AUDIT REPORT BEN HILL COUNTY BOARD OF EDUCATION FITZGERALD, GEORGIA YEAR ENDED JUNE 30, 1998 BEN HILL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS GENERAL PURPOSE FINANCIAL STATEMENTS COMBINED STATEMENTS - OVERVIEW A COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUP 2 B COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUND 4 C COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS 6 D STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE FIDUCIARY FUND TYPE - NONEXPENDABLE TRUST FUND 7 E STATEMENT OF CASH FLOWS FIDUCIARY FUND TYPE - NONEXPENDABLE TRUST FUND 9 F NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS 10 ADDmONAL FINANCIAL INFORMATION COMBINING STATEMENTS SPECIAL REVENUE FUND G COMBINING BALANCE SHEET 22 H COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 24 I FIDUCIARY FUND TYPES COMBINING BALANCE SHEET 26 SCHEDULES 1 SCHEDULE OF REQUIRED SUPPLEMENTARY INFORMATION 27 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 30 4 SCHEDULE OF EXPENDITURES LOTTERY PROGRAMS 31 BEN HILL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL ADDmONAL FINANCIAL INFORMATION SCHEDULES ANALYSIS OF MINIMUM EXPENDITURE REQUIREMENTS GENERAL FUND - QUALTIY BASIC EDUCATION PROGRAMS 5 OVERALL 33 6 BY PROGRAM 34 SECTIONll 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 WITII GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITII REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITII OMB CIRCULAR A-133 SECTIONm 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) 6562174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400 July 30, 1999 Honorable Roy E. Barnes, Governor Members ofthe General Assembly Members ofthe State Board ofEducation and Superintendent and Members ofthe Ben Hill County Board ofEducation INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL PURPOSE FINANCIAL STATEMENTS AND SupPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying general purpose financial statements of the Ben Hill County Board of Education, as of and for the year ended June 30, 1998, as listed in the table of contents. These general purpose financial statements are the responsibility ofthe Ben Hill County Board ofEducation's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in GoYernment Auditin~ Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perfonn 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 opinion. As described in the notes to the general purpose financial statements, the Board's financial statements have been prepared using certain accounting practices and policies whi~h, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows: The general purpose financial statements of the Board did not contain a General Fixed Assets Account Group to account for property and equipment owned by the Board which should be included to confonn to generally accepted accounting principles. 98ARL-13B * School activity accounts maintained at the individual schools are not included in the general pwpose financial statements. To confonn to generally accepted accounting principles, these accounts should be included in the general pwpose financial statements. * The Board did not recognize as expenditures, in the year ended June 30, 1998, a portion of salaries and the corresponding employer's cost ofrelated benefits earned for contractual services completed prior to June 30, 1998. Also funds received, subsequent to June 30, 1998, from the Georgia Department ofEducation for the State's share of these unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were improperly recorded in the year ended June 30, 1998. To confonn to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed. The aggregate effects on the general pwpose financial statements of these variances or omissions have not been detennined, but are believed to be material. In our opinion, except for the effects on the general pwpose financial statements of the matters referred to in the preceding paragraph, the general pwpose financial statements referred to above present fairly, in all material respects, the financial position ofthe Ben Hill County Board of Education as of June 30, 1998, and the results of its operations and the cash flows of its nonexpendable trust fund for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditin~ Standards, we have also issued our report dated July 30, 1999, on our consideration ofthe Ben Hill County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. The year 2000 supplementary infonnation on Schedule "1" is not a required part of the basic financial statements but is supplementary infonnation required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthe supplementary infonnation. However we did not audit the infonnation and do not express an opinion on it. In addition, we do not provide assurance that Ben Hill County Board ofEducation is or will become year 2000 compliant, that the Board's year 2000 remediation efforts will be successful in whole or in part, or that parties with which Ben Hill County Board of Education does business are or will become year 2000 compliant. Our audit was perfonned for the pwpose of fonning an opinion on the general pwpose financial statements of the Ben Hill County Board of Education taken as a whole. The accompanying combining statements (Exhibits G through I) and the financial schedules (Schedules 2 through 6), which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office ofManagement and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for pwposes of additional analysis and are not a required part of the general pwpose financial statements. Such infonnation has been subjected to the auditing procedures applied in the audit of the general pwpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such infonnation is fairly presented in all material respects in relation to the general pwpose financial statements taken as a whole. 98ARL-13B A copy of this report has been filed as a pennanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated Section 50-6-24. RWH:jb 98ARL-13B BEN HILL CQUNIY BOARD OF EDUCATION EXHIBIT "A" DEBT SERVICE FUND FIDUCIARY FUND TYPES TRUST FUNDS ACCOUNT GROUP GENERAL LONGTERM DEBT TOTALS (Memorandum Only) JUNE 30, 1998 JUNE 30,1997 $ 21,003.80 $ 3,757.28 $ 562,482.93 $ 2,433,531.28 500,000.00 3,262.68 2,773,080.09 8,836.45 329,584.72 544,188.23 3.500.00 3,500.00 $ 529,840.25 15,820.62 3,780.76 529,840.25 8,277.45 3,122.72 373,044.80 2,440,159.75 33,288.96 2,440,159.75 33,288.96 2,816,955.20 48,371.93 $ 529,840.25 $ 7,019.96 $ 3,003,288.96 $ 6,691,538.08 $ 6,230,991.61 $ 469,041.56 146,439.38 $ 381,640.15 187,653.59 157,864.70 10,041.71 12,571.53 8,946.19 39,220.30 70,350.00 $ 33,288.96 33,288.96 48,371.93 2.970,000.00 2,970,000.00 3,190,000.00 $ 3,003,288.96 $ 3.864,631.69 $ 3,860,798.31 $ 529,840.25 $ 0.00 $ 529.840.25 $ $ 529,840.25 $ 2,000.00 5,019.96 7,019.96 $ 97,501.00 1,073.19 $ 58,409.12 4,787.85 4,787.85 529,840.25 373,044.80 2,000.00 2,000.00 15,820.62 . 3,780.76 8,277.45 3,122.72 523,955.96 857.36 2,171,245.36 10,664.68 1,385,930.72 $ 2,826,906.39 $ 2,370,193.30 7,019.96 $ 3,003.288.96 $ 6,691 ,538.08 $ 6,230,991.61 3 BEN HILL COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUND YEAR ENDED JUNE 30,1998 REVENUES State Funds Federal Funds Taxes Other Funds 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 Food Services Operation Community Services Operations .Capital Outlay Debt Service Principal Interest Paying Agent Fees Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Capital Leases Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses FUND BALANCE JULY 1 Food Inventory - Net Change in Period Donated Commodities Purchased Food GENERAL FUND GOVERNMENTAL FUND SPECIAL CAPITAL REVENUE PROJECTS FUND FUND $ 13,041,579,24 $ 3,742,832.01 375,462.49 $ 17,159,873.74 $ 630,500,78 $ 1,961,100.57 336,967,92 2,928,569,27 $ 297,988.62 297,988,62 $ 10,957,643,12 $ 539,879.84 567,633,01 336,780.46 393,783,56 1,278,907.19 178,080,45 1,016,762,08 551,065,28 63,163,56 208,260,99 669,05 45,401.18 15,082,97 3,265,11 1,334,493.05 95,987,07 68,383,05 81,932,39 27,934,97 18,429,87 33,608,71 51,967,61 1,260,366,06 28,869,78 $ $ 16,156,3n,85 $ $ 1,003,495,89 $ 3,001,972,56 $ -73,403,29 $ 933,485,85 933,485,85 -635,497,23 $ $ -166,162,74 $ -166,162,74 $ $ ~37,333,15 $ 1,009,971,85 54,621.47 $ 54,621 ..47 $ -18,781,82 $ 453,321,79 7,543,17 658.04 111,541,27 111,541,27 -523,955.96 523,955.96 FUND BALANCE JUNE 30 $ 1,847,305.00 $ The notes to the general purpose financial statements are an integral part of this statement. -4- 442,741.18 $ ~O~.OO~ EXHIBIT-B- TYPES DEBT SERVICE FUND TOTAl FIDUCIARY FUND TYPE EXPENDABLE TRUST FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30,1998 JUNE 30,1997 $ 13,970,068.64 1,961,100.57 $ 508,221.58 4,251,053.59 21,487.29 733.917.70 $ $ 529,708.87 $ 20,916,140.50 $ $ 3.577.54 3,577.54 $ 13,970,068.64 $ 1,961,100.57 4,251,053.59 737,495.24 20,919,718.04 $ 13,905,229.18 2,038,815.04 4,115,950.93 730,818.76 20,790,813.91 $ 12,292,136.17 $ 635,866.91 636,016.06 336,780.46 475,715.95 1,306,842.16 178,080.45 1,035,191.95 584,673.99 63,163.56 260,228.60 1,261,035.11 28,869.78 978,887.03 $ 220,000.00 151,997.50 915.92 235,082.97 155,262.61 915.92 $ 372,913.42 $ 20,464,749.68 $ $ 156,795.45 $ 451,390.82 $ 6,618.18 $ 6,618.18 $ -3,040.64 $ 12,298,754.35 $ 635,866.91 636,016.06 336,780.46 475,715.95 1,306,842.16 178,080.45 1,035,191.95 584,673.99 63,163.56 260,228.60 1,261,035.11 28,869.78 978,887.03 235,082.97 155,262.61 915.92 20,471,367.86 $ 448,350.18 $ 12,678,081.63 711,120.77 450,334.88 347,430.69 734,435.26 1,135,505.47 90,410.77 949,867.78 751,830.53 184,908.29 1,183,331.66 75,295.44 942,743.23 233,348.07 159,630.75 823.11 20,629,098.33 161,715.58 $ 166,162.74 -166,162.74 $ 0.00 $ 156,795.45 $ 451,390.82 $ 373,044.80 2,360,294.40 7,543.17 658.04 $ $ 166,162.74 -166,162.74 $ 0.00 $ 66,720.00 13,359.35 -13,359.35 66,720.00 -3,040.64 $ 6,797.92 448,350.18 $ 2,367,092.32 228,435.58 2,136,469.37 7,543.17 658.04 644.00 1,543.37 $ 529,840.25 $ 2,819,886.43 $ 3?57.28 $ 2,823,643.71 $ 2,367,092.32 -5- BEN HILL COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUNp BALANCES BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30. 1998 EXHIBITC GENERAL FUND ACTUAL (BUDGET BUDGET BASIS) REVENUES State Funds Federal Funds Taxes Other Funds $ 12,600,709.00 $ 13,041,579.24 33,000.00 3,512,504.00 3,742,832.01 95,526.00 375,462.49 Total Revenues $ 16,241,739.00 $ 17,159,873.74 EXPENPITURES 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 Food Services Operation Community Services Operations Capital ouUay Debt Service $ 11,687,759.00 $ 10,957,643.12 695,749.00 419,722.00 311,385.00 391,141.00 1,102,444.00 169,215.00 1,146,390.00 622,009.00 76,998.00 129,994.00 539,879.84 567,633.01 336,780.46 393,783.56 1,278,907.19 178,080.45 1,016,762.08 551,065.28 63,163.56 208.260.99 669.05 45,401.18 18,348.08 Total Expendhures $ 16,752,806.00 $ 16,156.377.85 Excess of Revenues over (under) Expendhures $ -511,067.00 $ 1,003,495.89 OTHER FINANCING SOURCES (USES) Other Sources Other Uses $ -SOO,Ooo.OO $ -166,162.74 Total Other Financing Sources (Uses) $ -SOO,OOO.OO $ -166,162.74 Excess of Revenues and Other Financing Sources over (under) Expendhures and Other Financing Uses $ -1,011,067.00 $ 837,333.15 FUNP BALANCE JULY 1. 1997 1,514,458.66 1,009.971.85 Adjustments Food Inventory - Net Change in Period Donated Commodities Purchased Food SPECIAL REVENUE FUND ACTUAL (BUDGET BUDGET BASIS) $ 617,522.00 $ 630,500.78 1,900.738.00 1,961,100.57 405,600.00 336,967.92 $ 2,923,860.00 $ 2,928,569.27 $ 1,161,781.55 $ 1,334,493.05 170,460.45 56,366.00 95,987.07 68,383.05 102,123.00 771.00 81,932.39 27,934.97 19,493.00 33,363.00 18,429.87 33,608.71 31,400.00 1,228,447.00 32,696.00 51,967.61 1,260,366.06 28,869.78 $ 2,836,901.00 $ 3,001,972.56 $ 86,959.00 $ -73,403.29 $ 54,621.47 $ 54,621.47 $ 86,959.00 $ -18,781.82 442,612.37 453,321.79 -5,010.99 7,543.17 658.04 FUND BALANCE JUNE 30, 1998 $ 503,391.66 $ 1,847,305.00 $ 524,560.38 $ 442,741.18 The notas to the general purpose financial statements are an integral part of this statement. -6- BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "0" STATEMENT OF REVENUES. EXPENSES AND CHANGES IN FUND BALANCES FIDUCIARY FUND TYPE - NONEXPENABLE TRUST FUND YEAR ENDED JUNE 30. 1998 OPERATING REVENUES None Recorded OPERATING EXPENSES None Recorded Operating Income NONOPERATING REVENUES Interest Earned Net Income FUND BALANCE JULY 1 CUMBEE-MCCALL FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30, 1998 JUNE 30, 1997 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 161.70 161.70 65.25 $ 161.70 $ 161.70 $ 65.25 3,100.98 3,100.98 3,035.73 FUND BALANCE JUNE 30 $ 3,262.68 $ 3,262.68 $ ========3=,1.0,==0=.9==8 The notes to the general purpose financial statements are an integral part of this statement. -7- BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF CASH FLOWS FIDUCIARY FUND TYPE - NONEXPENABLE TRUST FUND YEAR ENDED JUNE 30. 1998 EXHIBIT"E" Cash Flows from Operating Activities: Net Cash Provided (Used) by Operating Activities Cash Flows from Investing Activities: Interest Received on Investments Net Increase (Decrease) in Cash Cash and Cash Equivalents - July 1 CUMBEEMCCALL FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30,1998 JUNE 30,1997 $ 0.00 $ 0.00 $ 0.00 $ 161.70 $ 161.70 $ 72.84 $ 161.70 $ .161.70 $ 72.84 $ 3,100.98 $ 3,100.98 $ 3,028.14 Cash and Cash Equivalents - June 30 $ 3,262.68 $ 3,262.68 $ ==-=====3=,1=0..0..=.9.8... The notes to the general purpose financial statements are an integral part of this statement. -9- BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 3D. 1998 Note 1; SUMMARY OF SIGNIFICANT ACCOUNTING POUCIES REPORTING ENTITY The Ben Hill County Board ofEducation (Board) 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 Board is a primary government and consists of all the organizations that compose its legal entity. FUND ACCOUNTING The Board uses funds and an account group to report on its financial position and the results ofits 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources. General Fixed Assets are recorded as expenditures in the various funds at the time ofpurchase. A General Fixed Assets Account Group is not presently maintained by the Board. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types. Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general pwpose financial statements. The general pwpose financial statements account for all State, Federal, Taxes and Other funds under control ofthe Board, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows: GOVERNMENTAL FUND TYPES - are used to account for all or most ofa Board's educational activities. Governmental Fund Types include: GENERAL FUND - the fund used to account for all financial resources ofthe Board except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education. SPECIAL REVENUE FUND - the fund used to account for the proceeds ofspecific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified pwposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal government to accomplish specific educational objectives. - 10- BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 1; SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL PROJECTS FUND - the fund used to account for financial resources to. be used for the acquisition or construction of major capital facilities. DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees. FIDUCIARY FUND TYPES - the funds used to account for assets held by a government unit in a trustee capacity or as an agent for individuals, private organizations, other government units and/or other funds. These funds include: NONEXPENDABLE TRUST FUND Cumbee-McCall Fund - the fund used to account for an endowment ofwhich the corpus is to be invested and preserved intact with the resultant income to be used for the purpose of providing for the care and support ofunderprivileged children. EXPENDABLE TRUST FUND Fitzgerald High School Preparatory Trust Fund- the fund used to account for income distributed by the Trustee and used to provide for expenditures pursuant to recommendations of an advisory committee. ACCOUNT GROUP GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for general obligation debt outstanding and material capital lease obligations. BASIS OF ACCOUNTING The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources. Liabilities which are expected to be financed from available SPendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group. All nonexpendable trust funds are accounted for on a flow of economicresources measurement focus. With this measurement focus, all assets and liabilities associated with the operation of these funds. are included on the balance sheet. Operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. - 11 - BEN HUL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 1: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES Governmental and expendable trust funds are accounted for using the modified accrual basis of accounting under which: Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount ofthe transaction can be detennined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities ofthe current period. Those revenues considered susceptible to accrual are property taxes, intergovernmental grants and investment income. Expenditures are generally recognized when the related fund liability is incurred. A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 1998, a substantial number of personnel ofthe Board were employed for a one hundred and ninety day period beginning in late August 1997 and ending in early June 1998. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 1997 and ending in August 1998. State grants to fund the State's share ofthese contracts were disbursed from the Georgia Department of Education to the Board in the same twelve months. As of June 30, 1998, compensation under these employment contracts had been earned, but two ofthe twelve monthly payments, due for July and August 1998, had not been made. Payments for these two months were made and recorded as expenditures by the Boardsubsequent to June 30, 1998. Also, the State's portion of the compensation paid in July and August 1998 was received and recorded as revenue in the fiscal year subsequent to June 30, 1998. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 1997, were recorded in the year ended June 30, 1998. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed. The accrual basis of accounting, as required by generally accepted accounting principles, is utilized by nonexpendable trust funds. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. BUDGET The Ben Hill County Board ofEducation's budget is a complete ~cial plan for the Board's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure of the budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level ofbudget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles. The budget process begins when the Board's administration prep~es a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a - 12 - BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 1; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167, to the Georgia Department ofEducation. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist of deposits in authorized financial institutions. Georgia Laws authorize the Board to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured State chartered building and loan associations. INVESTMENTS COMPOSmON OF INVESTMENTS Investments made by the Board in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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 of Georgia Annotated Section 36-83-4 authorizes the Board 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 cOIporation 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. -13 - BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS ruNE 30. 1998 Note 1; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RECEIVABLES Receivables consist of 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 general purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Ben Hill County Board of Commissioners fixed the property tax levy for the 1997 tax year (calendar year) on September 25, 1997 (levy date). Taxes were due on December 20, 1997. The lien date for property taxes was January 1, 1997. Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 1998. The Ben Hill County Tax Commissioner bills and collects the property taxes for the Board of Education, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the Board. Tax millage rates levied for the 1997 tax year (calendar year) for the Ben Hill County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value); School Operations School Bonds 18.00 mills ~mills ~mills INVENTORIES FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reserv~tionsof fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets. GENERAL OBLIGATION BONDS The Board issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond premiums and discounts, as well as issuance costs, are recognized in the financial statements during the year bonds are issued. General obligation bonds are direct obligations and pledge the - 14- BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30.1998 Note I: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES full faith and credit of the government. The outstanding amount of these bonds is recorded in the General Long-Tenn Debt Account Group. INTERFUND TRANSACTIONS The Board has the following types of interfund transactions: Reimbursements of expenditures/expenses initially made from a fund that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Operating transfers are recorded for all interfund transactions other than reimbursements. MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or cash flows in confonnity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. Note 2: DEPOSITS 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 of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate of the face value of such surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. OCGA Section 45-8-11 provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of anyone of or any combination of the following: (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 ofindebtedness or other direct obligations of the United States or of the State of Georgia, - 15 - BEN HILL COUNTY BOARD OF EDUCATION EXHIBIT "F" NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30. 1998 Note 2: DEPOSITS (4) Bonds, bills, notes, certificates of indebtedness or other obligations ofthe 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 ofdevelopment 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 and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 1998, the bank balances were $4,487,353.37. The amounts of the 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 Board or by the Board's agent in the Board's name. Category 2 - Cash collateralized with securities held by the pledging financial mstitution's trust department or agent in the Board'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 Board's name.) The Board's deposits are classified by risk category at June 30, 1998, as follows: Risk Cate&