Barrow County Board of Education, Winder, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003, June 30, 2003

BARROW COUNTY BOARD OF EDUCATION
WINDER, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

BARROW COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

BARROW COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
July 22, 2004

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Barrow County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Barrow County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Barrow County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Barrow County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-l 1

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Barrow County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated July 22, 2004, on our consideration ofthe Barrow County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 29 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Barrow County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:gp 2003-34ARL-11

State Auditor

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis of the Barrow County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003 (fiscal year 2002-2003). The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the notes to the basic financial statements and the financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2002-2003 are as follows:
The initial year for the implementation of GASB 34 was fiscal year 2002-2003. Since this was the implementation year, many comparisons are not available that will be available for fiscal year 2003-2004.
Net assets increased by a total of $3.47 million which represents a 8.57 percent increase from fiscal year 2001-2002. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $32.49 million in revenue or 39.67 percent of all revenues. Program specific revenues in the form of charges for services, operating and capital grants and contributions accounted for $49.37 million or 60.33 percent of total revenues of $81.86 million.
The Board had $78.39 million in expenses related to governmental activities; $49.37 million of these expenses were offset by program specific charges for services, grants or contributions.
Among major funds, the General Fund had $74.31 million in revenues and $77.88 million in expenditures. The General Fund's balance decreased to $6.87 million from $10.29 million.
Using the Basic Financial Statements
This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Barrow County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provides information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds. In the case of the Barrow County Board of Education, the General Fund is by far the most significant fund.
1

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document includes a number of funds used by the Board to provide programs and activities, a view of the Board as a whole requires a look at all financial transactions to ask the question, "How did we do financially during fiscal year 2002-2003?" The Statement of Net Assets and the Statement ofActivities answers this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be a result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement ofNet Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All of the Board's programs and services are reported here including instruction, pupil services, improvement of instructional services, educational media services, general administration, school administration, business administration, maintenance and operation of plant, student transportation services, central support services, other support services, enterprise operations, food services and interest on debt.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, District-wide Capital Projects Funds and the Debt Service Fund.
Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences)
11

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunds is reconciled in the financial statements.

Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole

The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2002-2003. Since this is the first year the Board has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 2001-2002 are not available.

Table 1 Net Assets

Assets Current and Other Assets Capital Assets, Net
Total Assets
Liabilities Current and Other Liabilities Long-Term Liabilities
Total Liabilities
Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted
Total Net Assets

Governmental Activities Fiscal Year 2003
$34,264,915 58,473,838
$92,738,753
$13,280,791 35,560,437
$48,841,228
$32,235,595 12,869,170 -1,207,240
$43,897.525

Total net assets increased $3.47 million.

Table 2 shows the changes in net assets for fiscal year 2002-2003. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2001-2002 are not available.

111

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 2 Change in Net Assets
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Proceeds from Sale of Buildings and Land Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets
IV

Governmental Activities Fiscal Year 2003
$ 4,030,310 43,767,262 1,570,849
$49,368,421
$18,365,414 104,453 11,485
6,187,489 1,217,232
326,027 4,922,375
272,803 19,550
1,064,508
$32,491,336
$81,859,757
$52,271,625
1,741,329 2,618,712 1,375,427
918,065 4,971,062
884,080 4,721,953 3,043,484
366,806 12,353
338,408 3,557,947 1,571,621
$78,392,872
$ 3,466.885

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Figure A shows the funding sources for the revenues. Operating grants and contributions comprise 53 percent of the Board's revenues while property taxes make up 23 percent of the total funding and an additional 9 percent is earned from the county's sales taxes.

Figure A Sources of Revenue for Fiscal Year 2002-2003

Grants and Contributions not Restricted to Specific
Programs Charges For &%
Services
5%

Capital Grants and Contributions 2%

Operating Grants and Contributions

9%
Property Taxes _ __ 23%

As shown in Figure B, Instruction comprised 67 percent of governmental program expenses. Administration and Other Services (3 percent) consist of the central support functions such as general administration, business services and community services. Interest expense of 2 percent of total expenses was attributable to capital leases and the outstanding bonds for capital projects.

Figure B Functional Expenses For Fiscal Year 2002-2003

Food Services 5%

Administration &
Other Services 3%

Interest On Debt

Improvement of Instruction 3%

Student
Maintenance &
Operations 6%

Pupil Services 2%
Educational Media 2%

Administration 6%
V

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Governmental Activities

Instruction comprises 66.68 percent of governmental program expenses. Interest expense was 2.00 percent. Interest expense was attributable to capital leases and outstanding bonds for capital projects.

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total costs of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the Board has prepared GASB Statement 34 financial statements, cost of service comparisons to fiscal year 2001-2002 are not available.

Table3 Governmental Activities

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt

$52,271,625 $15,371,333

1,741,329 2,618,712 1,375,427
918,065 4,971,062
884,080 4,721,953 3,043,484
366,806 12,353

1,316,096 2,158,230
556,700 -51,614 3,280,768 833,901 2,223,110 1,289,163 346,700 12,353

338,408 3,557,947 1,571,621

38,698 77,392 1,571,621

Total Expenses

$78,392,872 $291024i4s1

Although program revenues make up 60.33 percent of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 32.02 percent of total expenses are supported through property and sales taxes; for all governmental activities general revenue support is 39.67 percent.

VI

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $93.94 million and expenditures and other financing uses of $100.55 million. The General Fund had a decrease of $3 .42 million. This decrease in the fund balance of the General Fund was not totally unanticipated. The Board budgeted to use approximately $5.23 million from the fiscal year 2001-2002 ending balance to meet current costs in fiscal year 2002-2003. The Debt Service Fund had an increase of $4.04 million due to the accumulation of sales tax proceeds during the year for future use. There was a decrease of $6.95 million in the Capital Projects Fund due to payment for several construction projects.
General Fund Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
The Board uses site-based budgeting based on FTE student allocations. The budgeting systems are designed to tightly control total sited budgets but provide flexibility for site management.
For the General Fund, actual revenues and other financing sources exceeded the final budget of $71.47 million by $2.84 million. The additional revenues were mainly the result of the Board obtaining additional state grants, conservative budgeting for property and sales taxes, and the inclusion of the individual school and principal accounts that were not included in the final budget.
The final budgeted amount of $84.17 million for expenditures and other financing uses exceeded the actual amount of $78.14 million by $6.03 million. Conservative budgeting for instruction and extra duty supplements account for the majority of the difference.
General Fund expenditures and other financing uses exceeded revenues and other financing sources by $3.70 million before special items, which was less than the $5.23 million that was anticipated and budgeted for.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2002-2003, the Board had $58.47 million invested in capital assets, all in governmental activities. Table 4 shows these fiscal year 2002-2003 balances. Since this is the first year the Board has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2001-2002 are not available.
Vll

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 4 Capital Assets

Governmental Activities Fiscal Year 2003

Land Construction in Progress Land Improvements Buildings and Improvements Equipment Less: Accumulated Depreciation

$ 1,838,526 10,554,563 2,263,291 53,674,189 8,516,084 -18,372,815

Total

$ 58,473.838

The primary increases occurred in Buildings and Building Improvements and in Construction in Progress. In 2001, the Board began a $59.14 million capital outlay program funded by Special Purpose Local Option Sales Tax proceeds, state capital outlay grants and interest earnings. This program included the construction of two replacement elementary schools as well as several classroom additions and renovation projects at all thirteen schools. This program was implemented to provide adequate classroom space for our rapidly growing system.

Debt

At June 30, 2003, the Board had $32.60 million in bonds outstanding, $2.69 million in capital leases and $0.27 million in compensated absences, $5.51 million of which is due within one year. Table 5 summarizes general operations bonds, capital leases and compensated absences outstanding. Since this if the first year the Board has prepared financial statements following GASB Statement 34, debt comparisons to fiscal year 2001-2002 are not available.

Table 5 Debt at June 30

Governmental Activities Fiscal Year 2003

General Obligation Bonds Capital Leases Compensated Absences

$ 32,600,000 2,688,614 271,823

Total

$ 35,560.437

vm

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
At June 30, 2003, the Board's assigned bond ratings was "Aa2" and "AA" as determined by Moody's Investors Services, Incorporated and Standard and Poor's Rating Services.
Current Issues
The Barrow County School System consists of 14 campuses located in Barrow County, a fastgrowing area with a currently estimated population of over 52,000. Current student enrollment is approximately 9,875 students in Pre-Kindergarten through Grade 12.
The Board efforts towards achieving the goal of "A world class education with hometown values" have resulted in numerous awards, both state and national for the Barrow County School System. A sampling of these include a Presidential Award for Excellence in Math, a National Blue Ribbon School, Pay for Performance Schools, Redhook School of Excellence, Georgia School of Excellence, Milken National Educator Award, ARC Network Educator of the Year, National Science Foundation/Georgia Initiative in Math and Science (GIMS) and the 2002 Georgia School Social Worker of the Year.
The exceptional quality of education in Barrow County is reflected in the results of statewide standardized testing. Stanford Test results show that Barrow County students consistently score higher than average. Criterion-Referenced Competency Tests, as well, show more students in Barrow meet and exceed the standards than the average child in Georgia. The teacher/student ratio is lower than the state average in all grades, something certainly difficult to maintain in a county that averages five percent growth in student enrollment each year.
Of the 1,488 employees in the school system, over 55 percent are certified, assisted by an excellent group of classified staff and support. Over 50 percent of Barrow County teachers and administrators have Masters' degrees or higher. All of those employees have worked hard in the last several years to achieve the milestone of accreditation by the Southern Association of Colleges and Schools for each of the thirteen schools in the system. Of Georgia's 186 systems, Barrow is one of only 53 to receive this accreditation. Barrow County has six National Board Certified Teachers, out of only 384 in Georgia. The effort put forth to achieve National Board Certification is indicative of the commitment and dedication all of Barrow County's teachers bring to the classroom.
Over $32 million in Special Purpose Local Option Sales Tax (SPLOST) has been approved since 1995 by an overwhelming majority of voters in Barrow County. Classroom additions have been constructed at four existing schools, two replacement elementary schools will open in the 20042005 school year and a new middle school has just begun construction.
The Barrow County School System, Barrow County, and the State of Georgia continue to struggle through serious economic hardships. The State of Georgia sales tax and property tax revenue collections continue to run behind the previous year and current projections. As a result, state austerity reductions of over $2.62 million to the Barrow County School System in state revenue for fiscal years 2002-2003 and 2003-2004 have already been instituted. These state
lX

BARROW COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 austerity reductions are in addition to previous state budget cuts in specific non-instructional programs like administration, maintenance and transportation. Continued low interest rates have negatively affected investment earnings with no clear end in sight. Significant cost and budgetary control measures have been initiated by the school system in fiscal year 2002-2003, were continued into fiscal year 2003-2004, and are budgeted to continue into fiscal year 2004-2005. The Board of Education has taken budgetary action to see to it that the Barrow County School System will overcome the current economic downturns while increasing the working reserve to higher levels in order to sustain the school system through any future poor economic conditions. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Mike Russell, at the Barrow County Board of Education Professional Development Center and Central Offices, 179 W. Athens Street, Winder, Georgia 30680.
X

BARROW COUNTY BOARD OF EDUCATION

BARROW COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

24,120,416

38

2,782,297 6,016,951
901,907 377,998 65,308

1,838,526 10,554,563 2,263,291 53,674,189 8,516,084 -18,372,815

$ ===9=2;i.;7,=38==1'=75=3=

$

4,814,129

6,279,517

557,880

1,618,073

11,192

5,505,760 30,054,677

$

48,841,228

$

32,235,595

954,768 11,914,402 -1,207,240

$

43,897,525

$===9=2_,7~3=8'!,,;.75=3~

BARROW COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2003

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt

$

52,271,625 $

1,741,329 2,618,712 1,375,427
918,065 4,971,062
884,080 4,721,953 3,043,484
366,806 12,353

338,408 3,557,947 1 571 621

2,315,383
299,710 1,415,217

Total Governmental Activities

$ =====7=8=,3=9=2=,8=7=2= $

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Proceeds from Sale of Buildings Proceeds from Sale of Land

4 030 310

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

The notes to the basic financial statements are an integral part of this statement. -4-

EXHIBIT "B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

33,465,542 $

402,343 460,482 818,727 969,072 1,687,836
50,179 2,457,862 1,448,778
20,106

1,986,335

$

43,767,262 $

1,119,367 $ 22,890
607 2,458 40,981 305,543
79,003
1,570 849 $

-15,371,333
-1,316,096 -2,158,230
-556,700 51,614
-3,280,768 -833,901
-2,223, 110 -1,289, 163
-346,700 -12,353
-38,698 -77,392 -1 571 621
-29,024,451

$

18,365,414

104,453

11,485

6,187,489 1,217,232
326,027 4,922,375
272,803 1,064,508

11,250 8 300

$

32,491,336

$

3,466,885

40 430 640

$ ===43=,8=9=7'=52=5=

-5-

BARROW COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2003

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable. Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Questioned Costs
Unreserved Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,564.886 $ 3,844.051 $ 10.711.479 $ 24,120.416

38

38

1.516.323 5,270,586
901,907 370.467
65,308

3,971

1,138,995 3,560

2,655,318 5,270,586
901,907 377,998
65,308

$ 17,689,477 $ 3,848,022 $ 11,854,072 $ 33,391,571

$ 4,524,167 $ 289,962
6,279,517 557,880
1,618,073 11 192
$ 10,814,876 $ 2,465,915

$ 4,814,129
6,279,517 557,880
1,618,073 11 192
$ 13,280,791

$ 889.461

$ 889,461

$ 11,854,072

11,854,072

65,308

65,308

$ 1,382,107

1,382,107

204,154

204,154

5,715,678

5,715,678

$ 6,874,601 $ 1,382,107 $ 11,854,072 $ 20,110,780

$ 17,689,477 $ 3,848,022 $ 11,854,072 $ 33,391,571

The notes to the basic financial statements are an integral part of this statement. -6-

BARROW COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Revenue recognized for GSFIC and Lottery projects based on expenditures where the School District failed to request reimbursement on a timely basis.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Compensated Absences
Total Long-Term Liabilities

$ 20,110,780

$

1,838,526

10,554,563

2,263,291

53,674,189

8,516,084

-18,372,815

58,473,838

126,979

746,365

$ -32,600,000 -2,688,614 -271,823

-35,560,437

Net Assets of Governmental Activities (Exhibit "A")

$ 43,897,525

The notes to the basic financial statements are an integral part of this statement. -7-

BARROW COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30 2003

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Long-Term Capital-Related Debt Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Buildings Proceeds from Sale of Land
Total Special Items
Net Change in Fund Balances
Fund Balances - Beginning
Inventory - Net Change in Period

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 18,901,118 1,523,219
43,566,666 $ 5,122,971 4,030,310 98.873 1,064,508
$ 74,307,665 $

$ 824,484
129,087

101,362 $ 6,207,529
44,843

19,002,480 7,730,748
44,391,150 5,122,971 4,030,310 272,803 1,064,508

953 571 $ 6,353,734 $ 81 614 970

$ 50,855,500

$ 50,855,500

1,710,601 2,618,712 1,375,427
917,250 4,928,296
768,770 $ 4,802,340 3,565,103
366,806 12,353
338,408 3,504,129 1,564,959

115,310 12,178,112

1,710,601 2,618,712 1,375,427
917,250 4,928,296
884,080 4,802,340 3,565,103
366,806 12,353
338,408 3,504,129 13,743,071

403,403 145 611

$ 4,920,000 1,426,010

5,323,403 1,571,621

$ 77,877,668 $ 12,293,422 $ 6,346,010 $ 96,517,100

$ -3,570,003 $ -11,339,851 $

7724 $ -14,902,130

$ 8,165,000

$ 8,165,000

$

129,510

129,510

$ 4,032,215

4,032,215

-259,375

-3,772,840

-4,032,215

$ -129,865 $ 4,392,160 $ 4,032,215 $ 8,294,510

$ 250,000 33,300

$

250,000

33,300

$ 283,300

$

283,300

$ -3,416,568 $ -6,947,691 $ 4,039,939 $ -6,324,320

10,285,832

8,329,798

7,814,133

26,429,763

5337

5 337

Fund Balances - Ending

$ 6,874,601 $ 1,382,107 $ 11,854,072 $ 20,110,780

The notes to the basic financial statements are an integral part of this statement. -8-

BARROW COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
In the Statement of Activities, only the gain on the sale of the land/building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the cost of the land/carrying value of the building sold.
Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:
General Obligation Bonds Issued
Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments
Food Inventories are expensed on the District-wide Statements using the consumption method while on the fund level Food Inventories are recorded as expenditures when purchased. In the current period this difference amounts to.
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of:
Increase in Compensated Absences
Because some construction reimbursement will not be collected for several months after the School District"s fiscal year ends, they are not considered "available" revenues.

$ $ 14,496,008
-1,661,054
$ 4,920,000 403 403

-6,324,320
12,834,954 -521, 128 -263,750
-8,165,000 -129,510
5,323,403 5,337
-39,466 746 365

Change in Net Assets of Governmental Activities (Exhibit "B")

$ ===3,=46=6==,8=8=5

The notes to the basic financial statements are an integral part of this statement. -9-

BARROW COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2003

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net
Interest and Dividends Other
Total Assets
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

644 $

80,044

60,931

1,347

72 3,528

$

61 575 $===84-99=1=

$

84,991

$ _ _ _6.1....,._5__7__5__

$

61,575 $ ===84==99=1=

The notes to the basic financial statements are an integral part of this statement. - 10 -

BARROW COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2003
REVENUES Investment Earnings Net Increase (Decrease) in Fair Value of Investments Interest Total Investment Earnings
EXPENSES Scholarships Administrative Expenses Total Deductions Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT"H"

PRIVATE PURPOSE TRUSTS

$

1,479

7

$

1,486

$

4,375

15

$

4 390

$

-2,904

64479

$ ===6=1,=57=5=

The notes to the basic financial statements are an integral part of this statement. - 11 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Barrow County Board of Education (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Barrow County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement of Activities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 12 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, Special Local Option Sales Tax proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private Purpose Trust funds report trust arrangements in which the corpus is to be invested and preserved intact with the resultant income to be used to administer, secure and manage funds and assets to provide educational scholarships for students in Barrow County and for other general purposes.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. 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.

- 13 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of$1,299,818 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$613,099 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 14 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 8,372,915

Add Funds Consolidated with General Fund: School Food Services Fund Lottery Programs Federal Programs School Activity Account - Governmental Activity

1,042,217 81,535 176,066
613,099

General Fund Balance July 1, 2002 (Restated)

$ 10,285,832

CHANGES IN ACCOUNTING PRINCIPLES

The Barrow County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.

The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund

$ 10,285,832 8,329,798 7,814,133

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable Compensated Absences

$ 26,429,763 62,625,645 -16,723,011 648,107 -29,355,000 -2,962,507 -232,357

Net Assets Beginning (See Exhibit "B")

$ 40,430,640

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

- 15 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

- 16 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PROPERTY TAXES

The Barrow County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 20, 2002 (levy date). Taxes were due on December 20, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Barrow County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $18,889,633 and for school bonds amounted to $101,362.

The tax millage rate levied for the 2002 tax year (calendar year) for the Barrow County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

18.90 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,187,489 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the district-wide financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value

- 17 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000 20 to 80 years

$

5,000 10 to 80 years

$

5,000 3 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination of the following:

- 18 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) 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,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, 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 Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $25,717,570. The amounts ofthe total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)
The School District's deposits are classified by risk category at June 30, 2003, as follows:

- 19 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

Risk Category

Bank Balance

1

$ 9,679,715

2

14,389,069

3

1,648,786

Total

$ 25,717.570

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the fair value of the School District's total investments was $38 and this entire amount consisted of Federated U.S. Treasury Fund which was insured or registered, or securities held by the School District or the School District's agent in the School District's name.

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 1,602,837 $ 260,689 $

644,296

9,910,267

25,000 $ 1,838,526 10,554,563

Total Capital Assets Not Being Depreciated $ 2,247,133 $ 10,170,956 $

25,000 $ 12,393,089

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 51,061,928 $ 7,231,255 2,085,329

2,862,261 $ 1,284,829
177,962

250,000 $ 53,674,189 8,516,084 2,263,291

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

11,640,140 4,274,648
808,223

1,056,213 494,438 110,403

11,250

12,685,103 4,769,086
918,626

Total Capital Assets, Being Depreciated, Net $ 43,655,501 $ 2,663,998 $ 238,750 $ 46,080,749

Governmental Activity Capital Assets - Net $ 45,902,634 $ 12,834,954 $ 263,750 $ 58,473,838

-20-

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Capital assets being acquired under capital leases as of June 30, 2003, are as follows:

Governmental Funds

Buildings Equipment Less: Accumulated Depreciation

$ 2,805,898 1,189,026 473,868

$ 3,521,056

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 1,183,646

$

24,204

642

2,599

43,334

323,089

393,868 83,540

$ 1,661,054

Note 6: RESTRICTED ASSETS

General obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory prov1S1ons. Restricted assets at June 30, 2003, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services

$ 10,711,479 $ 10,775,961

$

38

- 21 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2003, consisted ofthe following:

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

Debt Service Funds

$ 259.375 $ 3,772,840

Transfers are used to move property tax revenues collected by the General Fund to (1) the Debt Service Fund for payment ofBonds and (2) to move bond funds as needed to the Debt Service Fund.

Note 8: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years.

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

2002 2003

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

6 546 $

6,546 $

0

$

0 $

28.041 $

28,041 $

0

The School District has purchased a surety bond to provide additional insurance coverage as follows:

-22-

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"I"

Note 8: RISK MANAGEMENT

Position Covered

Amount

Superintendent

$ 100,000

Note9: SHORT-TERMDEBT

The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

$ 53.832 $===0 $ 53,832 $.=====o

Note 10: LONG-TERM DEBT

CAPITAL LEASES The Barrow County Board of Education has entered into various lease agreements as lessee for school buses, copiers and buildings. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. The School District uses the vesting method to compute compensated absences.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

- 23 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 10: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - Series 2003

1.95%

General Government - Series 2001

4.00%

General Government - Series 1995A

4.00% - 5.40%

General Government - Refunding - Series 1995B 3.90% - 5.40%

General Government - Refunding - Series 1993 3.15% - 4.75%

$ 8,165,000 8,160,000 9,540,000 5,180,000 1,555,000

$ 32!600!000

The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows:

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences (1)

Bonds

Total

Balance July I, 2002

$ 2,962,507 $

232,357 $ 29,355,000 $ 32,549,864

Additions Capital Leases Annual Leave Earned G.O. Bonds

129,510

56,940

8,165,000

129,510 56,940 8,165,000

Deductions Annual Leave Utilized Debt Retired

403 403

17,474

4,920,000

17,474 5,323,403

Balance June 30, 2003

$ 2 688 614 $

2:Zl,823 $ 32,6Q0 0QQ $ 35,560,437

Portion of Long-Term Debt Due within One Year

$

443 937 $

271,823 $ 4,790,000 $ 5,505,760

(I) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows:

- 24-

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 10: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2004 2005 2006 2007 2008 2009 - 2012

$ 443,937 $ 366,526 248,151 245,000 255,000
1,130,000

132,473 103,070 80,991 70,905 60,248 125,498

Total Principal and Interest

$ 2,688,614 $ 573,185

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2004 2005 2006 2007 2008 2009 - 2013 2014 - 2015

$ 4,790,000 $ 1,320,795

5,020,000

1,195,990

5,260,000

1,029,128

5,500,000

850,368

1,220,000

662,250

7,265,000

2,253,420

3,545,000

300,440

Total Principal and Interest

$ 32,600,000 $ 7,612,391

Note 11: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $775,846 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $666,291

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $109,555

- 25 -

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

Southwest Barrow Elementary School Apalachee High School
GSFIC 00/99S-607-067 New County Line Elementary School
GSFIC 03/02S-607-002 Bethlehem Elementary School Haymon-Morris Middle School
GSFIC 04-607-002 Refinishing of Auburn, Holsenbeck and
Statham Elementary Schools Additions to Bramlett, Kennedy and
Yarga Elementary Schools

$ 409,998

1,538,340 $ 257,095

5,384,494 5,726,179

1,674,105 4,577,357

9,909,935

6,216,796

172,226

135,158

$ 23!276!330 $ 12!725!353

The amounts described in this note are not reflected in the basic financial statements.

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The Barrow County School District is a third-party defendant in a lawsuit filed against the contractor by the sub-contractor for the construction of two school buildings. The lawyers representing the School District believe that the verdict in the case could amount to $1.5 million to $2 million dollars. The School District currently holds $1.2 million dollars as retainage payable as of June 30, 2003.

Note 14: SUBSEQUENT EVENTS

In the subsequent fiscal year, the School District issued general obligation bonds in the amount of $9,830,000 dated May 12, 2004. The proceeds from these bonds will be used forrefunding a portion of the Series 1995A Bond issue.

- 26-

BARROW COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "I"

Note 15: ACCUMULATED EMPLOYEES' LEAVE

The School District has a personnel vacations policy which grants employees that retire, resign or are terminated, payment ofup to fifteen days for all earned unused vacation leave at a sum equal to the number of vacation days times the employee's daily rate of pay at the date of departure. See Note 2 - Compensated Absences

Note 16: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 3,738,058 $ 3,413,672 $ 3,607,448

-27 -

BARROW COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30 2003

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES}
Other Sources Other Uses
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Buildings Proceeds from Sale of Land
Total Special Items
Net Change in Fund Balances
Fund Balances - Beginning
Inventory - Net Change in Period

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

20,540,795 $

20,595,795 $

18,901,118

600,000

600,000

1,523,219

42,102,878

42,418,683

43,566,666

4,389,979

5,400,178

5,122,971

1,394,000

1,404,000

4,030,310

120,000

120,000

98,873

425 500

933 094

1064508

$

69,573,152 $

71 471 750 $

74,307,665

$

56,897,543 $

55,789,007 $

50,855,500

2,377,589 2,575,875 1,625,412 1,003,958 5,571,519
594,568 5,163,923 3,368,835
347,886 12,000
390,600 3,667,134 1,133,412

2,408,621 2,891,477 1,626,066
997,967 5,576,796
784,323 4,889,032 3,369,925
395,656 11,042
360,000 3,340,599 1,725,433

1,710,601 2,618,712 1,375,427
917,250 4,928,296
768,770 4,802,340 3,565,103
366,806 12,353
338,408 3,504,129 1,564,959
549 014

$

84,730,254 $

84165 944 $

77 877 668

$

-15, 157,102 $

-12,694,194 $

-3,570,003

$

129,510

-259 375

$

-129 865

$

250,000

33300

$

283 300

$

-15,157,102 $

-12,694, 194 $

-3,416,568

9,094,503

9,094,503

10,285,832

5 337

Fund Balances - Ending

$

-6,062,599 $

-3,599,691 $

6 874 601

Notes to the Schedule of Revenues. Ex~enditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements.
-29-

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Severely Emotionally Disturbed
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies State School Improvement Grants Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title Ill Immigrant Education Limited English Proficient TitleV Innovative Education Program Strategies Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant
Total U.S. Department of Education
Total Federal Financial Assistance
NIA = Not Available
- 30-

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

NIA
NIA $
$

(2) 3,070,148
3,070,148

10.550

NIA
$

198 763 3,268,911

84.027 84.173 84.027

NIA $ NIA
NIA
$

1,278,603 132,578 30 958
1,442,139

* 84.010 84.218
84.281 84.318 * 84.367
84.365 84.365
84.298 84.186
84.048

NIA
NIA
NIA NIA
NIA
NIA NIA
NIA NIA
NIA
$

1,349,564 20,779
12,007 39,190 302,652
1,911 30,690
55,269 42,883
74770
3,371,854

$ =====6,=64=0=.7=6=5

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($381, 163) were not maintained separately and are included in the 2003 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Barrow County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements.

See notes to the basic financial statements.

- 31 -

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Apprenticeship Program Health Insurance Mentor Teachers National Teacher Certification Outdoor Classroom Preschool Handicapped Program Residential and Reintegration Services Special Education Low Incidence Grant Special Education Support Cost Lottery Programs Assistive Technology Computers in the Classroom
- 32 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

660,528

$

660,528

2,516,042 434,791
5,937,407 952,731
2,825,532 484,521
5,380,911 3,303,933 1,568,479
267,976 736,774 3,042,576 635,853 308,187 556,607 174,883 373,335 440,708 818,727 268,368 172,702
912,255 1,650,767 2,457,862
1,135,067 198,681 11,400 184,419 37,069 57,728
4,096,027 235,218 196,297 -986,472
66,317 109,093
33,250 666,291
22,078 35,367
2,000 121,717
56,202 10,258 2,643
18,737 152,337

2,516,042 434,791
5,937,407 952,731
2,825,532 484,521
5,380,911 3,303,933 1,568,479
267,976 736,774 3,042,576 635,853 308,187 556,607 174,883 373,335 440,708 818,727 268,368 172,702
912,255 1,650,767 2,457,862
1,135,067 198,681 11,400 184,419 37,069 57,728
4,096,027 235,218 196,297 -986,472
66,317 109,093
33,250 666,291
22,078 35,367
2,000 121,717
56,202 10,258
2,643
18,737 152,337

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia Institute of Technology State Data and Research Center System Conversion Agreement
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Human Resources, Georgia Department of Second Step Program
Northwest Georgia Regional Educational Service Agency Georgia's Choice America Choice Grant Student Achievement Grant - NCEE

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

50,179

$

50,179

$ 109,555

824,484

824,484 109,555

7,294

7,294

55459

55,459

$ 43,566,666 $

824484 $ 44,391,150

See notes to the basic financial statements.

- 33-

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30 2003

SCHEDULE "4"

PROJECT
Provide funds to pay or to be applied toward the cost of the repayment of a portion of the principal and interest on the School District's Series 1973, Series 1990, Series 1993, Series 1995A and Series 1995B Bonds coming due February 1, 1998, through and including August 1, 2002, the maximum amount of debt to be retired not to exceed $3,250,000
Provide funds to pay or to be applied toward the cost of the acquisition, construction and equipping of a new high school and necessary furnishing and construction and equipping of a new elementary school, land for future school sites and renovations and modifications of all existing schools, including the acquisition of all necessary property, the maximum costs of such projects not to exceed $17,750,000
Provide funds to pay or to be applied toward the cost of the repayment of a portion of the principal and interest on the School District's Series 1993, Series 1995A and Series 1995B Bonds coming due August 1, 2002, through and including February 1, 2007, the maximum amount of debt to be retired not to exceed $9,000,000
Provide funds to pay or to be applied toward the cost of the acquisition, construction and equipping of two or more new elementary schools and necessary furnishing and additions, renovations and improvements to existing schools and system-wide technology improvements and acquisition of land for additional schools, the maximum costs of such projects not to exceed $34,000,000

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED
COST (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$

3,250,000 $ 3,250,000

$

2,247,744 Completed

17,750,000

20,068,004 $

892,750

19,175,254 Ongoing

9,000,000

9,000,000

1,817,010

Ongoing

34,000,000

34,000,000

11,314,620

1 717 042 Ongoing

$ 64,000,000 $ 66,318,004 $ 14,024,380 $ 23,140,040

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Barrow County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$

2,634,156

Current Year

509,000

Total

$ ===='3=14..,3,..1..,56.,.

See notes to the basic financial statements.

- 34-

BARROW COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003

SCHEDULE "5"

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

2,804,445 $ 477,696
6,648,754 1,034,857 3,176,101
530,699 5,940,403 3,692,509 1,737,426 5,564,073
591,706 197,417 413,988 475 878

2,925,571 $ 599,789
7,006,353 1,879,850 4,374,106
819,553 5,886,952 5,409,999 1,434,103
14,678 841,096 5,271,177 117,441
81,648 570,080 308,011 478,567 528,337

59,942 $ 4,775
344,434 20,583
177,561
4,599 317,840 369,259 392,785
181,849 10,325 50,308 14,685 20,898 7,365 2,385 5,070 1 692

2,985,513 604,564
7,350,787 1,900,433 4,551,667
824,152 6,204,792 5,779,258 1,826,888
196,527 851,421 5,321,485 132,126 102,546 577,445 310,396 483,637 530,029

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

33,285,952 $ 38,547,311 $

1,986,355 $

40,533,666

Media Center Program Staff and Professional Development

913,129 194 461

1,163,648 62,309

195,817 130 799

1,359,465 193 108

TOTAL QBE FORMULA FUNDS

$

34,393,542 $ 39,773,268 $

2,312,971 $ =====4=2''=0=86.,;,2=3==9

(1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction.

See notes to the basic financial statements.

- 35 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
July 22, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Barrow County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Barrow County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Barrow County Board of Education's basic financial statements and have issued our report thereon dated July 22, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Barrow County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Barrow County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2003-34YB-30

control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Barrow County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6071-03-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Barrow County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2003-34YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
July 22, 2004

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Barrow County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofBarrow County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Barrow County Board of Education's major Federal programs are identified in the Summary ofAuditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Barrow County Board of Education's management. Our responsibility is to express an opinion on Barrow County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits ofStates, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Barrow County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Barrow County Board of Education's compliance with those requirements.
2003SA-10

In our opinion, the Barrow County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003.
Internal Control Over Compliance
The management of Barrow County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Barrow County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Barrow County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2003SA-10

State Auditor

SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

BARROW COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6071-00-06 FS-6071-01-02 FS-6071-01-03 FS-6071-01-04 FS-6071-02-01 FS-6071-02-02 FS-6071-02-03

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

CORRECTIVE ACTION/RESPONSES

GENERAL LEDGER Failure to Refund Unearned Lottery Funds Amount: $28,088 Finding Control Number: FS-6071-00-06

The financial accounting system used by the School District for fiscal year 1999-2000 did not accurately account for nor process district financial transactions. However, this financial system did accurately reflect revenues and expenditures. Expenditure reports were used for the preparation ofthe Lottery Program, Pre-Kindergarten, completion report. These expenditures reports, along with other supporting reports, validate the expenditure ofthese funds (total of$605,916.92 expended during fiscal year 1999-2000 which exceeds fund drawn down). Therefore, the School District does not agree with this deficiency:

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6071-00-02 FA-6071-02-01

Umesolved - See Corrective Action/Reponses Umesolved - See Corrective Action/Reponses

CORRECTIVE ACTION/RESPONSES

REPORTING Erroneous Project Completion Reports ($176,066) Finding Control Number: FA-6071-00-02

The financial accounting system used by the School District for fiscal year 1999-2000 did not accurately account for nor process School District financial transactions. However, this financial system did accurately reflect revenues and expenditures. Expenditure reports

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BARROW COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
REPORTING Erroneous Project Completion Reports ($176,066) Finding Control Number: FA-6071-00-02
were used for the preparation of these completion reports. These expenditures reports, along with other supporting reports, validate the expenditure of these funds. In addition, some specific comments regarding some of these programs include:
Special Education Cluster - It appears that the voiding of some expenditure checks and the re-issuance in another period may have adversely affected General Ledger totals for these programs.
Title I - It appears that salary accruals on the General Ledger were not accurately reflected and caused this difference.
Title II - It appears that some programs expenditures were missed.
Title III - It appears that Program 1822 expenditures were not included. Staff development expenditures for the Technology Literacy Challenge Grant were recorded in Program 1822, not Program 1820.
Safe and Drug Free Schools - It appears that the voiding ofsome expenditure checks and the re-issuance in another period may have adversely affected General Ledger totals for this program.
It is our understanding that State Department of Audits personnel used General Ledger reports during audit fieldwork and that may provide the explanation for these differences. The auditors were provided with copies of these completion reports and our supporting documentation. Documentation was made available to State Department of Education Financial Review personnel for their review ofthis deficiency and this office accepted this documentation.
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Finding Control Number: FA-6071-02-01
All property that exceeds the $5,000 fixed asset threshold will be maintained through the fixed asset system.
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SECTION IV FINDINGS AND QUESTIONED COSTS

BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Barrow County Board of Education's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Barrow County Board of Education disclosed a financial statement reportable condition related to the following control category.
General Ledger
The reportable condition described above is not considered to be a material weakness.
3. Noncompliance Material to the Financial Statements The audit of the Barrow County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.
4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Barrow County Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Barrow County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Barrow County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program- Food Services-National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Barrow County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
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BARROW COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Inadequate Inventory Records Reportable Condition Nonmaterial Noncompliance Finding Control Number: FS-6071-03-01 The equipment records maintained by the School District for the Lottery funds were incomplete and failed to meet property management standards set forth in chapter 41 ofthe Financial Management for Georgia Local Units of Administration (FMGLUA), issued by the Georgia Department of Education. No equipment records were presented for the audit. The annual physical inventory count was not properly conducted to ensure the accuracy of equipment records. These conditions occurred because management failed to maintain complete equipment records and failed to ensure that physical inventory counts were properly performed and reconciled to property management records. An inventory system should be implemented that provides for complete inventory records and identification of all equipment as outlined in FMGLUA. An annual physical count should be performed and reconciled to the equipment records to ensure the accuracy of inventory records. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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