BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED - TABLE OF CONTENTS - INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION EXHffiITS FINANCIAL STATEMENTS A STATEMENT OF ASSETS AND FUND EQUITY ARISING FROM CASH TRANSACTIONS ALL FUND TYPES B STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS GENERAL FUND C NOTES TO TIlE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULE 1 CASH AND CASH EQUNALENTS Page 2 3 4 10 RUSSELL W. HINTON STATE AUDITOR (404) 6562174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street. S.w.. Suite 214 Atlanta, Georgia 30334-8400 January 24,2002 Honorable Roy E. Barnes, Governor Members of the General Assembly of Georgia Honorable Thomas T. Irvin, Commissioner Department of Agriculture and Board ofDirectors ofthe Boll Weevil Eradication Foundation of Georgia, Incorporated INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Ladies and Gentlemen: We have audited the accompanying financial statements (Exhibits A through C) ofthe Boll Weevil Eradication Foundation of Georgia, Incorporated as of and for the year ended June 30, 2001. These financial statements are the responsibility ofthe Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1, these financial statements were prepared on the cash basis, which is a comprehensive basis ofaccounting other than accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the cash and unencumbered cash balances of the Boll Weevil Eradication Foundation of Georgia, Incorporated as ofJune 30, 2001, and the revenues it received and expenditures it paid for the year then ended on the basis of accounting described in Note 1. 01ARL-1C Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information (Schedule 1) is presented for purposes of additional analysis and is not a required part of the financial statements of the Boll Weevil Eradication Foundation of Georgia, Incorporated. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. Respectfully submitted, RWH:as OIARL-le Russell W. Hinton State Auditor FINANCIAL STATEMENTS - 1- BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED STATEMENT OF ASSETS AND FUND EQUITY ARISING FROM CASH TRANSACTIONS ALL FUND TYPES JUNE 30, 2001 EXHIBIT "A" ASSETS Cash and Cash Equivalents (See Schedule) FUND EQUITY Fund Balance Unreserved Undesig nated GOVERNMENTAL FUND TYPE GENERAL FUND JUNE 30, 2001 JUNE 30, 2000 $ 4,779,309.06 $ 4,061,475.36 $ 4,779,309.06 $ 4,061,475.36 The notes to the financial statements are an integral part of this statement. -2. BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS GENERAL FUND YEAR ENDED JUNE 30, 2001 EXHIBIT "B" CASH RECEIPTS REVENUES OTHER REVENUES RETAINED Assessments and Penalties Interest Received Refunds Southeastern Boll Weevil Eradication Foundation, Incorporated Total Cash Receipts CASH AND CASH EQUIVALENTS - JULY 1 TOTALS YEAR ENDED JUNE 30, 2001 JUNE 3D, 2000 $ 5,940,959.94 $ 3,411,891.53 331,590.26 333,764.54 86,660.00 0.00 $ 6,359,210.20 $ 3,745,656.07 4,061,475.36 6,649,212.89 $ 10,420,685.56 $ 10,394,868.96 DISBURSEMENTS EXPENDITURES COST OF OPERATIONS Regular Operating Expenses Other Operating Expenses Administrative Fee Department of Agriculture Bank Fees Court Fees Per Diem, Fees and Contracts Contracts Southeastern Boll Weevil Eradication Foundation, Incorporated Total Disbursements CASH AND CASH EQUIVALENTS - JUNE 30 $ 71,446.80 $ 74,721.05 0.00 188.55 60.00 60.00 $ 71,506.80 $ _ _7:.:4~,9~6~9~.6.:::..0 $ 5,569,869.70 $ 6,258,424.00 $ 5,641,376.50 $ 6,333,393.60 4,061,475.36 The notes to the financial statements are an integral part of this statement. -3- $ 10,420,685.56 $ 10,394,868.96 BOLL WEEVll., ERADICATION FOUNDATION OF GEORGIA, INCORPORATED NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "C" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The "Georgia Boll Weevil Eradication Act of 1985" (Act No. 641, Georgia Laws 1985, p. 1079), was enacted to amend Chapter 7 of Title 2 of the Official Code of Georgia Annotated (OCGA), relating to plant diseases, pest control, and pesticides, and to provide for a program of boll weevil eradication in the State of Georgia. The Boll Weevil Eradication Foundation of Georgia, Incorporated (Foundation) was established in accordance with the provisions ofthe Act to assist in the functions necessary for the elimination ofthe boll weevil as a threat to cotton production within the southeastern United States. Membership in the Foundation is open to all cotton growers in the State ofGeorgia. The Foundation recognizes only one class of membership and each member has one vote. The Board of Directors consists of six (6) cotton growers elected by the membership and one (1) employee of the Georgia Department of Agriculture. Revenues of the Foundation are derived primarily from an assessment against certified cotton acreage as detennined by the U. S. Agricultural Stabilization and Conservation Service. The Commissioner of Agriculture is authorized to administer and enforce the provisions of the "Georgia Boll Weevil Eradication Act of 1985", and it is his duty to receive, collect, hold in trust, and, upon written authorization, disburse the funds ofthe Foundation. Funds received for the Boll Weevil Eradication Foundation ofGeorgia, Incorporated under the provisions ofthis act are held for the Foundation and are not required to be deposited with the Office ofTreasury and Fiscal Services, and appropriated therefrom as other State funds. The Foundation is not included in any other governmental reporting entity because the Foundation has decision making authority, the power to designate management, the ability to significantly influence its operations and is primarily responsible for its fiscal matters. FUND ACCOUNTING The Foundation uses a fund to report on its financial position and the results of its operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia. A fund is an independent fiscal and accounting entity with a selfbalancing set ofaccounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. The fund presented in the accompanying financial statements is as follows: GOVERNMENTAL FUND TYPE GENERAL FUND - The fund used to account for all activities except those required to be accounted for in some other fund. -4- BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHffiIT "C" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPE GENERAL FUND The Foundation maintains its General Fund on the Cash Receipts and Disbursements basis of accounting as prescribed or permitted by statutes and regulations ofthe State ofGeorgia. This basis ofaccounting is defined as that method ofaccounting in which certain revenue and the related assets are recognized when received rather than when earned, and certain expenses are recognized when paid rather than when the obligation is incurred. The General Fund, in accordance with accounting principles generally accepted in the United States ofAmerica, should be maintained on the modified accrual basis of accounting. CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include a demand deposit with a bank and the State investment pool that has the general characteristics of demand deposit accounts in that the Foundation may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. The State investment pool (Georgia Fund 1) is an external investment pool that is not registered with the Securities and Exchange Commission (SEC) but does operate in a manner consistent with the SEC's Rule 2a7 ofthe Investment Company Act of 1940. The State ofGeorgia's Office ofTreasury and Fiscal Services (OTFS) manages Georgia Fund 1 in accordance with policies and procedures established by State law and the State Depository Board, the oversight Board for OTFS. This investment is valued at the pool's share price, $1.00 per share. The Foundation does not have any risk exposure related to investments in derivatives or similar investments in Georgia Fund 1 as the investment policy ofOTFS does not provide for investments in derivatives or similar investments through the Georgia Fund 1. INVENTORIES No inventories of supplies are reported in these financial statements. Expendable supplies are recorded as expenditures at the time of purchase. COMPARATIVE DATA Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding ofthe changes in the Foundation's financial position and operations. NOTE 2: BUDGET A budget for the financial operations of the Foundation was not prepared by the Foundation, therefore, these financial operations represent nonbudgeted financial activities. . -5- BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "C" NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of 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 ofa surety bond, the depository may pledge as collateral anyone or more of the following securities as enumerated in the OCGA Section 50-17-59: (1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia. (2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. (3) Bonds of any public authority created by the laws 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 ofdevelopment authorities created by the laws ofthe State of Georgia. (5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by or securities guaranteed 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 Corporation, or the Federal National Mortgage Association. (6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the OCGA Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia the option of exempting demand deposits from the collateral requirements. . CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as ofJune 30,2001, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk. Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the Foundation or by its agent in the Foundation's name. - 6- BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHffiIT "C" NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS Category 2 - Amounts collateralized with securities (at market value) held by the pledging financial institution's trust department or agent in the Foundation's name. Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution or by its trust department or agent, but not in the Foundation's name, and amounts uncollateralized. Cash Deposits Carrying Amount Bank Balances $ 8O,l.Q6.3~ $ 83,4illl2 $ Risk Categ~on~e2..s _ 1 2 3 a3,4illl2 $ 0,00 $,==~o~,QO~ CATEGORIZATION OF INVESTMENTS The carrying amount ofthe investment balance as ofJune 30, 2001, shown below is maintained in an investment pool by the Office of Treasury and Fiscal Services and is not subject to risk categorization. me ofInvestment Reported Amount! Fair Value State Investment Pool $ 4,699,2Qf-74 NOTE 4: RISK MANAGEMENT The Foundation is exposed to risk ofloss related to general liability. The Foundation has elected to self-insure relative to this risk exposure. There were no claims made against the Foundation in fiscal year 2001 and there were no claims brought forward from previous fiscal years. -7- SUPPLEMENTARY INFORMATION - 9- BOLL WEEVIL ERADICATION FOUNDATION OF GEORGIA, INCORPORATED CASH AND CASH EQUIVALENTS JUNE 30, 2001 INTEREST BEARING ACCOUNTS SouthTrust Bank, Atlanta, Georgia Funds on Deposit with Office of Treasury and Fiscal Services State Investment Pool SCHEDULE "1" $ 80,106.32 4,699,202.74 $ 4,779,309.06 See notes to the financial statements. - 10-