Audit report, state of Georgia, State Personnel Board, Merit System of Personnel Administration, year ended June 30, 1996

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

AUDIT REPORT STATE OF GEORGIA STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRAnON YEAR ENDED JUNE 30, 1996

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
- TABLE OF CONTENTS -

INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXHIBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPE

5

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

6

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

8

E NOTES TO THE FINANCIAL STATEMENTS

9

SUPPLEMENTARY INFORMATION

F COMBINING BALANCE SHEET (STATUTORY BASIS)

BUDGET FUND

28

G COMBINING STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

BUDGET FUND

29

H COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

30

I COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

FIDUCIARY FUND TYPE - AGENCY FUNDS

33

SCHEDULES

1 SCHEDULE OF APPROVED BUDGET

34

2 CASH AND CASH EQUIVALENTS

35

3 SCHEDULE OF OTHER OPERATING EXPENSES

36

4 RECONCILIATION OF TRAVEL

37

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

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 14, 1997

Honorable Zell Miller, Governor Members of the General Assembly of Georgia Members ofthe State Personnel Board Merit System ofPersonnel Administration
and Honorable Dana Russell, Acting Commissioner
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (ExhIbits A through E) of the State Personnel Board, Merit System of Personnel Administration as of and for the year ended June 30, 1996. These financial statements are the responsibility of the Board's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, these financial statements were prepared on 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position (statutory basis) of the State Personnel Board, Merit System of Personnel Administration as of June 30, 1996, and the results of its operations (statutory basis) for the year then ended, on the basis of accounting described in Note 1.

96ARL-1

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The
accompanying supplementary information (Exhibits F through I and Schedules 1 through 4) is presented for. purposes of additional analysis and is not a required part of the financial statements of the State Personnel Board, Merit System of Personnel Administration. Such information has been subjected to the auditing procedures applied in the audit ofthe financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~
Claude L. Vickers State Auditor
CLV:dt 96ARL-I

FINANCIAL STATEMENTS - 1-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINED BALANCE SHEET (STATUTORY BASIS)
ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30.1996

ASSETS
Cash and Cash Equivalents (see Schedule)
Investments (see Note 8)
Accounts Receivable Claim Refunds Due Less: AIlaNance for Uncollectible Claim Refunds Due Other
Interest Receivable
Fixed Assets Equipment
Amount to be Provided for Payment of Accrued Compensated Absences Installment Purchase Commitments

GOVERNMENTAL FUND TYPE BUDGET

FIDUCIARY FUND TYPE
AGENCY

$ 269,278,112.68 $ 8,978,251.67 $ 254,001 ,971.63

$ 3,297,701.83 $ -1,896,3n.73 14,171,948.68
$ 15,573,272.78 $
$ 3,415,085.64

21,869.55 -20,214.48 272,991.46
274,646.53

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

EXHIBIT "A"

ACCOUNT GROUPS

GENERAL

GENERAL

F~ED

LON~TERM

ASSETS

DEBT

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

$ 278.256,364.35 $ 261,233.723.21 $ 254.001 ,971.63 $ 209,552,529.76

$ 3.319.571.38 $ 3.293.903.53

-1 .916.592.21

-1.840.450.83

14.444.940.14

14,693.419.09

$ 15.847.919.31 $ 16.146,871.79

$ 3.415.085.64 $

845.862.31

$ 960.310.03

$

960,310.03 $

800.441.17

$ 785.595.56 $ 36,437.09
$ 822,032.65 $

785.595.56 $ 36,437.09
822.032.65 $

734.914.24 22.631.98
757,546.22

$ 960.310.03 $ 822.032.65 $ 553.303,683.61 $ 489.336,974.46

$ 23,366,529.04 $ 22.908.795.21

1,730,609.58

1.590.209.30

357.50

517.50

137,489.000.00 136,965.000.00

263,027,518.79 219.354.120.19

$ 785.595.56

785.595.56

734.914.24

36,437.09

36,437.09

22,631.98

$ 822.032.65 $ 426,436,047.56 $ 381 ,576,188.42

$ 960.310.03

$

960.310.03 $

800.441.17

125,899,773.10 7.552.92

106.958.919.87 1.425.00

$ 960,310.03

0.00

0.00

$ 126,867.636.05 $ 107.760,786.04

$ 960.310.03 $ 822,032.65 $ 553,303,683.61 $ 489.336,974.46

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I I I I I I I I I I I I I I I I I I I I I I I I I I I I I
I

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION STATEMENT OF CHANGES IN FUND BALANCES (STATUTORY BASIS)
GOVERNMENTAL FUND TYPE YEAR ENDED JUNE 30,1996

EXHIBIT-B-

FUND BALANCES - JULY 1
Reserved Unreserved
Designated Surplus
ADDITIONS
Adjustments to Prior Year's Accounts Payable Claim Refunds Due
Excess of Funds Available over Expenditures Exhibit-C-
DEDUCTIONS
Adjustments to Prior Year's Expenditures Fund Balance Increase in Incurred But Not Reported Claims Liability Health Insurance
Increase in Allowance for Uncollectible Claim Refunds Due
Reserved Fund Balance Carried Over from Prior Year as Funds Available
Uncollectible Claim Refunds Due Written Off
FUND BALANCES - JUNE 30
(To Exhibit -A-)

BUDGET FUND

YEAR ENDED

JUNE 30,1996

JUNE 30,1995

$ 106,960,344.87 $ 85,086,419.19

0.00

0,00

$ 106,960,344,87 $ 85,086,419,19

$

148,847.39 $

113,574.67

187,286.03

120,758.85

126,256,387.73

118,248,062.57

$ 126,592,521.15 $ 118,482,396.09

$

0.00 $

9,438.92

524,000.00

11,142,000.00

75,469.38

240,556.28

106,960,344.87 85,725.75

85,086,419.19 130,056.02

$ 107,645,540.00 $ 96,608,470.41

$ 125,907,326.02 $ 106,960,344.87

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

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION STATEMENT OF FUNDS AVAILABLE ANp EXPENDITURES
BUOOETFUNP YEAR ENDED JUNE 30, 1996

EXHIBIT "CO

FUNDS AVAILABLE
REVENUES
OTHER REVENUES RETAINED ContrIbutions Employees State Agencies, AuthorIties and County Governments Local Education Agencies Individuals Employers State Agencies, AuthorIties and County Governments Local Education Agencies
Administrative Fees Charitable ContrIbutions Deferred Compensation Employees' Flexible Benefit Program Health Insurance Program Agency Assessments for Operations (Net)
Interest Eamed Training Fees
Total Revenues
CARRY.QVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance Health Insurance Claims GSAMS Grant
Total C8rry-Over from Prior Year

TOTALS
yEAR ENDEb JUNE 30, 1996 JUNE 30, 1995

$ 81,219,927.28 $ 81,531,298.35

159,502,729.37

156,986,216,45

5,583,150.87

5,410,998,99

260,201,476.97 434,327,827.09

247,126,213.69 411,607,556,79

$ 940,835,111.58 $ 902,662,284.27

87,338.45 269,098.29
36,944.99
32.531.00 12,103,526,09 16,198,959,51
10,000,00

77,436.60 157.922,04
64,656,99 33,893,81 10,763,011,76
11,953,402.02 5,000,00

$ 969,573,509.91 $ 925,717,607.49

$ 106,958,919.87 $ 1,425,00
$ 106,960,344.87 $

85,086,419.19 0,00
85,086,419.19

Total Funds Available

$ 1,076,533,854,78 $ 1,010,804,026,68

EXPENDITURES
PERSONAL SERVICES
Salaries and Wages Employer's Contributions for:
F.I.C.A. Retirement Health Insurance Personal Liability Insurance Unemployment Compensation Insurance Workers' Compensation Insurance Assessments by Merit System Drug Testing
REGULAR OPERATING EXPENSES
Supplies and Materials Repairs and Maintenance Rents (Other than Real Estate) Insurance and Bonding Other Operating Expenses (See Schedule) Duplicating and Rapid Copy Publications and Printing Equipment Purchases
TRAVEL
EQUIPMENT
Equipment Purchases Lease/Purchase of Equipment
The notes to the financial statements are an integral part of this statement.
-6-

$

6,113,990.52 $

438,530.28 939,944.42 757,085.31 33,598.00
6,886.00 32,777.00
6,917.96
0.00

$ - - = =8 ,=3 2.9.,:n=9 ..4.9. $

5,699,551.05
406,624.02 878,393.74 705,136.80
32,185.00 6,218.00
22,380.00 7,945.54 39.50
7,758,473.65

$

530,116,60 $

49,180,35

11,129.46

1.877.00

100,245.67

85,767.71

1,238,947.47

49,292.88

.$ --=;;;.=2,=0.6:.6,,.5:.5:.7...1.:4.. $ $ _ _--:;.9.;1..,L1.:2=4...:5.:3=.$

440,711.29 59,371.74 6,157.25 1,823.00 101,524.99
103,402.73 1,394,771.62
118,661.71
2,226.424.33
86.413.09

$

1,557.00 $

13,853.59

$ ----'='1:5'= .41:0'.=59-$

8,906.69 6,613.70
15,520,39

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30, 1996

EXHIBIT'CO

EXPENDITURES COMPUTER CHARGES
Software Equipment
Equipment Purchases Per Diem, Fees and Contracts
Contracts Computer Billings, DOAS
REAL ESTATE RENTALS
TELECOMMUNICATIONS
PER DIEM, FEES AND CONTRACTS
Per Diem and Fees Contracts
OTHER HEALTH INSURANCE PAYMENTS Other Costs Other Expenditures Total Expenditures
Excess of Funds Available over Expenditures

TOTALS
YEAR ENDED JUNE 30,1996 JUNE 30,1995

$

37,526.97 $

157,078.25

1,479,414.00 1,847,897,49

$_----'=3:,5.2.1:,.9r1.6=..7=1~ $ $-_-=9.1.4:,=268=.3=4 $ $ _ _-=:2.:7..6..:.:4.L6=1..;6,=7"-$

18,758.54 94,982,22 1,000,000.00 1,925,n4.59 3,039,465.35 915,271.36 184,944.50

$

1,201,644.07 $

519,901.41

151,976,039.59

135,675,755.16

$ 153,1n,683.66 $ 136,195,656.57

$ 781,884,314.92 $ 742,133,794,87

$ 950,2n,467.05 $ 892,555,964.11

126,256,387.73

118,248,062.57

$ 1,076,533,854.78 $ 1,010,804,026.68

The notes to the financial statements are an integral part of this statement. -7-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30.1996

EXHIBIT -0-

FUNDS AVAILABLE REVENUES
Other Revenues Retained CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
EXPENDITURES Personal Services RegUlar Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Health Insurance Payments
Excess of Funds Available over Expenditures

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 1,033,198,291.00 $ 969,573,509.91 $ -63,624,781.09

0.00

106,960,344.87 106,960,344.87

$ 1,033.198,291.00 $ 1,076,533,854.78 $ 43,335,563.78

$

8,636,124.00 $

8,329,729.49 $

306,394.51

2,070,573.00

2,066,557.14

4,015.86

91,512.00

91,124.53

387.47

15,668.00

15,410.59

257.41

3,522,686.00

3.521,916.71

769.29

921,758.00

914,268.34

7,489.66

427,123.00

276,461.67

150,661.33

159,334,049.00

153,1n,683.66

6,156,365.34

858,178.798.00

781,884,314.92

76,294,483.08

$1,033,198.291.00 $ 950,2n,467.05 $ 82,920,823.95

$ 126.256,387.73 $ 126,256.387.73

The notes to the financial statements are an integral part of this statement. -8-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The State Personnel Board, Merit System ofPersonnel Administration, an organizational unit ofthe State of Georgia, is part ofthe executive branch ofthe government ofthe State of Georgia. The agency is under the control of the State Personnel Board, which consists of five (5) members appointed by the Governor. The policies of the Board are administered by the Commissioner, who is appointed by the Governor, subject to coilfumation by the Senate ofthe General Assembly ofGeorgia. The annual operating costs ofthe agency are funded by pro rata assessments to the various agencies ofgovernment ofthe State of Georgia..
The State Personnel Board, Merit System ofPersonnel Administration does not have authority to determine the amount of funding it will receive from the State of Georgia for any given fiscal year. Such authority is vested in the General Assembly ofGeorgia. The Board also does not have authority to retain unexpended State appropriations (surplus),if any, for any given fiscal year. Accordingly, the State Personnel Board, Merit System of Personnel Administration is included within the State of Georgia reporting entity for financial reporting purposes because ofthe significance ofits legal, operational and financial relationships with the State ofGeorgia. 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 State Personnel Board, Merit System ofPersonnel Administration uses funds and account groups to report on its financial position and the results ofits operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations of the 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 offunds 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 Amended Appropriations Act of 1995-1996. This presentation differs from generally accepted accounting principles in that such principles provide that the Budget Fund of the State Personnel Board by accounted for in the following manner:
MERIT SYSTEM ADMINISTRATION The Merit System Administration should be accounted for as a Proprietary Fund Type - Internal Service Fund. An Internal Service Fund is used to account for the financing ofgoods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, on a cost-reimbursement basis.
-9-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FmANCIAL STATEMENTS JUNE 3D. 1996

EXIllBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTmG POLICIES

FUND ACCOUNTING

GOVERNMENTAL FUND TYPE

HEALTH INSURANCE PROGRAM The Health Insurance Program, a public entity risk pool which provides health and other medical benefits to employees and retirees ofparticipating employers, should be accounted for as a Proprietary Fund Type Enterprise Fund. A public entity risk pool is defined as a cooperative group of governmental entities joining together to finance an exposure, liability or risk.

FIDUCIARY FUND TYPE

AGENCY FUNDS - The funds used to account for assets held for use by other funds, governments, or

individuals.

'

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 ofaccounting for general fixed assets differs from generally accepted accounting principles in that the Budget Fund of the Board should be accounted for as a proprietary fund type. Fixed assets utilized in the operations ofproprietary fund types should be recorded as assets of such funds, rather than in the General Fixed Assets Account Group. The depreciation of such fixed assets should be recorded as an expense of proprietary fund types in order to more effectively determine the total cost of providing goods and services.

The cost of normal maintenance and repairs that do not add to the value ofthe asset or materially extend assets'lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value o~ useful life of the 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 Board should be reflected as a proprietary fund type. 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.

- 10-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXIllBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 of current 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 ofavailable spendable resources. In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund remits its unreserved fund balance (surplus), ifany, to the Office ofTreasury and Fiscal Services in the subsequent fiscal year.
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 in accordance with generally accepted accounting principles, utilizes the current financial resources measurement focus.
GOVERNMENTAL FUND TYPE BUDGETFUND
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 (Le., 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, ~xcept for unmatured interest on general long-term 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 financial resources. The Budget Fund, which should be reflected as a proprietary fund type in accordance with generally accepted accounting principles, should be maintained on the accrual basis of accounting.
The net effect ofthe change in the contra-asset account, Allowance for Uncollectible Claim Refunds Due, from the prior year is recorded as a charge (net) against fund balance. This practice is in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but is not consistent with generally accepted accounting principles, which provide for the recording of an operating expense (bad debt expense) for amounts recorded as a charge to the contra-asset valuation account.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 3D. 1996

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPE BUDGET FUND
Accounting practices prescribed or permitted by statutes and regulations of the State of Georgia allow a liability for estimates of costs relating to incurred but not reported (IBNR) claims to be recorded on the Combined Balance Sheet (Statutory Basis) with changes in this liability from the prior year reported on the Statement of Changes in Fund Balance (Statutory Basis). This method of accounting for estimated ffiNR claims is not consistent with generally accepted accounting principles, which provide for the recording of a liability and an expense for estimated ffiNR claims in proprietary funds.
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 conformity with accounting practices prescribed or permitted by statutes and regulations ofthe 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 types.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances ofthe 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-Term 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 ofthe 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.
BUDGET The operations of the State Personnel Board, Merit System ofPersonnel Administration are on the basis of a budget submitted by the Board and approved by the Legislature and the Governor. The budget is adopted on a basis consistent with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia and is compiled in the same manner as all State departments. Expenditures are classified by budget unit object classes as provided in Act No. 476 of Georgia Laws 1995 (as approved April 21, 1995) and
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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUDGET amended by Act No. 513 ofGeorgia Laws 1996 (as approved February 16, 1996). This budget is considered to be an appropriated budget and is referred to in these notes as the Amended Appropriations Act of 19951996.
Overexpenditure ofa budget unit object class, except for the "common object classes", included in the Board's final amended budget is in violation of Section 54 of the 1995-1996 Amended Appropriations Act. Expenditures of no more than 102% of the stated amount for each common object class are authorized by Section 54. However, the total expenditure for the group of common object classes may not exceed the sum of the stated amounts for the separate object classes of the group. The common object classes include Personal Services, Regular Operating Expenses, Travel, Motor Vehicle Purchases, Equipment, Computer Charges, Real Estate Rentals, Telecommunications and Postage.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand, demand deposits with banks and other financial institutions, cash management pools that have the general characteristics of demand deposit accounts in that the Board may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty, and funds on deposit with custodians ofthe deferred compensation plan funds not yet invested.
INVESTMENTS Investments consist of funds held by custodians for the deferred compensation plan. The Official Code of Georgia Annotated Section 45-18-33 provides that the State Personnel Board is authorized to make payments for the purchase ofinsurance, endowments, annuities, mutual funds, or savings from funds derived from the deferral of compensation. The code section further provides that the State Personnel Board has the power to arrange for a custodian for the holding of such insurance policies, funds, investments, and other assets of the fund. (See Note 8)
These investments ofthe deferred compensation plan include funds invested in open-end mutual funds. The State Personnel Board is not aware of the risk exposure resulting from investments in derivatives or similar investments, ifany, through these open-end mutual funds.
In addition, the State Personnel Board participates in an investment pool managed by the State of Georgia's Office ofTreasury and Fiscal Services (OTFS) referred to as the "Georgia Fund 1". The Board does not have any risk exposure related to investments in derivatives or similar investments in Georgia Fund 1 as the investment policy ofOTFS does not provide for investments in derivatives or similar investmen~s through the Georgia Fund 1.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE CLAIM REFUNDS DUE
The State Personnel Board, Merit System ofPersonnel Administration is legally restricted by the Official Code of Georgia Annotated Section 13-1-13 as to certain recoveries of voluntary payments of health insurance claims. Although the State Personnel Board has implemented policies and procedures for continued collection efforts, under the Constitution ofthe State of Georgia, the State Personnel Board is precluded from forgiving certain debts due the State in the absence of statutory exception. Accordingly, significant claim refunds due cannot be deleted from the accounting records of the State Personnel Board, Merit System of Personnel Administration.
At June 30, 1996, the accounts receivable for claim refunds due was $3,319,571.38 ($3,297,701.83 Governmental Fund Type and $21,869.55 Fiduciary Fund Type). A contra-asset valuation account has been established to indicate the portion of claim refunds due and estimated to be uncollectible in excess of the $400.00 statutory limit which cannot be legally written off At June 30, 1996, the allowance for uncollectible claim refunds due was determined to be $1,916,592.21.
OTHER Accounts receivable (Other) arising from operations are reported at gross value. Based on management's evaluation that amounts uncollectible are not material, no prQvision has been made for such amounts.
INVENTORIES No inventories of supplies are reported in these financial statements. Expendable supplies are recorded as expenditures at the time of purchase.
RESERVED FUND BALANCE Reserves represent those portions of fund equity not appropriable for expenditure or legally segregated for . a specific future use. The following is a brief description of the reserves reflected in the accompanying financial statements:
HEALTH INSURANCE CLAIMS Reserved for the payment of health insurance claims in future periods.
GEORGIA STATEWIDE ACADEMIC AND MEDICAL SYSTEM (GSAMS) GRANT Reserved for the unexpended portion of grant awarded by the Department of Administrative Services on behalf of the Distance Learning and Telemedicine Governing Board to develop programming for the GSAMS Network. This amount is restricted to expenditures on the GSAMS project for the 1997 fiscal year.

- 14-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 3D. 1996

EXIllBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPENSATED ABSENCES Compensated absences represent obligations of the State Personnel Board relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual 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 financial resources.
MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the Combined Balance Sheet (Statutory Basis) are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position in conformity with generally accepted accounting principles. Neither are such datacomparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
COMPARATIVE DATA Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of the changes in the Board's financial position and operations. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the Board's financial position and operations or would cause the statements to be unduly complex and difficult to understand. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZAnON 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 ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
(2) Bonds, bills, certificates ofindebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
(3) Bonds ofany public authority created by the laws of the 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.
- 15 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT"E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (5) Bonds, bills, certificates ofindebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, 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 ofthe State of Georgia the option of exempting demand deposits from the collateral requirements.

CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts and funds on deposit with custodians of the deferred compensation plan not yet invested. The bank balances as ofJune 30, 1996, 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 Board or by its agent in the Board's name.

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

Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution or by its trust department or agent, but not in the Board's name, and amounts uncollateralized.

Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$ 16.96436339 $ 1866901993 $ 400000 00 $====O~QQ~ $ 18.269.01993

CATEGORIZATION OF INVESTMENTS Investments consist offunds maintained in an investment pool by the Office of Treasury and Fiscal Services, and funds held by various custodians for the deferred compensation plan in guaranteed investment contracts and open-end mutual funds. These types ofinvestments are not subject to risk. categorization.

The state investment pool is stated at cost. The deferred compensation plan investments are stated at market value which approximates cost.

- 16-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS Type ofInvestment

Carrying Amount

Market Value

State Investment Pool

$ 261.292,000.96 $ 261.292,000.96

Deferred Compensation Plan Guaranteed Investment Contracts Open-End Mutual Funds

$ 120,619,908.29 $ 120,619,908.29 133,382,063.34 133,382,063.34

$ 254,001.971.63 $ 254 001.971.63

NOTE 3: OPERATING LEASES

The State Personnel Board, Merit System ofPersonnel Administration has entered into a certain agreement to lease real property and equipment which is classified as an operating lease. This lease contains a provision that, at the expiration date of the original term of the lease, the State Personnel Board, Merit System of Personnel Administration has the option of renewing the lease on a year-to-year basis. Future minimum commitments for the op~rating lease as of June 30, 1996, are'listed below. The amount is for a cancellable lease for which an option to renew for the subsequent fiscal year has been exercised.

Fiscal Year Ending June 30

1997

$ 115,874.04

Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 1996, totaled $162,269.46.

NOTE 4: INSTALLMENT PURCHASE COMMITMENTS

The State Personnel Board, Merit System ofPersonnel Administration acquires certain property and equipment through multi-year installment purchases or capital leases with varying terms and options. The majority of these agreements contain fiscal funding clauses in accordance with O.C.G.A. 50-5-64 which prohibits the creation ofa debt to the State ofGeorgia for the payment ofany sums under such agreements beyond the fiscal year ofexecution ifappropriated funds are not available. If renewal of such agreements is reasonably assured, however, installment purchases requiring appropriation by the General Assembly of Georgia are considered noncancellable for financial reporting purposes.

- 17 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 4: INSTALLMENT PURCHASE COMMITMENTS

At June 30, 1996, future minimum commitments under installment purchases for equipment are as follows:

Fiscal Year Ending June 30

1997 1998 1999 2000 2001

$ 14,043.00 12,805.50 9,097.80 5,399.52 4.499.60

Total Future Minimum Commitments

$ 45,845.42

Less: Amounts Representing Interest

9.408.33

Present Value ofFuture Minimum Commitments

$ 36.437.09

NOTE 5: CHANGES IN GENERAL FIXED ASSETS

In accordance with the statutory definition of moveable personal property as defined in Official Code of Georgia Annotated Section 50-16-161, only those items with an acquisition cost of$I,OOO.OO or greater are reflected in the General Fixed Assets Account Group.

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

Balance July 1, 1995

$ 800,441.17

Additions Deductions

184,255.86 24,387.00

Balance June 30, 1996

$ 960.310.03

- 18 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1996

EXHIBIT liE"

NOTE 6: GENERAL LONG-TERM DEBT

CHANGES IN GENERAL LONG-TERM DEBT A summary of changes in General Long-Tenn Debt for the year ended June 30, 1996, follows:

Compensated Absences

Installment Purchase
Commitments

Total

Balance July 1, 1995

$ 734,914.24 $ 22,631.98 $ 757,546.22

Additions Annual Leave Earned and Utilized (Net) Salaries Salary Related Fringe Benefits Current Year PurchaseslLeases
Deductions

47,079.72 3,601.60

29,228.00 15.422.89

47,079.72 3,601.60
29,228.00 15.422.89

Balance June 30, 1996

$ 785.595.56 $ 36.43709 $ 822.032.65

NOTE 7: RISK MANAGEMENT

Public Entity Risk Pool

The State Personnel Board, Merit System ofp'ersonnel Administration administers for the State of Georgia a program ofhealth benefits for the employees ofunits of government of the State of Georgia, units of county government and local education agencies located within the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units of government participating in the plan, and appropriations made by the General Assembly of Georgia. The State Personnel Board, Merit System ofPersonnel 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.

Other Risk Management

The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government 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

- 19-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "E"

NOTE 7: RISK MANAGEMENT
Other Risk Management
law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The State Personnel Board, Merit System of Personnel Administration 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 8: DEFERRED COMPENSATION PLAN
The State ofGeorgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees ofthe State of Georgia, county health departments and certain employee's of Community Service Boards, 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 of the State of Georgia subject only to the claims of the State's general creditors. Participant's rights under the plan are equal to those ofa general creditor ofthe State of Georgia in an amount equal to the fair market value of the deferred account ofeach participant. In the equity funds, the market value may be either greater or less than the participant's contributions. Market values, which approximate cost, of investments as ofJune 30, 1996, by plan type are listed below:

- 20-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "E"

NOTE 8: DEFERRED COMPENSATION PLAN
Guaranteed Investment Contracts Allstate Life Insurance Company Continental Assurance Company John Hancock Mutual Life Insurance Company Hartford Insurance Metropolitan Life Insurance Company Nationwide Life Insurance Company Principal Mutual Life Insurance Company Sunlife Insurance Travelers Insurance Company
Synthetic Guaranteed Investment Contract Sanford C. Bernstein and Company, Incorporated
Guaranteed Principal Option - Prime The Vanguard Group of Investment Companies
Index Trust 500 Portfolio The Vanguard Group ofInvestment Companies
Magellan Fund Fidelity Institutional Retirement Services Company
Over-The-Counter Portfolio Fidelity Institutional Retirement Services Company
Prime Portfolio The Vanguard Group ofInvestment Company
United International Growth Fund Waddell and Reed Asset Management Company
Wellesley Income Fund The Vanguard Group ofInvestment Companies
Windsor II The Vanguard Group of Investment Companies
Employees' Deferred Compensation Program Participants Accounts Administrative
Community Service Boards Georgia Employees' Qualified Trust Deferred Compensation Plan Participant Accounts Administrative

$ 6,538,128.91 4,793,367.15 11,009,233.55
20,295,722.16 6,476,751.59 6,076,407.07 5,987,588.90
20,732,786.40 2.390.084.47

$ 84,300,070.20 36,319,838.09 1,023,550.52 23,627,304.04 48,888,792.09 15,719,368.74 3,228,236.84 4,384,261.08 20,231,228.41 16.279.321.62

$ 254,001.971 63

$ 246,844,334.88 4.557.749.31 $ 251,402,084.19

$ 2,572,821.91 27.065.53

2.599.887.44

$ 254,001.971.63

- 21 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1996

EXHIBIT"E"

NOTE 8: DEFERRED COMPENSATION PLAN
In August, 1996, The Small Business Job Protection Act of 1996 was enacted by the Federal government. Under the provisions of this legislation, all amounts of compensation deferred under a Section 457 plan maintained by State and local employers, and all the plan's assets and income, are to be held in trust for the exclusive benefit ofthe participants and their beneficiaries. The State of Georgia is not required to establish such a trust before January 1, 1999.
NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The State Personnel Board, Merit System of Personnel Administration 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. The Merit System's payroll for the year ended June 30, 1996, for employees covered by ERS was $6,041,596.60. The Merit System's total payroll for all employees was $6,113,990.52.
Benefits The benefit structure of ERS 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 normal 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 formula which considers the monthly average of the members 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 normal retirement pension is payable monthly for life~ however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Funding Status and Progress Funding status and progress information is presented in the ERS June 30, 1996, financial report which may be obtained through ERS.

- 22-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "E"

NOTE 9: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Contributions Required and Contributions Made As established by State statute, all full-time employees ofthe State of Georgia and its political subdivisions, who are not members ofother state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute.
Under the old plan, member contributions consist of employee contributions paid by the employee of 1.25% ofcompensation and 4.75% of compensation paid by the Merit System on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% ofcompensation paid by employee. The Merit System also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 1996, the ERS employer contribution rate for the Merit System amounted to 14.81% of covered payroll and included the 4.75% contributed on behalf ofthe employee under the old plan referred to above. The employer contributions are projected to liquidate the unfunded actuarial liability within 20 years based upon the actuarial valuation of June 30, 1995. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Actuarial assumptions used by the ERS to compute aetuarially determined contribution requirements are the same as those used to compute the pension benefit obligation.
Total contributions to the plan made during fiscal year 1996 amounted to $970,154.05, of which $894,632.45 was made by the Merit Syst~m and $75,521.60 was made by employees. These contributions met the requirements of the plan.
Trend Information Historical trend information is presented in the ERS June 30, 1996, financial report which may be obtained through ERS. This information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The State Personnel Board, Merit System of Personnel Administration participates in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly for the purpose of providing 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 ofTrustees. The Merit System's payroll for the year ended June 30, 1996, for employees covered by GDCP was $59,055.99. The Merit System's total payroll for all employees was $6,113,990.52.

- 23 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 9: RETIREMENT PLANS
GEORG~DE~DCON~UTIONPLAN
Benefits A member may retire and elect to receive periodic payments after attainment ofage 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board. If a member has less than $ "3;500 credit to hislher account, the Board has the option ofrequiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary.
Contributions and Vesting Member contributions are seven and one-half percent (7:5%) of gross salary. There are no employer contributions. Earnings are credited to each member's account in a manner established by the Board. Upon termination ofemployment, the amount ofthe member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 1996 amounted to $4,429.25 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 10: LEAVB 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 ofcontinuous State service with a maximum accumulation offorty five days. Employees are paid for unused accumulated annual leave upon retirement or tenitination of employment. 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 11: CONTINGENCIES
Litigation, claims and assessments filed against the State Personnel Board, Merit System of Personnel Administration, if any, are generally considered to be actions against the State of Georgia. Accordingly," significant litigation, claims 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, 1996.

- 24-

STATE PERSONNEL BOARD 1vfERIT SYSTEM OF PERSONNEL ADMINISTRATION
NOTES TO THE FINANCIAL STATE1vfENTS JUNE 30, 1996

EXHIBIT "E"

NOTE 12: BONDING INFORMATION
The Commissioner and all employees ofthe State Personnel Board, Merit System ofPersonnel Administration are bonded under a Public Employees Blanket Bond written by Employers Insurance ofWausau, their Bond No. 1450-02-110723, on which the premium was paid to October 1, 1996. Under this agreement the Public Employee Dishonesty Coverage insures the Board to a maximum of $1,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees. The Faithful Performance ofDuty Coverage insures the Board to a maximum of $1,000,000.00 against loss sustained from failure of its employees to perform faithfully their duties or to account properly for all monies and property received by virtue of their position or employment.
All employees ofthe State Personnel Board, Merit System ofPersonnel Administration are also bonded under Commercial Crime Policies written by the United States Fire Insurance Company, their Policy Nos. 626 0122926 and 626 012294 4, on which premiums were paid to October 1, 1996. Under these additional public employee dishonesty coverages, the policies insure the Board to a maximum of $9,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees and from failure ofits employees to perform faithfully.

- 25-

Blo-V\\L
fO 'J.{P

SUPPLEMENTARY INFORMAnON - 27-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINING BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 1996

EXHIBIT "P'

ASSETS Cash and Cash Equivalents Accounts Receivable
Claim Refunds Due Less: Allowance for Uncollectible Claim Refunds Due
Other
Interest Receivable
Total Assets
LIABILITIES AND FUND EQUITY Liabilities
Accounts Payable Contracts Payable Payroll Withholdings Incurred But Not Reported Claims
Health Insurance Total Liabilities
Fund Equity Fund Balances Reserved Health Insurance Claims GSAMS Grant Unreserved Designated Surplus Total Fund Equity
Total Liabilities and Fund Equity
See notes to the financial statements.

MERIT SYSTEM ADMINISTRATION

HEALTH INSURANCE PROGRAM

TOTAL

$

1,924,098,89 $ 267,354,013.79 $ 269,278,112,68

$

3,297,701,83 $

3,297,701,83

-1,896,377.73

-1,896,377.73

$

27,291.16

14,144,657.52

14,171,948.68

$

27,291.16 $ 15,545,981.62 $ 15,573,272.78

$

3,415,085.64 $

3,415,085.64

$

1,951,390.05 $ 286,315,081.05 $ 288,266,471.10

$

505,698.71 $ 22,633,479.29 $ 23,139,178.00

1,437,780.92

292,828.66

1,730,609.58

357.50

357.50

137,489,000.00

137,489,000.00

$

1,943,837.13 $ 160,415,307.95 $ 162,359,145.08

$ 125,899,773.10 $ 125,899,773.10

$

7,552.92

7,552.92

0.00

0.00

0.00

$

7,552.92 $ 125,899,773.10 $ 125,907,326.02

$

1,951,390.05 $ 286,315,081.05 $ 288,266,471.10

- 28-

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINING STATEMENT OF CHANGES IN FUND BALANCES (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 1996

EXHIBIT"G"

See notes to the financial statements.

- 29-

STATE PERSONNEL BOARP MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENPITURES
BUpGETFUNp YEAR ENPEP JUNE 30 1996

EXHIBIT-H"

FUNpS AVAILABLE
REVENUES
OTHER REVENUES RETAINED Contributions Employees State Agencies, Authorities and County Governments Local Education Agencies Individuals Employers State Agencies, Authorities and County Govemments Local Education Agencies
Administrative Fees Charitable Contributions Deferred Compensation Employees' Flexible Benefit Program Health Insurance Program. Agency Assessments for Operations (Net)
Interest Earned Training Fees
Total Revenues
CARRYOVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance Health Insurance Claims GSAMSGrant

MERIT SYSTEM ADMINISTRATION

HEALTH INSURANCE PROGRAM

TOTAL

$

81,219,927.28 $

81,219,927.28

159,502,729.37

159,502,729.37

5,583,150.87

5,583,150.87

260,201,476.97 434,327,827.09

260,201,476.97 434,327,827.09

$ 940,835,111.58 $ 940,835,111.58

$

87,338.45

269,098.29

36,944.99

12,103,526.09

10,000.00

32,531.00 16,198,959.51

87,338.45 269,098.29
36,944.99 32,531.00 12,103,526.09 16,198,959.51 10,000.00

$

12,506,907.82 $ 957,066,602.09 $ 969,573,509.91

$ 106,958,919.87 $ 106,958,919.87

$

1,425.00

1,425.00

$

1,425.00 $ 106,958,919.87 $ 106,960,344.87

Total Funds Available

$ 12,508,332.82 $ 1,064,025,521.96 $ 1,076.533,854.78

See notes to the financial statements.

-30

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUpGETFUND YEAR ENDED JUNE 30. 1996

EXHIBIT-H"

EXPENDITURES
PERSONAL SERVICES
Salaries and Wages Employer's Contributions for:
F.I.C.A. Retirement Health Insurance Personal Liability Insurance Unemployment Compensation Insurance Workers' Compensation Insurance Assessments by Merit System
REGULAR OPERATING EXPENSES
Supplies and Materials Repairs and Maintenance Rents (other than Real Estate) Insurance and Bonding other Operating Expenses Duplicating and Rapid Copy Publications and Printing EqUipment Purchases
TRAVEL
EQUIPMENT
EqUipment Purchases Lease/Purchase of Equipment
COMPUTER CHARGES
Software Equipment
EqUipment Purchases Per Diem, Fees and Contracts
Contracts Computer Billings, DOAS
see notes to the financial statements.

MERIT SYSTEM ADMINISTRATION

HEALTH INSURANCE PROGRAM

TOTAL

$

4,590,971 .47 $

1,523,019.05 $

6,113,990.52

330,427.23 707,552.01 569,830.54 27,318.00
5,556.00 26,444.00

108,103.05 232,392.41 187,254.n
6,280.00 1,330.00 6,333.00 6,917.96

438,530.28 939,944.42 757,085.31 33,598.00
6,886.00 32,m.00
6,917.96

$

6.258,099.25 $

2,071,630.24 $

8,329,729.49

$

371,507.33 $

46.848.61

10,869.46

1,8n.00

84,381.43

79,948.73

466,717.15

46.988.96

$

1,109,138.67 $

$

83.559.62 $

158,609.27 $ 2,331.74 260.00
15,864.24 5,818.98 n2,230.32 2.303.92
957,418.47 $
7,564.91 $

530,116.60 49,180.35 11,129.46 1,8n.00 100,245.67 85,767.71
1,238,947.47 49.292.88
2.066,557.14
91,124.53

$

1,557.00 $

13,853.59

$

15,410.59 $

0.00 $ 0.00 $

1,557.00 13,853.59
15,410.59

$

37,304.79 $

125,447.01

1,113,356.00 1,469,697.73

$

2,745,805.53 $

222.18 $ 31,631.24 366,058.00 378,199.76 n6,'1'.18 $

37,526.97 157,078.25 1,479,414.00 1,847,897.49 3,521,916.71

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL APMINISTRATION COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUpGETFUNp YEAR ENPEP JUNE 30, 1996

EXHIBIT-W

EXP,ENPITURES REAL ESTATE RENTALS TELECOMMUNICATIONS PER PIEM, FEES ANP CONTRACTS
Per Diem and Fees Contracts
QI.tfEB.
HEALTH INSURANCE PAYMENTS Other COsts Other Expenditures Total Expenditures
Excess of Funds Available over Expenditures

MERIT SYSTEM ADMINISTRATION

HEALTH INSURANCE PROGRAM

TOTAL

$

689,868.34 $

224,400.00 $

914,268.34

$

170,503,44 $

105,958.23 $

276,461,67

$

1,164,556.20 $

37,087.87 $

1,201,644.07

263,838.26

151,712,201.33

151,976,039,59

$

1,428,394,46 $ 151,749,289,20 $ 153,177,683,66

$ 781,884,314,92 $ 781,884,314,92

$ 12,500,779,90 $ 937,776,687.15 $ 950,277,467.05

7,552.92

126,248,834,81

126,256,387.73

$ 12,508,332,82 $ 1,064,025,521,96 $ 1,076,533,854.78

See notes to the financial statements.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES . FIDUCIARY FUND TYPE - AGENCY FUNDS
YEAR ENDED JUNE 30. 1996

EXHIBIT "I"

FUND

ASSETSI LIABILITIES JULY 1,1995

ADDITIONS

DELETIONS

ASSETSI LIABILITIES JUNE 30,1996

Employees' Deferred Compensation Program $ 210,608,913.86 $ 78,700,538.05 $ 36,190,840.47 $ 253,118,611.44

Cash Bond for Legal Costs

200.00

200.00

Charitable Conbibutions Fund

501,276.73

2,017,306.81

1,925,197.32

593,386.22

County Health Insurance Program

216,966.49

2,093,567.60

2,105,437.53

205,096.56

Employees' Flexible Benefit Program

7,726,022.94

41,596,083.50

42,542,402.76

6,779,703.68

Savings Bond Encouragement Fund

50.00

50.00

Community Service Boards Georgia Employees Qualified Trust Deferred Compensation Plan

537,434.07

4,087,895.82

2,067,507.96

2,557,821.93

$ 219,590,864.09 $ 128,495,391.78 $ 84,831,386.04 $ 263,254,869.83

See notes to the financial statements.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30.1998

SCHEDULE -1-

FUNDS AVAILABLE REVENUES
Other Revenues Retained

ORIGINAL

AMENDED

BUDGET

APPROPRIATION APPROPRIATION ADJUSTMENTS

TOTAL

$ 1,032,668,020.00 $

92,624.00 $

437,647.00 $ 1,033,198,291.00

EXPENDITURES
Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Health Insurance Payments

$

8,564,000.00 $

1,885,130.00

88,512.00

14,161.00

3,275,673.00

921,758.00

419,923.00

159,320,065.00

858,178,798.00

72,124.00 10,300.00 $
3,000.00
7,200.00

$ 175,143.00
1,507.00 247,013.00
13,984.00

8,636,124.00 2,070,573.00
91,512.00 15,668.00 3,522,686.00 921,758.00 427,123.00 159,334,049.00 858,178,798.00

$ 1,032,668,020.00 $

92,624.00 $

437,647.00 $ 1,033,198,291.00

See notes to the financial statements.

-34 -

STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
CASH AND CASH EQUIVALENTS JUNE 30, 1996

SCHEDULE "2"

NONINTEREST BEARING ACCOUNTS
NationsBank of Georgia, N. A" Atlanta, Georgia
Wachovia Bank of Georgia, Atlanta, Georgia

$ 1,924,348.89 6,193,062.19 $ 8,117,411.08

INTEREST BEARING ACCOUNTS
NationsBank of Georgia, N. A" Atlanta, Georgia
Wachovia Bank of Georgia, Atlanta, Georgia
Funds on Deposit with Office of Treasury and Fiscal Services State Investment Pool

$

593,386.22

6,750,652.64

261,292,000.96 268,636,039.82

OTHER
Deferred Compensation Plan Funds on Deposit with Fidelity Institutional Retirement Services Company, Dallas, Texas
Funds on Deposit with The Vanguard Group of Investment Companies, Wayne, Pennsylvania
Funds on Deposit with The United Group of Mutual Funds, Shawnee Mission, Kansas

$

329,430.12

836,007.27

337,476.06

1,502,913.45

$ 278,256,364.35

See notes to the financial statements.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
SCHEDULE OF OTHER OPERATING EXPENSES YEAR ENDED JUNE 30. 1996
REGULAR OPERATING EXPENSES
Advertising Freight, Express, and Storage Marta Tokens Registration Fees Service Awards Subscriptions and Dues

SCHEDULE "3"

$

4,392.26

33,966.57

1,170.00

33,652.54

7,328.15

19,736.15

$ 100,245.67

See notes to the financial statements.

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STATE PERSONNEL BOARD MERIT SYSTEM OF PERSONNEL ADMINISTRATION
RECONCILIATION OF TRAVEL YEAR ENDED JUNE 30, 1996
Total per Annual Supplement Accruals July 1,1995 June 30, 1996
To~1 per Report

SCHEDULE "4"

$

86,692.64

-233.81 4,665.70

$ ====9=1,=:12=:4=.5:=3

See notes to the financial statements.

- 37-