BULLOCH COUNTY BOARD OF EDUCATION STATESBORO, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor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ashington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 May 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Bulloch 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 Bulloch County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Bulloch 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 opm10ns. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Bulloch County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Bulloch County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. In accordance with Government Auditing Standards, we have also issued our report dated May 3, 2004, on our consideration of the Bulloch County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Bulloch County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 4, 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, ~~ 0G ~ # 4 V Russell W. Hinton State Auditor RWH:as 2003-34ARL-l l BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 INTRODUCTION Our discussion and analysis of the Bulloch County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for 2003 are as follows: The School District implemented GASB 34 for 2003. Due to this being the implementation year, many comparisons are not available that will be available for 2004. On the district-wide financial statements, the assets of the School District exceeded liabilities by $46.2 million. Of this amount, $4.5 million is unrestricted and is available for spending at the School District's discretion. The School District had $73.1 million in expenses relating to governmental activities; only $47.2 million of these expenses are offset by program specific charges for services, grants and contributions. Special items and general revenues (primarily property and sales taxes) of $24.6 million and fund balance were adequate to provide for these programs. As stated above, general revenues and special items accounted for $24.6 million or 34% of all revenues totaling $71.8 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. OVERVIEW OF THE FINANCIAL STATEMENTS This report consists of several parts including management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide andfundfinancial statements. The district-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statement provides information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Bulloch County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements The district-wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the district-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. 11 BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled within the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the districtwide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available. 111 BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets (in Thousands) Governmental Activities Fiscal Year 2003 Assets Current and Other Assets Capital Assets, Net $ 14,855 56,280 Total Assets $ 71,135 Liabilities Current and Other Liabilities Long-Term Liabilities $ 9,260 15,640 Total Liabilities $ 24,900 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 40,639 1,075 4,521 Total Net Assets $ 46,235 Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available. IV BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets (in Thousands) Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Sales Taxes Local Option Sales Tax for Maintenance and Operations Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Building Total General Revenues and Special Items Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Expenses Decrease in Net Assets Governmental Activities Fiscal Year 2003 $ 1,234 45,959 $ 47 193 $ 9,307 1,872 7,867 360 72 1,840 155 2,191 918 $ 24,582 $ 71 775 $ 47,727 2,878 1,179 1,673 575 4,260 268 4,701 3,267 539 902 503 3,813 858 $ 73,143 $===-1=",3===6==8 V BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the School District has prepared financial statements following GASB Statement 34; cost of service comparisons for fiscal year 2002 are not available. Table 3 Governmental Activities (in Thousands) Total Cost of Services Fiscal Year 2003 Net Cost of Services Fiscal Year 2003 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 47,727 $ 14,363 2,878 1,179 1,673 575 4,260 268 4,701 3,267 539 902 1,818 402 734 -489 2,353 268 2,596 1,568 539 472 503 357 3,813 110 858 858 Total Expenses $ 73~143 $ 25~949 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues, special items and other financing sources of $72.6 million and total expenditures and other financing uses of $74.3 million. General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. Vl BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 During the course of fiscal year 2003, the School District amended its general fund budget as needed. The School District uses site-based budgeting as a part of the budget process. The budgeting systems are designed to control total site budgets but provide flexibility for site management. For the General Fund, the actual revenues of $70.1 million (including proceeds from the sale of the central office building) were over the final budgeted amount of $70 million by $0.1 million. This difference (actual vs. final budget) was due primarily to a decrease in state revenues under final budget of $1.8 million and miscellaneous revenues over final budget of $1.8 million. The miscellaneous revenues over final budget were due primarily to the inclusion of the principals' accounts in our financial statements, but not in the budget. The actual expenditures of $71 million exceeded the final budgeted amount of $69.1 million by $1.9 million. This difference was due primarily to the inclusion of the school principals' accounts in our financial statements, but not in the budget. General Fund revenues were less than expenditures by $1.9 million. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2003, the School District had $56.3 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available. Table 4 Capital Assets (Net of Depreciation, in Thousands) Governmental Activities Fiscal Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 2,572 957 49,089 3,344 317 Total $ 56,279 The School District had no construction projects during the year ended June 30, 2003, except for the central office renovation. Vil BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Debt At fiscal year ended June 30, 2003, the School District had $15.6 million in bonds outstanding, but no other long-term debt. This is summarized in Table 5. Table 5 Debt at June 30 (in Thousands) Governmental Activities Fiscal Year 2003 Bonds Payable $ 15,640 At June 30, 2003, the School District's assigned bond rating was "Al" as determined by Moody's Investors Services, Inc. CURRENT ISSUES Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations. Economic Slowdown - State funding for education has decreased and as a result more pressure is being placed on the local school district to prioritize its educational programs and provide additional local funding. Additional costs to the District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Bulloch County School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. The School District is evaluating necessary expenditure reductions in the event that state revenues continue to decline. In addition, due to a strong local economy, local revenues are expected to mcrease. Capital Improvements - The School District has developed a facilities plan to construct and improve three high schools and an elementary school. These capital expenditures will be funded by bond proceeds of $38.5 million, interest earning of $1.5 million, and state funding of $1.5 million. Bond Issuance - The School District issued $38 million in General Obligation Bonds which will be repaid by Special Purpose Local Option Sales Tax (SPLOST) proceeds collected over a five year period beginning on January 1, 2004. This SPLOST was passed by local voters on September 16, 2003. vm BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information contact Mr. Charles Wilson, Assistant Superintendent for Business and Finance for the Bulloch County School System, 150 Williams Road, Suite A, Statesboro, Georgia 30458. You may also email your questions to Mr. Wilson at cwilson@bulloch.k12.ga. us. IX BULLOCH COUNTY BOARD OF EDUCATION BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003 Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 5,243,432 634,525 2,232,028 4,782,372 1,833,867 13,609 115,370 2,571,985 957,425 977,957 59,582,518 9,587,893 -17,398,346 $ ===7=1=,1=3=4=,6=35= $ 2,632,922 6,546,683 25,856 54,057 54 775,000 14,865,000 $ 24,899,572 $ 40,639,432 155,933 918,766 4,520,932 $ 46,235,063 $ ===7=1:!.,1=3=4=,6=35= The notes to the basic financial statements are an integral part of this statement. -3- BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30 2003 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS 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 $ 47,726,663 $ 2,877,700 1,178,967 1,672,461 575,284 4,260,343 267,862 4,701,105 3,266,915 539,355 901,828 502,739 3,813,000 858,240 51,940 $ 146,178 1,036,328 33,311,547 $ 1,060,141 777,362 938,387 1,063,899 1,907,037 2,105,460 1,698,547 429,291 2,667,034 -14,363,176 -1,817,559 -401,605 -734,074 488,615 -2,353,306 -267,862 -2,595,645 -1,568,368 -539,355 -472,537 -356,561 -109,638 -858,240 Total Governmental Activities $ 73,142 462 $ 1,234 446 $======4=5=,=9'5'=8=7=0=5= $ -25,949,311 General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Maintenance and Operations Intangible Recording Tax Real Estate Grants and Contributions not Restrictad to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Building $ 9,306,521 1,871,863 7,867,710 360,381 72,477 1,839,840 154,777 2,190,529 917 550 Total General Revenues and Special Items $ _ _ _2_4~58_1_6_4_8_ Change in Net Assets $ -1,367,663 Net Assets - Beginning of Year 47 602 726 Net Assets - End of Year $ ===4=6,.,.2=3=5"=0=63== The notes to the basic financial statements are an integral part of this statement. -4 - BULLOCH COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 4,245,472 $ 634,525 1,679,410 4,782,372 1,833,867 13,609 115 370 161,508 $ 836,452 $ 28,793 5,243,432 634,525 1,708,203 4,782,372 1,833,867 13,609 115,370 $ 13,304,625 $ 161,508 $ 865,245 $ 14,331,378 $ 2,632,922 6,546,683 $ 54 $ 9,179,659 $ 25,856 54,057 79 913 $ 2,632,922 6,546,683 25,856 54,057 54 $ 9,259,572 $ 40,563 115,370 3,969,033 $ $ 4,124,966 $ $ $ 865,245 40,563 865,245 115,370 81,595 81,595 $ 865,245 $ 3,969,033 81,595 5,071,806 $ 13,304,625 $ 161,508 $ 865,245 $ 14,331,378 The notes to the basic financial statements are an integral part of this statement. - 5- BULLOCH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") $ 5,071,806 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 $ 2,571,985 957,425 977,957 59,582,518 9,587,893 -17,398,346 56,279,432 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. 523,825 Bonds Payable, which are Long-Term Liabilities, are not due and payable in the current period and therefore are not reported as liabilities in the funds. -15,640,000 Net Assets of Governmental Activities (Exhibit "A") $ 46,235,063 The notes to the basic financial statements are an integral part of this statement. -6- BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services 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 Proceeds from Sale of Building 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 $ 9,473,132 8,261,670 38,557,261 $ 9,221,284 1,234,446 152,833 2,160,529 $ 69,061,155 $ $ 20,000 1,818,342 $ 38,898 1,730 214 30,000 11,291,474 8,300,568 38,577,261 9,221,284 1,234,446 154,777 2,190,529 51,730 $ 1,857,454 $ 70,970,339 $ 46,616,942 $ 46,616,942 2,877,700 1,178,967 1,606,523 575,284 4,254,140 262,442 $ 4,719,513 3,555,648 539,355 579,295 502,739 3,671,733 20,658 $ 1,225,489 4,614 2,877,700 1,178,967 1,606,523 575,284 4,254,140 267,056 4,719,513 3,555,648 539,355 579,295 502,739 3,671,733 1,246,147 735,000 858,240 735,000 858,240 $ 70,960,939 $ 1,225,489 $ 1,597,854 $ 73,784,282 $ -1,899,784 $ -1,173,759 $ 259,600 $ -2,813,943 $ $ -580,000 1,078,800 580,000 $ 498,800 $ 580,000 $ -1,400,984 $ -593,759 $ 5,525,950 675,354 $ $ 259,600 $ 605,645 580,000 -580,000 1,078,800 1,078,800 -1,735, 143 6,806,949 $ 4,124,966 $ 81,595 $ 865,245 $=~5~,0~7,;.1,.;;,80~6~ The notes to the basic financial statements are an integral part of this statement. -7- BULLOCH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2003 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") $ -1,735,143 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 under Depreciation Expense $ 1,914,911 -2,008,091 -93, 180 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. -113,090 In the Statement of Activities, only the gain on the sale of the building is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building sold. -161,250 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, this amount consists of Bond Principal Retirements. 735,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ -1,367,663 The notes to the basic financial statements are an integral part of this statement. -8- BULLOCH COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===6=4=7,=30= $ ===6=4=7,=30= The notes to the basic financial statements are an integral part of this statement. -9- BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Bulloch 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 of the Bulloch County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement of Activities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods 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 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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 and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for property taxes legally restricted for the payment of general long-term 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 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 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 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 and acquisitions under capital leases are reported as other financing sources. - 12 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs, Federal Programs and Other Programs were reported as Special Revenue Funds. These funds had a combined fund balance of$121,492 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$473,913 at July 1, 2002. This change is in accordance with generally accepted accounting principles. General Fund Balance July 1, 2002 $ 4,930,545 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 121,492 473 913 General Fund Balance July 1, 2002 (Restated) $ 5,525,950 CHANGES IN ACCOUNTING PRINCIPLES The Bulloch County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions ofGASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: - 13 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 5,525,950 675,354 605,645 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable $ 6,806,949 71,987,867 -15,454,005 636,915 -16,375,000 Net Assets Beginning (See Exhibit "B ") $ 47!602!726 CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, - 14 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 Bulloch County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 8, 2002 (levy date). Taxes were due on January 17, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Bulloch County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $9,473, 132 and for school bonds amounted to $1,818,342. Tax millage rates levied for the 2002 tax year (calendar year) for the Bulloch County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 8.57 mills ~ mills 9.48 mills SALES TAXES Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $7,867,710 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District. - 15 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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 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 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 Any Amount $ 100,000 $ 100,000 $ 5,000 NIA 15 years 60 years 5 to 12 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 of Net Assets. - 16 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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 ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $6,735,406. The amounts of the total bank balances are classified into three categories of credit risk: - 17 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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, 2003, as follows: Risk Category Bank Balance 1 $ 336,857 2 115,615 3 6,282,934 Total $ 6,735,406 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $599,525 which is materially the same as fair value. This investment consisted entirely of funds 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 of the 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 to ensure stability. The pool distributes earnings (net of management 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. - 18 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 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, 2002 Increases Decreases Balances June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 2,571,985 0 $ $ 957,425 0 $ 2,571,985 957,425 Total Capital Assets Not Being Depreciated $ 2,571,985 $ 957 425 $ 0 $ 3,529,410 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 59,807,518 8,712,407 $ 895,957 $ 875,486 82,000 225,000 $ 59,582,518 9,587,893 977,957 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 9,419,836 5,398,527 635,642 1,137,417 845,803 24 871 63,750 10,493,503 6,244,330 660,513 Total Capital Assets, Being Depreciated, Net $ 53,961,877 $ -1,050,605 $ 161,250 $ 52,750,022 Governmental Activity Capital Assets - Net $ 56,533,862 $ -93 180 $ 161,250 $ 56,279,432 - 19 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services $ 994,222 $ 57,649 35,495 705 70,893 423,241 281,989 869,972 143,897 $ 2,008,091 Note 6: RESTRICTED ASSETS Property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) is reported as restricted assets in the Statement of Net Assets because its use is limited by statutory provisions. Restricted assets at June 30, 2003, was as follows: Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services $====8==36'=",4==5==2 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $==='5"="'8=='0.==00====0 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. - 20- BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" 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 automobiles, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups ofself-insurance funds, including the processing and defense ofclaims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake) and general liability (including coverage for sexual harassment, molestation and abuse). Payment of excess insurance for the system varies by line of coverage. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure 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 2002 2003 $ I 071 $ 6 198 $ 1 098 $ 6 171 $ 6 171 $ 8 378 $ 13 467 $ 1 082 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 50,000 $ 200,000 - 21 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1996 General Government - Series 1997 4.70% - 6.00% 4.80% - 7.00% $ 7,585,000 8,055,000 $ 15.640.000 Voters have authorized $38,000,000 in general obligation debt for various construction projects which was not issued as of June 30, 2003. The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Obligation Bonds Balance July 1, 2002 $ 16,375,000 Deductions Debt Retired 735 000 Balance June 30, 2003 $ 15.640.000 Portion of Long-Term Debt Due within One Year $ 775 000 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: - 22 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 2009 - 2013 2014 - 2017 $ 775,000 $ 814,140 815,000 767,640 855,000 723,950 900,000 683,325 945,000 639,660 5,590,000 2,420,443 5,760,000 777,262 Total Principal and Interest $ 15,640,000 $ 6,826,420 Note 10: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $782,929 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $664,766 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 $118,163 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2003: Project Unearned Executed Contracts William James Educational Complex $====58=4==0==4 The amount described in this note is not reflected in the basic financial statements. - 23 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" 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. Note 13: SUBSEQUENT EVENTS On September 16, 2003, the voters of Bulloch County voted in favor of a Special Purpose Local Option Sales Tax referendum for education purposes. The imposition ofthe tax approved by voters, as stated on the Official Ballot of Bulloch County is as follows: "Shall a one percent sales and use tax for educational purposes be imposed in the Bulloch County School District for a period oftime not to exceed five years and for the raising of not more than $49,800,000 for the purpose of acquiring, constructing and equipping new facilities for Portal High School and Middle School, Southeast Bulloch High School, Statesboro High School and Nevils Elementary School; relocation ofWilliam James Middle School to the existing Statesboro High School and the renovation and equipping of facilities for use as a middle school; a new central auditorium on the campus of the new Statesboro High School for use by all Bulloch County students; and, site improvements, improvements to facilities, and technology upgrades throughout the Bulloch County School System?" 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. 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: - 24 - BULLOCH COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 14: RETIREMENT PLANS Fiscal Year 2003 2002 2001 Percentage Contributed 100% 100% 100% Required Contribution $ 3,646,557 $ 3,493,822 $ 3,959,900 - 25 - BULLOCH COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Proceeds from Sale of Building Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS $ 9,623,825 $ 9,623,825 $ 9,473,132 8,124,434 8,124,434 8,261,670 40,371,137 40,373,087 38,557,261 8,411,471 8,899,708 9,221,284 1,218,500 1,123,500 1,234,446 128,610 128,610 152,833 507,755 507 755 2,160,529 $ 68,385,732 $ 68,780,919 $ 69,061,155 $ 45,275,187 $ 45,167,536 $ 46,616,942 2,693,603 1,316,976 1,449,773 557,175 4,157,000 582,674 4,538,820 3,185,340 440,904 882,564 3,959,385 2,680,940 1,523,006 1,603,222 554,244 4,235,435 582,674 4,518,298 3,188,499 461,954 896,514 3,684,990 2,877,700 1,178,967 1,606,523 575,284 4,254,140 262,442 4,719,513 3,555,648 539,355 579,295 502,739 3,671,733 20,658 $ 69,039,401 $ 69,097,312 $ 70,960,939 $ -653,669 $ -316,393 $ -1,899,784 $ 348,669 $ 348,669 -887,669 -887,669 $ -580,000 1,200,000 1,200,000 1,078,800 $ 661,000 $ 661,000 $ 498,800 $ 7,331 $ 344,607 $ -1,400,984 4,850,599 4,850,599 5,525,950 -134,656 -134,656 $ 4 723 274 $ 5,060,550 $ ===4;..1~2::a4g9~66~ See notes to the basic financial statements. - 27 - BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U.S. Department of Agriculture Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Direct TitleX Twenty-First Century Community Learning Centers Elementary and Secondary Education Act Title I Literacy Through School Libraries Pass-Through From First District Regional Educational Service Agency d/b/a Live Oak Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Title Ill Limited English Proficient Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Grants to Local Educational Agencies School Improvement Title 11 Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title VI Innovative Education Program Strategies Rural and Low Income Schools - 28- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 3,259,479 3,259,479 10.550 N/A $ 197,899 3 457 378 94.004 NIA $ 35641 . 84.027 . 84.173 . 84.027 N/A $ N/A N/A $ 1,158,703 67,753 40,603 1,267,059 84.287 84.364A 153,808 177,624 84.011 N/A 84.365 N/A 84.332 . 84.010 . 84.010 N/A N/A N/A 84.281 N/A . 84.318 84.367 N/A N/A 84.298 N/A 84.358 N/A 45,307 6,955 212,050 2,179,191 28,148 675 165,219 432,788 49,966 143,330 BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Education, U.S. Department of Other Programs Pass-Through From Georgia Department of Education Reading Excellence - Local Reading Improvement Reading Excellence - Tutorial Assistance Vocational Education - Basic Grants to States High School Program Basic Grant Total U. S. Department of Education Health and Human Services, U.S. Department of Pass-Through From Georgia Department of Human Resources Title IV Safe and Drug-Free Schools and Communities Justice, U.S. Department of Pass-Through from Office of Justice Programs Drug-Free Communities Support Program Grants Labor, U.S. Department of Pass-Through From Georgia Department of Technical and Adult Education Employment Services and Job Training Pilots Demonstration and Research Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 84.338 . 84.338 84.048 N/A $ N/A N/A $ 840,062 46,255 121,706 5 870,143 84.186 N/A $ 16.729 N/A $ 9,950 106,832 . 17.249 N/A $ 628 913 $ 132 131 Total Federal Financial Assistance N/A = Not Available $ ===1o::!'=24=0=,9=8=8 Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for funds earned on the School Breakfast Program ($630,439) were not maintained separately and are included in the 2003 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Bulloch County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 29- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Community Affairs, Georgia Department of Governor's Emergency Funds Local Assistance Grant Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Health Insurance National Teacher Certification Outdoor Classroom Post Secondary Options Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND $ 20,000 $ $ 20,000 1,893,663 531,995 4,305,446 1,442,273 2,142,667 850,506 4,936,787 4,021,160 1,342,442 217,293 973,717 2,399,878 927,977 61,935 604,318 31,702 376,557 175,837 725,661 247,230 146,478 870,409 1,724,264 2,079,518 1,288,272 288,348 171,961 32,379 52,337 505,851 1,688,797 229,312 155,127 -982,291 69,551 107,824 664,766 54,276 1,000 23,102 119,247 17,280 174,951 TOTAL 20,000 20,000 1,893,663 531,995 4,305,446 1,442,273 2,142,667 850,506 4,936,787 4,021,160 1,342,442 217,293 973,717 2,399,878 927,977 61,935 604,318 31,702 376,557 175,837 725,661 247,230 146,478 870,409 1,724,264 2,079,518 1,288,272 288,348 171,961 32,379 52,337 505,851 1,688,797 229,312 155,127 -982,291 69,551 107,824 664,766 54,276 1,000 23,102 119,247 17,280 174,951 - 30- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia Institute of Technology Student Information System Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Family Connection GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 48,659 629,420 118,163 $ 48,659 629,420 118,163 49 216 49216 $ 38,557,261 $ 20 000 $==38~,5=7=7-=,2=61= See notes to the basic financial statements. - 31 - BULLOCH COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003 SCHEDULE "4" 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 Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV 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 $ 2,183,405 $ 1,975,753 $ 105,047 $ 2,080,800 631,028 721,187 21,954 743,141 4,979,371 5,735,983 358,838 6,094,821 1,695,527 2,342,215 78,031 2,420,246 2,538,109 3,007,441 260,540 3,267,981 1,005,729 5,698,279 4,663,936 1,550,995 5,278,552 695,722 37,959 436,209 192,684 1,198,084 77,666 6,145,927 5,882,970 1,625,993 68,692 754,782 3,868,358 375,550 618,723 45,272 702,721 85,810 45,410 636 544,836 490,268 140,595 874 4,472 54,349 7,233 14,532 9,007 24,153 1,243,494 78,302 6,690,763 6,373,238 1,766,588 69,566 759,254 3,922,707 382,783 633,255 45,272 711,728 109,963 $ 31,587,505 $ 35,233,127 $ 2,160,775 $ 37,393,902 843,073 170 213 1,251,505 79,254 119,971 78,311 1,371,476 157,565 TOTAL QBE FORMULA FUNDS $ 32,600,791 $ 36,563,886 $ 2,359,057 $ ====3=8'!:9=22..,,9=4=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. - 33- 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 May 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Bulloch County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Bulloch County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Bulloch County Board of Education's basic financial statements and have issued our report thereon dated May 3, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Bulloch County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Bulloch County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Bulloch 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-6161-03-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use of the management, members of the Bulloch 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 2003-34YB-30 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 May 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Bulloch 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 ofBulloch County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Bulloch County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the 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 Bulloch County Board of Education's management. Our responsibility is to express an opinion on Bulloch County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States 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 Bulloch 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 Bulloch County Board of Education's compliance with those requirements. 2003SA-10 In our opinion, the Bulloch County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Bulloch 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 Bulloch County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Bulloch 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 2003SA-10 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS BULLOCH COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6161-01-01 FS-6161-02-01 Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6161-02-01 FA-6161-02-02 Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Child Nutrition Cluster (CFDA 10.553, 10.555, and 10.559) Finding Control Number: FA-6161-02-02 Steps have been taken to assure that policies and procedures currently in place for maintaining a correct equipment inventory are followed. A perpetual computerized inventory is maintained at each school and will be verified by the manager at the end of each school year by taking an actual physical count and comparing to the computerized inventory. SECTION IV FINDINGS AND QUESTIONED COSTS BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Bulloch 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 Bulloch County Board of Education 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 Bulloch 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 Bulloch County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Bulloch 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 Bulloch County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. - 1- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement 84.367 Elementary and Secondary Education Act - Title II- Improving Teacher Quality 84.338 Reading Excellence - Local Reading Improvement 84.338 Reading Excellence - Tutorial Assistance 17.249 Employment Services and Job Training Pilots - Demonstration and Research 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Bulloch 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 REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6161-03-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation was not reviewed by an administrator not directly connected with cash operations. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. -2 - BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6161-03-01 Expenditures/Liabilities/Disbursements Based on a sample of25 items, one voucher did not contain adequate documentation. There was no invoice or itemized receipt attached to the disbursement. 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. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6161-03-01 Property management records maintained by the Bulloch County Board of Education for the Child Nutrition Cluster (CFDA 10.553 and 10.555) were incomplete and failed to meet property management standards set forth in Chapter 41, ofthe Financial Management for Georgia Local Units ofAdministration (FMGLUA), or as outlined in 7 CFR3015.169. Areviewoffifteenitems selected at one location revealed the following deficiencies: * Two items physically located were not included on the inventory listing. * One item physically located was listed with an incorrect tag number on the inventory listing. * One item removed from the fiscal year 2003 inventory listing was deleted in error. * A review of property management records revealed that numerous items were not assigned a cost. -3- BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6161-03-01 These conditions occurred because management failed to maintain complete property management records as required for the Child Nutrition Cluster program and to ensure that physical inventory counts were properly performed and reconciled to property management records. An inventory system should be implemented that provides for complete inventory records and identification ofall equipment as outlined in Chapter 41, of the FMGLUA. -4-