Audit report, State Road and Tollway Authority, a component unit of the state of Georgia, year ended June 30, 2003

STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor
AUDIT REPORT STATE ROAD AND TOLLWAY AUTHORITY A COMPONENT UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 2003

STATE ROAD AND TOLLWAY AUTHORITY -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 FUND

14

D

STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

GOVERNMENTAL FUND

16

E

STATEMENT OF NET ASSETS

PROPRIETARY FUNDS-ENTERPRISE FUNDS

18

F

STATEMENT OF REVENUES, EXPENSES AND CHANGES

IN FUND NET ASSETS

PROPRIETARY FUNDS-ENTERPRISE FUNDS

20

G

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS-ENTERPRISE FUNDS

22

H NOTES TO THE FINANCIAL STATEMENTS

24

SUPPLEMENTARY INFORMATION

SCHEDULES

1 CASH AND CASH EQUIVALENTS

46

2 INVESTMENTS

47

SECTION II

COMPLIANCE AND INTERNAL CONTROL REPORT

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL

REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

51

STATE ROAD AND TOLLWAY AUTHORITY -TABLE OF CONTENTS-

SECTION Ill

AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

57

SECTION IV

CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

61

SECTION I FINANCIAL

DEPARTMENT OF AUDITS AND ACCOUNTS

254 Washington Street, S.W., Suite 214

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

Atlanta, Georgia 30334-8400

March 26, 2004
Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Road and Tollway Authority
and Honorable Douglas R. Hooker, 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, the business-type activities, and each major fund of the State Road and Tollway Authority, a component unit of the State of Georgia, as of and for the year ended June 30, 2003, which collectively comprise the Authority's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Authority'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 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, the businesstype activities, and each major fund of the State Road and Tollway Authority, as of June 30, 2003, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

-1-

In accordance with Government Auditing Standards, we have also issued a report dated March 26, 2004 on our consideration of the State Road and Tollway Authority'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 considering the results of our audit.
The management's discussion and analysis on pages 5 through 1O 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 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 State Road and Tollway Authority's basic financial statements. The accompanying supplementary information (Schedules 1 and 2) is presented for purposes of additional analysis and is not a required part of the basic financial statements. The accompanying supplementary information (Schedules 1 and 2) has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, such information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Respectfully submitted,

~~-

:=,,

Russell W. Hinton, CPA, CGFM State Auditor

RWH:et

-3 -

STATE ROAD AND TOLLWAY AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED JUNE 30, 2003
The following is a discussion and analysis of the financial performance of State Road and Tollway Authority. It provides an overview of the activities for the fiscal year ended June 30, 2003. The State Road and Tollway Authority is a public corporation and body corporate. The State Road and Tollway Authority maintains and operates two toll facilities in the State of Georgia and manages a bond financing program to finance certain transportation projects in the State of Georgia. The Management Discussion and Analysis is designed to be read in conjunction with the State Road and Tollway Authority's financial statements. Because fiscal year 2003 does not represent the first year in which the State of Georgia, including State Road and Tollway Authority, implemented the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, this discussion and analysis is required to include extensive comparisons of the current fiscal year's activities to the previous fiscal year ended June 30, 2002.
HIGHLIGHTS
Net Assets As of the close of fiscal year 2003, the State Road and Tollway Authority's combined ending net assets totaled $(120,173,721). Of this total, $(133,733,751) is the net asset balance for Governmental Activities while $13,560,030 is the net asset balance for Business-Type Activities. The total net capital asset investment is $15,740,194.
Long-term Debt The State Road and Tollway Authority's total long-term debt obligations at June 30, 2003 consist of bond indebtedness in the amount of $445,736,408. Of this total, $388,477,486 is the long-term bond indebtedness for Governmental Activities and $57,258,922 is the long-term bond indebtedness for Business-Type Activities.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the State Road and Tollway Authority's basic financial statements. The State Road and Tollway Authority'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 Financials Statements The government-wide financial statements are designed to provide a broad overview of the State Road and Tollway Authority's finances, in a manner similar to a private-sector business reports.
The Statement of Net Assets presents information on all the State Road and Tollway Authority 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 the State Road and Tollway Authority is improving or deteriorating.
-5 -

The Statement of Activities presents information showing how the State Road and Tollway Authority'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.
The government-wide financial statements only include the operations of the State Road and Tollway Authority. The State Road and Tollway Authority 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'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. The State Road and Tollway Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the State Road and Tollway Authority funds can be classified into the category of governmental funds and proprietary 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.
The State Road and Tollway Authority maintains one individual governmental fund. The General Fund (General Authority Governmental Fund) is the only governmental fund and is used to account for all activities of the Authority not otherwise accounted for by proprietary specific funds.
Proprietary Funds. The State Road and Tollway Authority only maintains one of the two different types of proprietary funds. The type used by the Authority, Enterprise Funds, is used to report the same functions as those presented as businesstype activities in the government-wide financial statements. The State Road and Tollway Authority uses enterprise funds to account for its Tollway operations in Brunswick, Georgia for the Torras Causeway operation, and, Atlanta, Georgia for the Georgia 400 Extension.
Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide information for the Torras Causeway and Georgia 400 Extension.
Notes To The Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and
-6 -

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 certain supplementary information concerning the State Road and Tollway Authority's cash and investments.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. The reader can think of the State Road and Tollway Authority's net assets as the difference between its assets (i.e., what the Authority owns) and its liabilities (i.e., what the Authority owes) at the end of a fiscal year. This balance represents one way to measure the Authority's financial health or its financial position. In the case of the State Road and Tollway Authority, liabilities exceeded assets by $133,733,751 at the close of the most recent fiscal year.
The negative net asset amount is attributable to the General Authority Governmental Fund and the method of accounting required by Generally Accepted Accounting Principles (GAAP). The General Authority manages the bond financing activities for certain transportation projects of the State of Georgia. The General Authority issues bonds for these transportation projects which are constructed and owned by the Department of Transportation (DOT). A project account is established for each bond issue. The proceeds from the bonds are maintained in the project accounts. The DOT remits invoices to SRTA for payment from the project accounts. The DOT collects motor fuel and federal revenues for State of Georgia transportation projects and is required to remit a portion of these revenues to SRTA for the bond sinking fund debt service requirements. As the project accounts are expended, the total asset amounts are reduced. GAAP does not allow SRTA to reflect a long-term accounts receivable from DOT. As a result, the project accounts are reduced faster than the receipt of funds from DOT for payment of the bond debt obligations, which caused a negative net asset amount at June 30, 2003.
The current fiscal year's total assets and total liabilities are lower than the previous year. During the year, a Bond Anticipation Note (BAN) was paid in full from the remaining proceeds from the BAN, which were included in total assets for the year ended June 30, 2002, and the issuance of the 2002 series Guaranteed Revenue Bond (GRB). The corresponding BAN liability was eliminated. The net effect of the issuance of the 2002 series GRB and the elimination of the BAN resulted in the lower total liabilities.
The net assets invested in capital assets for the year was $15,740,194. The book value of the capital assets was less than the previous year which totaled $16,405,071 and represents accumulated depreciation in excess of the current year's fixed asset acquisitions. The State Road and Tollway Authority uses these capital assets to provide services to those citizens served by the Authority.
The tabular information below provides a comparison of the State Road and Tollway Authority's net assets at June 30, 2003 and June 30, 2002. The schedule provides comparative information for both the governmental and business-type activities. For presentation purposes, the amounts shown have been rounded to the nearest dollar.
-7 -

Other Assets Capital Assets
Total Assets

Comparative Schedule Of SRTA's Net Assets

Governmental

Business-Type

Activities

Activities

Total

FY 2003

FY 2002

FY 2003

FY 2002

FY 2003

FY 2002

$ 276,123,008$ 666,114,608 $ 77,101,158 $ 81,129,410$ 353,224,166 $ 747,244,018

10,415,915 10,415,915

5,324,279

5,989,156

15,740,194

16,405,071

$ 286,538,923 $ 676,530,523 $ 82,425,437 $ 87,118,566 $ 368,964,360 $ 763,649,089

Current Liabilities $ Long-Term Liabilities
Current Noncurrent
Total Liabilities $

31,795,189$ 285,882,861 $
26,139,808 49,499,748 362,337,678 351,474,276 420,272,675 $ 686,856,885 $

11,606,484 $
57,258,922 68,865,406 $

11,732,621 $
63,081,173 74,813,794 $

43,401,673 $
26,139,808 419,596,600 489,138,081 $

297,615,482
49,499,748 414,555,449 761,670,679

Net Assets

Invested in Capital $ 10,415,915 $

Assets

Restricted

0

Unrestricted

-144,149,666

Total Net Asset~ $ -133,733,751 $

10,415,915$
15,302 -20,757,579 -10,326,362 $

5,324,279 $
0 8,235,751 13,560,030 $

5,989,156 $ 15,740,194$

0

0

6,315,616 -135,913,915

12,304,772 $ -120,173,721 $

16,405,071
15,302 -14,441,963
1,978,410

At the end of the current fiscal year, the State Road and Tollway Authority is able to report a positive balance in only the Business-Type Activities category of net assets. The Authority as a whole and the Governmental Activities report negative net asset balances which were discussed previously.

The following table provides a comparison of the changes in the State Road and Tollway Authority's net assets for the fiscal years ended June 30, 2003 and June 30, 2002. The schedule provides comparative information for both the governmental and business-type activities. For presentation purposes, the amounts shown have been rounded to the nearest dollar.

Comparative Schedule Of Changes In SRTA's Net Assets

Governmental

Business-Type

Activities

Activities

Total

FY 2003

FY 2002

FY 2003

FY 2002

FY 2003

FY 2002

Revenues:

Program Revenues

Charges for Services

$ 21,797,645 $ 21,758,950 $ 21,797,645 $ 21,758,950

General Revenues

Rents and Royalties

45,810

46,976

45,810

46,976

Unrestricted Invest-

ment Earnings $ 9,754,249 $ 8,431,683

585,130 1,582,593

10,339,379 10,014,276

Loss on Disposal of

Capital Assets

-109,391

0

-109,391

Total Revenues $ 9,754,249 $ 8,431,683 $ 22,428,585 $ 23,279,128 $ 32,182,834 $ 31,710,811

Expenses: General Government Debt Service Interest on Long-Term Debt Transportation Toll Roads

$ 1,436,872 $ 144,245
26,298,458 109,566,867

1,426,446 1,266,246

$ 1,436,872 $ 1,426,446 144,245 1,266,246

6,645,478 $ 17,112,842 $ 18,000,333

26,298,458 109,566,867
17,112,842

6,645,478 0
18,000,333

Total Expenses $ 137,446,442 $ 9,338,170 $ 17,112,842$ 18,000,333 $ 154,559,284 $ 27,338,503

-8-

Comparative Schedule Of Chane es In SRTA's Net Assets - continued

Governmental

Business-Type

Activities

Activities

Total

FY 2003

FY 2002

FY 2003

FY 2002

FY 2003

Increase/Decrease

In Net Assets Before

Before Other Items $ -127,692, 193 $ -906,487 $ 5,315,743 $ 5,278,795 $ -122,376,450 $

FY 2002 4,372,308

Transfers Payments from State of
Georgia Extraordinary Item

4,060,485 -9,419,875 -4,060,485 -37,715,734
249,935 -25,616

0 -47,135,609

249,935

0

-25,616

0

Change in Net Assets

$ -123,407,389 $ -10,326,362 $ 1,255,258 $ -32,436,939 $ -122, 152,131 $ -42,763,301

Net Assets - Beginning

-10,326,362

0 12,304,772 44,741,711

1,978,410 44,741,711

Net Assets - Ending

$ -133,733,751 $ -10,326,362 $ 13,560,030 $ 12,304,772 $ -120,173,721 $ 1,978,410

As indicated in the "FY 2003 Total" column above, the Authority's net assets decreased from $1,978,410 to $(120, 173,721) during the current fiscal year. The change in net assets was $(122, 152,130). The principal factors in this decrease for FY 2003 were attributed to the Governmental Activities bond management activities. The financial impact of these transactions on net assets is that the amounts expended to the DOT for transportation expenses and the payments of interest on long-term debt exceeded the transfers-in and payments from the State of Georgia.
FINANCIAL ANALVSIS OF THE AUTHORITY'S FUNDS
Governmental Fund General Fund. The General Fund is the governmental operating fund of the State
Road and Tollway Authority. At June 30, 2003, the General Fund had an unreserved fund balance of $255,703,921 that is primarily the result of the issuance of debt to fund transportation projects in conjunction with the Department of Transportation.
Proprietary Funds The proprietary fund statements provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net assets of the F. J. Torras Causeway at June 30, 2003 amounted to $147,941, and those of the Georgia 400 Project amounted to $8,087,810. Factors concerning the finances of these two funds have already been addressed in the discussion of the Authority's business-type activities.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets. The State Road and Tollway Authority's investment in capital assets as of June 30, 2003, totaled $23,780,100 with accumulated depreciation of $8,039,906 and a net book value of $15,740,194. This investment in capital assets includes, land, buildings and equipment. Actual depreciation charges for the year totaled $1,191,030. Additional information concerning the Authority's capital assets can be found in the notes to the financial statements.

-9 -

Long-Term Debt. At June 30, 2003, the State Road and Tollway Authority had total long-term debt in the amount of $445,736,408, which was comprised of $388,477,486 in revenue bonds in the governmental activities and $57,258,922 in revenue bonds in the business-type activities. Additional information on the Authority's long-term debt can be found in the notes to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The State Road and Tollway Authority's budget for fiscal year 2004 calculated revenue from operations to be comparable to the actual revenue of fiscal year 2003. The rationale for this revenue calculation are two-fold, the conservative calculation for operating income based on a slowing economy, as indicated by the declining revenue collections at the State level, and the projected closure of the Torras Causeway and calculating revenue for only six months as the Torras Causeway was scheduled for closure on or before December 31, 2003. The Causeway ceased collection of tolls on September 24, 2003.
REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the State Road and Tollway Authority's finances for all those individuals having an interest in the Authority's finances. Questions concerning any of the information provided in this report should be addressed to: State Road and Tollway Authority, 101 Marietta Street, Suite 2500, Atlanta, Georgia 30303.
- 10 -

BASIC FINANCIAL STATEMENTS - 11 -

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents Accounts Receivable (net of allowance for uncollectibles) Internal Balances Prepaid Items Deferred Charges Restricted Assets
Temporarily Restricted: Cash and Cash Equivalents Investments
Estate for Years, Net Capital Assets
Land Infrastructure
Less: Accumulated Depreciation Building
Less: Accumulated Depreciation Improvements Other Than Building
Less: Accumulated Depreciation Machinery and Equipment
Less: Accumulated Depreciation Computer Software
Total Assets
LIABILITIES AND NET ASSETS
Accounts Payable and Other Current Liabilities Current Liabilities Payable from Restricted Assets
lnterfund Payable Funds Held for Others Deferred Revenue Customer Deposits Payable Accrued Interest Payable Guaranteed Refunding Revenue Bonds Payable Transportation Revenue Bonds Payable Noncurrent Liabilities Due Within One Year Due in More Than One Year
Total Liabilities
Net Assets Invested in Capital Assets Unrestricted (Deficit)
Total Net Assets

Governmental Activities

Business-Type Activities

Total

$

627,699.63 $ 30,694,691.53 $ 31,322,391.16

86,559.56

86,559.56

28,859,995.90 -28,859,995.90

0.00

8,192.07

8,192.07

3,241,525.34

3,241,525.34

9,983,006.90 233,410,780.26

13,564,167.25 17,322,359.01 44,285,184.19

23,547,174.15 250,733,139.27
44,285,184.19

10,415,915.00

1,135,840.55 -567,920.26 5,082,076.89 -2,778,494.15 2,484,921.34 -1,369,115.83 4,460,671.49 -3,324,376.21 200,675.00

10,415,915.00 1,135,840.55 -567,920.26 5,082,076.89 -2,778,494.15 2,484,921.34 -1,369,115.83 4,460,671.49 -3,324,376.21 200,675.00

$ 286,538,923.03 $ 82,425,436.53 $ 368,964,359.56

$

127,028.82 $ 773,064.67 $

900,093.49

10,605,688.96 6,444,843.64 3,766,963.26 10,850,664.05

5,997.40 3,002,217.61
232,510.50 1,482,693.75 6,110,000.00

10,605,688.96 5,997.40
9,447,061.25 232,510.50
5,249,657.01 6,110,000.00 10,850,664.05

26,139,807.69 362,337,678.05

26,139,807.69 57,258,922.45 419,596,600.50

$ 420,272,674.47 $ 68,865,406.38 $ 489,138,080.85

$ 10,415,915.00 $ 5,324,278.82 $ 15,740,193.82

-144,149,666.44

8,235,751.33 -135,913,915.11

$ -133,733,751.44 $ 13,560,030.15 $ -120,173,721.29

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

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF ACTIVITIES YEAR ENDED JUNE 301 2003

Functions/Programs Governmental Activities: General Government Debt Service Interest on Long-Term Debt Transportation

Expenses

$

1,436,872.53 $

144,245.30

26,298,457.83

109,566,866.75

Program Revenues Charges for Services

Net (Expense) Revenue and

Changes in Net Assets

Governmental

Business-Type

Activities

Activities

Total

0.00 $

-1,436,872.53 $ -144,245.30
-26,298,457.83 -109,566,866. 75

0.00 $

-1,436,872.53 -144,245.30
-26,298,457.83 -109,566,866.75

Total Governmental Activities $ 137,446,442.41 $

0.00 $ -137,446,442.41 $

0.00 $ -137,446,442.41

Business-Type Activity:

......

Toll Roads

(,J

Total Activities

17,112,841.83 $ 154,559,284.24 $

21,797,644.83

0.00

21,797,644.83 $ -137,446,442.41 $

4,684,803.00

4,684,803.00

4,684,8()3.00 $ -132,761,639.41

General Revenues

Rents and Royalties

Unrestricted Investment Earnings

$

Payments from the State of Georgia

Extraordinary Item

Property Tax for Prior Year Land Purchase

Transfers

$ 9,754,248.63
249,935.55
-25,615.93 4,060,485.21

45,810.00 $ 585,130.74
-4,060,485.21

45,810.00 10,339,379.37
249,935.55
-25,615.93 0.00

Total General Revenues, Extraordinary

Item and Transfers

$

14,039,053.46 $

-3,429,544.47 $

10,609,508.99

Change in Net Assets

$ -123,407,388.95 $

1,255,258.53 $ -122,152,130.42

Net Assets - Beginning

-10,326,362.49

12,304,771.62

1,97_1'!,409.13

Net Assets - Ending The notes to the financial statements are an integral part of this statement.

$ __:133,733,751.44 $

13,560,030.15 $ -120,173,721.29

EXHIBIT "B"

STATE ROAD AND TOLLWAY AUTHORITY BALANCE SHEET
GOVERNMENTAL FUND JUNE 30. 2003

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Due From Other Funds Cash and Cash Equivalents - Restricted
Guaranteed Revenue Bond Covenant Accounts Transportation Revenue Bond Covenant Accounts Investments - Restricted Guaranteed Revenue Bond Covenant Accounts Transportation Revenue Bond Covenant Accounts
Total Assets

General Fund

$

627,699.63

28,859,995.90

9,981,859.82 1,147.08

222,332,463.29 11,078,316.97

$ 272,881,482.69

LIABILITIES AND FUND BALANCES
Liabilities Accounts Payable lnterfund Payable Deferred Revenue
Total Liabilities
Fund Balances Unreserved
Total Liabilities and Fund Balances

$

127,028.82

10,605,688.96

6,444,843.64

$ 17,177,561.42

255,703,921.27

$ 272,881,482.69

The notes to the financial statements are an integral part of this statement.
- 14 -

STATE ROAD AND TOLLWAY AUTHORITY BALANCE SHEET
GOVERNMENTAL FUND JUNE 30, 2003

EXHIBIT "C"

General Fund

Amounts reported for governmental activities in the Statement of Net Assets are different because:

Total Fund Balances - Governmental Fund

$ 255,703,921.27

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of:

Land

10,415,915.00

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:

Guaranteed Revenue Bonds Payable Premium on Guaranteed Revenue Bonds Payable
Less: Amortization of Premium on Guaranteed Revenue Bonds Payable
Deferred Charges Less: Amortization of Bond Issuance Costs
Accrued Interest Payable Transportation Revenue Bonds Payable Premium on Transportation Revenue Bonds Payable Deferred Charges Accrued Interest Payable

-341 ,445,000.00 -10 ,029 ,276.05
1,002,927.60 2,884,905.94
-288,490.60 -5,803,635.00 -45,760,000.00
-831,329.60 645,110.00 -228,800.00

Net Assets of Governmental Activities (Exhibit "A")

$ -133,733,751.44

The notes to the financial statements are an integral part of this statement.
- 15 -

STATE ROAD AND TOLLWAY AUTHORITY

EXHIBIT "D"

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUND

YEAR ENDED JUNE 30, 2003

REVENUES
Interest and Other Investment Income
EXPENDITURES
Current General Government
Debt Service Principal Interest Revenue Bond Issuance Costs
Total Expenditures
Deficiency of Revenues Under Expenditures
EXTRAORDINARY rTEM
Property Tax for Prior Year Land Purchase
Deficiency of Revenues Under Expenditures and Extraordinary Item
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out Long-Term Debt Issued
Total Other Financing Sources and Uses
Net Change in Fund Balances
FUND BALANCES - BEGINNING
FUND BALANCES - ENDING

General Fund $ _ _9_,_7_5_4,._2_48_.6_3_

$

1,436,872.53

48,666,212.00 22,102,486.63
645,110.00

$ 72,850,681.16

$ -63,096,432.53

25,615.93 $ -63,122,048.46

$ 43,581,558.76 -109,566,866.75 46,591,329.60
$ -19,393,978.39 $ -82,516,026.85
338,219,948.12
$ 255,703,921.27

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

STATE ROAD AND TOLLWAY AUTHORITY

EXHIBIT "D"

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUND

YEAR ENDED JUNE 30, 2003

General Fund

Amounts reported for governmental activities in the Statement of Activities are different because:

Net change in fund balances - total governmental funds

$ -82,516,026.85

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs and premiums when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. The following amounts are the differences in the treatment of long-term debt
Bond Anticipation Notes Retirement Guaranteed Revenue Bond Principal Retirement Accrued Interest Issuance of Transportation Revenue Bonds Premium on Issuance of Transportation Revenue Bonds

40,111,212.00 8,555,000.00 -6,032,435.00
-45,760,000.00 -831,329.60

Some items reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. In the current period, these amounts are:
Recognition of Premium on Bond Anticipation Notes Payable Retired Revenue Bond Issuance Costs Amortization of Premium on Guaranteed Revenue Bonds Payable Amortization of Guaranteed Revenue Bond Issuance Costs

1 ,335,000.00 645,110.00 501,463.80 -144,245.30

Some revenues reported on the accrual basis in the Statement of Activities in the prior year provide current financial resources reported as transfers-in in the fund statements.

-39,271, 138.00

Change in net assets of Governmental Activities (Exhibit "B")

$ -123,407,388.95

The notes to the financial statements are an integral part of this statement.
- 17 -

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF NET ASSETS
PROPRIETARY FUNDS-ENTERPRISE FUNDS JUNE 30, 2003

EXHIBIT "E"

F.J. TORRAS CAUSEWAY

GEORGIA400 PROJECT

TOTAL

ASSETS

Current Assets Cash and Cash Equivalents Accounts Receivable (net of allowance for uncollectibles) Interest Receivable Prepaid Items

$ 8,385,927.34 $ 680.00

22,308,764.19 $ 82,407.42 3,472.14 8,192.07

30,694,691.53 83,087.42 3,472.14 8,192.07

Total Current Assets

$ 8,386,607.34 $ 22,402,835.82 $ 30,789,443.16

Noncurrent Assets Restricted Cash and Cash Equivalents Customer Deposits Guaranteed Refunding Revenue Bond Covenant Accounts Investments Guaranteed Refunding Revenue Bond Covenant Accounts

$ 4,169,354.22 $ 9,394,813.03
17,322,359.01

4,169,354.22 9,394,813.03
17,322,359.01

Total Restricted Assets

$ 30,886,526.26 $ 30,886,526.26

Estate for Years, Net

$ 44,285,184.19 $ 44,285,184.19

Capital Assets Infrastructure Less: Accumulated Depreciation Building Less: Accumulated Depreciation Improvements Other Than Building Less: Accumulated Depreciation Machinery and Equipment Less: Accumulated Depreciation Computer Software

$ 1,135,840.55 -567,920.26 143,880.00 $ -111,507.00
302,136.30 -155,561.89

$
4,938,196.89 -2,666,987.15 2,484,921.34 -1,369,115.83 4,158,535.19 -3,168,814.32
200,675.00

1,135,840.55 -567,920.26 5,082,076.89 -2, 778,494.15 2,484,921.34 -1,369,115.83 4,460,671.49 -3,324,376.21 200,675.00

Capital Assets (Net of Accumulated Depreciation)

$ 746,867.70 $ 4,577,411.12 $

5,324,278.82

Total Noncurrent Assets

$ 746,867.70 $ 48,862,595.31 $ 49,609,463.01

Total Assets

$ 9,133,475.04 $ 102,151,957.39 $ 111,285,432.43

The notes to the financial statements are an integral part of this statement.
- 18 -

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF NET ASSETS
PROPRIETARY FUNDS-ENTERPRISE FUNDS JUNE 30, 2003

EXHIBIT "E"

F.J. TORRAS CAUSEWAY

GEORGIA400 PROJECT

TOTAL

LIABILITIES AND NET ASSETS

Current Liabilities Accounts Payable Contracts Payable Due to Other Funds

$ 139,728.94 $ 44,411.51
8,054,526.12

545,396.04 $ 43,528.18
20,805,469.78

685,124.98 87,939.69
28,859,995.90

Total Current Liabilities

$ 8,238,666.57 $ 21,394,394.00 $ 29,633,060.57

Current Liabilities Payable from Restricted Assets Funds Held for Others Deferred Revenue Customer Deposits Payable Accrued Interest Payable Guaranteed Refunding Revenue Bonds Payable

$

5,997.40 $

3,002,217.61

232,510.50

1,482,693.75

6,110,000.00

5,997.40 3,002,217.61
232,510.50 1,482,693.75 6,110,000.00

Total Current Liabilities Payable from Restricted Assets

$ 10,833,419.26 $ 10,833,41926

Noncurrent Liabilities Guaranteed Refunding Revenue Bonds Payable Unamortized Premium on Guaranteed Refunding Revenue Bonds Less: Deferred Amount on Refunding

$ 59,465,000.00 $
882,631.16 -3,088,708.71

59,465,000.00
882,631.16 -3,088,708.71

Total Noncurrent Liabilities

$ 57,258,922.45 $ 57,258,922.45

Total Liabilities

$ 8,238,666.57 $ 89,486,735.71 $ 97,725,402.28

Net Assets Invested in Capital Assets Unrestricted

$ 746,867.70 $ 147,940.77

4,577,411.12 $ 8,087,810.56

5,324,278.82 8,235,751.33

Total Net Assets

$ 894,808.47 $ 12,665,221.68 $ 13,560,030.15

The notes to the financial statements are an integral part of this statement.
- 19 -

STATE ROAD AND TOLLWAY AUTHORITY

EXHIBIT "F"

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS

PROPRIETARY FUNDS- ENTERPRISE FUNDS

YEAR ENDED JUNE 30, 2003

OPERATING REVENUES
Charges for Sales and Services Administrative Fees
Toll Fees Annual Toll Decals Cash Tolls Cruise Cards
Total Charges for Sales and Services
Rents and Royalties Rental Income
Total Operating Revenues
OPERATING EXPENSES
Personal Services Motor Vehicle Expense Printing and Publications, Media Supplies and Materials Repairs and Maintenance Equipment on Inventory- Not Capitalized Water and Sewage Energy Rents Other than Real Estate Freight Other Operating Expenses Travel Real Estate Rentals Per Diem and Fees Contracts Software Telecommunications Infrastructure Depreciation Amortization of Estate for Years Indirect Cost
Total Operating Expenses

F. J. TORRAS CAUSEWAY

GEORGIA 400 PROJECT

TOTAL

$

310.00 $

423,353.70 $

423,663.70

720,656.51 1,028,061.90

12,625,945.72 6,999,317.00

720,656.51 13,654,007.62 6,999,317.00

$ 1,749,028.41 $ 20,048,616.42 $ 21,797,644.83

45,810.00

45,810.00

$ 1,749,028.41 $ 20,094,426.42 $ 21,843,454.83

$ 623,651.71 $ 1,885,762.50 $ 2,509,414.21

751.12

2,750.68

3,501.80

2,899.00

553,177.21

556,076.21

49,088.76

896,991.34

946,080.10

76,089.89

1,514,574.35

1,590,664.24

1,050.00

57,004.81

58,054.81

339.96

2,274.24

2,614.20

9,919.54

81,187.25

91,106.79

2,673.00

72,015.48

74,688.48

655.79

7,013.53

7,669.32

34,244.12

357,096.21

391,340.33

3,873.93

1,423.10

5,297.03

189,291.71

267,785.88

457,077.59

3,781.61

487,405.41

491,187.02

285,533.26

960,661.00

1,246,194.26

119,557.36

119,557.36

3,840.58

96,586.11

100,426.69

47,685.00

47,685.00

193,742.51

997,287.92

1,191,030.43

3,947,341.24

3,947,341 .24

15,957.80

6,740.17

22,697.97

$ 1,545,069.29 $ 12,314,635.79 $ 13,859,705.08

Operating Income

$ 203,959.12 $ 7,779,790.63 $ 7,983,749.75

The notes to the financial statements are an integral part of this statement.
- 20 -

STATE ROAD AND TOLLWAY AUTHORITY

EXHIBIT"F"

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS- ENTERPRISE FUNDS

YEAR ENDED JUNE 30, 2003

NONOPERATING REVENUES (EXPENSES) Investment Income Bond Interest Expense Total Nonoperating Revenues (Expenses) Income Before Transfers
TRANSFERS Transfers Out Changes in Net Assets
TOTAL NET ASSETS -JULY 1

F. J. TORRAS CAUSEWAY

GEORGIA 400 PROJECT

TOTAL

$

7,349.31 $

577,781.43 $

585,130.74

-3,253, 136.75

-3,253, 136.75

$

7,349.31 $ -2,675,355.32 $ -2,668,006.01

$ 211,308.43 $ 5,104,435.31 $ 5,315,743.74

-200,000.00

-3,860,485.21

-4,060,485.21

$

11,308.43 $ 1,243,950.10 $ 1,255,258.53

883,500.04 11,421,271.58 12,304,771.62

TOTAL NET ASSETS - JUNE 30

$ 894,808.47 $ 12,665,221.68 $ 13,560,030.15

The notes to the financial statements are an integral part of this statement.
- 21 -

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS- ENTERPRISE FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT "G"

F.J. TORRAS CAUSEWAY

GEORGIA400 PROJECT

TOTAL

CASH FLOWS FROM OPERATING ACTIVmES

Cash Received from Customers Cash Paid to Vendors Cash Paid to Employees

$ 1,508,779.91 $ 20, 136,444.56 $ 21,645,224.47

-856,485.65

-5,407, 108.64

-6,263,594.29

-623,651.71

-1,885,762.50

-2,509,414.21

Net Cash Provided by Operating Activities

$

28,642.55 $ 12,843,573.42 $ 12,872,215.97

CASH FLOWS FROM NONCAPfTAL FINANCING ACTIVmES

Advances from Other Funds Operating Transfer - General Fund

$ 8,054,526.12 $ 20,805,469.78 $ 28,859,995.90

-200,000.00

-3,860,485.21

-4,060,485.21

Net Cash Provided by Noncapital Financing Activities

$ 7,854,526.12 $ 16,944,984.57 $ 24,799,510.69

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVmES

Acquisition and Construction of Capital Assets Interest Paid on Guaranteed Refunding Revenue Bonds Principal Paid on Guaranteed Refunding Revenue Bonds

$

-526,153.18 $

-526,153.18

-3,096,900.00

-3,096,900.00

-5,845,000.00

-5,845,000.00

Net Cash Used in Capital and Related Financing Activities

$ -9,468,053.18 $ -9,468,053.18

CASH FLOWS FROM INVESTING ACTIVmES

Purchase of Investment Securities Proceeds from Sale and Maturity of Investments Investment Income Received
Net Cash Provided by Investing Activities

$ $ - - -7~ ,349-.31-

-17,322,359.01 $ 17,216,021.62
595,851.08

-17,322,359.01 17,216,021.62
603,200.39

$ _ _--'-7-,'3-"4-9'~.3-1'-- $

489,513.69 $

496,863.00

Net Increase in Cash and Cash Equivalents

$ 7,890,517.98 $ 20,810,018.50 $ 28,700,536.48

CASH AND CASH EQUIVALENTS - JULY 1

495,409.36

15,062,912.94

15,558,322.30

CASH AND CASH EQUIVALENTS - JUNE 30

$ 8,385,927.34 $ 35,872,931.44 $ 44,258,858.78

The notes to the financial statements are an integral part of this statement.
- 22 -

STATE ROAD AND TOLLWAY AUTHORITY STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS- ENTERPRISE FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT"G"

F.J. TORRAS CAUSEWAY

GEORGIA400 PROJECT

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating Income

$

203,959.12 $ 7,779,790.63 $

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

Decrease in Prepaid Items

Increase (Decrease) in Liabilities (Other than Customer Deposits)

Increase in Customer Deposits Payable

Increase (Decrease) in Deferred Revenues

193,742.51 $
-130.00 -128,810.58 -240,118.50

997,287.92 $ 3,947,341.24
9,794.19 54.76
78,786.08 6,765.00
23,753.60

Total Adjustments

$ -175,316.57 $ 5,063,782.79 $

TOTAL
7,983,749.75
1,191,030.43 3,947,341.24
9,664.19 54.76
-50,024.50 6,765.00
-216,364.90 4,888,466.22

Net Cash Provided by Operating Activities

$

28,642.55 $ 12,843,573.42 $ 12,872,215.97

The notes to the financial statements are an integral part of this statement.
- 23 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY The State Road and Tollway Authority (Authority) is an instrumentality of the State of Georgia and a public corporation created to construct, operate and manage a system of roads, bridges and tunnels and facilities related thereto. The Authority consists of five (5) ex-officio members: the Governor, Commissioner of the Department of Transportation, Director of the Office of Planning and Budget, Appointee of Lieutenant Governor and Appointee of Speaker of the House. Administrative services are provided to the Authority by the Georgia Department of Transportation (GDOT). The Authority 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 (GASB) 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 economic resources measurement focus and the accrual basis of accounting 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 the Statement of Activities report information on all the non-fiduciary activities of the Authority. Governmental activities, which normally are financed through taxes, intergovernmental revenues, and other non-exchange revenues, are reported separately from business-type activities, which are financed in whole or in part by fees charged to external parties for goods or services.
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 are 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. Taxes and other items not meeting the definition of program revenues are instead reported as general revenue.

- 24 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
B. BASIS OF PRESENTATION Fund Financial Statements The Authority reports activity in a single governmental fund and two proprietary funds. Separate financial statements are provided for the governmental fund and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.
The Authority reports the following major governmental fund:
The General Fund is used to account for all financial transactions not required to be accounted for in another fund. Operations of the General Fund include accounting for the issuance of bond debt which finances State of Georgia transportation infrastructure construction. Funding of the debt service is realized through the remittance of motor fuel tax and/or federal funds by the GDOT.
The Authority reports the following major proprietary funds:
The Enterprise Funds are used to report activities for which fees are charged to external users for goods or services. These funds are also used when the activity is financed with debt that is secured by a pledge of the net revenues from the fees. The Authority's F.J. Torras Causeway Fund and Georgia 400 Project Fund are reported as enterprise funds.
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, as are the proprietary fund financial statements. 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). Revenues are considered to be "measurable" when the amount of the transaction can be determined and "available" when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Major revenue sources susceptible to accrual include interest and other investment income. Expenditures are generally recorded when the related fund liability is incurred as under accrual accounting. However, debt service expenditures, as well as expenditures related to claims and judgments are recorded only when payment is due.

- 25 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The Authority has elected to follow generally accepted accounting principles prescribed by the Governmental Accounting Standards Board (GASS) as well as Statements and Interpretations of the 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 GASS pronouncements.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Authority's enterprise funds are charges to customers for sales and services and rents and royalties. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. The Authority also recognizes as operating expense the amortization of the asset "Estate for Years". All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use, generally it is the Authority's policy to use restricted resources first, and then unrestricted resources as they are needed.
D. ASSETS, LIABILITIES AND NET ASSETS CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand, demand deposits with banks and other financial institutions. Cash and Cash Equivalents also include short-term, highly liquid investments with maturities of three months or less from the date of acquisition. The aforementioned definitions were applied in the preparation of the Statement of Cash Flows for proprietary funds.
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 for OTFS. 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 of OTFS does not provide for investments in derivatives or similar investments through the Georgia Fund 1.

- 26 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. ASSETS, LIABILITIES AND NET ASSETS 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 stated at amortized cost. Accounting principles generally accepted in the United States of America require that certain of the U. S. government securities be reported at fair value, however, the variance in amortized cost and fair value is deemed immaterial to the financial statements.
The Authority may invest regular funds in such securities and in such manner as it determines to be in its best interest. In addition, the Series 1998 Guaranteed Refunding Revenue Bond covenants, restrict the Authority to investment in the State investment pool or the following forms of investments with maturities if not in excess of two (2) years:
(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 of the Federal Land Bank, the Federal Home Loan Bank, Federal Intermediate Credit Bank or the Central Bank for Cooperatives.
(4) Repurchase Agreements.
The Series 2001 Guaranteed Revenue Bond covenants and the Series 2002 Transportation Revenue Bond covenants impose no additional restrictions.
ACCOUNTS RECEIVABLE Accounts receivable arising from operations of the Georgia 400 Project are reported net of an allowance for uncollectibles in the amount of $25,027.00.
Interest receivable for the Georgia 400 Project consists of interest earned which has not been received at year-end.
PREPAID ITEMS Payments made to vendors for services that will benefit periods beyond June 30, 2003, are recorded as prepaid items.

- 27 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT"H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. ASSETS, LIABILITIES AND NET ASSETS DEFERRED CHARGES Unamortized Bond Issuance Costs for the Series 2001 Guaranteed Revenue Bonds and the Series 2002 Transportation Revenue Bonds are recorded as deferred charges at June 30, 2003.
RESTRICTED ASSETS Specific portions of the Authority's Cash and Cash Equivalents and Investments are classified as restricted assets on the Statement of Net Assets. Certain guaranteed refunding revenue bond, guaranteed revenue bond and transportation revenue bond proceeds, as well as certain resources set aside for their repayment, are reflected as restricted assets on the Statement of Net Assets because their use is limited by applicable bond covenants.
In addition, Restricted Assets include customer deposits paid to the Authority.
ESTATE FOR YEARS On July 10, 1991, the GDOT granted to the State Road and Tollway Authority an "Estate for Years" in return for a portion of the proceeds of the sale of the Series 1991 Guaranteed Revenue Bonds in the amount of $67,508,129.40. This "Estate" entitles the Authority the right to 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 of the Series 1998 Guaranteed Refunding Revenue Bonds by the Authority, all rights, title and interest acquired by this agreement shall revert to the State of Georgia Department of Transportation.
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 of refunding revenue bonds redeemed in that year to total bonds issued multiplied by the original asset amount of $67,508,129.40. This amortization method corresponds to the revenue stream projected during the payoff period of the refunding revenue bonds. The amortization expense recognized for the fiscal year 2003 was $3,947,341.24, which reduced the "Estate for Years" to $44,285,184.19 as of June 30, 2003.
CAPITAL ASSETS Capital assets, which include property, plant, machinery and equipment, computer software and infrastructure assets, are reported in the government-wide financial statements and proprietary fund financial statements at historical cost. Donated capital assets are recorded at fair market value on the date donated and disposals are deleted at recorded cost. Infrastructure assets are capitalized when project costs exceed $1 million. Buildings and Improvements Other than Buildings are capitalized when the cost of individual items or projects exceeds $5,000. Machinery and equipment is capitalized when the cost of individual items exceeds $5,000. The Authority has elected to

- 28 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT"H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

D. ASSETS, LIABILITIES AND NET ASSETS capitalize computer software currently under development. The costs of normal maintenance and repairs that do not add to the value of assets or materially extend asset lives are not capitalized.

Applicable capital assets of the Authority are depreciated using the straight-line method over the following estimated useful lives:

Assets

Years

Infrastructure

8

Building and Building Improvements

7-20

Improvements Other Than Buildings

7-18

Machinery and Equipment

3-9

No depreciation was recognized for computer software in the year under review.
COMPENSATED ABSENCES It is the Authority's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the Authority does not have a policy to pay any amounts when employees separate from service with the government. All vacation pay is accrued and paid when incurred in the government-wide and fund financial statements. These amounts are paid when incurred due to the Georgia Department of Transportation (GDOT) performing certain administrative functions for the Authority (see note 1, A. Reporting Entity). The Authority reimburses the GDOT on a monthly basis for administrative expenses, including salaries and accrued vacation leave.
LONG-TERM OBLIGATIONS In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums, discounts, issuance costs and the differences between reacquisition price and net carrying amount of refunded revenue bonds ("deferred amount on refunding"), are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium, discount and deferred amount on refunding. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.
In the governmental fund financial statements, bond premiums, as well as bond issuance costs, are recognized during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

- 29 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT"H"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
D. ASSETS, LIABILITIES AND NET ASSETS NET ASSETS In the government-wide financial statements and the proprietary fund financial statements, the difference between fund assets and liabilities is reported as net assets. Net assets are reported in three categories:
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.
The unrestricted net assets deficit balance in the governmental activities included in the government-wide financial statements is the result of a timing difference in the flow of the Authority's assets (bond proceeds) and liabilities (bond debt). As mentioned in Note 1 B., the governmental fund issues bond debt to finance State of Georgia transportation infrastructure construction projects. Bond proceeds are disbursed to the GDOT over a three (3) to five (5) year construction period, whereas the bond debt obligations generally have maturity periods of twenty (20) years.
FUND EQUITY In the governmental fund financial statements, fund balances are classified as either reserved or unreserved. Reserved fund balances are those amounts that are not available for appropriation or are legally restricted by outside parties for a specific use. Unreserved fund balances reflect the balances available for appropriation for the general purposes of the fund.
Encumbrance accounting is employed in the governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end, if any, 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.
NOTE 2: BUDGET
The Authority prepares an internal operations budget for management purposes. The budget is not subject to review or approval by the Legislature of the State of Georgia and therefore, is a nonappropriated budget.

- 30 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 3: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
COMPLIANCE WITH 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}, the Series 2001 Guaranteed Revenue Bonds (Governor's Transportation Choices Initiative} and the Series 2002 Transportation Revenue Bonds.
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of the 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 any one or more of the following securities as enumerated in the Official Code of Georgia Annotated (OCGA} Section 5017-59:
(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 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.
(4) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
(5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Corporation, or the Federal National Mortgage Association.
(6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
OCGA Section 45-8-11 provides that the Authority may waive the requirements for security in the case of operating funds placed in demand deposit checking accounts.

- 31 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 4: 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 that include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 2003, 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.

Carrying Amount

Bank Balances

Risk Categories

2

3

Cash Deposits $43,007,052.17 $43,093,606.24 $ 300,000.00 $===0=.0=0=$ 42,793,606.24

CATEGORIZATION OF INVESTMENTS For purposes of analysis of custodial credit risk, investments consist of U. S. Government securities and repurchase agreements. Investments are stated at amortized cost (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 carrying amounts of investment balances as of June 30, 2003, are categorized below. These amounts also include amounts maintained in the State investment pool by the Office of Treasury and Fiscal Services that are not subject to risk categorization.

- 32 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 4: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS

TJlJ;ie of Investment

U.S. Government

Securities

$

Repurchase Agreements

Total

$

State Investment Pool

Risk Categories 2
0.00 $ 30,200,611.39 $
222,332,463.29
0.00 $ 252,533,074.68 $

Carrying

Fair

3

Amount

Value

0.00 $ 30,200,611.39 $ 30,079,958.58
222,332,463.29 222,332,463.29
0.00 $ 252,533,074.68 $ 252,412,421.87

9,999,067.81

9,999,067.81

$ 262,532,142.49 $ 262,411,489.68

NOTE 5: CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2003, was as follows:

Governmental Activities: Capital Assets Not Being Depreciated:
Land

Balance Jul:t: 1, 2002

Additions

Deletions

Balance June 30, 2003

$ 10,415,915.00 $

0.00 $

0.00 $ 10,415,915.00

Business-Type Activities: Capital Assets Being Depreciated:
Infrastructure Buildings Improvements Other than Buildings Machinery and Equipment Computer Software Total Capital Assets Being Depreciated

$ 1,135,840.55 5,063,230.89 $ 2,484,921.34 4,154,039.31
$ 12,838,032.09 $

$ 18,846.00
306,632.18 200,675.00 526,153.18 $

0.00 $ 0.00 $

1,135,840.55 5,082,076.89 2,484,921.34 4,460,671.49
200,675.00 13,364,185.27

Less Accumulated Depreciation For: Infrastructure Buildings Improvements Other than Buildings Machinery and Equipment
Total Accumulated Depreciation

$ -425,940.21 $ -141,980.05 $

-2,482,421. 76

-296,072.39

-1,215,918.60

-153, 197.23

-2, 724,595.45

-599,780.76

$ -6,848,876.02 $ -1, 191,030.43 $

Total Capital Assets Being Depreciated, Net $ 5,989, 156.07 $ -664,877.25 $

0.00 $
0.00

-567,920.26 -2,778,494.15 -1,369, 115.83 -3,324,376.21 -8,039,906.45

0.00 $ 5,324,278.82

Depreciation expense for the fiscal year ended June 30, 2003, was $1,191,030.43 and the total amount was charged to Toll Roads function of the business-type activities.

- 33 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 6: INTERFUND PAYABLES AND TRANSFERS

The composition of transfers during fiscal year 2003, is as follows:

Transfers Out

F. J. Tarras

Georgia 400

General Fund Causeway Fund Project Fund

Total

Transfers In:

lnterfund

$ 4,060,485.21 $ -200,000.00 $ -3,860,485.21 $ -4,060,485.21

Georgia Department of Transportation

39,205,105.63

Georgia Regional Transportation

Authority

153,967.92

Georgia Technology Authority

162,000.00

$ 43,581,558.76$ -200,000.00 $ -3,860,485.21 $ -4,060,485.21

Transfers Out: Georgia Department of Transportation

109,566,866.75

Total Transfers

$ -65,985,307.99 $ -200,000.00 $ -3,860,485.21 $ -4,060,485.21

The Authority reported transfers from the F. J. Torras Causeway Fund and the Georgia 400 Project Fund to the General Fund pursuant to OCGA Section 32-10-72 to move prior year retained earning to the General Fund.
In the fund financial statements, total transfers out are greater than total transfers in because of transfers between the General Fund and other state entities. The transfers out to the GDOT in the amount of $109,566,866.75 was transferred from the proceeds of the Guaranteed Revenue Bonds, Series 2001 to reimburse the GDOT for the construction costs related to various transportation projects. At June 30, 2003, $10,605,688.96 of the total amount transferred to the GDOT is reported as an lnterfund Payable in the Statement of Net Assets and on the Governmental Fund Balance Sheet.

NOTE 7: OPERATING LEASES
LESSEE AGREEMENTS The Authority has entered into certain agreements to lease real property and equipment which are classified as operating leases. Amounts are included only for multi-year leases and for cancelable leases for which an option to renew for the subsequent fiscal year has been exercised. Future minimum commitments for operating leases as of June 30, 2003, are as follows:

- 34 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT"H"

NOTE 7: OPERATING LEASES
LESSEE AGREEMENTS
Fiscal Year Ended June 30
2004 2005 2006 2007 2008
Total Minimum Commitments

$

577,730.43

511,557.49

503,813.88

515,543.04

217,453.35

$ ==::::2::,:3::2:6:=,0=9=8=.1=9=

On July 15, 2003, the Authority entered into a new real estate rental agreement for administrative offices. The schedule above has been adjusted to include lease payments made through termination of the old real estate lease and those due in future periods for the new lease agreement.
In addition, under a contractual agreement with the GDOT, the Authority operates the F. J. Torras Causeway. The Causeway is owned by the GDOT and leased to the 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, called for payments to the Department of $413,000.00 per year to the expiration of the lease on December 31, 2021. The lease could be terminated at anytime by mutual agreement between the Department and the Authority. On September 4, 2003, the Authority and the GDOT signed an intergovernmental agreement to terminate the lease as of December 31, 2003.
Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 2003, totaled $576,733.02.
LESSOR AGREEMENTS The Authority leases certain parcels of land 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 2003 amounted to $45,810.00. Minimum future rentals to be received under operating leases as of June 30, 2003, are as follows:

- 35 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 7: OPERATING LEASES

LESSOR AGREEMENTS

Fiscal Year Ended June 30

2004

$

2005

2006

2007

Total Minimum Commitments $

45,810.00 45,810.00 42,817.50
825.00
135,262.50

NOTE 8: LONG-TERM DEBT

Long-term obligations at June 30, 2003, and changes for the fiscal year then ended are as follows:

Governmental Activities: Notes Payable
Bond Anticipation Notes Premium on Bond Anticipation Notes

Jull 1: 2002
$ 40,111,212.00 $ 1,335,000.00

Total Notes Payable $ 41,446,212.00 $

Bonds Payable Guaranteed Revenue Bonds $ Premium on Guaranteed Revenue Bonds Transportation Revenue Bonds Premium on Transportation Revenue Bonds

350,000,000.00 $ 9,527,812.25

Total Bonds Payable $ 359,527,812.25 $

Governmental Activities LongTerm Liabilities

$ 400,974,024.25 $

Increases

Decreases

June 30, 2003

Amount Due Within One Year

0.00 $ -40, 111,212.00 $

0.00

-1,335,000.00

0.00 $ -41,446,212.00 $

0.00 $ 0.00 0.00 $

0.00 0.00 0.00

0.00 $ 0.00 45,760,000.00
831,329.60 46,591,329.60 $

-8,555,000.00 $ 341,445,000.00 $

-501 ,463.80 0.00

9,026,348.45 45,760,000.00

0.00

831,329.60

-9,056,463.80 $ 397,062,678.05 $

12,185,000.00 0.00
22,540,000.00 0.00
34,725,000.00

46,591,329.60 $ -50,502,675.80 $ 397,062,678.05 $ 34,725,000.00

The government-wide Statement of Net Assets includes $10,850,664.05 of long-term liabilities due within one year for governmental activities in "Current Liabilities Payable from Restricted Assets." The remaining amount of $23,874,335.95 is displayed as "Noncurrent Liabilities, Due Within One Year" on that same statement.

- 36 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 8: LONG-TERM DEBT

Business-Type Activities

Bonds Payable

Guaranteed Refunding

Revenue Bonds

$

Premium on Guaranteed

Refunding Revenue Bonds

Deferred Amount on Refunding

July 11 2002
71,420,000.00 $ 997,756.97
-3,491 1583.77

Increases
0.00 $ 0.00 0.00

Business-Type Activities LongTerm Liabilities

$ 68,926,173.20$ ======o=.00=$

REVENUE BONDS

Decreases

June 301 2003

Amount Due Within One Year

-5,845,000.00 $ 65,575,000.00 $

-115,125.81 402,875.06

882,631.16 -3,088,708.71

6,110,000.00
0.00 0.00

-5,5511250.15 $ 63,368,922.45$ a,110,000.00

Governmental Activities The Authority issued State of Georgia Guaranteed Revenue Bonds, Series 2001, for the purposes of (1) financing a portion of the Governor's Road Improvement Program, which consists of additions, extensions and improvements to the portion of the State's highway system known as the Developmental Highway System, and to finance certain other road and bridge projects both on and off the State's highway system and (2) to pay the costs of issuance of the bonds. These bonds are secured by the amount of net proceeds of motor fuel tax provided for in a joint resolution of the State Transportation Board and the State Road and Tollway Authority. Further, the State of Georgia has guaranteed the full payment of the bonds and the interest thereon in accordance with the Constitution of the State of Georgia and has reserved $29,559,121.25 in ttie State of Georgia Guaranteed Revenue Debt Common Reserve Fund that is on deposit at the Office of Treasury and Fiscal Services.

In fiscal year 2003, the Authority issued Transportation Revenue Bonds, Series 2002, for the purpose of refunding a portion of the Authority's Limited Obligation Bond Anticipation Notes issued in fiscal year 2002. The purpose of the bond anticipation notes was to finance the costs of making additions, extensions and improvements to the State of Georgia's highway system. These bonds are secured by the federal assistance that the State of Georgia is entitled to receive from the Federal Highway Administration.
Business-Type Activities The 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. The toll revenues to be generated from the usage of the Georgia 400 Extension secure these bonds. Further, the State of Georgia has guaranteed the full payment of the bonds and the interest thereon in accordance with the Constitution of the State of Georgia and has reserved $9,078,325.00 in the State of Georgia Guaranteed Revenue Debt Common Reserve Fund, which is on deposit at the Office of Treasury and Fiscal Services.

- 37 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 8: LONG-TERM DEBT

REVENUE BONDS Revenue bonds outstanding at June 30, 2003 are as follows:

Bond Issue Governmental Activities Guaranteed Revenue
Bonds, Series 2001
Transportation Revenue Bonds, Series 2002

Purpose
Governor's Road Improvement Program
Refunding of Limited Obligation Bond
Anticipation Notes Payable, Series 2001

Interest Rates

Amount

2.50 - 5.375% $ 341,445,000.00

3.00%

45,760,000.00 $ 387,205,000.00

Business-Type Activities: Guaranteed Refunding
Revenue Bonds, Series 1998

Georgia 400 Project

3.50 - 5.00% $ 65,575,000.00

Revenue bond debt service requirements to maturity are as follows:

Governmental Activities

Fiscal Year Ended June 30

Guaranteed Revenue Bonds, Series 2001

Princieal

Interest

Total

T ranseortation Revenue Bonds, Series 2002

Princieal

Interest

Total

2004

$ 12,185,000.00 $

2005

12,675,000.00

2006

13,215,000.00

2007

13,845,000.00

2008

14,570,000.00

2009 - 2013

84,755,000.00

2014 - 2018

109,695,000.00

2019 - 2021

80,505,000.00

17,410,905.00 $ 16,920,455.00 16,382,285.00 15,749,360.00 15,027,241.26 63,232,268.80 38,290,840.02 8,283,418.76

29,595,905.00 $ 29,595,455.00 29,597,285.00 29,594,360.00 29,597,241.26 147,987,268.80 147,985,840.02 88,788,418.76

22,540,000.00 $ 23,220,000.00

1,034,700.00 $ 348,300.00

23,574,700.00 23,568,300.00
0.00 0.00 0.00 0.00 0.00 0.00

$ 341,445,000.00 $ 191,296,773.84 $ 532,741,773.84 $ 45,760,000.00 $ 1,383,000.00 $ 47,143,000.00

- 38 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 8: LONG-TERM DEBT

REVENUE BONDS

Business-Type Activities

Fiscal Year

Guaranteed Refundina Revenue Bonds, Series 1998

Ended June 30

Principal

Interest

Total

2004 2005 2006 2007 2008 2009-2012

$ 6,110,000.00 $ 6,350,000.00 6,605,000.00 6,915,000.00 7,200,000.00 32,395,000.00

2,846,242.50 $ 2,600,097.50 2,316,228.75 2,017,602.50 1,695,845.00 3,151,397.50

8,956,242.50 8,950,097.50 8,921,228.75 8,932,602.50 8,895,845.00 35,546,397.50

$ 65,575,000.00 $ 14,627,413.75 $ 80,202,413.75

NOTE 9: RELATED PARTIES
The Georgia Department of Transportation and the State Road and 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 five members of the State Road and Tollway Authority.
NOTE 10: 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 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 year ended June 30, 2003.

- 39 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 10: RISK MANAGEMENT
OTHER RISK MANAGEMENT
The Authority 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, automobile insurance and to pay losses that might occur from such causes; liability insurance for employees against personal liability for damages arising out 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 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 selfinsurance 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 is presented in the State of Georgia Comprehensive Annual Financial Report for the year ended June 30, 2003.
NOTE 11: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Authority participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.
The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.

- 40 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 11: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Under both the old plan and the new plan, members become vested after ten (1 O} years of creditable service. A member may retire and receive normal retirement benefits after completion of ten (10) years of creditable service and attainment of age sixty-five (65). If ten (10) years of service is completed and age sixty (60) is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after twenty-five (25) years of service regardless of age.
Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four (24) consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
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 SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivision, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Authority's payroll for the year ended June 30, 2003, for employees covered by ERS was $2,163,163.58. The Authority's total payroll for all employees was $2, 165,898.40.
Under the old plan, member contributions consist of four percent (4%) of annual compensation up to $4,200.00 and six percent (6%) of annual compensation in excess of $4,200.00. Of these member contributions, the employee pays the first one and onequarter (1.25%) and the employer pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of one and one-quarter percent {1.25%) of annual compensation paid by employee. The Authority also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2003, the ERS employer contribution

- 41 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT"H"

NOTE 11: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

rate for the Authority amounted to 10.24% of covered payroll and included the amounts contributed on behalf of the employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.

Employer contributions made to the plan made during fiscal year 2003 amounted to $221,598.93. These contributions met the requirements of the plan. Employee contributions were not available. There is no net pension obligation for the plan. Employer contributions (annual pension cost) for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year
2003 2002 2001

Annual Pension Cost {APC}
$221,598.93 $192,156.76 Not Available

Percentage OfAPC
Contributed
100.00% 100.00%
N/A

Net Pension Obligation
N/A N/A N/A

The required contribution for 2003 was determined as part of the June 30, 2001, actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) seven percent (7%) investment rate of return, (b) projected salary increases ranging from five and two-tenths percent (5.2%) to nine percent (9%) per year. Both (a) and (b) included an inflation component of three and one-half percent (3.5%). The assumptions did not include postretirement cost-of-living adjustments. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The employer contributions are projected to liquidate the actuarial accrued funding excess within twenty (20) years based upon the actuarial valuation at June 30, 2001.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2003, financial report which may be obtained through ERS.

- 42 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 11: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The Authority participates in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the ERS Board of Trustees. ERS issues a publicly available financial report that includes the financial statements and disclosures applicable to GDCP. The report may be obtained through ERS.
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 are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board. Upon termination of employment, the amount of the member's account is refundable upon request by the member. No Authority employee participated in the GDCP during fiscal year 2003.
NOTE 12: POSTEMPLOYMENT BENEFITS
In addition to the pension benefits described in Note 11, the State of Georgia provides postretirement health care benefits through the State Health Benefit Plan to retirees pursuant to OCGA Section 45-18. An individual eligible for these benefits must have been a full time employee at the time of retirement of either the State of Georgia or a county social service agency and must be receiving monthly retirement benefits from either the ERS or a county employees' retirement system. The State Health Benefit Plan (Plan) is a public entity risk pool funded by employee and employer contributions. Employees and retirees subject to the Plan contribute amounts determined by the Department of Community Health for various health insurance plans. The various agencies of the State contribute to the health insurance fund based upon amounts recommended by the Department of Community Health and set forth in the State of Georgia's Appropriations Act. The plan is funded on a "pay-as-you-go" basis. Expenses of the Plan include provisions for incurred but not reported claims. The portion of employer contributions and expenses attributable to postretirement health care benefits cannot be reasonably estimated.
- 43 -

STATE ROAD AND TOLLWAY AUTHORITY NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2003

EXHIBIT "H"

NOTE 13: LEAVE POLICIES
Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employees' length of continuous State service with a maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. 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 ERS.
NOTE 14: SUBSEQUENT EVENTS
On October 8, 2003, the Authority issued State of Georgia Guaranteed Revenue Bonds in the amount of $309,140,000.00. The proceeds of the bonds will be used for the purpose of (1) paying costs of certain road and bridge projects of the State of Georgia, (2) initially funding approximately five months of interest on the bonds, and (3) paying the costs of issuing the bonds.
NOTE 15: CONTINGENCIES
Litigation, claims and assessments filed against the Authority, 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, 2003.

- 44 -

SUPPLEMENTARY INFORMATION - 45 -

STATE ROAD AND TOLLWAY AUTHORITY CASH AND CASH EQUIVALENTS JUNE 30, 2003

SCHEDULE "1"

INTEREST BEARING ACCOUNTS
Bank of America, N.A., Atlanta, Georgia
Banc of America Securities, L.L.C., Atlanta, Georgia
Money Market Account
The Bank of New York, Atlanta, Georgia
Cash Investment Accounts Guaranteed Refunding Revenue Bond Covenant Accounts Debt Retirement Fund Operating and Maintenance Fund Rebate Fund Resurfacing Fund Sinking Fund nterest Sinking Fund Principal Toll Facility Removal Fund Guaranteed Revenue Bond Covenant Accounts Debt Service Account Debt Service Reserve
U.S. Treasury Bills Purchase Date: June 26, 2003, Maturity Date: July 24, 2003
Funds on Deposit with Office of Treasury and Fiscal Services State hvestment Pool

$ 35,116,454.83 294,572.64

$

64.59

64.59

967.73

850.48

1,482,695.41

6,110,175.20

59.62

290.92 856.16

1,799,935.41

9,395,960.11

9,999,067.81 $ 54,806,055.39

OTHER Cash on Hand

63,509.92

$ 54,869,565.31

See notes to the financial statements.

- 46 -

STATE ROAD AND TOLLWAY AUTHORITY INVESTMENTS JUNE 30, 2003

SCHEDULE "2"

FUND/INVESTMENT TYPE

PURCHASE DATE

GENERAL FUND

Restricted

Funds Held by Guaranteed Revenue Bond Trustee

Wachovia Bank, N. A.,

Charlotte, North Carolina

General Account

Repurchase Agreement

January 10, 2002

Funds Held by Transportation Revenue Bond Trustee

The Bank of New York,

Atlanta, Georgia

Debt Service Account

U. S. Treasury Bill

April 24, 2003

Debt Service Reserve U.S. Treasury Notes U.S. Treasury Notes

November 15, 2002 May 1, 2003

GEORGIA 400 PROJECT

Restricted

Funds Held by Refunding Revenue Bond Trustee

The Bank of New York,

Atlanta, Georgia

Toll Facility Removal Fund

U.S. Treasury Bill

June 19, 2003

U.S. Treasury Bill

June 26, 2003

Resurfacing Fund U.S. Treasury Bill
Rebate Fund U.S. Treasury Bill
Debt Retirement Fund U. S. Treasury Notes U.S. Treasury Notes U.S. Treasury Notes U.S. Treasury Notes U.S. Treasury Notes U.S. Treasury Notes

June 26, 2003
August 22, 2002
April 25, 2003 May27,2003 June 26, 2003 November 26, 2002 November 29, 2002 December 26, 2002

MATURITY DATE

July 1, 2004

$ 222,332,463.29

October 23, 2003
October 31, 2003 October 31, 2003

$ 6,446,291.81
$ 4,569,502.03 62,523.13
$ 4,632,025.16 $ 233,410,780.26

December 18, 2003

$

13,944.79

December 18, 2003

995.63

$

14 940.42

December 18, 2003

$ 6,732,416.25

July 31, 2004

$

69,194.06

November 15, 2004 November 15, 2004 November 15, 2004 November 15, 2004 November 15, 2004 November 15, 2004

$

117,648.44

118,774.53

41,535.00

7,520.63

10,195,253.75

25,075.93

$ 10,505,808.28

17,322,359.01

$ 250,733,139.27

See notes to the financial statements.

- 47 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORT
- 49 -

DEPARTMENT OF AUDITS AND ACCOUNTS

254 Washington Street, S.W., Suite 214

w. RUSSELL

HINTON

STATE AUDITOR

(4IJ4) 656-2174

Atlanta, Georgia 30334-8400

March 26, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Road and Tollway Authority
and Honorable Douglas R. Hooker, Executive Director
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the State Road and Tollway Authority, a component unit of the State of Georgia, as of and for the year ended June 30, 2003 and have issued our report thereon dated March 26, 2004. 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.
Compliance
As part of obtaining reasonable assurance about whether the State Road and Tollway Authority's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 that are required to be reported under Government Auditing Standards.

- 51 -

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the State Road and Tollway Authority's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affectthe State Road and Tollway Authority's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule of Finding and Questioned Costs as item FS-927-03-01.

A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we consider item FS-927-03-01to be a material weakness.

This report is intended solely for the information and use of management, members of the Authority, and management of the State of Georgia, and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,
~~-

. ::,,.

Russell W. Hinton, CPA, CGFM State Auditor

RWH:et

- 53 -

SECTION Ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS
- 55 -

STATE ROAD AND TOLLWAY AUTHORITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENTS FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-927-01-01 FS-927-02-01 FS-927-02-02 FS-927-02-03 FS-927-02-04 FS-927-02-05

Further Action Not Warranted Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Further Action Not Warranted

CORRECTIVE ACTION/RESPONSES
REVENUES/RECEIVABLES/RECEIPTS Deficiencies in the Collection and Recording of Cash Tolls (F. J. Tarras Causeway) Finding Control Number FS-927-02-02
This issue is unresolved. The Tarras Causeway was scheduled to close on or before December 2003. The collection of tolls ceased on September 24, 2003. Studies were done to find alternatives to address the toll collection deficiencies. However, with the tolls at the Causeway scheduled to be removed it did not warrant the cost to implement any additional toll collection or enforcement systems.

- 57 -

SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS
- 59 -

STATE ROAD AND TOLLWAY AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Deficiencies in the Collection and Recording of Cash Tolls (F. J. Torras Causeway) Finding Control Number: FS-927-03-01 Reportable Condition/Material Weakness

Condition:

The following deficiencies were noted in the functioning of the Authority's equipment used to accumulate toll patron activity which documents revenue received at the F. J. Torras Causeway plaza:

1. Electronic equipment could not produce reports to track individual lane activity, including the number of vehicles passing through the toll booth and the amounts deposited into the toll bins as vehicles pass through each toll lane.

2. A formal reconciliation of amounts collected at the toll plaza and amounts deposited by the contracted security company was not performed for the final six months of the fiscal year.

3. Laser scanners used to read yearly decals were not functioning properly.

4. No formal violation processing procedures were in place to provide the appropriate data to identify toll violations.

Criteria:

The Accounting Procedures Manual for the State of Georgia, Section Five, pages 5-4-2 and 3 state, in part, as follows:

"Documentation - involves preserving evidence to substantiate a decision, event, transaction, or system. All documentation should be complete, accurate, and reported promptly. Documentation should contribute to achieving the State organization's mission, help managers in controlling their operations and assist in analyzing operations ... Documentation of transactions should enable managers to trace each transaction from its inception through its completion. This means the entire life cycle of the transaction should be recorded, including initiation and authorization, processing, and final classification ... "

Cause:

The malfunction of the Authority's equipment was the result of mechanical failure as well as management's failure to establish procedures to ensure timely deposits of cash receipts.

Effect:

Errors could occur in the recording of patron activity, including violations and tolls resulting in financial statement misstatements.

Recommendation:

The Authority should provide a system to accurately record patron activity, including violations, and toll revenue on the accounting records.

- 61 -