Review report, state of Georgia, State Board of Workers' Compensation, year ended June 30, 1994

GA A800
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STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET ATLANTA, GEORGIA 30334

REVIEW REPORT STATE OF GEORGIA STATE BOARD OF WORKERS' COMPENSATION YEAR ENDED JUNE 30, 1994

STATE BOARD OF WORKERS' COMPENSATION - 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)

ALLFUNDTYPESANDACCOUNTGROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPES

5

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

6

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

8

E STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS

STATE REVENUE COLLECTIONS FUND

9

F NOTES TO THE FINANCIAL STATEMENTS

10

SUPPLEMENTARY INFORMATION

G STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

FIDUCIARY FUND TYPE - AGENCY FUND

20

SCHEDULES

I SCHEDULE OF APPROVED BUDGET

21

2 CASH AND CASH EQUIVALENTS

22

3 SCHEDULE OF OTHER OPERATING EXPENSES

23

SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS

SECTION I FINANCIAL

CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174
TAX RATIO (404) 656-0494

~epartmeut of J\uhits
254 WASHINGTON STREET, SW ROOM 214
t-thmht, eorgia 30334-8400
August 24, 1994

FINANCIAL AUDITS (404) 656-2180
PROGRAM AUDITS (404) 656-2006

Honorable Zell Miller, Governor Members of the General Assembly of Georgia
and Members of the State Board ofWorkers' Compensation
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 the State Board of Workers' Compensation as of and for the year ended June 30, 1994, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. As described in Note 1, these financial statements were prepared on a prescribed basis of accounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis. of accounting other than generally accepted accounting principles. All information included in these financial statements is the representation of the management of the State Board of Workers' Compensation.
A review consists principally of inquiries of agency personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, with the exception ofthe matter described in the following paragraph, 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 of accounting described in Note 1.
As more fully discussed in Section II, Findings and Improper or Questioned Costs, material discrepancies were noted in the equipment inventory records ofthe State Board ofWorkers' Compensation. Equipment inventory comprises the General Fixed Assets Account Group. We were unable to determine the effects these discrepancies may have on the financial statements.

94ARL-5

Our review was made for the purpose ofexpressing limited assurance that there were no material modifications that should be made to the financial statements in order for them to be in conformity with the basis of accounting described in Note 1. The accompanying supplementary information (Exhibit G and Schedules 1 through 3) is presented only for supplementary analysis purposes. Such information has been subjected to the inquiries and analytical procedures applied in the review of the financial statements and we are not aware of any material modifications that should be made thereto.
Respectfully submitted,

CLV:gp 94ARL-5

~._,,. / )~..._,<.;
Claude L. Vickers State Auditor

FINANCIAL STATEMENTS -I-

STATE BOARD OF WORKERS' COMPENSATION COMBINED BALANCE SHEET (STATUTORY BASIS)
ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30 1 1994

ASSETS
Cash and Cash Equivalents (See Schedule)
Accounts Receivable State Appropriation
Prepaid Items Fixed Assets
Equipment Amount to be Provided for Payment of
Accrued Compensated Absences
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Funds Held for Others Compensated Absences
Total Liabilities
Fund Equity Investment in General Fixed Assets Fund Balances Reserved State Revenue Collections Fund Unreserved Designated Surplus
Total Fund Equity
Total Liabilities and Fund Equity

GOVERNMENTAL FUND TYPES

----------------------------

STATE

REVENUE

BUDGET

COLLECTIONS

-----------

$ 153,796.46 $

0.00

6,984.46 0.00

------------- -------------

$ 160,780.92 $

0.00

============= =============

$ 123,504.63 $ 123,504.63

$

0.00

$ 37,276.29

$ 37,276.29 $

0.00

$ 160,780.92 $

0.00

============= =============

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.
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EXHIBIT "A"

FIDUCIARY FUND TYPE
AGENCY

ACCOUNT GROUPS

GENERAL FIXED
ASSETS

GENERAL LONG-TERM
DEBT

TOTALS (Memorandum Only)
JUNE 30, 1994 JUNE 30, 1993

$ 129,233.64

$ 283,030.10$ 215,556.62

6,984.46 0.00

30,246.02 3,000.00

$ 552,733.36

552,733.36

507,146.03

$ 584,134.60

584,134.60

556,868.12

$ 129,233.64 $ 552,733.36 $ 584,134.60$ 1,426,882.52 $1,312,816.79

$ 129,233.6-4
-------------
$ 129,233.64
-------------

$ 123,504.63 $ 70,342.91

129,233.64

131,185.74

$ 584,134.60

584,134.60

556,868.12

------------- ------------- -------------

$ 584,134.60 $ 836,872.87 $ 758,396.77
------------- ------------- -------------

$ 552,733.36

$ 552,733.36 $ 507,146.03

0.00

0.00

-------------
$ 552,733.36
-------------

37,276.29

47,273.99

------------- -------------

$ 590,009.65
-------------

$ ----5-5-4-,4--2-0-.0--2

$ 129,233.64 $ 552,733.36 $ 584,134.60 $ 1,426,882.52 $ 1,312,816.79
------------- ------------- ============= ============= =============

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STATE BOARD OF WORKERS' COMPENSATION COMBINED STATEMENT OF CHANGES IN FUND BALANCES (STATUTORY BASIS)
GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 1994

EXHIBIT "B"

BUDGET

STATE REVENUE COLLECTIONS

TOTALS (Memorandum Only)
YEAR ENDED ---------------------------JUNE 30, 1994 JUNE 30, 1993

FUND BALANCES - JULY 1

Reserved Un-reserved
Designated Surplus
ADDITIONS

$

0.00 $

0.00 $

0.00

$ 47,273.99

47,273.99

65,584.35

------------- ------------- ------------- -------------

$ 47,273.99
-------------

$

0.00

-------------

$ 47,273.99
-------------

$ 65,584.35
-------------

Adjustments to Prior Year's Accounts

Payable

$

0.00

$

0.00 $

103.00

Cash Receipts for the Year

Exhibit "E"

$ 9,349,211.53 9,349,211.53 9,071,326.29

Excess of Funds Available over Expenditures

Exhibit "C"

1,035,585.37

1,035,585.37 1,047,170.99

Reimbursement of Prior Year's Expenditures

1,690.92
-------------

-------------

1,690.92
-------------

0.00
-------------

$-1--,0-3--7-,2-7--6-.2--9

$ 9,349,211.53
-------------

$10,386,487.82
-------------

$10,118,600.28
-------------

DEDUCTIONS

Unreserved Fund Balance (Surplus) Returned to Office of Treasury and
Fiscal Services Year Ended June 30, 1992
Year Ended June 30, 1993 Year Ended June 30, 1994 Cash Disbursements for the Year Exhibit "E"

$

0.00

47,273.99

1,000,000.00

$

0.00 $ 65,584.35

47,273.99 1,000,000.00

1,000,000.00

0.00

$ 9,349,211.53 9,349,211.53 9,071,326.29
------------- ------------- ------------- -------------

$1,047,273.99 $ 9,349,211.53 $10,396,485.52 $10,136,910.64

FUND BALANCES - JUNE 30

(To Exhibit "A")

$ 37,276.29 $

0.00 $ 37,276.29 $ 47,273.99

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.
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STATE BOARD OF WORKERS' COMPENSATION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND
YEAR ENDED JUNE 30, 1994

EXHIBIT "C" Page 1

FUNDS AVAILABLE
REVENUES
STATE APPROPRIATION General Appropriation Amended Appropriation
Less: Lapsed Funds
Total State Appropriation
OTHER REVENUES RETAINED Application Fees Drug-Free Workplace Certificates Contract Subsequent Injury Trust Fund Sales Annual Reports Forms on Disk Manuals Photocopies Physician's Fee Schedules Transfer from Agency Funds Training Fund Excess Accumulation of Funds Received for Conferences
Total Other Revenues Retained

TOTALS YEAR ENDED JUNE 30. 1994 JUNE 30. 1993

$ 9,758,103.00 $ 9,392,687.00

0.00

-48.945.00

$ 9,758,103.00 $ 9,343,742.00

0.00

25 1 000.00

$ 9,758,103.00 $ 9,318,742.00

$

7,415.00 $

0.00

16,333.00

16,333.00

115. 00 5,012.00
0.00
141,524.26 28,079.04

0.00 0.00 981. 00 140,451.29 26,740.00

141 1 1io.oo

158,500.QQ

$ 339,598.30 $ 343,005.29

Total Funds Available

$1010971701.30 $ 9.6611747.29

EXPENDITURES
PERSONAL SERVICES
Salaries and Wages Employer's Contributions for:
F.I.C.A. Retirement Health Insurance Personal Liability Insurance Unemployment Compensation Insurance Workers' Compensation Insurance Assessments by Merit System
REGULAR OPERATING EXPENSES
Motor Vehicle Expenses Supplies and Materials Repairs and Maintenance Rents (Other than Real Estate) Insurance and Bonding

$ 5,030,905.05 $ 4,866,774.86

351,989.54 804,063.24
628,863.13 16,920.00 4,896.00 88,380.00
13 .381.36

341,647.47 771,831.14
607,896.00 11,371.00 2,871.00 45,615.00 14,726.76

$ 6,939,398.32 $ 6,662,733.23

$

986.06 $

1,017.85

234,663.09

249,725.03

26,386.56

19,704.47

1,010.00

2,724.25

1,683.00

l,BlS.00

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.
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STATE BOARD OF WORKERS' COMPENSATION STAtEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND
.YEAR ENDED JUNE 30. 1994

EXHIBIT "C" Page 2

EXPENDITURES REGULAR OPERATING EXPENSES
Other Operating Expenses (See Schedule) Duplicating and Rapid Copy Publications and Printing
TRAVEL EQUIPMENT
Equipment Purchases Rental of Equipment
COMPUTER CHARGES Other Costs Supplies and Materials Repairs and Maintenance Other Operating Expenses (See Schedule) Software Equipment Equipment Purchases Computer Billings, DOAS
REAL ESTATE RENTALS TELECOMMUNICATIONS PER DIEM, FEES AND CONTRACTS
Per Diem and Fees Contracts
Total Expenditures Excess of Funds Available over Expenditures

TOTALS YEAR ENDED JUNE 30 1 1994 JUNE 30. 1993

$ 26,221.42 $ 19,827.24

6,803.98

7,575.18

59,353.37

76.269.6~

$ 357,107.48 $ 378,658.64

$ 60,705.95 $ 61,670.06

$ 118,732.37 $ 3,294.50
$ 122,026.87 $

10,768.28 3,331.96
14,100.24

$

3,054.92 $

7,145.35

220.00

1,785.50

25,971.98 267,974.23
$___3_0..6...,..1""5""1' .98 $

$_...._9."5"-1'-.,:1:..0:.:0.10 $ $___1_0..4....,..0""2""8' .12 $

9,188.88 20,169.88
1,370.00 2,760.00
79,143.26 144,418.93
257,050.95
922,458.10
106,725.63

$ 219,719.11 $ 211,179.45

1,878.00

0.00

$ 221.597 .11 $ 211,179.45

$ 9, 062, 115. 93 $ 8,614,576.30

1,035,585.37 1,047,170.99

$10.0971701.30 $ 9.6611747.29

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.
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STATE BOARD OF WORKERS' COMPENSATION STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30. 1994

EXHIBIT "D"

FUNDS AVAILABLE REVENUES
State Appropriation Other Revenues Retained
EXPENDITURES Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Payments to State Treasury
Excess of Funds Available over Expenditures

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$9,758,103.00$ 9,758,103.00$

331,011.00

339,598.30

0.00 8,587.30

$10,089,114.00 $10,097,701.30 $ 8,587.30

$ 6,916,982.00 $ 6,939,398.32 $ -22,416.32

359,620.00

357,107.48

2,512.52

67,000.00

60,705.95

6,294.05

124,320.00

122,026.87

2,293.13

314,073.00

306,151.98

7,921.02

949,619.00

951,100.10

-1,481.10

108,000.00

104,028.12

3,971.88

249,500.00

221,597.11

27,902.89

1,000,000.00

0.00 1,000,000.00

------------- ------------- -------------

$10,089,114.00 $ 9,062,115.93 $1,026,998.07

$1,035,585.37 $1,035,585.37
============= =============

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.
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STATE BOARD OF WORKERS' COMPENSATION STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
STATE REVENUE COLLECTIONS FUND YEAR ENDED JUNE 30 1 1994

STATE REVENUE COLLECTIONS
Earnings Protection Services Assessments for Administration of Workers' Compensation Act Insurance Companies - Insurers Self-Insured Employers
Total Cash Receipts
CASH AND CASH EQUIVALENTS - JULY 1, 1993

CASH RECEIPTS

DISBURSEMENTS TRANSFERS
To Office of Treasury and Fiscal Services CASH AND CASH EQUIVALENTS - JUNE 30, 1994

EXHIBIT "E"
$ 5,522,204.97 3,827,006.56
$ 9,349,211.53 0.00
$ 9,349,211.53
$ 9,349,211.53 0.00
$ 9,349,211.53

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.
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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXHIBIT "F"

NOTE I: SUMlvfARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The State Board of Workers' Compensation, an organizational unit of the State of Georgia, is part of the executive branch of the government of the State of Georgia. The Board enforces the provisions of the
Workers' Compensation Act. In doing so, it receives claims for compensation, assigns claims to administrative law judges, and reviews and amends compensation awards. The State Board ofWorkers' Compensation is composed ofthree (3) members who are appointed by the Governor with the advice and consent of the Senate o~ the General Assembly of Georgia.
The State Board ofWorkers' Compensatipn does not have authority to determine the amount of funding it will receive from the State of Georgia for any given fiscal year. Such authority is vested in the General Assembly of Georgia. The Board also does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the State Board of Workers' Compensation is included within the State ofGeorgia reporting entity for financial reporting purposes because of the significance of its legal, operational and financial relationships with the State ofGeorgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The State Board ofWorkers' Compensation uses funds and account groups to report on its financial position and the results of its operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. An account group, on the other hand, is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. Funds and account groups presented in the accompanying financial statements are as follows:
GOVERNMENTAL FUN:O TYPES
BUDGET FUND - The fund used to account for activities and functions as set forth in the Amended Appropriations Act of 1993-1994. The Budget Fund is similar in nature to a General Fund as identified in generally accepted accounting principles in that the Budget Fund is used to account for all activities except those required to be accounted for in some other fund.
STATE REVENUE COLLECTIONS FUND - The fund used to account for the collection of specific revenues ofthe State of Georgia as provided by statute or administrative action and the subsequent transfer of such funds to the Office of Treasury and Fiscal Services. This presentation differs from generally accepted accounting principles in that such activity should be included in the General Fund of the governmental organization.

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXHIBIT "F"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
FIDUCIARY FUND TYPE
AGENCY FUND - The fund 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. Fixed assets purchased are recorded at historical cost. 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:
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 MEASUREMENT FOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds should be accounted for using the current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues) and decreases (i.e., expenditures) in net current assets.
GOVERNMENTAL FUND TYPES BUDGET FUND
Except as disclosed in the following paragraphs, units of government of the State of Georgia record their Budget Fund revenues and expenditures in accordance with the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Revenues that are accrued include primarily State appropriations and certain amounts earned under operating agreements with other parties. Further, the modified accrual basis of accounting calls for expenditures, other than accrued interest of general long-term debt, to be recorded when the related fund liability is incurred.
Contractual obligations for services which have not been performed and for goods which have not been delivered at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. The recognition of encumbrances as expenditures and liabilities is in conformity with
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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXIHBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPES BUDGET FUND
accounting practices prescribed or permitted by statutes and regulations of the State ofGeorgia, but is not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation of fund balance.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances ofthe Budget Fund in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures.
STATE REVENUE COLLECTIONS FUND The State Revenue Collections Fund is maintained on the Cash Receipts and Disbursements basis of accounting as prescribed or permitted by statutes and regulations of the State of Georgia. This basis of accounting is defined as ,that method of accounting in which certain revenue and the related assets are recognized when received rather than when earned, and certain expenses are recognized when paid rather than when the obligation is incurred. The State Revenue Collections Fund, which should be included in the General Fund in accordance with generally accepted accounting principles, should be maintained on the modified accrual basis of accounting.
FIDUCIARY FUND TYPE AGENCY FUND
The Agency Fund is custodial in nature in that assets are equally offset by liabilities to other funds, governmental units, or individuals. The modified accrual basis of accounting is utilized for recognizing assets and liabilities.
BUDGET Appropriation allotments to the State Board ofWorkers' Compensation are on the basis of a budget submitted by the Board and approved by the Legislature and the Governor. The budget is compiled in the same manner as all State departments and expenditures are classified by budget unit object classes as provided in Act No. 608 of Georgia Laws 1993 (as approved April 28, 1993) and amended by Act No. 622 of Georgia Laws 1994 (as approved February 8, 1994), which is an appropriated budget and is referred to in these notes as the Amended Appropriations Act of 1993-1994.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of demand deposits with banks.

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES No inventories of supplies are reported in the current financial statements. Expendable supplies are recorded as expenditures at the time of purchase.
COMPENSATED ABSENCES Compensated absences represent obligations of the Board relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount will not be liquidated with expendable available financial resources. Funds are provided in the appropriation of funds each year to the Board 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 Statements (Statutory Basis) are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results ofoperations or changes in financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
COMPARATIVE DATA Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the Board's financial position and operations. However, comparative data have not been presented in all statements because their inclusion would make certain statements unduly complex and difficult to understand.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of the State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(1) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia.
(2) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe State of Georgia.
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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXHIBIT "F"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (3) Bonds ofany public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.

(4) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

(5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, and debt obligations issued by the Federal Land Banlc, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

(6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

As authorized in the Official Code of Georgia Annqtated Section 50-17-53, the State Depository Board has adopted policies which allow agencies ofthe State of Georgia 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. These bank balances are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk.

Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the Board or by its agent in the Board's name.

Category 2 - Amounts collateralized with securities (at market value) held by the financial institution's trust department or agent in the Board's name.

Category 3 - Amounts collateralized with securities (at market value) held by the financial institution or by its trust department or agent, but not in the Board's name, and amounts uncollateralized.

Carrying Amount

Bank Balance

Risk Categories

2

3

Cash Deposits

$ 283 030 JO $ 475 889 03 $ 100.000 00 $==~0.00g $ 375 889 03

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXHIBIT "F"

NOTE 3: OPERATINGLEASES

The State Board of Workers' Compensation has entered into certain agreements to lease real property and ' equipment which are classified as operating leases. These leases generally contain provisions that, at the expiration date ofthe original term of the lease, the Board has the option of renewing the lease on a year-toyear basis. Future minimum commitments for operating leases as ofJune 30, 1994, 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

1995

$ 963,679.92

Expenditures for rental of real property and equipment under operating leases for the year ended June 30, 1994, totaled $955,404.60.

NOTE 4: CHANGES IN GENERAL FIXED ASSETS

In accordance with the statutory definition of moveable personal property as defined in Official Code of

Georgia Annotated Section 50-16-161, only those items with an acquisition cost of$1,000.00 or greater are

reflected in the General Fixed Assets Account Group.



The following is a summary of changes of equipment in the General Fixed Assets Account Group during the fiscal year:

Balance July 1, 1993

$ 507,146.03

Additions Deductions

99,872.13 54,284.80

Balance June 30, 1994

$ 552,733.36

NOTE 5: GENERALLONG-TERMDEBT

CHANGES IN GENERAL LONG-TERM DEBT During the year ended June 30, 1994, the following changes occurred in the compensated absences liability reported in the General Long-Term Debt Account Group:

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXIIlBIT "F"

NOTE 5: GENERAL LONG-TERM DEBT

CHANGES IN GENERAL LONG-TERM DEBT Balance July 1, 1993

$ 556,868.12

Additions Annual Leave Earned and Utilized (Net) Salaries Salary Related Fringe Benefits(*)

25,180.60 2,085.88

Balance June 30, 1994

$ 584,134.60

(*) Includes related fringe benefits applicable to compensated absences at July 1, 1993.

NOTE 6: DEFERRED COMPENSATION PLAN

The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees of the State of Georgia and county health departments, permits such employees to defer a portion of their salary until future years. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property or rights ofthe State of Georgia subject only to the claims ofthe State's general creditors. Participant's rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value ofthe deferred account of each participant. Financial information relative to the plan is presented in the financial report of the State Personnel Board - Merit System of Personnel Administration for the year ended June 30, 1994.

NOTE 7: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA The State Board of Workers' Compensation participates in the Employees' Retirement System of Georgia, a single-employer, defined benefit pension plan1 The Employees' Retirement System of Georgia was established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees ofthe State of Georgia. The Retirement System is funded through a combination of employee and employer contributions. Employees are required to contribute a graduated percentage of annual compensation. Employer contributions are for a specified percentage of active member payroll determined annually by an actuarial valuation. During the year ended June 30, 1994, the Board contributed $804,063.24 to the Employees' Retirement System of Georgia. Participation in the Retirement System is not segregated by employee groups ofindividual governmental units and the Board has no further liability under the retirement system other than future employer contributions as established for each fiscal year. Information relative to the plan description, funding status and historical trends is presented in the financial report of the Employees' Retirement System of Georgia for the year ended June 30, 1994.

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXIIlBIT "F"

NOTE 7: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN The State ofGeorgia also provides retirement coverage for temporary, seasonal, and part-time employees who are not eligible for membership in the Employees' Retirement System of Georgia referred to above through a single-employer defined contribution plan. The Georgia Defined Contribution Plan was established by the General Assembly of Georgia and is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Covered employees are required to contribute 7.5% of their gross salary, with no matching contribution by the employer. A member who terminates employment may apply for a refund of contributions and interest. Benefits are based solely on the amount contributed by the employee plus investment earnings. Upon discretion ofthe Board ofTrustees, members who leave employment with less than $3,500.00 credited to their account may be required to make a lump-sum withdrawal. Members are eligible to retire at the age of65 with the option ofreceiving a periodic payment based on mortality tables and interest accumulation as adopted by the Board of Trustees of the Employees' Retirement System of Georgia. Information relative to the plan description and funding status is presented in the financial report of the Employees' Retirement System of Georgia for the year ended June 30, 1994.
NOTE 8: LEAVE POLICIES
Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employees' length ofcontinuous State service with a maximum accumulation of forty five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. See Note 1 - Compensated Absences
Certain employees who retire with one hundred and twenty days or more of forfeited annual and sick leave
are entitled to additional service credit in the Employees' Retirement System of Georgia.
NOTE 9: CONTINGENCIES
Litigation, claims and assessments filed against the State Board of Workers' Compensation, if any, are generally considered to be actions against the State of Georgia. Pursuant to the Official Code of Georgia Annotated, the Department of Administrative Services maintains a program of purchased insurance and selfinsurance which provides coverage for such litigation, claims and assessments. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1994.

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STATE BOARD OF WORKERS' COMPENSATION NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1994

EXIIlBIT "F"

NOTE 10: BONDING INFORMATION
All employees of the State Board of Workers' Compensation are bonded under a Public Employees Blanket Bond written by Employers Insurance of Wausau, their Bond No. 1450-00-110723, on which the premium was paid to October 1, 1994. Under this agreement the Public Employee Dishonesty Coverage insures the Board to a maximum of $1,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees. The Faithful Performance of Duty Coverage insures the Board to a maximum of $100,000.00 against loss sustained from failure ofits employees to perform faithfully their duties or to account properly for all monies and property received by virtue of their position or employment.
All employees of the State Board of Workers' Compensation are also bonded under a Commercial Crime Policy written by the United States Fire Insurance Company, their Policy No. 626 011675 2, on which the premium was paid to October 1, 1994. Under this additional public employee dishonesty coverage, the policy insures the Board to a maximum of$4,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees.

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SUPPLEMENTARY INFORMATION - 19 -

FUND Training Fund

STATE BOARD OF WORKERS' COMPENSATION STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
FIDUCIARY FUND TYPE - AGENCY FUND YEAR ENDED JUNE 30, 1994

EXHIBIT "G"

ASSETS/ LIABILITIES JULY 1, 1993

ADDITIONS

DELETIONS

ASSETS/ LIABILITIES JUNE 30, 1994

$ 131,185.74$ 250,159.00 $ 252,111 ..10 $ 129,233.64
-=====-=====- ============= ============= =============

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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STATE BOARD OF WORKERS' COMPENSATION SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30, 1994

SCHEDULE "1"

FUNDS AVAILABLE
---------------
REVENUES
--------
State Appropriation Other Revenues Retained
EXPENDITURES
Personal Services Regular Operating Expenses Travel Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts Payments to State Treasury

ORIGINAL

BUDGET

APPROPRIATION ADJUSTMENTS

TOTAL

------------- -----------

$ 9,75B,103.00

$ 9, 7SB, 103. 00

189,891.00 $ 141,120.00

331,011.00

------------- ------------- -------------

$ 9,947,994.00 $ 141,120.00 $10,089,114.00

$ 6,916,982.00

$ 6,916,982.00

309,620.00 $ 50,000.00

359,620.00

62,000.00

5,000.00

67,000.00

9,200.00

115,120.00

124,320.00

314,073.00

314,073.00

938,619.00

11,000.00

949,619.00

125,000.00

-17,000.00

108,000.00

272,500.00

-23,000.00

249,500.00

1,000,000.00

1,000,000.00

------------- ------------- -------------

$9,947,994.00$ 141,120.00 $10,089,114.00

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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STAT{ BOARD OF WORKERS' COMPENSATION ' CASH ANO CASH EQUIVALENTS JUNE 30 1 1994
NONINTEREST BEARING ACCOUNTS
Wachovia Bank of Georgia, Atlanta, Georgia

SCHEDULE "2" $ 283,030.10

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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STATE BOARD OF WORKERS' COMPENSATION SCHEDULE OF OTHER OPERATING EXPENSES
YEAR ENDED JUNE 30, 1994
REGULAR OPERATING EXPENSES Cleaning Services Court Reporter Services and Transcripts D.O.A.S. Handling Charges Freight, Express and Storage Identification Cards Key Duplication Legal Advertising Photographic Services Registration Fees Relocation Expenses Subscription and Dues
COMPUTER CHARGES Subscriptions and Dues

SCHEDULE "3"

$

195.00

100.55

15.00

894.72

24.00

24.00

86.66

630.00

5,669.50

3,096.08

15,485.91
-------------

$ 26,221.42

$

220.00

See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information.
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SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS

STATE BOARD OF WORKERS' COMPENSATION SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS
YEAR ENDED JUNE 30, 1994
CURRENT YEAR
BUDGET PREPARATION/EXECUTION Overexpenditure of Budget Unit Common Object Classes Financial Statements Audit Control Number 490-94-01
The total approved budget for the State Board of Workers' Compensation provided for expenditures totaling $10,089,114.00. A comparison of anticipated funds available and budgeted expenditures to actual funds available and expenditures by object class indicates that the total expenditures for the common object classes as defined in Section 78 of the Amended Appropriations Act of 1993-1994 were overspent in the amount of $904.82. This overexpenditure is in violation of Section 78 ofthe Amended Appropriations Act of 1993-1994.
The State Board of Workers' Compensation should review its internal control procedures over budget operations, design procedures which would prohibit the expenditure of funds in excess ofbudget approval, and implement those procedures to strengthen the internal controls over the budget function.
GENERAL FIXED ASSETS/PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Financial Statements Audit Control Number 490-94-02
For the year under review, our examination included a review of the internal accounting controls utilized by the State Board ofWorkers' Compensation in maintaining their State Property System. This review consisted oftesting the system for compliance with State equipment laws and regulations. In addition, procedures were completed to verify the accuracy ofthe total equipment inventory valuation contained in the inventory records, which comprises the General Fixed Assets Account Group. Our examination revealed that of the thirteen (13) equipment items selected for physical inspection, three (3) could not be located during the course of our reVIew.
As a result of the discrepancies identified above, we were unable to determine the validity of the total equipment inventory valuation contained in the inventory records, which comprises the General Fixed Assets Account Group.
The State Board of Workers' Compensation should establish the necessary internal controls to ensure that equipment inventories are maintained-in accordance with the provisions of the State Property System Manual.