Audit report, Georgia Public Telecommunications Commission, a component unit of the state of Georgia, year ended June 30, 2008

STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor
AUDIT REPORT GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION
A COMPONENT UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 2008

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS

ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION AND

SUPPLEMENTARY INFORMATION

1

MANAGEMENT'S DISCUSSION AND ANALYSIS

5

EXHIBITS

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

12

B

STATEMENT OF ACTIVITIES

13

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET- GOVERNMENTAL FUNDS

14

D

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES- GOVERNMENTAL FUNDS

15

E

NOTES TO THE FINANCIAL STATEMENTS

16

SCHEDULES

SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES AND EXPENDITURES- BUDGET AND

ACTUAL-GENERAL FUND

36

2 ANALYSIS OF FINANCIAL ACTIVITY OF BLENDED COMPONENT UNIT

ANALYSIS OF BALANCE SHEET ACTIVITY OF BLENDED

COMPONENT UNIT

38

3 ANALYSIS OF OPERATING ACTIVITY AND CHANGES IN FUND

BALANCES OF BLENDED COMPONENT UNIT

39

SECTION II

INTERNAL CONTROL AND COMPLIANCE REPORT

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON

COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT

AUDITING STANDARDS

43

SECTION I FINANCIAL

DEPARTMENT oF AuDITS AND AccouNTS

270 Washington St. S.W. Suite 1-156

Atlanta, Georgia 30334

RussELL W. HINToN

STATE AUDITOR (404) 656-2174

November 18, 2008

The Honorable Sonny Purdue, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Georgia Public Telecommunications Commission
and Honorable BonnieR. Bean, Chief Financial Officer/Acting Executive Director

INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION AND SUPPLEMENTARY INFORMATION

Ladies and Gentlemen:

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Georgia Public Telecommunications Commission, a component unit of the State of Georgia, as of and for the year ended June 30, 2008, which collectively comprise the Commission's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Commission's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 consideration of internal control over financial reporting as a basis for the designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control over financial reporting. Accordingly we express no such opinion. An audit also 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 opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Georgia Public Telecommunications Commission, as of June 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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As discussed in Note 1 to the basic financial statements, the general fund includes the financial activity of its blended component unit, The Foundation for Public Broadcasting in Georgia, Incorporated (Foundation). Blending the Foundation's financial activity with the general fund of the Commission, however, is not in accordance with accounting principles generally accepted in the United States of America (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB statement 14, as amended by statement 34) which prescribes that a general fund of a component unit be reported as a special revenue fund. We believe, however, this departure from GAAP does not cause the financial statements to be misleading, but rather more accurately depicts the unique relationship between the Commission and the Foundation.
In accordance with Government Auditing Standards, we have also issued a report dated November 18, 2008, on our consideration of the Georgia Public Telecommunications Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
The management's discussion and analysis information on pages 5 through 9 are not a required
part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Georgia Public Telecommunications Commission's basic financial statements. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying supplementary information (Schedules 1 through 3) has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,

RWH:

Russell W. Hinton, CPA, CGFM State Auditor

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MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is a discussion and analysis of the financial performance of Georgia Public Telecommunications Commission (d/b/a Georgia Public Broadcasting, GPB). It provides an overview of the activities for the fiscal year ended June 30, 2008 and compares them to fiscal year ended June 30, 2007. Georgia Public Broadcasting provides educational, instructional and public broadcasting services to the citizens of the State of Georgia. It is designed to be read in conjunction with the Georgia Public Broadcasting financial statements that follow this section.
HIGHLIGHTS
Net Assets As of the close of fiscal year 2008, Georgia Public Broadcasting's combined ending net assets totaled $34,453,725.93. Of this total, $22,053,743.52 is invested in capital assets; $36,500.00 is restricted for the WSVH Endowment; and $12,363,482.41 is unrestricted.
Long-term Debt GPB's total long-term debt obligations consist of $1,255,916.77 in compensated absences.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to Georgia Public Broadcasting's basic financial statements. GPB's basic financial statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains additional supplementary information to the basic financial statements themselves.
Government-wide Financial Statements The government-wide financial statements are designed to provide a broad overview of Georgia Public Broadcasting's finances, in a manner similar to private-sector business reports.
The Statement of Net Assets presents information on all GPB assets and liabilities, with the difference between the two reported as Net Assets. Over time, increases or decreases in net assets should serve as a useful indicator of whether the financial position of Georgia Public Broadcasting is improving or deteriorating.
The Statement of Activities presents information showing how GPB's net assets have changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned unused vacation leave).
The government-wide financial statements only include the operations of Georgia Public Broadcasting. The Commission is considered a component unit of the State of .Georgia for financial reporting purposes because of the significance of GPB's legal, operational
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and financial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards.
Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Georgia Public Broadcasting, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All GPB funds can be classified into the category of governmental funds.
Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
Georgia Public Broadcasting maintains three individual governmental funds. The General Fund is a major fund and is used to account for all activities of the Commission not otherwise accounted for by specific funds. The Capital Projects Fund, also a major fund, is used to account for the financial resources provided for the digital conversion of towers and transmitters. The Permanent Fund for the Commission is used to account for funds donated to the Foundation for Public Broadcasting in Georgia, Inc. (blended component unit of the Commission). It is a Non-major fund. The permanent fund is divided into two parts: reserved and unreserved. The reserved portion of the endowment is held in perpetuity. The interest earned on the endowment can be used in accordance with periodic determinations of the needs of WSVH-FM as determined by the Foundation Board of Directors.
Notes To Financial Statements. Notes to financial statements provide additional information essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found in the Basic Financial Statements section of this report.
-Other Information. In addition to the basic financial statements and accompanying notes, this report also presents a General Fund Statement of Revenues and Expenditures Budget And Actual statement.
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GOVERNMENT-WIDE FINANCIAL ANALYSIS

Georgia Public Telecommunications Commission Net Assets

FY2008

FY2007

Capital Assets, Net of Depreciation Other Assets

$ 22,053,743.52 15.147.375.96

$ 23,060,248.10 20.556.068.83

Total Assets

$ 37.201.119.48 $ 43,616,316.93

Other Liabilities Long-Term Liabilities
Current Noncurrent

$ 1,491,476.78
506,926.10 748.990.67

$ 2,917,306.19
465,857.31 775.792.69

Total Liabilities

$ 2.747,393.55 $ 4.158.956.19

Net Assets Invested in Capital Assets Restricted Unrestricted

$ 22,053,743.52 36,500.00
12.363,482.41

$ 23,060,248.10 36,500.00
16.360.612.64

Total Net Assets

$ 34.453.725.93 $ 39.457.360.74

The largest component (64%) of GPB's net assets is the investment in Capital Assets

(e.g. land, buildings and equipment) of $22,053,743.52. Less than 1% ($36,500.00) of

current assets is a restricted fund for the WSVH endowment. The remaining balance of

$12,363,482.41 (35%) is unrestricted and may be used to meet the Commission's

ongoing obligations to citizens and creditors.

The following is a summary of the Revenues, Expenses and changes in Net Assets for

FY 2008:

FY2008

FY 2007

Revenues

Program Revenues

Charges for Services

$ 4,489,313.36

$ 3,622,207.50

Operating Grants and Contributions

8,487,302.74

9,330,264.51

General Revenues

Intergovernmental - Other

18,069,614.00

17,023,143.00

Unrestricted Investment Earnings

566.746.48

1.305.583.22

Total Revenues
Expenses Culture and Education

$ 31,612,976.58 36.616.611.39

$ 31,281,198.23 31.796.538.75

Increase (Decrease) in Net Assets

$ (5,003,634.81)

$ (515,340.52)

Net Assets - Beginning Total Net Assets- Ending

39.457.360.74
s 34 453,725.93

39.972.701.26
s 39 45Z 360.Z4

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The increase in revenues from FY 2007 to FY 2008 is primarily attributable to the increase in program revenues from production grants and from an increase in the state appropriation. However, these revenue increases were offset by reductions in contributions and donations to the Foundation and investment earnings. Expenses exceeded revenues in FY 2008 due to the purchase of a radio station in Dalton, Georgia by the Foundation for $3,250,000.00 plus legal expenses and by the recording of depreciation expense in the governmental-wide financials resulting in a decrease of total net assets.
FINANCIAL ANALYSIS OF THE COMMISSION'S FUNDS
General Fund. The General Fund is the chief operating fund of Georgia Public Broadcasting. It consists of two components: the general fund of The Foundation for Public Broadcasting in Georgia, Inc., and the budget fund for GPB. Although legally separate, the Foundation is in substance a part of the Commission's operations. Funds raised by the Foundation are devoted entirely to the benefit of the Commission. The budget fund for GPB is the fund responsible for all activities of the Commission not otherwise accounted for in the Foundation or by the specific funds described in the following paragraph. At June 30, 2008, the General Fund has $722,305.95 reserved for encumbrances and unreserved, designated fund balances of $12,896,571.03 described in the Notes to the Financial Statements.
Capital Projects Fund. The Capital Projects Fund is used to account for financial resources designated for the digital conversion of the towers and transmitters. At June 30, 2008, total assets are a net of $921,877.38 of which $7,352,269.52 is due from other intergovernmental agencies. The liabilities of $921,877.38 represent current accounts payables due to vendors.
Other Non-major Governmental Fund. One fund comprises the Other Non-major Governmental fund and is included on Exhibits C and D of this report.
The WSVH Endowment is a Permanent Fund of which $36,500.00 is held in perpetuity. The designated fund balance of $522.20 is being held for future use in accordance with the needs of WSVH.
BUDGET COMPARISON ANALYSIS
The original budget for Georgia Public Broadcasting of $32,293,905.00 was increased by $1,600,000.00 during the fiscal year. Expenditures on a budgetary basis were under budget and less than revenues by $609,232.10.
CAPITAL ASSETS
Georgia Public Broadcasting's investment in capital assets as of June 30, 2008, amounts to $50,344,803.75 which--with accumulated depreciation of $28,291,060.23-leaves a net book value of $22,053,743.52. This investment in capital assets includes land, buildings and equipment. The actual depreciation charges for the year totaled $1 ,245,661.95. The Commission transferred Land and Other Property and Equipment located at the tower sites through an Intergovernmental agreement to the Board of Regents. This agreement provides general obligation bonds to fund the digital
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conversion of the Commission's towers and transmitters. The value of the land is $200,000.00, the equipment is $26,498,347.06 and the accumulated depreciation is $21,374,871.88 for a net value of $5,323,475.18 at June 30, 2008.
The transfer of property and equipment was required for the Commission to obtain the use of five-year general obligation bonds sold in the name of the Board of Regents on behalf of the Commission. The Commission, an authority created after 1967, cannot have bonds sold on its behalf. An intergovernmental agreement has been executed between the Commission and the Board of Regents that allows the Commission to utilize these funds for the digital conversion of the towers and antennae. The bonds were sold September 7, 2005, and the agreement with the Board of Regents expires at the end of the five-year period when the bonds are paid in full. All equipment will be transferred back to the ownership of the Commission immediately upon the expiration of the intergovernmental agreement.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
Georgia's economy experienced a modest downturn in FY 2008 and is projected to continue to decline in FY 2009. Georgia's monthly revenue collections are continuing to fall short of revenue projections. The Commission, like most state agencies, was not permitted to request additional state funding in the FY 2009 general appropriations budget. The amended budget for FY 2009 originally requested a 3.5% reduction in state expenditures; however, this has been revised as requested by the Governor's office to reflect potential cuts of 6%, 8% and 10%. This request for additional budget reductions also applies to GPB's FY 201O's budget request.
The state appropriation is approximately 55% of GPB's annual budget. To meet expenditures, GPB must raise approximately $14 million each year. Our revenue generation from outside sources reflects modest increases in FY 2008, and this trend is expected to remain steady into FY 2009.
Georgia Public Broadcasting has completed our transition to digital broadcast for out television network. All nine television stations are broadcasting a High Definition (HDTV) signal in addition to the analog signal that will go away February 17, 2009, as mandated by the FCC. GPB has been working to upgrade, rebuild, and enhance our broadcast transmitter equipment and facilities, and only a few minor items remain to be completed. Beginning October 1, 2008, GPB will provide the experience of high definition television (HDTV) and multiple channel choices to our Georgia viewers. This digital initiative in Georgia is made possible through the efforts of our Board of Directors with capital outlay funding (bonds) appropriated by the General Assembly and approved the Governor as well as some matching grants.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Georgia Public Broadcasting's finances for all those individuals having an interest in the Commission's finances. Questions concerning any of the information provided in this report should be ddressed to: Georgia Public Broadcasting, 260 14th Street, NW, Atlanta, Georgia 303185360.
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BASIC FINANCIAL STATEMENTS - 11 -

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION STATEMENT OF NET ASSETS JUNE 30. 2008

EXHIBIT"A"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable Other Inventories Capital Assets Land Buildings and Building Improvements Other Property and Equipment Less: Accumulated Depreciation

Governmental Activities

$

4,145,888.85

2,799,465.99

8,194,030.61 7,990.51

1,278,948.00 26,127,162.00 22,938,693.75 -28,291 ,060.23

Total Assets

$ 37,201 '119.48

LIABILITIES Accounts Payable and Other Accruals Deferred Revenue Noncurrent Liabilities Due Within One Year Compensated Absences Due in More Than One Year Compensated Absences
Total Liabilities
NET ASSETS Invested in Capital Assets Restricted for WSVH Endowment Nonexpendable Unrestricted
Total Net Assets

$

1,443,419.78

48,057.00

506,926.10 748,990.67

$

2,747,393.55

$ 22,053,743.52

36,500.00 12,363,482.41

$ 34,453,725.93

The notes to the financial statements are an integral part of this statement. - 12-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2008

EXHIBIT "B"

Functions/Programs Governmental Activities Culture and Education
Total Governmental Activities
....>.
w
I

Expenses

Program Revenues

Operating

Charges for

Grants and

Services

Contributions

Net (Expense) Revenue and Changes in Net Assets
Gove rnm enta I Activities

$

36,616,611.39 $

4,489,313.36 $

8,487,302.74 $

-23,639,995.29

$

36,616,611.39 $

4,489,313.36 $

8 487 302.74 $

-23,639,995.29

General Revenues Intergovernmental- Other Unrestricted Investment Earnings Total General Revenues Change in Net Assets
Net Assets- Beginning
Net Assets- Ending

$

18,069,614.00

566,746.48

$

18,636,360.48

$

-5,003,634.81

39,457,360.74

$

34,453,725.93

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

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30. 2008

EXHIBIT"C"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable
Other mertories
Total Assets

General Fund
$ 10,576,280.99 $ 2,762,443.79
841,761.09 7,990.51
$ 14,188,476.38 $

Capital Projects
Fund

Nonmajor Governmental
Fund

Total Governmental
Funds

-6,430,392.14 $

$ 37,022.20

4,145,888.85 2,799,465.99

7,352,269.52

8,194,030.61 7,990.51

921,877.38 $

37,022.20 $ 15,147,375.96

LIABILITIES AND FUND BALANCES Liabilities
Accounts Payable and Other Accruals Deferred Revenue
Total Liabilities
Fund Balances Reserved for: Encumbrances WSVH Endowment Unreserved Designated
Total Fund Balances
Total Liabilities and Fund Balances

$

521 ,542.40 $

921,877.38

48,057.00

$

569,599.40 $

921,877.38

$ 1,443,419.78 48,057.00
$ 1,491 ,476.78

$

722,305.95

12,896,571.03 $ $ 13,618,876.98 $ $ 14,188,476.38 $

$ 0.00 0.00 $ 921,877.38 $

$ 36,500.00
522.20 37,022.20 $
37,022.20

722,305.95 36,500.00
12,897,093.23
13,655,899.18

Amounts reported for governmental activities in the Statement of Net Assets are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Buildings and BLilding Improvements Other Property and Equipment Accumuated Depreciation Total Capital Assets
Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term Liabilities at year-end consist of: Compensated Absences

$

1,278,948.00

26,127,162.00

22,938,693.75

-28,291,060.23

22,053,743.52

-1,255,916.77

Net Assets of Governmental Activities (Exhibit "A") The notes to the financial statemerts are an integral part oftlis statement.
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$ 34,453,725.93

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION

EXHIBIT"D"

STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30. 2008

REVENUES ntergoverMlental- Federal U.S. Department of Agriculture U.S. Department of Commerce htergoverMlental- Other State Appropriations through the Board of Regents of the Unversity System of Georgia Corporation for Plblic Broadcasting -Grants GSFIC PBS -Grants Department of Administrative Ser\ices nsurance Recovery Office of the Governor Georgia Emergency Management Agency Cormbutions arxl Donations
Fourxlation for Plblic Broadcasting in Georgia, nc.
hterest arxl Other nvestment ncome Production Grants Rents arxl Royalties Sales arxl Ser\ices Urxlerwriting MiscellarEous
Total Revenues
EXPENDITURES Current
Culture arxl Education
Excess Of Revenues Over (Urxler) Experxlitures

GerEral Fllld

Captial Projects
Fllld

Norvnajor GoverMlerial
Fllld

Total GoverMlerial
Furxls

$

247,355.05

1,464,279.21

$

247,355.05

1,464,279.21

$ 18,069,614.00 3,297,466.00

2,468,585.88 11 ,229,285.39
125,142.46

1,687,639.72

236,479.24

5,189,836.74

566,724.28

$

1,468,985.06

761,464.32

727,705.38

1,251,883.34

279,275.26

$ 31,612,954.38 $ 17,458,766.95 $

18,069,614.00 5,766,051.88 11 ,229,285.39
125,142.46
1,687,639.72

22.20 22.20 $

5,189,836.74 566,746.48
1,468,985.06 761,464.32 727,705.38
1,251,883.34 279,275.26
49,071,743.53

$ 35,595,840.04 $ 17,458,766.95 $_ _ _ _0;.;.;.0:.:.0 $ 53,054,606.99

$

-3,982,885.66 $

0.00 $

22.20 $

-3,982,863.46

FUND BALANCES- BEGINNING FUND BALANCES- ENDING

17,601,762.64

0.00

37,000.00

17,638,762.64

$

13,618,876.98 s_ _ _ _o;.;.;.o.;.o s_ _...3.7.,..;.;;o2.;.;;2.2~o s

13,655,899.18

Net change in fllld balances- total goverMlental flllds
Amounts reported for governmental actillities in the Statement of Actillities are different because:
Capital outlays are reported as experxlitures in governmental flllds. However, in the Statement of Actillities, the cost of these assets is allocated over their estimated usefiJ lives as depreciation expense. 11 the current period, these amounts are: Capital OlAiay Depreciation Expense
Some items reported in the Statement of Actillities do not reqLire the use of current financial resources arxl therefore are not reported as revenues or experxlitures in governmental flllds. Ttis actillity consists ot. Increase in Compensated Absences
Change in rEt assets of governmental actillities (EJCiibit "B")
The notes to the financial statements are an integral part of this statement

$

-3,982,863.46

$

239,157.37

-1,245,661.95

-1 ,006,504.58

-14,266.77 $=~-5:,;;,;,00;,;;,~3,6;;,;;;34,;;;.8;,;,1

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY The Georgia Public Telecommunications Commission ("the Commission") is an instrumentality of the State of Georgia and a public corporation. The Commission was created by an Act of the General Assembly of the State of Georgia for the purpose of providing educational, instructional and public broadcasting services to the citizens of the State of Georgia.
The overall management of the business and affairs of the Commission is vested in a Board of Directors. State law provides that the Board is to be comprised of nine members. Board members serve on a part-time basis and are appointed by the Governor for specific periods of time. The Board of Directors appoints an Executive Director who is responsible for the day-to-day operations of the Commission.
A component unit is an entity for which the Commission is considered to be financially accountable. Financial accountability includes the ability of the Commission to appoint a voting majority of a Commission's governing board and to impose will upon the organization or to have exist the potential for the organization to provide specific financial benefits or impose specific financial burdens on the Commission.
As required by accounting principles generally accepted in the United States of America (GAAP), these financial statements present the Commission and its blended component unit, The Foundation for Public Broadcasting in Georgia, Inc. ("the Foundation"). The Foundation assists the Commission in fulfilling its statutory responsibility for providing educational and public broadcasting to the citizens of the State of Georgia. Funds raised by the Foundation are almost entirely devoted to the benefit of the Commission. The Foundation's Board of Directors is composed of the Chairperson and the Vice Chairperson of the Commission's Board, two directors elected by the Commission's Board, two directors elected by the Foundation's Board and the Executive Director of the Commission.
Because the Foundation, a legally separate entity, is in substance a part of the Commission's operations, the financial statements of the Foundation have been blended with the financial statements of the Commission. Blending the Foundation's financial activity with the general fund of the Commission is a departure from GAAP, however this does not cause the financial statements to be misleading, but rather more accurately depicts the unique relationship between the Commission and the Foundation. Information on obtaining the individual financial statements of the blended component unit is available from the Finance Office of the Commission.
The Georgia Public Telecommunications Commission, with its blended component unit, is considered a component unit of the State of Georgia 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.
B. BASIS OF PRESENTATION A key feature of the governmental financial reporting model is its unique combination of government-wide and fund financial reporting. This combination of government-wide and fund financial reporting is designed to accomplish two goals: (1) to provide information using the
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT "E"

economic resources measurement focus and the accrual basis of accounting for functions reported in governmental funds, and (2) to provide net cost information by function for governmental activities. This is accomplished through government-wide financial statements and fund financial statements.
Government-Wide Financial Statements The Statement of Net Assets and Statement of Activities report information on all the non-fiduciary activities of the Commission and its blended component unit.
As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. The only exception to this general rule are in those instances where the elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Annual appropriations received from the State of Georgia, through the Board of Regents of the University System of Georgia, and other items not meeting the definition of program revenues are instead reported as general revenue.
Fund Financial Statements Separate financial statements are provided for governmental funds. The Major individual governmental funds and the nonmajor fund are reported as separate columns in the fund financial statements.
The financial activities of the Commission and its blended component unit are recorded in individual funds, each of which is deemed to be a separate accounting entity. The Commission uses fund accounting to report on its financial position and results of operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
The Commission reports the following major and nonmajor governmental funds:
The General Fund is used to account for all financial transactions not required to be accounted for in another fund. These transactions relate to resources obtained and used for providing educational, instructional and public broadcasting services to the citizens of the State of Georgia.
The Capital Projects Fund is used to account for the financial resources provided by the Georgia State Financing and Investment Commission (GSFIC) and other intergovernmental agencies for the digital conversion of towers and transmitters.
The Nonmajor Governmental Fund is the Permanent Fund used to account for funds bequeathed to the Foundation for Public Broadcasting in Georgia, Inc. (blended component unit of the Commission). The permanent fund is divided into two parts: reserved and
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

unreserved. The reserved portion of the endowment is held in perpetuity. The interest earned on the endowment can be used in accordance with periodic determinations of the needs of WSVH as determined by the Foundation Board of Directors.
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of cash flows.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., when they become both 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 be used to pay liabilities of the current period. Major revenue sources susceptible to accrual include intergovernmental revenue. Appropriations from the State of Georgia, passed through the Board of Regents of the University System of Georgia to the Commission, are recognized when they become measurable and available to the extent they are collected within the current period. All other revenue items become measurable and available when they are earned.
Expenditures generally are recorded when the related fund liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
D. ASSETS, LIABILITIES AND NET ASSETS OR EQUITY Cash and Cash Equivalents
The Commission's Cash and Cash Equivalents are considered to be cash on hand, demand deposits with banks and other financial institutions, and certificates of deposits; and money market funds and the State investment pool that have the general characteristics of demand deposit accounts in that the Commission may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty.
The State investment pool (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 of the Investment Company Act of 1940. The State of Georgia's Office of Treasury and Fiscal Services (OTFS) manages Georgia Fund 1 in accordance with policies and procedures established by State law and the State Depository Board, the oversight Board of OTFS. This investment is valued at the pool's share price, $1.00 per share.
Funds held in money market mutual funds and certificates of deposit are valued at cost which approximates fair value.
The Commission does not have any risk exposure related to investments in derivatives or similar investments in Georgia Fund 1 as the investment policy of OTFS does not provide for investments in derivatives or similar investments through the Georgia Fund 1.

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

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 of revenue. Investments are presented at fair value.

Accounts Receivable Accounts receivable for service are recorded when either the asset or revenue recognition criteria have been met. Estimates of allowances for uncollectible receivables have not been made within the financial statements; accordingly, no allowance for uncollectible accounts has been established.

Capital Assets Capital assets, which include property, plant and equipment, are reported in the applicable governmental activities in the government-wide financial statements. All land is capitalized regardless of cost. Buildings and Building Improvements are capitalized when the cost of individual items or projects exceed $100,000.00. Equipment is capitalized when the cost of individual items exceed $5,000.00. Such assets are recorded at historical costs or estimated historical cost if historical cost information is unavailable. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at recorded cost.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Capital assets of the Commission are depreciated using the straight-line method over the following estimated useful lives:

Buildings and Building Improvements Equipment

40 Years 3-7 Years

Compensated Absences Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employee's length of continuous State service with a maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. Funds are provided in the appropriation of State funds each fiscal year to cover the cost of annual leave of terminated employees.

Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Sick leave does not vest with the employee. Unused accumulated sick leave is forfeited upon retirement or termination of employment. However, 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.

Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities.
Net Assets In the government-wide financial statements, the difference in the Commission's assets and liabilities is reported as net assets. Net assets are reported in three categories:

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Invested in capital assets consists of capital assets, net of accumulated depreciation.
Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation.
Unrestricted net assets consist of net assets that do not meet the definition of the two preceding categories. Unrestricted net assets often are designated, indicating they are not available for general operations. Such designations have internally imposed constraints on resources, but can be removed or modified.
Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.
The Commission receives an annual appropriation from the State of Georgia through the Board of Regents of the University system of Georgia. In general, Georgia law requires that unencumbered annual state appropriations lapse at fiscal year end; however, statutory provisions allow the Commission to carry over unencumbered appropriations to future periods. Encumbrance accounting is employed in the governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent fiscal year.
E. BUDGET The annual budget of the commission is prepared on the modified accrual basis. The budget is prepared by the Commission and approved by the Board. Liabilities and expenditures are recorded upon issuance of completed purchase orders. Goods and services need not have been received for liabilities and expenditures to be recorded.
NOTE 2: STEWARDSHIP. COMPLIANCE AND ACCOUNTABILITY
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia (and thus the Commission) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"E"

4.

Industrial revenue bonds and bonds of development authorities created by the laws of the

State of Georgia.

5.

Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary

corporation of the United States government, which are fully guaranteed by the United

States government both as to principal and interest and debt obligations issued by the

Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank,

the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan

Mortgage Association and the Federal National Mortgage Association.

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

As authorized in the OCGA Section 50-17-53, the State Depository Board has adopted policies that allow agencies of the State of Georgia the option of exempting demand and special deposits from the collateral requirements.

NOTE 3: DEPOSITS AND INVESTMENTS

A. Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the Commission's deposits may not be recovered. At June 30, 2008, $2,819,339.99 of the Commission's deposits was uninsured and not collateralized.

Cash and Cash Equivalents

Investments

Per Statement of Net Assets

$4,145,888.85 $ 2,799,465.99

Reclassifications from Investments to Cash Certificate of Deposits

37,022.20

(37,022.20)

Reclassifications to Investments for Risk Assessment Disclosures Money market mutual fund State investment pool

(611,317.48) (17,263.23)

611,317.48 17,263.23

Per notes to the financial statements

$ 3.554.330.34 $ 3.391 024.50

B. Investments The Commission's investments as of June 30, 2008, other than those on deposit with the Office of Treasury and Fiscal Services, are presented below. All investments are presented by investment type and debt securities are presented by maturity.

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Investment Type

Debt Securities

Corporate Debt

$

Money Market Mutual Fund

Mortgaged-Backed Securities

Municpal Bonds

U.S. Agencies

U.S. Treasury Obligations

Fair Value

Less Than 1 Year

Investment Maturi~

1-5

6-10

Years

Years

More than 10 Years

979,788.32 $ 611,317.48 264,504.81 139,473.60 201,894.96 303,875.00

195,792.26 $ 611,317.48

241,580.98 $
79,012.01 139,473.60
98,375.00

542,415.08
100,349.00 $
104,437.74 205,500.00

85,143.80 97,457.22

$ Other Investments Equity Securities - Domestic

2,500,854.17 $ 872,907.10

807,109.74 $

558,441.59 $

952,701.82 $ 182,601.02

$ 3,373,761.27

The Commission also holds $17,263.23 of investments in the Office of Treasury and Fiscal Services Georgia Fund 1 Investment Pool. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. At June 30, 2008, the holdings of the Georgia Fund 1 Investment Pool were composed of debt securities with a weighted average maturity of 40 days and other investments that are not subject to interest rate risk.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The organization does not have a formal policy for managing interest rate risk.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Commission's investment policy includes the following investing restrictions to manage credit quality risk:
1. Acceptable Equity Investments should consist of the following: Domestic (U.S.) common stock-includes preferred and convertible issues; ADR's of foreign companies; mutual funds (excluding those managed or sponsored by advisory firm(s)); Exchange Traded Funds (ETF's) and Publicly-traded Real Estate Investment Trusts (REIT's).
2. Unacceptable Equity Investments include the following, but not limited: Unlisted stocks; "Penny Stocks," Options (puts and calls) and Non U.S. Dollar denominated foreign stocks
3. Acceptable Fixed Income Investments may be comprised of the following: Domestic bonds, of "A3/A-"(as rated by Moody's and/or S&P) or better with sufficient liquidity; bonds issued by or guaranteed by the U.S. Treasury or U.S. Government agencies are considered AAA rating; Convertible bonds; Treasury Inflation Protected Securities (TIP's); Exchange Traded Funds (ETF's) and Fixed Income mutual funds.
4. Acceptable Cash Equivalent Investments may be comprised of the following: Certificates of Deposit ($1 00,000 maximum investment per issuer, as insured by FDIC); Money Market Funds, U.S. Treasury bills and any other high quality fixed income

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

investment with a yield to maturity of less than one (1) year (see ratings restrictions in above Fixed Income). 5. Unacceptable/Restricted Investments and/or Transactions are as follows: Borrowing of money; Purchasing of securities on margin or short sales; Pledging, mortgaging, or hypothecating of any securities; Purchase of securities of the investment advisor, its parent or its affiliates; Purchase of illiquid securities (i.e. private placements, real estate or mortgages, Limited Partnerships); Purchase or sale of commodities, commodity contracts and Purchase or sale of futures of options for speculation or leverage.

The following table provides information about the Commission's exposure to credit quality risk.

Rated Debt Investments

Corporate Debt

$

Money Market Mutual Fund

Mortgaged-Backed Securities

Municpal Bonds

U.S. Agencies

$

Fair Value 979,788.32 $ 611,317.48 264,504.81 139,473.60 201,894.96
2,196,979.17$

AAA 19,642.62 $
85,143.80 139,473.60 104,437.74
348,697.76 $

Quality Ratings

M

A

271,407.67 $

604,768.03 $

79,012.01

350,419.68 $

604,768.03 $

Unrated 83,970.00 611,317.48 100,349.00
97,457.22
893,093.70

The Georgia Fund 1 was rated AAA by Standard and Poor's.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the Commission will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Commission's policy for managing custodial credit risk for investments is to have all investments managed through an investment account custodian. This custodian provides Securities Investor Protection Corporation (SIPC) which protects securities customers of its member institutions for up to $500,000 (including $100,000 for claims for cash). In addition to this coverage, the custodian has secured protection through additional commercial insurance to $150 million per customer.
At June 30, 2008, $3,373,761.27 of the Commission's applicable investments were held by the investment account custodian.
Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Commission's policy for managing concentration of credit risk is no individual security, except diversified funds, shall make up more than 5% of each portfolio. The Fixed Income Securities portfolio has additional stipulations stating that in the case of asset backed securities and private label mortgage obligations the maximum limit shall relate to obligations from a specific "master trust" which holds the assets collateralizing the securities. There shall be no such limit on U.S. Government securities or U.S. Government-sponsored agency securities or mortgage obligations that are collateralized entirely by U.S. Government or U. S. Government agency securities. The maximum exposure to any single municipal obligor shall not exceed 5% of the total portfolio.
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

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The investment advisor for the Fixed Income portfolio which represents approximately 75% of the Commission's total funds available for investment has additional restrictions to limit the relative No obligations of BB&T Corporation which own the investment advisor's company; No Private Placements; No Derivatives; No Non-U.S. Dollar Denominated Issues. The restrictions to limit the relative sector exposure include: Exposure to corporate debt will be maintained at a minimum of 50% and restricted to a maximum of 150% of the weighting of corporate debt of the Lehman Intermediate Government/Corporate Index; Exposure to mortgage-backed securities will be restricted to a maximum of 30% of the weighting of the portfolio; Asset-backed securities will be restricted to a maximum of 25% of the portfolio; Commercial Mortgage Backed Securities will be restricted to a maximum of 25% of the portfolio; Yankee debt will be restricted to a maximum of 10% of the fund and Total exposure to municipal obligations shall not exceed 15% of the overall account.

NOTE 4: ACCOUNTS RECEIVABLE Receiva~les at June 30, 2008, consist of the following:

Governmental Activities

Other {Services)

$ 8.194.030.61

NOTE 5: CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2008, was as follows:

Governmental Activities: Capital Assets, Not Being Depreciated:
Land
Capital Assets, Being Depreciated: Buildings and Building Improvements Other Property and Equipment

Beginning Balance

$

1 ,278,948.00

$

26,127,162.00

23,094,625.38 $

Increases

Decreases

$

239,157.37 $

$ 395,089.00

Total Capital Assets Being Depreciated

$

49,221,787.38 $

239,157.37 $

395,089.00 l

Ending Balance
1 ,278,948.00
26,127,162.00 22,938,693.75 49,065,855.75

Less: Accumulated Depreciation For: Buildings and Building Improvements Other Property and Equipment
Total Accumulated Depreciation
Governmental Activities Capital Assets, Net

$

(5,829,623.01) $

~21 ,610,864.2!2

$

~27,440,487.28l $

(587,861.15) ~657,800.80l $
1,245,661.95 $

$

23,060,248.1 0 $ ($1 ,006,504.58) $

$ 395,089.00
395,089.00 $

(6,417,484.16) {21,873,576.07l
{28,291,060.23}

$0.00 $

221053,743.52

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Depreciation expense for the fiscal year ended June 30, 2008, was $1,245,661.95 and the total amount was charged to Culture and Education function of the Commission.

The Commission transferred Land and Other Property and Equipment located at the tower sites site through an Intergovernmental agreement to the Board of Regents. This agreement provides general obligation bonds to fund the digital conversion of the Commission's towers and transmitters. The value of the land is $200,000.00 and the equipment is $26,498,347.06 and the accumulated depreciation is $21,374,871.88 for a net value of $5,323,475.18 at June 30, 2008.

NOTE 6: OPERATING LEASES

The Commission has entered into certain agreements to lease equipment and transmitter space, which are classified for accounting purposes as operating leases. These leases generally contain provisions that, at the expiration date of the original term of the lease, the Commission has the option of renewing the lease on a year-to-year basis. Total expenditures for the rental of real property under such leases were $1,561,484.41 for the year ended June 30, 2008. The future minimum commitments for operating leases as of June 30, 2008, 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 Ended June 30 2009 2010 2011 2012 2013 2014-2019

$ 1,746,144.00 1,158,877.20 1,164,877.20 1,080,416.46 1,103,183.76 4,731.942.46

Total Minimum Commitments

$ 10,985.441.08

NOTE 7: LONG-TERM DEBT

Compensated Absences Compensated absences are liquidated by the fund they are reported in and do not have scheduled future debt service requirements beyond one year.

Long-term obligations at June 30, 2008, and changes for the fiscal year then ended are as follows:

Amounts Due July, 1 2007 Increases Decreases June 30,2008 Within One Year

Compensated Absences

$1,241,650.00 $481,642.77 $ 467,376.00 $1,255,916.77 $ 506,926.10

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

NOTE 8: UNRESERVED-- DESIGNATED FUND BALANCES
Designations of fund balances are used to show the amounts within the unreserved fund balances intended to be used for specific purposes, but not legally restricted. The Commission has designated unreserved fund balances for future year's expenditures as follows:

Purpose

General Fund

Digital Conversion General operational support lllges fund Programming and educational content productions WSVH-FM

$ 5,500,000.00 808,687.53
1,087,883.50 5,500,000.00
522.20

Total Designations

$12.897.093.23

NOTE 9: RISK MANAGEMENT
Public Entity Risk Pool The Department of Community Health administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county government and local education agencies located within the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units of government participating in the plan, and appropriations made by the General Assembly of Georgia. The Department of Community Health has contracted with various outside parties to process claims in accordance with the State Employees' Health Benefit Plan as established by the Department. Details on the liability for unpaid claims are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008.
Other Risk Management The Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and injuries to employees. The State of Georgia utilizes self-insurance programs established by individual agreement, statute or administrative action, to provide property insurance covering fire and extended coverage and automobile insurance and to pay losses that might occur from such causes; liability insurance for employees against personal liability for damages arising out of performance of their duties; survivors' benefits for eligible members of the Employees' Retirement System; consolidating processing of unemployment compensation claims against State agencies and the payment of sums due to the Department of Labor; and workers' compensation insurance coverage for employees of the State and for the receipt of benefits as prescribed by the workers' compensation statutes of the State of Georgia. These self-insurance funds are accounted for as internal service funds of the State of
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Georgia where assets are set aside for claim settlements. The majority of the risk management programs are funded by assessments charged to participating organizations. A limited amount of commercial insurance is purchased by the self-insurance funds applicable to property, employee and automobile liability, fidelity and certain other risks to limit the exposure to catastrophic losses. Otherwise, the risk management programs service all claims against the State for injuries and property damage. Financial information relative to the self-insurance funds will be presented in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008.
In addition, the Commission has purcnased a liability insurance policy for broadcasters and producers and another liability and crime policy for the Foundation's Board of Directors.
NOTE 10: RELATED PARTY TRANSACTIONS
As further described in Note 1, the Commission, through its board members, the State of Georgia, and other State agencies, participates in related party transactions which are inherent to its organizational and funding structure. Agencies that fund the Commission also contract with the Commission for goods and services and the Commission purchases goods and services from funding agencies.
NOTE 11: RETIREMENT PLANS
Employees' Retirement System of Georgia
Plan Description The Georgia Public Telecommunications Commission participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract. ERS issues a publicly available financial report that includes the applicable financial statements and required supplementary information. The report may be obtained from Employees' Retirement System of Georgia, Two Northside 75, Suite 300, Atlanta, Georgia 30318-7778 and is available on line at www.ersga.org.
Benefits The benefit structure of ERS is established by the Board of Trustees under statutory guidelines, which were 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. (A different plan for new hires and electing members will take effect January 1, 2009, with defined benefit and defined contribution aspects.)
Under both the old and new plans now existing, a member may "vest" after completion of 10 years of creditable service and retire after attainment of age 60, or 30 years of creditable service
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest twentyfour (24) consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments are also made to members' benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and Disability benefits are also available through ERS. ERS with the State Employees' Assurance Department administers a separate survivors benefit program for retirees and employees.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415.
Funding Policy and Actual Contributions Employee contribution rates are set by law. In order to assure actuarial soundness, the minimum annual employer contribution is determined, appropriated and paid by employers under minimum funding standards as required by law. Member contributions under the old plan are 4% of annual compensation up to $4,200, plus 6% of annual compensation in excess of $4,200. 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 the employee. The Commission also is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. For the year ended June 30, 2008, the ERS contribution rate for the Commission was 10.41% for new plan employees and 5.66% for old plan employees (exclusive of the contributions of behalf of old plan employees as described above). The required contribution for 2008 was determined as part of the June 30, 2005, actuarial valuation. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. Contributions for the benefit of the employees of the Georgia Public Telecommunications Commission to ERS made during fiscal year 2008 totaled $1,001,160.30 of which $893,742.78 was made by the Georgia Public Telecommunications Commission and $107,417.52 was made by employees
Georgia Defined Contribution Plan
Plan Description Certain employees of the Commission participate in the Georgia Defined Contribution Plan (GDCP), which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for public employees who are not members of a public retirement or pension system. GDCP is administered by the ERS Board of Trustees.

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board. If a member has less than $3,500 credit to his/her account, the Board has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions of GDCP are established and may be amended by State statute
Contributions Required and Contributions Made Member contributions are 7.5% of gross salary. There are no employer contributions. Contribution rates are established and may be amended by State statute. Earnings are credited to each member's account in a manner established by the Board. Upon termination of employment, the amount of the member's account is refundable upon request by the member. Total contributions by employees during the fiscal year ended June 30, 2008, were $35,565.89, which represents 7.5% of covered payroll. These contributions met the requirements of the 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 defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. TRS issues a publicly available financial report that includes the applicable financial statements and required supplementary information. The report may be obtained from the Teachers' Retirement System of Georgia, Two Northside 75, Suite 100, Atlanta, Georgia 30318.
Benefits The Benefit Structure of TRS is established by the Board of Trustees under statutory guidelines. TRS provides service retirement, disability retirement, and survivor's benefits. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of onetwelfth of seven percent for each month the member is below age 60, or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. Death, disability and spousal benefits are also available.
In addition, the TRS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective July 1, 1997. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

purpose of the SRBP is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415.
Funding Policy and Actual Contributions TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees in accordance with State law. Member contributions are limited by State law to not less than five or more than six percent of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2008, were five percent of annual salary. The employer contribution rate was 9.28%, as recommended by the June 30, 2005, actuarial valuation in accordance with State law. Contributions for the benefit of the employees of the Georgia Public Telecommunications Commission to TRS made during fiscal year 2008 totaled $60,395.58 of which $39,248.46 was made by the Georgia Public Telecommunications Commission and $21,147.21 was made by employees
NOTE 12: OTHER POSTEMPLOYMENT BENEFITS
Georgia Retiree Health benefit Fund
Plan Description The Georgia Public Telecommunications Commission contributes to the Georgia Retiree Health
Benefit Fund (GRHBF). GRHBF funds health insurance benefits to eligible retirees and their qualified beneficiaries provided by the health insurance plan for state employees. Pursuant to Title 45, Chapter 18 of the Official Code of Georgia Annotated, the Commission to establish and amend the benefit provisions of the employees health insurance plan is assigned to the Board of Community Health, which also is required to provide for health insurance for retiring state employees and their spouses and dependent children, as defined by the regulations of the board, on such terms as the board may deem appropriate. As to retiree participants, that part of the plan funded by GRHBF is a cost-sharing multiple-employer defined benefit postemployment healthcare plan. The Department of Community Health issues a publicly available financial report that includes financial statements and required supplementary information for GRHBF. That report may be obtained from the Department of Community Health at 2 Peachtree Street, Atlanta, Georgia 30303.
Funding Policy The contribution requirements of plan members and participating employers are established by the Board of Community Health in accordance with current appropriations and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately twenty-five percent (25%) of the cost of health insurance coverage.
Participating State employers are statutorily required to contribute in accordance with the employer contribution rate established by the Board. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The combined rate for the active and retiree plans (pay-as-you go basis for the fiscal year ended June 30, 2008, was 18.534% of covered payroll. An additional contribution of 4.309% of covered payroll was required by the Board for fiscal year 2008; eleven months of this additional contribution will be deposited into GRHBF (an "OPES fund") to prefund retiree benefits; such additional contribution amounts are determined annually by the Board in accordance with the state plan for other post-employment benefits and subject to appropriation.
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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

The Commission's contribution for the health insurance plan for the fiscal year ended June 30, 2008, was $2,093,841.22 which equaled the required contribution
State Employees' Assurance Department- OPEB
Plan Description The State Employees' Assurance Department ("SEAD") contracts with the Employees' Retirement System of Georgia ("ERS") to provide group term life insurance for the survivors benefit program provided by ERS (separately from retirement plans). The program is for active members, retired members and vested inactive members of ERS (and by contract for those of the Georgia Legislative Retirement System, and the Georgia Judicial Retirement System). Authority to establish and amend the survivors benefit plan is with the Board of Trustees of ERS, and authority to establish and amend the group term life insurance is with Trustees and the directors of SEAD, subject in each case to potential application of restraints against impairment of contract. Subject to certain age based reductions and payment of contribution, the benefits for retiring members or vested members withdrawing from service after 18 years service become fixed as of the day before retirement
ERS administers a survivors benefit fund. Two separate trust funds under the control and management of the directors of SEAD are maintained for the provision of group term life insurance, a fund for active members and a fund for retired and vested inactive members. That part of the survivors benefit plan consisting of SEAD group term life insurance funded by the trust fund for retired and vested inactive members is a single-employer defined benefit postemployment plan ("SEAD/OPEB Plan"). The Employees' Retirement System of Georgia (ERS) issues a publicly available financial report that includes financial statements and required supplementary information for SEAD-OPEB. That report may be obtained from the Employees' Retirement System of Georgia, Two Northside 75, Suite 300, Atlanta, Georgia 30318-7778.
Funding Policy Contributions by plan members are established by the Boards of Trustees, up to the maximum allowed by statute (not to exceed 0.5% of earnable compensation). The Boards of Trustees of the Systems establish employer contribution rates which when added to members' contributions, may not exceed one percent (1%) of earnable compensation. For the fiscal year ended June 30, 2008, contributions of ERS "old plan" members were one-half of one percent (0.5%) of earnable compensation, one-quarter of one percent (0.25%) of which was paid by the employer. Contributions of ERS "new plan" members and of members of the Judicial and Legislative Retirement Systems were one-quarter of one percent (0.25%) of earnable compensation. For the fiscal year ended June 30, 2008 there was no employer contribution required.
Annual OPEB Cost For the fiscal year ended June 30, 2008, the Commission had no annual OPEB cost for SEADOPEB (the ARC was zero).

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT "E"

Funded Status and Funding Progress The funded status of SEAD-OPEB as of June 30, 2007, was as follows:

Actuarial accrued liability {AAL)

$

Actuarial value of plan assets

Unfunded actuarial accrual liability {UAAL) {funding excess) $

642,530,433 778,048,000 {135,517,567)

Funded ratio (actuarial value of plan assets I AAL)

Cowred payroll (actiw plan members)

$

UAAL (funding excess) as a percentage of cowred payroll

121.09% 2,720,771,905
{4.98%)

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Historical trend information presented in the financial report of ERS includes multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the June 30, 2007, actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 7.5% investment rate of return, which includes a 3. 75% inflation assumption. The actuarial value of SEAD-OPEB assets was determined using market value. SEAD-OPEB's funding excess is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2007, was thirty-six years.
NOTE 13: NONMONETARY TRANSACTIONS
During the year ended June 30, 2008, the Commission received in-kind contributions from the following institutions that housed local GPB radio operations throughout the state. The in-kind contributions are administrative, communication, facilities and departmental support. These amounts are not reflected on the Commission's financial statements.

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION NOTES TO FINANCIAL STATEMENTS JUNE 30. 2008

EXHIBIT"E"

Institution
Augusta State University Georgia Highlands College Mercer University Piedmont College University of West Georgia University of Georgia

GPB Facility In-kind Contribution

WACG-FM WGPB-FM WMUM-FM WPPR-FM WUWG-FM WUGA-FM

$ 26,680.55 17,465.87 12,726.00 4,840.00 17,310.71
769. 132.00

Total In-kind Contributions

$ 848,155.13

NOTE 14: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustments by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the Commission expects such amounts, if any, to be immaterial.
Litigation, claims and assessments filed against 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, 2008.

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SUPPLEMENTARY INFORMATION -35-

GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION
SCHEDULE OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL GENERAL FUND
YEAR ENDED JUNE 30. 2008

SCHEDULE "1"

Funds Available Revenues Other Revenues Retained
Expenditures CuHure and Education

Original Budget

Final Budget

Actual Amounts (Budgeta!Y Basis)

VarianceFawrable (Urfawrable)

$ 32,293,905.00 $ 33,893,905.00 $ 31,569,958.25 $ -2,323,946.75

$ 32,293,905.00 $ 33,893,905.00 $ 32,179,190.35 $ 1,714,714.65

Excess of Funds Available over (under) Expenditures
The budget for the Commission is adopted on a basis consistent with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, wtich is a basis other than prescribed by Generally Accepted Accounting Principles (GAAP). The following is an explanation of differences between budgetal)' inflows and oiAftows and GAAP revenues and expenditures
Sources/inflows of resources Actual amounts (budgetal)' basis) "Funds available"
Differences- Budget to GAAP: For budget purposes, certain adjustments to prior year revenue/receivable items are considered fund balance adjustments rather than revenue items for financial reporting purposes.
Total revenues as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances- Governmental Funds (Exhibit "D")
Uses/outflows for resources Actual amounts (budgetal)' basis) "expenditures"
Differences- Budget to GAAP: For budget purposes, certain adjustments to prior year expenditure/payable items and inventol)' adjustments are considered fund balance adjustments rather than expenditure items for financial reporting purposes.
For budget purposes, encumbrances are reported as expenditures in the year purchase orders are issued blt are expensed when inwiced for financial reporting purposes.
For budget purposes, expenditures in the Foundation are non-budgetal)'.
Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances- Governmental Funds (Exhibit "D")

$ -6091232.10 $ -609,232.10
$ 31,569,958.25 42,996.13
$ 3116121954.38 $ 32,179,190.35
-254,132.36 38,136.46
3,632,645.59 $ 35,595,840.04

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ANALYSIS OF FINANCIAL ACTIVITY OF BLENDED COMPONENT UNIT (FOUNDATION FOR PUBLIC BROADCASTING IN GEORGIA, INC)
- 37-

GEORGIA PUBLIC TELECOMMUNICATION COMMISSION ANALYSIS OF BALANCE SHEET ACTIVITY OF BLENDED COMPONENT UNIT JUNE 30. 2008

SCHEDULE "2"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable
Other Inventories
Total Assets

Commission

Foundation

Total

$ 9,229,946.50 $ 1,346,334.49 $ 10,576,280.99

2,762,443.79

2,762,443.79

841,761.09 7,990.51

841,761.09 7,990.51

$ 10,079,698.10 $ 4,108,778.28 $ 14,188,476.38

LIABILITIES AND FUND BALANCES Liabilities
Accounts Payable and Other Accruals Deferred Revenue
Total Liabilities
Fund Balances Reserved for: Encumbrances Unreserved Designated
Total Fund Balances
Total Liabilities and Fund Balances

$ 516,575.11 $ 48,057.00
$ 564,632.11 $

4,967.29 $ 4,967.29 $

521,542.40 48,057.00
569,599.40

$ 722,305.95

$ 722,305.95

8,792,760.04 $ 4,103,810.99 12,896,571.03

$ 9,515,065.99 $ 4,103,810.99 $ 13,618,876.98

$ 10,079,698.10 $ 4,108,778.28 $ 14,188,476.38

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GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION SCHEDULE "3" ANALYSIS OF OPERATING ACTIVITY AND CHANGES IN FUND BALANCES
OF BLENDED COMPONENT UNIT YEAR ENDED JUNE 30. 2008

Commission

Foundation

Total

REVENUES

Intergovernmental - Other

State Appropriations through the Board of Regents of the

University System of Georgia

$ 18,069,614.00

$ 18,069,614.00

Corporation for Pl.blic Broadcasting -Grants

3,297,466.00

3,297,466.00

Contributions and Donations

Foundation for Public Broadcasting in Georgia, nc.

$ 5,189,836.74

5,189,836.7 4

Interest and Other nvestment Income

39,833.13

526,891.15

566,724.28

Production Grants

1 ,468,985.06

1 ,468,985.06

Rents and RoyaHies

761,464.32

761,464.32

Sales and Services

727,705.38

727,705.38

Underwriting

1,251,883.34

1 ,251,883.34

Miscellaneous

279,275.26

279,275.26

Total Revenues

$ 25,896,226.49 $ 5,716,727.89 $ 31,612,954.38

EXPENDITURES Current CuHure and Education

$ 31,963,194.45 $ 3,632,645.59 $ 35,595,840.04

Excess Of Revenues Over (Under) Expenditures

$ -6,066,967.96 $ 2,084,082.30 $ -3,982,885.66

OTHER FINANCING SOURCES (USES) Intra-Fund Transfers

$ 14,578,100.00 $ -14,578,100.00 $

0.00

Excess of Revenue and other Financing Sources over (under) Expenditures and other Fiancing Uses

$ 8,511,132.04 $ -12,494,017.70 $ -3,982,885.66

FUND BALANCES -BEGINNING

1,003,933.95 16,597,828.69

17,601,762.64

FUND BALANCES -ENDING

$ 9,515,065.99 $ 4,103,810.99 $ 13,618,876.98

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SECTION II INTERNAL CONTROL AND COMPLIANCE REPORT
-41 -

RussELL W. HINToN
STATE AUDITOR (404) 656-2174

270 Washington St. S.W. Suite 1-156 Atlanta, Georgia 30334
November 18, 2008

The Honorable Sonny Purdue, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Georgia Public Telecommunications Commission
and Honorable BonnieR. Bean, Chief Financial Officer/Acting Executive Director
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Georgia Public Telecommunications Commission as of and for the year ended June 30, 2008, which collectively comprise the Georgia Public Telecommunications Commission's basic financial statements and have issued our report thereon dated November 18, 2008.
internal Control Over Financial Reporting
In planning and performing our audit, we considered the Georgia Public Telecommunications Commission's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Georgia Public Telecommunications Commission's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Georgia Public Telecommunications Commission's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control.
-43-

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting .that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Georgia Public Telecommunications Commission's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, members of the Georgia Public Telecommunications Commission Board, others within the entity, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~
~tb-~
Russell W. Hinton, CPA, CGFM State Auditor RWH:
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