Labor, Department of Lake Lanier Islands Development Authority Law, Department of Lottery Corporation, Georgia (*) Motor Vehicle Safety, Department of Music Hall of Fame Authority, Georgia Natural Resources, Department of North Georgia Mountains Authority CONTROL NUMBERS 403 926 402 940 404 483 406 900 903 904 905 428 419 921 467 411 914 414 906 907 928 409 420 496 445 975 958 422 918 986 924 923 427 429 408 974 471 910 430 461 440 913 442 973 475 929 462 912 (*) Audits of these organizational units performed in whole or in part by other auditors. AP - 3 Listing of Organizational Units Comprising the State of Georgia Reporting Entity For the Fiscal Year Ended June 30,2002 ORGANIZATIONAL UNIT OneGeorgia Authority Pardons and Paroles, State Board of Pension Funds Class Nine Fire Department Pension Fund, Georgia Employees' Retirement System of Georgia (*) Regular Defined Contribution Plan, Georgia District Attorneys Retirement Fund of Georgia Judicial Retirement System, Georgia Legislative Retirement System, Georgia Public School Employees Retirement System State Employees' Assurance Department Superior Court Judges Retirement Fund of Georgia Firefighters' Pension Fund, Georgia Judges of the Probate Courts Retirement Fund of Georgia Peace Officers' Annuity and Benefit Fund Sheriffs' Retirement Fund of Georgia Superior Court Clerks' Retirement Fund of Georgia (*) Teachers Retirement System of Georgia (*) Personnel Board, State - Merit System of Personnel Administration Ports Authority, Georgia (*) Public Safety, Department of Public Service Commission Public Telecommunications Commission, Georgia Rail Passenger Authority, Georgia Regents of the University System of Georgia, Board of Colleges and Universities Research Universities Georgia Institute of Technology (*) Georgia State University Medical College of Georgia University of Georgia (*) Regional Universities Georgia Southern University Valdosta State University State Universities Albany State University Armstrong Atlantic State University Augusta State University Clayton College and State University Columbus State University Fort Valley State University Georgia College and State University Georgia Southwestern State University Kennesaw State University North Georgia College and State University Savannah State University Southern Polytechnic State University State University of West Georgia CONTROL NUMBERS 981 465 983 416 N/A 946 N/A N/A 468 N/A 945 950 949 947 951 948 482 460 916 466 470 977 960 472 503 509 512 518 539 551 521 524 527 528 530 533 536 542 543 545 548 550 554 (*) Audits of these organizational units performed in whole or in part by other auditors. AP-4 Listing of OrganizationaL Units Comprising the State of Georgia Reporting Entity For the Fiscal Year Ended June 30, 2002 ORGANIZATIONAL UNIT Colleges and Universities (continued) Associate Degree Colleges Abraham Baldwin Agricultural College Atlanta Metropolitan College Bainbridge College Coastal Georgia Community College Dalton State College Darton College East Georgia College Floyd College Gainesville College Georgia Perimeter College Gordon College Macon State College Middle Georgia College South Georgia College Waycross College Other Georgia Military College Skidaway Institute of Oceanography Regional Educational Service Agencies Central Savannah River Area Regional Educational Service Agency Chattahoochee-Flint Regional Educational Service Agency Coastal Plains Regional Educational Service Agency First District Regional Educational Service Agency Griffm Regional Educational Service Agency Heart of Georgia Regional Educational Service Agency Metropolitan Regional Educational Service Agency Middle Georgia Regional Educational Service Agency North Georgia Regional Educational Service Agency Northeast Georgia Regional Educational Service Agency Northwest Georgia Regional Educational Service Agency Oconee Regional Educational Service Agency Okefenokee Regional Educational Service Agency Pioneer Regional Educational Service Agency Southwest Georgia Regional Educational Service Agency West Georgia Regional Educational Service Agency Regional Transportation Authority, Georgia Removal of Hazardous Materials, Agency for Revenue, Department of Road and Tollway Authority, State Sapelo Island Heritage Authority School Readiness, Office of Secretary of State Seed Development Commission, Georgia Soil and Water Conservation Commission, State Southwest Georgia Railroad Excursion Authority Sports Hall of Fame Authority, Georgia Stone Mountain Memorial Association (*) Student Finance Authority, Georgia (*) CONTROL NUIVlBERS 557 561 562 563 569 570 572 573 575 571 576 581 584 587 589 968 593 8684 8724 8864 8804 8624 8764 8564 8644 8524 8584 8504 8664 8884 8544 8844 8604 976 497 474 927 942 469 478 919 480 984 944 911 917 (*) Audits of these organizational units performed in whole or in part by other auditors. AP-5 Listing of Organizational Units Comprising the State of Georgia Reporting Entity For the Fiscal Year Ended June 30,2002 ORGANIZATIONAL UNIT Student Finance Commission, Georgia Subsequent Injury Trust Fund Superior Court Clerks' Cooperative Authority, Georgia (*) Technical and Adult Education, Department of State Technical Colleges Albany Technical College Altamaha Technical College Appalachian Technical College Athens Technical College Atlanta Technical College Augusta Technical College Central Georgia Technical College Chattahoochee Technical College Columbus Technical College Coosa Valley Technical College DeKalb Technical College East Central Technical College Flint River Technical College Georgia Aviation Technical College Griffin Technical College Heart of Georgia Technical College Lanier Technical College Middle Georgia Technical College Moultrie Technical College North Georgia Technical College North Metro Technical College Northwestern Technical College Ogeechee Technical College Okefenokee Technical College Sandersville Technical College Savannah Technical College South Georgia Technical College Southeastern Technical College Southwest Georgia Technical College Swainsboro Technical College Valdosta Technical College West Central Technical College West Georgia Technical College Technology Authority, Georgia Tobacco Community Development Board, Georgia Transportation, Department of Treasury and Fiscal Services, Office of Veterans Service, Department of Workers' Compensation, State Board of World Congress Center Authority, Geo. L. Smith II, Georgia CONTROL NUMBERS 476 489 955 415 820 821 840 822 823 824 835 827 828 829 830 825 847 816 831 833 834 836 837 838 839 849 844 818 817 841 842 843 846 845 848 826 819 980 978 484 486 488 490 922 (*) Audits of these organizational units performed in whole or in part by other auditors. AP-6