Audit report, state of Georgia, Georgia Public Telecommunications Commission, a component unit of the state of Georgia, year ended June 30, 1998

lrt\ I\~ao
lRI
T45
tqq?-~~
AUDIT REPORT STATE OF GEORGIA GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION A COMPONENT UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30,1998
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXlllBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCE

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPES

3

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

GOVERNMENTAL FUND TYPES

4

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

6

E NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 SCHEDULE OF APPROVED BUDGET

28

2 CASH AND CASH EQUIVALENTS

29

3 INVESTMENTS

30

4 SCHEDULE OF OTHER OPERATING EXPENSES

32

5 RECONCILIATION OF SALARIES AND TRAVEL

33

6 RECONCILIATION OF PER DIEM AND FEES

34

7 SUMMARY OF SALARIES, TRAVEL, AND PER DIEM AND FEES

35

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

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION - TABLE OF CONTENTS -
SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

CLAuDE L. VICKERS
STATE AlJDI10R
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
December 28, 1998

Governor of the State of Georgia Members of the General Assembly of Georgia Members of the Georgia Public Telecommunications Commission
and Honorable Werner Rogers, Executive Director Georgia Public Telecommunications Commission
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through E) of the Georgia Public Telecommunications Commission as ofand for the year ended June 30, 1998. These financial statements are the responsibility of the Commission's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Governmental Accounting Standards Board Technical Bulletin 98-1, Disclosures About Year 2000 Issues, requires disclosure ofcertain matters regarding the year 2000 issue. The Georgia Public Telecommunications Commission has included such disclosures in Note 14 of the Notes to the Financial Statements. Because of the unprecedented nature ofthe year 2000 issue, its effects and the success of related remediation efforts will not be fully determinable until year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support the Georgia Public Telecommunications Commission's disclosures with respect to the year 2000 issue made in the Notes. Further, we do not provide assurance that the Georgia Public Telecommunications Commission is or will be year 2000 ready, that the Georgia Public Telecommunications Commission's year 2000 remediation efforts will be successful in whole or in part, or that parties with which the Georgia Public Telecommunications Commission does business will be year 2000 ready.
98ARL-2X

As described in Note 1, these financial statements were prepared on a prescribed basis of accounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
As more fully discussed in Section ill, Current Year Findings and Questioned Costs, material discrepancies were noted in the equipment inventory records of the Commission. Equipment inventory comprises the General Fixed Assets Account Group. We were unable to detennine the effects these discrepancies may have on the financial statements.
In our opinion, except for the effects on the financial statements ofthe adjustments, if any, as might have been detennined to be necessary had we been able to examine sufficient evidence regarding year 2000 disclosures described in the third paragraph, and except for the effects on the financial statements of the adjustments to the equipment inventory records that may be necessary as described in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position (statutory basis) of the Georgia Public Telecommunications Commission as of June 30, 1998, and the results of its operations (statutory basis) for the year then ended, on the basis of accounting described in Note 1.
Our audit was made for the purpose of fonning an opinion on the financial statements taken as a whole. The accompanying supplementary information (Schedules 1 through 7) is presented for purposes of additional analysis and is not a required part of the financial statements of the Georgia Public Telecommunications Commission. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, except for the effects ofsuch adjustments, if any, as might have been required had we been able to examine sufficient evidence regarding year 2000 disclosures, such information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Rea:~

CLV:gp 98ARL-2X

Claude L. Vickers State Auditor

FINANCIAL STATEMENTS - 1-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION COMBINED BALANCE SHeET (STATUTORY BASIS) ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30,1998

EXHIBIT "A"

GOVERNMENTAL FUND TYPES

SPECIAL

BUDGET

REVENUE

FUND

FUND

ACCOUNT GROUPS

GENERAL

GENERAL

FIXED

LONG-TERM

ASSETS

DEBT

TOTAL (Memorandum Only)

ASSETS

cash and cash EqUivalents (See SChedule)

$ 215,947.73

$

215,947.73

Investments (See Schedule)

$ 159,334.21

$

159,334.21

Accounts Receivable

Other

$ 1,241,750.13 $ 156,378.25

'1;

Less: Allowance for Doubtful Accounts

-72,275.00

$

1,398,128,38

-72,275.00

$ 1,241,750.13 $ 84,103.25

$

1,325,853.38

Notes Receivable

$ 100,988.79

$

100,988.79

Inventories

$

95,126.22

$

95,126.22

Fixed Assets Land, Buildings and Equipment

$ 91,630,743.63

$

91,630,743.63

Amount to be Provided for Payment of Accrued Compensated Absences Installment Purchase Commitments

$ 1,055,263.92 $ 10,824,659.82

1,055,263.92 10,824,659.82

$ 11,879,923.74 $

11,879,923.74

Total Assets

$ 1,336,876.35 $ 560,373.98 $ 91 ,630,743.63 $ 11,879,923.74 $

105,407,917.70

LIABILITIES AND FUND EQUITY

Uabilities Cash Overdraft (See Schedule) Accounts Payable Deferred Revenue Payroll Wlthholdings Compensated Absences Installment Purchases

$ 1,332,479,32 4,689,051.41 $ 215,666.00 220,310.82

-8,239.n

$
$ 1,055,263.92 10,824,659.82

Total Uabilities

$ 6,457,507.55 $ 8,239.n

$ 11,879,923.74 $

Fund Equity

Investment in General Fixed Assets

$ 91,630,743.63

$

Fund Balances

Reserved

Singleton Bequest

$ 338,540.88

WSVH FM Funds

36,500.00

Unreserved

Undesignated

1n,093.33

Deficit to be Funded in Subsequent Year $ -5,120,631.20

Total Fund Equity

$ -5,120,631.20 $ 552,134.21 $ 91 ,630,743.63

$

1,332,479.32 4,697,291.18
215,666.00 220,310.82 1,055,263.92 10,824,659.82
18,345,671.06
91,630,743.63
338,540.88 36,500,00
1n,093.33 -5,120,631,20
87,062,246.64

Total U8bilities and Fund Equity

$ 1,336,876.35 $ 560,373.98 $ 91,630,743.63 $ 11.879,923.74 $

105,407,917.70

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

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION . COMBINED STATEMENT OF CHANGES IN FUND BALANCE (STATUTORY BASIS)
GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 3D. 1998

EXHIBIT"B"

The notes to the financial statements are an integral part of this statement. -3-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION
STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
GOVERNMENTAL FUND TYPES
YEAR ENDED JUNE 30. 1998

EXHIBIT"C"

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 1998

EXHIBIT "COl

EXPENDITURES
OPERATING EXPENSES
TRAVEL
MOTOR VEHICLE PURCHASES
EQUIPMENT EqUipment Purchases LeaselPurchase of Equipment Rental of EqUipment
COMPUTER CHARGES Software EqUipment EqUipment Purchases Per Diem, Fees and Contracts Per Diem and Fees Contracts Computer Billings, DOAS
REAL ESTATE RENTALS
TELECOMMUNICATIONS
PER DIEM, FEES AND CONTRACTS Per Diem and Fees Contracts
Total Operating Expenses
CAPITAL OUTLAY
Per Diem, Fees and Contracts Per Diem and Fees Contracts
Total Capital Outlay
Total Expenditures
Excess of Funds Available under Expenditures

BUDGET FUND

SPECIAL REVENUE
FUND

TOTAL (Memorandum
Only)

$

156,012.70

$

14,428.88

$

156,012,70

$

14,428.88

$

264,448.13

1,663,455.55

40,785.56

$ 1,968,689.24

$

264,448.13

1,663,455.55

40,785.56

$ 1,968,689,24

$

43,605.41

607,874.12

45,179.48 157,815.29
415.72

$

854,890.02

$

48,345.91

$

387,910.17

$

43,605.41

607,874,12

45,179.48 157,815.29
415.72

$

854,890.02

$

48,345.91

$

387,910.17

$ 1,182,533.48 $ 5,553,184.50
$ 6,735.717.98 $
$ 25,655,831.43 $

34.314,00 $
34,314.00 $ 128,173.40 $

1,216,847.48 5,553,184.50
6,770.031,98
25,784.004.83

$

25.989,35

1.253,059.46

$

25,989.35

ct..

1,253,059.46

$ 1,279,048.81

$ 1,279,048.81

$ 37,470,922.03 $ 128,173.40 $ 37,599,095.43

-4,542,999.26

-765,269.81

-5,308.269.07

$ 32,927,922.77 $ -637,096.41 $ 32,290,826.36

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

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30. 1998

EXHIBIT"D"

FUNDS AVAILABLE REVENUES
Other Revenues Retained

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 35,601,169.00 $ 32,927,922.n $ -2,673,246.23

EXPENDITURES
Personal Services Operating Expenses Capital Outlay

$ 10,335,050.00 $ 10,536,041.79 $ 25,266,119.00 25,655,831.43
_ _ _-=.0:.;;..0.;:..0 1,279,048.81

-200,991.79 -389,712.43 -1,279,048.81

$ 35,601,169.00 $ 37,470,922.03 $ -1,869,753.03

Excess of Funds Available under Expenditures

$ -4,542,999.26 $ -4,542,999.26

The notes to the financial statements are an integral part of this statement. -6-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The Georgia Public Telecommunications Commission is an instrumentality of the State of Georgia and a public corporation. The Commission consists of nine (9) members, six (6) of whom are chosen by the Governor from the general public. The remaining three (3) ex-officio members are the State School Superintendent, the Chancellor of the Board of Regents of the University System of Georgia and the Commissioner of the Department of Technical and Adult Education. The Commission is assigned to the Board of Regents of the University System of Georgia for administrative purposes only. The Commission has decision making authority, the power to designate management, the ability to influence operations and is primarily accountable for its fiscal matters. In addition, the Commission may solicit and receive funds from the general public, corporate underwriters, and various public and private foundations as well as receive gifts, donations, contributions, or endowments from any person, firm, or corporation.
The Foundation for Public Broadcasting in Georgia, Incorporated (Foundation), a component unit of the Commission, assists the Commission in fulfilling its statutory responsibilities for providing educational and public broadcasting to the citizens ofthe State of Georgia. Funds raised by the Foundation are almost entirely devoted to the benefit of the Commission. The Foundation, incorporated on August 13, 1982, is governed by a board of directors which is currently comprised solely of the nine (9) members of the Georgia Public Telecommunications Commission.
During 1990, an act was passed by the State of Georgia General Assembly making the Commission a public corporation. This act allows the Commission to perform, and since July 1, 1990, the Commission has performed, certain functions previously performed only by the Foundation. This act also transferred all employees of the Foundation to the Commission. Since July 1, 1990, most expenses are borne directly by the Commission, however, the Foundation continues certain fund raising activities on behalf of the Commission.
The Foundation's financial statements have been blended with the Commission's financial statements. The blended component unit (the Foundation), although legally separate, is in substance a part of the Commission's operations. Complete financial statements of the Foundation can be obtained from the Commission which acts as fiscal agent for the Foundation.
The Georgia Public Telecommunications Commission (and its blended component unit) is considered a component unit of the State of Georgia and is included within the State of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational and financial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
As a result of including the Foundation as a blended component unit ofthe Commission for fiscal year 1998, the beginning fund balance ofthe Commission's Special Revenue Fund has been increased by $1,317,404.02.

-7-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 3D. 1998

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING A fund is an independent fiscal and accounting entity with a self-balancing set ofaccounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account groups are a reporting device used to account for certain assets and liabilities ofthe governmental funds not recorded directly in those funds. The funds and account groups presented in the accompanying financial statements are as follows:
GOVERNMENTAL FUND TYPES
BUDGET FUND - The fund used to account for activities and functions as set forth in the Amended Appropriations Act of 1997-1998. The Budget Fund is similar in nature to a General Fund as defined in generally accepted accounting principles in that the Budget Fund is used to account for all activities except those required to be accounted for in some other fund. The Budget Fund records the financial activity of the Georgia Public Telecommunications Commission.
SPECIAL REVENUE FUND - The fund used to account for specific revenues that are legally restricted to expenditures for specified purposes. The Special Revenue Fund accounts for the financial activity of the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit ofthe Georgia Public Telecommunications Commission.
ACCOUNT GROUPS
GENERAL FIXED ASSETS - The account group used to account for fixed assets used in governmental fund type operations. Fixed assets purchased are recorded at cost or at estimated historical cost ifhistorical cost is not practically determinable. Donated fixed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on general fixed assets.
The costs of normal maintenance and repairs that do not add to the value of assets or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life of assets are included in the General Fixed Assets Account Group.
GENERAL LONG-TERM DEBT - The account group used to report the noncurrent portions of certain governmental long-term liabilities, such as claims, judgments and compensated absences, which will be paid from future resources.
BASIS OF ACCOUNTING MEASUREMENT FOCUS
The Georgia Public Telecommunications Commission uses funds and account groups to report on its financial position and the results of its operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia. The accounting and financial reporting
-8-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING MEASUREMENT FOCUS
treatment applied to a fund is determined by its measurement focus. Governmental funds should be accounted for using the flow ofcurrent financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets and unreserved fund balance is a measure of available spendable resources.
GOVERNMENTAL FUND TYPES BUDGET FUND/SPECIAL REVENUE FUND
Except as disclosed in the following paragraphs, units of government of the State of Georgia record their Governmental Fund Type revenues and expenditures in accordance with the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities ofthe current period. Revenues that are accrued include primarily certain amounts earned under operating agreements with other parties. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgements which are recognized when the obligations are expected to be liquidated with expendable available financial resources.
Revenues and expenditures related to capital outlay projects financed through the Georgia State Financing and Investment Commission (See Note 15) are not budgeted by the Commission and therefore, are netted in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia, but differs from generally accepted accounting principles in that revenues and expenditures related to these projects should be recorded in the financial statements.
Contractual obligations for goods and services which have not been received at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. The recognition of encumbrances as expenditures and liabilities is in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, butis not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation offund balance.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances ofthe Governmental Fund Type in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures.

-9-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUDGET The budget of the Georgia Public Telecommunications Commission (Budget Fund) is adopted on a basis consistent with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia and is compiled in the same manner as all State departments. Expenditures are classified by budget unit object classes as provided in Act No. 405 of Georgia Laws 1997 (as approved April 24, 1997), and amended by Act No. 502 of Georgia Laws 1998 (as approved February 16, 1998) and by Act No. 518 of Georgia Laws 1998 (as approved March 9,1998). This budget is considered to be an appropriated budget and is referred to in these notes as the Amended Appropriations Act of 1997-1998.
The Special Revenue Fund does not prepare a budget.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include demand deposits with banks and other financial institutions, and the State investment pool that has the general characteristics of demand deposit accounts in that management may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. Cash and Cash Equivalents also include short-term, highly liquid investments with maturities ofthree months or less from the date of acquisition.
Included in Cash and Cash Equivalents is a short-term investment in a certificate ofdeposit. This investment is valued at cost which approximates fair value.
The Georgia Public Telecommunications Commission participates in an investment pool managed by the State of Georgia's Office of Treasury and Fiscal Services (OTFS) referred to as Georgia Fund 1. Georgia Fund 1 is an external investment pool that is not registered with the Securities and Exchange Commission (SEC) but does operate in a manner consistent with the SEC's Rule 2a7 ofthe Investment Company Act of 1940. OTFS manages Georgia Fund 1 in accordance with policies and procedures established by State law and the State Depository Board, the oversight Board for OTFS. This investment is valued at the pool's share price, $1.00 per share.
The Commission 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.
INVESTMENTS Investments are defined as those financial instruments with terms in excess of three months from the date of purchase and certain other securities held for the production ofrevenue.
The Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, has accumulated a portfolio of stocks through donations which has been utilized by the Foundation to produce revenue for the use ofthe Commission. These securities are valued at fair value.

- 10-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXlllBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE Accounts receivable (Other) 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 by the Georgia Public Telecommunications Commission. However, management has established a contra-asset valuation account to indicate the portion of accounts receivable due and estimated to be uncollectible in the amount of $72,275.00 for the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission.
NOTE RECEIVABLE In May 1995, a donation was made to the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, consisting of a house and land. The donation included a note ;, receivable to be received in equal monthly installments of $923.59, including interest at 9.75%, to a maturity date of January 2021. As of June 30, 1998, the remaining balance on this note excluding interest was $100,988.79.
RESERVED FUND BALANCE Reserves represent those portions of fund equity not appropriable for expenditure or legally segregated for a specific future use. The following is a brief description of the reserves reflected in the accompanying financial statements:
SINGLETON BEQUEST The Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, has received a bequest offunds to be used for programing about the environment and child abuse. These funds are restricted for subsequent year expenditures as specified by the donor's bequest.
WSVH FM FUNDS During fiscal year 1993, the Georgia Public Telecommunications Commission assumed the operations of WSVH FM of Savannah. As a part ofthat transaction, the Foundation accepted a donation from WSVH FM and agreed to maintain the funds specifically for operation of WSVH FM. These funds and earnings thereof are restricted for subsequent year expenditures of WSVH FM.
INVENTORIES Inventories of supplies are valued at weighted average cost on the Combined Balance Sheet (Statutory Basis). The consumption method is used to account for the use of inventories. Under the consumption method, the costs of inventories are recorded as expenditures when the inventories are consumed rather than when purchased.
COMPENSATED ABSENCES Compensated absences represent obligations ofthe Georgia Public Telecommunications Commission relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual and compensatory leave in which payment is probable
- 11 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPENSATED ABSENCES and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount will not be liquidated with expendable available financial resources.
The liability for compensated absences at year end is reported in the General Long-Tenn Debt Account Group for governmental funds.
MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the financial statements are captioned "Memorandum Only" because they do not represent consolidated financial infonnation and are presented only to facilitate financial analysis. The columns do not present infonnation that reflects financial position in confonnity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
COMPARATIVE DATA Comparative total data for the prior year has not been presented in the accompanying financial statements due to the inclusion of the Foundation for Public Broadcasting in Georgia, Incorporated in the Georgia Public Telecommunications Commission's financial report as a blended component unit of the Commission (see Note 1). In previous years the financial statements ofthe Foundation have been presented as a stand-alone financial report.
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 of the 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 ofthe United States or of the State of Georgia.
(2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
(3) Bonds ofany public authority created by the laws ofthe State ofGeorgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose.
(4) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

- 12-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

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

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

; As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has : adopted policies which allow agencies ofthe State of Georgia the option of exempting demand deposits from - the collateral requirements.

CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1998, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk for the Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit ofthe Commission.

Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the CommissionIFoundation or by its agent in the Commission's or Foundation's name.

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

Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$-1 11844160 $ 68062873 $ 282703 72 $==~O~Oo!O $ 39792501

CATEGORIZATION OF INVESTMENTS For purposes ofanalysis ofcustodial credit risk, investments consist of common stock. Investments are stated at fair value and are summarized and classified as to custodial credit risk within the categories described
below:

- 13 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS Category 1 - Insured or registered, or securities held by the Foundation or its agent in the Foundation's name.

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

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

The carrying amounts ofinvestment balances as ofJune 30, 1998, are categorized below. These amounts also include amounts maintained in an investment pool by the Office of Treasury and Fiscal Services for the Commission which are not subject to risk categorization.

Type of Investment Stocks State Investment Pool
NOTE 3: OPERATING LEASES

Risk Categories

2

3

Reported
Amount!
Fair Value

$ 159.334,21 $

0,00 $_~=o~,o!!.o $ 159,334.21

1.910,01

$ 161.244,22

The Georgia Public Telecommunications Commission has entered into certain agreements to lease copiers and transmitter space which are classified as operating leases. Future minimum commitments for operating leases as of June 30, 1998 are listed below. Amounts are included only for multi-year leases and for cancellable leases for which an option to renew for the subsequent fiscal year has been exercised.

Fiscal Year Ending June 30

1999

$ 50,578.92

2000

51,778.92

2001

39,044.72

2002

18,000.00

Total Future Minimum Commitments

$ 159.402.56

Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 1998, totaled $40,669.45.

- 14-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"E"

NOTE 4: INSTALLMENT PURCHASE COMMITMENTS

The Georgia Public Telecommunications Commission acquires certain equipment through multi-year installment purchases with varying terms and options. The majority of these agreements contain fiscal funding clauses in accordance with O.C.G.A. 50-5-64 which prohibits the creation of a debt to the State of Georgia for the payment of any sums under such agreements beyond the fiscal year of execution if appropriated funds are not available. However, if renewal of such agreements is reasonably assured, installment purchases requiring appropriation by the General Assembly of Georgia are considered noncancellable for financial reporting purposes.

At June 30, 1998, future minimum commitments under installment purchases for equipment are as follows:

Fiscal Year Ending June 30
1999 2000 2001 2002 2003 Thereafter
Total Future Minimum Commitments
Less: Amounts Representing Interest
Present Value ofFuture Minimum Commitments

$ 2,087,410.68 2,083,803.96 2,083,803.96 2,083,803.96 2,083,803.96 2,309,919.18
$12,732,545.70
1,907,885.88
$10.824.659.82

NOTE 5: FINANCING AGREEMENT/ACCOUNTS PAYABLE

The Georgia Public Telecommunications Commission entered into a financing agreement with the Public Broadcasting Service to defer payment of the 1998 National Program Service Assessment. Payments will be made in 36 monthly payments beginning August 31, 1998. The $2,062,632.00 has been recorded as a current year expenditure and is included in accounts payable on Exhibit "A" of this report. The payment schedule is as follows and does not include interest:

Fiscal Year Ending June 30
1999 2000 2001 2002
Total Payments

$ 658,790.00 652,190.91 692,416.64 59,234.45
$ 2.062.632.00

- 15 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT"E"

NOTE 6: CHANGES IN GENERAL FIXED ASSETS

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

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

'');

Land

Buildings

Equipment

Total

Balance July 1, 1997

$ 1,278,948.00 $ 25,645,146.00 $ 46,982,502.83 $ 73,906,596.83

Additions

436,236.00 19,925,800.96 20,362,036.96

Deductions

2,637,890.16 2,637,890.16

Balance June 30, 1998

$ 1.278.948.00 $ 26,081.382.00 $ 64.270.413.63 $ 91.630.743.63

NOTE 7: GENERAL LONG-TERM DEBT

CHANGES IN GENERAL LONG-TERM DEBT A summary of changes in General Long-Term Debt for the year ended June 30,1998, follows:

Installment Compensated Purchase
Absences Commitments

Total

Balance July 1, 1997

$ 969,318.87 $ 5,100,311.68 $ 6,069,630.55

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

79,837.48 6,107.57

7,000,000.00 1,275,651.86

79,837.48 6,107.57
7,000,000.00 1,275,651.86

Balance June 30, 1998

$1.055.263,92 $10.824.659,82 $11.879.923,74

NOTE 8: RISK MANAGEMENT

Public Entity Risk Pool

The State Personnel Board, Merit System of Personnel Administration administers for the State of Georgia a program ofhealth benefits for the employees ofunits ofgovernment ofthe State of Georgia, units ofcounty 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

- 16-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"E"

NOTE 8: RISK MANAGEMENT

Public Entity Risk Pool

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 ofGeorgia ofmaking ; and carrying out decisions that will minimize the adverse effects of accidental losses that involve State ;: government assets. The State believes it is more economical to manage its risks internally and set aside assets . for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed,
including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Commission and its blended component unit are part ofthe State of Georgia reporting entity, and as such, are 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.

In addition, liability and crime insurance has been purchased by the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit ofthe Commission, for the Foundation's Board ofDirectors.

NOTE 9: DEFERRED COMPENSATION PLAN

The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue

Code Section 457. The plan, available to employees of the State of Georgia and county health departments,

permits such employees to defer a portion of their salary until future years. Participation in the plan is

~.

optional. Participants choose the option or options in which they wish to participate. The deferred

compensation is not available to employees until termination, retirement, death, or unforeseeable emergency.

All amounts ofcompensation deferred under the plan, all property and rights purchased with those amounts,

and all income attributable to those amounts, property, or rights are (until paid or made available to the

employee or other beneficiary) solely the property or rights ofthe State of Georgia subject only to the claims

of the State's general creditors. Participant's rights under the plan are equal to those of a general creditor of

the State of Georgia fu. 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, 1998.

A change in the Internal Revenue Code Section 457, effective August 20,1996, requires that by January 1, 1999 all existing eligible deferred compensation plans must be held in trust for the exclusive benefit of participants and their beneficiaries. The State of Georgia's plan was converted effective July 1, 1998.

- 17-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1998

EXHIBIT"E"

NOTE 10: RETIREMrnNTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Georgia Public Telecommunications Commission 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 of providing retirement allowances for employees of the State of Georgia.
The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.
Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive nonnal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 30 years of service regardless ofage.
Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest eight consecutive calendar quarters ofsalary, the number ofyears ofcreditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The nonnal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
The ERS issues a financial report each fiscal year which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees ofthe State of Georgia and its political subdivisions, who are not members ofother state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Commission's payroll for the year ended June 30, 1998, for employees covered by ERS was $6,632,482.90. The Commission's total payroll for all employees was $7,789,302.09.
Under the old plan, member contributions consist of4% ofannual compensation up to $4,200.00 and 6% of annual compensation in excess of$4,200.00. Of these member contributions, the employee pays the first 1.25% and the employer pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% of annual compensation paid by employee. The Commission also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 1998, the ERS employer contribution rate for the Commission amounted to 15.34% of covered payroll and included the amounts contributed on behalf of the employee
- 18-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"E"

NOTE 10: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 1998 amounted to $1,100,454.43, of which $1,017,547.19 was made by the Commission and $82,907.24 was made by employees. These contributions met the requirements of the plan.
; Actuarial and Trend Information . Actuarial and historical trend information is presented in the ERS June 30, 1998, financial report which may
be obtained through ERS.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The Georgia Public Telecommunications Commission participates in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and parttime and are not members ofa public retirement or pension system. GDCP is administered by the Employees' Retirement System Board of Trustees.
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. Ifa 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 hislher account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
The Employees' Retirement System of Georgia (ERS) issues a financial report each fiscal year which may be obtained through ERS.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board. Upon termination ofemployment, the amount ofthe member's account is refundable upon request by the member. The Commission's payroll for the year ended June 30, 1998, for employees covered by GDCP was $454,082.49. The Commission's total payroll for all employees was $7,789,302.09.
- 19-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30,1998

EXHIBIT"E"

NOTE 10: RETIREMENTPLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions and Vesting Total contributions made by employees during fiscal year 1998 amounted to $34,056.75 which represents 7.50% of covered payroll. These contributions met the requirements ofthe plan.
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Plan Description The Georgia Public Telecommunications Commission participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer public employee retirement system (PERS) established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia.
TRS provides service retirement, disability retirement, and survivor's benefits for its members. A member is eligible for service retirement after the member (1) has attained the age of60 years and has at least ten years of creditable service, or (2) has at least 25 years of creditable service. For those members with 30 years of service or those age 60 with at least ten years of service, nonnal retirement benefits are equal to 2% of the average ofthe member's two consecutive highest paid years of service multiplied by the number ofyears of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of 1/12 of 7% for each month the member is below age 60, or by 7% for each year or fraction thereofby which the member has less than 30 years of service. The nonnal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death.
Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on member's creditable service (minimum of 10 years of service) and compensation up to the date of death or up to time of disability.
Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions are refunded with interest.
Funding Policy Employees of the Commission who are covered by TRS are required to pay 5% of their gross earnings to TRS. The Commission makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees as advised by their independent actuary. For fiscal year 1998, the employer contribution rate was 11.81% for covered employees. The interest rate assumption (rate ofreturn on investments) was 7.50%. The Commission's payroll for the year ended June 30, 1998, for employees covered by TRS was $431,588.30. The Commission's total payroll for all employees was $7,789,302.09.
- 20-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT "E"

NOTE 10: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Funding Policy Total contributions to the plan made during fiscal year 1998 amounted to $72,555.04, of which $50,970.57 was made by the Commission and $21,584.47 was made by employees. These contributions represented 11.81% (Commission) and 5% (employees) of covered payroll.
Total contributions from all employers to TRS for the year ended June 30, 1998, were $710,409,000.00. The Commission's contribution for the year ended June 30, 1998, of $50,970.57 was actuarially determined and represented .0071% oftotal contributions made by all participating employers.
" Actuarial and Trend Information Actuarial and historical trend infonnation is presented in the TRS June 30, 1998, fmancial report which can be obtained through TRS.
NOTE 11 : LEAVE POLICIES
Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employees' length of continuous State service with a maximum accumulation offorty five days. Employees are paid for unused accumulated annual leave upon retirement or tennination ofemployment. See Note 1 - Compensated Absences.
Certain employees who retire with one hundred and twenty days or more of forfeited annual and sick leave are entitled to additional service credit in the Employees' Retirement System of Georgia.
NOTE 12: DEFICIT FUND BALANCE
At June 30, 1998, the Budget Fund ofthe Georgia Public Telecommunications Commission had a deficit fund balance of $5,120,631.20. This deficit will be funded in subsequent years through either increased fundraising efforts or through increased support by the State of Georgia.
NOTE 13: DONATED SUPPORT
Donated support to the Georgia Public Telecommunications Commission during fiscal year 1998 which was not reflected on the fmancial statements ofthe Commission was as follows:

- 21 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXIllBIT "E"

NOTE 13: DONATED SUPPORT

Governmental Agency Georgia Department ofEducation

$ 69,134.37

Other Sources

497.408.20

Total

$ 566.542,57

NOTE 14: COMPLIANCE WITH YEAR 2000 ISSUES

The Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, has identified numerous computer systems and other electronic equipment (Systems) that are critical to operations which are affected by the year 2000 issue. The year 2000 issue is the result of shortcomings in many electronic data processing systems and other equipment that make operations beyond 1999 troublesome. These Systems include both "outsourced" Systems where the State of Georgia through the Department of Administrative Services (DOAS) is responsible for remediation efforts and "in-house" Systems where the Commission and the Foundation are responsible for remediation efforts. The following stages have been identified as necessary to implement a year 2000 compliant systems.

Awareness Stage - Encompasses establishing a budget and project plan for dealing with the year 2000 issue.

Assessment Stage - The actual process ofidentifying all of its systems and individual components of the systems to check for compliance.

Remediation Stage - When changes are made to systems and equipment.

Validationffesting Stage - The process of ensuring that the changes made to systems and equipment will produce a year 2000 compliant system.

It will be necessary for the Commission and the Foundation to progress through all four of these stages for each computer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected. The following is a list of the Systems, their primary function, and the year 2000 compliance stage the Systems are in as defined by Governmental Accounting Standards Board Technical Bulletin No. 98-1.

- 22-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"E"

NOTE 14: COMPLIANCE WITH YEAR 2000 ISSUES

Systems

Primary Function

Compliance Stage at June 30. 1998

Compliance Stage Necessary for Completion

1) Statewide Systems (DOAS)

General accounting, fixed assets, etc.

Remediation Stage

Validationffesting Stage

2) First Alert

Provides weather alert to PeachStar Education Services. Satellite viewers in schools

Assessment Stage

Remediation and Validationffesting Stages

'3) GPB Agency Production Facilities Equipment

Supports Broadcast operations

Assessment Stage

Remediation and Validationffesting Stages

4) GPB Television and Radio Stations (22)

Terrestrial Transmission Facilities located statewide

Assessment Stage

Remediation and Validationffesting Stages

5) Agency LAN Servers and LAN Infrastructure

Provides computer network servers and connectivity for agency computing

Assessment Stage

Remediation and Validationffesting Stages

6) Mitel Telephone PBX

Telephone and Voicemail System

Assessment Stage

Remediation and Validationffesting Stages

7) PC Desktop Systems

170+ Networked Personal Computers

Assessment Stage

Remediation and Validationffesting Stages

8) Plant Operations, 14th

Building Mechanical

Assessment Stage

Remediation and

Street

Systems, Air Cond.,

Validationffesting

,

Elevators, UPS,

Stages

Generators, etc.

9) ProTrack

Broadcast Traffic . Management Database

Assessment Stage

Remediation and Validationffesting Stages

10) Remote Truck

18 Wheel Portable Television Production Vehicle

Assessment Stage

Remediation and Validationffesting Stages

11) Satellite Uplink Facilities

Provide Encoding and Uplink ofTelevision and Radio Broadcast Services

Assessment Stage

Remediation and Validationffesting Stages

- 23-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXlllBIT "E"

NOTE 14: COMPLIANCE WITH YEAR 2000 ISSUES

Systems 12) Team Approach
13) Peachtree Accounting Software

Primary Function
GPB Oracle Database used for tracking membership in both Georgia Public Television and Peach State Public Radio
General accounting for the Foundation

Compliance Stage at June 30. 1998
Assessment Stage

Compliance Stage Necessary for Completion
Remediation and Validation/I'esting Stages

Assessment Stage

Remediation and Validation/I'esting Stages

Expenditures by DOAS for the Statewide Systems cover the State of Georgia as a whole and are not kept by individual agency. The Commission and the Foundation did not have any significant amount of resources committed for the year 2000 issue at June 30, 1998. The Commission and the Foundation management currently estimate that the completion of the project will result in expenditures of approximately $400,000.

NOTE 15: TRANSACTIONS FOR THE BENEFIT OF THE COMMISSION

The Georgia State Financing and Investment Commission (GSFIC), a unit ofState government, is responsible for the issuance of state debt and for the investment and accounting for proceeds derived from the issuance of state debt. In addition, GSFIC is authorized to acquire and construct projects for the benefit of units of State government or to contract with units of State government for the construction or acquisition ofcapital outlay projects. During the fiscal year ended June 30, 1998, the Georgia State Financing and Investment Commission paid $10,390,996.02 for approved projects related to the Georgia Public Telecommunications Commission.

NOTE 16: CONTINGENCrnS

Litigation, claims and assessments filed against the Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1998.

NOTE 17: STATUSOF~STIGATION

During the fiscal year ending June 30, 1996, management of the Georgia Public Telecommunications Commission informed the Department of Audits that an internal investigation had uncovered possible financial irregularities ofan employee and that the Georgia Bureau ofInvestigation and the Attorney General's

- 24-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"E"

NOTE 17: STATUS OF INVESTIGATION
office were conducting an investigation ofthe matter. The investigation has been concluded. However, legal proceedings have not been concluded as ofthe date ofthis report. The results ofthis matter, ifavailable, will be reported in the audit report for the year ended June 30, 1999.

- 25-

THIS PAGE LEn BLAHK

SUPPLEMENTARY INFORMATION - 27-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30,1998

SCHEDULE "1"

FUNDS AVAILABLE REVENUES
Other Revenues Retained

ORIGINAL

AMENDED

BUDGET

APPROPRIATION APPROPRIATION ADJUSTMENTS

TOTAL

$ 28,139,624.00 $

1.838,096.00 $ 5,623,449.00 $ 35,601,169.00

EXPENDITURES
Personal Services Operating Expenses

$

9,906,134.00

18,233,490.00 $

$ 1,838,096.00

428,916.00 $ 10,335,050.00 5,194,533.00 25,266,119.00

$ 28,139,624.00 $

1,838,096.00 $ 5,623,449.00 $ 35,601.169.00

See notes to the financial statements.

- 28-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION CASH AND CASH EQUIVALENTS JUNE 30, 1998

SCHEDULE "2"

NONINTEREST BEARING ACCOUNTS
NationsBank of Georgia, NA, Atlanta, Georgia
Heritage Bank, Tempe, Arizona
Wachovia Bank, Atlanta, Georgia
INTEREST BEARING ACCOUNTS
First Union National Bank of Georgia, Atlanta, Georgia
Certificate of Deposit No. 8625292
NationsBank of Georgia, NA, Atlanta, Georgia
Interest Checking Account
Salomon Smith Barney, Savannah, Georgia
Money Market Account No. 447-08307-14-700
Funds on Deposit with Office of Treasury and Fiscal Services State Investment Pool

$ -1,334,553.30 163.97
-7.074.89 $ -1,341,464.22

$

45,870.94

175,482.72

1,668.96 1,910.01

224.932.63

$ -1.116.531.59

See notes to the financial statements.

- 29-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION INVESTMENTS JUNE 30,1998

SCHEDULE "3"

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION INVESTMENTS JUNE 30. 1998

SCHEDULE "3"

$ ==1=5:=!9'353==4==:,2:=1

See notes to the financial statements.

- 31 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF OTHER OPERATING EXPENSES YEAR ENDED JUNE 30, 1998

SCHEDULE "4"

OPERATING EXPENSES

REGULAR OPERATING EXPENSES

Advertising

Bank Charges

>.

Courier Services Fund Raising Expenses

General Assessment Services and

Interconnection Fees

Public Broadcasting Services

Postage

Production Costs

Program Rating Services

Promotional Expenses

Registration Fees

Relocation Expenses

Subscriptions and Dues

Other

BUDGET FUND

SPECIAL REVENUE
FUND

TOTAL

$

46,214,66

$

80,683,80

1,338,149.28

$ 47,961,57

46,214,66 47,961.57 80,683,80 1,338,149,28

4,111,087.00 355,325,59 197,107.79 51,306,25 421,486,03 86,554,76 31,846,74 797,795.41 134,232,80

16,289,00

4,111,087.00 355,325,59 197,107,79 51,306,25 421,486,03 86,554,76 31,846,74 814,084.41 134,232.80

$ 7,651,790,11 $ 64,250,57 $ 7,716,040,68

See notes to the financial statements.

- 32-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 1998

SCHEDULE "S"

Totals per Annual Supplement
Adjustments Unidentified Variance (See Current Year Findings)

SALARIES

TRAVEL

$ 7,nS,664.20 $ 138,690.S9

13,637.89

17,322.11

$ 7,789,302.09 $ 1S6,012.70

See notes to the financial statements.

- 33-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION RECONCILIATION OF PER DIEM AND FEES YEAR ENDED JUNE 30,1998

SCHEDULE "6"

Totals per Annual Supplement
Adjustments Beth Shapiro and Associates Coopers and Lybrand Ragsdale, Porter Randstadt Staffing Services Wills, Scott

TYPE PAYMENT

FEE AMOUNT

EXPENSE AMOUNT

TOTAL

$ 1,276,219,57 $ 21,038,38 $ 1,297,257,95

Consultant Consultant Consultant Consultant Consultant

5,000,00 29,314.00
135.00 -48,158.76
4,468.12

5,000.00 29,314.00
135.00 -48,158.76
4.468.12

$ 1.266.977.93 $ 21.038.38 $ 1.288.016.31

See notes to the financial statements.

- 34-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SUMMARY OF SALARIES, TRAVEL AND PER DIEM AND FEES
YEAR ENDED JUNE 30, 1998

SCHEDULE '7"

BUDGET FUND
Regular Computer Charges Capital Outlay

SALARIES

TRAVEL

PER DIEM AND FEES

$ 7,789,302,09 $ 156,012,70 $ 1,216,847,48 45,179.48 25,989,35

$ 7,789,302,09 $ 156,012,70 $ 1,288,016,31

See notes to the financial statements.

- 35-

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

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

977-96-04 FS-977-97-01 FS-977-97-02

Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

SECTIONID CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30. 1998
. FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate Separation ofDuties Finding Control Number: FS-977-98-01
An examination of the internal accounting controls utilized by the Georgia' Public Telecommunications Commission for the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, revealed that the Commission did not provide for adequate separation of duties in the performance of certain accounting functions and related procedures in the following control categories:
(1) Cash and Cash Equivalents
(2) Revenues/Receivables/Receipts
(3) Expenditures/Liabilities/Disbursements
The Commission should review the accounting procedures in place. To the extent possible and practical, the Commission should design and implement procedures which would enhance the segregation ofduties relative to the above control categories.
CASH AND CASH EQUIVALENTS Inadequate Bank Reconciliation Procedures Finding Control Number: FS-977-98-02
For the year under review, accounting procedures at the Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit of the Commission, were not sufficient to provide for adequate control over the bank reconciliation process. Audit procedures and interviews with personnel revealed that bank reconciliations of the operating, payroll, restricted and special projects bank accounts were not reconciled in a timely manner. Our examination ofthe bank reconciliations ofthe Commission's accounts revealed unreconciled differences of$14,481.96 for the operating account and $73,445.87 for the payroll account between the amount recorded on the general ledger and the bank statement at June 30, 1998.
The Commission and Foundation should establish the necessary procedures to ensure that the bank reconciliations are reconciled on a monthly basis. The Commission should also take action to identify the unreconciled differences and make adjustments to the accounting records where appropriate.
- 1-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS Inadequate Accounts Receivable Records Finding Control Number: FS-977-98-03
Our examination included a review of the internal accounting controls utilized by the Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit ofthe Commission, in maintaining their respective accounts receivable records. The following conditions relating to inadequate accounting controls were found to exist:
(1) An analysis of the accounts receivable aging report at the Commission at June 30, 1998, revealed that $536,241.86 in receivables on the report were over 90 days old and ofthis amount $337,859.15 were over I year old.
(2) A sample of43 items at the Commission was selected to test the validity ofthe accounts receivable. It was noted that 13 items totaling $148,755.54 did not have adequate supporting documentation. Further analysis ofthe accounts receivable subsidiary records beyond the 43 sample items revealed 2 receivables totaling $150,000.00 which were no longer outstanding and an audit adjustment was made to correct these receivables.
(3) An analysis of the accounts receivable at the Foundation revealed that the accounts receivable balance of$156,378.25 did not have adequate supporting documentation. In addition, confirmation procedures performed revealed discrepancies in the balance recorded at the Foundation and the balance confirmed with the customer. -
(4) An allowance for doubtful accounts receivable is maintained by the Foundation. The Foundation could not provide written documentation supporting the methodology utilized for charges to the allowance account.
The above conditions occurred because ofmanagement's failure to properly monitor accounts receivable aging reports, to record collection of receivables against the accounts receivable general ledger accounts and to maintain a system for accounting for doubtful accounts.
The Commission and the Foundation should establish accounting controls and procedures to monitor their respective accounts receivable accounting records and to ensure that accounts receivable balances on the general ledger are substantiated with adequate source documentation. In addition, the Commission and the Foundation should undertake a comprehensive review oftheir respective accounts receivable balances and adjust the accounting records for those receivables no longer outstanding. Further, the Foundation should establish a written policy regarding the recording of an allowance for doubtful accounts receivable.
-2-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in the Operation ofProperty Management System Finding Control Number: FS-977-98-04
Qur examination included a review of the internal accounting controls utilized by the Georgia Public Telecommunications Commission in maintaining their State Property System and also included testing the system for compliance with State Laws and Regulations. The following conditions relating to inappropriate accounting practices associated with inventory records were found to exist:
(1) Certain equipment additions were not supported by adequate documentation.
(2) Certain equipment items that were surplused during the year were not taken offthe inventory reports at fiscal year end.
(3) Certain equipment deletions were not supported by adequate documentation.
In addition, 194 equipment items were selected to test the accuracy ofthe Commission's property management records. These items contained a value of $34,579,496.68 out of a population of $64,270,413.63 and were selected for the purpose of locating the equipment as recorded in the inventory records. The following deficiencies were noted:
(1) 108 items totaling $1,493,130.87 could not be located.
(2) 5 items did not have decal numbers attached. However, items were identified by serial numbers or descriptions.
(3) 2 items were located at locations other than the one listed on the inventory report.
The Commission is required to maintain equipment inventories in accordance with provisions of the State Property Management System Manual. The discrepancies identified above were caused by the Commission's failure to follow guidelines for maintaining equipment inventories.
As a result of the discrepancies identified above, we were unable to determine the validity of the total equipment inventory valuation contained in the inventory records which comprise the General Fixed Assets Account Group.
The Commission should establish the necessary internal controls to ensure that equipment inventories are maintained in accordance with provisions ofthe State Property Management System Manual.
-3-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Inadequate Accounts Payable Records Finding Control Number: FS-977-98-05
Our examination included a review of the internal accounting controls utilized by the Georgia Public Telecommunications Commission and the Foundation for Public Broadcasting in Georgia, Incorporated, a blended component unit ofthe Commission, in maintaining their respective accounts payable records. During this review, it was noted that the accounts payable subsidiary ledger for the Commission did not agree with the general ledger. Extensive audit procedures were performed to reconcile these amounts. The following errors were noted during this reconciliation:
(1) Accounts payable balance to a vendor in the amount of $357,438.00 was no longer outstanding and an audit adjustment was made to write this payable off.
(2) An accounts payable balance to a vendor was recorded as $668,175.00. Documentation revealed that the balance at June 30, 1998, was $78,417.00. An audit adjustment was made in the amount of $589,758.00 to correct the balance.
(3) An accounts payable balance to a vendor was recorded as $1,128,871.70. Documentation revealed that the balance at June 30, 1998, was $326,664.23. An audit adjustment was made in the amount of $802,207.47 to correct the balance.
In addition to the errors noted above, the following errors were noted when performing audit procedures at the Commission and the Foundation:
(1) Management failed to record a payable from the Georgia Merit System for $31,373.00. An audit adjustment was made to record this payable on the books.
(2) A sample performed on the Commission's accounts payables at June 30, 1998 consisted of 83 items totaling $244,991.92. The sample revealed that 4 payables totaling $10,105.26 were deleted in the subsequent period without adequate explanation or documentation.
(3) The accounts payable balance at the Foundation included $8,239.77 of payables due to the Commission. This amount was not substantiated with adequate documentation.
The errors identified above were caused by management's failure to follow proper accounting procedures in maintaining and reconciling the accounts payable records.
-4-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Inadequate Accounts Payable Records Finding Control Number: FS-977-98-05
The Commission and the Foundation should establish accounting controls and procedures to ensure that the accounts payable records are being properly debited when payments are made, that payables outstanding are substantiated with adequate source documentation, that any payables deleted are done so with adequate explanations and documentation, and that all payables are properly recorded within the records.
GENERAL LEDGER ; General Ledger not in Balance with Subsidiary Ledgers : Finding Control Number: FS-977-98-06
The Commission's general ledger at June 30, 1998 did not agree with the applicable subsidiary records. A comparison ofthe Commission's general ledger to subsidiary records revealed that the "Departmental Trial Balance" (Facs Report No. 2410) did not agree with the subsidiary listings for outstanding receivables (Facs Report No. 2230) and outstanding payables (Facs Report No. 2060). This condition was caused by the Commission's failure to update subsidiary ledgers for adjustments made to the general ledger by journal entries. In addition, the Commission's accounting procedures were not sufficient to provide for adequate control over journal vouchers. The journal vouchers did not contain sufficient explanations or supporting documentation to determine the propriety of each entry.
The Accounting and Procedures Manual, as published by the State Auditor, states that the general ledger control accounts should be reconciled to the subsidiary ledger accounts at the end of each accounting period. The conditions identified above were caused by the Commission's failure to follow guidelines for maintaining general and subsidiary ledgers.
The Commission should implement procedures to ensure that subsidiary records are updated for adjustments made to the general ledger and that all journal voucher packages contain sufficient information so that the propriety of each entry can be determined.
GENERAL LEDGER Detailed Listing of Salaries and Travel not Reconciled Finding Control Number: FS-977-98-07
For the year under review, the detailed listing of Salary and Travel payments made to employees and reported to the Georgia Department of Audits by the Georgia Public Telecommunications Commission did not reconcile with the amounts recorded as salaries and travel in the general ledger as presented for examination. A comparison of the amounts submitted to the Department of Audits with the general ledger disclosed a difference of $13,637.89 for salaries and $17,322.11 for travel. This difference is reflected as an unlocated variance on the "Reconciliation of Salaries and Travel" schedule ofthis report.
-5-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Detailed Listing of Salaries and Travel not Reconciled Finding Control Number: FS-977-98-07 The Commission should ensure that the quarterly reports submitted to the Georgia Department of Audits are balanced to the general ledger.
-6-