Review report, Georgia Correctional Industries Administration, a component unit of the state of Georgia, year ended June 30, 1996

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REVIEW REPORT
GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION A COMPONENT UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1996

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRAnON - TABLE OF CONTENTS -

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

EXHIBITS

FINANCIAL STATEMENTS

A BALANCE SHEET

ALL FUND TYPES

2

B STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN

RETAINED EARNINGS

PROPRIETARY FUND TYPE - INTERNAL SERVICE FUND

3

C STATEMENT OF CASH FLOWS

PROPRIETARY FUND TYPE - INTERNAL SERVICE FUND

4

D NOTES TO THE FINANCIAL STATEMENTS

6

SUPPLEMENTARY INFORMATION

SCHEDULES

1 CA~H AND CASH EQUIVALENTS

18

2 SCHEDULE OF PROPERTY AND ACCUMULATED DEPRECIAnON

19

3 SCHEDULE OF OPERATING EXPENSES BY OBJECT

20

4 RECONCILIAnON OF SALARIES

21

CLAUDE L. VICKERS
STATE AUDITOR (404) 6562174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 7, 1997

Honorable Zell Miller, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Georgia Correctional Industries Administration Honorable 1. Wayne Gamer, Commissioner Department of Corrections
and Honorable E. D. Lively, Executive Director Georgia Correctional Industries Administration
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 D) ofthe Georgia Correctional Industries Administration as of and for the year ended June 30, 1996, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of the Georgia Correctional Industries Administration.
A review consists principally of inquiries of agency personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware ofany material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.
Our review was made for the purpose ofexpressing 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 generally accepted accounting principles. The accompanying supplementary information (Schedules 1 through 4) is presented only for supplementary analysis purposes. Such information has been subjected to the inquiries and analytical

96ARL-4X

procedures applied in the review ofthe financial statements and we are not aware of any material modifications that should be made thereto.
Respectfully submitted,

CLV:dt 96ARL-4X

Claude L. Vickers State Auditor

FINANCIAL STATEMENTS - 1-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION BALANCE SHEET ALL FUND TYPES JUNE 30.1996

EXHIBIT "A"

LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Payroll Withholdings Installment Purchase Payable Compensated Absences Payable Notes Payable Deferred Revenue
Total Liabilities
Fund Equity Contributed Capital Retained Earnings Undesignated
Total Fund Equity
Total Liabilities and Fund Equity
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-

$

916,266.36 $

694,648.67

876.32

43,085.20

90,206.88

0.00

665,920.32

627,315.84

1,578,571.40

1,200,000.00

3,286,213.87

689,366.52

$

6,538,055.15 $

3,254,416.23

$

1,309,948.10 $

1,309,948.10

18,739,267.53

17,699,128.19

$

20,049,215.63 $ 19,009,076.29

$

26,587,270.78 $ 22,263,492.52

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS
PROPRIETARY FUND TYPE - INTERNAL SERVICE FUND YEAR ENDED JUNE 30, 1996

EXBIHIT "B"

OPERATING REVENUES
Sales (Net) Less: Cost of Goods Sold
.Gross Profit on Sales
OPERATING EXPENSES
Personal Services Regular Operating Expenses Travel Telecommunications Per Diem, Fees and Contracts Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
Contracts - Department of Corrections Interest Income Interest Expense Gain/(Loss) on Disposal of Fixed Assets Rental Income Sale of Scrap Metal Other Sales
Total Nonoperating Revenues (Expenses)
Net Income
RETAINED EARNINGS - JULY 1

TOTALS

YEAR ENDED

JUNE 30, 1996

JUNE 30, 1995

$

30,233,626,51 $

23,912,575.84

17,876,749,92

14,815,367,14

$

12,356,876,59 $

9,097,208,70

$

7,432,697,11 $

2,493,514,30

141,091.99

174,803,56

50,319,96

1,457,100.88

$

11,749,527.80 $

$

607,348,79 $

7,247,967,08 548,415,39 182,842,35 161,575.68 54,229.34
1,323,019,99
9,518,049.83
-420,841.13

$

93,021,33 $

183,969.97

261,040,60

112,086.89

-76,627.90

-25,069.78

-48,183,65

6,448.46

121,767,12

32,400,00

53,795.53

80,489.20

27,977,52

33.005,59

$

432,790.55 $

423,330.33

$

1,040,139.34 $

2,489.20

17,699,128.19

17.696,638.99

RETAINED EARNINGS - JUNE 30

$

18,739,267.53 $==i1=7,!:6=99::!:,1=2;,;,8;,,;,.1;;,,9

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. -3-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION STATEMENT OF CASH FLOWS
PROPRIETARY FUND TYPE - INTERNAL SERVICE FUND YEAR ENDED JUNE 30, 1996

EXHIBIT"C"

CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers Cash Paid to Vendors and Employees
Net Cash Provided by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Contracts - Department of Corrections Rental Income Sale of Scrap Other Sales
Net Cash Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition of Capital Assets (Net) Interest Paid on Notes Interest Paid on Installment Purchase Principal Payments on Note Proceeds from Notes Payable
Net Cash Used for Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on Cash and Cash Equivalents
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EqUIVALENTS JULY 1, 1995

$

33,253,835,17

-27,452,581,18

$ _ _"""5,:.-80_1..:..,2_5""-3,,,,,-99_

$

93,021,33

121,767,12

53,795,53

27,977.52

$ _ _--==2:;;.,96~,5~6:;.,;,1..:.:::,5~0

$

-1,576,844,19

-73,679.02

-2,948,88

-421,428,60

800,000.00

$ _ _-....:.:1,~27;..,4;,.:.;,9;.,,;;0..;;,;0,:.;;.69;...

$

26_1..:..,0;....;.4""-0,,,,,-60_

$

5,083,955,40

1,478,124,69

CASH AND CASH EQUIVALENTS JUNE 30 ,1996

$===6,=56=2=,0=8=0,=09=

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. - 4-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION STATEMENT OF CASH FLOWS
.PROPRIETARY FUND TYPE -INTERNAL SERVICE FUND
YEAR ENDED JUNE 30, 1996

EXHIBIT"C"

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating Income

$

60_7...,.3.._4_8._79_

Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Expense Change in Assets and Uabilities: Decrease in Accounts Receivable Increase in Prepaid Items Decrease in Inventories Increase in Compensated Absences Decrease in Payroll Withholdings Increase in Deferred Revenue Increase in Accounts Payable

$

1,457,100.88

427,335.75 -18,280.28 512,888.21 38,604.48 -42,208.88 2,596,847.35 221,617.69

Total Adjustments

$ _ _..;:;.5~,1,;;;,;93:;,.z.;,9:;.,;;0..;:;.5=.2~0

Net Cash Provided by Operating Activities
DISCLOSURE OF ACCOUNTING POLICY For the purposes of the statement of cash flows, all demand deposits, savings accounts, and funds on deposit with the Office of Treasury and Fiscal Services are considered to be cash equivalents.

$ ==5=,8==1'52:5=3=.9=9

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-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION EXHIBIT "D" NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The Georgia Correctional Industries Administration is an instrumentality ofthe State of Georgia, and a public corporation. Board members ofthe Georgia Department ofCorrections also serve as the Board ofthe Georgia Correctional Industries Administration. Objectives of the Administration are to reduce the cost of State government by utilizing the inmate workforce to manufacture products and provide services; to create correctional work programs; and to provide industrial work and training for inmates. The Georgia Correctional Industries Administration is considered a component unit of the State of Georgia and is included within the State ofGeorgia reporting entity for financial reporting purposes because of the significance ofits legal, operational and financial relationship with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Government Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The Administration uses a fund, which is an independent fiscal and accounting entity with a self-balancing set of accounts, to report on its financial position and the results of its operations. This report presents the Proprietary Fund Type - Internal Service Fund, which is used to account for the financing of goods 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.
BASIS OF ACCOUNTING MEASUREMENT FOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Proprietary fund types 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 measurementfocus emphasizes the determination of net income.
PROPRIETARY FUND TYPE INTERNAL SERVICE FUND
The Georgia Correctional Industries Administration maintains its Internal Service Fund on the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the accounting period in which they are earned, and expenses recognized when incurred.
BUDGET The Georgia Correctional Industries Administration is not required to prepare a formal budget subject to review and approval by a governing body. A nonappropriated operations budget is prepared for internal purposes only.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include demand deposits with a bank and cash management pools that have the general characteristics of demand deposit accounts in that the Administration may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty.
-6-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "0"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS The Georgia Correctional Industries Administration participates in an investment pool managed by the State of Georgia's Office of Treasury and Fiscal Services (OTFS) referred to as the "Georgia Fund 1". The Administration does not have any risk exposure related to investments in derivatives or similar investments in Georgia Fund 1 as the investment policy ofOTFS does not provide for investments in derivatives or similar investments through the Georgia Fund 1.
ACCOUNTS RECEIVABLE Accounts receivable arising from operations are reported at gross value. Based on management's evaluation that amounts uncollectible are not material, no provision has been made for such amounts.
PREPAID ITEMS Payments made to vendors for services that will benefit periods beyond June 30, 1996, are recorded as prepaid items.
INVENTORIES Except for inventories ofthe chemical plant, all inventories are valued at weighted average cost on the Balance Sheet. Inventories of the chemical plant are valued using the standard cost method. Periodic physical inventory methods were used to account for inventories at all facilities.
DEFERRED REVENUE The Georgia Correctional Industries Administration reports deferred revenue on the Balance Sheet. Deferred revenues arise when a potential revenue does not meet the "available" criterion for recognition in the current period. In subsequent periods, when the revenue recognition criterion is met, the liability for deferred revenue is removed from the Balance Sheet and revenue is recognized.
FIXED ASSETS 0 All purchased fixed assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are recorded at fair market value on the date donated and disposals are deleted at recorded cost. Depreciation of all exhaustible fixed assets used by the Proprietary Fund Type - Internal Service Fund is charged as an expense against its operations. Accumulated depreciation is reported on the Balance Sheet. Depreciation is computed over the estimated useful life of the property using the straight-line method.
COMPENSATED ABSENCES Compensated absences represent obligations of the Administration 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. Funds to cover the cost of annual leave paid to terminated employees are provided through Internal Service Fund operations. Annual leave is recorded as an expense of the Internal Service Fund as earned.

-7-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 3D. 1996

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LONG-TERM OBLIGATIONS In accordance with generally accepted accounting principles, long-term obligations are recorded as liabilities of proprietary fund types (See Note 4).
FUND EQUITY Fund equity is segregated into contributed capital and retained earnings components. Contributed capital represents amounts contributed to Georgia Correctional Industries Administration by the State of Georgia.
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 Administration's financial position and operations. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the Administration'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 COLLATERALIZATION STATUTES AND POLICIES Funds ofthe State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral anyone or more 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 oftl1e State of Georgia.
(2) Bonds, bills, certificates ofindebtedness, notes, or other obligations of the counties or municipalities ofthe 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.
(5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by 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.
-8-

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXHIBIT "D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (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, 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 Administration or by its agent in the Administration's name.

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

Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$ 297 309 63 $ 1 436274 60 $ 100.000,00 $====:!o!!.!.lo~o $ 1336274 60

CATEGORIZATION OF INVESTMENTS Investments are stated at cost. The carrying amount of the investment balance as ofJune 30, 1996, 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

Carrying Amount

Market Value

State Investment Pool

$ 6.264.770 46 $ 6.264.770.46

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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "0"

NOTE 3: INSTALLMENTPURCHASECO~TMENT

The Georgia Correctional Industries Administration acquires certain property and equipment through multiyear installment purchases with varying terms and options.

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

Fiscal Year Ending June 30

1997 1998 1999 2000

$ 30,940.00 28,560.00 28,560.00 11.900.00

Total Future Minimum Commitments

$ 99,960.00

Less: Amounts Representing Interest

9,753.12

Present Value ofFuture Minimum Commitments

$ 90,206.88

NOTE 4: LONG-TERM DEBT

NOTES PAYABLE During fiscal year 1995, the Georgia Correctional Industries Administration entered into a promissory note with NationsBank of Georgia, N.A., dated February 1, 1995, to provide operating capital for acquisition of furniture and other improvements at manufacturing facilities. Under terms of the agreement, the Administration borrowed $900,000.00 in fiscal year 1995 and the remaining balance of$800,000.00 in fiscal year 1996. At June 30, 1996, the outstanding balance on this loan was $1,578,571.40.

Principal payments due on these notes by fiscal year are as follows:

Fiscal Year Ending June 30

Note Dated February 1. 1995

1997 1998 1999 2000 2001 Thereafter

$ 242,857.20 242,857.20 242,857.20 242,857.20 242,857.20 364,285.40

$ 1.578,571.40

- 10 -

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30,1996

EXHIBIT "0"

NOTE 5: CONTRIBUTED CAPITAL
Appropriated State funds remitted to the Georgia Correctional Industries Administration through the Georgia Department of Corrections and General Obligation Bond proceeds remitted to the Administration by the Georgia State Financing and Investment Commission are identified on Exhibit "A" of this report as contributed capital. There were no changes in contributed capital for the year ended June 30, 1996.
NOTE 6: RELATEDPARTffiS
The Department of Corrections and the Georgia Correctional Industries Administration are considered to be related parties due to certain common management personnel. The Board of Corrections constitutes, exofficio, the Georgia Correctional Industries Administration. In this capacity the Board has the power to perfect its own organization and to adopt such rules and bylaws as may be necessary for it to carry out its duties under Chapter 10, Correctional Industries of the Official Code of Georgia Annotated. In addition, the Commissioner ofthe Department of Corrections also serves as chief executive officer of the Administration.
NOTE 7: RISK MANAGEMENT
Public Entity Risk Pool
The State Personnel Board, Merit System ofPersonnel 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 law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Georgia Correctional Industries Administration 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.

- 11 -

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996

EXIllBIT "D"

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 and county health departments, pennits such employees to defer a portion oftheir 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 of a general creditor of the State of Georgia in an amount equal to the fair market value of the deferred account of each participant. Financial information relative to the plan will be presented in the State of Georgia Comprehensive Annual Financial Report for the year ended June 30, 1996.
NOTE 9: RETffiEMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Georgia Correctional Industries Administration participates in the Employees' Retirement System of Georgia ("ERS"), a single-employer, defined benefit plan established by the General Assembly of Georgia for the purpose ofproviding retirement allowances for employees of the State of Georgia. The Administration's payroll for the year ended June 30, 1996, for employees covered by ERS was $5,062,622.50. The Administration's total payroll for all employees was $5,466,201.22.
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 member's highest eight consecutive calendar quarters of salary, the number of years 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.
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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1996

EXHIBIT "0"

NOTE 9: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

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.

Contributions Required and Contributions Made As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute.

Under the old plan, member contributions consist of employee contributions paid by the employee of 1.25% of compensation and 4.75% of compensation paid by the Administration on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% of compensation paid by employee. The Administration 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 Administration amounted to 14.96% of covered payroll and included the 4.75% contributed on behalf of the 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 actuarially 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 $820,631.60, of which $757,347.59 was made by the Administration and $63,284.01 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 Georgia Correctional Industries Administration participates in the Georgia Defined Contribution Plan ( t1GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly for the purpose ofprovidihg retirement coverage for State employees who are temporary, seasonal, and part-

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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1996

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description time and are not members ofa public retirement or pension system. GDCP is administered by the Employees' Retirement System Board of Trustees. The Administration's payroll for the year ended June 30, 1996, for employees covered by GDCP was $67,211.00. The Administration's total payroll for all employees was $5,466,201.22.
Benefits A member may retire and elect to receive periodic payments after attainment of age 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 of employment, the amount ofthe member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 1996 amounted to $5,040.84 which represents 7.50% 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 of forty five days. Employees are paid for unused accumulated annual leave upon retirement or termination 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.

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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION EXHIBIT "0" NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1996
NOTE 11: CONTINGENCIES Litigation, claims and assessments filed against the Georgia Correctional Industries Administration, if any, are generally considered to be actions against the State ofGeorgia. Accordingly, significant litigation, claims and assessments pending against the State ofGeorgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1996. NOTE 12: BONDING INFORMATION The Executive Director and all employees of the Georgia Correctional Industries Administration are bonded under a Public Employees Blanket Bond written by Employers Insurance of Wausau, their Bond No. 1450-02110723, on which the premium was paid to October 1, 1996. Under this agreement the Public Employee Dishonesty Coverage insures the Administration 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 Administration 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 Georgia Correctional Industries Administration 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, 1996. Under these additional public employee dishonesty coverages, the policies insure the Administration to a maximum of $9,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees and from failure of its employees to perform faithfully.
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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 I I I I I I I I I I I I I I

SUPPLEMENTARY INFORMAnON - 17 -

GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION CASH AND CASH EQUIVALENTS JUNE 30 ,1996

SCHEDULE "1"

NONINTEREST BEARING ACCOUNTS NationsBank of Georgia, N,A., Atlanta, Georgia
INTEREST BEARING ACCOUNT
Funds on Deposit with Office of Treasury and
Fiscal Services - State Investment Pool

$

297,309,63

6,264,770.46

$ ====6=,5=62=,0=:8::::0=,0=9

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION SCHEDULE OF PROPERTY AND ACCUMULATED DEPRECIATION
YEAR ENDED JUNE 30. 1996

SCHEDULE "Z'

PROPERTY
Land
Buildings Equipment
Administrative Motor Vehicle Shop
Total Equipment
Total Property

BALANCE JULY1,1995

ADDITIONS

RETIREMENTS

BALANCE JUNE 30,1996

$

44,431.78 $

0.00 $

$

7,450,014.17 $ 420,570.67 $

$

1,675,301.84 $

70,974.73 $

1.398,no.78

64,580.00

8,537,108.96

1,123,215.51

$

11,611,181.58 $ 1,258,nO.24 $

0.00 $ 0.00 $

44.431.78 7,870,584.84

14,375.07 $ 81,049.76 190,476.91
285,901.74 $

1.731,901.50 1.382,301.02 9,469,847.56
12,584,050.08

$

19,105,627.53 $ 1,679,340.91 $

285,901.74 $ w._ _2.O..4.~9.9.,066.7_0

ACCUMULATED DEPRECIATION
Buildings
Equipment Administrative Motor Vehicle Shop
Total Equipment

$

2,248,413.56 $ 354,143.63 $

0.00 $

2,602,557.19

$

1,015,805.74 $ 144.379.72 $

12,572.28 $

1,147,613.18

923,165.39

189,482.66

76,598.04

1,036,050.01

4,409,232.39

nO,429.97

137,593.03

5,042,069.33

$

6,348,203.52 $ 1.104,292.35 $

226,763.35 $

7,225,732.52

Total Accumulated Depreciation

$

8,596,617.08 $ 1,458,435.98 $

226,763.35 $

9:,;;,8;;,;28;,:,;,2;;;89;;;.;.;.,.7,;.1

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION SCHEDULE OF OPERATING EXPENSES BY OBJECT YEAR ENDED JUNE 30, 1996

SCHEDULE "3"

PERSONAL SERViCES

Salaries and Wages Employer's Contributions for:
F.I.C.A. Retirement Health Insurance Personal Uability Insurance Unemployment Compensation Insurance Workers' Compensation Insurance

REGULAR OPERATING EXPENSES

Motor Vehicle Expense

Supplies and Materials

Repairs and Maintenance

Utilities

'

Rents (Other than Real Estate)

Insurance and Bonding

Other Operating Expenses

Publications and Printing

TRAVEL

TELECOMMUNiCATIONS

PER DIEM, FEES AND CONTRACTS

Per Diem and Fees

DEPRECIATION

$ 5,466,201.22

441,443.08 795,317.27 675,963.54
34,556.00 2,307.00 16,909.00 $

7,432,697.11

$

85,383.70

963,032.53

427,228.78

350,010.01

25,978.19

59,377.72

513,730.37

68,773.00

2,493,514.30 141,091.99 174,803.56

50,319.96 1,457,100.88

Total Operating Expenses

$ 11,749,527.80

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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GEORGIA CORRECTIONAL INDUSTRIES ADMINISTRATION RECONCILIATION OF SALARIES YEAR ENDED JUNE 30 ,1996

SCHEDULE "4"

Total per Annual Supplement
Accruals Compensated Absences Payable June 30,1995 June 30,1996

SALARIES

$

5,474,919.46

-627,315.84 618,597,60

Total per "Report

$ =~5,4,;;66~,2~0~1~,2~2

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