Ben Hill County Board of Education, Fitzgerald, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

BEN HILL COUNTY BOARD OF EDUCATION
FITZGERALD, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

BEN HILL 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

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 FUND

11

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

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

29

BEN HILL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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

BEN HILL COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

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
April 28, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Ben Hill 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 Ben Hill County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Ben Hill 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 op1mons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Ben Hill County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

The Ben Hill County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated April 28, 2005, on our consideration of the Ben Hill County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is 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 Ben Hill 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 2004ARL-11

State Auditor

BEN HILL COUNTY BOARD OF EDUCATION

BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
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 Capital Projects Unrestricted
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

$

6,537,305

3,384,501

447,709 1,831,051
370,454 30,141 32,243

126,126 208,366 1,292,422 24,108,947 3,272,379 -9,789,696

$ ===3=1=8=5=1-=9=48=

$

631,506

2,183,333

54,870

8,220

14,271

1,900,000 5,025,000

$

9 817 200

$

16,065,888

619,970 1,702,271
257,533 3,389,086

$

22,034,748

$ ===3=1=8=5=1-=9=48=

BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

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 Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities

$

17,671,686 $

862,867 342,203 331,918 605,169 1,619,255 307,162 1,561,379 703,658 197,171

200,252 1,457,678
290 403

26,150,801 $

2,700
164,294 247,854 414 848

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 For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

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

$

15,200,841 $

286,881 327,777 304,132
14,361 117,964

17,241 442,939
90,416

1,190,738

$

17,993,290 $

402,773 $
13,992 7,521
1,884 72,935 22,593
50,602
572 300 $

-2,065,372
-575,986 -14,426 -13,794
-583,287 -1,501,291
-307,162 -1,542,254
-187,784 -84,162
-35,958 31,516 -290 403
-7,170,363

$

3,737,558

-3,798

11,740

172,586 2,027,699
67,653 9,001
1,729,698 182,348 963 795

$

8,898,280

$

1,727,917

20,306,831

$===2=2=,0=34='=74=8=

-5 -

BEN HILL COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

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
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,662,991 $ 4,859,556 $ 14,758 $ 6,537,305

2,879,430

505,071

3,384,501

641,136 1,831,051
370,454 30,141 32,243

404,221

111

1,045,468

1,831,051

370,454

30,141

32,243

$ 7447446 $ 5,263,777 $ 519,940 $ 13,231,163

$ 631,506
2,183,333
$
14 271
$ 2,829,110 $

54,870 8,220
63,090

$ 631,506
2,183,333 54,870 8,220 14 271
$ 2,892,200

$ 587,727

$

587,727

$ 1,170,810 $ 519,940

1,690,750

32,243

32,243

4,029,877

4,029,877

12,903

12,903

3,985,463

3,985,463

$ 4,618,336 $ 5,200,687 $ 519,940 $ 10,338,963

$ 7 447 446 $ 5,263,777 $ 519,940 $ 13,231,163

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

BEN HILL COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

EXHIBIT" "

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.
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
Net Assets of Governmental Activities (Exhibit "A")

$ 10,338,963

$

126,126

208,366

1,292,422

24,108,947

3,272,379

-9,789,696

19,218,544

-597,759

-6,925,000 $ 22,034,748

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

BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

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 Other Support Services Enterprise Operations Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Proceeds of Refunding Bonds - Par Value Insurance Proceeds Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,583,615

$

76,654 $ 2,027,699

16,335,761

499,365

3,460,162

414,848

130,435

44,304

662,586

$ 25,664,061 $ 2,571,368 $

498 $ 4,584,113

172,586

2,276,939

16,835,126

3,460,162

414,848

7,609

182,348

662,586

180,693 $ 28,416,122

$ 17,062,965

$ 17,062,965

862,867 342,203 310,407 593,606 1,619,255 261,064 1,558,483 830,079 162,437 200,252 1,379,883
$

$ 1,583,108

46,098

862,867 342,203 310,407 593,606 1,619,255 307,162 1,558,483 830,079 162,437 200,252 1,379,883 1,583,108

3,180,000 290,403

3,180,000 290,403

$ 25,183,501 $ 1,583,108 $ 3,516,501 $ 30,283,110

$

480,560 $ 988,260 $ -3,335,808 $ -1,866,988

$ 1,425,000 $ 1,425,000

$

310,000

310,000

1,641,333

1,641,333

$ -1,641,333

-1,641,333

$ 310,000 $ -1,641,333 $ 3,066,333 $ 1,735,000

$ 790,560 $ -653,073 $ -269,475 $ -131,988

3,827,776

5,853,760

789 415

10,470,951

$ 4,618,336 $ 5,200,687 $ 519,940 $ 10,338,963

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

BEN HILL 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. 2004

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 equipment 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 carrying value of the equipment 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:

Refunding Bonds issued

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

$

-131,988

1,615,112 -662,803

952,309 -838,613

-8,791

-1,425,000

3,180,000

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

$ ==1=7=2=7=9.,.17=

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

BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2004

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
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

$

63,667

$

4,135

$

4 135 $ ===63=6=6=7=

$

63,667

$ _ _ _4~1_35_

$

4,135 $ ===63====66=7=

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

BEN HILL COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2004
ADDITIONS Investment Earnings Interest
DEDUCTIONS None Noted Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

EXHIBIT"H"

PRIVATE PURPOSE TRUSTS

$

55

$

0

$

55

4,080

$===4====13=5=

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

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Ben Hill County Board of Education (School District) was established under the laws of the 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 ofthe Ben Hill County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities 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. Eliminations have been made to minimize the double counting ofinternal activities. 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 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds 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 fund reports a trust arrangement, Cumbee-McCall Trust Fund, under which income is to be used for the purpose of providing for the care and support of under privileged children.
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting 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 ofwhen 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 and grants. 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 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 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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 of accounting. 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, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities 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.
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 School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
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 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 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,

- 14 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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.

PROPERTY TAXES

The Ben Hill County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on August 28, 2003 (levy date). Taxes were due on December 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Ben Hill 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, 2004, for maintenance and operations amounted to $4,571,875 and for school bonds amounted to $498.

The tax millage rate levied for the 2003 tax year (calendar year) for the Ben Hill County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

16.27 mills

- 15 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,200,276 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 basic financial statements, inventories ofdonated 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 of purchase (including ancillary charges). 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 estimated 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 ofassets 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 Construction in Progress

Any Amount

$

50,000

$

50,000

$

5,000

$

50,000

NIA 15 years 60 to 75 years 5 to 25 years NIA

- 16 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 of Net Assets.
Note 3: 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 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. If a 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:
(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 ofthe bonds for this purpose,

- 17 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 3: DEPOSITS

(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, 2004, the bank balances were $12,062,363. 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, 2004, as follows:

Risk Category

Bank Balance

1

$ 714,428

2

11,347,935

3

0

Total

$ 12,062.363

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:

- 18 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Balances July I, 2003

Increases

Balances Decreases June 30, 2004

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

$ 126,126

$ 126,126

944,702 $ 208,366 $ 944,702

208,366

Total Capital Assets Not Being Depreciated $ 1,070,828 $ 208,366 $ 944 702 $ 334,492

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 22,130,625 $ 2,974,729 1,292,422

1,978,322 373,126 $

$ 24,108,947

75,476

3,272,379

1,292,422

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

6,274,910 1,862,865 1,055,803

399,165 208,308
55,330

66,685

6,674,075 2,004,488 1,111,133

Total Capital Assets, Being Depreciated, Net $ 17,204,198 $ 1,688,645 $

8 791 $ 18,884,052

Governmental Activity Capital Assets - Net $ 18,275.026 $ 1,897.011 $ 953.493 $ 19,218.544

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services

$ 408,817

$

14,202

7,634

1,912

155,945

22,932

202,625 51,361

Note 6: RESTRICTED ASSETS

$.==6-6~2-~80~3

Special Purpose Local Option Sales Tax (SPLOST), 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 provisions. Restricted assets at June 30, 2004, were as follows:

- 19 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 6: RESTRICTED ASSETS

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

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

$ 1,046,924

$

$ 3,815,807

$

14,758 505,071

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2004, consisted of the following:

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Fund

$ 1,641.333

Transfers are used to move sales tax revenues collected by the District-wide Capital Projects Fund to the Debt Service Fund to meet debt service obligations.

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; unemployment compensation and dental coverage.

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 School District'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 of that loss can be reasonably estimated.

- 20 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 8: RISK MANAGEMENT

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2003 2004

$

4460 $

10 723 $

15 017 $

166

$

166 $

1 144 $

1 310 $

0

The School District has established a limited risk management program for dental coverage of its employees and their dependents. Estimated claims are budgeted by management based on known claims and prior experience. The employees contribute a premium to the fund and the School District funds any deficits. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District.

Claims in dental claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

112,890 $

112,890 $

0

$

0 $

120,648 $

120,648 $

0

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

Position Covered

Amount

Superintendent Military Property Custodian Each Principal Director of Budget and Finance Each Lunchroom Manager and Assistant Manager Each Secretary and Bookkeeper Payroll Administrator

$ 100,000

$

25,000

$

10,000

$

9,000

$

5,000

$

5,000

$

4,000

Note 9: OPERATING LEASES

Ben Hill County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2004, for governmental funds amounted to $96,960. Future minimum lease payments for these leases are as follows:

- 21 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 9: OPERATING LEASES

Year Ending

Governmental Funds

2005 2006

$

41,840

390

Total Note 10: LONG-TERM DEBT

$==="42=,2=3==0

ADVANCE REFUNDING During fiscal year 2004, the Ben Hill County Board of Education issued $1,425,000 in General Obligation Refunding Bonds to advance refund $1,380,000 ofoutstanding bonds. The bond issue of $1,425,000 less underwriters and bond issue cost of$31,200 provided net proceeds of$1,393,800. The total net proceeds were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on portions of the 1993 Bond issue. As a result, portions of the 1993 Series Bonds are considered defeased, and the liability for these portions has been removed from the District-wide Statement of Net Assets. The Ben Hill County Board of Education refunded the aforementioned bonds to reduce its total Debt Service payments over four years beginning subsequent to fiscal year 2004 by $66,600 and to obtain an economic gain (difference between the present values of total debt service payments and the old and new debt) of $65,584.

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

Purpose

Interest Rates

Amount

General Government - Series 2001

2.50% - 3.75%

General Government - Refunding - Series 2004 1.15% - 2.40%

$ 5,500,000 1,425,000

$ 6,925,000

The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows:

- 22 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 10: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2003

$ 8,680,000

Additions G.O. Bonds

1,425,000

Deductions Debt Retired

3,180,000

Balance June 30, 2004

$ 6,925,000

Portion of Long-Term Debt Due within One Year

$ 1,900,000

At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2005 2006 2007 2008

$ 1,900,000 $ 2,065,000 2,575,000 385,000

184,132 130,393 57,802
9 240

Total Principal and Interest

$ 6,925.000 $ 381,567

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $226,453 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $207,529

- 23 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 11: ON-BEHALF PAYMENTS

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $17,073

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 $1,851

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, 2004:

Project

Unearned Executed Contracts

Ben Hill County Primary School Drainage Project

$==="=16=,7~8-0

The amount described in this note is 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 School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 14: 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.

- 24 -

BEN HILL COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "I"

Note 14: RETIREMENT PLANS

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 of Trustees 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

2004 2003 2002

100% 100% 100%

$ 1,368,648 $ 1,361,084 $ 1,342,960

- 25 -

BEN HILL COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2004

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 Other Support Services Enterprise Operations Food Services Operation
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Other Sources
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL {1)

FINAL {1)

ACTUAL AMOUNTS

$

4,222,836 $

4,222,836 $

4,583,615

50,000

50,000

76,654

16,651,168

16,718,014

16,335,761

3,000,877

4,503,567

3,460,162

266,614

266,614

414,848

106,500

106,500

130,435

75 386

75 386

662,586

$

24,373,381 $

25,942,917 $

25,664,061

$

16,912,515 $

18,134,528 $

17,062,965

852,107 539,886 358,472 610,639 1,632,642 272,972 1,636,642 936,402 169,184
1,573,019 145 000

938,036 751,993 358,472 626,222 1,605,518 272,972 1,637,108 986,558
91,552
1,573,019 145 000

862,867 342,203 310,407 593,606 1,619,255 261,064 1,558,483 830,079 162,437 200,252 1,379,883

$

25,639,480 $

27,120,978 $

25,183,501

$

-1,266,099 $

-1, 178,061 $

480,560

310 000

$

-1,266,099 $

-1, 178,061 $

790,560

4,436,345

4,436,345

3,827,776

-71 907

-71 907

Fund Balances - Ending

$

3,098,339 $

3 186 377 $ ===4='=,6=1=8-=,3=36=

Notes to the Schedule of Revenues, Expenditures 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.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555
10.550

N/A

(2)

N/A $ _ _--'-'1,=20"-'9"-1'-'1-"--0

$

1,209,110

N/A

68 586

$ _ _--'-'1=27'-'7-"6'-"9-"--6

84.027 84.173
84.365 84.318 84.213 84.367 84.358 84.186 84.298 * 84.010 84.048

N/A

$

N/A

$

426,520 36,693
463,213

N/A N/A N/A N/A N/A NIA N/A N/A N/A
$

13,570 51,110 250,179 255,764 96,848 32,684 27,641 1,083,757 50,531
2,325,297

$ _ _ ___;4c::6.z.=,2:..:1.=..8

Total Federal Financial Assistance N/A = Not Available

$ ======3'=64=9=,2=1=1

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation 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 ($244,923) were not maintained separately and are included in the 2004 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 Ben Hill 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 fund financial statements.

See notes to the basic financial statements.

- 28 -

BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

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 Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V 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 Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program Health Insurance National Teacher Certification Preschool Handicapped Program Statewide After School Program (4-8) Statewide Reading Program (K-3) Teachers Retirement Lottery Program Technology Installation
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 29-

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

622,080

$

622,080

982,687 107,434 2,030,760 461,796 983,635 176,582 1,973,814 1,509,651 676,382
370,233 763,818 216,018
62,530 130,186
78,912 155,648 118,216 302.738
98,559 58,172
433,410 606,696 853,683
366,849 72,935 19,500 75,830 11,749 18,015
250,856 1,904,200
102,188 71,508
-719,949
1,900 207,529
12,905 62.497 25,656 49,395 17,073
9,634

982.687 107,434 2,030,760 461,796 983,635 176,582 1,973,814 1,509,651 676,382
370,233 763,818 216,018
62,530 130,186
78,912 155,648 118,216 302,738
98,559 58,172
433,410 606,696 853,683
366,849 72,935 19,500 75,830 11,749 18,015
250,856 1,904,200
102,188 71,508
-719,949
1,900 207,529
12,905 62,497 25,656 49,395 17,073
9,634

$ 1 851

499,365

499,365 1 851

$

16 335 761 $

499 365 $ 16,835,126

BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2004

SCHEDULE "4"

PROJECT
Funding the modification, remodeling, renovation, improving and making additions to existing educational facilities of the School District and to require system-wide technology improvements for educational purposes.
To retire up to $1,294,528 of principal and interest on previously incurred general obligation debt with regard to the series 1993 Ben Hill County School District bonds previously issued by the School District.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 12,701,791 $ 12,701,791 $ 1,583,108 $ 3,377,593 Ongoing

1,294,528

1,294,528

386,402

588,120 Ongoing

$ 13,996,319 $ 13,996,319 $ 1,969,510 $ 3,965,713

(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 Ben Hill 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

$

361,000

Current Year

204,000

Total

$ ====s=s=s.,;;,o=o=o

See notes to the basic financial statements.

- 30 -

BEN HILL COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004

SCHEDULE "5"

DESCRIPTION
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 II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

1,107,703 $ 1,085,631 $

8,153 $

1,093,784

120,327

278,002

1,862

279,864

2,274,615

1,826,963

81,353

1,908,316

490,699

808,833

3,779

812,612

1,104,832

995,858

35,393

1,031,251

197,927 2,208,031 1,655,583
762,000 1,582,399
149,383 92,133
172,046 129 920

229,837 2,406,812 2,215,151
829,162
589,081 1,047,161
108,756 168,240
9,168 328,461 176 473

74,161 94,433 69,954
5,770 43,259 37,064
8,149 471

229,837 2,480,973 2,309,584
899,116
594,851 1,090,420
145,820 168,240
9,168 336,610 176 944

$

12,047,598 $ 13,103,589 $

463,801 $

13,567,390

336,756 64 412

295,932

31,089 19,172

327,021 19172

TOTAL QBE FORMULA FUNDS

$

12,448,766 $ 13,399,521 $

514,062 $ ==1=3,=9=13=,5=8===3

(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.

- 31 -

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
April 28, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Ben Hill County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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 ofBen Hill County Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise Ben Hill County Board of Education's basic financial statements and have issued our report thereon dated April 28, 2005. 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 of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Ben Hill County Board ofEducation'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 an opinion on the internal 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 Ben Hill 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-6091-04-01.

2004YB-30

A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud 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.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Ben Hill County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial 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 of noncompliance or other matters that are required to be reported under Government Auditing Standards.

This report is intended solely for the information and use of the management and members of the Ben Hill County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,

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State Auditor

RWH:gp 2004YB-30

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
April 28, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Ben Hill 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 of Ben Hill County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to its major Federal program for the year ended June 30, 2004. Ben Hill County Board of Education's major Federal program is identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of Ben Hill County Board of Education's management. Our responsibility is to express an opinion on Ben Hill County Board of Education's compliance based on our audit.
We conducted our audit of compliance 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 of States, 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 Ben Hill 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 Ben Hill County Board of Education's compliance with those requirements.
2004SA-30

In our opinion, the Ben Hill County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Ben Hill 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 Ben Hill 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.
We noted a certain matter involving the internal control over compliance 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 compliance that, in our judgment, could adversely affect the Ben Hill County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6091-04-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud 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. Our consideration ofthe internal control over compliance 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 ofthe Ben Hill County Board of Education, 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 2004SA-30

State Auditor

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

BEN HILL COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6091-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-6091-03-01

School District continues efforts to ensure that appropriate staff at each school have implemented procedures to achieve separation of duties.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

F A-6091-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6091-03-01

Per Georgia Department of Education procedures we are using a spreadsheet to allocate percentage of combined Federal funds. Meeting attended on August 10, 2004, with John Dunn, Financial Review and our Title I Education Program Specialist, Nancy Norton.

Auditor's Note: The School District has implemented changes to resolve this finding in fiscal year 2005 and this finding will be shown as resolved in the fiscal year 2005 audit report.

SECTION IV FINDINGS AND QUESTIONED COSTS

BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Ben Hill County Board ofEducation's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Ben Hill County Board ofEducation disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The reportable condition described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the Ben Hill 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 Ben Hill County Board ofEducation disclosed a reportable condition in internal control over its major program for the following compliance requirements.

Special Tests and Provisions

The reportable condition described above is not considered to be a material weakness.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Ben Hill County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .5 lO{a) of 0MB Circular A-133 The Ben Hill County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report.

7. Major Programs Federal award audited as a major program is as follows: 84.010 Title I Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

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BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Ben Hill County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Repeated From Prior Year Finding Control Number: FS-6091-04-01
The Ben Hill County Board ofEducation (School District) did not provide for adequate separation of employee duties related to principals' (school activity) accounts in the performance ofthe following accounting functions and procedures: Cash and Cash Equivalents
The bank reconciliation function is not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Cash receipt function is not separated from deposit preparation and record keeping functions. Expenditures/Liabilities/Disbursements Claims processing function is not separated from record keeping and claims approval functions. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principals' account sites, for the accounting functions. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated.
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BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Repeated From Prior Year Finding Control Number: FA-6091-04-01
During the year in review, there were three schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures.
In accordance with provisions ofU. S. Department of Education Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a school-wide program, U.S. Department ofEducation Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school-wide program in a reasonable manner. Ifthere is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program.
The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department ofEducation and (2) in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The Board should seek Georgia Department ofEducation guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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SECTIONV MANAGEMENT'S RESPONSES

BEN HILL COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6091-04-01
We concur with this finding. The School District has begun the process ofmeeting with our staffto assure that there is separation of duties by those who perform key accounting functions of custody, record keeping, and authorization. The School District will implement strategies and procedure documentation for separation of duties by each school and anticipates clearing this finding for the fiscal year 2005 school year.
Finding Control Number: FA-6091-04-01
We concur with this finding. The bookkeeper has implemented the procedures suggested by Georgia Department ofEducation to assure that appropriate strategies for combining and allocating more than one Federal Program is used in implementing the School-wide Program expenditures.
Contact Person: Kenneth C. Cato, Associate Superintendent Phone: (229) 409-5500 ext 5522 Fax Number: (229) 409-5513 E-mail Address: kcato@benhill.k12.ga.us