~ STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS ~fto , -RI Vf.LJ . J)L-\ rJCCD-a'-00 I I DEKALB TECHNICAL COLLEGE CLARKSTON, GEORGIA REPORT ON REVIEW OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2001 r< l::c fl:iflf E[D Russell W. Hinton State Auditor DEKALB TECHNICAL COLLEGE - TABLE OF CONTENTS - SECTION I FINANCIAL 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 BALANCE (STATUTORY BASIS) GOVERNMENTAL FUND TYPE 4 C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES BUDGETFUND 5 STATEMENTSOFFUNDSAVAILABLEANDEXPENDITURES COMPARED TO BUDGET BUDGET FUND D "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 6 E "B" LOTTERY FOR EDUCATION 7 F NOTES TO THE FINANCIAL STATEMENTS 8 SUPPLEMENTARY INFORMATION G COMBINING BALANCE SHEET (STATUTORY BASIS) BUDGETFUND 24 H COMBINING STATEMENT OF CHANGES IN FUND BALANCE (STATUTORY BASIS) BUDGET FUND 25 I COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES BUDGET FUND 26 SECTIONil AUDITEE*S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS DEKALB TECHNICAL COLLEGE -TABLE OF CONTENTS- SECTION ID CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RussELL W. HtNTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 2.54 Washington Street. S.W.. Suite 214 Atlanta. Georgia 30334-8400 August 23, 2001 Honorable Roy E. Barnes, Governor Members of the General Assembly of Georgia Members ofthe State Board of Technical and Adult Education Members of the Local Board of Directors and Honorable Paul M. Starnes, President DeKalb Technical College 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 F) of DeKalb Technical College as of and for the year ended June 30, 2001, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute ofCertified Public Accountants. All information included in these financial statements is the representation of the management of DeKalb Technical College. A review consists principally ofinquiries ofCollege personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, 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 op1mon. As described in Note 1, these financial statements were prepared on a prescribed basis ofaccounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis ofaccounting other than accounting principles generally accepted in the United States of America. Based on our review, we are not aware of any 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. 01ARL-6T Our review was made for the purpose of expressing limited assurance that there are 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 (Exhibits G through I) is presented for additional analysis purposes. Such information has been subjected to the inquiries and analytical procedures applied in the review ofthe financial statements and we are not aware of any material modifications which should be made thereto. Respectfully submitted, ?,_.m-w~- 1 ~ell W. Hinton State Auditor RWH:gp 0IARL-6T FINANCIAL STATEMENTS DEKALB TECHNICAL COLLEGE COMBINED BALANCE SHEET /STATUTORY BASIS) ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 2001 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Fixed Assets Equipment Amounts to be Provided for Payment of: Accrued Compensated Absences Capital Lease Commitments GOVERNMENTAL FUND TYPE BUDGET FIDUCIARY FUND TYPE AGENCY $ 739,030.64 $ 99,331.43 $ 112,700.51 383,240.34 $ 211,718.05 $ 495,940.85 $ 211,718.05 Total Assets LIABILITIES AND FUND EQUITY Liabilities Accounts Payable Salaries Payable Deferred Revenue Tuition and Fees Funds Held in Custody for Others Compensated Absences Capital Leases Total Liabilities Fund Equity Investment in General Fixed Assets Fund Balance Reserved Federal Financial Assistance For Continuation of Federal Program For Other For Refund to Georgia Department of Technical and Adult Education - Administrative Central Office Live Work Projects Local Grants and Contracts PriorYearLocalFunds Unreserved Designated Surplus Regular Lottery for Education Total Fund Equity Total Liabilities and Fund Equity See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary lnfonnation. The notes to the financial statements are an integral part of this statement -2- $ 1,234,971.49 $ 311,049.48 $ 190,710.29 138,431.57 65,597.50 $ 311,049.48 $ 394,739.36 $ 311,049.48 $ 75,955.03 4,592.51 42,921.69 14,901.79 2,846.29 346,127.92 308,909.96 43,976.94 $ 840,232.13 $ 1,234,971.49 $ 311,049.48 EXHIBIT"A" ACCOUNT GROUPS GENERAL GENERAL FIXED LONG-TERM ASSETS DEBT TOTAL (Memorandum Only) $ 838,362.07 $ 112,700.51 594,958.39 $ 707,658.90 $ 10,190,367.55 $ 10,190,367.55 $ 987,989.11 $ 17,491.75 $ 1,005,480.86 $ 987,989.11 17 491.75 1,005,480.86 s $ 10,1901367.55 $ 110051480.86 12.7411869.38 $ $ 987,989.11 17,491.75 $ 1,005.480.86 $ 190,710.29 138,431.57 65,597.50 311,049.48 987,989.11 17,491.75 1,711,269.70 $ 10,190,367.55 $ 10,190,367.55 75,955.03 4,592.51 42,921.69 14,901.79 2,846.29 346,127.92 $ 10,190,367.55 308,909.96 43,976.94 $ 11,030,599.68 $ 1011901367.55 $ 110051480.86 $ 12.7411869.38 DEKALB TECHNICAL COLLEGE STATEMENT OF CHANGES IN FUND BALANCE (STATUTORY BASIS) GOVERNMENTAL FUND TYPE YEAR ENDED JUNE 30, 2001 EXHIBIT"B" FUND BALANCE - JULY 1, 2000 Reserved Unreserved Designated Surplus ADDITIONS Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures Exhibit "C" Prior Year's Checks Voided DEDUCTIONS Adjustments to Prior Year's Accounts Receivable Refunds to Grantors Georgia Department of Technical and Adult Education - Administrative Central Office Federal Financial Assistance Reserved Fund Balance Carried Over from Prior Year as Funds Available FUND BALANCE - JUNE 30, 2001 (To Exhibit "A") BUDGET FUND $ 186,989.48 0.00 $ 186,989.48 $ 309,572.61 551,089.67 -108.00 $ 860,554.28 $ 905.78 22,747.01 183,658.84 $ 207,311.63 $ 840,232.13 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. -4- DEKALB TECHNICAL COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES BUDGET FUND YEAR ENDED JUNE 30, 2001 EXHIBIT "C" FUNDS AVAILABLE REVENUES STATE APPROPRIATIONS Allotment from Georgia Department of Technical and Adult Education - Administrative Central Office FEDERAL REVENUES OTHER REVENUES RETAINED Sales and Services Fines and Forfeits Interest and Other Investment Income Rents and Royalties Tuition and Fees Other Sources Total Other Revenues Retained Total Revenues CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance Total Funds Available EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Adult Literacy Grants Job Training Partnership Act Capital Outlay Equipment-Technical Institutes Total Expenditures Excess of Funds Available over Expenditures 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. -5- $ 17,872,114.00 $ 2,658,355.33 $ 1,494,614.07 1,618.00 69,158.12 1,600.00 3,359,765.11 25,618.16 $ 4,952,373.46 $ 25,482,842.79 $ 183,658.84 $ 25,666,501.63 $ 17,638,201.24 5,257,054.67 1,565,587.49 27,100.26 93,606.30 533,862.00 $ 25,115,411.96 5511089.67 $ 25,666,501.63 DEKALB TECHNICAL COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30, 2001 EXHIBIT"D" FUNDS AVAILABLE REVENUES State Appropriations Federal Revenues Other Revenues Retained CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 17,338,252.00 $ 17,338,252.00 $ 2,912,056.17 2,658,355.33 8,713,937.00 4,952,373.46 $ 28,964,245.17 $ 24,948,980.79 $ 0.00 -253,700.84 -3,761,563.54 -4,015,264.38 0.00 183,658.84 183,65~.84 $ 28,964,245.17 $ 25,132,639.63 $ -3,831,605.54 EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Adult Literacy Grants Job Training Partnership Act Capital Outlay $ 18,083,680.32 $ 17,638,201.24 $ 9,124,365.85 5,257,054.67 1,609,539.00 1,565,587.49 47,801.00 27,100.26 98,859.00 93,606.30 445,479.08 3,867,311.18 43,951.51 20,700.74 5,252.70 $ 28,964,245.17 $ 24,581,549.96 $ _ _4_,3__82__,6_9_5_.2_1 Excess of Funds Available over Expenditures $ 551,089.67 $ _ _ _s_s1...o..s..,9,...6.,..7 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. -6- DEKALB TECHNICAL COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BUDGET FUND "B" LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 2001 EXHIBIT"E" FUNDS AVAILABLE REVENUES State Appropriations EXPENDITURES Equipment-Technical Institutes Excess of Funds Available over Expenditures BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) ____ $ 533,862.00 $ 533,862.00 $ 0.00 _..;_..;..;... $ 533,862.00 $ 533,862.00 $_ _ _ _..;o.;_;.o~o $ o.oo $=====o=.o=o 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. -7- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY DeKalb Technical College (formerly DeKalb Technical Institute) is one of thirty-two (32) State supported member colleges of postsecondary education in Georgia which comprise the Georgia Department of Technical and Adult Education, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations ofDeKalb Technical College as a separate reporting entity. The College's Local Board of Directors is composed of nine (9) members serving staggered threeyear terms who are appointed by the State Board ofTechnical and Adult Education. Appropriation of State funds is made to the Georgia Department ofTechnical and Adult Education by the General Assembly of Georgia. The Department's Administrative Central Office determines the amount of State appropriations to be received by DeKalb Technical College. The College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, DeKalb Technical College is considered an organizational unit of the Georgia Department of Technical and Adult Education for financial reporting purposes because of the significance of its legal, operational, and financial relationships as defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards. FUND ACCOUNTING DeKalb Technical College uses funds 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 of Georgia. A fund isan independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account groups are a reporting device used to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. Funds and account groups presented in the accompanying financial statements are as follows: GOVERNMENTAL FUND TYPE BUDGET FUND - The fund used to account for activities and functions as set forth in the Amended Appropriations Act of 2000-2001. This fund also includes operations from various institutional services provided to students, faculty, and/or staffwhich are funded by fees charged to participants that are directly related to, but not necessarily equal to, the cost of service. The Budget Fund is similar in nature to a General Fund as defined in accounting principles generally accepted in the United States of America in that the Budget Fund is used to account for all activities except those required to be accounted for in some other fund. - 8- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT"F" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FUND ACCOUNTING FIDUCIARY FUND TYPE AGENCY FUNDS - The funds used to account for assets held for use by other funds, governments, or individuals. ACCOUNT GROUPS GENERAL FIXED ASSETS - The account group used to account for fixed assets used in governmental fund type operations. Fixedassets 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 costs ofnormal maintenance and repairs that do not add to the value of assets or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life ofassets 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 GOVERNMENTAL FUND TYPE BUDGET FUND The Technical College maintains its Budget Fund on a modified cash basis of accounting. Under this basis of accounting, receivables and revenues are recorded as follows: 1) State receivables and revenues are recorded when State appropriations are allotted to the Technical College by the Georgia Department ofTechnical and Adult Education. 2) For expenditure-driven funding arrangements (grants, charges for services), receivables and revenues are recorded when qualifying expenditures are recorded or when services have been provided. 3) All other revenues are recorded when received in cash. -9- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPE BUDGET FUND Liabilities and expenditures are recorded as follows: 1) When purchase orders or other contractual obligations to procure goods or services have been executed by the Technical College. 2) Expenditures for travel, utilities and other items not requiring purchase orders are recorded when incurred. Prior period adjustments and certain other items are reported as additions to and deductions from fund balance (July 1, 2000) of the Budget Fund in the accompanying financial statements. The modified cash basis ofaccounting is a comprehensive basis ofaccounting other than accounting principles generally accepted in the United States of America. Generally accepted accounting principles require that the Governmental Fund Type of the Technical College be reported on the modified accrual basis ofaccounting. Under the modified accrual basis ofaccounting, revenues are recognized when they become both measurable and available; expenditures are recorded when the related fund liability is incurred, except for certain compensated absences, which are recognized when the obligations are expected to be liquidated with expendable available financial resources; and immaterial prior period adjustments are reported as revenues or expenditures, as appropriate. Contractual terms ofcertain Federal grant agreements received by the College for vocational training services require that grant funds earned be recorded as Federal revenues rather than as revenues from tuition and fees. Accordingly, it is the College's policy to record certain Federal grant funds as Federal revenues and also as other revenues retained with offsetting expenditures for student expenses charged to the other operating expenses expenditure account. This accounting policy results in an overstatement ofboth revenues and expenditures in the financial statements for such Federal grants. This policy is in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but is not consistent with accounting principles generally accepted in the United States of America. FIDUCIARY FUND TYPE AGENCY FUNDS Agency Funds are custodial in nature and do not measure results of operations or have a measurement focus. The modified cash basis of accounting is utilized for recognizing assets and liabilities. -10- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2001 EXHIBIT"F" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUDGET The Georgia Department ofTechnical and Adult Education - Administrative Central Office receives State appropriation allotments and certain Federal funds for the various technical colleges throughout the State. The appropriated budget is adopted at the departmental level and represents appropriations provided by the Amended Appropriations Act of 2000-2001. The budget allocation and disbursement ofthese funds is made to the various technical colleges by the Administrative Central Office. In addition, the technical colleges receive certain Federal funds and other funds directly and include these funds in the budget filed with the Administrative Central Office. CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand and demand deposits with banks and other authorized financial institutions. ACCOUNTS RECEIVABLE Accounts receivable consist ofallotments due from the Georgia Department ofTechnical and Adult Education - Administrative Central Office, reimbursements due :from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available. Accounts receivable (Other) arising from operations are reported at gross value. Based on management's evaluation that amounts uncollectible are not material, no provision has been made for such amounts. INVENTORIES No inventories of supplies are reported in these 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 briefdescription ofthe reserves reflected in the accompanying financial statements: FEDERAL FINANCIAL ASSISTANCE REFUND TO GEORGIA DEPARTMENT OF TECHNICAL AND ADULT EDUCATION ADMINISTRATNE CENTRAL OFFICE DeKalb Technical College receives Federal funds for the Adult Education - State Grant Program, the Employment Service and Job Training Pilots - Demonstration and Research Grant, the Temporary Assistance to Needy Families Grant, the Social Services Block Grant and the Vocational Education - Basic Grants to States - Title II through Georgia Department ofTechnical and Adult Education - Administrative Central Office. As provided by the respective budget allocation to the College, these funds were required to be expended by June 30, 2001. At June 30, 2001, the following programs had unexpended Federal funds which should be refunded to the Administrative Central Office: - 11 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RESERVED FUND BALANCE FEDERAL FINANCIAL ASSISTANCE REFUND TO GEORGIA DEPARTMENT OF TECHNICAL AND ADULTEDUCATIONADMINISTRATNE CENTRAL OFFICE Adult Education State Grant Program Employment Service and Job Training Pilots Demonstration and Research Temporary Assistance to Needy Families Social Services Block Grant Vocational Education - Basic Grants to States - Title II $ 304.58 4,714.25 13,012.28 3,985.99 20,904.59 $ 42,921.69 CONTINUATION OF FEDERAL PROGRAM The residual portion of Federal financial assistance revenues not yet expended or encumbered. This amount is restricted for expenditure in future years. This accounting treatment differs from accounting principles generally accepted in the United States of America in that the unearned portion of Federal financial assistance should be reflected as deferred revenue. LIVE WORK PROJECTS In accordance with the Official Code ofGeorgia Annotated Section 20-4-14(c), the accumulated balance ofunexpended funds derived from student live work projects. This amount is restricted to expenditures for live work projects or for the benefit of instructional programs at the technical college in subsequent fiscal years. PRIOR YEAR LOCAL FUNDS Effective July 1, 1996, DeKalb Technical College became a part of the Georgia Department of Technical and Adult Education. The Official Code of Georgia Annotated Section 20-4-23 provides the College may retain for future operations "...any unexpended nonstate funds that have been collected by, appropriated for, or otherwise earmarked for use by said postsecondary technical school operated by a local board of education or an area board...". These unexpended local funds are available for use in subsequent fiscal years. LOCAL GRANTS AND CONTRACTS The unexpended balance of private grants and contracts which is restricted for expenditure in future years for the specific purposes as designated by the granters. UNRESERVED FUND BALANCE In accordance with accounting practices prescribed or permitted by statutes and regulations of the State ofGeorgia, the Budget Fund's unreserved fund balance is returned to the Georgia Department - 12 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 1: SUMMARY OF SIGNJFICANT ACCOUNTING POLICIES UNRESERVED FUND BALANCE of Technical and Adult Education - Administrative Central Office for remittance to the Office of Treasury and Fiscal Services in the subsequent fiscal year as surplus, as follows: REGULAR - An amount ofunexpended regular appropriations designated for reappropriation by the State in subsequent years. LOTTERY FOR EDUCATION - An amount ofunexpended lottery appropriations designated for future reappropriation by the State for Lottery for Education. COMPENSATED ABSENCES Compensated absences represent obligations ofthe College relating to employees' rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulated annual and compensatory leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the Budget Fund for the current portion of this obligation as this amount will not be liquidated with expendable available financial resources. Funds are provided in the allotment of State funds each year to the College to cover the cost of annual 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 (StatutoryBasis) are captioned M 11 emorandum 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 accounting principles generally accepted in the United States ofAmerica. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation ofthis data. NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the 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 of a surety bond, the depository may pledge as collateral any one or more ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: (1) Bonds, bills, certificates ofindebtedness, notes, or other direct obligations ofthe United States or ofthe State ofGeorgia. - 13 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. (3) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. (4) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia. (5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by 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 I;,oan Mortgage Association, and the Federal National Mortgage Association. (6) Guarantee or insurance of accounts provided by the. Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (which include technical colleges) the option of exempting demand deposits from the collateral requirements. 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, 2001, 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 fair value) held by the College or by its agent in the College's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the College's name. Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized. - 14 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2001 EXHIBIT "F" NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS Cash Deposits Carrying Amount Bank Balances Risk Categories 2 3 $ 837.562,07 $ 2.207.548.) 7 $ 200.000,00 $ 2 007.548. J7 $===0...,,0='=0 NOTE 3: OPERATING LEASES DeKalb Technical College has entered into certain agreements to lease office equipment which are classified as operating leases (leases on assets not recorded on the balance sheet). These leases generally contain provisions that, at the expiration date ofthe original term ofthe lease, the College has the option of renewing the lease on a year-to-year basis. Future minimum lease payments for operating leases as of June 30, 2001, 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 2002 2003 2004 2005 $ 156,840.72 156,840.72 145,901.22 71,780.22 Total Future Minimum Lease Payments $ 5311362.8~ Expenditures for rental ofoffice equipment under operating leases for the year ended June 30, 2001, totaled $82,882.20. NOTE 4: CAPITAL LEASES DeKalb Technical College acquires certain office equipment through multi-year capital leases with varying terms and options. These agreements contain fiscal funding clauses in accordance with Official Code of Georgia Annotated Section 50-5-64 which prohibits the creation of a debt to the State of Georgia for the payment of any sums under such agreements beyond the fiscal year of execution if appropriated funds are not available. If renewal of such agreements is reasonably assured, however, capital leases requiring appropriation by the General Assembly of Georgia are considered noncancellable for financial reporting purposes. - 15 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 4: CAPITAL LEASES As of June 30, 2001, future minimum lease payments under capital leases are as follows: Fiscal Year Ending June 30 2002 2003 $ 14,178.84 4,557.26 Total Future Minimum Lease Payments $ 18,736.10 Less: Amounts Representing Interest 1,244.35 Present Value of Future Minimum Lease Payments $ 17,491.75 NOTE 5: CHANGES IN GENERAL FIXED ASSETS In accordance with the statutory definition ofmoveable personal property as defined in Official Code ofGeorgia 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. The following is a summary of changes of equipment for the General Fixed Assets Account Group during the fiscal year: Balance July 1, 2000 $ 4,229,427.29 Additions Deductions 303,780.51 466,170.00 Adjustment for Unidentified Variance Resulting from Complete Physical Inventory 6,123,329.75 Balance June 30, 2001 $10.190.367.55 NOTE 6: GENERAL LONG-TERM DEBT CHANGES IN GENERAL LONG-TERM DEBT A summary of changes in General Long-Term Debt for the year ended June 30, 2001, follows: - 16 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 200 I EXHIBIT"F" NOTE 6: GENERAL LONG-TERM DEBT CHANGES IN GENERAL LONG-TERM DEBT Balance July 1, 2000 Compensated Absences Capital Leases Total $1,035,603.16 $ 32,550.68 $1,068,153.84 Retroactive Restatement of Prior Year Balances 1,189.83 1,189.83 Balance July I, 2000 Restated $ 1,035,603.16 $ 33,740.51 $ 1,069,343.67 Additions Annual Leave Earned and Utilized (Net) Salaries and Wages Salary-Related Fringe Benefits Deductions -47,432.06 -181.99 16,248.76 -47,432.06 -181.99 16,248.76 Balance June 30, 2001 $ 987,989.11 $ 17,491.75 $ 1,005,480.86 NOTE 7: RISK MANAGEMENT Public Entity Risk Pool The Department of Community Health administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county governments, and local education agencies located with the State ofGeorgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units ofgovernment participating in the plan, and appropriations made by the General Assembly of Georgia. The Department ofCommunity Health has contracted with Blue Cross Blue Shield ofGeorgia to process claims in accordance with the State Employees' Health Benefit Plan as established by the Department of Community Health. Other Risk Management The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia ofmaking and carrying out decisions that will minimize the adverse effects ofaccidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The College, as an organizational unit of the Georgia Department of Technical and Adult Education, is part of the State of Georgia reporting - 17 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2001 EXHIBIT "F" NOTE 7: RISK MANAGEMENT Other Risk Management entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. NOTES: RETIREMENTPLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description DeKalb Technical College participates in the Teachers Retirement System ofGeorgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State ofGeorgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System ofGeorgia issues a separate stand alone financial audit report and a copy may be obtained from the Georgia Department of Audits and Accounts. Funding Policy Employees ofthe College who are covered by TRS are required to pay 5% oftheir gross earnings to TRS. The College makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees as advised by their independent actuary. For fiscal year 2001, the employer contribution rate was 11.29% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2001 100% $ 1,268,569.27 2000 100% $ 1,181,887.08 1999 100% $ 1,201,670.32 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description DeKalb Technical College participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established bythe General Assembly ofGeorgia for the purpose ofproviding retirement allowances for employees ofthe State ofGeorgia. The benefit structure ofERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan - 18 - DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 8: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years ofcreditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. 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 25 years of service regardless ofage. Retirement benefits paid to members are based upon a formula which considers the monthly average ofthe member's highest twenty-four consecutive calendar months ofsalary, the number ofyears of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustmets are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution ofthe member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. In addition, the ERS Board ofTrustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 ofthe Internal Revenue Code (IRC) as a portion ofERS. The purpose ofSRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members ofother state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2001, for employees covered by ERS was $1,617,753.17. The College's total payroll for all employees was $15,603,669.43. Under the old plan, member contributions consist of 6.5% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalfofthe employee. Under the new plan, member contributions consist solely of 1.5% ofannual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2001, the ERS employer contribution rate for the College amounted to 14.75% ofcovered payroll -19- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTE 8: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Funding Policy and included the amounts contributed on behalfofthe employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. Total contributions to the plan made during fiscal year 2001 amounted to $262,897.49, of which $238,630.03 was made by the College and $24,267.46 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2001, financial report which may be obtained through ERS. GEORGIA DEFINED CONTRIBUTION PLAN Plan Description DeKalb Technical College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly ofGeorgia for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and parttime and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees ofthe Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment ofage 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees. Ifa member has less than$ 3,500.00 credited to his/her account, the Board ofTrustees has the option ofrequiring a lump sum distribution to the member in lieu ofmaking periodic payments. Upon the death ofa member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. The Employees' Retirement System ofGeorgia issues a financial report each fiscal year which may be obtained through ERS. Contributions and Vesting Member contributions are seven and one-halfpercent (7.5%) ofgross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount ofthe member's account is refundable upon request by the member. The College's payroll for the year ended June 30, 2001, for employees covered by GDCP was $1,857,618.60. The College's total payroll for all employees was $15,603,669.43. -20- DEKALB TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2001 EXHIBIT "F" NOTES: RETIREMENTPLANS GEORGIA DEFINED CONTRIBUTION PLAN Contributions and Vesting Total contributions made by employees during fiscal year 2001 amounted to $139,322.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. NOTE 9: LEAVE POLICIES Employees earn annual leave ranging from one and one-quarter days to one and three-quarter days each month depending upon the employees' length of continuous State service with a maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. See Note 1 - Compensated Absences Employees earn one and one-quarter days ofsick 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. 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 of Georgia. NOTEl0: 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 ofexpenditures which may be disallowed by the grantor cannot be determined at this time although the College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against DeKalb Technical College (an organizational unit of the Department of Technical and Adult Education), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2001. - 21 - SUPPLEMENTARY INFORMATION -23 - DEKALB TECHNICAL COLLEGE COMBINING BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2001 EXHIBIT "G" ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION "B'' LOTTERY FOR EDUCATION TOTAL $ 680,433.47 $ 58,597.17 $ 739,030.64 $ 112,700.51 383,240.34 $ 495,940.85 $ 112,700.51 383,240.34 $ 495,940.85 Total Assets $ 1,176,374.32 $ 58,597.17 $ 1,234,971.49 LIABILITIES AND FUND EQUITY Liabilities Accounts Payable $ Salaries Payable Deferred Revenue Tuition and Fees Total Liabilities $ Fund Equity Fund Balance Reserved Federal Financial Assistance For Continuation of Federal Program $ For Other For Refund to Georgia Department of Technical and Adult Education - Administrative Central Office Live Work Projects Local Grants and Contracts PriorYearLocalFunds Unreserved Designated Surplus Regular Lottery for Education Total Fund Equity $ 176,090.06 $ 138,431.57 65,597.50 380,119.13 $ 14,620.23 $ 190;710.29 138,431.57 65,597.50 14,620.23 $ 394,739.36 75,955.03 4,592.51 42,921.69 14,901.79 2,846.29 346,127.92 $ 75,955.03 4,592.51 42,921.69 14,901.79 2,846.29 346,127.92 308,909.96 $ 796,255.19 $ 43,976.94 308,909.96 43,976.94 43,976.94 $ 840,232.13 Total Liabilities and Fund Equity $ 1,176,374.32 $ 58,597.17 $ 1,234,971.49 See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. - 24- DEKALB TECHNICAL COLLEGE COMBINING STATEMENT OF CHANGES IN FUND BALANCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2001 EXHIBIT "H" FUND BALANCE - JULY 1, 2000 Reserved Unreserved Designated Surplus ADDITIONS Adjustments to Prior Year's Accounts Payable Excess of Funds Available over Expenditures Exhibit "I" Prior Year's Checks Voided DEDUCTIONS Adjustments to Prior Year's Accounts Receivable Refunds to Grantors Georgia Department of Technical and Adult Education - Administrative Central Office Federal Financial Assistance Reserved Fund Balance Carried Over from Prior Year as Funds Available FUND BALANCE - JUNE 30, 2001 (To Exhibit "G") "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION "B" LOTTERY FOR EDUCATION TOTAL $ 186,989.48 0.00 $ $ 186,989.48 $ $ 186,989.48 0.00 0.00 0.00 $ 186,989.48 $ 265,595.67 $ 43,976.94 $ 309,572.61 551,089.67 -108.00 551,089.67 -108.00 $ 816,577.34 $ 43,976.94 $ 860,554.28 $ 905.78 $ 0.00 $ 905.78 22,747.01 183,658.84 $ 207,311.63 $ 22,747.01 183,658.84 0.00 $ 207,311.63 $ 796,255.19 $ 43,976.94 $ 840,232.13 See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary lnfonnation. -25- DEKALB TECHNICAL COLLEGE COMBINING STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES BUDGET FUND YEAR ENDED JUNE 30. 2001 EXHIBIT"!" FUNDS AVAILABLE REVENUES STATE APPROPRIATIONS Allotment from Georgia Department of Technical and Adult Education - Administrative Central Office FEDERAL REVENUES OTHER REVENUES RETAINED Sales and Services Fines and Forfeits Interest and Other Investment Income Rents and Royalties Tuition and Fees Other Sources Total Other Revenues Retained Total Revenues CARRY-OVER FBOM PRIOR YE8R Transfer from Reserved Fund Balance HA" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION a LOTTERY FOR EDUCATION TOTAL $ 17,338,252.00 $ 533,862.00 $ 17,872,114.00 $ 2,658,355.33 $ 2,658,355.33 $ 1,494,614.07 $ 1,494,614.07 1,618.00 1,618.00 69,158.12 69,158.12 1,600.00 1,690.00 3,359,765.11 3,359,765.11 25.618.16 25,618.16 $ 4,952,373.46 $ 4,952,373.46 $ 24,948,980.79 $ 533,862.00 $ 25,482,842.79 $ 183,658.84 $ 183,658.84 Total Funds Available $ 25,132,639.63 $ 533,862.00 $ 25,666,501.63 EXPENDITURES Personal Services-Institutions Operating Expenses-Institutions Adult Literacy Grants Job Training Partnership Act Capital Outlay Equipment-Technical Institutes Total Expenditures Excess of Funds Available over Expenditures $ 17,638,201.24 $ 17,638,201.24 5,257,054.67 5,257,054.67 1,565,587.49 1,565,587.49 27,100.26 27,100.26 93,606.30 93,606.30 $ 533,862.00 533,862.00 $ 24,581,549.96 $ 533,862.00 $ 25,115,411.96 551,089.67 0.00 551,089.67 $ 25.132,639.63 $ See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. -26- 533.862.00 $ 25,666,501.63 SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS DEKALB TECHNICAL COLLEGE AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 2001 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-830-98-02 FS-830-99-01 FS-830-00-01 Further Action Not Warranted Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in the Operation ofProperty Management System Finding Control Number: FS-830-00-01 A physical inventory was completed by an external company in June, 2001. The local inventory records reflect all acquisitions to date, including fiscal year 2001. All assets acquired through capital lease agreements have been added to the inventory. Procedures are in place to ensure that all equipment acquisitions are added to the inventory in a timely manner. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-830-98-01 Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED OR UNALLOWED Improper Expenditures for Financial Aid Services Questioned Costs: $31,480.04 Finding Control Number: FA-830-98-01 Questioned costs have not yet been resolved. A revised use ofPerkins funds for allowable activities is being used for the current year. SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS DEKALB TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FS-830-01-01 Our examination of the College's property records revealed the following deficiencies at June 30, 2001: 1. Equipment additions of$19,156.00 as shown in the Property Management System could not be reconciled to the related equipment expenditures of $303,780.51 shown in the general ledger accounts. 2. The Technical College could not identify or provide supporting documentation for equipment deletions of$466,l 70.00 as shown in the Property Management System. During the year under review, DeKalb Technical College hired an outside firm to perform a complete physical inventory of equipment. An adjustment of$6,123,329.75 was necessary to reconcile the variance between the Property Management System and the actual physical inventory of $10,190,367.55. DeKalb Technical College is required to maintain equipment inventories in accordance with provisions ofState laws and regulations. The discrepancies identified were caused by the College's failure to follow guidelines for maintaining equipment inventories. DeKalb Technical College should establish appropriate procedures to ensure that equipment inventories are maintained in accordance with State laws and regulations.