Review report, state of Georgia, State Department of Veterans Service, year ended June 30, 1995

G-A f\ i co
.- t\ I V4-5 1qq4-9s
STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET ATLANTA. GEORGIA 30334

REVIEW REPORT STATE OF GEORGIA STATE DEPARTMENT OF VETERANS SERVICE YEARENDEDJUNE30, 1995

STATE DEPARTMENT OF VETERANS SERVICE -TABLE OF CONTENTS-

INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXHIBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPE

3

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

4

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

6

E NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULE OF APPROVED BUDGET

22

2 CASH AND CASH EQUIVALENTS

23

3 SCHEDULE OF GOVERNOR'S EMERGENCY FUND

24

4 SCHEDULE OF FEDERAL REVENUES

25

5 SCHEDULE OF OTHER OPERA TING EXPENSES

26

CLAUDE L. VICKERS
STATE AUDITOR (4CM) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
September 1, 1995

Honorable Zell Miller, Governor Members ofthe General Assembly ofGeorgia Members ofthe Veterans Service Board
and Honorable Pete Wheeler, Commissioner State Department of Veterans Service
INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have reviewed the accompanying financial statements (Exhibits A through E) ofthe State Department of Veterans Service as ofand for the year ended June 30, 1995, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. As described in Note 1, these financial statements were prepared on a prescribed basis of accounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. All information included in these financial statements is the representation of the management of the State Department of Veterans Service.
A review consists principally of inquiries of agency personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware ofany material modifications that should be made to the accompanying financial statements in order for them to be in conformity with the basis ofaccounting described in Note 1.
Our review was made for the purpose ofexpressing limited assurance that there were no material modifications that should be made to the financial statements in order for them to be in conformity with the basis of accounting described in Note 1. The accompanying supplementary information (Schedules 1 through 5) is presented only for supplementary analysis purposes. Such information has been subjected to the inquiries and

95ARL-4

analytical procedures applied in the review of the financial statements and we are not aware ofany material modifications that should be made thereto.
Respectfully submitted,
L~-
Claude L. Vickers State Auditor
CLV:cm 95ARL-4

FINANCIAL STATEMENTS -l -

EXHIBIT"A"

~
Accounts Receivable SlaloApp,oprialion F - Flnanc:ial Assistance 0thor

FIX9dEquipnwd

-

to be ProYidod far Payment"'

Acc:ruod Compensated -

Tclal-

GOVERNMENTAL FUND TYPE BUDGET

ACCOUNT GROUPS

GENERAL

GENERAL

FIXED

LONG-TERM

ASSETS

DEBT

TOTALS O!!ernorandum On!Y} JUNE 30 1995 JUNE 30 1994

$

287,754.24

1,447,643.81

0.00

$ 1735397.85

$

287,754.24 $

390,656.n

1,447,643.81

1,515,423.84

0.00

1.50

$ 1 735 397.85 $ 1908082.11

$ 964 802.44

$ 429888.01 $

964802.44 $ 429888.01 $

854830.37 410021.84

1735397.85 $ 964 802.44 $ 429,888.01 $ 3130,086.30 $ 3170934.32

LIAEillLIIIE~ AHQ E!.!Ht2 Eg!.!ID'.

UabllCuh Overdraft (See Schedule) Ao<ounta Payable Contracts Payable
Payroll Wllhholdings
Compensated-

TCllal IJabllitiN

Fund Equity

I -In Gonelal FIX9dFund Balances

R....-

F-..1 Fmanoial Assistance

$

Unr9S8MICI

Designated

Surplus

Tclal Fund Equity

104,816.16 18,673.43 1,600,423.n
287.50
1 724200.98
2,499.93
8897.06 11196.99 $

$ $ 964,802.44
964802.44

$
429888.01 429888.01 $
$

104,816.16 $ 18,673.43
1,600,423.n 287.50
429888.01 2 154 086.87 $
964,802.44 $
2,499.93
8897.06 975999.43 $

98,565.89 37,855.54 1,640,394.20 410021.84 2188837.47
854,830.37
54,588.45
74 680.03 984 096.85

Tclal Uabllrues and Fund Equity

1735397.85 $ 964802.44 $ 429888.01 $ 3130 086.30 $ 3170 934.32

See Independent Ao<ountant's Combined Report on ROYiew al Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement.
2.

STATE DEPARTMENT Of VETERAN SERVICE
STATEMENT OF CHANGES IN FUND BALANCES (STATUTORY BASIS} GOVERNMENTAL FUND TYPE YEAR ENDED JUNE 30 1995

EXHIBIT"B"

FUND BALANCES - JULY 1 Reserved Unreserved Designated Surplus
ADDITIONS
Adjustments to Prior Year's Accounts Payable
Excess of Funds Available over Expenditures Exhibit"C"
DEDUCTIONS
Unreserved Fund Balance (Surplus)
Returned to Office of Treasury and
Fiscal Services Year Ended June 30, 1993 Year Ended June 30, 1994
Reserved Fund Balance Carried Over from Prior Year as Funds Available
FUND BALANCES - JUNE 30 (To Exhibit "Aj

BUDGET FUND YEAR ENDED JUNE 30, 1995 JUNE 30, 1994

$

54,586.45 $

0.00

74,680.03

$

129,266.48 $

83,753.27 83,753.27

$

43.00 $

329.74

11,153.99

128,936.74

$

11,196.99 $

129,266.48

$

0.00 $

83,75327

74,680.03

0.00

54,586.45

0.00

$

129,266.48 $ _ _.:;.83=.,.,7:...;5;.::3.:::.2aa...7

$

11,196.99 $==12=9=,2=6=6.=48=

See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. -3-

Alf PEPMIMfNJ OF YEifBML, SfBYICE
STAifMENI OF BJNC A\/AH AHi EANP EXPfNPITVBfS ll!.!l2!iEI..El
YEAR FNPEP ltlNE Ml lQQS
FUND r6:Y4H .6.W E
--~ STATE APPROPRIATION
-.EmwgoncyFund(See-) T...I S l o l o -
FEDERAI. REVENUEs (Soo - ) OTHER REVENUES RETAINED
Donotion& T0181Rwenue&
A6BRX:9YEB fB9M ffi!9B YfAB Tra,..,.,.frorn R....-..cl Fund Blllance
Federal Filwlcial Auiltance
TotalFundsA......._
fXPfNDITUBFS PfBSONAl SfBY!CES
Salaries and Wages
-.ConlrttkJtiansror.
............ R,F....l..C..A.,_
1.Jnempoyment Compang,ation l115Urance
--b-y--- WOftcers' Compansation Insurance
BFGULAR QPEBAT1NG FXPFNSES -V-Expenses Supplies and Materials Repairs and Maintenance
~ Rent& (Other than Real Estate) lnsufance nd Bonding
"""Grants ID Counties, Cities and CMI Divisions Operating Expenses (See Schodule) 0up1-.. and - Copy Publications and Printing
!B6:&
Equipment Puroha&es Rental rl Equipment
See Independent Accountant's Combined Report on Review rl Financial Statements and SUpplementary Information. The nol8s ID the financial stalBmeflls are an integral part rl this statemant

TOTALS

YEAR ENDED

JUNE 30 1995

JUNE 30 1994

23,661,088.00 S -125,000.00 46500.00
23582566.00 $ 6 688 276.63 S
0.00 S 30,270,842.63 $

22,666,171.00 -150,000.00 17000.00
~533171.00 6083113.69
15000.00 28,631,284.69

54586.45

0.00

30325429.08 S

286312SC89

3,415,160.99 $

3.Z29,fmS3

~.346.13 517,615.54 420,638.33 20,086.00
1,118.00 93,350.00 18695.35

231,861.83 509,9U0.57 399,456.82
15,360.00 1,425.00
78,631.00 1839939

4 731 020.34 $ _ _~=484=792~04=

745.35 $ 73,970.84
9,500.46 13,111.46
1,443.15 2,835.11 36,500.00 6,890.37 1,136.56 24153.37

695.88 58,600.67 10,325.90 13,415.62
1,205.75 2,497.80 17,000.00 9,247.11 2,5ff7.74 15119.31

110286.67 s_ _~,:,o~"'=s.1=

_ __,.63.,809=.35"- , _ ____,_n,..os=2.43,,._

177,250.78 $ 9921.55

74,923.32 10224.04

187 1n.33 s _ _~ss=1"'1.as=

STAif QfPARJMfNI 9f YfI6WlS ffMCf STATEMENT OF FUNDS AVAlLABL f ANP EXPENQITLJRfS
~
YEARFNPEPJUNE30 1995
___EXPfNQ(TlIRES
c.ot.lPlfIEB QHABGE
--Pu- 00.C.00.0ponlting-(SNSdMldulo)
"""--OOAS
BfAI ETATI; BENTAl S I9 fQWVN!CATIONS PER QlsM FEES ANP CONTRACTS
Pw Diem and Fees C:0.0-
2Il:lm
OPERATING EXPENSEJPAYMENTS TO CENTRAL STATE HOSPITAL.
Pw Diem, Fees and Contracts C:0.0-
OPERATING EXPENSE/PAYMENTS TO MEDICAL COLLEGE OF GEC>RGV\
Pw Diem, F._ and Contracts
""""-
REGULAR OPERATING EXPENSES FOR PROJECTS ANO INSURANCE
00.C.SuppliesandMlterial& RepaifsandMalnlenanoe lnlurance nd Bonding Publications and Printing
EquEquipment Purchases
Per Diem, Fees and Contracts
""""-
Total Other
Total Expenditures
Exces& d Funds Available CMH' Expenditures

EXHIBIT"<:

TOTALS

YEAR ENDED

JUNE30 1995

JUNE30 1994

881.58 S 500.00 513.38 3,651.8' 4816.58 10363.38 S 233540.25 S 58464.96 S
206,475.00 S 0.00
208475.00 S

465.00 295.08 500.00 4,812.76 922.87 6795.71 230353.92 57191.65
22.816.95 15000.00 37816.95

17 336143.60 S

16218709.19

6 969 192.91 S

6460100.00

0.00 S 316,"95.06
9,035.03 276.21
0.00
0.00
325806.30 S
24 631142.81 $
30,314,275.09 S
11153.99

248.56 629,363.00
8,611.36 0.00
47,890.00
32600.00
718712.92
23 397 522. 11
28,f,02,347.95
128936.74

30 325 429.08 S

28 631 284.69

See Independent Accoumants Combined Report on Review d Financial Statements and Supplementary Information.
The notas to the financial sta1l8menls are an integral part d this statament.
-5-

STATE DEPARTMENT OF VETERANS SERVICE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30 1995

EXHIBIT"D"

FUNDS AVAILABLE REVENUES
s - Appropriation
Federal RIIV8IIUN
CARRY-OVER FROM PRIOR YEAR Tnansfar from R""8Ned Fund Balance

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE!

$ 23,582,566.00 $ 23,582,566.00 $

6,835 735.00

6,SBB,276.63

$ 30,418,301.00 $ 30,270,842.63 $

0.00 -147 458.37
-147,458.37

0.00

54,586.45

54,586.45

$ 30418301.00 $ 30,325,429.08 $

~.871.92

EXPENDITURES
Personal Services Regular Operating Expenses Trawl Equipment Computer Charges Real Es1ate Rentals Telecommunications Per Diem, Fees and Con1nlcls Operating Expense/Payments lo
Central S - Hospital Operating Expense/Payments lo
Medical College of Georgia Regular Operating Expenses for
Projacls and Insurance

$ 4,769,371.00 $ 4,731,020.34 $

181,631.00

170,286.67

84,900.00

83,809.35

183,700.00

187,172.33

10,253.00

10,363.38

238,641.00

233,540.25

57,883.00

58,464.96

208,500.00

208,475.00

17,386,621.00 17,336,143.60

6,970,976.00

6,969,192.91

325,825.00

325,806.30

38,350.66 11,344.33
1,090.65 -3,472.33
-110.38 5,100.75 -581.96
25.00
50,4TT.40
1,783.09
18.70

$ 30 418 301.00 $ 30,314,275.09 $

104,025.91

Excess of Funds Available over Expenditures
See Independent Accountant's Combined Report on Review of Financial S1atements and Supplementary Information. The notes lo the financial statements are an integral part of 1his statement.
-6-

$

s_ _ 11 1153.99

~11.1_53;;:;;;:;99:;;.

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The State Department of Veterans Service, an organizational unit of the State of Georgia, is part of the executive branch of the government ofthe State ofGeorgia. The Department is empowered to take actions necessary for the interest and protection ofGeorgia residents who are or have been on active military duty, their families and dependents. The Department accomplishes its duties through the dissemination of information to veterans concerning their rights and benefits under Federal or State laws, assistance in preparation and prosecution of claims, and furnishing counsel to veterans relative to educational training facilities, health, medical and rehabilitation services, employment services and other benefits.
The Veterans Service Board consists of seven (7) members appointed by the Governor and confirmed by the Senate. The duties of the Board include the promulgation of rules and regulations necessary to accomplish its objectives and the appointment ofthe Commissioner ofthe Department. The Commissioner is charged with the duty of administering and enforcing rules and regulations promulgated by the Veterans Service Board. The Commissioner is empowered to determine the manner of execution of the objectives of the Board in accordance with its policies and to employ personnel in accordance with State Merit System requirements.
The State Department ofVeterans Service does not have authority to determine the amount offunding it will receive from the State ofGeorgia for any given fiscal year. Such authority is vested in the General Assembly ofGeorgia. The Department also does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the State Department of Veterans Service is included within the State ofGeorgia reporting entity for financial reporting purposes because ofthe significance ofits legal, operational and financial relationships with the State ofGeorgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The State Department of Veterans Service uses a fund and account groups to report on its financial position and the results ofits operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia. A fund is an independent fiscal and accounting entity with a self-balancing set ofaccounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account groups are a reporting device used to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. The fund and account groups presented in the accompanying financial statements are as follows:

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STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXHIBIT "E"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
GOVERNMENTAL FUND TYPE
BUDGET FUND - The fund used to account for activities and functions as set forth in the Amended Appropriations Act ofl994-1995. The Budget Fund is similar in nature to a General Fund as identified in generally accepted accounting principles in that the Budget Fund is used to account for all activities except those required to be accounted for in some other fund.
ACCOUNT GROUPS
GENERAL FIXED ASSETS - The account group used to account for fixed assets used in governmental fund type operations. Fixed assets purchased are recorded at cost or at estimated historical cost ifhistorical cost is not practically determinable. Donated fixed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on general fixed assets.
The cost of normal maintenance and repairs that do not add to the value ofthe asset or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life ofthe assets are included in the General Fixed Assets Account Group.
GENERAL LONG-TERM DEBT - The account group used to report the noncurrent portions of certain governmental long-term liabilities, such as claims, judgments and compensated absences, which will be paid from future resources.
BASIS OF ACCOUNTING MEASUREMENTFOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds should be accounted for using the flow ofcurrent financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets and unreserved fund balance is a measure ofavailable spendable resources. In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund remits its unreserved fund balance (surplus) to the Office ofTreasury and Fiscal Services in the subsequent fiscal year.
GOVERNMENTAL FUND TYPE BUDGETFUND
Except as disclosed in the following paragraphs, units of government of the State of Georgia record their Budget Fund revenues and expenditures in accordance with the modified accrual basis of accounting. Under the modified accrual basis ofaccounting, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current
- 8-

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE30 1995

EXHIBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPE BUDGETFUND
period. Revenues that are accrued include primarily State appropriations and Federal grants and entitlements. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences, claims and judgements which are recognized when the obligations are expected to be liquidated with expendable available financial resources.
Contractual obligations for services which have not been performed and for goods which have not been delivered at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. This accounting practice causes expenditure-driven grant revenues to be accrued based, in part, on the unexecuted portion of contracts for goods and services. The recognition of encumbrances as expenditures and liabilities is in conformity with accounting practices prescribed or permitted by statutes and regulations ofthe State of Georgia, but is not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation of fund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures determined in accordance with generally accepted accounting principles.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances ofthe Budget Fund in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures.
BUDGET Appropriation allotments to the State Department of Veterans Service are on the basis ofa budget submitted by the Department and approved by the Legislature and the Governor. The budget is adopted on a basis consistent with accounting practices prescnbed or permitted by statutes and regulations of the State of Georgia and is compiled in the same manner as all State departments. Expenditures are classified by budget unit object classes as provided in Act No. 1208 ofGeorgia Laws 1994 (as approved April 18, 1994) and amended by Act No. 6 of Georgia Laws 1995 (as approved February 22, 1995), which is an appropriated budget and is referred to in these notes as the Amended Appropriations Act of 1994-1995.
Overexpenditure of a budget unit object class, except for the "common object classes", included in the Department's final amended budget is in violation of Section 80 of the 1994-1995 Amended Appropriations Act. Expenditures ofno more than 102% of the stated amount for each common object class are authorized by Section 80. However, the total expenditure for the group of common object classes may not exceed the sum of the stated amounts for the separate object classes of the group. The common object classes include Personal Services, Regular Operating Expenses, Travel, Motor Vehicle Purchases, Equipment, Computer Charges, Real Estate Rentals, Telecommunications and Postage.
-9-

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO TIIE FINANCIAL STATEMENTS JUNE 30 1995

EXHIBIT "E"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand and demand deposits with banks and other financial institutions.
INVENTORIES No inventories ofsupplies are reported in the current financial statements. Expendable supplies are recorded as expenditures at the time of purchase.
RESERVED FUND BALANCE Reserves represent those portions of fund equity not appropriable for expenditure or legally segregated for a specific future use. The following is a brief description of the reserves reflected in the accompanying financial statements:
FEDERAL FINANCIAL ASSISTANCE The residual portion ofFederal financial assistance revenues not yet expended or encumbered. This amount is restricted for expenditure in future years. This accounting treatment differs from generally accepted accounting principles in that the unearned portion of Federal financial assistance should be reflected as deferred revenue.
UNRESERVED FUND BALANCE In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund's unreserved fund balance is remitted to the Office ofTreasury and Fiscal Services in the subsequent fiscal year as surplus. This amount of unexpended general appropriations is available to the State for reappropriation in subsequent years.
COMPENSATED ABSENCES Compensated absences represent obligations of the Department relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount will not be liquidated with expendable available financial resources. Funds are provided in the appropriation offunds each year to the Department to cover the cost ofannual leave paid to terminated employees.
The liability for compensated absences at year end is reported in the General Long-Term Debt Account Group for governmental funds.
MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the Combined Balance Sheet (Statutory Basis) are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
- 10 -

STATE DEPARTMENT OF VETERANS SERVICE
NOTES TO THE FINANCIAL STATEMENTS
illNE 30 1995

EXI-IlBIT "E"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPARATIVE DATA Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of the changes in the Department's financial position and operations. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the Department's financial position and operations or would cause the statements to be unduly complex and difficult to understand.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds ofthe State ofGeorgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu ofa surety bond, the depository may pledge as collateral any one or more ofthe following securities as enumerated in the Official Code ofGeorgia Annotated Section 50-17-59:
(1) Bonds, bills, certificates ofindebtedness, notes, or other direct obligations of the United States or of the State ofGeorgia.
(2) Bonds, bills, certificates ofindebtedness, notes, or other obligations of the counties or municipalities of the State ofGeorgia.
(3) Bonds ofany public authority created by the laws ofthe 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 ofdevelopment authorities created by the laws of the State of Georgia.
(5) Bonds, bills, certificates ofindebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
(6) Guarantee or insurance ofaccounts provided by the Federal Deposit Insurance Corporation.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies ofthe State of Georgia the option ofexempting demand deposits from the collateral requirements.

- 11 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE30 1995

EXHIBIT"E"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS

CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1995, 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 Department or by its agent in the Department's name.

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

Carrying Amount

Bank Balance

Risk Categories

Cash Deposits

s -1049616 s 776$88 s 19999900 s_ _,,.,000.., s 676,.yss

NOTE 3: OPERATING LEASES
The State Department of Veterans Service has entered into certain agreements to lease real property and equipment which are classified as operating leases. These leases generally contain provisions that, at the expiration date ofthe original term ofthe lease, the Department has the option of renewing the lease on a yearto-year basis. Future minimum commitments for operating leases as of June 30, 1995, are listed below. Amounts are included only for multi-year leases and for cancellable leases for which an option to renew for the subsequent fiscal year has been exercised.

Fiscal Year Ending June 30

1996

$ 8291676

Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 1995, totaled $88,317.95.

NOTE 4: CHANGES IN GENERAL FIXED ASSETS

In accordance with the statutory definition of moveable personal property as defined in Official Code of Georgia Annotated Section 50-16-161, only those items with an acquisition cost of$1,000.00 or greater are reflected in the General Fixed Assets Account Group.

- 12 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE30 1995

EXHIBIT "E"

NOTE 4: CHANGES IN GENERAL FIXED ASSETS

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

Balance July 1, 1994 Additions Deductions Balance June 30, 1995 NOTE 5: GENERAL LONG-TERM DEBT

$ 854,830.37 131,607.30 21 635.23
$ 964 802 44

CHANGES IN GENERAL LONG-TERM DEBT During the year ended June 30, 1995, the following changes occurred in the compensated absences liability reported in the General Long-Term Debt Account Group:

Balance July 1, 1994 Additions '
Annual Leave Earned and Utilized (Net) Salaries Salary Related Fringe Benefits
Balance June 30, 1995 NOTE 6: RISK MANAGEMENT

$ 410,021.84
18,454.41 1411.76 $ 429 888 OJ

Public Entity Risk Pool

The State Personnel Board, Merit System ofPersonnel Administration internally administers for the State of Georgia a program of health benefits for the employees ofunits ofgovernment of the State ofGeorgia and 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' contnbutions paid by the various units ofgovernment participating in the plan, and appropriations made by the General Assembly of Georgia. The State Personnel Board, Merit System ofPersonnel Administration has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the State Employees' Health Benefit Plan as established by the State Personnel Board.

Other Risk Management

The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets

- 13 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXHIBIT "E"

NOTE 6: RISK MANAGEMENT
Other Risk Management
for claim settlement. Accordingly, DOAS services claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance is purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The State Department of Veterans Service is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the state agencies by DOAS to provide claims servicing and claims payment.
NOTE 7: DEFERRED COMPENSATION PLAN
The State ofGeorgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees ofthe State of Georgia and county health departments, permits such employees to defer a portion oftheir salary until future years. Participation in the plan is optional. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property or rights of the State of Georgia subject only to the claims of the State's general creditors. Participant's rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value of the deferred account of each participant. Financial information relative to the plan is presented in the financial report ofthe State Personnel Board - Merit System ofPersonnel Administration for the year ended June 30, 1995.
NOTE 8: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The State Department of Veterans Service 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 ofproviding retirement allowances for employees of the State of Georgia. The Department's payroll for the year ended June 30, 1995, for employees covered by ERS was $3,332,486.15. The Department's total payroll for all employees was $3,415,160.99.
Benefits The benefit structure of ERS 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.
- 14 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXHIBIT "E"

NOTES: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Benefits Members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest eight consecutive calendar quarters 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. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 30 years of service regardless ofage.
Contributions Required and Contributions Made Under the old plan, member contributions consist of employee contributions paid by the employee of 1.25% ofannual compensation and 4.75% of annual compensation paid by the Department on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% of annual compensation paid by employee. The Department also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 1995, the ERS employer contribution rate for the Department amounted to 14.80% of covered payroll and included the 4.75% contributed on behalf of the employee referred to above. Contributions are also made on amounts paid for accumulated leave of retiring employees.
Tot.al contributions to the plan made during fiscal year 1995 amounted to $534,766.41, of which $493,109.83 was made by the Department and $41,656.58 was made by e~ployees. These contributions met the requirements of the plan.
Funding Status and Progress Pension Benefit Obligation
The amount shown as the "pension benefit obligation" is a standardized disclosure measure of the present value ofpension benefits, adjusted for the effects ofprojected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status ofERS on the going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among employers. The measure is the actuarial present value of credited projected benefits, and is independent of the funding method used to determine contributions to the plan.
The pension benefit obligation was computed as part of an actuarial valuation performed as ofJune 30, 1994. Significant actuarial assumptions used in the valuation include the following:

- 15 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXIIlBIT "E"

NOTES: RETIREMENTPLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Funding Status and Progress Pension Benefit Obligation
1) The present value offuture pension benefits paid was computed using a discounted rate of7.5 percent. This rate is also the same rate assumed to be earned on investments in the plan in future years.

2) Future pension payments reflect the following assumed salary increases as a result of inflation and merit increases:

~

Percentage

20

9.5%

25

8.5%

30

6.5%

35

6.0%

40to65

5.7%

3) ERS has the authority to grant cost-of-living adjustments by state statute. As ofJune 30, 1994, cost-ofliving adjustments have been included in the pension benefit obligation.

The total unfunded pension benefit obligation ofERS as ofJune 30, 1994, was $310,149,000, as follows:

Pension Benefit Obligation:

Retirees and Beneficiaries Currently Receiving Benefits and Terminated Employees Entitled to Benefits but Not Yet Receiving Benefits
Current Employees Accumulated Contributions Employer-Financed Vested Employer-Financed Nonvested Total Pension Benefit Obligation
Net Assets Available for Benefits Unfunded Pension Benefit Obligation

$ 2,227,653,000
648,516,000 1,085,190,000 1206805 000 $5,168,164,000 4 858 015 000 $ 310 )49 000

- 16 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO TIIB FINANCIAL STATEMENTS JUNE30 1995

EXHJBIT"E"

NOTES: RETIREMENTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Fuudiug Status and Progress Pension Benefit Obligation
The measurement ofthe total pension benefit obligation is based on an actuarial valuation as ofJune 30, 1994. Net assets available for benefits were valued as of the same date. ERS does not make separate measurements of assets and pension benefit obligation for individual employers.
Funding Policy The ERS funding policy provides for periodic employer contributions at actuarially determined rates that, expressed as percentages ofannual payroll, are sufficient to accumulate sufficient assets to pay benefits when due. Level percentage of payroll employer contribution rates are determined using the entry age funding method. ERS also uses the level percentage of payroll method to amortize the unfunded liability within approximately 20 years following the valuation date.
Total contnbutions from all employers to ERS for the year ended June 30, 1995, were $256,624,679.00. The Department's contribution was actuarially determined and represented O.19"/o oftotal contributions made by all participating employers.
Significant actuarial assumptions used to compute contributions are the same as those used to compute the standardized measure of pension obligation.
Trend Information Historical trend information is presented in the financial report ofERS for the year ended June 30, 1995. This information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The State Department of Veterans Service participates in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly in July 1993 for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and parttime and are not members ofa public retirement or pension system. GDCP is administered by the Employees' Retirement System Board of Trustees. The Department's payroll for the year ended June 30, 1995, for employees covered by GDCP was $36,680.46. The Department's total payroll for all employees was $3,415,160.99.

- 17 -

STATE DEPARTMENT OF VETERANS SERVICE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30 1995

EXHIBIT "E"

NOTES: RETIREMENTPLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits A member may retire and elect to receive periodic payments after attainment ofage 65. The payment will be
based upon mortality tables and interest assumptions to be adopted by the Board. Ifa member has less than $ 3,500 credit to his/her account, the Board has the option ofrequiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contnbutions. Earnings are credited to each member's account in a manner established by the Board. Upon tennination ofemployment, the amount ofthe member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 1995 amounted to $2,751.11 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 9: 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 ofcontinuous State service with a maximum accumulation offorty five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. See Note 1 - Compensated Absences.
Certain employees who retire with one hundred and twenty days or more offorfeited annual and sick leave are entitled to additional service credit in the Employees' Retirement System ofGeorgia.
NOTE 10: NONMONETARYTRANSACTIONS
The Georgia State Financing and Investment Commission (GSFIC), a unit of State government, is responsible for the issuance of state debt and for the investment and accounting for proceeds derived from the issuance of state debt. In addition, GSFIC is authorized to acquire and construct projects for the benefit of units of State government or to contract with units of State government for the construction or acquisition ofcapital outlay projects. During the fiscal year ended June 30, 1995, the Georgia State Financing and Investment Commission paid $221,253.90 to various vendors for approved projects related to the State Department of Veterans Service.

- 18 -

STATE DEPARTMENT OF VETERANS SERVICE NOTES TO THE FINANCIAL STATEMENTS JUNE 30 1995

EXIIlBIT "E"

NOTE 11: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the Department expects such amounts, ifany, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the State Department of Veterans Service, ifany, are generally considered to be actions against the State ofGeorgia. Pursuant to the Official Code of Georgia Annotated, the Department of Administrative Services maintains a program of purchased insurance and self-insurance which provides coverage for such litigation, claims and assessments. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State ofGeorgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1995.
NOTE 12: BONDING INFORMATION
Mr. Pete Wheeler, Commissioner, is bonded in the amount of $20,000.00 with the Continental Insurance Company, their Bond No. BND 1396025, on which premium has been paid to March 1, 1996.
The Commissioner and all employees ofthe State Department of Veterans Service are bonded under a Public Employees Blanket Bond written by Employers Insurance ofWausau, their Bond No. 1450-00-110723, on which the premium was paid to October 1, 1995. Under this agreement the Public Employee Dishonesty Coverage insures the Department to a maximum of $1,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees. The Faithful Performance ofDuty Coverage insures the Department to a maximum of$1,000,000.00 against loss sustained from failure ofits employees to perform faithfully their duties or to account properly for all monies and property received by virtue of their position or employment.
All employees ofthe State Department ofVeterans Service are also bonded under Commercial Crime Policies written by the United States Fire Insurance Company, their Policy Nos. 626 012292 6 and 626 012294 4, on which premiums were paid to October 1, 1995. Under these additional public employee dishonesty coverages, the policies insure the Department to a maximum of$9,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees.

- 19 -

SUPPLEMENTARY INFORMATION - 21 -

STAIE PsPARJMENt Qf YEIFRANS SEFMC.E SCHEPYbf QF AfPBOYEP BlJOOEI ffAR FHPsP.IUNs 1ffl

SCHEDUlE"1"

FUNDS AYAILARLE
~
Slale Appropriation F-IR_,_

ORIGINAL APPROPRIATION

AMENDED APPROPRIATION

GOVERNOR'S EMERGENCY FUND

BUDGET ADJUSTMENTS

TOTAL

23,661,066.00 $ 6496491.00

-125,000.00 $

46,500.00

300000.00 _ _ _ _ _ _ _ $ _ _~39=.2~44~=00~

23,582,566.00 6835735.00

30,157,557.00 $

175,000.00 $

- -ExeE~Qlll.!BE
Rogulor Opeqting Exponoes

$

Travel

Equipment

Canpulor Charges

RNIEmMRT_,,,...,_

P.,Diom,F--Conlrads

Opeqting Elq,enselPaymen ID

CennlS-Hoopilal

Operating E_,..,payrnentsto
Medical College of 0-Uia

Rogullr Operating Exponoes for

~ - Insurance

4,768,335.00 115,123.00 74,200.00 $ 183,700.00 11,753.00 238,641.00 57,883.00 23,500.00
17,386,621.00
6,970,976.00
325825.00

1,500.00 -1,500.00
175,000.00

30,157,557.00 $

175,000.00 $

46,500.00 $

39.244.00 $ 30,418.301.00

36,500.00 10,000.00

36.00 $ 30,008.00
8,200.00

4,768.371.00 181,631.00 84,800.00 183,700.00 10.253.00 238,641.00 57,883.00 208,500.00

17,386,621.00

6,870,976.00

325825.00

46,500.00 $

39,244.00 $ 30,418,301.00

Seo _ , i y t n g noleo and Independent Accountants Combined Report on Review of Fmancial Slatsments and Supplementary Information.
-22-

STATE DEPARTMENT OF VETERANS SERVICE CASH AND CASH EQUIVALENTS JUNE 30 1995

SCHEDULE "2"

NONINTEREST BEARING ACCOUNTS Wachovia Bank of Georgia, Atlanta, Georgia
OTHER cash on Hand

$ -104,966.16 150.00
$ -104,816.16

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
-23-

STATE DEPARTMENT OF VETERANS SERVICE SCHEDULE OF GOVERNOR'S EMERGENCY FUND
YEAR ENDED JUNE 30 1995
Decatur County Veterans Bus - Help with the Purchase of a New Bus to Transport Veterans to the VA Hospital
RosweU Vietnam War Memorial Committee -Assist with the Completion of the Memorial Expenses in Connection with a Study to Determine the Location, Design and Cost of
Erecting a Monument Dedicated to the Memory of Georgia's World War II Veterans Veterans and Community Outreach Foundation - Assist with Expenses in Comection
with the Children's Program Georgia Committee for POW/MIA, Inc. - Assist with Operating Expenses Veterans Express Bus, Inc. - Assist with Operating Expenses Berrien County World War II Monument Committee - Assist with Expenses in
Connection with Restoring their Monument

SCHEDULE "3"
$ 5,000.00 15,000.00 10,000.00 2,000.00 7,500.00 5,000.00 2,000.00
$ 46,500.00

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
-24-

STATE DEPARTMENT OF VETERANS SERVICE SCHEDULE OF FEDERAL REVENUES )'.EAR ENDED JUNE 30 1995

PROGRAM
Veterans Affairs, U. S. Department of Veterans State Domiciliary Care Direct
Veterans State Nursing Home Care Direct
Veterans Educational Assistance Direct

CFDA NUMBER
64.014 64.015 64.111

SCHEDULE 4

AMOUNT

$

392,208.60

6,026,826.46

269,241.57

$

6.688,276.63

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
-25-

STATE DEPARTMENT QF VETERANS SERVICE SCHEDULE OF OTHER OPERATING EXPENSES
YEAR ENDED JUNE 30 1995
REGULAR OPERATING EXPENSES Clipping Service Fim Processing Freight, Express and Storage Notary Public Commission and Seal Radio Program Expense Registration Fees Subscriptions and Dues
COMPUTER CHARGES Education and Training Expenses

SCHEDULE 5

$

720.00

450.41

3,017.09

238.09

102.41

125.00

2,237.37

$

6,890.37

s==.;;,;50=0=.oo=

See accompanying notes and Independent Accountanrs Combined Report on Review of Financial Statements and Supplementary Information.
-26-