Audit report, Georgia Technology Authority, a component unit of the state of Georgia, year ended June 30, 2002

GEORGIA TECHNOLOGY AUTHORITY

-TABLE OF CONTENTS-

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS

ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION AND

AND SUPPLEMENTARY INFORMATION

1

MANAGEMENT'S DISCUSSION AND ANALYSIS

5

EXHIBITS

BASIC FINANCIAL STATEMENTS

A BALANCE SHEET

PROPRIETARY FUND-ENTERPRISE FUND

14

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN

FUND NET ASSETS

PROPRIETARY FUND-ENTERPRISE FUND

16

C STATEMENT OF CASH FLOWS

PROPRIETARY FUND-ENTERPRISE FUND

18

D NOTES TO THE FINANCIAL STATEMENTS

20

SUPPLEMENTARY INFORMATION

SCHEDULE

1 RECONCILIATION OF SALARIES

37

SECTION II

COMPLIANCE AND INTERNAL CONTROL REPORT

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL

REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

41

SECTION III

CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

47

SECTION I FINANCIAL

.RUSSFLI W. HINTON
STATE AUDITOR (~) &!6-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
2,4 W...,hlnglOn S"cel S W ~UIIC 214 AlIdntd. Georgia 30334l!400

March 24, 2003
Honorable Sonny Perdue. Governor Members of the General Assembly of Georgia Members of the GeorgIa Technology Authonty
and Honorable Thomas E Wade. ActIng Chiefinformation Officer and Actmg ExecutIve DIrector
INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION AND SUPPLEMENTARY INFORMAnON
Ladles and Gentlemen
We have audIted the aecompanymg basiC financIal statement> of the Georgia Technology Authonty, a component Unit of thc State of GeorgIa, as of and for the year endcd June 30. 2002, as lIsted m the table of contents These finanCial statements arc the responsibilIty of the Authonty's management Our responsibility IS to express an opmlon on these financial statements based on our audil
E'l.cept as discussed m the followmg paragraph. we conducted our audIt m accordance With audltmg standards generally accepted m the United States of Amenca and the standards applIcable to financial audIts eontamed m Government AudIlmg Standards, Issued by the Comptroller General of the United State, Those standards reqUIre that we plan and perform the audit to obtam reasonable ~surance about whether the financial statements arc free of matenal misstatement An audit mcludes exammmg. on a test basiS. eVidence support109 the amounts and disclosures m the financial statements An audit also mcludes assessmg the accountmg pnnclples used and SIgnificant e,llmates made by managemenl as well a~ evaluatmg the overall finanCial statement presentallon We belIeve that our audIt proVides a reasonable basiS for our opmlOn
As discussed m the Schedule of Fmdmgs and QuestIoned Costs. apparent mlsappropnatIons of Georgia Technology Authonty assets and other undocumented expenses were discovered m the Telecom DIVISIOn operatIOns The po~slble outcome of these matters. which have been reported to appropnate state officlab, I~ uncertam at thiS llme Accordmgly, no proVISIOns have been made m the baSIC financial statements for the resolutIon of these matters

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In our oplmon, except for the above-mentioned lImItatIOn on thc scope of our audit, the financIal statements referred to above prescnt fairly, m all matenal respects, the finanCial posItion of the GeorgIa Technology Authonty, as of June 30, 2002, and the changes m ItS financial posItion and cash flows, where applIcable, thereof for the year then ended In confonmty WIth accountmg pnnclples generally accepted m the Umted States of Amenca
As dIscussed In Note 3 to the ba~lc finanCIal statements, the Georgia Technology Authonty adopted Governmental Accountmg Standards Board Statement No, 34, BasiC FmanclQl Statements - and Management's D,SCUSSIOn and AllQlysls - for State and Local Gm'ernments, Statement No 37, BaSIC FmanclQl Statements - and Afanagement 's DlIcusslOn and AnalySIS for State and Local Governments Omnibus, and Statcment No 38, Certam FmanclQl Statement Note DISl'/osures, as of June 30, 2002
In accordance WIth Government Audl/mg Standards, we have also Issued a report dated March 24, 2003 on our conSIderation of the GeorgIa Technology Authonty's Internal control over finanCIal reportIng and on our tests of ItS complIance with certam proVISIOns of laws, regulations, contracts and grants That report IS an Integral part of an audIt perfonned m accordance WIth Government Audl/mg Standards and should be read In conjunction with thIS report consldenng the results of our audit
The management's dISCUS~lon and analySIS on pages 5 through 9 IS not a reqUIred part of the basiC financIal statemcnts but IS supplementary mfonnatlOn reqUIred by the Governmental Accountmg Standards Board We have applied certaIn lImited proccdures, which conSIsted pnncipally of mqulfle~ of management regardIng the method~ of measurement and presentatIOn of the reqUIred ~upplementary mfonnatIon However, we dId not audIt the mfonnallOn and express no opmlOn on II
Our audIt was conducted for the purpose of fonnIng an 0plmon on the finanCIal statements that collectIvely compnse the GeorgIa Technology Authonty's baSIC finanCial statements The accompanymg supplementary mfonnatlOn (Schedule I) IS pre~ented for purpo~es of addItional analySIS and IS not a reqUIred part of the basIC finanCial statemcnts The accompanymg supplementary Infonnatlon (Schedule I) has been subjected to thc audItmg procedures applIed In the audit of the baSIC finanCIal statements and, m our OpInIOn, such InfonnatlOn IS falfly stated m all matenal respects m relatIOn to thc basIC finanCIal statements taken as a whole
Respectfully submlltcd,

RWHel

Rus 11 W HInton, CPA, CGFM Stalc Auditor

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Georgia Technology Authority Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2002
Georgia Technology Authonty (GTA or AuthontY) provides this narrative to supplement the financial statements that follow thiS sectIOn
Background: Georgia Technology Authonty began ItS eXistence on July I, 2000 to proVide mfonnatlon technology overSight to the State of Georgia GTA's fundmg would come from an mltlal appropnatlOn of $5,000,000 plus any net assets and ongomg revenues bemg generated by the GeorglaNet Authonty GTA superceded GeorglaNet which became a diVIsion wlthm GTA
GTA's mission and financial posItion were dramatically altered when on July \, 2001, GTA assumed the added responSibilities of managmg the stateWide telecommunIcations, financial and human resource systems, and data center operations that had previously been under the Department of AdminIstrative Services (DOAS) GTA received from DOAS an additional 756 employees or pOSItions, a portIOn of DOAS' appropnated funds, equity 10 the maJonty of DOAS' Information Technology (IT) capital assets, and certam liabilities DOAS mamtamed ownershIp of liS IT recelvable~ and payables accrued through June 30, 200 I With GTA plckmg up busmess thereafter
GTA currently denves ItS revenucs from three major sources TelecommUnIcatIOns and relatcd servlce~, Computer ServIces (Data Center), and InfonnatlOn Sales and Services (GeorglaNet) GTA's customer base mcludes federal, state, and local governmental entitIes as well as a large contmgent of pnvate mdustry concern~
Implementation of GASB 34: Along With the rest of the State of Georgia, GTA completed the ImplementatIOn of the proVISions of the Governmental Accountmg Standards Board (GASB) Statement No 34, et sequencc, dunng fiscal ycar 2002 ThiS slgmficantly Impacted the content and presentatIon of the Authonty's financial statements Because of thIs and the fact that GTA's financial position was SignIficantly changed upon takmg over IT and telecommunIcatIOns opemtIons, no finanCial compansons Will be made With the prevIous fiscal year Future reports will reqUire such compansons
The Authonty's baSIC finanCial statements are reported a~ a specIal purpose government (component UnIt of the State of Georgia) engaged 10 busmes~-type actIvities and are cornpnsed offund finanCial statements for propnetary (enterpnse) funds
GTA IS claSSified as an "Enterpnse Fund" because It carnes on busmes~-type activities and denve~ Its pnmary revenues from bill lOgs to customers for ~crvlces GASB 34 reqUires enterpn~e funds to account for their activities 10 the same manner as a commercial enterpn~e, that IS, usmg an economIc resource~ measurement focus and the accrual baSIS of accountmg Put Simply, thc economIc resources mcasurement focus
-5-

reqUires us to recognize all assets and lIabllllles, both short-term and long-term, on our Balance Sheet It also requires us to capitalize and depreciate certain ~ets, and recognize other deferrals The accrual baSIS of accounting reqUires us to recognlzc revenues when earned, not when cash IS received, and to recognIze expenses when Incurred, not when cash IS paId out

- ..~ ~--.~--~



......-

- - - - - - . _ ..... - __ r - -

The purpose behind all thiS IS to recogmze the total cost of dOing bUSiness and to measure

the abihty of the Authonty to mect Its future obhgallons

Basic Financial Statements:

The basic financial statements that are reqUired to be presented by an enterpnse fund are the Balance Sheet. Statement of Revenues, Expenses, and Changes In Fund Net Assets, and the Statement ofCash Flows

Balance Sheet

The Balance Sheet shows assets and hablhtles separated Into thelT current and noncurrent portIOns The dIfference between total assets and total hablhlles equals Net Assets Net Assets WIll be subdIvIded Into three categones the amount Invested In capItal assets. amounts restncted, and amount unrestncted By comparing the change In Net Assets between fiscal penods. the reader WIll be able to see If the financIal posItion of the Authonty has gone up or down Future reports WIll hIghlight thIS comparison and explaIn any fluctuatIOns

Balance Sheet (thousands of dollars)

Assets

Current Assets

$

Capital Assets, Net

Total Assets

$

lIabllrlJes and Net Assets

Liabilities

Current lIabllllles

$

Non-current liabilities

Total liabilities

$

82,934 50,859 133,793
14,899 9,780
24,679

-6-

Net Assets

Invested In Capital Assets, Net

$

Restncted

Unrestncted

Total Net Assets

$

Total Llabilibes and Net Assets

$

41,028 20,300 47,786
109,114
133,793

Seventy-two percent of Current Assets were made up of cash and cash eqUivalents Cash eqUIvalents consisted of funds mvested short-term m Georgia Fund I, managed by the Office of Treasury and Fiscal Services The remainder of current assets was primarily accounts receivable due from customers GTA's ongomg account~ receivable balance WIll usually represent approximately one month's worth of billIng With most customers normally makmg payment withm the 30 to 60 day range At year-end, GTA had an accounts receivable balance of $21,160,000 Sixty-three percent of Capital Assets were madc up of machmery and eqUIpment-the majority of which wa~ IT hardware for the Data Center and telecommunIcaUons systems The remammg 37% was software, most of which was the State's financial accountmg and human resources systems software, PeopleSoft
Current LlabllIlles were made up mostly of Accounts Payable to vendors for goods and services, and the current portion of capital leases or Installment purchases Current IIablhues also mcluded the settlement of a contractual dispute \\1th Sprmt CommunicatIOns Company concemmg charges and credIts Payment of thiS ~etllement was made In November of 2002 but was accrued at June 30, 2002 as the amount to be paid was known prior to the release of the finanCial statements This payment has been Included as a SpeCial Item on the Statement ofRevenues, Expenses and Changes In Fund Net Asset~ Non-eurrent liabilIlles consisted of the habllIty for employee compensated absences and the long-term portIOn of capital leases or mstallment purchases GTA IS currently makmg Installment payments for a major IBM mamframe system upgrade which Will be paid out m FY 03, as well as other data center hardware, several telecommunicatIOns systems and software Most of these mstallment purchases were inherited from DOAS More mformallon pertainIng to long-term debt IS prOVided m the notes to the financial statements
Net assets Invested m capital a~sets made up 37% of total net assets, the breakdown of which was given above Restricted Net Assets consisted of the Distance LearnIng and Telemedlcme Fund which was also acqUIred from DOAS The remaInder represented unrestncted net assets that were avallable for expenditure by GTA to fullill Its corporate purposes, $8,000,000 of which IS earmarked for expenditures on developmcnt of the Department of Human Resources (DIIR) portal dealmg primarily With cluld welfare services

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Statement of Revenues, Expenses, and Changes in Fund Net Assets

The purpose of thc Statement of Revenues. Expenses and Changes In Fund Net A~sets IS

I

to present revenues and expenses from operatIons, revenues and expenses from non-

I

operatmg actIvItIes, capnal contnbutIons gIven or receIved, other transfers m or out, and

I-

the resultmg change m net assets The change m net assets IS added to or-subtracted from -- --.-.

I
I

the net assets balance brought forward from the previous fiscal year to obtam the balance

of net assets at the end of the fiscal year

Statement of Revenues, Expenses. and Changes In Fund Net Assets (Thousands of dollars)

Operallng Revenues

$ _ _-=2:;.,;1..:,8"",94,.;,4..:.

Operallng Expenses General and Admlnlstrallve Goods and Services DepreCiation Total Operating Expenses

$

97,201

98,467

16,189

$

211,857

Operating Income

$

7,087

Nonoperating Revenues (Expenses)

350

Income before Contnbutlons,

SpeCIal Item and Transfers

$

7,437

Capital Contributions

31,958

Special Item - Contract Settlement

-2,900

Transfers

16,390

Changes In Net Assets

$

52,885

Net Assets July 1, 2001

41,733

Prior Period Adjustments

14,496

Net Assets June 30,2002

$

109,114

Operating Rcvcnucs consisted of $118,231.000 m telecommUnIcatIOns revenues. $76.396,000 In computer servIces revenues mcludmg a one-tnne receIpt of $12,000,000 from the Department of Education for the Wireless Classroom PIlot ProJcct. $22,489,000 In GeorglaNet revcnucs, and $1,828,000 m mIscellaneous revenues of which $ 1.500,000 was for Georgia Cancer CoalItIon IT projects

-8-

These operating revenues are classified a~ $218,912,000 of Charges for Services Program Revenues and $32,000 of Other General Revenucs Nonoperating revenues Include the following General Revenues $1.237,000 Investment Incomc and $100,000 Intergovernmental - Federal
Operating expenses Included gencral and admlnlstrallve expenses of $97,201,000 to cover personnel costs, supplIes and matenals, rents and malntenancc. pcr diem and fces, and other miscellaneous operating costs Operating expenses also Included goods and services costs of $98.467,000 E"penses In thiS category consisted pnmanly of direct costs associated WIth proViding services to customers. most of which was paid to telecommunications service proViders WIth BellSouth being the largest
Capital ContnbutlOns consisted of the eqwty In capital assets or capital leases/Installment purchases mhented from DOAS
Transfers consisted of $35.413,000 received from appropnatlOns of which $15,348,000 was an operating advance against customer billings This advance was, In tum. credited to customer accounts over the course of the fiscal year, thus redUCing their billIng The remaining $20,065,000 In appropnated fund~ was for the follOWing purposes $3,500,000 for the state portal arclutecture that Included the Department of Motor Vehlclc Safety onlIne dnver's lIcense applIcatIOn which went lIve on July 1, 2002, $8,000,000 for DHR portal, $8,565,000 for operation of the state finanCial and human resource systems (PeopleSoft) for wluch GTA does not bill customers GTA also received a transfer of $1,\ 22,000 In telecommunications shelf stock Inventory and a transfer of an employee compensated absences lIabilIty of ($4,797,000) from DOAS
GTA brought forward on July 1,2001 a Net Asset balance of$41,733,000 Adjustments to thiS Included adding $15,202,000 net book value for PeopleSoft softwarc. the capitalization of which did not occur until fi~cal year 2002, when GTA acqUired ownership, even though capitalizatIOn of assets under GASB 34 wa~ Implemented In fiscal year 2001 Another adJustmcnt was to subtract $916,000 for a change In the State of Georgia's capitalIzatIOn threshold from an acqUisitIOn cost of one thousand to five thousand dollars and an adjustment made from a GTA deCISIOn to change the useful life of all assets from 3 years to 5 years that Increased net assets by $211,000
Statement of Cash Flows
The Statement of Cash Flows IS useful for several reasons It may indicate an entity's ability to generate future cash flows or pay Its debt service It also explainS reasons for differences betwcen cash flows from operations and operating Income The statement must contain the follOWing categones of cash flows cash flows from operating actlvilles, cash flows from noncapilal finanCing actiVItIes, cash flows from capItal and related finanCing acllvltles, and cash flows from investing acllvltles Also on the statemcnt I~ a reconCiliatIOn of Opcrallng Income to Net Cash proVided by or used In Operating Actlvilies
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The $10,055,000 net posItive cash flow from operating activIties represented the difference between cash received from cllStomers, cash paid out to vendors, and cash paid out for payroll Cash provided by noncapltal financmg activIties represented pnmanly the $20,165,000 appropnation, the purpose of which was explamed earlier. Of the $10,011,000 cash expended for capItal and related financmg actlVltles, $5,725,000 was spent for a vanety of IT hardware and other equipment, .mcludmg approXimately . $4,000,000 for state portal hardware components housed at thc data center $4,286,000 was expended for pnnclpal and mterest on long-term dcbt More mformatlOn about longterm debt can found m the notes to thc financial statements
Interest Income of $1,237,000 was denved from cash on hand at the bank and from thc Georgia Fund I account llSed for short-term mvestmg
The reconciliatIOn of Operatmg Income to Net Cash prOVided by operatIOns indicates an Increase m assets of $9,412,000 and a decrease m liabilities of $3,809,000 both of which represented uses of cash .
Capital Assets
The Authonty's mvestment m capital assets as of June 30, 2002 amounled to $99,259,000, which with accumulated depreCiation of $48,400,000, left a net book value of $50,859,000 ThiS mvestment m capital assets mcluded computer software and machmcry and equipment The Authonty's net capital assets mcreased by $34,644,000 as a result of the capital contnbutlOns from DOAS descnbed above and by $15,202,000 for the additIOn of computer software not preVIOusly reported
Economic Factors
One of GTA's major project, smce the begmmng was the Converged Communications Outsourcmg Project (CCOP) The project had several goals mcludmg upgradmg the state's telecommUnications mfrastructure and promotmg economic development opportunities m remote area> of the state Two bidders - ConncctGA, led by BellSouth, AT&T and EDS and EnvlslOnGeorgIa, led by IBM submitted bids by the November 15, 2002 deadline However, cIting uncertaInties m the telecom mdllStry and the economic envlronmenl, IBM notified GTA on January 3, 2003 that It was Wlthdrawmg ItS bid On January 29, Governor Sonny Perdue created a task force representmg the public and pnvate sectors to Identify a manageable and sustamable approach to outsourcmg the state's telecommUnicatIOns services Shortly after nammg the task force, Governor Perdue also recommended that GTA dlscontmue CCOP The task force IS expected to Issue ItS recommendations, which may Significantly affect some GTA operatIOns m Apnl 2003
In fiscal year 2003. GTA undertook measures to reduce operating costs and ultimately the rates billed to customers startmg With long distance service, This began with GTA awardmg a new Intra1ata (wltlun the call zone) long distance contract to BellSouth and mlgratmg all long distance to the direct dial public SWitch access by the end of January
- 10-

2003 ThIs resulted m reducmg the lntralata long dIstance rate by approximately 2 5 cents per mmute GTA abo began the process of dlsmanthng the state's pnvate vOice network (GIST), whIch IS expected to be completed by the end of fiscal year 2003 ThIS Will ehmmate the fixed costs associated With mamtammg the VOice network From thiS action, It IS expected that GTA Will be able to lower Its lon.g distance rates across th-e -. board-
Subsequent to year-end, GTA transferred approximately $775 mllhon to the State's General Fund The purpose of thiS payment was to release unreserved, undeslgnated surplus to the state treasury
Effective m January 2003, BellSouth, GTA's largest telecommunicatIOns service proVider, raised ItS Georgia GSST tanff allowmg It to pass on to Its users the full amount of the franchIse fecs and occupational hcense taxes leVied by munlclpahtles Before, under the tariff, BellSouth was only allowed to pass through thc portion of the fees and taxes that exceeded 3% of recumng local SCrvice revenue m any munlclpahty Furthermore, the CIty of Atlanta changed Its fec base from only mcludmg recumng local service to mcludmg retaIl sales gross receipts The City of Macon IS consldenng a Similar change. No other munlclpahtles, to-date, have mdlcated makmg thiS change The Impact of these changes thus far Will be approXimately $675,000 m addlllonal annual costs
Another situation mvolvmg the Umversal Service contribution that IS billed to GTA by ItS service providers could have a slml1ar negative Impact on costs The Federal Commumcatlons CommiSSIOn (FCC) made a new rule that effectively mcreased the unIversal service contnbutlOn on Centrex services, of which state governments are among the largest users Due to the numerous protests receIved natlOnWldc, the FCC granted an mtenm waiver on the new rule pendmg actIOn to reconSider the Impact Should this rule stand, the Universal Service contnbutlOn Will mcrease annual costs substantially GTA IS estlmatmg the Impact to be between $775,000 and $1,000,000 from all telecommunicatIOns proViders
GTA IS plannmg the upgrade of Its finanCial and human resource systems (PeopleSofi) to take place over the ne"t three years legislation IS pendmg to allow the use of funds m the Umversal Services Fund for the upgrades GTA expects to spend approximately 12.6 million on upgradmg thcse systems to their web enabled versions
In January 2003, GTA asked the Georgia Bureau of InvestigatIOn (GBI) to mvestlgate allegations of fraudulent activity mvolvmg GTA employees and employees of a state contractor The request for GBI assistance was prompted by allegatIOns brought to GTA management by a GTA employee AllegatlOn~ mcluded suspected fraudulent bIllmgs by a state contractor and work performed by employees of the contractor at a GTA employee's reSidence GTA also requested audit assistance from the Department of Audits and Accounts to determme the extent to which state funds might have been mIsused The mvestigatlOn to-<late IS ongomg
- II -

Fmally, slgmficant one-time expendlturcs that GTA will mcur dunng fiscal year 2003 and 2004 will mclude $6 75 mllhon for state portal architecture and $8 0 mllhon for DHR portal services
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BASIC FINANCIAL STATEMENTS - 13 -

GEORGIA TECHNOLOGY AUTHORITY BALANCE SHEET
PROPRIETARY FUND-ENTERPRISE FUND JUNE 30, 2002

EXHIBIT "A"

ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable Prepaid Items Inventories
Total Current Assets
Noncurrent Assets Capital Assets Computer Software Less Accumulated Depreclabon Machmery and EqUipment Less Accumulated Depreciation
Total Noncurrent Assets
Total Assets

$

59,380,79099

21,160,20119

518,79864

1,874,59575

$

82,934,386 57

$

36,482,687 59

-17,616,681 76

62,776,78897

-30,783,59798

$

50,859,19682

$

133,793,58339

The notes to the finanCial statements are an Integral part of this statement - 14 -

GEORGIA TECHNOLOGY AUTHORITY BALANCE SHEET
PROPRIETARY FUND-ENTERPRISE FUND JUNE 30, 2002

EXHIBIT "A"

LIABILITIES AND NET ASSETS
Current Liabilities Accounts Payable Contracts Payable SalanesIWlthholdlngs Payable Compensated Absences Payable Accrued Interest Payable Capital Leases/Installment Purchases Payable
Total Current Liabilities
Noncurrent LlabllilJes Compensated Absences Payable Caprtal Leasesllnstallment Purchases Payable
Total Noncurrent LlablhlJes
Total Liabilities
Net Assets Invested In Capital Assets, Net of Related Debt Restncted for Federal FinanCial Assistance Universal Service Fund Distance Leamlng and Telemedlclne Unrestncted
Total Net Assets
Total liabilities and Net Assets

$

7,291,917 10

2,900,000 00

82,76677

1,140,08645

393,75270

3,090,727 41

$

14,899,25043

$

3,039,24928

6,740,91400

$

9,780,16328

$

24,679.41371

$

41,027,55541

100,21000

20,199,88659 47,786,51768

$

109,114,16968

$

133,793,58339

The notes to the finanCial statements are an Integral part of thiS statement - 15 -

GEORGIA TECHNOLOGY AUTHORITY STATEMENT OF IN REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS PROPRIETARY FUND-ENTERPRISE FUND
YEAR ENDED JUNE 30, 2002

EXHIBIT "B"

OPERATING REVENUES
Sales and Charges for Services Other
Total Operating Revenues

$ 218.911.80426 31.92211
$ 218.943.72637

OPERATING EXPENSES
General and AdministratIve Goods and Services Depreclallon
Total Operallng Expenses
Operallng Income
NONOPERATING REVENUES (EXPENSES)
Intergovemmental - Federal Interest and Other Investment Income Interest Expense Loss on Capital Asset Disposals
Total Nonoperating Revenues (Expenses)
Income Before Contnbullons and Transfers
CAPITAL CONTRIBUTIONS
From Department of Administrative Services Capital Assets Capital Leases
Total Capital Contnbutlons

$ 97,201,39246 98,466,411 55 16,188,931 40

$ 211,856,73541

$

7.086.99096

$

100.21000

1,237,12018

-621,15658

-365.92019

$ _ _...,;3",5",0"",2",5",-34.2.1.:..

$ _~7c..:,4~3~7~,2:::44~3~7

$ 34.643.630 60 -2,685,87846
$ 31.957,752 14

The notes to the financial statements are an Integral part of this statement - 16 -

GEORGIA TECHNOLOGY AUTHORITY STATEMENT OF IN REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS PROPRIETARY FUND-ENTERPRISE FUND
YEAR ENDED JUNE 30, 2002

EXHIBIT "B"

SPECIAL ITEM Contract Settlement
TRANSFERS Transfers In Transfers Out Total Transfers

$ _---=2~,9~00~,0~0~0~0~0
$ 31,737,93397 -15,348,10000
$ 16,389,833 97

Changes In Net Assets
TOTAL NET ASSETS JULY 1
Adjustments Change In Capitalization Threshold Change In Useful lives of Capital Assets Correction of Pnor Period Error

$ 52,884,83048 41,733,20042
-916,434 74 211,02657 15,201 ,546 95

TOTAL NET ASSETS - JUNE 30

$ 109,114,16968

The notes to the financial statements are an Integral part of thiS statement - 17 -

GEORGIA TECHNOLOGY AUTHORITY STATEMENT OF CASH FLOWS
PROPRIETARY FUND-ENTERPRISE FUND YEAR ENDED JUNE 30, 2002

EXHIBIT"C"

CASH FLOWS FROM OPERATING ACTIVITIES

, ..

I

Cash Received from Customers

Cash Paid to Vendors

Cash Paid to Employees

$ 203,547,864 55 -142,251,164 35 -51 ,241 ,943 11

Net Cash ReceIVed from Operating Actlvlues

$ 10,054,75709

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfer In - General Fund Transfer Out - General Fund Transfer Out - Higher Education Fund Intergovernmental - Federal Grants Received

$ 35,412,87400 -11,765,10000 -3,583,00000 100,21000

Net Cash Provided by Noncaprtal FinanCing ActiVities

$ 20,164,984 00

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Pnnclpal Paid on Capital Leases/Installment Purchases Interest Paid on Cap Ital Leasesllnstallment Purchases AcqUlsrtlon and Construction of Capital Assets

$ -4001,013 05 -285,061 20
-5,724,83471

Net Cash Used In Caprtal and Related FinanCing ActiVIties

$ -10,010,90896

CASH FLOWS FROM INVESTING ACTIVlTIES

Interest on Investments

$

1,237,120 18

Net Cash ProVided by Investing ActIVities

$

1,237,12018

Net Increase In Cash and Cash EqUIValents

$ 21,445,95231

CASH AND CASH EQUIVALENTS - JULY 1

37,934,83868

CASH AND CASH EQUIVALENTS - JUNE 30

$ 59,380,790 99

The notes to the finanCial statements are an Integral part of thiS statement - 18-

GEORGIA TECHNOLOGY AUTHORITY STATEMENT OF CASH FLOWS
PROPRIETARY FUND-ENTERPRISE FUND YEAR ENDED JUNE 30, 2002

EXHIBIT"C"

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operatmg Income
Adjustments to Reconcile Operatmg Income to Net Cash Provided by Operatmg Activities Depreclallon Changes In Assets and Liabilities Increase m Accounts Receivable Decrease In Prepaid Items Increase In Inventories Decrease m Liabilities (Other than Customer Deposits) Decrease m Deferred Revenues
Total Adjustments

$ _-,-,7,,,,,08,,,,6,,,,9,,,9,,,-0..:::;96"",

$ 16,188,93140

-12,810,42052 4,150,38864 -752,12751

-1,223,564 58 -2,585,441 30

$

2,967,766 13

Net Cash PrOVided by Operating Activities

$ 10,054,757 09

The notes to the finanCial statements are an Integral part of thiS statement - 19-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A, REPORTING ENTITY The Georgia Technology Authonty (Authority) IS an lllStrurncntality ofthc State of GeorgIa and a publIc corporatIon created for the purpo~es of operatIng the state's data center and telecommUnIcations network and coordInatIng thc purchase of technology resources for state government The management ofthe bUSIness and affairs of the Authonty IS vested m a twelvc (12) member Board of DIrectors The Board of DIrectors of thc Authonty consIsts ofseven (7) members appomted by the Governor. two (2) members appomted by the Lieutenant Governor, two (2) members appomted by the Speaker ofthe House of RepresentatIves, and one (I) non-voung member appointed by the Cluef JUStice of the GeorgIa Supreme Court The Authonty IS conSIdered a component UnIt ofthe State of Georgia for fmanclaJ reportmg purpO<leS because ofthe SIgnIficance of Its legaJ, operatlOnaJ and financlaJ relatlOnslup WIth the State of Georgia Thcse reportmg relatlonslups are defined m Section 21 00 of the Governmental Accountmg Standards Board (GASB) CodificatIOn of Governmental Accountmg and FInanCial ReportIng Standards
Pursuant to an ExecutIve Order of the Governor dated May 24. 2001. certam changcs were made m the organIzational ~tructure of the Authonty effcctIve July I, 2001 These changes mcluded the assumptIon ofvariou~ dutIes preVIOusly performed by the Deparunent of AdmInlstratlve Scrvlces
B, BASIS OF PRESENTATION The Authonty reports Its finanCial pOSItIon and the results of Its operatIOns under accountmg pnnclples generaJly accepted m the Untted States of Amenca for a speCial purpose government engaged In bUSIness-type actlvlUes utllIzmg the followmg major fund
PROPRIETARY FUND TYPE Enterprise Fund Enterpnse funds account for activItIes for which the mtent of management IS to recover, pnmarIly through user charges, the cost of proVldmg goods or services to the general publIc, or where sound financial management dIctates that penodIC determInatIOns of results of operations are appropnate
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The accountIng and financlaJ reportmg treatment applIed to a fund IS determIned by Its measurement focus. Propnetary fund types are reported U~Ing the economIc resources measurement focus and the accrual basiS of accountmg Undcr the accrual basiS of accountmg, revenues are recordcd when earned and expenses are recorded when a lIabIlIty IS Incurred, regardless of the lImIng ofcash flows

- 20-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO TIlE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The Authonty has c1cctcd to follow generally accepted accountmg pnnclples prcscribed by the Governmental Accountmg Standards Board (GASB) as well as Statements and Interpretations ofthe Fmanclal Accounting Standards Board, Accountmg Pnnclples Board Oplillons and Accountmg Research Bulletms of the Committee on Accountmg Procedure Issued on or before November 30. 1989, unless those pronouncements conflict with or contradict GASB pronouncements
Propnetary funds dlsttngUish operatmg revenucs and expenses from nonoperatmg Items Operating revenue~ and expenses generally result from proVldmg services and producing and dehvenng goods In connectIOn With a propnetary fund's ongoing operatIOns The pnnclpal operating revenue of the Authonty's' enterpnse fund IS charges to customers for sales and sef\1ces Operating expenses mclude the cost of sales and services, admlmstratlvc expen~es and depreCiation on caPital assets All revenues and expen,es not meetmg thiS defimtlon are reported as nonoperatmg revenues and expenscs.
D. ASSETS, LIABILITIES AND NET ASSETS CASH AND CASH EQUIVALENTS Cash and Cash EqUivalents Include currency on hand, demand depoSits With banks and othcr finanCial inStitutIOns. and the State Investment pool that has the general charllctenstlcs of demand deposit accounts In that the Authonty may depoSit addltlonal cash at any tlmc and also may WlthdraW ca~h at any tlme Without pnor notlcc or penalty The aforementIOned defimtlOns were applied m the prcparatlOn of the Statement of Cash Flows
The State Investment pool (Georgia Fund 1) I~ an external Investment pool thatl~ not registered Wlth the Seeuntles and Exchange ComnusslOn (SEC) but does operate In a manner consistent With the SEC's Rule 2a7 of the Investment Company Act of 1940 1be State of Georgia's Office of Treasury and Fiscal Services (OTFS) manages Georgia Fund I in accordance Wlth poliCies and procedures established by State law and the State DepOSitory Board, the oversight Board for OTFS Tlus Investment IS valued at the pool's share pnce, $1 00 per share
The Authonty does not have any risk exposure related to Investments In denvatlves or Similar Investments m Georgld Fund I as the Investment pohcy ofOTFS does not proVide for mve,tments III denvatlves or Similar Investments through the Georgia Fund I
ACCOUNTS RECEIVABLE Accounts recci vable arismg from operatlOns arc rcported at gross value Based on management', evaluatIOn that amounts uncollectible are not matenal. no proVISion has been made for such amounts
Accounts receivable mclude amounts due from other funds reported In the pnmary government of thc State ofGeorgta for tclecommumcatlons and data processing <;crvlces prOVided hy the Authonty Sce Note 6

- 21 -

GEORGIA TECHNOLOGY AUTHORITY NOTES 10 THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. ASSETS, LIABILITIES AND NET ASSETS PRbPAID ITEMS Payments made to vendors for services that will benefit penods beyond June 30, 2002, are recorded as prepaid Items

INVENTORIES Inventones are valued at COSI. usmg the tirst-m/first-out (FIfO) method liems meluded m mventone~ are recorded as mventones at thc time of purchase and are recorded as ex.pense bal>ed on consumplton

CAPITAL ASSETS Capital assets, which melude machmery and eqUipment and computer software, are recorded m the Balancc Sheet at historical cost Donated capital assets are recorded at fmr market value on the datc donated and dl~posals are deleted at recordcd cost Machmery and cqUlpmcnt are capitalized when the cost of mdlvldualltcms exceed $5,000 00 The purchase or development ofcomputer software IS capltall7ed when the cost exceeds $1,000,000 00 The costs of normal mmntenance and repaIrs that do not add to the value of assets or matenally extend asset lives are not capitalized

Applicable capital assets of the Authonty are depreciated usmg the straight-line method over the followmg estimated useful lives

Assets

Machmery and EqUipment Computer Software

3-7 3-7

CONTRACTS PAYABLE Contracts payable have been accrued to reflect the subsequent penod payment of a settlement related to a telecommuDlcatlons proVider contract dispute over charges and credits from prevIOus fi~caI years ThiS accrual has been recorded as a Speclalliem

LONG-TERM OBLIGATIONS Long-term debt IS recogmzed as a liability of propnetary fund types Ifthose liabllItle~ are expected to
be financed from propnetary fund operations

Ner ASSETS The difference between fund assets and liabilIties IS "Net A~sets" Net assets arc reported m three categones

Net Assets Invested in Capital Assets, Net of Related Debt consIsts of capital assets. net of accumulated depreCiation and reduced by outstandmg balances for bonds, notes and other deht that are attnbuted to the acquISItion, constructIon. or Improvement of those assets

- 22-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATloMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOlINTING POLICIES
D.ASSETS, LIABILITIES AND NET ASSETS Restricted Net Assets result when constramts placed on net asset use arc either externally Imposed by creditors, grantors, contributors, and the like, or Imposed by law through constItutional provIsions or enablmg legislation The Authonty reports the followmg restricted net asscts
Fedcral Fmanclal ASSIstance - represents funds restncted by a grant agreement from the U S EnVIronmental ProtectIOn Agency's Water Management DIVISIOn
Umversal ServIce Fund - GeorgIa DIstance Learnmg and Telemedleme - represents funds re~tneted m accordance with Official Code of GeorgIa Annotated (OCGA) SectIOns 50-5-109 through 50-5-202, the GeorgIa Distance Learmng and Telemedlcme Act of 1992
Unrestricted Net A,sets consist of net assets that do not meet the defimtlOn ofthc two precedmg eategones Unrestncted net as~ets often are deSignated, mdlcatmg they are not aVaIlable for general operatIOns Such deSignatIOns havc mternally Imposcd constraInts on resources, but can be removed or modlficd
E. REVENUES AND EXPENSES COMPENSATED ABSENCES Compensated absences represent obligatIOns ofthe Authonty relatIng to employee's nghts to receIve compensation for future abscnces based upon servIces already rendered ThiS obligatIOn relates only to vestmg accumulated annual leave Annual lcave IS recordcd as an expense as earned
F. CAPITAL CONTRIBUTIONS Capital ContributIOns mclude net capItal assets and capItal lease balances transferred from thc Dcpartment of Adnllmstrative Services as part of the change m the Authonty's organizational structure descnbed m Note 1 These capital contnbutlOns have been mcluded m current year additIOns to capital assets and accumulated depreCiation m Note 8 and capltallcases m Notc 10
G. TRANSFERS Transfers mclude the receipt of operatmg funds from the Department of Admmlstratlvc Services m accordance WIth thc AppropnatlOn~ Act, begmnmg mventoncs and compensated absences balanccs transferred from the Department of Admlmstratlve Services as part of the change m thc Authonty's organizatIOnal structure descnbed m Note I, and tran~ter~ ofmdlrect fundmg to entitles wlthm the pnmary govcrnment of the State of Georgia The tran~fer of compensated absences balance~ h~ heen included m currcnt ycar addltlOn~ m Note 10

- 23 -

GEORGIA TECill.OLOGY AUTHORITY
NOTES TO HIE FINANCIAL STATEME'N rs
JUNE 30, 2002

r:XHIBIT "D"

NOTE 2: BUDGETS
The annual budget of the Authonty IS prepared on a basl~ consIstent WIth accounting practices presenbed or pennitted by statUtes and regulations of the State of Georgia The legal level of budgetary control IS the Authonty level by expenditure object class The budget IS submItted by the Authonty and approved by the GeorgIa General Assembly and the Governor Supplementary and amended budget requests may be submitted during the fiscal year using the same process used for onglnal budget requests There I~ no legal prolubltlOn regardmg overexpcndlture of the aggregatc budget

NOTE 3: ACCOUNTING CHANGES AND RESTATEMENTS
In fiscal year 2002, the Authonty Implemented the followmg new accountmg standards Issued by GASS'
Statement 34, BaSIC FInancIal Statements - and Management's Dlscl/sslOn and A.nalysI~ - for State and Local Government\,
Statement 37, BaSIC Fmanclal Statements - and Management 's Dlscu~~lOn and Analysl~ - jilr State and Local Governments Ommblls, and
Statement 38, Certam Financial Statement Note Dlsclosllre~
Statement 34, as amended by Statement 37, estabhshes new finanCial reporting requirements for state and local governments It reqUIres new informatIOn and restructures much of the mfonnatlOn that governments have presented m the past Comparablhty vnth rcports Issued In pnor years I~ affected
Statement 38 requires certam note disclosures when Statement 34 IS Implemented
No adjustments to beglnrung net assets were reqUlrcd as a re~ult of the ImplemcntatlOn of thcse Statements
In fiscal year 2002, the Authonty Implemented the follOWing changes m thc apphcatlOn of accounting pnnclples
The capitahzatlOn threshold for capital assets was Increased as outlmed In the State ofGeorglO CapItal Asset GUIde This change In capltahzatlOn threshold resulted m decreases to begmrung net assets in the amount of $916.434 74
The useful lives of certam cla~~es of Maclunery and EqUIpment were changed for 3 to 5 year~ 11us change resulted in an Increase to beginning net assets In the amount of$21 1.02657

- 24-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNF 30. 2002

EXHIBIT "0"

NOTE 3: ACCOUNTING CHANGES AND RESTATEMENTS
The c1a~slficatlon of certain capital assets With a net book value of$1 0,837.I43 33 was changcd from Machmery and Equipment to Computer Software No adjustment to beginnIng net assets was reqUired as a result of thl~ change
Capital assets and accumulated deprecIatIon were restated to correct the balances for Items not prevIOusly reported Beginning net assets was Increased by $15.201.546 95 as a result of thiS correction

NOTE 4: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of the State of GeorgIa cannot be placed In a depository paymg Interest longer than ten days WIthOUt the depOSitory proViding a surety bond to the State In lIeu of a surety bond, the depoSitory may plcdge as collateral anyone or more ofthe followmg secuntles as cnumerated In OCGA Section 50-17-59
(I) Bonds. bills, certificates of Indebtedness, notes. or other direct oblIgatIOns of the UnIted States or of the State of GeorgIa
(2) Bonds. bIlls, certificates of Indcbtedness, notes. or other oblIgatIOns of the counties or municipalIties of the State of Georgia
(3) Bonds of any publIc authonty created by the laws of the State of GeorgIa, provldmg that the statute that created the authonty authonzed the use of the bonds for thi~ purpose
(4) Industnal revenue bonds and bonds of development authonties created by the laws of the State of Georgia
(5) Bonds, bl1ls, certificates of Indebtedness, notes, or other oblIgations of a SUbSidiary corporatIOn of the UnIted States government, winch are fully guaranteed by the UnIted States government both as to pnnclpal and Interest, or debt oblIgations Issued by or secuntIes guaranteed 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 Corporation. or the Federal NatIOnal Mortgage ASSOCIation
(6) Guarantee or Insurance of accoun~ proVided by the Federal DepoSit Insurance Corporation
As authonzed In the OCGA SectIOn 50-17-53. the State DepOSItory Board has adopted polICies which allow agencies of the State of Georgia the optIon of exemptmg demand depoSits from the collateral requirements

- 25 -

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EAt-IIBIT "D"

NOTE 5: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND Il'I/VESTMENTS
CATEGORIZATION OF DEPOSITS For purposes of analysIs of custodial credit nsk, cash depoSits consist of all bank balances which Include demand depOSits and/or Interest beanng accounts Thc bank balances as ofJune 30, 2002, are categOrized below In order to proVide InformatIOn about the extent to whIch sueh depOSll~ are exposed to custodial credit nsk
Category I - Amounts covered by depOSitory Insurance or collateralized with secunlles (at market value) held by the Authonty or by Its agent In the Authonty's name.
Category 2 - Amounts collaterahzed With seeuntIes (at market value) held by the pledging financial institutIon's trust department or agent In the Authonty's name
Category 3 - Amounl~ collaterahzed With secunlles (at market value) held by the pledging finanCial institution or by Its trust department or agent, but not In the Authonty's name, and amounts uncollaterahzed

Cash DepoSits

Carrying Amount

Bank Balances

S 12,248,203 17 $ 10.547,827 12 S

Risk Cdlegones 3
200,00000 $=~~.,;O=O=O=$ 10.347.82712

CATEGORIZATION OF INVESTMENTS Investments held In the Office of Treasury and Fiscal Services State Investment Pool are presented as a cash cqUlvalent on the Authonty' s statement ofnet assets The carrying amount of the Investment balance as of June 30, 2002. IS shown below and IS not subject to nsk categonzatlOn

T,pe of Inveslment

Carrying Amount

Georgia Fund I

$ 47.132,587 82

- 26-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 6: ACCOUNTS RECEIVABLE
ReceIvables at June 30, 2002, con~lst of the follOWIng
Intergovernmental State of GeorgIa General Fund GeorgIa State FInancIng and Investment CommIssIOn Component Umts Regents of the Umverslty System of Georg.. Colleges and Umversltles Department of Techmcal and Adult Education Imernal ServIce Fund
Other

$ 15,773,48393 3.50000
42.39085
472,85645 180.67404 23,48983 $ 16,496,395 10 4.663.80609
$ 21.160,201 19

NOTE 7: TRANSFERS

Transfers durIng the year ended June 30, 2002, consIst of the follOWIng

Transfers In Department of AdminIstrative Semees trom General Fund from Intemal Service Fund BeginnIng Inventory Balance BegInning Compensated Absences LiabIlIty Balance
Transfcrs Out Indltect FundIng Department ofCorrectIons Department of Human Resources Department of Motor VehIcle Safety Dcpartment of Natural Resources Department of PublIc Safety Departmcnt of Revenue Gcorgla Instllute ofTeehnology GeorgIa State Umverslty MedIcal College of GeorgIa Umverslty of GeorgIa
Total Transfers

$ 35,412.87400
1,122,468 24 -4.797,408 27 S 31,737,93397

$

-450.000 00

-5,620.10000

-1,593 332 00

-200,00000

-1.140.000 00

-2.761,668 00

-1.129,80000

-500,00000

-693,50000

-1,259,70000

$ -15,348.10000

$ 16,389,83397

- 27-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 8: eAPnAL ASSETS

As mcntloned In Notc 3, varIOus changes In the applIcation of accounting pnnclplcs resulted In adjustments to beginning balances

Capital Assets Bemg Deprcclated Computer ~oftwarc
Machmery and EqUipment Total Capital Assets Being Depreciated
Less Accumulated DepreCiation For Computer ~oftwarc MJ.chmery and EqUIpment
Total Act.umulated Depreciation
lotal Capital fusets Bemg Deprecliued. l'.ct

Dalance July 1,2001

Recaatements

Balance (Restated) July I, 2001

S

36,482,687 59 S

S

15,541,49194

(12,063,21074)

S

) 5,541,49) 94 S

24,419,47685 S

36,482,687 59 3,478,28120
39,%0,968 79

S

(10,32014424) S

S

(2,992,04762)

3%,806 17

S

(2,992,04762) S

(9,923,33807) S

S

12,549,444 12 S

14,496,138 78 S

(10,320,144 24) (2,595,24145)
(12915,38569)
27,045,583 10

Capital asset activity for thc year ended June 30, 2002, was as follows

Capital MSCts Bcm~ Depreciated
Computer Sofiv.-are
Machmery and Equlpmenl fotal Capilal A"isets Bemg Depreciated
Los Accumulated DepreciatIOn For
Computer ~lftware Machmery and Equipment lotal Accumulate:d Depreciation
10ta1 Capital Assets Remg Deprecuued. Net

Balance
(Rc~I.Jled)
Jul} 1,2001

AddltlOnc;

I>c:lctlons

Balance June 30 2002

S

36,482,687 59

S

3648268759

3,478,181 20 S

60,021,271 Q8 S (712 764211

62,77~ 788 97

S

39,460,96879 S

6002127198 S (722764 21) S

99,15947656

S (10,12014424) S

(7.2% 537 52/

S (17,616,68176)

(259524145)

(28.542 R25 55) S 3;4,46902

(30,783,;Q798l

$

(12,91538569) S

(3; ~39.363 07) S

3;4,46902 S

(48 400,27Q 74)

27,04558310 S

24181,90891 S (108295 19) S

50859196 82

NOTE 9: OPERATING LEASES
The Authonty has entered Into certain agrecmcnts to lcase coplcrs, telecommUnications eqwpment and real estate whIch are clasSified as operating leases future mlTUmurn commitments for operating leases as of June 30, 2002, are IIstcd below Amounts are Included only for multi-year leases and for canccllablc leases for which an option to renew for thc subsequcnt fiscal year has been exerCised

- 28 -

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 9: OPERATlNG LEASES

f"cal Year Endmg June 30

Amount

2003

$ 5,867,78661

2004

2,838,94344

2005

943,99069

$ 9.650,720 74

Expenditures for rental of real property and eqUipment under operatmg leases for the year cnded June 30, 2002, totaled $4,844,341 08

NOTE 10: LONG-TERM DEBT Long-term oblIgatJons at June 30, 2002, and changes for the fiscal year then ended are as follows

July I, 2001

Increases

Compensated Absences S Capiial Leases

'66 563 86 S 11.146.17600

5.885.982 33 S 2.685.81846

S

11.713.33986 S 8511.86019 S

Decreases

June 30 2002

ArnOlUlb Due Within One Year

(2.273,210 46) S (4.001.013 05)

4.17933573 S 9.83164141

1.14008645 3.090.12741

(6,274,22351) S

1401091714 S

4 ~30 813 86

COMPENSATED ABSENCES Compensated absences are IIqUidatcd by the fund thcy are reported m and do not have scheduled futurc debt service reqUirements beyond one year
CAPITAL LEASES Thc Authonty acquires certam eqUipment through multi-year capital leases With varymg terms and optIOns At June 30, 2002, futurc mmlmum commitments under capital leases were as follows

- 29-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO TIm FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBlT"D"

NOTE 10: LONG-TERM DEBT
eAPITAL LEASES
FIScal Vear Endmg lune 30
2003 2004 2005 2006
Total Mmlmum Lease Payments
Less Imputed Interest
Present Value of Mmlmum Lease Payments

$ 3161,10336 2,493,00000 2,493,00000 2,49299900
$ 10,640, I02 36
(808,46095)
$ 9,831,64141

Intercst due on August I, 2003, m the amount of $393,75270 was recorded as a liability of the Entcrpnse Fund at June 30, 2002
NOTE 11: RISK MANAGEMENT
Public Entil}' Risk Pool
The Department of Commumty Health admlmsters for thc State of Georgia a program of health benefits for the employees of umts of government of the State of Georgia, umts of county government and local education agencies located wIthm the State ofGeorgJa 11us plan tS funded by partlctpants covered m thc plan, by cmployers' contnbutlons paId by the various urnts of government partlclpatmg m the plan, and appropriations madc by thc General Assembly of GeorgIa The Department ofCommumty Health has contractcd ",,1th Blue Cross Blue Shield of GeorgJa to process claIms m accordance WIth the State Employees' Health Bencfit Plan as establIshcd by the Dcpartment of Community Health
Other Risk Management
The Department of Admmlstratlve ServIces (DOAS) has the responsibility for the State of GeorgIa of makmg and carrymg out dCClSlons that WIll mmlmlze the adverse effects of accidental losses that Involve State government asset~ The State belIeves It IS more economical to managc ItS rIsks internally and set ~Ide assets for claim settlcment Accordmgly. DOAS processes claIms for rIsk of loss to whIch thc State IS exposed. mcludmg general lIabIlity. property and casualty, workcrs' compensatIOn, uncmployment compensatlon, and law cnforccment officers' mdemmficatlon LimIted amounts of commerCial msurance are purchased applicable to property, employee and

- 30-

GEORGIA TECHNOLOGY AUTHORITY NOTES TO TIlE FINANCIAL STATEMCNTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 11: RISK MANAGEMENT
Other Risk Management
automobile lIabilIty, fidelIty and certam other nsks The Authonty IS part of the State of Georgia reportmg enllty, and as such, IS covered by the State of Georgia nsk management program admmlstered by DOAS PremIUms for the nsk management program are charged to the vanous state organizatIOns by DOAS to provide claims servlcmg and claims payment

NOTE 12: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Authonty participates m the Employees' Retirement System of Georgia ("ERS"), a smgleemployer, defined benefit plan establIshed by the General Assembly of Georgia for the purpose of provldmg retIrement allowances for employees of the State of Georgia
The benefit structure of ERS IS defined by State statute and was slgmficantly modified on July 1. 1982 Unless elected otherwise, an employee who currently mamtams membership WIth ERS based upon State employment that started pnor to July I, 1982, IS an "old plan" member subject to the plan provISIons m effect pnor to July I, 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 rellrement benefits after completIOn of 10 years of creditable service and attamment of age 65 If 10 years of service IS completed and age 60 IS reached. the member may rellre With a reduced benefit Addillonally, there are certam provISIons allowmg for rellrement after 25 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 twenty-four consecutive calendar months of salary, the number of years of creditable service. and the member's age at rellrement Postrel1rement cost-of-lIvmg adjustments are also made to member's benefits The normal retirement pension IS payable monthly for lIfe, however, optIOns are available for distribution ofthe member's monthly pcmlOn at reduced rates to a deSignated benefiCiary upon the member's death Death and disability benefits arc also aVllllable through ERS
In addition, the ERS Board of Trustecs created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998 The SRBP was established as a qualified governmental excess benefit plan m accordance WIth SectIOn 415 of the Internal Revenue Code (IRq as a portIOn ofERS The purpose of SRBP IS to proVide retirement benetits to employees covered by ERS whose benefits are otherwise limited by IRe 415
The ERS issues a financial report each fiscal year which may be obtlllned through ERS - 31 -

GEORGIA TECHNOLOGY AUTHORITY NOTES TO TIlE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE 12: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy As establIshed by Stale statute, all full-time employees of the State of Georgia and Its polItical
SUbdivIsions, who are not members of other state retuement systems, are elIgible to partIcIpate In the
ERS Both employer and employee contnbutlOns are establIshed by State statute Member contrIbUtions under the old plan are four percent (4%) of annual compensatIon up to $4,200 00 plus SIX percent (6%) of annual compensatIOn In excess of$4,200 00 Under the old plan, the State pays member contrIbutions In excess of one and one-fourth percent (I 25%) of annual compensation Under the old plan, these Authonty contnbutlons are Included In the members' accounts for refund purpose~ and are used In the computation of members' earnable compensatIOn for the purpose of computing retirement benefits Member contnbutlons under the new plan are one and one-fourth percent (I 25%) of annual compensation The Authonty IS also reqUIred to contrIbute at a specIfied percentage of active member payroll determined annually by actuanal valuatIOn
Employer contnbul1on~ made to the plan dUrIng fiscal year 2002 amounted to $4,027,94265 These contnbutlOns met the reqUIrements of the plan There IS no net pensIOn oblIgation for the plan
Annual Pension Cost The required contnbutlon for 2002 was determined as part of the June 30, 200 I, actuanal valuation USing the entry age actuanal cost method The actuanal assumptIOns Included la) seven percent (7%) Investment rate of return, lb) projected salary Increases due to inflation ofthree and one-halfpercent (3 5%) per year, and (c) projected salary Increases due to semonty/ment raIses of five and two-tenths percent (52%) to nine percent (9 0%) per year The actuarIal value of assets was determined USing techniques that smooth the effects of short-term volatility In the market value of Investments over a five-year penod ERS' actuarial funding excess IS being amortized as a level percentage ofproJccted payroll on an open basiS The employer contrIbUtions are projected to lIqUIdate the actuanal accrued funding excess WithIn forty (40) years based upon the actuarIal valuation at June 30, 2001
Actuarial and Trend Information Actuanal and historIcal trend informatIOn IS presented In the ERS June 30, 2002, finanCial report whIch may be obtained through ERS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The Authonty partIcIpates In the Georgia Defined ContrIbution Plan ("GOCP") whIch IS a sIngleemployer defined contrIbutIOn plan established by the GeorgIa General Assembly for the purpose of provldmg retirement coverage for State employecs who are temporary, seasonal, and part-tIme and are not members of a publIc retirement or pensIOn system GOCP IS administered by the Employees' Retirement System Board of 1 rustees

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GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE 12: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits A member may retire and elect to receive penodlc pa}ments aftcr attamment ofage 65 The payment wIll be based upon mortality tables and mterest assumplions to be adopted by the Board If a member has less than $ 3,500 credit to hlslher account, the Board ha~ the optIOn of reqUIring a lump sum dlstnbutlOn to the member ill lIeu ofmakmg penodlc payments Upon the death ofa member, a lump sum dlstnbUtlon equalIng the amount credited to hlslher account Will be paid to the member'~ designated beneficiary Bcncfit proVISIOns are establIshed by State statute
The Employees' Retirement System of Georgia (ERS) Issues a finanCial report each fiscal year wluch may be obtamed through ERS
Contributions and Vesting Member eontnbutlons are seven and one-halfpercent (7 5%) of gross salary There are no employer contnbutlOns ContnbutlOn rates are establIshed by State statute Earmngs are credited to each member's account m a manner estabhshed by the Board Upon termmatlon of employment, the amount of the member's account IS refundable upon request by the member The Authonty's payroll for the year ended June 30, 2002, for employees covered by GOer wa.' $153,99342 The Authonty's total payroll for all employees was $37,770,203 01
Contributions and Vesting Total contnbutlOns made by employees durmg fiscal year 2002 amounted to $11.55091 which represents 7 5% of covered payroll These contnbutlons met the reqUIrements of the plan

NOTE 13: POSTEMPLOYMENT BENEFITS
In addition to the pensIOn benefits descnbed m Note II, the State ofGeorgia proVides postretlremcnt health care benefits through the State Hcalth Benefit Plan to retirees pUThuant to OCGA SectIOn 4518 An mdlvldual ehglble for these benefits must have been a full lime employee at the time of relirement of either the State of Georgia or a county SOCial service agency and must be recelvmg monthly retirement benefits from ellher the ERS or a county employee~' retirement system The State Health Benefit Plan (Plan) IS a publIc enlity nsk pool funded by employee and employer eontnbutlOns Employees and retirees subject to the Plan contnbute amounts determmed by the Department ofCommumty Health for vanous health msurance plans The vanous agencies of the State contnbute to the health msurance fund based upon amounts recommended by the Department ofCommumty Health and set forth m the State of Georgia's Appropnatlons Act The plan IS funded on a "pay-as-you-go" basiS Expenses of the Plan melude proVISions for mcurred but not reported chums The portion of employer contributIOns and expenses attnbutable to postretirement health care benefits cannot be reasonably estimated

- 33 -

GEORGIA TECHNOLOGY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 14: LEAVE POLICIES
Employces earn ten hours of sIck leave each month With a maxImum accumulatIOn of nmety days Unused accumulated sIck leave does not vest WIth thc employee-and IS forfeited upon retirement or termination of employment
Employees earn annual leave rangmg from ten to fourteen hours each month depending upon the employees' length of contlnuou~ State servIce WIth a maJ<Imum accumulation of forty five days Employees are paId for unused accumulated annual leave upon retIrcment or termlna\lon of employment See Note IE - Compen~ated Absences Ccrtwn employees who retire WIth one hundred and twenty days or more offorfelted annual and SIck leave are entitled to additional <;crvlce crcdlt In the Employees' Retirement System of Georgia

NOTE IS: CONTINGENCIES
Lltlgatlon, claIms and assessments filed against the Authonty, If any, are generally conSIdered to be actions against thc State of GeorgIa Accordingly, slgmficant litigation, claJm~ and asses~men~ pending against thc State of GeorgIa are dIsclosed In the State of Georgia Comprchenslve Annual FinanCial Report for the fiscal year ended June 30, 2002

NOTE 16: PENDING INVESTIGATION
Dunng audIt fieldwork, management of the Georgia Technology Authonty Informed the Departmcnt of AudIts that an Internal investigation had uncovered poSSible fraud In payments to a cable and wifing contractor and that the Georgia Bureau of InvestigatIOn and the Attorney General's office were conducting an Investlgatlon of the matter As of the date of this rcport, the investigation had not been concluded

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SUPPLEMENTARY INFORMATION
- 35 -

GEORGIA TECHNOLOGY AUTHORITY RECONCILIATION OF SALARIES YEAR ENDED JUNE 30, 2002

SCHEDULE "1"

Total per Annual Supplement
Accruals Salanes Payable June 30, 2001 June 30, 2002
Compensated Absences Payable June 30, 2001 June 30, 2002
Total per Report

$ 38,812,33868
-4,672 25 62,98842 -4,982,78879 3,882,336 95
$ =.,;3;.;,7,;,;7',;.7~0',;;,20;,;3;.;0;,;1=

See notes to the finanCial statements

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORT
- 39-

RUSSPLI W. HINTON
STATE AUDITOR
(<4041656-~174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 WJ.. hmgton Street S W. SUIlC 214
Allanl., Georg.. 10334-l!400
March 24, 2003

Honorablc Sonny Perdue, Governor Membcrs of the General Assembly of Georgm Members of the Georgia TeLhnology Authonty
and Honorablc Thomas L Wadc, ActIng ChleflnfonnatlOn Officer and ActIng Executlve Dlrcctor
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITlNG STANDARDS
Ladles and Gentlemen
We have audited the financIal statcments of the Georgia Technology Authonty as ofand for the ycar cnded lune 30, 2002. and have Issued our report thereon dated March 24, 2003 ThIs report wa~ quahfied for a scope hmltallon due to apparent mlsappropnatlOns of Georgia Technology Authonty assets and other undocumented cxpenses, a~ Idenllfied In the auditor's rcport on the basiC finanCial statements We conducted our audIt In accordance with auditIng standards gcnerally accepted In the Untted States of Amenca and thc ~tandards apphcable to financIal audits contained In GovernmenJ Audumg Standards, Issued by thc Comptroller Gcneral ofthc Untted States
ComplIance
As part of obtainIng reasonable assurance about whether the Georgia Technology Authonty's finanCial statements are free of matenal mlsstatemcnt, wc perfonned test~ of Its complIance With certain proVISIOns oflaws, regulatIOns. contracts and grants. noncomphance W1th whIch could have a dlrcct and matenal effect on thc determInallon of financial ~tatemcnt amounts However, proVIdIng an opmlOn on comphance wlth thosc proVISIOns was not an objectIve of our audlt, and accordingly. we do not express such an opInIOn The re~ults ofour tests dIsclosed no Instanccs ofnoncomphance that are reqUired to be reported under Government Audl/I/l!: Standards

- 41 -

Intcrnal Control Over Financial Reporting
In planning and perfonmng our audit, we considered the Georgia Technology Authonty's Internal control over financial reporting m order to detennlne our auditing proccdures for the purpose of expressing our opinion on the finanCial statements and not to prOVIde assurance on the Intcrnal control, over finanCial reporting However, we noted certain mattcrs involving the Internal control over finanCial reporting and Its operation that we conSider to be reportable conditions Reportablc condltlons Involve matters conung to our attentIOn relating to slgruficant deficlcncles In the deSign or operatIOn ofthe Intcrnal control ovcr finanCial reporting that, In our Judgment, could adversely affect thc Georgia Technology Authonty's ability to record, proccss, summanze and rcport financial data consistent With assertIons of management In the finanCial ~tatements The rcportable condltlOn~ are descnbcd m the accompanYing Schedule of Fmdlngs and Questioned Costs as Item FS-980-02-01 and FS-980-02-02
A matenal weakness IS a condition m which the deSign or opcratlOn of onc or more ofthc Internal control components docs not reduce to a relatively low lcvel the nsk that misstatements m amounts that would be matenal In rclatlOn to the finanCial statements bemg audited may occur and not bc dctected wlthm a timely penod by employees m the nonnal course of perfonnmg their asSigned functIOns Our conSideration of the mternal control over financIal rcportlng would nOl necessanly dlsclosc all matters In the Internal control that might bc reportablc conditions and, accordingly, would not necessanly disclose all rcportable conditIOns that arc also conSidered to be matenal weaknesses However, we conSider Item FS-980-02-01 to be a matenal weakness
This report IS Intended solely for the mfonnallon and use of management and IS not Intended to be and should not be used by anyone other than these speCified parties
Respectfully submitted,
~~~
Ru ell W Hinton, CPA, CGFM State Auditor
RWH.et
- 43 -

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS
- 45-

GEORGIA TECHNOLOGY AUTHORlfY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
EXPENSESfLIABlLlTIES/DlSBURS EMENTS - - -Inadequate Accounting Proccdures
Reportable CondltlOnlMatenal Wcakness Finding Control Nwnber FS-980-02-01
Our examination Included a revIew of the Internal accounting controls and accounting proccdures utilized by thc GeorgIa Technology Authonty (Authonty) In processing expenses paid to a certain vendor from thc Telephonc Billing object class Included In Goods and Services operating expenscs ThIs object class capture~ cxpenses assocIated WIth prOViding telecommunIcatIOns servIces to customers of the Authonty The vendor, as a contractor of the Authonty, proVided cable and wmng servIces and repaIrS at the faclhtles of customcrs of the Authonty Total expenses In the Telephone BIllings object class totaled $84,338,695 67 and total expenses recorded for the vendor totaled $6,532,03670 Management of the Authonty faIled to maintain effective controls to determine whether servlccs paid for by the Authonty werc actually received by the Authonty's customers lbe follOWing deficlenclcs were noted
I) Docwnentatlon supporting a slgruficant number of invOIces receIved from the vendor for servIces performed for customers of the Atlanta regIOn could not be proVIded for audit, nor was there any indIcation that the Authonty penodlcally revlcwed the onglnal records maintained by the vendor to substantiate the InVOICCS Thcsc InVOICCS amounted to $3,683,01928 of Authonty expenses to the vendor Other dcficlencles noted In the Authonty's proccdurcs for maintenance of documcntatlon supporting the remalmng InvOIce~ expenscd dunng fiscal year 2002 are as follows
There was no conslstcncy In the documentatIOn submllted by the vendor to support the inVOIces For example, labor summanes, indiVidual time sheets, etc, to document labor hours bIlled by the vendor and receipts to docwnent matenals purchased were submitted In some Instances, but not In others
DocumentatIOn malnlaJned often did not fully support the transaction The vendor was allowed to inVOIce for blocks of hours, whIch could not be Identified to actual work performed or to the specIfic customer served InVOIces bIlled to the Authonty With thcJob name of "block time" amounted to $1,617,471 81
2) The Internal control procedures utIhzed by the Authonty did not proVide for adequate momtonng of the propnety and progress of cable and/or wmng projects as follows
No umform format was consIstently utIlIzed for customer orders, mternal cost proposals or cost propo~als submitted to customers (whIch Included the Authonty's mark-up and service order charge) to ensure that the Authonty paId the vendor only for work authonzed and for work whIch was actually and adequatcly performed
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GEORGIA TECHNOLOGY AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENSES/LlABILlTIESIDISBURSEMENTS Inadequate Accountmg Procedures Reportable CondlhonJMatenal Weakness fIndIng Control Numbcr fS-980-02-0l (contInued)
In the Authonty's Atlanta regIOn, Authonty personnel approved InVOices for purchases of
matenals by the vendor that could not be Idcntlfled to actual work performed or to the specific customer scrved Matenals purchased by the vendor were Includcd on InVOices to the Authonty With the vendor's mark-up 000% added
3) The Internal control procedures utilized by the Authority did not provide a formal process to accumulate all costs of a particular cable and/or wmng project to ensure that all costs wcre Identified and passed on to the Authonty's customers As a result, the Authonty could not perform the pnmary function associated v,'lth enterpnse fund accountmg, which IS the determmatlon of profitability or the cost to the general government, Ie, the State of Georgia Project costs could Include labor hours of Authonty techmclans, matcnals purchased by the Authonty, and labor and matcnals inVOiced by the vendor The Authonty fatled to prOVide a methodology for trackmg or momtonng these costs as follows
The Authonty did not uhllze Its accountIng system to accommodate the determInatIOn of profitability by proVidIng a common Identifier between the accounts payable system utlhzed to process costs and the billIngs system utilized to bill customers In addition, no manual procedures were In place at a management level to perform the task of comparIng the costs of proVidIng services to customer billings
The Job namIng conventIOn uhhzed by the Authonty did not prOVide for a direct Identification of the customer name, which IS how billIng records are mamtaIned Accounts payable records Included the vendor's InVOice mformatlOn along With the Job name We found that the Job names consisted of a variety of htles, which made any companson of project costs to billIngs unduly difficult to perform
These deficienCies were a result ofthe Authonty's failure to adcquately estabhsh clear wntten pohcles and procedures over cable and wmng services and repatrs performed by outSide vendor; Such defiCienCies did result In erroneous payments to the vendor, misstatements In the finanCial statements going undetected and InCOnSistencies In the review and approval proce\s over vendor invOices An Investigation by the Georgia Bureau ofinvestlgatlOn IS currently In progress for payments made to the vendor
The Authonty should establish the necessary pohcles and procedures to ensure that there are adequate Internal controls over cable and wifing services and repairs performed by outSide vendors
-48-

GEORGIA TECHNOLOGY AUTHORITY SCHEDULE OF FINDINGS AND OUES fIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CAPITAL ASSETSfPROPERTY MANAGEMENT InadequacIes m Operation o(Asset Management Module Reportable CondItion Fmdmg Control Number FS-980-02-02
As part ofour audIt ofthe basIc financIal statements for the State of Georgia and our stand-alone audit ofGeorgia Technology Authonty (Authonty). a component umt of the State of GeorgIa. tesung ofthe asset management module of the PhoeniX financIal system was c~nducted Our testmg disclosed that the asset management module table "DIST_LN" and the general ledger table "DXjRNL_LN_HlSr were out of balance WIth each other Out of balance amounts were found to eXist at 59 orgaruzatlonal Units of the State of Georgia At June 30, 2002, the cumulative out of balance amount for these 59 organizatIonal Units was detenmned to be $210,530,022 55
The financial Impact of the above out of balance amount IS not a reflectIOn solely on the Authonty's financial statements but rather a reflectIon on the basiC finanCIal statement;, for the State ofGeorgta. as a whole This defiCiency IS mcluded wlthm the report of the Authonty due to Its operational responslblhty over the PhoeniX financial system. and m particular the assct management modulc, for the State of Georgia
The above defiCiency relating to the asset management module admlnlstcred by the Authonty resulted m the mIsstated balances on the general ledgers for the 59 orgamzatlonal umts ofthe Statc of Georgia for asset management transactIOns These mlsstatement~ were caused by numerous factors Thc pnmary factor was duphcate entnes bemg mdde for accumulated dcprecIatlOn Efforts to reverse the duphcate entnes were not successful smce the hnes for the reversmg entnes were mlssmg from the Journal hne and ledger tables
Thc Authonty should review the out of balance analySIS and prepare correcting Journal entncs and table corrections as needed The correcung Journal entnes should have thc same Identification numbers as the ongmal entries, when pOSSIble, m order to Identify whIch Journal entne~ arc bemg corrected
Also, to proVIde for mcreased control~ over thc asset management module. the Authonty should conSider placmg edits Wlthm the purchasmg and accounts payable modules whIch would reqUire users to route, to the a~set management module, all charges made to applIcable capital a~set expendlturc chart of accounts
Sub~equent to the close of the fiscal year, the Authonty posted adJustmgJournal entnes to corrcct a SIgnificant portIOn of the out of balance condition Identified above The overall Impact of these adjustments was approximately $209 mllhon, Icavmg a debll out of balance amount of$564,989 65 and a credIt out of balance amount of $574.92940 remammg to be corrected
-49-