C:,A ,, ' , '.A~>,oc vv AFIS _;2.00, -:200;:t ,_ -i \ I, ' ~' ' JI ' ' i' J i IJ ' ) ,. , / r ' '. ' ~!,' ,, ,, ,, -\ I .. '-. -' ,, ' - . '' -, ' " ' ATLANTA TECHNICAL COLLEGE ' ' ATLANTA,' GEORGIA 'I I t t I I. \ ' '. 'REPORT ON AUDrr ' \ : . OF THE FINANCIAL STATEMENTS - , FOR THE FISC~L YEAR ENDED JUNE ~O, 2002 )_ J~ I .. . Russell W. Hinton State Auditor 'I '-, I "\ ' ' - .- ,. '' - ,\ ATLANTA TECHNICAL COLLEGE -TABLE OF CONTENTS - Page SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS 2 BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET ASSETS 1 I B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 12 C STATEMENTOFCASHFLOWS 13 D NOTES TO THE FINANCIAL STATEMENTS 14 SUPPLEMENTARY INFORMATION SCHEDULES SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET (NON-GAAP BASIS) BUDGETFUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 29 2 RECONCILIATION OF SALARIES AND TRAVEL 30 SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS ATLANTA TECHNICAL COLLEGE - TABLE OF CO1','TENTS - SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS R11sslLL W. H.-m, STATE AUDITQFI (404) 656 2174 DEPARTl\1ENT OF AUDITS AND ACCOUNTS :!54 \\'Jc,,hmgron S1rc.-e1 S W , Sunc 2 I 4 AtlJntJ, Gcorg1J ~01 ~4-8400 September 23, 2002 Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board ofTechmcal and Adult Education Members of the Local Board of Directors and Honorable Brenda Jones, President Atlanta Techmcal College INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEME1'.1TS AND SUPPLEME1'.1TARY INFORMATJON Ladies and Gentlemen We have audited the accompanymg basic financial statements (Exh1b1ts A through D) of Atlanta Techmcal College, an orgamzat1onal umt of the State of Georgia, as of and for the year ended June 30, 2002 These financial statements are the respons1b1hty of the Techmcal College's management Our respons1b1hty 1s to express an opm1on on these financial statements based on our audit We conducted our audit m accordance with aud1tmg standards generally accepted m the Umted States of Amenca Those standards require that we plan and perform the audit to obtam reasonable assurance about whether the financial statements are free of matenal misstatement An audit mcludes exammmg, on a test basis. evidence supportmg the amounts and disclosures m the financial statements An audit also mcludes assessmg the accountmg pnnc1ples used and s1gmficant esumates made by management, as well as evaluatmg the overall financial statement presentation We beheve that our audit provtdes a reasonable basis for our opm1on As discussed m Note I, the fmanc1al statements of Atlanta Techmcal College are mtended to present the financial pos11Ion and changes m financial pos11Ion (mcludmg cash flows) of only that port10n of the busmess-type acllv111es of the State of Georgia that 1s attnbutable to the transactions of Atlanta Techmcal College They do not purport to, and do not, present fairly the financial pos1t1on and changes m financial pos1t1on (mcludmg cash flows) of the State of Georgia, m conformity with accountmg pnnc1plcs generally accepted m the Umted States of Amenca 02ARL-IT In our opm10n, the basic financial statements referred to above present fairly, mall matenal respects, the financial pos1t1on of Atlanta Techmcal College as of June 30, 2002. and 11s changes m financial pos1t10n (mcludmg cash flows) for the year then ended m conforrmty with accounlmg pnnc1ples generally accepted m the Umted States of Arnenca As descnbed m Note I, Atlanta Techmcal College adopted the prov1s1ons of Governmental Accountmg Standards Board (GASB) Statements No 35, Basic Financial Statements - and Management's Discusswn and Analvsis - for Public Colleges and Umvers1/ies, as amended by GASB Statement No 37, Basic Financial Statements -and Management's Discusswn and Ana(vs1s for State and Local Governments, and GASB Statement No 38, Certain Financial Statements Note Disclosures, as of July I, 2001, to implement a new financial reportmg model. Management's Discussion and Analysis 1s not a required part ofthe basic financial statements but 1s supplementary mforrnatlon required by the GASB We have applied certain limited procedures, which consisted pnnc1pally ofmqumes ofmanagement regardmg the methods ofmeasurement and presentation of this supplementary mforrnat1on However, we did not audit this mforrnatlon and express no op1mon on 11 Our audit was conducted for the purpose of forrnmg an op1mon on the basic financial statements taken as a whole. The accompanymg supplementary mforrnatlon (Schedules I and 2) 1s presented for purposes of add1tlonal analysis and 1s not a reqmred part of the basic financial statements of Atlanta Technical College Such mforrnatlon has been subjected to the aud1tmg procedures applied by us in the audit of the basic financial statements and, m our opm1on, based on our audit, 1s fairly stated m all matenal respects m relation to the basic financial statements taken as a whole. Respectfully submitted, ~~~ II W. Hmton RWH:gp 02ARL-IT REQUIRED SUPPLEMENTARY INFORMATION -I- - - ----------------------- Atlanta Technical College Management's Discussion and Analysis The followmg 1s a d1scuss1on and analysis of Atlanta Technical College's financial perfonnance for the fiscal year endmg June 30, 2002 Please read 11 m conJunct10n with the College's financial statements, which follow tins section Due to the fact that the State of Georgia, mcludmg Atlanta Technical College, implemented the prov1s1ons of Governmental Accountmg Standards Board (GASB) Statements No 34 and 35 for the fiscal year 2002 only hm1ted fiscal year 2001 data will be presented for comparative purposes Tlus comparative mfonnatlon will be required m future reports Overview ofthe Financial Statements and Financial Analysis Tlus armual report consists of a senes of financial statements prepared m accordance With the rules and regulations established by the Governmental Accountmg Standards Board. These financial statements differ, m both fonn and the accountmg pnnc1ple used, from the presentation of pnor financial statements The Statement of Net Assets used m conJunctlon With the Statement of Revenues, Expenses and Changes m Net Assets contams mfonnatlon concemmg the College's finances and act1V1t1es as a whole and assists with prov1dmg an answer to the question "Is the College as a whole better or worse off as a result of the year's activities?" These statements mclude all assets and hab1ht1es usmg the accrual basis of accounting, which 1s s1m1lar to the accounting method used by corporations and other pnvate sector comparues. All revenues and assets are recognized when the service 1s provided and expenses and hab1ht1es are recogmzed when others provide the goods or service, regardless of when cash 1s exchanged The Statement of Cash Flows 1s a valuable tool when evaluating the ab1hty of the College to meet financial obligations as they mature. This statement presents mfonnatlon related to cash mflows and outflows summanzed by operating, non-capital financmg, capital and related financmg and mvestmg activities This d1scuss1on and analysis of the College's financial statements proV1des an overview of its fmancial act1v1t1es for the year Statement ofNet Assets The purpose of the Statement of Net Assets 1s to present to the users of the financial statements a fiscal snapshot of the Techrucal College at a specific pomt m time The statement presents the assets, habihtles and net assets of the College as of the end of the fiscal year Assets and hab1ht1es are reported as current and non-current and the difference between assets and hab1ht1es 1s reported as net assets. Over a penod of time the mcreases and decreases reflec,ted m the -2 - Statement of Net Assets, when considered with other non-financial facts such as enrollment levels and the cond1l!on of the fac1hlles, can provide a measure to aid in determining whether the Techmcal College's financial pos1l!on 1s 1mprovmg or dctenoratmg Net assets are d1v1ded into two maJor categones The first category, invested m capital assets, net of debt, provides informat10n concerning the College's equity in propeny, plant and equipment owned by the College The final category 1s unrestncted net assets. which are available for expenditure by the College for any lawful purpose deemed necessary to operate the College. Statement of Net Assets (thousands of dollars) Assets: Current Assets Capital Assets, Net $ 3,098 5,309 Total Assets S 8 407 Liabilities Current Liab1hlles Non-Current Liab1ht1es $ 1,611 515 Total Liabilities $ 2,126 Net Assets Invested in Capital Assets, Net of Debt Unrestncted $ 5,310 971 Total Net Assets $ ti,i I Statement ofRevenues, Expe11ses and Changes in Net Assets The purpose of the Statement of Revenues, Expenses and Changes in Net Assets 1s to present the revenues received by the College, both operating and nonoperal!ng, and the expenses incurred by the College, operallng and nonoperallng, and any other revenues, expenses, gains and losses received or spent by the College dunng the fiscal year Changes in total net assets as presented on the Statement of Net Assets are based on the informat10n presented in the Statement of Revenues, Expenses and Changes in Net Assets Operating revenues are received for prov1dmg goods and/or services to vanous customers and consutuenc1es of the College Operatmg expenses are those expenses paid to acquire or produce the goods and/or services provided in return for the operating revenues. and to carry out the m1ss1on of the College Therefore, nonoperatmg revenue 1s received when no goods or services are provided in exchange for the revenue State appropnatlons and gifts were classified as operating revenues in previous reports With the issuance of Statement No 35, new guidelmes -3- have been established by the Governmental Account:mg Standards Board (GASB) chang:mg the class1ficat1ons of state appropnat10ns and gifts from operating to nonopcrating revenue This change may result :m an operating deficit that 1s offset by a nonoperatlng surplus Statement of Revenues, Expenses and Changes in Net Assets (thousands of dollars) Operating Revenues Operating Expenses $ 6,806 19.290 Operating Loss $ -12,484 Nonoperatlng Revenues and Expenses 13.399 Income Before Other Revenues $ 915 Other Revenue Increase :m Net Assets 89 s 1.004 Net Assets at Beginning of Year, as Onginally Reported s 4.456 Cumulative Effect of Changes :m Accounting Pnnc1ple 821 Net Assets at Beginning of Year - Restated $ 5,277 Net Assets at End of Year $ Ii 2..8.l The Statement of Revenues, Expenses, and Changes in Net Assets reflects a pos1t1ve year with an :mcrease :m the net assets at the end of the year Some h1ghhghts of the :mformat1on presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows -4- Revenue by Source (thousands of dollars) Operatmg Revenue Tmtlon and Fees Grants and Contracts Sales and Services of Educational Departments Other Total Operatmg Revenue $ 3.830 2,325 568 83 s 6,806 Nonoperatmg Revenue State Appropnat1ons Grants and Contracts - Nonoperatmg Gifts Investment Income Other $ I 1,935 1,303 122 39 89 Total Nonoperatmg Revenue $ 13,488 Total Revenues S-2Q,224 Operating Expenses (thousands of dollars) Operatmg Expenses Instruction $ 19,290 Total Operating Expenses $ 19.290 The sources of operatmg revenue for the College are tmt1on and fees, grants and contracts, aux1hary services, and educational act1V1tles The operatmg loss 1s directly related to the exclusion of the State of Georgia appropnat10n m the amount of $11,935,990 from operating revenues per GASB 35 Tmtlon mcreased by $1,436,137. This 1s directly related to the mcreased enrollment of 17.2% from fiscal year 200 I Personal Services expenses mcreased by approximately $72.176 This increase reflects an annual pay raise for College employees of approximately 4.5% with the associated fnnge benefits It also reflects cost conservation measures due to anticipated revenue shortfalls related to the economy The cumulative effects of changes m accountmg pnnc1p\e are the result of the College adopting depreciation on capital assets and changmg from the budgetary basis to the GAAP basis of accounting. -5- ---------------------- --- ----- Under nonoperating revenues (expenses) state appropnat10ns decreased by approximately $ I 35,660 The College, as well as all other state agencies, incurred a 2 5% budget reduct10n in fiscal year 2002 due to a nal!onal economic slowdown following the tragedy of September 11, 2001 Statement ofCash Flows The purpose of the Statement of Cash Flows 1s to provide relevant informal!on concermng the cash receipts and payments of the College dunng the year It also provides information concermng the College's ab1hty to generate future cash flows and to meet its obhgat10ns as they come due The statement 1s d1V1ded into three sections The first section reports on the operating cash flows and shows the net cash used by the operating act1vn1cs of the College The second section shows the cash flows from the nonoperatmg acl!V!lles of the College The final scct10n reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes m Net Assets Statement of Cash Flows (thousands of dollars) Cash Provided (Used) By Operating Act1v11Ies Non-Capital Financmg Acl!v111es Investmg Acllv11Ies Capital and Related Financing Act1v11Ies $ -11,463 13,735 39 -641 Net Change m Cash $ 1,670 Cash. Beginning of Year 493 Cash, End of Year S 2.!63 Capital Assets The College had no s1gmficant capital asset additions for fac1hlles m the fiscal year 2002 An addition to one of the bwldmgs at Atlanta Techrucal College was under construction dunng fiscal year 2002 but was not completed. Tlus project 1s being funded by the Georgia State Financmg and Investment Cornm1ss1on (GSFIC) Other projects funded by the GSFIC included $89,082.36 for eqmpment Projected funding by the GSFIC for fiscal year 2003 will be approximately the same Economic Outlook The College 1s unaware of any currently known fact, dec1s1on, or cond11Ion that 1s expected to have a s1gmficant effect on the financial pos11Ion or change how the College operates for the next fiscal year As in pnor years, the College's overall financial pos11Ion 1s strong Enrollment has mcreased annually for the past five years and this trend 1s expected to continue into the next -6- fiscal year As a result, the College anl!c1pates the next fiscal year will be much hke the last and the College will mamtam a close watch over resources to mamtam the ab1hty to react to unknown internal and external issues Dr Brenda Jones, President Atlanta Techrucal College - 7- BASIC FINANCIAL STATEMENTS -9- ATLANTA TECHNICAL COLLEGE STATEMENT OF NET ASSETS JUNE 30. 2002 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable Federal Financ,a1 Assistance Other Prepaid Items lnventones Total Current Assets Noncurrent Assets Capital Assets, Net Total Assets LIABILITIES Current L1ab1lrt1es Salanes Payable Payroll Wrthhold1ngs Accounts Payable Deferred Revenue Funds Held for Others Compensated Absences Total Current Liabilities Noncurrent Uablht1es Compensated Absences Total L1ab1ht1es NET ASSETS Invested ,n Ceprtal Assets, Net of Related Debt Restnded Unrestncted Total Net Assets EXHIBIT "A" $ 2,163,203 37 136,784 95 115,436 42 500,912 06 18141694 $ 3.097,753 74 5,309,593 58 $ 8,407,347 32 $ 22,044 84 328 13 322,103 45 604,839 72 210,622 43 450 813 38 $ 1,610,751 95 515 415 46 $ 2,126167 41 $ 5,309,593 58 29318 971,293 15 The notes to the financial statements are an integral part of this statement - 11 - ATLANTA TECHNICAL COLLEGE STATEMENT OF REVENUES. EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30 2002 EXHIBIT "B" OPERATING REVENUES Student Tu1t1on and Fees Less Scholarship Allowances Grants and Contracts Federal Sales and Services Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salanas Benefits Travel Scholarships and Fellowships Ut1llt1es Supplies and Other Services Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES State Appropnat1ons Grants and Contracts Federal Local Gifts Interest and Other Investment Income Net Nonoperaung Revenues Income Before Other Revenues and Expenses Caprtal Grants and Gifts State Increase in Net Assets Net Assets Net Assets - Beginning of Year, as Ong1nally Reported Cumulauve Effect of Changes In Accounting Pnnc,ple Net Assets - Beginning of Year, Restated Net Assets - End of Year The notes to the financial statements are an integral part of this statement - 12 - s 3,991,915 04 -161,91211 2 325,159 83 567,896 81 83 489 02 $ 6,806,548 59 $ 10 698,887 53 2,337,077 12 44.820 30 2,364,963 58 744,64944 2,271,591 92 828,832 29 $ 19,290,822 18 $ -12,484,273 59 $ 11,935,990 39 1,282,504 12 20,26541 121,627 99 38 749 56 $ 13 399 137 47 $ 914,863 88 89,082 36 s 1,003,946 24 $ 4,456,416 38 820 817 29 $ 5,277,233 67 $ 628117991 ATLANTA TECHNICAL COLLEGE STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2002 CASH FLOWS FROM OPERATING ACTIVITIES Tu1t1on and Fees Grants and Contracts Sales and Services Payments for Scholarships and Fellowships Payments to Supphers Payments to Employees Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropnabons Agency Funds Transactions (Net) Gifts and Grants Received for Other than Caprtal Purposes Net Cash Flows Provided by Noncap1tal F1nancmg Act1vrties CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Net Increase m Cash Cash and Cash Equivalents - Begmn1ng of Year Gash and Cash Equivalents - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Opera~ng Income (Loss) AdJustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Ac1M11es Depreciation Expense Change In Assets and LJab1ht1es Receivables, Net Prepaid Items lnventones Salanes Payable Payroll Withholdmgs and Employer Benefits Accounts Payable Deferred Revenue Compensated Absences Net Cash Provided (Used) by Operating Act1vrties The notes to the financial statements are an integral part of this statement - 13 - EXHIBIT "C" $ 4,237 194 89 2,407,895 86 559,837 91 -2,364,963 58 -5,682,423 36 -10,620,415 70 $ -11,462,873 98 $ 11,935,990 39 -67.584 45 1,866 630 14 $ 13,735 036 08 $ -640 516 05 $ 38 749 56 $ 1,670,395 61 492,807 76 $ 211631203 37 $ -12,484,273 59 828,832 29 291,944 92 -912 06 -75,709 41 -415 79 245 -207,665 56 106,435 15 78 887 62 $ -11 ,4621873 98 ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT"D" NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Atlanta Techmcal College 1s one of thirty-three (33) State supported member colleges of postsecondary education m Georgia which compnse the Georgia Department ofTechmcal and Adult Education, an orgamzatlonal umt of the State of Georgia The accompanymg financial statements reflect the operations of Atlanta Techmcal College as a separate reportmg entity The Techmcal College's Local Board of Directors 1s composed of ten (10) members servmg staggered three-year terms who are appomted by the State Board ofTechmcal and Adult Educat10n Appropnatlon ofState funds 1s made to the Georgia Department ofTechmcal and Adult Education by the General Assembly of Georgia The Department's Adm1mstrat1ve Central Office determmes the amount of State appropnatlons to be received by Atlanta Techmcal College The Techmcal College does not have authonty to retam unexpended State appropnat10ns (surplus) for any given fiscal year. Accordmgly, Atlanta Techmcal College 1s considered an organ1zat10nal unit of the Georgia Department ofTechmcal and Adult Education for financial reportmg purposes because of the s1gmficance of Its legal, operational, and financial relat10nslups as defined m Section 2100 ofthe Governmental Accountmg Standards Board (GASB) Cod1ficat10n ofGovernmental Accountmg and Fmanc1al Reportmg Standards FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No 34, Basic Financial Statements and Management Discusszon and Ana(vszsfor State and Local Governments. Tins was followed m November I999 by GASB Statement No. 35, Basic Financial Statements and Management's Discusszon and Analysis for Public Colleges and Universities The State of Georgia 1s required to unplement GASB No 34 as of and for the year ended June 30, 2002. As an orgamzatlonal umt of the State of Georgia, the Techmcal College 1s also required to adopt GASB Statements No 34 and No 35 as amended by GASB Statements No. 37 and No 38 The financial statement presentation required by these standards provide a comprehensive, entity-wide perspective of the Techmcal College's assets, hab1ht1es, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective previously reqmred The Techmcal College has elected to not restate its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial mformatlon will not be presented for fiscal year 2002 S1gmficant accountmg changes made m order to comply with the new requirements mclude (1) adoption of depreciation on capital assets, and (2) recogmtlon of compensated absences Also, generally accepted accountmg pnnc1ples (GAAP) reqmres that the reportmg of summer school revenues and expenses be split between fiscal years rather than m one fiscal year However, because the effect oftlus change 1s not matenal, the Techmcal Colleges ofthe Georgia Department ofTechmcal and Adult Education will contmue to report summer revenues and expenses m the year m which the predommate acllv1ty takes place - 14 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "D" NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING For financial reportmg purposes, the Technical College 1s considered a special-purpose government engaged only m busmess-type act:IV1tles Accordmgly, the Technical College's financial statements have been presented usmg the economic resources measurement focus and the accrual basis of accountmg, except as noted m the precedmg paragraph Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obhgat10n has been mcurred All s1gmficant mtra-college transactions have been ehmmated. The Technical College has the option to apply all Fmanc1al Accountmg Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB confucts with GASB. The Technical College has elected to not apply FASB pronouncements issued after the applicable date RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoption ofGASB Statement No. 34, the Technical College was also required to make certam changes m accounting pnnc1ples, spec1fically (I) adoption of depreciation on capital assets, and (2) recordmg of compensated absences. GASB Statement No 34 reqmres certam summer semester revenues be recognized between fiscal years rather than the fiscal year m which the semester was predommantly conducted The Technical College has chosen to contmue to record summer revenue m the year m which the semester was predommantly conducted Effective July 1, 2001, the Technical College's cap1taltzatlon pohcy for eqmpment was increased from $1,000.00 to $5,000 00 Net assets at July I, 2001 were mcreased by $820,817.29 for the cumulative effect of these changes. CASH AND CASH EQUIVALENTS Cash and Cash Eqmvalents mclude currency on hand and demand deposits with banks and other authonzed financial mstltutlons. ACCOUNTS RECEIVABLE Accounts receivable consist of allotments due from the Georgia Department ofTechmcal and Adult Education - Admm1strat1ve Central Office, rermbursements due from Federal, State, local, and pnvate grants and contracts, and other receivables disclosed from mformat10n available Accounts receivable (Other) ansmg from operations are reported at gross value Based on management's evaluation that amounts uncollectible are not matenal, no prov1s1on has been made for such amounts INVENTORIES Inventones of goods for resale are recorded as assets at cost at the time of purchase The Technical College uses the weighted average method m costmg-out mventones based on sales - IS - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT"D" NOTE I SUMMARY OF SIGNIFTCANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets are recorded at cost at date of acqu1s111on, or fair market value at the date of capital contribullon. The Techmcal College cap1tal1zes all land and land improvements For equipment, the Techmcal College's cap1tahzallon pohcy mcludes all items with a umt cost of$5,000 00 or more, and an esllmated useful hfe of greater than one year Bmldmgs and Bmldmg Improvements, Improvements Other Than Bmldmgs and Library Collectlons that exceed SI 00,000.00 or s1gmficantly mcrease the value or extend the useful hfe of the asset are cap1tahzed. For mfrastructure, the Techrucal College's cap1tal1zatJon threshold 1s $1,000,000 00 Rout.me reprurs and mruntenance are charged to operatmg expense m the year m which the expense was mcurred Depreciation 1s computed usmg the strrught-hne method over the esllmated useful hves ofthe assets, generally 10 to 40 years for bmldmgs, 15 to 25 years for mfrastructure, 15 years for improvements other than bmldmgs, IO years for hbrary books, and 3 to IO years for eqmpment To obtam full disclosure of capital assets acquired by the Techrucal Colleges of the Georgia Department ofTechrucal and Adult Education, 1t 1s necessary to look at the actlVJlles ofthe Georgia State Fmancmg and Investment Comnuss1on (GSFIC) - an organization that 1s external to both the Techrucal College and the Georgia Department of Techmcal and Adult Educat10n The GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to 11 m the Const1tu11on of the State of Georgia and the Act creatmg the GSFIC The bonds arc issued for the purpose of acqumng capital assets and this debt conslltutes drrect and general obhgalions ofthe State of Georgia, to the payment of which the full fruth, credit and taxmg power of the State are pledged GSFIC records construction m progress on its books throughout the construction penod and at completion transfers the enure proJect cost to Atlanta Techrucal College to be recorded as an asset on the Techrucal College's books. The balance ofconstruction m progress retamed by GSFIC totaled $2,141,846.02 at June 30, 2002. DEFERRED REVENUES Deferred revenues mclude amounts received for tuition and fees and other act1v1t1es pnor to the end of the fiscal year but related to the subsequent accountmg penod Deferred revenues also mclude amounts received from grant and contract sponsors that have not yet been earned COMPENSATED ABSENCES Employee vacallon pay 1s accrued for financial statement purposes when vested The hab1hty and expense mcurred are recorded at year-end as accrued vacation payable m the Statement of Net Assets, and as a component of compensauon and benefit expense m the Statements of Revenues, Expenses, and Changes m Net Assets Atlanta Techrucal College had an accrued hab1hty for compensated absences m the amount of $887,341.22 as of July 1, 2001 For fiscal year 2002, $746,222.80 was earned m compensated absences and employees were prud $667,335.18, for a net mcrease of$78,887.62 The endmg balance as ofJune 30, 2002 m accrued hab1hty for compensated absences 1s $966,228 84 - 16 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINA..l\JCIAL STATEMENTS JUl\'E 30. 2002 EXHIBIT "D" NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NON-CURRENT LIABILITIES Non-current hab1ht1es mclude hab1hlles that will not be prud w1thm the next fiscal year NET ASSETS The Techmcal College's net assets are classified as follows Invested m capital assets, net ofrelated debt This amount represents the Technical College's total mvestment m capital assets, net ofoutstandmg debt obhgal!ons related to those cap11al assets To the extent debt has been mcurred but not yet expended for capital assets, such amounts are not mcluded as a component ofmvested m capital assets, net ofrelated debt (The term "debt obhgal!ons" as used tn this defimllon does not mclude debt of the GSFIC as discussed above ) Resmcted net assets Restncted net assets mclude resources m which the Techmcal College 1s legally or contractually obhgated to spend resources m accordance with restncl!ons imposed by external third parties, except for unexpended grant funds of $293 18 due to grantor agencies Unrestricted net assets Unrestncted net assets represent available resources denved from student tml!on and fees, state appropnal!ons, and sales and services of educational departments These resources will be used for transact10ns relatmg to the educal!onal and general operal!ons of the Techmcal College, and may be used at the d1scret10n of the govemmg board to meet subsequent fiscal year expenses for those purposes, except for unexpended state appropnal!ons (surplus) of $179,436.62 Unexpended state appropnauons must be refunded to the Department ofTechmcal and Adult Educat10n for remittance to the Office ofTreasury and Fiscal Services These resources also mclude auxiliary enterpnses, which are substanl!ally self-supportmg ac11v1t1es that provide services for students, faculty and staff When an expense 1s incurred that can be paid usmg either restncted or unrestncted resources, the Technical College's pohcy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources INCOME TAXES Atlanta Tecltn1cal College, as a pohllcal subd1v1s1on of the State of Georgia, 1s ell.eluded from Federal mcome taxes under Section 115( I) of the Internal Revenue Code, as amended CLASSIFICATION OF REVENUES The Technical College has classified Its revenues as either operal!ng or nonoperal!ng revenues tn the Statement of Revenues, Expenses, and Changes m Net Assets according to the following cntena Operating revenues Operating revenues mclude ac11v1t1es that have the charactensllcs ofexchange transactions, such as (I) student tu111on and fees, net ofscholarslup allowances, (2) Federal, state and local grants and contracts, and (3) sales and services - 17 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "D" NOTE J SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CLASSIFICATION OF REVENUES Nonoperating revenues Nonoperating revenues include activities that have the charactensucs of non-exchange transactions, such as gifts and contnbutlons, and other revenue sources that are defined as nonoperating revenues by GASB No 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entitles That Use Proprietary Fund Accounting, and GASB No 34, such as state appropnatlons and investment income Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarslup allowances in the Statement of Revenues, Expenses, and Changes in Net Assets Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the Techmcal College's financial statements To the extent that revenues from such programs are used to satisfy tu1t1on and fees and other student charges, the Techmcal College has recorded contra revenue for scholarship allowances NOTE 2 CASH AND CASH EOUNALENTS AND OTHER DEPOSITS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to Atlanta Techmcal College (and thus 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 heu of a surety bond, the depository may pledge as collateral any one or more of the following secunues as enumerated in the Official Code of Georgia Annotated Section 50-17-59 I. Bonds, bill, certificates of indebtedness, notes, or other direct obhgat1ons ofthe Umted States or of the State of Georgia 2 Bonds, bills, certificates of indebtedness, notes, or other obhgatlons of the counties or mumc1paht1es of the State of Georgia 3 Bonds of any pubhc authonty created by the laws of the State ofGeorgia, providing that the statute that created the authonty authonzed the use of the bonds for this purpose. 4 Industnal revenue bonds and bonds of development authontles created by the laws of the State of Georgia 5. Bonds, bills, certificates of mdebtedness, notes, or other obhgat10ns of a subs1d1ary corporation ofthe Umted States government, which are fully guaranteed by the Umted States government both as to pnnc1pal and interest, or debt obhgal!ons 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 Nal!onal Mortgage Associal!on - 18 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT"D" NOTE 2 CASH AND CASH EOUNALENTS AND OTHER DEPOSITS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 6 Guarantee or msurance ofaccounts provided by the Federal Deposit Insurance Corporation As authonzed m the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted pohc1es, which allow agencies ofthe State ofGeorgia (and thus Atlanta Techrucal College), the option of exemptmg demand deposits from the collateral reqwrements CATEGORIZATION OF DEPOSITS The Technical College's cash deposits are categonzed by nsk as follows: Category I - Amounts covered by depository insurance or collaterahzed with secunt1es (at fair value) held by the Techrucal College or by its agent m the Technical College's name. Category 2 - Amounts collaterahzed with secunt1es (at fiur value) held by the pledgmg financial mst1tut1on's trust department or agent m the Techrucal College's name Category 3 - Amounts collateral1zed with secunt1es (at fa.Jr value) held by the pledging financial 1nstltution, or by its trust department or agent but not m the Techmcal College's name, and amounts uncollateral1zed. At June 30, 2002, the Techmcal College's cash deposits were as follows Cash Depos,ts Carrying Amount Bank Balances Rsk Categoaes S 2 161 785 37 S 2967 997 33 S 133 568 90 S,_ __.o""oo""' S 2 51,4 428 4.l NOTE 3 INVENTORIES Inventones at June 30, 2002, consisted of the following: Bookstore NOTE 4 CAPITAL ASSETS $ 18),416.94 The balance of capital assets at July I, 2001, was adjusted for accounting changes reqmred in 1mplementmg GASB Statements 34 and 35 as disclosed m Note I Following are the changes m capital assets for the year ended June 30, 2002 - 19 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "D" NOTE4 CAPITAL ASSETS AdJusted Ba\ancc Jujy I, 2001 6dd1t120~ Rdl!r;;UQD~ Balance June ;lQ 2002 Capital Assets, Not Bemg Depreciated Land and Land Improvements s l ,4<12,521 QQ $ 1,402 ~~] QO Capital Assets, Bemg Dcprcc,ated Butldmg and Bu1ld1ng Improvements s 4,115,629 00 Improvements Other Than Buildings Equipment 1,828,713 00 I ,773,671 I I s Library Collcct1ons 48~,641 SQ s ,Ql ~54 6) 5 229,598 41 222 22 4) s 4, I I5,629 00 1,828,713 00 2,003,269 52 485 641 50 $ 433 :151 Ql Less Accumulated Dcprec1anon Bu1ldmgs and Bu1ldmg Improvements $ Improvements Other Than Bulldmgs Equipment Library Collccllons s 1,477,242 67 I ,599,992 74 404,60606 2)536 92,601 65 41,022 63 646,643 86 48,564 15 s 1,569,844 32 1,641,015 37 1,051,249 92 267 1023 $ 37QQ3Q )5 $ 82.32 22 5 4,529,212 44 Total Capital Assets, Bcmg Depreciated, Net $ 4 5Q3 274 46 S Capital Assets, Net 5 "90 827 46 S -522 ,33 s -'i29 233 88 s 0 !JO $ 1 2(M (MQ 5 0 OP $ 5 302 593 58 NOTES DEFERRED REVENUE Deferred revenue at June 30, 2002, consists of the following Capital Grants and Gifts - State Gifts - GSFIC Grants and Contracts - Federal Grants and Contracts - Local Prepaid Twt1on and Fees Totals $ 71,785 69 210,819 96 247,775 02 39,809 59 34 649 46 s 604,839,72 NQTE6 LONG-TERM LIABILITIES Long-term hab1hty act1v1ty for the year ended June 30, 2002 was as follows Other L1ab1!1t1es Compensated Absences Balance July I, 2001 Add1nons ReductJons BaJance June 30 2002 Current Portion $ ssz J41 22 5 z~~ 2"2 su $ ~~7 3J~ 18 $ 96~ ~2S S4 s ~~g BP J~ - 20- ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "D" NOTE 7 RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Atlanta Techmcal College part1c1pates ID the Teachers Rettrement System ofGeorgia (TRS), acostshanng multtple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of proVId1Dg retirement allowances and other benefits for teachers of the State of Georgia. TRS proVIdes service rettrement, d1sab1hty retirement, and survivor's benefits for its members m accordance with State statute The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obta1Ded from the Georgia Department of Audits and Accounts Funding Policy Employees of Atlanta Techmcal College who are covered by TRS are requrred by State statute to contnbute 5% ofthetr gross earnmgs to TRS Atlanta Techrucal College makes monthly employer contnbuttons to TRS at rates adopted by the TRS Board ofTrustees ID accordance with State statute and as adVJsed by their 1Ddependent actuary For fiscal year 2002, the employer contnbutton rate was 9 24% for covered employees Employer contnbut1ons for the current fiscal year and the preced1Dg two fiscal years are as follows Fiscal Year Percentage Contnbuted Required Contnbutton 2002 2001 2000 100% )00% 100% $ 656,066 81 $ 787,428 02 s 801,567 95 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Atlanta Techrucal College part1c1pates ID the Employees' Rettrement System of Georgia (ERS). a s1Dgle-employer defined benefit pens10n plan estabhshed by the General Assembly ofGeorgia for the pUipOse of prov1d1Dg retirement allowances for employees of the State of Georgia The benefit structure of ERS 1s defined by State statute and was s1gmficantly modified on July I, 1982 Unless elected otherw:tse, an employee who currently ma1Dtatns memberslup with ERS based upon State employment that started pnor to July 1, 1982, 1s an "old plan" member subJect to the plan prov1s1ons m effect pnor to July I, 1982. All other members are "new plan" members subJect to the modified plan prov1s1ons - 21 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002 EXHIBIT "D" NOTE7 RETIREMENTPLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Under both the old plan and new plan, members become vested after IO years of creditable service A member may retrre and receive normal retirement benefits after completion of IO years of creditable service and attamment of age 65. If 10 years of service 1s completed and age 60 1s reached, the member may rettre with a reduced benefit Add1nonally, there are certam prov1s1ons allowmg for rettrement after 25 years of service regardless of age. Rettrement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement Postretlrement cost-of-hvmg adJustments are also made to member's benefits The normal retirement pension 1s payable monthly for hfe; however, opttons are available for d1stnbutton ofthe member's monthly pension at reduced rates to a designated beneficiary upon the member's death Death and d1sab1hty benefits are also available through ERS. In add1tton, the ERS Board of Trustees created the Supplemental Rettrement Benefit Plan (SRBP) effective January I, 1998 The SRBP was established as a qualified governmental excess benefit plan m accordance with Sectton 415 of the Internal Revenue Code {IRC) as a portton ofERS. The purpose ofSRBP 1s to provide rettrement benefits to employees covered by ERS whose benefits are otherwise hrmted by IRC 415. The ERS issues a financial report each fiscal year wluch may be obtained through ERS. Funding Policy As estabhshed by State statute, all full-ttme employees of the State of Georgia and its pohttcal subd1V1s1ons, who are not members ofother state rettrement systems, are ehgible to part1c1pate in the ERS Both employer and employee contnbuttons are estabhshed by State statute The Technical College's payroll for the year ended June 30, 2002, for employees covered by ERS was $1,630,800 35 The Techrucal College's total payroll for all employees was $10,698,887.53 Under the old plan, member contnbuttons consist of 6.25% of annual compensatton. Of these member contnbuttons, the employee pays the first I 5% and the Technical College pays the remainder on behalf of the employee Under the new plan, member contnbunons consist solely of 1.5% of annual compensatton paid by employee The Technical College also 1s requrred to contnbute at a specified percentage of acttve member payroll determined annually by actuanal valuatton For the year ended June 30, 2002, the ERS employer contnbutton rate for the Techrucal College amounted to 9.99% ofcovered payroll and mcluded the amounts contributed on behalfofthe employee under the old plan referred to above Employer contnbuttons are also made on amounts paid for accumulated leave to retmng employees - 22 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT"D" NOTE 7 RETIREMENT PLANS EMPLOYEES' RETIREME1''T SYSTEM OF GEORGIA Funding Policy Total contnbutlons to the plan made dunng fiscal year 2002 amounted to $187,428 56, ofwh1ch $162,859.85 was made by the Technical College and $24,568 71 was made by employees These contnbutions met the reqwrements of the plan Actuarial and Trend Information Actuanal and h1stoncal trend information 1s presented in the ERS June 30, 2002. financial report wluch may be obtained through ERS GEORGIA DEFINED CONTRIBUTION PLAN Plan Description Atlanta Techmcal College participates in the Georgia Defined Contribution Plan (GDCP) wluch 1s a single-employer defined contnbut1on plan established by the General Assembly of Georgia for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and parttime and are not members of a public retirement or pension system. GDCP 1s adm1mstered by the Board of Trustees of the Employees' Retirement System of Georgia Benefits A member may retire and elect to receive penod1c payments after attamment ofage 65 The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees If a member has less than$ 3,500.00 credited to lus/her account, the Board ofTrustees has the option ofrequmng a lump sum d1stnbut1on to the member in heu of making penodJc payments. Upon the death of a member, a lump sum d1stnbut1on equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit prov1S1ons are established by State statute The Employees' Retirement System of Georgia issues a financial report each fiscal year wluch may be obtained through ERS Contributions and Vesting Member contnbullons are seven and one-halfpercent (7 5%) of gross salary There arc no employer contnbuuons. Contnbutlon rates are established by State statute Earnings are credited to each member's account in a manner established by the Board of Trustees Upon termmatlon of employment, the amount of the member's account 1s refundable upon request by the member. The Techrucal College's payroll for the year ended June 30, 2002, for employees covered by GDCP was $1,545,203.38. The Technical College's total payroll for all employees was $ I0,698,887 53 Total contnbutlons made by employees dunng fiscal year 2002 amounted to SI 15,904 14 wluch represents 7.5% of covered payroll. These contr1bunons met the requuements of the plan - 23 - ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT "D" NOTE 8 RISK MANAGEMENT Public Entity Risk Pool The Department of Commumty Health ad!mmsters for the State of Georgia a program of health benefits for the employees of umts of government of the State of Georgia, umts of county governments, and local education agencies located with the State of Georgia Th!S plan 1s funded by participants covered m the plan, by employers' contnbutlons paid by the vanous umts ofgovernment part1c1patmg m the plan, and appropnatlons made by the General Assembly of Georgia The Department of Commumty Health has contracted with Blue Cross Blue Slueld ofGeorgia to process medical claims and Express Scnpts, Incorporated to process prescnption drug claims m accordance with the State Employees' Health Benefit Plan as established by the Department of Commumty Health. Other Risk Management The Department ofAd!mmstrat1ve Services (DOAS) has the respons1b1lity for the State of Georgia of makmg and canymg out dec1s10ns that will m1mm1ze the adverse effects of accidental losses that mvolve State government assets The State believes 11 1s more economical to manage its nsks mtemally and set aside assets for chum settlement Accordmgly, DOAS processes chums for nsk of loss to which the State 1s exposed, mcludmg general liability, property and casualty, workers' compensat10n, unemployment compensation, and law enforcement officers' mdemmficatlon Limited amounts of commerc1al msurance are purchased applicable to property, employee and automobile liab1 hty, fidelity and certain other nsks The Techmcal College, as an orgamzational umt of the Georgia Department of Techmcal and Adult Education, 1s part of the State of Georgia reporting entity, and as such, 1s covered by the State of Georgia nsk management program adm1mstered by DOAS Premiums for the nsk management program are charged to the vanous state organ1zat1ons by DOAS to provide claims serv1cmg and chums payment NOTE 9 CONTINGENCIES Amounts received or receivable from grantor agencies are subJect to aud!.t and adJustment by grantor agencies. Tlus could result m refunds to the grantor agency for any expenses wluch are di.sallowed under grant terms The amount of expenses which may be disallowed by the grantor cannot be deterrnmed at this time although Atlanta Techmcal College expects such amounts, 1f any, to be 1mmatenal to its overall financial position Lltlgatlon, claims and assessments filed agamst Atlanta Techmcal College (an orgaruzatlonal unit of the Department of Techmcal and Adult Education), 1f any, are generally considered to be actions against the State of Georgia Accordmgly, s1gmficant litigation, claims and assessments pendmg against the State of Georgia are disclosed m the State of Georgia Comprehensive Annual Fmancial Report for the fiscal year ended June 30, 2002 -24- ATLANTA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002 EXHIBIT"D" NOTE IO NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The Techmcal College's operating expenses shown at the natural class1ficat1on on the "Statement of Revenues, Expenses and Changes m Net Assets" are all classified as Instrucl!on at the funct10nal class1fica1Ion - 25 - SUPPLEMENTARY INFORMATION - 27 - ATLANTA TECHNICAL COLLEGE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET - INON-GMP BASIS) BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30 2002 SCHEDULE "1" FUNDS AVAILABLE REVENUES State Appropnabon Federal Revenues Other Revenues Retained BUDGET ACTUAL (1) VARIANCEFAVORABLE (UNFAVORABLE) $ 11,936,027 00 $ 11,936,027 00 $ 1,920,888 00 1,508,159 09 5,859,114 00 5,490,161 67 000 -412,728 91 -368,952 33 $ 19,716,029 00 $ 18,934,347 76 $ _ _ _-7;_;8;...;1.:..:,6:..:8_;_1-=2"-4 EXPENDITURES Personal SeMces-lnst1tubons Operabng Expenses-Institutions Adutt Literacy Grants Caprtal Outlay $ 13,900,831 00 $ 12,950,239 25 $ 5,587,284 00 5,275,800 00 8,000 00 8,000 00 219 914 00 215,990 00 950,591 75 311,484 00 000 3 924 00 $ 19,7161029 00 $ 18,450,029 25 $ _ _ _1~,2_6_5~,_999_75_ Excess of Funds Available over Expendrtures --~~--- $ 484,318 51 $ 484,318 51 (1) Actual amounts were prepared on a prescnbed basis of accounting that demonstrates comphance wrth budgetary staMes and regulauons of the State of Georgia, wtuch Is a comprehensive basis of accounbng other than generally accepted accounung pnnciples - 29 - ATLANTA TECHNICAL COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30 2002 SCHEDULE "2" Totals per Annual Supplement Accruals June 30, 2001 June 30, 2002 Compensated Absences June 30, 2001 June 30, 2002 SALARIES $ 10,648,528 33 $ TRAVEL 44,820 30 -22,460 63 22,044 84 -868,919 34 919 694 33 $ 10 698,887 53 $ 44 820 30 - 30 - SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS ATLANTA TECHNICAL COLLEGE AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS Al\'D QUESTIONED COSTS YEAR ENDED JUNE 30. 2002 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-823-00-01 FS-823-01-0 I FS-823-01-02 Further Act10n Not Warranted Previously Reported Corrective Act10n Implemented Previously Reported Corrective Action Implemented SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS ATLA.."ITA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS '{EAR ENDED JUNE 30, 2002 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUNALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS INVENTORIES CAPITAL ASSETS Inadequate Accounting Procedures Finding Control Number FS-823-02-01 The accounting procedures of the College were insufficient to proVJde adequate control over the above control categones The following defic1enc1es were noted as summanzed below I) Cash and Cash Eqmvalents a) Reconc1hng items, such as unposted deposits and checks, noted by the College dunng monthly bank reconc1hallon procedures for the operating, payroll, PELL, and H O.P E accounts were not corrected in a llmely manner Upon reVJew ofthe College's monthly bank reconc11Iat1ons, some reconc1hng items remained uncorrected for up to twelve (12) months b.) The College did not have procedures in place to ensure the bank was notified to stop payments on outstanding checks that were issued and subsequently vmded c ) The College did not have procedures in place to ensure access to thetr check-s1gmng maclune was hm1ted In add!l!on, the acllvauon key was left in the machine The defic1enc1es noted above occurred because of management's failure to implement controls adequate to safeguard cash and cash equivalents The College should estabhsh appropnate procedures and controls to ensure uncorrected items 1dent1fied when reconc1hng bank statements to the general ledger are documented and posted in a llmely manner, to ensure the bank 1s nollfied to stop payments on outstanding checks that were issued and subsequently v01ded, and to ensure access to the check s1gmng maclune 1s restncted to authonzed personnel 2) Revenues/Rece1vables/Rece1pts a) The College did not have procedures in place to ensure that accounts receivable wnteoffs were made in comphance with O C G A Sec. 50-16-18 Our testing revealed that the College made twoJoumal entnes wnting off a total of$146,127 07 in accounts receivable which were not adequately documented or explained -I- ATLAf..'TA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS INVENTORIES CAPITAL ASSETS Inadequate Accountmg Procedures Fmdmg Control Number FS-823-02-01 2) Revenues/Rece1vables/Rece1pts b ) The College did not have procedures m place to perform reconc1hat1ons of the accounts receivable subs1d1ary ledger (BANNER) to the general ledger (Phoemx/PeopleSoft) In add1tlon, the College could not provide documentation venfymg that receipts posted to the subs1d1ary ledger (Banner) are bemg properly recorded m the general ledger (Phoen1x/PeopleSoft) c ) The College did not have effective procedures m place to ensure revenues were recorded m the general ledger ma timely manner. Our testing revealed S247,362 18 of H O P.E. Scholarslup Program receipts had not been properly recognized as revenue m the general ledger An audit adjustment was made to properly reflect revenues m the financial statements d) The College did not have procedures m place to ensure a daily log was mamtained for receipts received by mail. The deficiencies noted above occurred because of management's failure to implement controls adequate to ensure revenues, receivables and receipts were properly documented and recorded m the accountmg records The College should estabhsh appropnate procedures and controls to document accounts receivables wntten off are m comphance with O C.G.A. Sec 50-16-18, to ensure accounts receivable subs1d1ary records are m agreement with the general ledger, to ensure that amounts rece1Ved are properly recorded m the accounting records, and to ensure a detailed log 1s mamtained of all receipts received by mail 3) Expend1tures/L1ab1ht1es/D1sbursements The College did not have procedures m place to venfy receipt ofgoods before the accounts payable department processed vendor payments. -2- ATLANTA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS INVENTORIES CAPITAL ASSETS Inadequate Accountmg Procedures Fmdmg Control Number: FS-823-02-01 3) Expend1tures/L1ab1h1ies/D1sbursements The deficiency noted above occurred because of management's failure to implement adequate controls supportmg disbursement of funds The College should implement controls to ensure documental!on supportmg receipt of goods 1s reVJewed by accounts payable pnor to processmg vendor payments. 4) Inventones The College did not have procedures m place to perform reconc1halions from quarterly bookstore resale mventory counts to the general ledger In add11ion, the resale mventory balance reported on the general ledger had not been adjusted for goods sold Based on testmg performed, an audit adjustment of $857,556 34 was necessary to properly reflect resale mventory for cost of sales m the financial statements The defic1enc1es 1dent1fied above occurred because of management's failure to implement controls adequate to ensure the general ledger accurately reflected resale mventory and cost of goods sold The College should establish appropnate controls to ensure resale mventory records are penod1cally reconciled to the general ledger, and the College should implement controls to ensure mventory and cost of goods sold balances reflected m the general ledger are adjusted to reflect sales activity and physical mventory counts S) Capital Assets The College did not have effecl!ve controls m place to ensure eqmpment mventory Items were properly tagged A test oftlurty-one {31) eqmpment items revealed twenty-eight {28) items did not contain mventory tags nor were assigned mventory numbers 1den11tied on the items The deficiency 1denlified above occurred because of management's failure to implement controls to easily 1den11fy and track equipment mventory items The College should implement procedures to ensure that equipment Items are easily 1denl!fied and tracked through the Capital Assets system -3 - ATLANTA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002 FINANCIAL STATEMEN'T FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Improper Student Receivables Fmdmg Control Number FS-823-02-02 The College disbursed $83,489 02 from the 2002 Pell grant program to students who were mehg1ble to receive the funds As a result, the 2002 Pell Grant program, as presented for audit. reflected a deficit balance An audit adjustment was made to set-up the $83,489 02 overpayments as accounts receivable due from students Th.is deficiency occurred because management failed to estabhsh controls to ensure approval was received from the U S Department Educallon before disbursement of Pell funds In add111on, the College did not perform a reconc1ha11on ofthe Pell disbursement subs1d1ary ledger (BANNER) to the general ledger (Phoen1x/PeopleSoft) The College should take appropnate acllons to secure reimbursement for these over awards. In add11Ion, the College should estabhsh appropnate controls to ensure approval 1s received from the U S Department of Educal!on before Pell funds are disbursed to students and to ensure penod1c reconc1hallon of the Pell disbursement subs1d1ary ledger to the general ledger are performed GENERAL LEDGER Reports Not Reconciled to Accountmg Records Fmdmg Control Number FS-823-02-03 The College's H O.P.E. Scholarship Program reconc1ha11on reports for the fiscal year 2002, which were provided to the Georgia Student Fmance Comm1ss1on, did not reconcile with the accounting records as md1cated below Report Item Cash D1sb~rsed to School Amount Awarded to Students PerHOPE Reconc,hallon 4,326,629 00 4,383,295 00 Per Accounllng Records 4,326,629 00 4,354,617 97 Unreconciled Difference 28,677 03 The unreconciled difference identified above occurred because management failed to reconcile accounting records to H O P E Scholarship Program reconc1hallon reports at year-end Procedures should be estabhshed to ensure that all HO P.E Scholarship Program reconc1hat1on reports are reconciled to the College's formal accounting records -4-