Berrien County Board of Education, Nashville, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

BERRIEN COUNTY BOARD OF EDUCATION
NASHVILLE, 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

BERRIEN 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

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

29

BERRIEN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM

Page 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

BERRIEN COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS-
SECTION V MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 8, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Berrien 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 H) of the Berrien 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 Berrien County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Berrien County Board of Education, 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 Berrien 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 August 8, 2005, on our consideration ofthe Berrien County Board ofEducation'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 ofour 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 25 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 of measurement 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 Berrien 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 of Georgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2004ARL-11

State Auditor

BERRIEN COUNTY BOARD OF EDUCATION

BERRIEN 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 Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries 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
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

2,954,978

1,162,004

375,438 1,668,521
691,173 45,147

332,814 1,978,041 19,176,715 2,894,522 -6,185,788

$

704,856

1,860,495

5,307

1,225,000 4 070 000

$

7 865 658

$

13,491,791

99,175 294,089 114,588 721,129 2,507,135

$

17,227,907

$ ===2=5=-,0=9=3-=,5=6=5

The notes to the basic financial statements are an integral part of this statement. -3-

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

14,102,734

762,877 518,117 336,322 735,113 1,021,545 122,697 1,315,157 921,768 135,202
18,997

3,994 $ 1,431,546
278105

$

21 704 174 $

106,381 321,288
427 669

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

$

13,494,963

593,560 260,982 265,511 288,814
10,939

22,829 515,155 $
7,133

1,020,256

$

16 480 142 $

$ 105,601 105 601 $

-607,771
-169,317 -257, 135
-70,811 -446,299 -1,010,606 -122,697 -1,292,328 -301,012 -135,202
-11,864
102,387 -90,002 -278 105
-4,690,762

$

2,942,742

3,483

1,392,321 11,018 9,892
1,287,748 43,473
343,780

$

6,034,457

$

1,343,695

15,884,212

$ ===17=2=2=7=9=07=

-5-

BERRIEN 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 Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2.514.083 $

686.452

1,162.004

146,097

$

1,668,521

691,173

45147

$ 245,557

3.200.535 1.162.004
391,654 1,668,521
691,173 45,147

Total Assets

$

5,065,021 $

1848456 $

245 557 $ ==~7~1;,;;5~9~0~34~

LIABILITIES AND FUND BALANCES
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances

$

$

704,856

1,860,495

5,307

$ 2,570,658

$

$

99,175

248.942

$

114,588 $

45,147

1,310,868

2,101,099

423,000

$

2,494,363 $

1,848,456 $

245,557 $ 245,557 $
$ 0
0 $

245,557 704,856 1,860,495
5,307
2,816,215
99,175 248,942 114,588
45,147 1,310,868
2,101,099 423,000
4,342,819

Total Liabilities and Fund Balances

$ 5,065,021 $ 1,848,456 $

245 557 $ ==~7~1;,;;5~9~0~34;,.,

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

BERRIEN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2004

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land 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

$

4,342,819

$

332,814

1,978,041

19,176,715

2,894,522

-6,185,788

18,196,304

-16,216

-5,295,000

Net Assets of Governmental Activities (Exhibit "A")

$ 17,227,907

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

BERRIEN 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 Central Support 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)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 2,947,455 20,910
13,927,910 3,945,581 427,669 30,998 $ 343 780
$ 21,644,303 $

$ $ 1,392,321
12,475 12 475 $ 1,392,321 $

2,947,455 1,413,231 13,927,910 3,945,581
427,669 43,473
343 780
23,049,099

$ 13,851,221
741,925 518,091 336,319 732,692 1,021,545 119,432 1,212,414 821,065 135,202
18,997 3,994
1,380,761 $

$ 20,893,658 $

$

750 645 $

$ 13,851,221

741,925

518,091

336,319

732,692

1,021,545

119,432

1,212,414

821,065

135,202

18,997

3,994

1,380,761

747

747

$ 1,165,000 278,105

1,165,000 278 105

747 $ 1 443 105 $ 22,337,510

11 728 $

-50 784 $

711 589

$ 423,000 $

$

-423,000

-50 784

$

-423,000 $

372,216 $

$

327,645 $ 383,944 $

2,166,718

1,464,512

50,784 $
50,784 $ 0 $ 0

473,784 -473,784
0 711,589 3,631,230

Fund Balances - Ending

$ 2,494,363 $ 1,848,456 $====0= $====4=1=,3=4=2,.;;;8=19=

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

BERRIEN 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.
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

$

711,589

$ 74,864 -606,528

-531,664 -1,230

1,165,000

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

$ ==1,..,34=3=,6=9=5

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

BERRIEN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS $ ===70=2=1=1=
$ = = =70= ,211=

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Berrien County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Berrien 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.
The School District reports the following major governmental funds:
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various principal accounts held at each school.
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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, 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 and acquisitions under capital leases are reported as other financing sources.
- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 Berrien County Board ofCommissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 30, 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 Berrien 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 $2,943,972.

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

School Operations

12.0 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,392,321 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.

- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at 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 of assets or materially extend the useful lives ofthe 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

Any Amount

$

5,000

$

5,000

$

5,000

NIA 20 to 80 years 10 to 80 years
5 to 50 years

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

GENERAL OBLIGATION BONDS

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

- 15 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination ofthe 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 of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $5,161,699. The amounts of the total bank balances are classified into three categories of credit risk:

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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

$ 300,000

2

3,660,243

3

1,201,456

Total

$ 5,161.699

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value ofthe School District's total investments was $1,162,004 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net ofmanagement fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2003

Increases

Balances Decreases June 30, 2004

Governmental Activities

Capital Assets, Not Being Depreciated:

Land

$ 332,814 $

0 $

0 $ 332 814

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 19,176,715 2,819,658 $ 1,978,041

$ 74,864

0 $ 19,176,715 2,894,522 1,978,041

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,863,694 1,756,824
958 742

290,536 211,220 104 772

3,154,230 1,968,044 1,063,514

Total Capital Assets, Being Depreciated, Net $ 18,395,154 $ -531 664 $

0 $ 17,863,490

Governmental Activity Capital Assets - Net $ 18,727,968 $ -531 664 $

0 $ 18,196,304

Current year depreciation expense by function is as follows:

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS
Instruction Support Services
Pupil Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 251,204

$

20,952

2,417

3,265

125,154

152,814

304,602 50,722

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and Lottery 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:

District-wide Capital Projects

Bond

Lottery

SPLOST

Proceeds

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

$

12,824 $ 245,942 $

4,686

$ 114,588 $ 462,363 $ 585,053

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects Debt Service Funds

$ 423,000 $

50 784

Total

$ 423!000 $

50 784

- 19 -

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

EXHIBIT "H"

Note 7: INTERFUND TRANSFERS

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as supplemental funding source for capital construction projects, and to move SPLOST revenue to Debt Service Fund to make bond payments.

Note 8: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. 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 these risks 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.

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

$

0 $

7 352 $

7 352 $

0

$

0 $

4 948 $

2 360 $

2,588

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000.

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

- 20 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

Position Covered

Amount

Superintendent All Employees

$

20,000

$ 100,000

Note 9: OPERATING LEASES

Berrien 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 $83,415. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2005 Note 10: LONG-TERM DEBT

$======9=3=7

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

Purpose

Interest Rates

Amount

General Government - Series 1998

4.0%-4.4% $ 5,295.000

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

Governmental Funds
General Obligation
Bonds

Balance July 1, 2003

$ 6,460,000

Deductions Debt Retired

1,165,000

Balance June 30, 2004

$ 5,295,000

Portion of Long-Term Debt Due within One Year

$ 1,225,000

- 21 -

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

EXHIBIT"H"

Note 10: LONG-TERM DEBT

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

$ 1,225,000 $ 1,290,000 1,355,000 1,425,000

229,175 177,112 121,643 62,700

Total Principal and Interest

$ 5,295.000 $ 590.630

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $218,319 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 of Non-Certified Personnel In the amount of $216,297

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 $2,022

Note 12: 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.

- 22 -

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

EXHIBIT "H"

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board 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%

$ 1,137,575 $ 1,154,144 $ 1,068,061

- 23 -

BERRIEN 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 Central Support Services Other Support Services Enterprise Operations Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Other Uses
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

2,795,454 $

2,795,454 $

2,947,455

20,910

13,973,085

13,973,085

13,927,910

2,866,086

2,866,086

3,945,581

362,000

362,000

427,669

24,000

24,000

30,998

42,500

42 500

343,780

$

20,063,125 $

20,063,125 $

21,644,303

$

12,845,910 $

12,768,061 $

13,851,221

903,838 334,994 368,110 612,078 1,028,965 122,869 1,192,815 798,881 147,607
12,860 2,500
1 391 347

893,738 332,656 368,110 608,678 1,028,965 122,919 1,192,815 798,181 147,607
14,000 2,500
1,391,625

741,925 518,091 336,319 732,692 1,021,545 119,432 1,212,414 821,065 135,202
18,997 3,994
1 380 761

$

19 762 774 $

19,669,855 $

20,893,658

$

300,351 $

393,270 $

750,645

-423,000

$

300,351 $

393,270 $

327,645

2,297,946

2,297,946

2,166,718

-430,361

-430,361

Fund Balances - Ending

$

2,167,936 $

2,260,855 $ ==~2,.,;;49~4~,3;;;;63;;,,,

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.

-25-

BERRIEN 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 Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Summer Food Service Program for Children
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 Direct Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education Education for Homeless Children and Youth Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Pass-Through From Coastal Plains Regional Educational Service Agency d/b/a Southern Pines Migrant Education Agency Migrant Education
Total U. S. Department of Education
Labor, U.S. Department of Pass-Through From South Georgia Regional Educational Service Agency Workforce Investment Act Youth Activities
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553 10.555 10.559

N/A N/A $
N/A $

(2) 1,208,638
5 546 1,214,184

10.550

N/A
$

88,334 1,302,518

84.027 84.173
. 84.287
84.196 84.318
. 84.367 84.338 84.358 84.186 84.298
. 84.010 . 84.287
84.048
84.011

N/A $
N/A
$

466,516 45 127
511,643

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

109,829
10,000 67,551 174,837 719,971 82,538 29,117 13,300 950,005 211,657 45,559
57,035
2,983,042

17.259

N/A $

23,043

$ ===4=!'=30=8"",6=03=

- 26 -

BERRIEN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2004

SCHEDULE "2"

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 ($223,231) 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 Berrien 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.

- 27 -

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

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 CategoryV Gifted Student - Category VI Remedial Education Program Alternative Program 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 Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Environmental Science Program Family Connection Health Insurance National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Statewide After School Program 4-8 Statewide Reading Program K-3 Lottery Program Student Information System
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 28-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

299,343

642,495 223,039 1,495,194 563,135 882,181 219,633 1.949,068 1,187,372 648,582
392,317 560,637 120,910
76,628 212,458 118,556 137,707 265,511
85,987 54,338
401,650 551,049 797,795
488,358 105,601
19,500 72,134 10,939
4,609 1,251,788
84,742 119,347 -616,758
38,690 88,734 216,297
2,819 56,000 11,369 23,972 39,779
22,383
2 022
$ =====13;,;;9..2=71=9.1..o=

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

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS(3)

PROJECT STATUS

Acquiring, constructing and equipping one

new high school facility; adding to, renovating,

repairing, improving and equipping existing

school buildings and other buildings and

facilities useful or desirable in connection

therewith; acquiring any necessary property

therefore, both real and personal; and to pay

expenses incidental to accomplish

the foregoing

$ 11,345,000 $ 14,041,736

$ 14,041,736 Completed

Retiring a portion of the School Districts General Obligation Bonds, Series 1998, by paying or making provision for the payment of principal of and interest on such bonds coming due on August 1, 2003 through February 1, 2008

7,400,000

7,400,000 $

1,443,105

Ongoing

Adding to, renovating, repairing, improving, and

equipping existing school buildings and other

buildings and facilities useful or desirable in

connections therewith, and acquiring any

necessary property therefore, both real and

personal, or the School District

800,000

800,000

747

Ongoing

$ 19,545,000 $ 22,241,736 $

1,443,852 $ 14,041,736

(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 Berrien County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 29-

BERRIEN 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 CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program
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

$

706,476 $

678,033 $

22,408 $

700,441

260,252

240,217

1,441

241,658

1,652,010

1,558,688

87,161

1,645,849

632,677

533,881

4,211

538,092

975,703

851,674

18,238

869,912

271,795 2,161,149 1,317,377
702,683 1,267,957
238,354 143,238 152,271

237,588 1,933,396 1,441,066
591,154
399,104 703,255
18,248
224,286 298,014 226,299

1,499 63,163 58,757 48,779
6,318 11,139
1,736 3,696 3,874 2,692 2,177

239,087 1,996,559 1,499,823
639,933
405,422 714,394
19,984 3,696
228,160 300,706 228,476

$

10,481,942 $ 9,934,903 $

337,289 $

10,272,192

294,103 60 119

294,297 11,235

27,588 43 768

321,885 55 003

TOTAL QBE FORMULA FUNDS

$

10 836 164 $ 10,240,435 $

408 645 $ =~1ai,0~,6~49~,0~8~0

(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
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 8, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Berrien 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 of Berrien County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Berrien County Board of Education's basic financial statements and have issued our report thereon dated August 8, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Berrien County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. 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 Berrien County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6101-04-01 and FS-6101-04-02.
2004YB-30

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 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 none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Berrien 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 Berrien County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 8, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Berrien County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofBerrien County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Berrien County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Berrien County Board of Education's management. Our responsibility is to express an opinion on Berrien 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 ofAmerica; 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 Berrien 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 Berrien County Board of Education's compliance with those requirements.
2004SA-30

In our opinion, the Berrien County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Berrien 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 Berrien 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 Berrien 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-6101-04-01.
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 of the Berrien County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004SA-30

State Auditor

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

BERRIEN 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-6101-03-01

Unresolved - See Corrective Action/Reponses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6101-03-01

Due to limited personnel at the schools, some bookkeeping functions showed a weakness in internal control. We have implemented new procedures to separate some of the bookkeeping responsibilities with the secretary, bookkeeper and principal. This way there is more than one person involved in the handling of cash, deposits and record keeping.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6101-03-01

Unresolved - See Corrective Action/Reponses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6101-03-01

Systems have complied with all of the guidelines/requirements currently set forth by the Georgia Department ofEducation. The system is waiting on additional guidance from the State on how the LEA should implement funding and operational procedures to remove fiscal and accounting barriers under the current accounting system of Georgia. We expect that guidance will be provided prior to or no later than July 22, 2005. This will be corrected in fiscal year 2005 per the Georgia Department of Education.

SECTION IV FINDINGS AND QUESTIONED COSTS

BERRIEN 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 Berrien County Board of Education's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Berrien County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Employee Compensation

Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Berrien 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 Berrien County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement.

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 Berrien County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Berrien County Board of Education's audit disclosed an audit finding required to be reported by section .51 0(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 10.559 Summer Food Service Program for Children 84.010 Title I Grants to Local Educational Agencies 84.287 Twenty-First Century Community Learning Centers 84.338 Reading Excellence - Local Reading Improvement

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BERRIEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Berrien County Board of Education did not qualify 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 Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-6101-04-01
Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of 25 items, 5 were not deposited in a timely manner.
Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of 25 items, 2 checks did not have supporting documentation.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated.
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BERRIEN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Failure to Maintain Adequate Payroll Documentation Reportable Condition Finding Control Number: FS-6101-04-02
A review ofthe employee compensation transaction records disclosed that the School District failed to provide adequate documentation in the following areas:
The calculation for extended day and extended year salary amounts appeared to be inconsistently applied using different supplemental amounts along with the state base salary. In addition, there was no documentation available to verify the School District's calculation method for the individual employees.
The manual sick and personal leave records did not agree to the PC GENESIS system yearend reports for numerous employees.
These deficiencies are a result of management's failure to provide adequate monitoring of their employee compensation transactions. The School District should implement procedures to ensure complete and accurate records are maintained for the calculation ofextended day and extended year salaries included in the employee's contracts. The School District should also ensure that the records used to calculate sick and personal leave are accurate.
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-6101-04-01
During the year in review, the School District identified four schools that participated in a schoolwide program. Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program. The Title I program supports the school-wide program at the four schools in the District. Although required by U.S. Department ofEducation and 0MB A-133 Compliance Supplement provisions, we found that the School District had not consolidated the different Federal funds for each ofthose schools that participated in a school-wide program. Furthermore, we noted that the School District arbitrarily charged each Federal fund with individual school-wide expenditures rather than using a prescribed cost allocation plan to distribute school-wide program expenditures to each funding source.
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BERRIEN 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-6101-04-01
In accordance with provisions ofU. S. Department ofEducation 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 ofthe school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department ofEducation funded programs in support ofa school-wide program, U. S. Department of Education Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a schoolwide 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. 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 ofthe school-wide program. To distribute such costs, provisions of 0MB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented, maintained for audit. The School District personnel were unaware of these requirements and it was the School District's understanding that school-wide program expenditures lose their identity and therefore any school-wide program cost can be charged to Title I and other Federal funding programs.
The School District should implement procedures to (1) combine such funds as prescribed by U.S. Department of Education and (2) in line with 0MB Circular A-87 provisions allocate such schoolwide program costs to the respective Federal fund in a reasonable manner. The Board should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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SECTIONV MANAGEMENT'S RESPONSES

BERRIEN COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED ITJNE 30, 2004
Finding Control Number: FS-6101-04-01
The schools have limited staff. We have implemented new guidelines for our schools to help with segregation of duties. There will be at least two people handling cash and cash equivalents.
Finding Control Number: FS-6101-04-02
Calculations were made by former personnel. Current personnel are calculating extended day and extended year salaries consistently for all employees. As offiscal year 2006, manual leave cards are being kept on all personnel to ensure leave is correct from this day forward.
Finding Control Number: FA-6101-04-01
Systems have complied with all of the guidelines/requirements currently set forth by the Georgia Department of Education. The system had been waiting on additional guidance from the State on how the LEA should implement funding and operational procedures to remove fiscal and accounting barriers under the current accounting system ofGeorgia. Guidance has been provided by the Georgia Department ofEducation, which came after fiscal year 2004. This has been corrected in fiscal year 2005 per the Georgia Department of Education.
Contact Person: Julie Wiley, Finance Director Phone: (229) 626-2081 Fax Number: (229) 686-9002 E-mail Address: jwiley@berrien.k12.ga.us