Review report, North Georgia Mountains Authority, a component unit of the state of Georgia, year ended June 30, 1995

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

REVIEW REPORT NORTH GEORGIA MOUNTAINS AUTHORITY
A COMPONENT UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 1995

NORTH GEORGIA MOUNTAINS AUTHORITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPES

5

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

6

D STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS

DEBT SERVICE FUND

8

E NOTES TO THE FINANCIAL STATEMENTS

9

SUPPLEMENTARY INFORMATION

F STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

FIDUCIARY FUND TYPE - AGENCY FUND

20

SCHEDULES

I CASH AND CASH EQUIVALENTS

21

2 DEBT SERVICE REQUIREMENTS TO MATURITY

22

3 RECONCILIATION OF PER DIEM AND FEES

23

4 SUMMARY OF PER DIEM AND FEES

24

SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 18, 1996

Honorable Zell Miller, Governor Members of the General Assembly of Georgia Members ofthe North Georgia Mountains Authority
and Honorable Lonice C. Barrett, Commissioner Department ofNatural Resources
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 North Georgia Mountains Authority as ofand for the year ended June 30, 1995, 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 financial statements is the representation ofthe management of the North Georgia Mountains 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, with the exception ofthe matter described in the following paragraph, we are not aware ofany 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.
As more fully discussed in Section II, Findings and Improper or Questioned Costs, material discrepancies were noted in the equipment inventory records ofthe North Georgia Mountains Authority. Equipment inventory comprises the General Fixed Assets Account Group. We were unable to determine the effects these discrepancies may have on the financial statements.
95ARL-5

Our review was made for the purpose of expressing limited assurance that there were no material modifications that should be made to the financial 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 I through 4) is presented only for supplementary analysis purposes. Such information has been subjected to the inquiries and analytical procedures applied in the review of the financial statements and we are not aware of any material modifications that should be made thereto.
Respectfully submitted,
~~
Claude L. Vickers State Auditor
CLV:cm 95ARL-5

FINANCIAL STATEMENTS - 1-

NORTH GEORGIA MOUNTAINS AUTHORITY COMBINED BALANCE SHEET (STATUTORY BASIS)
ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 1995

ASSETS
Cash and Cash Equivalents (See Schedule)
Accounts Receivable Other
Fixed Assets Equipment
Amount Available in Debt Service Fund Amount to be Provided for Retirement of
General Long-Term Debt
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities
Accounts Payable Contracts Payable Funds Held for Others Bonds Payable
Total Liabilities
Fund Equity Investment in General Fixed Assets Fund Balances Reserved Debt Service Fund Special Project Unreserved Unclesignated
Total Fund Equity
Total Liabilities and Fund Equity

GOVERNMENTAL FUND TYPES

DEBT

BUDGET

SERVICE

FIDUCIARY FUND TYPE
AGENCY

$ 1,877,255.70 $ 334,782.42

1,322.00 $

17.96

$ 2,212,038.12 $

1,322.00 $

17.96

$ 222,851.17 1,014,354.00
$ 1,237,205.17

$

17.96

$

17.96

$

$

1,207.66

973,625.29

$ 974,832.95 $

1,322.00 1,322.00

$ 2,212,038.12 $

1,322.00 $

17.96

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-

EXHIBIT"A"

ACCOUNT GROUPS

GENERAL

GENERAL

FIXED

LONG-TERM

ASSETS

DEBT

TOTALS (Memorandum Only) JUNE 30, 1995 JUNE 30, 1994

$ 1,878,595.66 $ 2,827,562.07

334,782.42

0.00

$

no,471.46

$

1,322.00

no,471.46 1,322.00

0.00 1,311.63

268,678.00

268,678.00

308,688.37

$

no471.46 s

270,000.00 $ 3,253,849.54 $ 3,137,562.07

$

222,851.17 $

0.00

1,014,354.00

1,264,000.00

17.96

17.96

$

270,000.00

270,000.00

310,000.00

$

270,000.00 $ 1,507,223.13 $ 1,574,017.96

$

no,471.46

$

no,471.46 $

0.00

$

no,471.46

1,322.00 1,207.66

1,311.63 1,207.66

973,625.29

1,561,024.82

$ 1,746,626.41 $ 1,563,544.11

$

no411.46 $

270,000.00 $ 3,253,849.54 $ 3, 1371562.07

- 3-

NORTH GEORGIA MOUNTAINS AUTHORITY COMBINED STATEMENT OF CHANGES IN FUND BALANCES (STATUTORY BASIS)
GOVERNMENTAL FUND TYPES
YEAR ENDED JUNE 30, 1995

EXHIBITB

FUND BALANCES - JULY 1
Reserved Unreserved
Undesignated
ADDITIONS
Cash Receipts for the Year ExhibitD
Excess of Funds Available over Expenditures
- Exhibit c
Prior Year's Checks Voided
DEDUCTIONS
Cash Disbursements for the Year ExhibitD
Fund Balance Carried Over From Prior Year as Funds Available Reserved Unreserved
FUND BALANCES - JUNE 30 (To Exhibit A)

BUDGET

DEBT SERVICE

TOTALS {Memorandum Onl:r:2
YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994

$

1,207.66 $

1,561,024.82

$ 1,562,232.48 $

1,311.63 $

2,519.29 $

1,561,024.82

1,311.63 $ 1,563,544.11 $

4,184.30 67,657.43 71,841.73

$
$ 974,640.45 192.50
$ 974,832.95 $

53,685.37 $ 53,685.37 $

53,685.37 $
974,640.45 192.50
1,028,518.32 $

55,125.00
1,562,232.48 0.00
1,617,357.48

$

53,675.00 $

53,675.00 $

55,327.76

$

1,207.66

1,561,024.82

$ 1,562,232.48 $

1,207.66 1,561,024.82
53,675.00 $ 1,615,907.48 $

2,669.91 67,657.43
125,655.10

$ 9741832.95 $

11322.00 $

9761154.95 $ 1!5631544.11

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-

NORTH GEORGIA MOUNTAINS AUTHORITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30, 1995

EXHIBIT"C"

FUNDS AVAILABLE
REVENUES
OTHER REVENUES RETAINED Gross Revenue from Unicoi State Park (Georgia Recreation Experiment Station) Contracts - Georgia Department of Natural Resources G.O. Bond Proceeds For Mountain Park Project Central Reservations Center Interest Earned Lease Rental Georgia Department of Natural Resources Liquor Sales Rents Services Charges on Returned Checks
TRANSFER To Debt Service Fund
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Fund Balance Reserved Unreserved
Total Carry-Over From Prior Year
Total Funds Available

TOTALS
YEAR ENDED JONE 30, 1995 JONE 30, 1994

$ 3,452,187.65 $ 3,286,613.87

10,785,519.61 182,532.00 176,352.99

9,093,619.13 0.00
68,040.59

53,675.00 579.63 600.00 45.00

55,125.00 0.00 0.00 0.00

$ 14,651,491.88 $ 12,503,398.59

-53,675.00

-55,125.00

$ 14,597,816.88 $ 12,448,273.59

$

1,207.66 $

1,561,024.82

2,669.91 67,657.43

- - - - - - $ 1,562,232.48 $

70,327.34

$ 16,160,049.36 $ 12,518,600.93

EXPENDITURES
RESaULAR OP~RATING EXPENSES
Supplies and Materials Repairs and Maintenance Insurance and Bonding Other Operating Expenses
Legal Advertising State Alcohol License Application Fee
REAL ESTATE RENTALS

$

203.32 $

625.84

435.00

32.00 600.00

$

1,896.16 $

$ 1,415,630.00 $

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-

0.00 0.00 0.00
0.00 0.00
0.00
492,127.00

NORTH GEORGIA MOUNTAINS AUTHORITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND
YEAR ENDED JUNE 30, 1995

EXHIBIT"C"

EXPENDITURES
PER DIEM, FEES AND CONTRACTS
Per Diem and Fees Contracts
CAPITAL OUTLAY
Other Costs Supplies and Materials Repairs and Maintenance Other Operating Expenses Blue Prints Publication and Printing
Computer Charges Software
Equipment Equipment Purchases
Per Diem, Fees and Contracts Per Diem and Fees Contracts
OTHER
MOUNTAIN PARK DEVELOPMENT Other Costs Supplies and Materials Repairs and Maintenance Rents Motor Vehicle Purchases Computer Charges Software Equipment Equipment Purchases Per Diem, Fees and Contracts Contracts
Total Other
Total Expenditures
Excess of Funds Available over Expenditures

TOTALS
YEAR EFJOEO JO~E 30, ~gg5 JOI\JE 30, l g94

$

1,114.16 $

1,120,607.00

$ 1,121,721.16$

0.00 1,314,000.00
1,314,000.00

$

3,738.21 $

0.00

53,677.84

0.00

3.50

0.00

483.91

0.00

129,182.49

0.00

234,132.83

0.00

50,544.28
438,750.00

0.00
9,150,241.45

$ 910,513.06 $ 9,150,241.45

$ 281,611.86 $

0.00

44,987.50

0.00

1,957.29

0.00

24,774.50

0.00

7,450.00

0.00

2,028,811.11

0.00

9,346,056.27

0.00

$ 11,735,648.53 $

0.00

$ 15,185,408.91 $ 10,956,368.45

974,640.45

1 ,562,232.48

$ 16,160,049.36 $ 12,518,600.93
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.
-7-

NORTH GEORGIA MOUNTAINS AUTHORITY STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
DEBT SERVICE FUND YEAR ENDED JUNE 30, 1995

EXHIBIT"D"

CASH RECEIPTS
REVENUES
OTHER REVENUES RETAINED Interest Received
TRANSFER From Budget Fund
Total Cash Receipts CASH AND CASH EQUIVALENTS - JULY 1, 1994

$

10.37

53,675.00 $ 53,685.37
1,311.63

$ 54,997.00

EXPENSES
Interest on Bonds Paying Agent's Fees

DISBURSEMENTS

DEBT RETIREMENT Bonds Redeemed Nos. 109-116 Total Disbursements
CASH AND CASH EQUIVALENTS - JUNE 30, 1995

$ 13,175.00 500.00 $

13,675.00

40,000.00 $ 53,675.00
1,322.00

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. -8-

$ 54,997.00

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The North Georgia Mountains Authority is an instrumentality ofthe State of Georgia and a public corporation and consists of nine (9) members. These members are the same individuals that comprise the Board ofNatural Resources. The Authority is assigned to the Department ofNatural Resources for administrative purposes only. The North Georgia Mountains Authority is considered a component unit ofthe State of Georgia and is included within the State of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational and financial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 ofthe Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The North Georgia Mountains 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 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 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 TYPES
BUDGET FUND-The fund used to account for activities and functions of the North Georgia Mountains 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 financed 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 financed or recovered primarily through user charges or that periodic measurement of revenues earned and expenses incurred are appropriate for capital maintenance, public policy, accountability and other purposes.
DEBT SERVICE FUND - The fund used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. The presentation differs from generally accepted accounting principles in that accumulation of resources and payment of general longterm debt principal, interest and related costs should be recorded as part of the Enterprise Fund as discussed above.
FIDUCIARY FUND TYPE
AGENCY FUND - The fund used to account for assets held for use by other funds, governments, or individuals.
-9-

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXIIlBIT "E"

NOTE I: 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. Accounting practices prescribed or permitted by statutes and regulations ofthe State of Georgia do not require the value of land deeded to the Authority by the State of Georgia and the cost of buildings thereon to be recorded in the financial statements.
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 of proprietary fund types should be recorded as assets of such funds, rather than in the General Fixed Assets Account Group. In addition, all fixed assets should be recorded and depreciation of such fixed assets should be recorded as an expense of the proprietary fund type in order to more effectively determine the total cost of providing goods and services.
The cost ofnormal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life ofthe 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, compensated absences and bond debt payable, 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 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 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
- 10-

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXIIlBIT "E"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING MEASUREMENT FOCUS
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 generally accepted accounting principles, utilizes the current financial resources measurement focus.
GOVERNMENTAL FUND TYPES 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 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 - Enterprise Fund in accordance with generally accepted accounting principles, should be maintained on the accrual basis of accounting.
Contractual obligations for services which have not been performed and for goods which have not been delivered 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 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 ofthe Budget Fund in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations ofthe 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.
DEBT SERVICE FUND The Debt Service Fund is maintained on the Cash Receipts and Disbursements basis of accounting as prescribed or permitted by statutes and regulations ofthe State ofGeorgia. This basis of accounting is defined as that method of accounting in which certain revenue and the related assets are recognized when received rather than when earned, and certain expenses are recognized when paid rather than when the obligation is incurred. To comply with generally accepted accounting principles, debt service activity should be recorded as a part of an enterprise fund on the accrual basis of accounting.
- 11 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING FIDUCIARY FUND TYPE AGENCYFUND
Agency Funds are rustodial 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 A budget for the :financial operations of the North Georgia Mountains Authority was not prepared by the Authority, therefore, the :financial operations represent nonbudgeted financial activities.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include demand deposits with a bank, cash management pools that have the general characteristics of demand deposit accounts in that the Authority 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 the Department ofNatural Resources.
INVESTMENTS The North Georgia Mountains Authority participates in an investment pool managed by the State of Georgia's Office ofTreaswy and Fiscal Services (OTFS) referred to as the "Georgia Fund 1". The Authority does not have any risk exposure from investments in Georgia Fund 1 as the investment policy of OTFS does not provide for investments in derivatives or similar investments through the Georgia Fund 1.
ACCOUNTS RECEIVABLE The North Georgia Mountains Authority has entered into an agreement with Stormont Trice Corporation (Stormont) to operate the Brasstown Valley Resort (Mountain Park Project). Pursuant to Article 5 ofthis agreement, the Authority provided $330,000.00 to fund an initial working capital account for the resort (See Note 7). These funds are reflected as an accounts receivable on Exhibit "A" ofthis report.
INVENTORIES No inventories ofsupplies are reported in the current 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:
DEBT SERVICE FUND Funds to be used for retirement ofgeneral long-term debt principal, interest and related costs.

- 12 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXIIlBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESERVED FUND BALANCE
SPECIAL PROJECT Funds reserved for this project represent the accumulation of resources for the Tallulah Gorge Project.
MEMORANDUM ONLY -TOTAL COLUMNS Total columns on the Combined Statements (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, results of operations or changes in financial 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. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation.
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 ofthe changes in the Authority's financial position and operations. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the Authority's financial position and operations or would cause the statements to be unduly complex and difficult to understand.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of the State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one 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 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.

- 13 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXJilBIT "E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (5) Bonds. bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

(6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

As authorized in 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. The bank balances as of June 30, 1995, 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 financial institution or by its trust department or agent, but not in the Authority's name, and amounts uncollateralized.

Cash Deposits

Carrying Amount

Bank Balances

S 132200 S 132200 S

Risk Categories

2

3

132200 S

0 00 $.=====0=00=

Certain deposits ofthe North Georgia Mountains Authority reflected on Schedule "2" of this report are a part of the demand deposits maintained by the Department of Natural Resources. The amounts of the bank balances for these deposits are classified by custodial credit risk categories in the review report of the Department ofNatural Resources.

- 14 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXIIlBIT "E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS Investments are stated at cost. The carrying amount of the investment balance as of June 30, 1995, shown below is maintained in an investment pool by the Office of Treasury and Fiscal Services and is not subject to risk categorization.

Type of Investment State Investment Pool NOTE 3: CHANGES IN GENERAL FIXED ASSETS

Carrying Amount
$3,463.152 14

Market Value
$3,463,152.14

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

Balance July 1, 1994 Additions Balance June 30, 1995 NOTE 4: GENERAL LONG-TERM DEBT

$

0.00

770,471.46

$ 770,471.46

CHANGES IN GENERAL LONG-TERM DEBT During the year ended June 30, 1995, the following changes occurred in the bonds payable liability reported in the General Long-Term Debt Account Group:

Balance July 1, 1994

$ 310,000.00

Less: Bonds Redeemed

40,000.00

Balance June 30, 1995

$ 270,000.00

The total general long-term debt outstanding at June 30, 1995, excluding interest, was $270,000.00, and a schedule of this obligation by fiscal year is reflected on Schedule "2" ofthis report.

NOTE 5: TRANSACTIONS WITH DEPARTMENT OF NATURAL RESOURCES

RELATED PARTIES The Department of Natural Resources and the North Georgia Mountains Authority are considered to be related parties due to certain common management personnel. The Board ofNatural Resources also serves as the Board of the North Georgia Mountains Authority.

- 15 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXHIBIT "E"

NOTE 5: TRANSACTIONS WITH DEPARTMENT OF NATURAL RESOURCES

LEASED FACILITIES
GEORGIA RECREATION EXPERIMENT STATION Under terms ofan agreement with the Department ofNatural Resources {DNR), the North Georgia Mountains Authority (NGMA) leased to DNR all facilities constructed with proceeds ofNGMA Revenue Bonds - Series 1971. The lease term was defined as the period of time until the related bonds have been paid or provision is duly made to retire the bonds. Terms of the lease provide for NGMA, at DNR's request, to execute and deliver to the State ofGeorgia a quitclaim deed for all leased properties after DNR has paid all sums due and owing under the terms ofthe lease. Accounting practices prescribed or permitted by statutes and regulations of the State of Georgia allows the lease to be accounted for as an operating lease by NGMA. This method ofaccounting for the lease is not in accordance with generally accepted accounting principles, which provide for the accounting ofa lease ofthis nature as a direct financing lease for NGMA. Revenue derived from this lease during fiscal year 1995 amounted to $53,675.00. Future minimum rentals, including bond interest, on this lease are as follows:

Fiscal Year Ending June 30

1996 1997 1998 1999 2000 2001

$ 51,475.00 54,775.00 52,862.50 50,950.00 49,037.50 52,125.00

$ 311,225.00

MOUNTAIN PARK PROJECT The Department ofNatural Resources (DNR) has custody of approximately five hundred acres owned by the State of Georgia in Towns County, Georgia to develop a State park referred to as Mountain Park Project. Under terms of an agreement with DNR, the North Georgia Mountains Authority (NGMA) agreed to exclusively occupy, develop and use the Mountain Park Project. Proceeds from the sale of general obligation bonds ofthe State ofGeorgia have been made available to NGMA to design, construct and equip the Project. The agreement further provides that NGMA will lease the facilities from DNR and all improvements to the Project premises funded with State funds or proceeds of general obligation debt ofthe State shall remain the property of the State of Georgia. Terms of the lease, as revised, call for NGMA to pay to DNR an amount equal to the debt service required to be paid by the State in connection with general obligation bonds issued for this project. Additionally, in any fiscal year in which revenues available to NGMA are not sufficient for such purpose, the deficiency shall carry forward into the next year, and payments shall be made annually until debt service is fully recouped. The lease is accounted for as an operating lease by NGMA. Lease payments for fiscal year 1995 amounted to $1,415,630.00. Future minimum lease payments, including bond interest,
on this lease are as follows:

- 16 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXHIBIT "E"

NOTE 5: TRANSACTIONS WITH DEPARTMENT OF NATURAL RESOURCES

LEASED FACILITIES MOUNTAIN PARK PROJECT

Fiscal Year Ending June 30

1996 1997 1998 1999 2000 Thereafter

$ 1,422,256.45 1,424,501.09 1,426,635.03 1,429,219.00 1,432,064.26
21,181,336.13

$28,316,011.96

ADDffiONAL AGREEMENTS As part ofthe above lease agreement for the Mountain Park Project, NGMA was designated as recipient of all income and receipts of the Mountain Park Project and of the Georgia Recreation Experiment Station (Unicoi State Park) subject to DNR billing NGMA for the costs incurred by DNR to operate the Experiment Station. Commencing with fiscal year 1999 the agreement designates DNR as recipient of all income and receipts for the Georgia Recreation Experiment Station.

NOTE 6: RISK MANAGEMENT

The North Georgia Mountains Authority is exposed to risk of loss related to general liability and property and
casualty. The Authority has elected to self-insure in regards to the risk exposure. There were no claims made against the Authority in fiscal year 1995 and there were no claims brought forward from previous fiscal years.

NOTE 7: OTHER FINANCIAL NOTES

The North Georgia Mountains Authority (NGMA) has entered into a five (5) year agreement, subject to extension, with Stormont Trice Corporation (Stormont) to operate the Mountain Park Project, referred to as
Brasstown Valley Resort (Resort). Under terms ofthis agreement, Stormont is paid an operator's fee, which is adjusted each fiscal year, plus one (1) percent of annual gross revenues of the Resort not to exceed the
annual operator's fee. During the first and second years ofthe agreement, Stormont is to transfer three (3) percent of annual gross revenues into a "reserve" account. During the third, fourth and fifth years of the agreement, Stormont is to transfer five (5) percent of annual gross revenues into the reserve account. A greater amount may be transferred into the reserve account if approved by NGMA. Stormont may expend these "reserve" funds for purposes as outlined in the agreement. NGMA is responsible for funding any
shortfalls in the reserve account each fiscal year.

- 17 -

NORTH GEORGIA MOUNTAINS AUTHORITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1995

EXHIBIT "E"

NOTE 7: OTHER FINANCIAL NOTES
In addition, NGMA funded an initial amount for working capital and is required to provide additional funds as necessary for Stormont to maintain sufficient working capital to insure uninterrupted and efficient operation ofthe Resort.
Under terms ofthe agreement, Stormont is required to transfer to NGMA quarterly an amount equal to gross revenues less operating expenses and transfers to the reserve account.
NOTE 8: CONTINGENCIES
Litigation, claims and assessments filed against the Authority, if any, are generally considered to be actions against the State of Georgia. Pursuant to the Official Code of Georgia Annotated, the Department of Administrative Services maintains a program of purchased insurance and self-insurance which provides coverage for such litigation, claims and assessments. 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, 1995.
NOTE 9: BONDING INFORMATION
Accounting records and related information of the Authority are maintained by employees of the Department of Natural Resources. These employees are bonded under a Public Employees Blanket Bond written by Employers Insurance ofWausau, their Bond No. 1450-00-110723, on which the premium was paid to October 1, 1995. Under this agreement the Public Employee Dishonesty Coverage insures the Department to a maximum ofSl,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees. The Faithful Performance ofDuty Coverage insures the Department to a maximum ofSl,000,000.00 against loss sustained from failure ofits 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 of the Department of Natural Resources are also bonded under Commercial Crime Policies written by the United States Fire Insurance Company, their Policy Nos. 626 012292 6 and 626 012294 4, on which premiums were paid to October 1, 1995. Under these additional public employee dishonesty coverages, the policies insure the Department to a maximum of$9,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees.

- 18 -

SUPPLEMENTARY INFORMATION - 19-

FUND Children's Fund

NORTH GEORGIA MOUNTAINS AUTHORITY STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
FIDUCIARY FUND TYPE - AGENCY FUND YEAR ENDED JUNE 30. 1995

EXHIBIT"P'

ASSETS/ LIABILITIES JULY 1, 1994

ADDITIONS

DELETIONS

ASSETS/ LIABILITIES JUNE 30, 1995

$

17.96 $

0.00 $

------ 0.00 $

17.96

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

NORTH GEORGIA MOUNTAINS AUTHORITY CASH AND CASH EQUIVALENTS JUNE 30, 1995

SCHEDULE "1"

NONINTEREST BEARING ACCOUNTS
Funds on Deposit with Department of Natural Resources
INTEREST BEARING ACCOUNTS
Reliance Trust Company, Atlanta, Georgia
Trust Account No. 185001252
Funds on Deposit with Office of Treasury and Fiscal Services State Investment Pool

$ -1,585,878.48

$

1,322.00

3,463,152.14

3,464,474.14

$ 1,878,595.66

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

NORTH GEORGIA MOUNTAINS AUTHORITY DEBT SERVICE REQUIREMENTS TO MATURITY
YEAR ENDED JUNE 30, 1995

SCHEDULE "2''

PAYMENTS DUE IN FISCAL YEAR ENDING JUNE 30
1996 1997 1998 1999 2000 2001
OTHER INFORMATION Semi-Annual Interest Payment Dates Annual Debt Retirement Date

TOTAL DEBT SERVICE

NORTH GEORGIA MOUNTAINS AUTHORITY

REVENUE BONDS

1971 ISSUE

INTEREST

PRINCIPAL

$

51,475.00 $

54,775.00

52,862.50

50,950.00

49,037.50

52,125.00

11,475.00 $ 9,775.00 7,862.50 5,950.00 4,037.50 2,125.00

40,000.00 45,000.00 45,000.00 45,000.00 45,000.00 50,000.00

$ 311,225.00 $

41,22s.oo s _ _ _ _ _2_1.0...o==o=o..o...o...

May 1 -Nov 1 May1

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

NORTH GEORGIA MOUNTAINS AUTHORITY RECONCILIATION OF PER DIEM AND FEES
YEAR ENDED JUNE 30. 1995

SCHEDULE "3"

Totals per Annual Supplement
Adjustments
Beverly.Joe
Carter, Donald J. Clark, Sara S. Future Technologies
Consulting Group
Harvey Taub Engineering
HowelVPope Info 200, Incorporated Jackson, Clyde W. Olin Murphy Soil Survey, Incorporated Piedmont Geotechnical
Consultants, Incorporated Planned Interiors, Incorporated Williams, John R. Wheeler, Thomas W., Jr.

TYPE PAYMENT
Board Member Board Member Board Member
Consultant Consultant Architect Consultant Board Member Consultant
Consultant Consultant Board Member Board Member

FEE AMOUNT

EXPENSE AMOUNT

$

0.00 $

0.00 $

TOTAL 0.00

3,946.50 3,200.00 7,905.10 21,500.00
150.00
508.00 12,000.00

272.65 164.46 173.35
1,334.68 178.88
196.90 127.92

272.65 164.46 173.35
3,946.50 3,200.00 7,905.10 22,834.68
178.88 150.00
508.00 12,000.00
196.90 127.92

Totals per Report

$

49,209.60 $

2,448.84 $ _ .....5_1_,0_5_8_.44_

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

BUDGET FUND
Regular Capital Outlay

NORTH GEORGIA MOUNTAINS AUTHORITY SUMMARY OF PER DIEM AND FEES YEAR ENDED JUNE 30, 1995

SCHEDULE "4"

PER DIEM AND FEES

$

1,114.16

50,544.28

$===51==,6=5=8=.4=4

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

SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS

NORTH GEORGIA MOUNTAINS AUTHORITY SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS
YEAR ENDED JUNE 30, 1995
CURRENT YEAR
GENERAL FIXED ASSETS/ PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Financial Statements Audit Control Number 912-95-01
For the year under review, our examination included a review ofthe internal accounting controls utilized by the North Georgia Mountains Authority in maintaining their State Property System. This review consisted of testing the system for compliance with State equipment laws and regulations. Procedures were also completed to verify the accuracy ofthe total equipment inventory valuation contained in the inventory records, which comprises the General Fixed Assets Account Group. The following condition relating to inappropriate accounting practices was found to exist:
(1) Equipment additions were not adequately reconciled to the general ledger expenditure accounts.
In addition, a sample of equipment items was selected to test the accuracy of the Authority's fixed asset records. Of the 50 equipment items selected for physical inspection, the following deficiencies were noted:
(1) 10 items could not be located. (2) 8 items did not have decals attached. Items were identified by serial numbers or descriptions.
The Authority is required to maintain equipment inventories in accordance with provisions of the State Property System Manual. The discrepancies identified above were caused by the Authority's failure to follow guidelines for maintaining equipment inventories.
The Authority should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with provisions of the State Property System Manual.