GA
A~DO
.R\
i::. ~b j
N58 " 1915 _eli:.

AUDIT REPORT NORTII GEORGIA REGIONAL EDUCATIONAL
SERVICE AGENCY ELLIJAY, GEORGIA YEAR ENDED JUNE 30, 1996

STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET
ATLANTA. GEORGIA 30334

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE

EXHIBITS

GENERAL PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES AND ACCOUNT GROUP

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

3

C

STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL AND SPECIAL REVENUE FUNDS

5

D NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS

6

ADDITIONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

16

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

18

SCHEDULES

1 SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE

20

2 CASH AND CASH EQUIVALENTS

21

3 ACCOUNTS RECEIVABLE

22

SCHEDULE OF REVENUE

4

STATE

23

5

OTHER

24

SCHEDULE OF EXPENDITURES BY OBJECT

6

GOVERNMENTAL FUND TYPES

25

7

LOTTERY PROGRAM

26

8 SCHEDULE OF COMPENSAnON AND TRAVEL OF BOARD MEMBERS

27

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY - TABLE OF CONTENTS -
SECTION II SUMMARY AND SCHEDULE OF SALARIES AND TRAVEL
SECTION ill COMPLIANCE
COMPLIANCE REPORT BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SINGLE AUDIT REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS SINGLE AUDIT OPINION ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS SINGLE AUDIT REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS
SECTION IV INTERNAL CONTROL REPORT ON INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS SINGLE AUDIT REPORT ON THE INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING FEDERAL FINANCIAL ASSISTANCE PROGRAMS
SECTION V FINDINGS AND IMPROPER OR QUESTIONED COSTS SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS

SECTION I FINANCIAL

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members ofthe North Georgia Regional Educational Service Agency Board ofControl
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE
Ladies and Gentlemen:
We have audited the general purpose financial statements (Exhibits A through D) of the North Georgia Regional Educational Service Agency, as of and for the year ended June 30, 1996, as listed in the table of contents. These financial statements are the responsibility of the Agency's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of the Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose 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.
We did not observe the taking of inventories for resale at June 30, 1996, nor could we satisfY ourselves as to the accuracy of the amounts stated as inventories for resale through alternative procedures.
As described in the notes to the general purpose financial statements, the Agency's financial statements have been prepared using a certain accounting practice and policy which, in our opinion, varies in some respects from generally accepted accounting principles. This variance is described as follows:
96ARL-33

* The general purpose financial statements of the Agency did not contain a General Fixed Assets
Account Group to account for equipment owned by the Agency which should be included to conform to generally accepted accounting principles.
The aggregate effects on the general purpose financial statements of this variance or omission have not been determined, but are believed to be material.
In our opinion, except for the effect of adjustments, if any, on the General and Special Revenue Funds, as might have been determined to be necessary had we been able -to satisfY ourselves as to the accuracy ofthe inventories for resale as discussed in the third paragraph, and except for the effects on the general purpose financial statements of the matter referred to in the preceding paragraph, the general purpose financial statements present fairly, in all material respects, the financial position of the North Georgia Regional Educational Service Agency as ofJune 30, 1996, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated March 26, 1997, on our consideration of the Agency's internal control structure and a report dated March 26, 1997, on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements of the North Georgia Regional Educational Service Agency taken as a whole. The combining statements (Exhibits E and F), the financial schedules (Schedules 1 through 8 which includes the Schedule of Federal Financial Assistance) and the Schedule of Salaries and Travel, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part ofthe general purpose financial statements of the North Georgia Regional Educational Service Agency. Such information has been subjected to the auditing procedures applied in the audit ofthe general purpose financial statements and, in our opinion, except for the effect of adjustments, if any, on the General and Special Revenue Funds, as might have been determined to be necessary had we been able to satisfY ourselves as to the accuracy of the inventories for resale as discussed in the third paragraph, such information is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated Section 50-6-24.
Respectfully submitted,
de ~
Claude L. Vickers State Auditor
CLV:cm 96ARL-33

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY - 1-

NORTH GEORGIA REGIONAL EDUCATIONAL SER\llCE AGENCY COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUP JUNE 30,1996

EXHIBIT "A"

~ Cash and Cash Equivalents Accounts Receivable Inventories Amount to be Provided in Future Years
For Payment of Compensated Absences
Total Assets

GOVERNMENTAL FUND TYPES

SPECIAL

GENERA!..

REVENUE

FUND

FUND

$

635.497.08

101.765,54 $

196.519.78

251.997.76

75.250,19

ACCOUNT GROUP GENERA!..
LONG-TERM DEBT

TOTALS (Memorandum Only) JUNE 30. 1996 JUNE 30.1995

$

635.497.08 $

600,242.68

298,285.32

310,528.41

327,247.95

581,298.17

$

53.992,40

53.992.40

49.354.11

$

989.260.38 $

271.769,97 $

53.992,40 $ 1.315.022.75 $ 1.541.423.37

LIABILITIES AND FUND EaUITY

LIABILITIES

Cash Overdraft

Accounts Payable

$

Expired Grant Balances Payable

Claims Payable

Compensated Absences

Total Liabilities

$

FUND EqUITY

Fund Balances

Reserved

For Sick and Personal Leave

$

For Continuation of Federal Program

For Inventories for Resale

$ Unreserved
Deficit Designated
For Self-Insurance Undesignated

Total Fund Equity

$

$ 139.526.10
2.372,36
141,898.46 $
1.225,00 $
251.997,76 253.222.76 $
30.904.47 563.234,69 847.361.92 $

256.305.67 103.078.82
31.829,59 $
391.214.08 $
5.420.48 75.250.19 80.670.67 -200.114.78
-119,444.11

Total Liabilities and Fund Equity

$

989,260.38 $

271.769.97 $

$
53.992.40 53.992.40 $

256.305.67 $ 242.604.92
34.201.95
53.992.40
587.104.94 $

198.072.18 182.336.83
22.902.55 3.315.00
49.354,11
455.980.67

$

1.225.00 $

1.225.00

5,420,48

3.884.92

327.247,95

581.298.17

$

333.893.43 $

586.408.09

-200.114,78

-194.378.93

30.904.47 563.234.69

30.904.47 662,509.07

$

727.917.81 $ 1.085.442.70

53.992.40 $ 1,315.022.75 $ 1.541,423.37

The notes to the general purpose financial statements are an integral part of this statement. 2-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30,1996

EXHIBIT"B"

GENERAL FUND

SPECIAL REVENUE
FUND

TOTALS (Memorandum Only)
YEAR ENDED JUNE 30,1996 JUNE 30,1995

REVENUES

State Funds Federal Funds Other Funds

$ 1,074,016,75 $

164,102.43 $ 1,238,119,18 $

735,703.90

1,369,786.71

1,369,786.71

1,436,120.36

286,252.98

275,750.13

562,003.11

518,607.78

Total Revenues

$ 1,360,269.73 $ 1,809,639.27 $ 3,169,909.00 $ 2,690,432.04

EXPENDITURES

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration Business Administration Maintenance and Operation of Plant

$

40,425.00

$

40,492.00 $

141,108.33 $

181,600.33

430,890.16

1,218,644.71

1,649,534.87

6,458.81

6,458,81

699,265.14

130,573.97

829,839.11

'.147,510.73

327,871.91

475,382.64

50,252.35

20,882.40

71,134.75

135,934.18 1,643,904.13
5,450.54 331,625.27 385,676.90
76,328.89

Total Expenditures Excess of Revenues over (under) Expenditures

$ 1,368,410.38 $ 1,845,540,13 $ 3,213,950.51 $ 2,619,344,91

$

-8,140.65 $

-35,900,86 $

-44,041.51 $

71,087,13

OTHER FINANCING SOURCES (USES)

Operating Transfers In Operating Transfers Out

$

$

-31,700.57

31,700.57 $

31,700.57 -31,700.57

Total Other Financing Sources (Uses)

$

-31,700,57 $

31,700.57 $

0,00

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses $

-39,841,22 $

-4,200.29 $

-44,041.51 $

71,087.13

FUND BALANCE JULY 1 - Restated (See Note 1)

1,181,191,24

-95,748.54

1,085,442.70

1,458,106.17

Net Change in Period Inventories for Resale
Refund of Contract Residual Equity Transfer Transfer of the Cooperative Purchasing
Agency to Pion~er Regional Educational Service Agency

-233,058.59 -59,433,16 -1,496.35

-20,991.63 1,496.35

-254,050.22 -59,433.16

25,149.87 -468,900.47

FUND BALANCE JUNE 30

$

847,361.92 $ -119,444.11 $

727,917,81 $ 1,085,442.70

The notes to the general purpose financial statements are an integral part of this statement. - 3-

THIS PAGE LE" BLANK

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30.1996

EXHIBITC

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration Business Administration Maintenance and Operation of Plant
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1) 1995
Adjustments Net Change in Period
Inventories for Resale Refund of Contract Residual Equity Transfer

GENERAL FUND

BUDGET

ACTUAL

$ 555,717.00 $ 1,074,016.75

98,225.53

158,738.50

286,252.98

$ 812,681.03 $ 1,360,269.73

$ 50,000.00 $ 40,492.00

320,465.76

430,890.16

318,726.81 113,471.95
33,909.31

699,265.14 147,510.73
50,252.35

$ 836,573.83 $ 1,368,410.38

$ -23,892.80 $

-8,140.65

$ -31,700.57 $ -31,700.57
$ -23,892.80 $ -39,841.22 492,756.18 1,181,191.24 30,127.02 -233,058.59 -59,433.16 -1,496.35

FUND BALANCE JUNE 30,1996

$ 498,990,40 $ 847,361.92

SPECIAL REVENUE FUND

BUDGET

ACTUAL

$ 691,560.32 $ 164,102.43

1,579,371.21 1,369,786.71

702,046.41

275,750.13

$ 2,972,977.94 $ 1,809,639.27

$ 140,419.00 $ 141,108.33

1,471,129.92 1,218,644.71

12,887.93

6,458.81

548,225.99

130,573.97

732,524.64

327,871.91

46,937.00

20,882.40

$ 2,952,124.48 $ 1,845,540.13

$ 20,853.46 $ -35,900.86

$ 31,700.57

$ 31,700.57

$ 20,853.46 $ 618,904.07 -368,138.18

-4,200.29 -95,748.54
-20,991.63 1,496.35

$ 271,619.35 $ -119,444.11

The notes to the general purpose financial statements are an integral part of this statement. -5-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30,1996

EXHlBIT"D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The North Georgia Regional Educational Service Agency (Agency) was established pursuant to the Official Code ofGeorgia Annotated Sections 20-2-270 through 20-2-274 for the purposes of providing shared services designed to improve the effectiveness of educational programs and services oflocal school systems and for providing instructional programs directly to selected public school students in the state.

Each regional educational service agency is governed by a board. The number of members and terms of office are prescribed by the State Board ofEducation; provided, however, that at least one-third ofthe membership of each Board shall be individuals who hold no other public office, who are not employees of any local unit of administration, and who are not employees ofthe Georgia Department ofEducation.

With the exception of the departure from generally accepted accounting principles disclosed in these notes,

the financial statements of the Agency have been prepared in conformity with generally accepted accounting

principles as applied to governmental units and unless otherwise disclosed in these notes, the financial

statements present all ofthe fund types and the account group ofthe Agency. The Governmental Accounting

Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and

financial reporting principles.

.

The more significant of the Agency's accounting policies are described below.

REPORTING ENTITY

In evaluating how to define the governmental unit for financial reporting purposes, management has considered the criteria set forth in GASB Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, "Defining the Financial Reporting Entity". Based upon the application ofthe above criteria, the North Georgia Regional Educational Service Agency is determined to be a jointly governed organization.

The members of the Board are elected by an annual caucus ofan equal number of members of local boards of education from the respective member local school systems. Each Board appoints and contracts with a director who is the executive officer ofthe regional educational service agency. The director is responsible for the administration of the programs and services approved by the Board.

Member boards of education in the North Georgia Regional Educational Service Agency are as follows: Cherokee County, City of Dalton, Fannin County, Gilmer County, Murray County, Pickens County and Whitfield County.

FUND ACCOUNTING

The Agency uses funds and an account group to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial managemertt by segregating transactions related to certain governmental functions or activities.

- 6-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30,1996

EXHIBIT"D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A fund is a separate accounting entity with a self-balancing set of accounts. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the Agency. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
The general purpose financial statements account for all State, Federal and Other funds under control ofthe Agency, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of a regional educational service agency's general activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the Agency except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a regional educational service agency.
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. These funds are primarily received from the Georgia Department ofEducation and from the Federal government to accomplish specific objectives and are required to be accounted for separately.
ACCOUNT GROUP
GENERAL LONG-TERM DEBT ACCOUNT GROUP - used to account for material accrued compensated absences.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group.
- 7-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1996

EXHIBIT"D"

. Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Governmental funds are accounted for using the modified accrual basis of accounting under which:

Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount ofthe 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. Those revenues considered susceptible to accrual are intergovernmental grants, sales and services and investment income.

Expenditures are generally recognized when the related fund liability is incurred.

RESTATEMENT OF PRIOR YEAR FUND BALANCE

In prior years, the Unemployment Compensation activities for the Agency's Self-Insured Employee Benefit Fund were reported as an Expendable Trust fund. This fund had a fund balance of $30,904.47 at June 30, 1995. For fiscal year 1996, this fund has been reported as a part of the General Fund. The fund balance at July 1, 1995 has been restated as appropriate.

BUDGET

The North Georgia Regional Educational Service Agency's budget is a complete financial plan for the Agency's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure of the budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Agency at the aggregate level. The budget for governmental funds was prepared in accordance with generally accepted accounting principles.

The budget process begins when the Agency's administration prepares a tentative budget for the Board's approval. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year end.

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS

Cash and cash equivalents consist of deposits (including savings accounts) in authorized financial institutions.

Georgia Laws authorize the Agency to deposit its funds in one or more solvent banks, insured Federal savings

and loan associations, or insured State chartered building and loan associations.

"

- 8-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1996

EXHIBIT"D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RECEIVABLES

Receivables consist ofgrant reimbursements due from State or other grantors for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

INVENTORIES

GOODS FOR RESALE

Inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). The Agency uses the

purchases method to account for inventories whereby purchases for resale are recorded at the time of

purchase. The inventory reported on the balance sheet is equally offset by a reservation offund balance which

indicates that it does not constitute "available spendable resources" even though it is a component of net

current assets.

'

COMPENSATED ABSENCES

Compensated absences represent obligations of the Agency relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount is deemed immaterial to the general purpose financial statements.

RESERVED FUND BALANCES

Reserves represent those portions of fund equity that are legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources.

Reserved fund balances include $1,225.00 in unexpended funds received in prior years from the Georgia Department ofEducation for sick and personal leave to be paid to substitute personnel. These funds will be used for the original purpose until exhausted.

INTERFUND TRANSACTIONS

The Agency has the following types of interfund transactions:

Reimbursements of expenditures initially made from a fund that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

- 9-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30, 1996

EXHIBIT"D"

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Residual equity transfers are recorded for nonrecurring or nonroutine permanent transfers of equity.

Operating transfers are recorded for all interfund transactions other than residual equity transfers and reimbursements.

MEMORANDUM ONLY - TOTAL COLUMNS

Total columns on the general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. Certain reclassifications have been made to the comparative data to conform to the current year classifications.

DEFICIT FUND BALANCES

The following fund is reporting a deficit fund balance position at June 30, 1996, which is not readily apparent on the general purpose financial statements.

Fund TypelFund Name

Deficit Balance

Special Revenue Fund Equipment Repair Fund

$ 20011478

Note 2: DEPOSITS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of the securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance. OCGA Section 45-8-11 provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of anyone of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

- 10 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30. 1996

EXHIBIT"D"

Note 2: DEPOSITS

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,

(4) Bonds, bills, notes, certificates ofindebtedness or other obligations ofthe counties or municipalities ofthe State of Georgia,

(5) 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,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, 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.

CATEGORIZATION OF DEPOSITS At June 30, 1996, the bank balances were $506,467.41. The amounts of the total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the Agency or by the Agency's agent in the Agency's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the Agency's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the Agency's name.)

The Agency's deposits are classified by risk category at June 30, 1996, as follows:

Risk Category

Bank Balance

1

$ 200,000.00

2

190,239.12

3

116.228.29

Total

$ 506.46741

- 11 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30,1996

EXHffiIT"D"

Note 3: RISK MANAGEMENT

The Agency is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; natural disaster; and unemployment compensation.

The Agency has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions and job related illnesses or injuries to employees. The Agency has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Agency's insurance coverage in any of the past three years.

The Agency has elected to self-insure for all losses related to natural disaster. The Agency has not experienced any losses related to this risk in the past three years.

The Agency is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user fund on the basis of the percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The Agency accounts for claims with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

1995 1996

$

0.00 $

5,070.00 $

1.755.00 $

3,315.00

$

3.315.00 $

0.00 $

3.315.00 $

0.00

Note 4: GENERAL LONG-TERM DEBT

The changes in General Long-Term Debt during the fiscal year ended June 30, 1996, were as follows:

Compensated Absences

Balance July 1, 1995

$ 49,354.11

Additions Annual Leave Earned and Utilized (Net)

4,638.29

Balance June 30, 1996

- 12 -

$ 5399240

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30.1996

EXHIBIT"D"

Note 5: ON-BEHALF PAYMENTS
The Agency has recognized revenues and expenditures in the amount of$35,109.44 for health insurance and retirement contributions paid on the Agency's behalf by the following State Agency.
Georgia Department ofEducation Paid to the State Merit System of Personnel Administration For Health Insurance ofNon-Certified Personnel In the amount of$29,569.52
Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of$5,539.92
Note 6: CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any expenditures which are disallowed under grant terms. The Agency believes that such disallowances, if any, will be immaterial to its overall financial position.
The Agency is a defendant in a legal proceeding pertaining to a matter incidental to the performance of routine Agency operations. The ultimate disposition of this proceeding is not presently determinable, but is not believed to be material to the general purpose financial statements.
Note 7: ACCUMULATED EMPLOYEES' LEAVB
The Agency's administrative staff and certain other full-time employees earn one and one-quarter days per month of annual leave. Annual leave may be accumulated to a maximum of forty-five days. Employees are paid, at their current rate ofpay, for unused annual leave up to a maximum accumulation of fifteen days upon retirement or termination of employment. See Note 1 - Compensated Absences
Note 8: RETIRE:tvffiNT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by Agency's are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer public employee retirement system (PERS).

- 13 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30.1996

EXHIBIT"D"

Note 8: RETIREMENT PLANS
TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. A member is eligible for service retirement after 30 years of creditable service, regardless ofage, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service and attainment of age 55, at a reduced benefit. Retirement benefits paid to members are equal to 2% of the average of the member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. The normal retirement pension is payable monthly for life. Options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death.
Retirement benefits also include death and disability benefits. A disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The death benefit is the amount that would be payable to the member's beneficiary had the member retired on the date of death on either a service retirement allowance or a disability retirement allowance, whichever is larger. The benefit is based on the member's creditable service (minimum of 10 years of service) and compensation up to the time of disability or death.
Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions are refunded with interest.
The Agency's payroll for employees covered by TRS for the year ended June 30, 1996, was $966,576.74; total payroll was $992,903.25.
TRS CONTRIBUTIONS REQUIRED AND MADE Employees of the Agency who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The Agency makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For fiscal year 1996 that rate for employer contributions was 11.81%. The interest rate assumption (rate of return on investments) was 7.50%.
Total contributions made during fiscal year 1996 amounted to $162,481.54, of which $114,152.46 was made by the Agency and $48,329.08 was made by employees. These contributions represented 11.81% (Agency) and 5% (employees) of covered payroll.
TRS FUNDING STATUS AND PROGRESS The amount of the total pension benefit obligation is based on a standardized measurement established by Statement No.5 ofthe Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by a PERS. The standardized measurement is the actuarial present value of credited projected. benefits. This valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of employee services performed to date, and is adjusted for the effects of projected salary increases. A standardized measure ofthe pension benefit obligation was adopted by the GASB to enable

- 14 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
JUNE 30,1996

EXHIBIT"D"

Not"e 8: RETIREMENT PLANS

readers of PERS financial statements to assess that PERS funding status on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among other PERS and among other employers.

Total unfunded pension benefit obligation ofTRS as of June 30, 1995, was as follows:

Total pension benefit obligation

$17,442,607,000.00

Net assets available for benefits, at cost

15,857,066,000.00

Unfunded pension benefit obligation

$ 1 585,541 000.00

The measurement ofthe total pension benefit obligation is based on an actuarial valuation as of June 30, 1995. Net assets available to pay pension benefits were valued as of the same date. TRS does not make separate measurements of assets and pension benefit obligation for individual employers.

Total contributions from all employers to TRS for fiscal year ended June 30, 1996 were $607,275,000,00. The Agency's contribution for the year ended June 30, 1996 of $114, 152.46 was actuarially determined and represented .0188% of total contributions made by all participating employers.

Ten year historical trend information is presented in the 1996 TRS c.omponent Unit Financial Report. This information is useful in assessing TRS's accumulation of sufficient assets to pay pension benefits as they become due.

Note 9: SURETY BONDS

The Director, Mr. Charles E. Gibson and the bookkeepers, Ms. Alice Ellis and Ms. Linda Williamson, are bonded in the amount of $100,000.00 with the Hartford Insurance Company of the Southeast, Orlando, Florida, their Bond No. RN-4542273, on which premium was paid through September 15, 1996.

- 15 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 3D, 1996

ASSETS Cash and Cash Equivalents Accounts Receivable Inventories
Total Assets

GEORGIA LEARNING RESOURCES
SYSTEM

VOCATIONAL EDUCATION CURRICULUM
CENTER

LOTTERY PROGRAM

AIDS HEALTH EDUCATION

$ 14,923.92

2,760.00 $ 88,400.00 $

3,703.27 $

1,617.31

$ 17,683.92 $ 88,400.00 $

3,703.27 $

1...,,6_1.7..3..1.-

Total Liabilities and Fund Equity

$ 17,683.92 $ 88,400.00 $

3,703.27 $ _ _.1..,._61_7_.3_1

See notes to the general purpose financial statements.

- 16 -

EXHIBIT"E"

LEARN AND SERVE
AMERICA

SAFE AND DRUG-FREE SCHOOLS

VOCATIONAL EDUCATION

EQUIPMENT REPAIR FUND

TOTALS JUNE 30, 1996 JUNE 30, 1995

$

1,848.51 $ 59,967.60

$

76,740.03 $

29,467.88

$

4,013.00

49,649.23 $ 46,376.97

196,519.78

34,961.34

75,250.19

75,250.19

96,241.82

$

4,013.00 $

1,848.51 $ 109,616.83 $ 121,627.16 $ 348,510.00 $

160,671.04

$

211.00

3,802.00

-----$

$

4,013.00 $

$ 1,848.51

$ 89,601.50 20,015.33

241,161.24 $ 5,330.51

1,848.51 $ 109,616.83 $ 246,491.75 $

333,045.70 $ 103,078.82 31,829.59
467,954.11 $

227,540.06 11,013.18 17,866.34
256,419.58

$ $ 75,250.19

5,420.48 $ 75,250.19

2,388.57 96,241.82

$ 75,250.19 $

80,670.67 $

98,630.39

-200,114.78

-200,114.78

-194,378.93

$

0.00 $

0.00 $

0.00

0.00

0.00

0.00

$

0.00 $

0.00 $

0.00 $ -124,864.59 $ -119,444.11 $

-95,748.54

$

4,013.00 $

1,848.51 $ 109,616.83 $ 121,627.16 $ 348,510.00 $

160,671.04

- 17 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 3D. 1996

GEORGIA LEARNING RESOURCES
SYSTEM

VOCATIONAL EDUCATION CURRICULUM
CENTER

LOTTERY PROGRAM

AIDS HEALTH EDUCATION

REVENUES

State Funds Federal Funds other Funds

$ 75,674.00 $ 35,000.00 $ 236,802.25 128,427.36

9,792.27 $

5,578.72

Total Revenues

$ 312,476.25 $ 163,427.36 $

9,792.27 $

5,578.72

EXPENDITURES

Current Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration Business Administration Maintenance and Operation of Plant

$ 141,108.33

109,082.34 $ 134,069.66 $

,6,458.81

47,308.82

12,100.73

5,472.78

5,000.00

13,753.32

9,792.27 $

5,204.26 387.72

Total Expenditures

$ 309,431.08 $ 164,923.71 $

9,792.27 $

5,591.98

Excess of Revenues over (under) Expenditures

$

3,045.17 $ -1,496.35 $

0.00 $

-13.26

OTHER FINANCING SOURCES

Operating Transfers In

Excess of Revenues and other Financing Sources

over (under) Expenditures

$

3,045.17 $ -1,496.35 $

0.00 $

-13.26

FUND BALANCE JULY 1

2,375.31

0.00

0.00

13.26

Net Change in Period Inventories for Resale
Residual Equity Transfer Transfer of the Cooperative Purchasing
Agency to Pioneer Regional Educational Service Agency

1,496.35

FUND BALANCE JUNE 30

$ 5,420.48 $

0.00 $

0.00 $

0..0..0..

See notes to the general purpose financial statements.

- 18 -

EXHIBIT"F"

LEARN AND SERVE
AMERICA

SAFE AND DRUG-FREE SCHOOLS

VOCATIONAL EDUCATION

EQUIPMENT REPAIR FUND

TOTALS YEAR ENDED JUNE 30, 1996 JUNE 30. 1995

$ 14.590.00 $ $ 14,590.00 $

$ 18,151.49
18;. .:. .1. . ;.5. . ;.1....;.49_$

28,861.16 $ 966,236.89
5,100.00

14,775.00 $ 270,650.13

164,102.43 $ 1,369,786.71
275,750.13

1,000.198.05 $ 285.425.13 $ 1,809.639.27 $

101,838.50 265,791.66 201.772.20
569,402.36

$ 13,850.00 $ 740.00

$ 14.590.00 $

$

0.00 $

16,848.23 $ 1,303.26
18,151.49 $ 0.00 $

929,797.95
68,733.44 $
1,666.66

$
317,399.13 5.462.42

141,108.33 $ 1,218,644.71
6,458.81 130,573.97 327,871.91 20.882.40

1,000,198.05 $ 322,861.55 $ 1.845,540.13 $

0.00 $ -37,436.42 $ -35,900.86 $

135.934.18 138,801.06
5,450.54 49,914.96 286,404.68 10,212.09
626.717.51
-57,315.15

$

0.00 $

0.00

$

0...0...0.. $

0.00 $ 0.00
0.00 $

31,700.57

31.700.57

0.00 $ -5,735.85 $

0.00

-98,137.11

-4,200.29 $ -95,748.54

-57.315.15 432.431.01

-20,991.63

-20,991.63 1,496.35

-1.963.93

-468.900.47

....0.....0...0.. $ -124.864.59 $ -119,444.11 $ -95,748.54

- 19-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 1996

SCHEDULE "1"

Total Federal Financial Assistance
The Major Program is identified by an asterisk (*) in front of the CFDA number.
(1) Expenditures for this program include State, and/or Local and Other Funds. Expenditures are not maintained by fund source.

$ 1,369,786.71 $

1,437,212.31

See notes to the general purpose financial statements.

- 20 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY CASH AND CASH EQUIVALENTS JUNE 30, 1996

SCHEDULE "2"

INTEREST BEARING ACCOUNTS
Gilmer County Bank, Ellijay, Georgia
Priority Account (5.66%)
Regions Bank, Ellijay, Georgia
Money Market Accounts (Variable)

$ 100,157.92 279,033.49
$ 379,191.41

See notes to the general purpose financial statements. - 21 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY ACCOUNTS RECEIVABLE JUNE 30,1996

SCHEDULE "3"

Boards of Education Sales and Services Seminar Registration
Education, Georgia Department of Contracts Evaluate the Activities and Services of the Department of Education Instructional Training Technology Center Teacher Training - AIDS Health Education Teachers in Elementary School Foreign Languages Model Program Vocational Education Research and Curriculum Development Vocational Education State Federal Lottery Program Education Technology Centers Federal Programs Individuals with Disabilities Education Act Part B - Special Education Georgia Learning Resources System Learn and Serve America
Georgia Professional Standards Commission Sales and Services
Various Sources Sales and Services

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$

28,297.39 $

35,440.09 $ 63,737.48

3,093,00

3,093,00

33,000,00 2,346.71
35,028.44

1,617.31
49,649.23 35,000.00 53,400.00 3,703.27

33,000.00 2,346.71 1,617,31
35,028,44
49,649.23
35,000.00 53,400.00
3,703.27

2,760.00 4,013.00
10,662,30
274.58

2,760.00 4,013.00
10,662,30
274.58

$

101,765.54 $ 196,519.78 $ 298,285.32

See notes to the general purpose financial statements.

- 22 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 1996

AGENCY/FUNDING
GRANTS Education, Georgia Department of Vocational Education Other State Programs Georgia Learning Resources System Health Insurance Regional Educational Service Agencies Supervision and Assessment of Student and Beginning Teachers and PerformanceBased Certification Teachers'Retirement Lottery Program Education Technology Centers
CONTRACTS Education, Georgia Department of Evaluate the Activities and Services of the Department of Education InstiMe for School Counselors Instructional Technology Materials Development and Publishing Instructional Training Technology Center Teachers in Elementary School Foreign Languages Model Program Vocational Education Curriculum Center
OTHER Education, Georgia Department of Reimbursement for Printing

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$

$

29,569.52

468,172.96

28,861.16 $ 75,674.00

28,861.16
75,674.00 29,569.52 468,172.96

85,714.00 5,539.92

9,792.27

85,714.00 5,539.92
9,792.27

397,192.95 3,434.69
2,700.00 2,346.71
79,346.00

35,000.00

397,192.95 3,434.69
2,700.00 2,346.71
79,346.00 35,000.00

14,775.00

14,775.00

$ 1,074,016.75 $ 164,102.43 $ 1,238,119.18

See notes to the general purpose financial statements. - 23 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF OTHER REVENUE YEAR ENDED JUNE 30. 1996

SCHEDULE "5"

Membership Contributions Boards of Education Cherokee County Dalton, City of Fannin County Gilmer County Murray County Pickens County Whitfield County
Other Sources Contract Staff Development Indirect Cost Special Revenue Fund Interest Earned Reimbursements For Gas Tank Testing Various Sources For Summer Honors Program Various Sources Rents Sales and Services Less: Purchases for Resale Seminar Registration other

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$

88,816.02 $ 88,816.02

18,741.12

18,741.12

13,397.54

13,397.54

13,234.10

13,234.10

25,623.76

25,623.76

13,955.96

13,955.96

40,353.20

40,353.20

.. $

4,990.00

100,647.09 32,345.99

5,852.52
41,003.80 19,999.98 158,005.95 -134,652.74 55,601.17 2,459.22

4,990.00
100,647.09 32,345.99

198,344.64 -141,816.21
5,100.00

5,852.52
41,003.80 19,999.98 356,350.59 -276,468.95 55,601.17
7,559.22

$ 286,252.98 $

275,750.13 $ 562,003.11

See notes to the general purpose financial statements. - 24 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF EXPENDITURES BY OBJECT GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 1996

SCHEDULE -6-

EXPENDITURES
Operating Costs Salaries Employee Benefits Travel of Employees Professional and Technical Services Compensation and Travel of Board Members Water, Sewer and Cleaning Services Repair and Maintenance Services Rents Insurance Communications Other Purchased Services Supplies Energy Books, Textbooks and Periodicals Dues and Fees Federal Indirect Costs Other Expenditures
Nonoperating Costs Equipment
Total Expenditures

GENERAL FUND

SPECIAL REVENUE
FUND

TOTAL

$ 422,747.11 $ 570,156.14 $ 992,90325

245,712.77

129,802.66

375,515.43

18,327.85

13,438.41

31,766.26

496,048.87

848,627.96 1,344,676.83

2,124.00

2,124.00

8,999.18

8,999.18

761.65

3,811.49

4,573.14

20,553.23

20,659.98

41,213.21

2,951.27

6,111.65

9,062.92

21,278.82

15,246.64

36,525.46

2,595.87

2,595.87

57,660.20

96,046.98

153,707.18

11,324.13

3,564.12

14,888.25

1,814.26

2,100.00

3,914.26

6,456.26

624.00

7,080.26

100,647.09

100,647.09

42,337.91

16,697.06

59,034.97

6,717.00

18,005.95

24,722.95

$ 1,368,410.38 $ 1,845,540.13 $ 3,213,950.51

See notes to the general purpose financial statements. - 25 -

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF EXPENDITURES BY OBJECT LOTIERY PROGRAM YEAR ENDED JUNE 30, 1996

SCHEDULE "7"

EXPENDITURES Operating Costs Supplies Nonoperating Costs Equipment
Total Expenditures

EDUCATION TECHNOLOGY
CENTERS

$

3,703.27

6,089.00

$ ===9::::::,7=9=2=,2==7

See notes to the general purpose financial statements. - 26 -

NORTH GEORGIA REGIONAL EPUCATIONAL SERVICE AGENCY
SCHEDULE Of COMPENSATION ANP TRAVEL OF BOARD MEMBERS
YEAR ENDED JUNE 30 1996

SCHEDULE "8"

BOARD MEMBER ADDRESS
Mr. Frank" Thomason, Chairman (")
City of Dalton Board of Education P.O.Boxl408 Dalton, Georgia 30722-1408
Mr. Ben Arp (") Gilmer County Board of Education 275 Bobcat Trail Ellijay, Georgia 30540-5212
Mr. Morgan Arp (") Fannin County Board of Education 2290 East First Street Blue Ridge, Georgia 30513
Mr. Robert Blalock (") Route 2, Box 76 Waleska, Georgia 30183
Mr. Terry Cullifer (") Whitfield County Board of Education P.O. Box 2167 Dalton, Georgia 3On22167
Mr. Don Hall (") P.O.Box698 Blue Ridge, Georgia 30513
Mr. Homer Hefner (") Route 5, Box 602 Ellijay, Georgia 30540
Mr. Corky Jones (*) Cherokee County Board of Education P.O. Box 769 Canton, Georgia 30114
Mrs. Kathryn Kelehear (") 614 McFarland Avenue Dalton, Georgia 30720
Dr. Mickey McNeill (*) Murray County Board of Education P.O. Box 40 Chatsworth, Georgia 30705
Mr. Gary Middleton 1778 Dug Gap BaWe Rocky Face, Georgia 30740
Mr. Gary Reece P.O.BoxG Ellijay, Georgia 30540-
Mr. Kimsey Wood (*) Pickens County Board of Education 159 Stegall Drive Jasper, Georgia 30143
(*) Denotes Board Members Serving as of June 30.1996
See notes to the general purpose financial statements.

- 27

COMPENSATION

TRAVEL

$

500.00

400.00 550.00

650.00 $

24.00

$

2.100.00 $

24.00

SECTIONll SUMMARY AND SCHEDULE OF SALARIES AND TRAVEL

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SUMMARY OF SALARIES AND TRAVEL YEAR ENDED JUNE 30.1996

"
SALARIES
GENERAL FUND Support Services Improvement of Instructional Services General Administration Business Administration Maintenance and Operation of Plant
Total General Fund
SPECIAL REVENUE FUND

TOTAL PER FINANCIAL STATEMENTS (ACCRUAL BASIS)

ADJUSTMENTS FOR ACCRUALS JUNE 30,1995 JUNE 30, 1996

TOTAL PER SCHEDULE (CASH BASIS)

$

148,780.52 $

204,384.83

65,964.00

3,617.76

$

422,747.11 $

570,156.14

0.00 $ 0.00 $

0.00 $ 0.00 $

148,780.52 204,384.83
65,964.00 3,617.76
422,747.11
570,156.14

Total Salaries

$

992,903.25 $

0.00 $

0.00 $ _...9..92001.,;0,;90=3,;,;;;.2;,,;;,,5

TRAVEL

GENERAL FUND Support Services Improvement of Instructional Services $ General Administration Business Administration

Total General Fund

$

SPECIAL REVENUE FUND

10,715.83 5,802.58 $ 1,809.44
18,327.85 $
13,438.41

$ 42.63
42.63 $

0.00 $ 0.00 $

10,715.83 5,845.21 1,809.44
18,370.48
13,438.41

Total Travel

$

31,766.26 $

42.63 $

0.00 $ _........3..1.=,8=0=8.;,;;,8=9

NORTH GEORGIA R.E.S.A. SCHEDULE OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 1996

NAME

TITLE CATEGORY

ALLEN, CAROL YN S

SUPP SRVS - IMPROV INSTR & ED MED

$

BELL, CEDERICK K

SPECIAL REVENUE FUND - OTHER PROGRAMS

BROCK,CHARLES B JR

INTERNAL SERVICES FUND

CANTRELL, WILLIAM L JR INTERNAL SERVICES FUND

CARSON,JAMES KNOX

SUPP SRVS - IMPROV INSTR & ED MED SRVS

CARSON,JAMES KNOX

GEORGIA LEARNING RESOURCES SYSTEM FUND

CHAMPION, GAIL S

GENERAL ADMINISTRATION

CHAMPION,GAIL S

SPECIAL REVENUE FUND - OTHER PROGRAMS

COX,RALPH N

INTERNAL SERVICES FUND

ELLIS,ALICE M

SUPPORT SERVICES - BUSINESS

ENIS,DONALD F

SUPP SRVS - IMPROV INSTR & ED MED SRVS

ENIS,DONALD F

SUPPORT SERVICES - BUSINESS

ENIS,DONALD F

GEORGIA LEARNING RESOURCES SYSTEM FUND

FOSTER,JAMES F

SPECIAL REVENUE FUND - OTHER PROGRAMS

GIBSON,CHARLES E

DIRECTOR

GIBSON,CHARLES E

GENERAL ADMINISTRATION

GIBSON, MARK

SPECIAL REVENUE FUND - OTHER PROGRAMS

HEFNER, ESTHER R

GENERAL ADMINISTRATION

JOHNSON,JOHNNY

INTERNAL SERVICES FUND

LEIGH,CAROL A

GENERAL ADMINISTRATION

MULKEY,CINDY

GENERAL ADMINISTRATION

MULKEY,CINDY

SUPPORT SERVICES - BUSINESS

MULKEY,CINDY

GEORGIA LEARNING RESOURCES SYSTEM FUND

NORTON, LELAND EUGENE

GENERAL ADMINISTRATION

NORTON,LELAND EUGENE

SPECIAL REVENUE FUND - OTHER PROGRAMS

PEREZ, RASHIDA A

SPECIAL REVENUE FUND - OTHER PROGRAMS

TANKERSLEY,EVELYN P

INTERNAL SERVICES F.UND

TANKERSLEY,WILLIAM LARRY GENERAL ADMINISTRATIoN

TANKERSLEY,WILLIAM LARRY MAINTENANCE & OPER. OF PLANT SERVICES

TANKERSLEY,WILLIAM LARRY INTERNAL SERVICES FUND

VAIL,J PAUL

SPECIAL REVENUE FUND - OTHER PROGRAMS

WEAVER,CANDACE LYNN

SUPP SRVS - IMPROV INSTR & ED MED SRVS

WEAVER,CARA

SUPP SRVS - IMPROV INSTR & ED MED SRVS

WEAVER,CARA

GENERAL ADMINISTRATION

WEAVER, JOSEPH BENNY

INTERNAL SERVICES FUND

WILLIAMS,ARTHUR M

SUPP SRVS - IMPROV INSTR & ED MED SRVS

WILLIAMS,ARTHUR M

SPECIAL REVENUE FUND - OTHER PROGRAMS

WILLIAMSON,LINDA W

SUPPORT SERVICES - BUSINESS

TOTALS

$

SALARIES AMOUNT
53,532.60 $ 12,862.50 38,209.92 27,778.80
270.00 56,594.16
23,233.20 46,908.24 33,597.36
4,563.60
50,199.00 19,706.25 74,833.44
28,183.68 14,893.10 40,794.24 29,889.36
1,973.73
21,710.67 48,702.48 12,175.68 17,275.00 35,702.16 20,803.44
3,617.76 20,803.44 58,854.72 57,233.04
2,531.28 13,289.28 34,164.48 30,650.00 25,000.00 32,366.64
992,903.25 $

TRAVEL EXPENSE
2,613.96
226.85 90.57
4,207.14 202.25 143.50 206.90 523.50 125.67 528.64
5,000.00
4,049.88 5.00
262.25
48.75
250.30
1,282.08 1,040.39
20.75 15.00
269.81 2,091.00 5,161.49
121 .50 2,814.71
507.00
31,808.89

SECTION ill COMPLIANCE

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members of the North Georgia Regional Educational Service Agency Board of Control
COMPLIANCE REPORT BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERmAENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as of and for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose.financial statements are free of material misstatement.
We did not obseIVe the taking of inventories for resale at June 30, 1996, nor could we satisfy ourselves as to the accuracy of the amounts stated as inventories for resale through alternative procedures.
Compliance with laws, regulations, contracts, and grants applicable to North Georgia Regional Educational SeIVice Agency is the responsibility of the Agency's management. As part of obtaining reasonable assurance about whether the 'general purpose financial statements are free of material misstatement, we performed tests ofthe Agency's compliance with certain provisions oflaws, regulations, contracts, and grants. However, the objective of our audit of the financial statements was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards.
96CRL-IO

This report is intended for the information of management, the Federal cognizant audit agency and other Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a matter of public record.
"
Respectfully submitted,
~~~
Claude L. Vickers
State Auditor
CLV:cm 96CRL-IO

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members ofthe North Georgia Regional Educational Service Agency Board of Control

SINGLE AUDIT REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS

Ladies and Gentlemen:

We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as of and for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements.

We have applied procedures to test the North Georgia Regional Educational Service Agency's compliance with the following requirements applicable to each of its Federal financial assistance programs, which are listed in the Schedule of Federal Financial Assistance, for the year ended June 30, 1996:

(1) Political Activity

(5) Allowable Costs/Cost Principles

(2) Civil Rights

(6) Audit Follow-Up/Resolution

(3) Cash Management

(7) Administrative Requirements

(4) Federal Financial Reports

Our procedures were limited to the applicable procedures described in the Office of Management and Budget's "Compliance Supplement for Single Audits of State and Local Governments" and other additional procedures as deemed necessary. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Agency's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion.

96CRL-50

With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the North Georgia Regional Educational
Serv"ice Agency had not complied, in all material respects, with those requirements. However, the results of
our procedures disclosed an immaterial instance ofnoncompliance with those requirements, which is described in the Schedule ofFindings and Improper or Questioned Costs.
This report is intended for the information of management, the Federal cognizant audit agency and other Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a matter of public record.
Respectfully submitted,

CLV:cm 96CRL-50

Claude L. Vickers State Auditor

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members ofthe North Georgia Regional Educational Service Agency Board of Control

SINGLE AUDIT OPINION ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS

Ladies and Gentlemen:

We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as ofand for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements.

We have also audited the North Georgia Regional Educational Service Agency's compliance with the requirements governing:

(1) Types of Services Allowed or Unallowed
(2) Reporting

(4) Other Requirement Claims for Advances and Reimbursements

(3) Applicable Special Tests and Provisions

These requirements are applicable to the major Federal financial assistance program, which is identified in the Schedule of Federal Financial Assistance, for the year ended June 30, 1996. The management of the North Georgia Regional Educational Service Agency is responsible for the Agency's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

96CRL-80

Except as discussed in the following paragraph, we conducted our audit of compliance in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Circular A-128, "Audits of State and
Loc3I Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit
to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the Agency's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion.
We did not observe the taking of inventories for resale at June 30, 1996, nor could we satisfY ourselves as to the accuracy of the amounts stated as inventories for resale through alternative procedures. However, this matter has no affect on the Agency's compliance with the requirements listed in the second paragraph of this report.
In our opinion, the North Georgia Regional Educational Service Agency complied, in all material respects, with the requirements as disclosed in the second paragraph that are applicable to its major Federal financial assistance program for the year ended June 30, 1996.
This report is intended for the information of management, the Federal cognizant audit agency and other Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a matter of public record.
Respectfully submitted,

CLV:cm 96CRL-80

Claude L. Vickers State Auditor

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members ofthe General Assembly Members ofthe State Board ofEducation
and Director and Members ofthe North Georgia Regional Educational Service Agency Board of Control

SINGLE AUDIT REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS

Ladies and Gentlemen:

We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as of and for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements.

In connection with our audit ofthe fiscal year 1996 general purpose financial statements of the North Georgia

Regional Educational Service Agency and with our consideration of the Agency's control structure used to

administer Federal financial assistance programs, as required by Office of Management and Budget (OMB)

Circular A-128, IIAudits of State and Local Governments", we selected certain transactions applicable to

certain nonmajor Federal financial assistance programs for the year ended June 30, 1996. As required by OMB

Circular A-128, we have performed auditing procedures on the selected transactions to test compliance with

the requirement governing:

.

Types of Services Allowed or Unallowed

Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the North Georgia Regional Educational Service Agency's compliance with this requirement. Accordingly, we do not express such an opinion.

96CRL-120

With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirement listed in the second paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the North Georgia Regional Educational Service Agency had"not complied, in all material respects, with that requirement.
This report is intended for the information of management, the Federal cognizant audit agency and other Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a matter of public record.
Respectfully submitted,

CLV:cm 96CRL-120

Claude L. Vickers State Auditor

SECTION IV INTERNAL CONTROL

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members ofthe North Georgia Regional Educational Service Agency Board ofControl
REPORT ON INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as ofand for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards, and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement.
We did not observe the taking of inventories for resale at June 30, 1996, nor could we satisfy ourselves as to the accuracy of the amounts stated as inventories for resale through alternative procedures.
The management of the North Georgia Regional Educational Service Agency is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods
96ICL-4

is subject to risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.
In planning and performing our audit of the general purpose financial statements of the North Georgia Regional Educational Service Agency for the year ended June 30, 1996, we obtained an understanding ofthe internal control structure. With respect to the internal control structure, we obtained an understanding of the design ofrelevant policies and procedures and whether they have been placed in operation, and we assessed control risk in order to determine our auditing procedure for the purpose of expressing our opinion on the general purpose financial statements and not to provide an opinion on the internal control structure. Accordingly, we do not express such an opinion.
We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements.
As described in the Schedule ofFindings and Improper or Questioned Costs, reportable conditions were noted in the following control categories:
(1) Cash and Cash Equivalents
(2) General Fixed Assets
A material weakness is a reportable condition in which the design or operation of one or more ofthe specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.
Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, as described in the Schedule of Findings and Improper or Questioned Costs, the following control category includes a reportable condition that is also considered to be a material weakness:
General Fixed Assets
These conditions were considered in determining the nature, timing, and extent of the procedures to be performed in our audit ofthe North Georgia Regional Educational Service Agency's financial statements and this report does not affect our report thereon dated March 26, 1997.
96ICL-4

This report is intended for the information of management, the Federal cognizant audit agency and other Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a ma.t,.ter of public record.
Respectfully submitted,
~~
Claude L. Vickers State Auditor
CLV:cm 96ICL-4

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
March 26, 1997

Honorable Zell Miller, Governor Members of the General Assembly Members ofthe State Board ofEducation
and Director and Members of the North Georgia Regional Educational Service Agency Board of Control
SINGLE AUDIT REPORT ON THE INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING FEDERAL FINANCIAL ASSISTANCE PROGRAMS
Ladies and Gentlemen:
We have audited the general purpose financial statements of the North Georgia Regional Educational Service Agency as of and for the year ended June 30, 1996, and have issued our report thereon dated March 26, 1997. This report was qualified for a scope limitation and for a departure from generally accepted accounting principles, as identified in the auditor's report on the general purpose financial statements. We have also audited the North Georgia Regional Educational Service Agency's compliance with requirements applicable to the major Federal financial assistance program and have issued our opinion thereon dated March 26, 1997.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of Office of Management and Budget (OMB) Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and about whether the North Georgia Regional Educational Service Agency complied with laws and regulations, noncompliance with which would be material to a major Federal financial assistance program.
We did not observe the taking of inventories for resale at June 30, 1996, nor could we satisfy ourselves as to the accuracy of the amounts stated as inventories for resale through alternative procedures.
In planning and performing our audit for the year ended June 30, 1996, we considered the Agency's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinions on the Agency's general purpose financial statements and on its compliance with requirements applicable to major Federal financial assistance programs and to report on the internal control structure in accordance with OMB Circular A-128. This report addresses our consideration of internal control structure policies and procedures
96ICL-5

relevant to compliance with requirements applicable to Federal financial assistance programs. We have addressed internal control structure policies and procedures relevant to our audit of the general purpose financial statements in a separate report dated March 26, 1997.
"
The management of the North Georgia Regional Educational Service Agency is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles, and that Federal financial assistance programs are managed in compliance with applicable laws and regulations. Because ofinherent limitations in any internal control structure, errors, irregularities or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.

For the purposes of this report, we have classified the significant internal control structure policies and procedures used in administering Federal financial assistance programs in the following control categories:

GENERAL REQUIREMENTS

SPECIFIC REQUIREMENTS

(1) Political Activity (2) Civil Rights (3) Cash Management (4) Federal Financial Reports

(1) Types of Services Allowed or Unallowed
(2) Reporting
(3) Applicable Special Tests and Provisions

(5) Allowable Costs/Cost Principles (6) Audit Follow-UplResolution

(4) Qther Requirement Claims for Advances and Reimbursements

(7) Administrative Requirements

For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk.

During the year ended June 30, 1996, the North Georgia Regional Educational Service Agency expended 80% of its total Federal financial assistance under a major Federal financial assistance program.

96ICL-5

We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with general requirements and specific requirements as described above that are applicable to the Agency's major Federal financial assistance program, which is identified in the Schedule ofFederal Financial Assistance. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, we do not express such an opinion.

Our consideration of the internal control structure policies and procedures used in administering Federal financial assistance would not necessarily disclose all matters in the internal control structure that might constitute material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control structure elements does not reduce to a relatively low level the risk that noncompliance with laws and regulations that would be material to a Federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above.

This report is intended for the information of management, the Federal cognizant audit agency and other

Federal grantor agencies. This restriction is not intended to limit the distribution of this report which is a

matter ofpublic record.

.

Respectfully submitted,
~-&.~
Claude L. Vickers State Auditor

CLV:cm 96ICL-5

SECTION V FINDINGS AND IMPROPER OR QUESTIONED COSTS

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF FINDINGS AND IMPROPER OR OUESTIONED COSTS
YEAR ENDED JUNE 30. 1996
PRIOR YEAR
AUDIT FOLLOW-UPIRESOLUTION Reimbursement Requisitions not Supported by Accounting Records Federal Financial Assistance Finding Resolved Audit Control Number 8524-93-03
The audit report for the year ended June 30, 1995, noted that the Agency had an unexpended balance of $1,496.25 in the Vocational Education - Basic Grants to States Program (Curriculum Development ContractCFDA 84.048) at the end ofthe 1995 fiscal year. This balance resulted from excess funds requisitioned from the Georgia Department ofEducation on DE form 0447 and certified to have been expended for the purpose indicated and in accordance with applicable regulations. During the year under review, the remaining balance of$1,496.25 was expended for proper program purposes.
PRIOR YEAR/CURRENT YEAR
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Financial Statements Reportable Condition - Material Weakness Audit Control Number 8524-93-01
The audit report for the year ended June 30, 1995, noted that the management of the North Georgia Regional Educational Service Agency had chosen not to maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. In the year under review, the Agency did not establish a General Fixed Assets Account Group within the formal accounting records. This condition results in the general purpose financial statements of the Agency being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the Agency to establish accounting controls and procedures to provide for maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory of equipment owned by the Agency and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account Group.
- 1-

NORTH GEORGIA REGIONAL EDUCATIONAL SERVICE AGENCY SCHEDULE OF FINDINGS AND IMPROPER OR OUESTIONED COSTS
YEAR ENDED JUNE 30, 1996
CURRENT YEAR
CASH AND CASH EQUIVALENTS Uncollateralized Deposits Financial Statements Reportable Condition Nonmaterial Noncompliance Audit Control Number 8524-96-01
As ofJune 30, 1996, the North Georgia Regional Educational Service Agency failed to have its bank balances fully collateralized as provided for by the Official Code of Georgia Annotated Section 45-8-12 which states, in part, as follows:
"The collecting officer or officer holding public funds may not have on deposit at any time in any
depository for a time longer than ten days a sum of money belonging to the public body when such depository has not given bond to the public body as set forth in this code section... The aggregate of the face value of such surety bond, and the market 'value ofsecurities pledged, shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance" .
This noncompliance occurred because of management's failure to adequately monitor the collateralization of balances at individual banks. The Agency should implement procedures to monitor the collateralization of bank balances to ensure compliance at all times with State laws governing deposits and investments.
CASH MANAGEMENT Excessive Cash Balances Federal Financial Assistance Major Program Nonmaterial Noncompliance Audit Control Number 8524-96-02
A review of cash management procedures for the Vocational Education - Basic Grants to State program (CFDA 84.048) disclosed that cash draws utilizing DE Form 0147, "Quarterly Report of Expenditures and Estimated Requirements for Grant Funds", were made in advance of immediate cash needs, resulting in the accumulation of excessive cash balances. During fiscal year 1996, the program had an average cash balance of $66,398.83 with excessive ending montWy cash balances in ten (10) months. Procedures should be implemented to minimize the time elapsing between the transfer of funds from the Georgia Department of Education and disbursement of such funds by the Agency.
Note: The North Georgia Regional Educational Service Agency was provided an opportunity to include pertinent comments from the Agency's management concerning these audit findings, conclusions and recommendations. The Agency has elected not to provide comments for inclusion in this report.
-2-