Audit report, State Tollway Authority, a component unit of the state of Georgia, year ended June 30, 1999

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AUDIT REPORT STATE TOLLWAY AUTHORITY
A COMPONENT UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 1999
\..~-----------------,----_./
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

STATE TOLLWAY AUTHORITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET

ALL FUND TYPES

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN

RETAINED EARNINGS

PROPRIETARY FUND TYPE - ENTERPRISE FUND

5

C STATEMENT OF CASH FLOWS

PROPRIETARY FUND TYPE - ENTERPRISE FUND

6

. D NOTES TO THE FINANCIAL STATEMENTS

8

SUPPLEMENTARY INFORMATION

PROPRIETARY FUND TYPE - ENTERPRISE FUND

E

COMBINING BALANCE SHEET

20

F

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES

IN RETAINED EARNINGS

22

G

COMBINING STATEMENT OF CASH FLOWS

24

H FIDUCIARY FUND TYPE - AGENCY FUND

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

25

SCHEDULES

1 SCHEDULE OF REQUIRED SUPPLEMENTARY INFORMATION.

26

2 CASH AND CASH EQUIVALENTS

28

3 INVESTMENTS

29

4 ANALYSIS OF CONSTRUCTION AND WORK IN PROGRESS

30

5 SCHEDULE OF OTHER OPERATING EXPENSES

31

6 RECONCILIATION OF PER DIEM AND FEES

32

SECTIONll CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I
FINANCIAL

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
January 21, 2000

Honorable Roy E. Barnes, Governor Members ofthe General Assembly ofGeorgia Members ofthe State Tollway Authority
and Honorable Billy F. Sharp, Secretary - Treasurer
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through D) of the State Tollway Authority as of and for the year ended June 30, 1999. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audit.
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 ofmaterial 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position ofthe State Tollway Authority as ofJune 30, 1999, and the results ofits operations and cash flows of its proprietary fund type for the year then ended, in conformity with generally accepted accounting principles.
The year 2000 supplementary information on Schedule "1" is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthe supplementary information. However, we did not audit the information and do not express an opinion on it. In addition, we do not provide assurance that State Tollway Authority is or will become year 2000 compliant, that the Authority's year 2000 remediation efforts will be successful in whole or in part, or that parties with which State Tollway Authority does business are or will become year 2000 compliant.
99ARL-IG

Our audit was made for the purpose offonning an opinion on the financial statements taken as a whole. The accompanying supplementary information (Exhibits E through H and Schedules 2 through 6) is presented for purposes of additional analysis and is not a required part of the financial statements of the State Tollway Authority; Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, such information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
w.4.dk
R sell W. Hinton State Auditor
RWH:jb 99ARL-IG

FINANCIAL STATEMENTS - 1-

STATE TOLLWAY AUTHORITY COMBINED BALANCE SHEET
ALL FUND TYPES JUNE 30,1999

Total Assets

$ 119,426,382,68 $

The notes to the financial statements are an integral part of this statement
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0,.0..0. $ 119,426,382.68 $ 109,270,976,71

STATE TOLLWAY AUTHORITY COMBINED BALANCE SHEET
ALL FUND TYPES JUNE 30, 1999

EXHIBIT "A"

Total Liabilities and Fund Equity

$ 119,426.382.68 $

0...0.0... $ 119,426,382.68 $ 109,270,976.71

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

STATE TOLLWAY AUTHORITY STATEMENT OF REVENUES. EXPENSES AND CHANGES IN RETAINED EARNINGS
PROPRIETARY FUND TYPE - ENTERPRISE FUND YEAR ENDED JUNE 30,1999

EXHIBIT "B"

RETAINED EARNINGS - JUNE 30

$ 29.763,942.54 $ 19,179.687.10

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

STATE TOLLWAY AUTHORITY STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE - ENTERPRISE FUND
YEAR ENDED JUNE 30,1999

EXHIBIT"C"

CASH AND CASH EQUIVALENTS - JUNE 30
RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating InCome
Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Amortization of Estate for Years Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (Increase) Decrease in Prepaid Items Increase (Decrease) in Liabilities (Other than Customer Deposits) Increase in Customer Deposits Payable Increase in Deferred Revenues
Total Adjustments
Net Cash Provided by Operating Activities
The notes to the financial statements are an integral part of this statement.
-6-

$ 18,345,697.02 $ 17,322,265.47

$ 12,938.412.26 $ 11,615,894.98

$ 1,133,178.86 $
955,601.00

908,586.84 2,613,081.96

-18,962.63 -117,607.36 184,234.78
19,140.00 268,765.67

3,136.56 123.60
-526,155.57 22,785.00
271,239.76

$ 2.424,350.32 $ _--::3.,,2:=;92::1,,7.:.,:9:.::;8.:..:,.1=..5

$ 15,362,762.58 $ 14,908,693.13

STATE TOLLWAY AUTHORITY STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE - ENTERPRISE FUND
YEAR ENDED JUNE 30, 1999

EXHIBIT"C"

NONCASH CAPITAL AND RELATED FINANCING ACTIVITY
Disposal of Fixed Asset Purchase of Building on Account Refunding Bond Proceeds Deposited Directly into
Escrow Account

TOTALS

YEAR ENDED

JUNE 30,1999

JUNE 30,1998

$

422,273,87 $

0.00

536,217,84 46,402.50

0.00

90,526,229.30

$

422,273.87 $ 91,108,849.64

The notes to the financial statements are an integral part of this statement. -7-

STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30.1999

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The State Tollway Authority was established as an instrumentality of the State of Georgia and a public corporation to finance the construction of toll highways and bridges in Georgia. The Authority consists of three (3) ex-officio members: the Governor, Commissioner ofthe Department ofTransportation and Director of the Office of Planning and Budget. Administrative services are provided to the Authority by the Department ofTransportation. The State Tollway Authority is considered a component unit ofthe State of Georgia and is included within the State ofGeorgia 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.
FUND ACCOUNTING The State Tollway Authority uses funds to report on its financial position and the results of its operations determined in conformity with generally accepted accounting principles. A fund is an independent fiscal and accounting entitY with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Funds presented in the accompanying financial statements are as follows:
PROPRIETARY FUND TYPE
ENTERPRISE FUND - The fund used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that costs ofproviding goods or services to the general public on a continuing basis are financed or recovered primarily through user charges or that periodic measurement ofrevenues earned and expenses incurred are appropriate for capital maintenance, public policy, accountability and oth~ purposes.
FIDUCIARY FUND TYPE
AGENCY FUND - The fund used to account for assets held for use by other funds, governments, or individuals.
BASIS OF ACCOUNTING MEASUREMENT FOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Proprietary fund types should be accounted for on a flow ofeconomic resources measurement focus. With this measurement focus, all assets and all liabilities are included on the balance sheet. Operating statements of these funds present increases, (i.e., revenues) and decreases, (i.e., expenses) in net total assets. This measurement focus emphasizes the determination ofnet income.

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STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1999

EXHIBIT "D"

NOTE 1: .SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING PROPRIETARY FUND TYPE ENTERPRISE FUND
The State Tollway Authority maintains its Enterprise Fund on the accrual basis of accounting. Under the accrual basis ofaccounting, revenues are recognized in the accounting period in which they are earned, and expenses are recognized when incurred.
The Authority has elected to follow generally accepted accounting principles prescribed by the Governmental Accounting Standards Board (GASB) as well as Statements and Interpretations ofthe Financial Accounting Standards Board, Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedure issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.
FIDUCIARY FUND TYPE AGENCYFUND
The Agency Fund is custodial in nature and does not measure results ofoperations or have a measurement focus. The modified accrual basis of accounting is utilized for recognizing assets and liabilities.
BUDGET An internal operations budget for management purposes is prepared by the State Tollway Authority. The budget is not subject to review or approval by the Legislature of the State of Georgia and therefore, is a nonappropriated budget.
ASSETS, LIABILITIES AND FUND EQUITY CASH AND CASH EQUNALENTS
Cash and Cash Equivalents include currency on hand, demand deposits with banks and other financial institutions, and the State investment pool that has the general characteristics ofdemand deposit accounts in that the Authority may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. Cash and Cash equivalents also include short-term, highly liquid investments with maturities ofthree months or less from the date ofacquisition. Funds ofthe Georgia 400 Project on deposit with the Trustee for the purpose ofcontinual investment are reflected as investments regardless of the term ofthe investments. The aforementioned definitions were applied for the preparation ofthe Statement ofCash Flows.
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 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
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STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1999

EXHIBIT"D"

NOTE 1; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ASSETS, LIABILITIES AND FUND EQUITY CASH AND CASH EQUNALENTS
the State Depository Board, the oversight Board for OIFS. This investment is valued at the pool's share price, $1.00 per share.
The Authority does not have any risk exposure related to investments in derivatives or similar investments in Georgia Fund 1 as the investment policy ofOIFS 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, funds of the Georgia 400 Project on deposit with the Trustee of the Series 1998 Guaranteed Refunding Revenue Bonds and certain other securities held for the production ofrevenue. Investments are stated at cost and fair value as follows:
(l) Certificates of deposit are recorded at cost which approximates fair value.
(2) Repurchase Agreements and U. S. Government securities are recorded at fair value.
In accordance with the Series 1998 Guaranteed Refunding Revenue Bond covenants, the Authority is limited to the following forms of investments for the Georgia 400 Project:
(1) Obligations issued by the United States government.
(2) Obligations of any corporation of the United States government fully guaranteed by the United States government.
(3) Obligations ofthe Federal Land Bank, Federal Hoine Loan Bank, Federal Intennediate Credit Bank otthe Central Bank for Cooperatives.
(4) Repurchase agreements.
INTEREST RECENABLE Interest receivable consists ofinterest earned which has not been received at year end.
ACCOUNTS RECENABLE Accounts receivable arising from operations are reported at gross value. Based on management's evaluation that amounts uncollectible are not material, no provision has been made for such amounts.

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".

STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1999

EXHIBIT "D"

NOTE 1; SUMMARY OF SIGNlFICANT ACCOUNTING POLICIES
ASSETS, LIABILITIES AND FUND EQUITY PREPAID ITEMS
Payments made to vendors for services that will benefit periods beyond June 30, 1999, are recorded as prepaid items.
ESTATE FOR YEARS On July 10,1991, the State of Georgia Department ofTransportation granted to the State Tollway Authority an "Estate for Years" in return for a portion ofthe proceeds ofthe sale ofthe Series 1991 Guaranteed Revenue Bonds in the amount of $67,508,129.40. This "Estate" entitles the State Tollway Authority the rightto possess and operate the Georgia 400 Project and was continued in force by the Series 1998 Guaranteed Refunding Revenue Bonds which defeased the Series 1991 Bonds. Upon payment in full ofthe Series 1998 Guaranteed Refunding Revenue Bonds by the Authority, all rights, title and interest acquired by this agreement shall revert to the State ofGeorgia Department ofTransportation.
The asset "Estate for Years" is amortized over the payoff period of the refunding revenue bonds. The amortization expense each year is based on the percentage ofrefunding revenue bonds redeemed in that year to to~ bonds issued multiplied by the original asset amount of $67,508,129.40. This amortization method corresponds to the revenue stream projected during the payoffperiod ofthe refunding revenue bonds. The amortization expense recognized for the fiscal year 1999 was $955,601.00, which reduced the "Estate for Years" to $59,162,845.01 as ofJune 30, 1999.
FIXED ASSETS Fixed assets are recorded at cost. Donated fixed assets are recorded at fair market value on the date donated and disposals are deleted at recorded cost. Depreciable assets are depreciated over the estimated useful lives of the assets using the straight-line method ofdepreciation.
The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not included in the Fixed Assets. Material improvements adding to the value or useful life ofthe assets are included in Fixed Assets.
Work in Progress represent costs of construction projects for the F. J. Torras Causeway which will be capitalized in subsequent fiscal periods.
RESTRICTED ASSETS Specific portions of the Authority's Cash and Cash Equivalents and Investments are classified as restricted assets on the Combined Balance Sheet. Certain refunding revenue bond proceeds recorded in the Enterprise Fund, as well as certain resources set aside for their repayment, are reflected as'restricted assets on the Combined Balance Sheet because their use is limited by applicable bond covenants. The "Revenue Fund" is used to record deposits of all Pledged Revenues as defined in the Trust Indenture. Funds in the "Revenue Fund" are distributed monthly by the Trustee to other funds and accounts as set forth in the Trust Indenture. The "Sinking Fund" is comprised of the "Interest Account" which is used for the payment of interest on the Series 1998 Guaranteed Refunding Revenue Bonds and the ''Principal Account" which is used for the
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STAIB TOLLWAY AUTHORITY
NOTES TO tHE FINANCIAL STATEMENTS
JUNE 30. 1999

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ASSETS, LIABILITIES AND FUND EQUITY RESTRICTED ASSETS
payment of principal or redemption price on the Series 1998 Guaranteed Refunding Revenue Bonds. The "Operating and Maintenance Fund" is used to pay the operating and maintenance expenses. The "Resurfacing Fund" is used to pay the costs ofthe next scheduled major resurfacing of the Project. The "Debt Retirement Fund" is used for restoring any deficiency in funding of the aforementioned funds and accounts.
LONG-TERM OBLIGATIONS Long-term debt is recognized as a liability of proprietary fund types and will be liquidated as funds are derived from proprietary fund operations. (See Note 5)
UNAMORTIZED DISCOUNT ON GUARANTEED REFUNDING REVENUE BONDS PAYABLE The original issue discount on the Series 1998 Guaranteed Refunding Revenue Bonds (Georgia 400 Project) is to be amortized over the term ofthe bonds using the straight-line method. The unamortized bond discount is recorded as an offset to the principal amount ofthe refunding revenue bonds outstanding.
FUND EQUITY Designations ofUnreserved Retained Earnings represent tentative managerial plans or intent for financial resource utilization in a future period.
MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the Combined Balance Sheet are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation ofthis data.
COMPARATIVE DATA Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding ofthe changes in the Authority's financial position and operations.
NOTE 2: STEWARDSHIP. COMPLIANCE AND ACCOUNTABILITY
COMPLIANCE WITH GUARANTEED REFUNDING REVENUE BOND COVENANTS The Authority is subject to certain covenants with regard to the issuance of the Series 1998 Guaranteed Refunding Revenue Bonds (Georgia 400 Project).
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:
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STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1999

EXHIBIT "D"

NOTE 2: STEWARDSHIP. COMPLIANCE AND ACCOUNTABILITY
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
(2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities ofthe State of Georgia.
(3) Bonds of any public authority created by the laws ofthe State of Georgia, 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.
(5) Bonds, bills, certificates ofindebtedness, 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 45-8-11, the State Tollway Authority has the option of exempting demand deposits from the collateral requirements.
NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
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, 1999, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk.
Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the Authority or by its agent in the Authority's name.
Category 2 - Amounts collateralized with securities (at market value) held by the pledging financial institution's trust department or agent in the Authority's name.
Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution or by its trust department or agent, but not in the Authority's name, and amounts uncollateralized.
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STATE TOLLWAY AUTHORITY
NOTES TO THE FlNANCIAL STATEMENTS JUNE 30. 1999

EXHIBIT "D"

NOTE 3: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS

Cash Deposits

Carrying Amount

Bank Balances

$ 14,856,439.39 $ 14,713,594.90 $

Risk Categories

2

3

403.193,26 $ 1.096.129.15 $ 13,214,272.49

CATEGORIZATION OF INVESTMENTS For purposes of analysis of custodial credit risk, investments consist ofU. S. Government securities and repurchase agreements. Investments are stated at fair value (See Note 1) and are summarized and classified as to custodial credit risk within the categories described below:

Category 1 - Insured or registered, or securities held by the Authority or its agent in the Authority's
name.

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

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

The reported amounts ofinvestment balances as ofJune 30, 1999, are categorized below. These amounts also include amounts maintained in an investment pool by the Office ofTreasury and Fiscal Services which are not subject to risk categorization.

TYl'e of Investment U. S, Government Securities Repurchase Agreements
Total State Investment Pool
NOTE 4: OPERATING LEASES

Risk Categories

1

2

3

Reported Amount!
Fair Value

$ 30,252,531.44 $ 1.461.000.00

0,00 $

0,00 $ 30,252,531.44

0.00 _ _~O~.OI::LO 1.461.000,00

$ 31.713.531.44 $

0.00 $'=====0f::l'0~0 $ 31,713,531.44

4,280.542,58

$ 35,994.074.02

LESSEE AGREEMENTS The State Tollway Authority has entered into certain agreements to-lease real property and equipment which are classified as operating leases. These leases generally contain provisions that, at the expiration date of the original term ofthe lease, the Authority has the option of renewing the lease on a year-to-year basis. Future minimum commitments for operating leases as of June 30, 1999, are $245,606.28. This amount represents the fiscal year 2000 commitment which an option to renew has been exercised.

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STAIB TOLLWAY AUTHORITY
NOTES TO THE FlNANCIAL STATEMENTS JUNE 30. 1999

EXHIBIT "D"

NOTE 4: OPERATING LEASES

LESSEE AGREEMENTS In addition, under a contractual agreement with the State of Georgia Department of Transportation, the Authority operates the F. J. Torras Causeway. The Causeway is owned by the Department of Transportation and leased to the State Tollway Authority in order to collect tolls for the purpose of earning sufficient revenues to make possible the maintenance, repair and improvements to the Causeway. Terms of the lease, as revised, call for payments to the Department of $413,000.00 per year to the expiration of the lease on December 31, 2021. The lease may be terminated at anytime by mutual agreement between the Department and the Authority.

Expenditures for rental ofreal property and equipment under operating leases for the year ended June 30, 1999, totaled $657,279.74.

LESSOR AGREEMENTS The State Tollway Authority leases certain parcels ofland for use by others for varying terms. The leases are accounted for as operating leases and revenues are recorded when earned. Revenue derived from these leases during fiscal year 1999 amounted to $46,753.94. Minimum future rentals to be received under operating leases as of June 30, 1999, are as follows:

Fiscal Year Ending June 30

2000 2001 2002

$ 46,480.56 38,230.56 34.357.18

$==. 119.068.30

NOTE 5: LONG-TERM DEBT

GUARANTEED REFUNDING REVENUE BONDS PAYABLE The State Tollway Authority issued State of Georgia Guaranteed Refunding Revenue Bonds (Georgia 400 Project), Series 1998, for the purpose of financing a.portion of the costs of acquiring, constructing and maintaining the Georgia 400 Project. These bonds are secured by the toll revenues to be generated from the usage of the Georgia 400 Extension. Further, the State of Georgia has guaranteed the full payment of the
bonds and the interest thereon in accordance with the Constitution ofthe State of Georgia and has reserved $9,078,325.00 in the State of Georgia Guaranteed Revenue Debt Commoll Reserve Fund which is on deposit at the Office ofTreasury and Fiscal Services. Guaranteed refunding revenue bonds outstanding at June 30, 1999, are as follows:

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STATE TOLLWAY AUTHORITY .
NOTES TO THE FINANCIAL STAIEMENTS
ruNE 30. 1999

EXHIBIT "D"

NOTE 5:LONG-IERM DEBT

GUARANTEED REFUNDING REVENUE BONDS PAYABLE

Purpose Georgia 400 Project

Interest Rates 3.50 - 5.00%

Amount $87.605.000.00

Guaranteed refunding revenue bond debt service requirements to maturity are as follows:

Fiscal Year Ending June 30
2000 2001 2002 2003 2004 Thereafter

Total Debt

Interest

Principal

$ 7,136,103.75 $ 1,936,103.75 $ 5,200,000.00 9,075,007.50 3,685,007.50 5,390,000.00 9,075,187.50 3,480,187.50 5,595,000.00 9,073,412.50 3,228,412.50 5,845,000.00 9,075,387.50 2,965,387.50 6,110,000.00 72.609.720.00 13,144.720.00 59.465,000.00

$1,16.0~18.75$28,439,818.75 $87.605.000.00

Interest due on July 1, 1999, in the amount $1,936,103.75 was recorded as a liability ofthe Enterprise Fund for the year ended June 30, 1999.

NOTE 6: DEFEASANCE OF DEBT

During the fiscal year ended June 30, 1998, the State Tollway Authority defeased certain revenue bonds by placing the proceeds ofa refunding revenue bond issue in an irrevocable trust to provide for all future debt service payments on the refunded revenue bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the financial statements ofthe State Tollway Authority. The principal outstanding at June 30, 1999, but considered defeased is reflected below:

Fiscal Year Defeased

Defeased Bonds Outstanding

1998

$81.630,000.00

NQTE7: RELATEDPARTIffiS

The Georgia Department of Transportation and the State Tollway Authority are considered to be related parties due to certain common management personnel. The Commissioner of the Department of Transportation serves as one of three members of the State Tollway Authority and the Treasurer of the Department of Transportation also serves as the Secretary-Treasurer of the Authority.

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STATE TOLLWAY AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1999

EXHIBIT "D"

NOTE 8: RISK MANAGEMENT
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 State Tollway Authority is part ofthe State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
NQTE9: CONIWGENCrnS
Litigation, claims and assessments filed against the State Tollway Authority, if any, are generally considered to be actions against the State ofGeorgia. 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, 1999.

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SupPLEMENTARY INFORMATION -19 -

STATE TOLLWAY AUTHORITY COMBINING BALANCE SHEET PROPRIETARY FUND TYPE - ENTERPRISE FUND
JUNE 30,1999

EXHIBIT"E"

F.J. TORRAS CAUSEWAY

GEORGIA 400 PROJECT

ASSETS

Cash and Cash Equivalents Restricted Revenue Fund Sinking Fund Interest Account Principal Account Resurfacing Fund Debt Retirement Fund Unrestricted

$ $ 5,499,948.26

3,113,231.82 $
210.52 534.89 719.74 1,712.29 9,729,339.50

Total Cash and Cash Equivalents

$ 5,499,948.26 $ 12,845,748.76 $

Investments Restricted Sinking Fund Interest Account Principal Account Operating and Maintenance Fund Resurfacing Fund Debt Retirement Fund Unrestricted

$ 1,935,893.25 $

5,199,465.07

1,461,000.00

4,232,765.30

8,594,112.50

$ 869,542.75

10,290,295.32

Total Investments

$ 869,542.75 $ 31 ,713,531.44 $

Interest Receivable Unrestricted

$ 30,8n.16 $

206,890.26 $

Accounts Receivable

$

107,367.03 $

Prepaid Items

$

119,494.96 $

Estate for Years

$ 59,162,845.01 $

Fixed Assets Building Less: Accumulated Depreciation Improvements Other than Building Less: Accumulated Depreciation Equipment Less: Accumulated Depreciation Work in Progress
Total Fixed Assets (Net of Accumulated Depreciation)

$ 143,880.00 $
-82,731.00 354,672.80 -343,519.92 0 219,673.31 -210,565.47 1,196,732.55
$ 1,278,142.27 $

4,807,002,71 $
-1,567,304.66 2,368,465.34
-766,997.99 5,705,818.48 -2,954,989.10
7,591,994.78 $

. TOTAL
3,113,231.82 210.52 534.89 719.74
1,712.29 15,229,287.76 18,345,697.02
1,935,893.25 5,199,465.07 1,461,000.00 4,232,765.30 8,594,112.50 11,159,838.07 32,583,074.19
237,767.42 107,367.03 119,494.96 59,162,845.01
4,950,882.71 -1,650,035.66 2,723,138.14 -1,110,517.91 5,925,491.79 -3,165,554.57 1,196,732.55 8,870,137.05

Total Assets

$ 7,678,510.44 $ 111,747,872.24 $ 119,426,382.68

See notes to the financial statements.

-20-

STATE TOLLWAY AUTHORITY COMBINING BALANCE SHEET PROPRIETARY FUND TYPE - ENTERPRISE FUND
JUNE 30, 1999

EXHIBIT"E"

LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Contracts Payable Deferred Revenue Customer Deposits Payable Guaranteed Refunding Revenue Bonds Payable Less: Unamortized Discount on Guaranteed Refunding Revenue Bonds Accrued Interest Payable
Total Liabilities
Fund Equity Retained Eamings Unreserved Designated for Maintenance Undesignated
Total Fund Equity

F.J. TORRAS CAUSEWAY

GEORGIA 400 PROJECT

TOTAL

$ 225,539.05 $

326,455.94 $

551,994.99

99,623.01

346,026.81

445,649.82

218,561.50

2,109,819.63

2,328,381.13

152,385.00

152,385.00

87,605,000.00

87,605,000.00

-3,357,074.55 1,936,103.75

-3,357,074.55 1,936,103.75

$ 543,723.56 $ 89,118,716.58 $ 89,662,440.14

$ 2,586,000.00

$

4,548,786.88 $ 22,629,155.66

$ 7,134,786.88 $ 22,629,155.66 $

2,586,000.00 27,177,942.54
29,763,942.54

Total Liabilities and Fund Equity

$ 7,678,510.44 $ 111,747,872.24 $ 119,426,382.68

See notes to the financial statements.

-21 -

STATE TOLLWAY AUTHORITY

EXHIBIT "FlO

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS

PROPRIETARY FUND TYPE - ENTERPRISE FUND

YEAR ENDED JUNE 30,1999

See notes to the financial statements.

-22 -

STATE TOLLWAY AUTHORITY

EXHIBIT "P'

COMBINING STATEMENT OF REVENUES. EXPENSES AND CHANGES IN RETAINED EARNINGS

PROPRIETARY FUND TYPE - ENTERPRISE FUND

YEAR ENDED JUNE 30.1999

NONOPERATING REVENUES (EXPENSES) Investment Income Loss on Disposal of Fixed Assets Bond Interest Expense Guaranteed Refunding Revenue Bond Issuance Costs Total Nonoperating Revenues (Expenses) Net Income
RETAINED EARNINGS - JULY 1. 1998
RETAINED EARNINGS - JUNE 30.1999

F. J. TORRAS GEORGIA 400

CAUSEWAY

PROJECT

TOTAL

$ 354,213.00 $ 1,871,732.17 $ 2,225,945.17

-417,145.24

-417,145.24

-4,159,956.75 -4,159,956.75

-3,000.00

-3,000.00

,
$ 354,213.00 $ -2,708,369.82 $ -2.354,156.82

$ 308,856.88 $ 10,275,398.56 $ 10,584,255.44

6,825,930.00 12.353.757.10 19.179.687.10

$ 7,134.786.88 $ 22,629.155.66 $ 29.763,942.54

See notes to the financial statements.

-23 -

STATE TOLLWAY AUTHORITY COMBINING STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE - ENTERPRISE FUND
YEAR ENDED JUNE 30. 1999

CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers Cash Paid to Vendors and Employees
Net Cash Provided by Operating Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Interest Paid on Bonds Principal Paid on Bonds Other Bond Related Payments Acquisition and Construction of Capital Assets
Net Cash Used in Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Investment Securities Proceeds from Sale and Maturity of Investments Investment Income Received
Net Cash Provided by (Used in) Investing Activities
Net Increase in Cash and Cash Equivalents
CASH AND CASH EQUIVALENTS - JULY 1. 1998

F.J. TORRAS CAUSEWAY

GEORGIA 400 PROJECT

TOTAL

$ 1,478,308.69 $ 21,186,711.25 $ 22,665,019.94

-1,413,217.34

-5,889,040.02

-7,302,257.36

$ 65,091.35 $ 15,297,671.23 $ 15,362,762.58

$
$ -1,196.732.55 $ -1,196,732.55 $

-3,570,158.75 $ -1,415,OqO.00
-3,000.00 -1,178,980.10
-6,167,138.85 $

-3,570,158.75 -1,415,000.00
-3,000.00 -2,375,712.65
-7,363,871.40

$ -869,542.75 $ -65,528,615.14 $ -66,398,157.89

1,735,737.90

55,641,286.81

57 , 3 n,024. 71

380,831.64

1,664,841.91

2.045,673.55

$ 1,247,026.79 $ -8,222,486.42 $ -6,975,459.63

$ 115,385.59 $

908,045.96 $ 1,023,431.55

5,384,562.67

11 ,937,702.80

17,322,265.47

CASH AND CASH EqUIVALENTS - JUNE 30. 1999

$ 5,499,948.26 $ 12,845.748.76 $ 18,345,697.02

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating Income (Loss)
Adjustments to Reconcile Operating Income (Loss) to
Net Cash Provided by Operating Activities: Depreciation Amortization of Estate for Years Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable Increase in Prepaid Items Increase in Liabilities (Other than Customer Deposits) Increase in Customer Deposits Payable Increase in Deferred Revenues
Total Adjustments
Net Cash Provided by Operating Activities

$ -45,356.12 $ 12,983,768.38 $ 12,938,412.26

$ 32,693.19 $
2,738.19 68,39i.09
6,618.00 $ 110,447.47 $

1,100,485.67 $ 955,601.00
-21,700.82 -117,607.36 115,836.69
19,140.00 262,147.67
2,313,902.85 $

1,133,178.86 955,601.00
-18,962.63 -117,607.36 184,234.78
19,140.00 268.765.67
2,424,350.32

$ 65.091.35 $ 15,297,671.23 $ 15,362,762.58

NONCASH CAPITAL AND RELATED FINANCING ACTIVITY Disposal of Fixed Asset
See notes to the financial statements.

-24-

$

422,273.87 $ _ ......4.;;;22.2.7.3..-.8.7..

STATE TOLLWAY AUTHORITY STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
FIDUCIARY FUND TYPE - AGENCY FUND YEAR ENDED JUNE 30. 1999

EXHIBIT"W

Contractors' Retainage Escrow Deposits

ASSETSI LIABILITIES JULY 1,1998

ADDITIONS

DELETIONS

ASSETSI LIABILITIES JUNE 30,1999

$ 75,787.92 $ ===0=.0:=0 $ 75,787.92 $ ====0=.0=0

See notes to the financial statements.

-25 -

STAIB TOLLWAY AUTHORITY

SCHEDULE "1"

SCHEDULE OF REQUIREP SUPPLEMENTARY INFORMATION

YEAR 2000 DISCLOSURES

YEAR ENDED JUNE 30. 1999

The State TollwayAuthority (STA) 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 ofshortcomings in many electronic data processing systems and other equipment that make operations beyond 1999 troublesome. The following stages have been identified as necessary to implement a year 2000 compliant system.

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

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

Remediation Stage - The time when changes are made to systems and equipment.

Validation/Testing 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 STA 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 ofthe 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, as amended by Technical Bulletin 99-1.

Systems 1) PC Hardware 2) PC Software 3) Compaq Alpha Cluster

Primary Function
General accounting and management functions
General accounting and office management functions
Host ofthe toll collection system

4) Toll Collection System

Toll collection system

5) Open VMS and Layered

Operating system for Compaq

Products (UCx, MessageQ, Alpha Cluster

6) Oracle RDB

Transactions database

Compliance Stage at June 30.1999
Validationtresting StageCompleted
Validationffesting StageCompleted
Validationffesting StageCompleted
Validationffesting StageCompleted
Validationffesting Stage Completed
Validationffesting StageCompleted

Compliance Stage Necessary for Completion None
None
None
None
None
None

See notes to the financial statements.

-26-

STATE TOLLWAYAUIHORITY

SCHEDULE "1"

SCHEDULE OF REQUIRED SuppLEMENTARY lNEORMATION

YEAR 2000 DISCLOSURES

YEAR ENDED JUNE 3D. 1999

Systems
7) Equipment with Embedded Microprocessors

Primmy Function
Plaza elevator, security system, UPS and power generator system

Compliance Stage at June 30. 1999
Validation!festing StageCompleted

Compliance Stage Necessary for COmPletion
None

The STA does not have any outstanding commitments for the year 2000 issue at June 30, 1999.

See notes to the financial statements.

- 27-

STATE TOLLWAY AUTHORITY CASH AND CASH EqUIVALENTS
JUNE 30. 1999

SCHEDULE "2"

NONINTEREST BEARING ACCOUNTS

The Bank of New York, Atlanta, Georgia

$

3,193.26

INTEREST BEARING ACCOUNTS

Bank of America, N.A., Atlanta, Georgia

$ 13,557,141.98

Suntrust Bank, Southeast Georgia, N.A., Brunswick, Georgia
Certificate of Deposit No. 23721 Public Funds Checking

$ 426,601.40
-40.00

426,561.40

Funds on Deposit with Office of Treasury and Fiscal Services State Investment Pool

4,280,542.58 18,264,245.96

OTHER

Cash on Hand

78,257.80

$ 18,345,697.02

See notes to the financial statements.

-28-

STATE TOLLWAY AUTHORITY ANALYSIS OF CONSTRUCTION AND WORK IN PROGRESS
YEAR ENDED JUNE 30, 1999

SCHEDULE "4"

CONSTRUCTION IN PROGRESS BALANCE - JULY 1, 1998 CHARGES OUT DURING FISCAL YEAR To Expense To Loss on Disposal of Fixed Assets
BALANCE - JUNE 30,1999
WORK IN PROGRESS BALANCE - JULY 1, 1998 CHARGES IN DURING FISCAL YEAR Equipment Equipment Purchases Per Diem, Fees and Contracts Contracts CHARGES OUT DURING FISCAL YEAR To Fixed Assets To Expense
BALANCE - JUNE 30,1999

$ 460,191.27
-44,155.03 -416,036.24
$ ====0:.=.0=0
$ 635,520.66
1,517,481.96 1,135,840,55 -1,679,521.73 -412,588.89
$ 1,196,732.55

See notes to the financial statements.

-30-

STATE TOLLWAY AUTHORITY SCHEDULE OF OTHER OPERATING EXPENSES
YEAR ENDED JUNE 30.1999

SCHEDULE "5"

OTHER OPERATING EXPENSES
Regular Operating Expenses Advertising Expense Bank Charges Check Charges Credit Card Charges Dues and Subscriptions Freight Internet and Computer License Fees Registration Fees Uniforms Vehicle Registration Search Fees

F.J.TORRAS GEORGIA 400

CAUSEWAY

PROJECT

TOTAL

$

15,566.06 $ 15,566.06

$

3,464.69

84,837.01

88,301.70

22,643.95 22,643.95

194,651.05 194,651.05

1,448.59

1'448.59

8.42

5,922.74

5,931.16

19,380.00

19,380.00

32,971.00

32,971.00

7,364.07

1,029.18

8,393.25

240.00

240.00

$ 10,837.18 $ 378,689.58 $ 389,526.76

See notes to the financial statements.

- 31 -

STATE TOLLWAY AUTHORITY RECONCILIATION OF PER DIEM AND FEES
YEAR ENDED JUNE 30. 1999

SCHEDULE "6"

Total per Annual Supplement
Adjustments AccuStaff, Incorporated AppleOne Bank of New York Capricorn Systems, Incorporated Delta Staffind Services, Incorporated Dobbs, Ram and Company Dunhill Staffing Systems Excel Georgia Department of Law Onsite Commercial Staffing Phillip DeBecker Randstad Staffing Services Steven J. Brudi Steven Cleary Tempworld Staffing Services TRC Staffing Services, Incorporated

TYPE PAYMENT

FEE AMOUNT

$

0.00

Other Fees Other Fees Other Fees Other Fees Other Fees Consultant Other Fees Other Fees Attomey Other Fees Consultant Other Fees Consultant Consultant Other Fees Other Fees

2,499.01 45,044.88
4,163.50 16,995.00 129,487.27
750.00 147,501.12
61,500.00 3,035.99 1,350.00 4,440.00
54,843.59 3,550.00 100.00 4,051.55
17,190.25

$ 496,502.16

See notes to the financial statements.

-32 -

SECTIONn CURRENT YEAR FINDINGS AND QUESTIONED COSTS

STATE TOLLWAY AUTHORITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1999
. FINANCIAL STATEMENTFINPlNGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS Deficiencies in the Collection and Recording of Cash Tolls (p. J. Torras Causeway) Finding Control Number: FS-927-99-01
Our audit included an examination ofthe internal controls over collection and recording ofcash tolls utilized by the State Tollway Authority. This examination included procedures to provide reasonable assurance that cash tolls collected were correctly recorded on subsidiary records and posted on the Authority's accounting records. We observed that the Authority's equipment used to record toll patron activity and revenue received at the F. J. Torras Causeway plaza was not functioning properly. Specifically, the lane equipment used failed to produce accurate data to compare patron activity and tolls collected to the amount oftoll revenue recorded on the accounting records. As a result, cash toll revenue recorded on the accounting records was not verifiable through machine generated patron activity. Lack of internal controls over the recording ofpatron activity and tolls collected could result in undetected misstatements and/or misappropriation of assets. This deficiency is a result of mechanical failure oftoll plaza equipment. The Authority should provide a system to accurately record patron activity and toll revenue on the accounting records.