Review report, Lake Lanier Islands Development Authority, a component unit of the state of Georgia, year ended June 30, 1997

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REVIEW REPORT LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY
A COMPONENT UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 1997
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXIllBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B STATEMENT OF CHANGES IN FUND BALANCE

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPE

3

Kl
v',"

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES BUDGET FUND

4

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

6

E NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

F COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

FIDUCIARY FUND TYPE - AGENCY FUNDS

20

SCHEDULES

1 SCHEDULE OF APPROVED BUDGET

21

2 CASH AND CASH EQUIVALENTS

22

3 .SCHEDULE OF OTHER OPERATING EXPENSES

23

4 RECONCILIATION OF TRAVEL

24

5 RECONCILIATION OF PER DIEM AND FEES

25

SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY - TABLE OF CONTENTS -
SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

CLAUD~ L. VICKERS STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 20, 1998

Honorable Zell Miller, Governor Members ofthe General Assembly of Georgia Members of the Lake Lanier Islands Development Authority
and Honorable Frank Lee Smith, Executive Director
INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have reviewed the accompanying financial statements (Exhibits A through E) of the Lake Lanier Islands Development Authority as of and for the year ended June 30, 1997, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. As described in Note 1, these financial statements were prepared on a prescribed basis of accounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. All information included in these fmancial statements is the representation ofthe management ofthe Lake Lanier Islands Development Authority.
A review consists principally of inquiries of agency personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with the basis of accounting described in Note 1.
Our review was made for the purpose of expressing limited assurance that there were no material modifications that should be made to the fmancial statements in order for them to be in conformity with the basis of accounting described in Note 1. The accompanying supplementary information (Exhibit F and Schedules 1 through 5) is presented only for supplementary analysis purposes. Such information has been
97ARL-4

subjected to the inquiries and analytical procedures applied in the review of the financial statements and we are Rot aware of any material modifications that should be made thereto.
Respectfully submitted,
~
Claude L. Vickers State Auditor
CLV:gp
97ARL-4

FINANCIAL STATEMENTS - 1-

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement.
-2-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY STATEMENT OF CHANGES IN FUND BALANCE (STATUTORY BASIS)
GOVERNMENTAL FUND TYPE
YEAR ENDED JUNE 30,1997

EXHIBIT"B"

SUMMARY OF SETTLEMENT TRANSACTIONS Prior Year Lease Revenue from KSL Lake Lanier, Incorporated Refund of Prior Year Management Fee from KSL Reimbursement for Expenditures from KSL Reimbursement for Repairs and Maintenance Incurred by KSL Reimbursement for Expenditures Incurred by KSL
See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement.
- 3-

$ 379,332,26 242,580.65 5,038.29
-1,335,000.00 -81,311.29
$ -789,360.09

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30, 1997

EXHIBIT"C"

FUNDS AVAILABLE
REVENUES
OTHER REVENUES RETAINED Fees - Telephone Hotel Occupancy Tax Interest Earned Rents KSL Lake Lanier, Incorporated Stouffer/Pinelsle (August 10, 1995 to May 15, 1996) Sale of Assets to KSL Lake Lanier, Incorporated Other Commissions Georgia Power Franchise Jury Duty Photocopies Liquor License

$

1,425.49

345,667.41

327,204.86

$ 3,296,000,00 560,807.00

3,856,807,00 9,000,000,00

$

15,962,02

36,003.47

100.00

34.00

8,000.00

60,099.49

Total Funds Available

$ 13,591,204.25

EXPENDITURES

PERSONAL SERVICES

Salaries and Wages Employer's.Contributions for:
F.I.C.A. Retirement Health Insurance

$ 341,301.71
18,653.45 66,435.91 4,964.24 $

REGULAR OPERATING EXPENSES

Motor Vehicle Expenses Supplies and Materials Repairs and Maintenance Utilities Insurance and Bonding Other Operating Expenses (See Schedule) Publications and Printing Equipment Purchases

$

964.32

94,006.22

21,209,97

54.36

59,465.51

345,892.41

320.63

579.99

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.

The notes to the financial statements are an integral part of this statement. -4-

431,355.31
. 522,493.41

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30. 1997

EXHIBIT"C"

EXPENDITURES TRAVEL COMPUTER CHARGES
Equipment Equipment Purchases
REAL ESTATE RENTALS TELECOMMUNICATIONS PER DIEM, FEES AND CONTRACTS
Per Diem and Fees OTHER
LOAN REPAYMENT: 20-YEAR LOAN PAYMENT TO GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION Total Expenditures
Excess of Funds Available over Expenditures

$

447.00

431.74 3.319.67
371.75
218,594.72
$ 2,663,931.00 7,600,000.00 10.263,931.00 $ 11,440,944.60 2,150,259.65
$ 13,591,204.25

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. -5-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30, 1997

EXHIBIT"D"

FUNDS AVAILABLE REVENUES
Other Revenues Retained
EXPENDITURES Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Loan Repayment: 20-Year Loan Payment to Georgia State Financing and
Investment Commission
Excess of Funds Available over Expenditures

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 6,216,118,00 $ 13,591,204.25 $

7,375,086.25

-_.:..-~--

$

466,593.00 $

807,150.00

706.00

580,00

732,00

0.00

8,765.00

. 2,267,661,00

2,663,931.00

0.00

431,355.31 $ 522,493.41
447.00 0.00
431,74 3,319,67
371.75 218,594.72 2,663,931.00
7,600,000.00

35,237.69 284,656.59
259.00 580.00 300.26 -3,319.67 8,393.25 2,049,066.28
0.00
-7,600,000.00

$ 6,216,118.00 $ 11,440,944.60 $ -5,224,826.60

$ 2,150,259.65 $ =======2=,=1=5i:::0:::,::2:::5==9=.=6=5==

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement.
-6-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The Lake Lanier Islands Development Authority is an instrumentality of the State of Georgia and a public corporation which is assigned to the Department ofNatural Resources for administrative purposes only. The Authority consists of nine (9) members as follows: the Commissioner of the Department of Natural Resources and eight (8) additional members appointed by the Governor. The Authority is considered a compo~ent unit of the State of Georgia and is included within the State of Georgia reporting entity for fmancial reporting purposes because of the significance of its legal, operational and fmancial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The Lake Lanier Islands Development Authority uses funds and account groups 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 of Georgia. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. 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. Account groups are a reporting device used to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. Funds and account groups presented in the accompanying financial statements are as follows:
GOVERNMENTAL FUND TYPE
BUDGET FUND - The fund used to account for activities and functions as set forth in the operating budget approved by the Lake Lanier Islands Development Authority. This presentation differs from generally accepted accounting principles in that such principles provide that the Budget Fund of the Authority be accounted for as a Proprietary Fund Type - Enterprise Fund. An Enterprise Fund is used to account for operations that are fmanced and operated in a manner similar to private business enterprises, where the intent is that costs of providing goods or services to the general public on a continuing basis are fmanced or recovered primarily through user charges or that periodic measurement ofrevenues earned and expenses incurred are appropriate for capital maintenance, public policy, accountability and other purposes.
FIDUCIARY FUND TYPE
AGENCY FUNDS - The funds used to account for assets held for. use by other funds, governments, or individuals.

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
ACCOUNT GROUPS
GENERAL-FIXED ASSETS - The account group used to account for fixed assets used in governmental fund type operations. Fixed assets purchased are recorded at cost or at estimated historical cost if historical cost is not practically determinable. Donated fixed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on general fixed assets. This methodology of accounting for general fixed assets differs from generally accepted accounting principles in that the Budget Fund ofthe Authority should be accounted for as a Proprietary Fund Type - Enterprise Fund. Fixed assets utilized in the operations ofproprietary fund types should be recorded as assets ofsuch funds, rather than in the General Fixed Assets Account Group. The depreciation ofsuch fixed assets should be recorded as an expense ofproprietary fund types in order to more effectively determine the total cost of providing goods and services.
The costs of normal maintenance and repairs that do not add to the value of assets or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life of assets are included in the General Fixed Assets Account Group.
GENERAL LONG-TERM DEBT - The account group used to report the noncurrent portions of certain governmental long-term liabilities, such as claims, judgments and compensated absences, which will be paid from future resources. This presentation differs from generally accepted accounting principles in that the Budget Fund of the Authority should be reflected as a Proprietary Fund Type - Enterprise Fund. The liabilities and related expenses for the items listed above should be recorded as a part of the proprietary fund type in order to more effectively determine the total cost of providing goods and services.
BASIS OF ACCOUNTING MEASUREMENT FOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds should be accounted for using the flow ofcurrent financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets and unreserved fund balance is a measure of available spendable resources.
Proprietary fund types, on the other hand, should be accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities are included on the balance sheet. Operating statements of these funds present increases, (i.e., revenues) and decreases, (i.e., expenses) in net total assets. ,This measurement focus emphasizes the determination of net income. In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund, which should be reflected as a Proprietary Fund Type - Enterprise Fund in accordance with generallo/ accepted accounting principles, utilizes the current financial resources measurement focus.

-8-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPE BUDGET FUND
Except as disclosed in the following paragraphs, units of government of the State of Georgia record their Budget Fund revenues and expenditures in accordance with the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Revenues that are accrued consist of certain amounts earned under operating agreements with other parties. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on generallong-tenn debt which is recognized when due, and certain compensated absences, claims and judgements which are recognized when the obligations are expected to be liquidated with expendable available fmancial resources. The Budget Fund, which should be reflected as a Proprietary Fund Type Enterprise Fund in accordance with generally accepted accounting principles, should be maintained on the accrual basis of accounting.
Contractual obligations for goods and services which have not been received at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. The recognition of encumbrances as expenditures and liabilities is in confonnity with accounting practices prescribed or pennitted by statutes and regulations of the State of Georgia, but is not consistent with generally accepted accounting principles, which do not provide for the recording of encumbrances within the Proprietary Fund Type - Enterprise Fund.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances of the Budget Fund in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but differs from generally accepted accounting principles for proprietary fund types in that immaterial adjustments should be reported as current period revenues and expenses.
In accordance with policies of the State of Georgia, the cost of annual and sick leave is recorded when paid rather than when earned. The cost of annual leave earned but not yet paid at the end of the fiscal year is reflected in the General Long-Tenn Debt Account Group, in that such liability is not expected to be financed from expendable available financial resources. This practice differs from generally accepted accounting, principles for proprietary fund types in that the total accrued liability for compensated absences at the end of the fiscal year should be reflected as a fund liability of the proprietary fund type involved.
FIDUCIARY FUND TYPE AGENCY FUNDS
Agency Funds are custodial in nature and do not measure results of operations or have a measurement focus. The modified accrual basis of accounting is utilized for recognizing assets and liabilities.

- 9-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 3D. 1997

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUDGET A budget for the financial operations of the Lake Lanier Islands Development Authority is approved by the Authority at a selected meeting. The budget is not subject to review or approval by the Legislature ofthe State of Georgia and therefore, is a nonappropriated budget. Budgets are prepared to provide a basis for funding operations and there is no legal prohibition regarding overexpenditure of the aggregate budget.

CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand, demand deposits with banks and other fmancial institutions, and short-term, highly liquid investments with maturities of three months or less from the date of acquisition.

ACCOUNTSRECENABLE

Accounts receivable arising from operations are reported at gross value. Based on management's evaluation

that amounts uncollectible are not material, no provision has been made for such accounts.

.

INVENTORIES No inventories of supplies are reported in these financial statements. Expendable supplies are recorded as expenditures at the time of purchase.

COMPENSATED ABSENCES Compensated absences represent obligations of the Authority relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual and compensatory 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 will not be liquidated with expendable available fmancial resources.

MEMORANDUM ONLY - TOTAL COLUMNS The total column on the Combined Balance Sheet (Statutory Basis) is captioned "Memorandum Only" because it does not represent consolidated financial information and is presented only to facilitate financial analysis. The column does not present information that reflects fmancial position 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.

NOTE 2: RESTATEMENT OF FUND BALANCE

Effective May 16, 1996, The Lake Lanier Islands Development Authority (LLIDA) entered into 'a management agreement with KSL Lake Lanier, Incorporated (KSL) to manage the properties previously operated by LLIDA (Project) until such time as a "privatization agreement" could be finalized between LLIDA and KSL. Terms of the management agreement called for the KSL to utilize certain accounts for maintaining the financial records of the project and stated that these accounts were to remain the property

- 10-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,1997

EXHIBIT"E"

NOTE 2: RESTATEMENT OF FUND BALANCE
of LLIDA during the term of the management agreement. As a result of this agreement, certain fmancial activity maintained by KSL was included in the financial statements ofLLIDA for fiscal year ended June 30, 1996.
The privatization agreement was entered into on August 1, 1997, and was retroactive to May 16, 1996. As a result, LLIDA's fund balance as of July 1, 1996, has been restated to reflect the retroactive clause of the privatization agreement.
NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds ofthe State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral anyone or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(l) 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 of development authorities created by the laws of the State of Georgia.
(5) Bonds, bills, certificates ofindebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
(6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia the option of exempting demand deposits from the collateral requirements.

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHIBIT"E"

NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

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 of June 30, 1997, 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 Authority or by its agent in the Authority's name.

Category 2 - Amounts collateralized with securities (at market value) held by the pledging financial institution's trust department or agent in the Authority's name.

Category 3 - Amounts collateralized with securities (at market value) held by the pledging fmancial

institution or by its trust department or agent, but not in the Authority's name, and

amounts uncollateralized.

.

Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$ 305,802.89 $ 429 575 47 $ 100 000 00 $,=====!o!.!.!.o~o $ 329 575 47

CATEGORIZATION OF INVESTMENTS For purposes of analysis of custodial credit risk, investments consist of U. S. Government securities. Investments are stated at cost, and are summarized and classified as to custodial credit risk within the categories described below:

Category 1 - Insured or registered, or securities held by the Authority or its agent in the Authority's name.

Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the Authority's name.

Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the Authority's name.

Type ofInvestment U. S. Government Securities

Risk Categories

2

3

Carrying Amount

Market Value

$ 2 392 272 00 $

o00 $==~OOlQl;O $ 2.392 272 00 $ 2 392 272 00

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT"E"

NOTE 4: OPERATING LEASE

The Lake Lanier Islands Development Authority has entered into a certain agreement to lease real property which is classified as an operating lease. This lease contains a provision that, at the expiration date of the original term ofthe lease, the Lake Lanier Islands Development Authority has the option ofrenewing the lease on a year-to-year basis. Future minimum commitments for the operating lease as of June 30, 1997, are listed below.

Fiscal Year Ending June 30

1998

$ 14.758.83

Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 1997, totaled $3,319.67.

NOTE 5: OTHER LEASES

LEASE WITH SECRETARY OF THE ARMY/SUBLEASE WITH DEPARTMENT OF NATURAL RESOURCES On April 15, 1968, the Secretary of the Army entered into an agreement with the Department of Natural Resources (DNR), formerly the Department of State Parks, whereby DNR agreed to lease certain properties known as "Lake Lanier Islands" from the U. S. government for public park and recreational purposes. The term ofthe prime lease, as amended, runs through July 31, 2047. Subsequently, DNR sublet these properties to the Lake Lanier Islands Development Authority (LLIDA). The term of the LLIDA sublease, as amended, runs through July 30, 2047.

SUBLEASE WITH THE STOUFFERIPINEISLE The Stouffer/PineIsle sublease was originally entered into on February 26, 1973, for certain properties ofLake Lanier Islands. The Stouffer/PineIsle sublease, as amended, calls for varying percentages of gross revenues of a resort/golf operation to be paid to LLIDA on an annual basis. The term ofthe Stouffer/PineIsle sublease, as amended, runs through Apri114, 2018.

SUBLEASE WITH KSL LAKE LANIER, INCORPORATED (pRIVATIZATION AGREEMENT) On May 16, 1996, KSL Lake Lanier, Incorporated (KSL) and LUDA entered into an agreement for KSL to operate the Lake Lanier Islands for LLIDA until such time as a "privatization agreement" could be reached whereby KSL would purchase the assets of LLIDA and sublease Lake Lanier Islands. The terms of this management agreement called for the privatization agreement to be retroactive to May 16, 1996 upon signing. The privatization agreement was entered into on August 1, 1997. The effect of the retroactive provision of the privatization agreement is detailed on Exhibit liB" of this report..

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHIBIT "E"

NOTE 5: OTHER LEASES

SUBLEASE WITH KSL LAKE LANIER, INCORPORATED (pRIVATIZATION AGREEMENT) Under terms of the KSL sublease, KSL agreed to pay $9,000,000.00 to LLIDA in return for the assets of LLIDA at May 16, 1996, including assignment of the StoufferlPineIsle sublease to KSL. The KSL sublease created and vested in KSL an estate for years in the Lake Lanier Islands. The term of the KSL sublease runs through July 29,2047.

The KSL sublease requires KSL to make an annual basic rent payment of $3,000,000.00 to LLIDA, which is payable in equal monthly installments of $250,000.00. In addition, an annual percentage rent payment is to be made by KSL and is determined by multiplying 3.5% ofthe amount of aggregate revenue, as defmed in the KSL sublease, which exceeds the annual sales base, as defined in the KSL sublease. The minimum amount of the annual percentage rent payment is $100,000.00 for the first five years of the lease and $200,000.00 for the remainder ofthe KSL sublease term.

NOTE 6: CHANGES IN GENERAL FIXED ASSETS

The following is a summary of changes of equipment in the General Fixed Assets Account Group during the fiscal year:

BUILDING

EQUIPMENT

TOTAL

Balance July 1, 1996

$26,566,125.10 $ 6,857,735.60 $33,423,860.70

Additions Deductions (See Note 5)

26.566,125.10

9,391.00

9,391.00

6,857,735.60 33.423,860.70

Balance June 30, 1997

$

0.00 $

9,391.00 $ 9.391.00

NOTE 7: GENERALLONG-TERMDEBT

REPAYMENT OF ADVANCES In prior years, the Lake Lanier Islands Development Authority received funds from the State of Georgia from the sale of general obligations bonds of the State of Georgia through the Department of Natural Resources. These funds have been used for capital outlay projects for the Lake Lanier Islands Development Authority. The Authority has agreed to repay these contributions plus interest to the extent that funds are available.

CHANGES IN GENERAL LONG-TERM DEBT A summary of changes in General Long-Term Debt for the year end~d June 30, 1997, follows:

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHffiIT"E"

NOTE 7: GENERAL LONG-TERM DEBT

CHANGES IN GENERAL LONG-TERM DEBT

Compensated Absences

General Obligation Bond Payback

Total

Balance July 1, 1996

$ 63,542.18 $37,295,034.00 $37,358,576.18

Additions (Deductions) Annual Leave Earned and Utilized (Net) Salaries Salary Related Fringe Benefits Payments to Georgia Department of Natural Resources

-40,551.44 -3,102.18

-40,551.44 -3,102.18

-2,663,931.00 -2,663,931.00

Balance June 30, 1997

$ 19,888,56 $34,631,103,00 $34,650,991.56

The aggregate future annual payments for advances through the Georgia Department of Natural Resources as of June 30, 1997, including principal and interest are as follows:

1998 1999 2000 2001 2002 Thereafter

$ 2,663,931.00 2,663,931,00 2,663,931.00 2,663,931.00 2,663,931.00 21,311,448.00

$34,631.103.00

NOTE 8: RISK MANAGEMENT

Public Entity Risk Pool

The State Personnel Board, Merit System of Personnel Administration administers for the State of Georgia a program of health benefits for the employees ofunits of government ofthe State of Georgia, units of county government and local education agencies located within the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units of government participating in the plan, and appropriations made by the General Assembly of Georgia. The State Personnel Board, Merit System of Personnel Administration has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the State Employees' Health Benefit Plan as established by the State Personnel Board.

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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT"E"

NOTE 8: RISK MANAGEMENT
Other Risk Management
The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia ofmaking and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Lake Lanier Islands Development Authority is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
NOTE 9: DEFERRED COMPENSATION PLAN
The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees of the State of Georgia and county health departments, permits such employees to defer a portion of their salary until future years. Participation in the plan is optional. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property or rights ofthe State of Georgia subject only to the claims of the State's general creditors. Participant's rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value of the deferred account of each participant. Financial information relative to the plan will be presented in the State of Georgia Comprehensive Annual Financial Report for the year ended June 30, 1997.
A change in the Internal Revenue Code Section 457, effective August 20, 1996, requires that by January 1, 1999 all existing eligible deferred compensation plans must be held in trust for the exclusive benefit of participants and their beneficiaries. The State of Georgia's plan will be converted effective July 1, 1998.
NOTE 10: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Lake Lanier Islands Development Authority participates in the Employees' Retirement System of Georgia ("ERSil), a single-employer, defined benefit plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.
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LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997

EXHIBIT "E"

NOTE 10: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.
Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive nonnal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 30 years of service regardless of age.
Retirement benefits paid to members are based upon a fonnula which considers the monthly average of the member's highest eight consecutive calendar quarters of salary, the number ofyears of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The nonnal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
The ERS issues a financial report each fiscal year which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees ofthe State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Authority's payroll for the year ended June 30, 1997, for employees covered by ERS was $161,557.93. The Authority's total payroll for all employees was $341,301.71.
Under the old plan, member contributions consist of 4% of annual compensation up to $4,200.00 and 6% of annual compensation in excess of $4,200.00. Of these member contributions, the employee pays the first 1.25% and the employer pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% of annual compensation paid by employee. The Authority also is required to contribute at a specified percentage of active member payroll detennined annually by actuarial valuation. For the year ended June 30, 1997, the ERS employer contribution rate for the Authority amounted to 23.52% of covered payroll and included the amounts contributed on ,behalf of the employee under the old plan referred to above. Employer contributions are also made on amounts paid" for accumulated leave to retiring employees.

- 17 -

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHlBIT"E"

NOTE 10: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy Total contributions to the plan made during fiscal year 1997 amounted to $40,017.96, of which $37,998.40 was made by the Authority and $2,019.56 was made by employees. These contributions met the requirements ofthe plan.
Actuarial and Trend Information Actuarial and historical trend infonnation is presented in the ERS June 30, 1997, financial report which may be obtained through ERS.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The Lake Lanier Islands Development Authority is eligible to participate in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defmed contribution plan established by the Georgia General Assembly for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Employees' Retirement System Board of Trustees. The Authority did not have any employees eligible to participate in the GDCP during the fiscal year ended June 30, 1997.
NOTE 11 : LEAVE POLICIES
Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employees' length of continuous State service with a maximum accumulation of forty five days. Employees are paid for unused accumulated annual leave upon retirement or termination ofemployment. See Note 1 - Compensated Absences.
Certain employees who retire with one hundred and twenty days or more of forfeited annual and sick leave are entitled to additional service credit in the Employees' Retirement System of Georgia.
NOTE 12: CONTINGENCIES
Litigation, claims and assessments filed against the Lake Lanier Islands Development Authority, if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claim's and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1997.
- 18 -

SUPPLEMENTARY INFORMAnON - 19-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
FIDUCIARY FUND TYPE - AGENCY FUNDS YEAR ENDED JUNE 30, 1997

EXHIBIT"F"

FUND

ASSETSI LIABILITIES JULY 1,1996

ADDITIONS

DELETIONS

ASSETSI LIABILITIES JUNE 30, 1997

Concessionaire Security Deposits

$

1,000,00

$ 1,000.00

Aquatic Rental Deposits

130,919.56

130,919.56

Georgia Department of Natural Resources

5,398.75 $ 6,517.93

6,837,68 $

5,079.00

Olympic Security Deposits

161,261,00

161,261,00

United States Postal Service

1,882.88

1,882.88

$ 300,462.19 $ 6,517,93 $ 301,901.12 $=======:5,:=:07=9=.0::::0

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 20-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30. 1997

SCHEDULE "1"

FUNDS AVAILABLE
REVENUES
Other Revenues Retained
EXPENDITURES
Personal Services Regular Operating Expenses Travel Equipment Computer Charges Telecommunications Per Diem, Fees and Contracts Capital Outlay Loan Repayment: 20-Year Loan

ORIGINAL BUDGET

BUDGET ADJUSTMENTS

TOTAL

$ 16,010,569.00 $ -9,794,451.00 $ 6,216,118.00

$

7,861,404.00 $ -7,394,811.00 $

466,593.00

4,174,758.00

-3,367,608.00

807,150.00

20,500.00

-19,794.00

706.00

0.00

580.00

580.00

32,000.00

-31,268.00

732.00

100,000.00

-91,235.00

8,765.00

75,000.00

2,192,661.00

2,267,661.00

1,082,976.00

-1,082,976.00

0.00

2,663,931.00

0.00

2,663,931.00

$ 16,010,569.00 $ -9,794,451.00 $ 6,216,118.00

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 21 -

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY CASH AND CASH EQUIVALENTS JUNE 30,1997

SCHEDULE "2"

INTEREST BEARING ACCOUNTS
Wachovia Bank of Georgia, NA, Gainesville, Georgia
Commercial Checking Accounts U. S. Treasury Bill No. 9127942S2
Purchase Date: June 30, 1997 Maturity Date: July 24, 1997
OTHER
Cash on Hand

$

305,802.89

2,392,272.00 $ 2,698,074.89

500.00
$ 2,698,574.89

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 22-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY . SCHEDULE OF OTHER OPERATING EXPENSES YEAR ENDED JUNE 30, 1997

SCHEDULE "3"

REGULAR OPERATING EXPENSES Advertising, Publicity and Promotions Excise Tax Remitted to Hall County Board of Commissioners Registration Fees

$ 207,400.57 138,266.84 225.00
$ 345,892.41

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 23-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY RECONCILIATION OF TRAVEL YEAR ENDED JUNE 30. 1997
Total per Annual Supplement Adjustments Raymond, Kay
Total per Report

SCHEDULE "4"

TRAVEL

$

784.50

-337.50

$ ======44=7=:.0=0

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 24-

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY RECONCILIATION OF PER DIEM AND FEES
YEAR ENDED JUNE 30,1997

SCHEDULE "5"

Totals per Annual Supplement Adjustments Raymond, Kay KSL Lake Lanier, Incorporated
Totals per Report

TYPE PAYMENT
Board Member Consultant

FEE AMOUNT

EXPENSE AMOUNT

TOTAL

$ 2,132,935.75 $

5,321.47 $ 2,138,257,22

-1,920,000,00

337,50

337.50 -1,920,000.00

$ 212,935,75 $

5,658,97 $ 218,594,72

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
- 25-

SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

LAKE LANIER ISLANDS DEVELOPMENT AUTHORITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1997

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

913-96-01

Previously Reported Corrective Action Implemented

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

LAKE LANIERISLANDS DEVELOPMENT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1997
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS Accounts Receivable Deleted Finding Control Number: FS-913-97-01
For the year under review, the Lake Lanier Islands Development Authority deleted accounts receivable in the amount of $118,045.02. The Authority made a determination that the receivables were either recorded in error or that previous collections had not been properly credited to the receivable account. However, the Authority could not provide documentation to support the cancelled receivables.
The Lake Lanier Islands Development Authority should establish controls to ensure that future adjustments to accounts receivable are fully documented.