BULLOCH COUNTY BOARD OF EDUCATION
STATESBORO, 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

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

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

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

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

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

BULLOCH COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
April 13, 2005

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) ofthe Bulloch 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 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 opinions.
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 Bulloch County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated April 13, 2005, 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 grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
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 25 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 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

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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, 2004. 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 2004 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $51.5 million. Of this amount, $5.1 million is unrestricted and is available for spending at the School District's discretion.
The School District had $68.5 million in expenses relating to governmental activities; only $46.9 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $26.8 million and fund balance were adequate to provide for these programs.
As stated above, general revenues accounted for $26.8 million, or 36%, of all revenues totaling $73.7 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.
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
- 1-

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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 Funds, and Debt Service Funds 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 about whether the District is in 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 ofaccounting 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.
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
-11-

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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 Table 1, Statement of Net Assets, provides the perspective of the School District as a whole. Table 2 shows the Changes in Net Assets for the year.
- 111 -

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Net

Year 2004 Year 2003

Change

Assets Current and Other Assets Capital Assets, Net

$ 57,674 54,976

$ 14,855 56,280

$ 42,819 -1,304

Total Assets

$ 112,650 $ 71,135 $ 41,515

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 8,331 52,865

$ 9,260 15,640

$ -929 37,225

Total Liabilities

$ 61,196 $ 24,900 $ 36,296

Net Assets Invested in Capital Assets, Net of Related Debt$ Restricted Unrestricted

40,692 5,701 5,061

$ 40,639 1,075 4,521

$

53

4,626

540

Total Net Assets

$ 51,454 $ 46,235 $ 5,219

- IV -

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 2
Chan~ in Net Assets (in Thousands)

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Net

Year2004

Year 2003

Change

$

2,558 $

1,234 $

1,324

44,098

45,959

-1,861

274

274

Total Program Revenues

$ 46,930 $ 47 193 $_ __,-2=-=6=3

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$

For Debt Service

Railroad Cars

Sales Taxes

Special Purpose Local Option Sales Tax

For Maintenance and Operations

For Debt Service

Intangible Recording Tax

Real Estate

Grants and Contributions not Restricted

to Specific Programs

Investment Earnings

Miscellaneous

Special Items

Gain on Sale of Building

9,544 $ 1,787
6
8,355 3,821
444 45
1,620 394 757

9,307 $

237

1,872

-85

6

7,867
360 72
1,840 155
2,191
918

488 3,821
84 -27
-220 239 -1,434
-918

Total General Revenues and Special Items

$ 26,773 $ 24,582 $_~2,=19~1

Total Revenues

$ 73,703 $ 71 775 $_~1=.9~2=8

Program Expenses

Instruction

$

Support Services

Pupil Services

Improvement of Instructional Services

Educational Media Services

General Administration

School Administration

Business Administration

Maintenance and OJ?eration 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

44,511 $
2,849 1,121 1,416
589 4,314
440 4,658 2,876
439 744
523 4,004

47,727 $
2,878 1,179 1,673
575 4,260
268 4,701 3,267
539 902
503 3,813
858

-3,216
-29 -58 -257 14 54 172 -43 -391 -100 -158
20 191 -858

Total Expenses

$ 68,484 $ 73,143 $_ _-4=6=5~9

Increase (Decrease) in Net Assets

$

5,219 $ -1.368 $=====6-,5===8==7

-v-

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services Fiscal Year 2004

Net Cost of Services Fiscal Year 2004

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

$ 44,511 $ 11,877

2,849 1,121 1,416
589 4,314
440 4,658 2,876
439 744

1,837 513 576 -471
2,458 440
2,530 1,265
439 247

523

-101

4 004

-56

Total Expenses

$ 68,484 $ 21,554

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 and other financing sources (uses) of $112.5 million and total expenditures of $68.8 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.

- VI -

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

During the course of fiscal year 2004, 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 $67.8 million were over the final budgeted amount of $65 million by $2.8 million. This difference (actual vs. final budget) was due primarily to sales tax collections and Federal funds collections in excess of budgeted amounts, as well as the inclusion of the principals' accounts in the financial statements but not in the budget.

The actual expenditures of $66.8 million were less than the final budgeted amount of $67 million by $0.2 million. This difference was due primarily to efforts taken to reduce operational expenditures due to concern over shrinking state revenue trends.

General Fund revenues exceeded expenditures by $1 million.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2004, the School District had $55 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. 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 earnings of $1.5 million and state funding of$1.7 million.

Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands)

Governmental Activities

Fiscal

Fiscal

Net

Year 2004

Year 2003

Change

Land Construction in Progress Land Improvements Buildings and Building Improvements Equipment

$

2,572 $

2,572

957

290

317

49,051

49,089

3,063

3 344

$

0

-957

-27

-38

-281

Total

54,976 $ 56,279 $ -1,303

- Vll -

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Debt
The School District issued $3 8 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. At fiscal year ended June 30, 2004, the School District had $52.9 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

Fiscal

Net

Year 2004

Year 2003

Change

Bonds Payable

$ 52,865 $ 15,640 $ 37,225

At June 30, 2004, the School District's assigned bond rating was "AA" as determined by Standard and Poors.

CURRENT ISSUES
Following is a list of 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 continues to evaluate 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.

In fiscal year 2005, the School District issued $12.835 million in General Obligation Refunding Bonds for the purpose of refunding the eligible portion of its Series 1996 and Series 1997 General Obligation Bonds.

- vm -

BULLOCH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, 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. 2004
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other 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

$

47,097,470

1,493,856

3,525,128 4,521,679
782,240 65,814
188,038

2,571,985 977,957
60,694,681 9,836,265
-19,104,905

$ ===11=2"'=,6=5=0,=20=8=

$

2,462,944

5,846,026

21,803

7,615,000 45,250,000

$

61 195 773

$

40,692,234

145,734 326,511 4,963,282 265,894 5 060,780

$

51454435

$ ===11=2"=,6=5=0,=20=8=

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. 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
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Local Option Sales Tax For Maintenance and Operations 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

$

44,511,383 $

2,848,515 1,120,475 1,416,427
589,309 4,314,487
439,565 4,658,216 2,875,980
438,952 743,627

523,442 4,003,945

$

68,484,323 $

795,454
624,512 1,138,348 2,558,314

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

$

31,839,247

1,011,812 607,618 839,794
1,060,362 1,856,204

2,128,343 1,337,172 $

495,958

2,921,300

$

44,097,810 $

$ 274,066 274 066 $

-11,876,682
-1,836,703 -512,857 -576,633 471,053
-2,458,283 -439,565
-2,529,873 -1,264,742
-438,952 -247,669
101,070 55,703
-21,554, 133

$

9,543,726

1,787,236

5,878

8,354,897

3,820,636 444,087 45,200
1,620,114 394,288 757 443

$

26,773,505

$

5,219,372

46,235,063

$

51454435

-5-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 4,786,781 $ 38,810,482 $ 3,500,207 $ 1,493,856

1,595,292 4,521,679
782,240 65,814 188 038

1,410,103

47,097,470 1,493,856
3,005,395 4,521,679
782,240 65,814 188 038

Total Assets

$ 13,433,700 $ 38,810,482 $ 4,910,310 $ ===5=7=,1=5='4,=49=2=

LIABILITIES AND FUND BALANCES
LIABILITIES
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

$ 2,462,944

$

5,846,026

21,803

$ 8,330,773

$

$

145,734

$

138,473

$ 4,910,310

188,038

$ 38,804,145

4,630,682

6 337

$ 5,102,927 $ 38,810,482 $ 4,910,310 $

2,462,944 5,846,026
21,803
8 330 773
145,734 138,473 4,910,310 188,038 38,804,145
4,630,682 6 337
48,823,719

Total Liabilities and Fund Balances

$ 13,433,700 $ 38,810,482 $ 4,910,310 $ ===5=7,,.,1=5=4!=49=2=

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

BULLOCH 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.
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.

$ 48,823,719

$ 2,571,985 977,957
60,694,681 9,836,265
-19,104,905

54,975,983

519,733 -52,865,000

Net Assets of Governmental Activities (Exhibit "A")

$ 51454435

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

BULLOCH 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)
Proceeds of Long-Term Capital-Related Debt Premiums on Bonds Sold Discounts on Bonds Sold
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,553,147 8,813,399 36,824,394 9,167,596 2,558,314 128,170 $ 757 443
$ 67,802,463 $

$ 1,787,785 $ 3,851,421

265,894

224

265,894 $ 5,639,430 $

11,340,932 12,664,820 36,824,394
9,167,596 2,558,314
394,288 757 443
73,707,787

$ 43,804,722
2,848,515 1,120,475 1,359,506
580,208 4,276,044
198,800 $ 4,598,033 2,607,956
438,952 575,760 523,442 3,884,805
7,284

$ 66,824,502 $

$

977 961 $

$

234,844 $

5,225

118,258 775,000 814,140
353,102 $ 1,594,365 $ -87,208 $ 4,045,065 $

43,804,722
2,848,515 1,120,475 1,359,506
580,208 4,276,044
438,869 4,598,033 2,607,956
438,952 575,760 523,442 3,884,805 125,542
775,000 814 140
68,771,969
4,935,818

$ 38,000,000 857,605 -41 510

$ 38,000,000 857,605 -41 510

$ 38,816,095

$ 38,816,095

$

977,961 $ 38,728,887 $ 4,045,065 $ 43,751,913

4,124,966

81 595

865,245

5,071,806

Fund Balances - Ending

$ 5,102,927 $ 38,810,482 $ 4,910,310 $ 48,823,719

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

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. 2004

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

$ 43,751,913

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

$ 601,316 -1,904,765

-1,303,449

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.

-4,092

Bond Proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from General Obligation Bonds Issued.

-38,000,000

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.

775 000

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

$ ==5=,2=1=9=,3=72=

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

BULLOCH 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
$ =====1=21=,6=9=1=
$ ==1=21=,6=9=1=

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

BULLOCH 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 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 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 ofintemal 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, 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 (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund 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, 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 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,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and

- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 ofCommissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 7, 2003 (levy date). Taxes were due on January 9, 2004 (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 Bulloch County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes 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 $9,547,269 and for school bonds amounted to $1,787,785.

Tax millage rates levied for the 2003 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

8.560 mills .909 mills

9.469 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $8,354,897 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation ofthe School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,820,636 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 -

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

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.

- 15 -

BULLOCH 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 ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use 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 $49,288,942. The amounts ofthe total bank balances are classified into three categories of credit risk:

- 16 -

BULLOCH 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

$ 2,800,358

2

891,440

3

45,597,144

Total

$ 49,288,942

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value ofthe School District's total investments was $1,423,542 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 -

BULLOCH 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 I, 2003

Increases

Decreases

Balances June 30, 2004

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

$ 2,571,985 $ 957,425

0

$ 2,571,985

$ 957,425

0

Total Capital Assets Not Being Depreciated $ 3,529,410 $

0 $ 957,425 $ 2,571,985

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 59,582,518 $ 9,587,893 977,957

1,112,163 446,578 $

$ 60,694,681

198,206

9,836,265

977,957

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

10,493,503 6,244,330
660,513

1,149,776 727,309 27,680

198,206

11,643,279 6,773,433
688,193

Total Capital Assets, Being Depreciated, Net $ 52,750,022 $ -346,024 $

0 $ 52,403,998

Governmental Activity Capital Assets - Net $ 56,279.432 $ -346.024 $ 957.425 $ 54,975.983

Current year depreciation expense by function is as follows:

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

$ 1,003,505

$

57,807

9,243

39,041

707

71,124

411,901

170,480

760,303 140,957

$ 1,904,765

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$ 3,500,207 $ 38,804,145

Note 7: 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. The School District has neither significantly reduced coverage for this risk nor incurred losses (settlements) which exceeded the School District's insurance coverage in any ofthe past three years.

- 19 -

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

EXHIBIT"H"

Note 7: RISK MANAGEMENT

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 of self-insurance funds, including the processing and defense of claims 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 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:

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

6 171 $

8 378 $

13 467 $

1,082

$

1 082 $

12,618 $

9 809 $

3 891

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:

Position Covered

Amount

Superintendent All Employees

$

50,000

$ 200,000

- 20 -

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

EXHIBIT"H"

Note 8: 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 General Government - Series 2004

4.70%- 6.00% 4.80%- 7.00% 2.00% - 4.00%

$ 7,210,000 7,655,000
38,000,000

$ 52,865,000

The Board of Education has authorized $12,835,000 in general obligation debt for the purpose of refunding the eligible portion of its Series 1996 and Series 1997 General Obligation bonds. This debt was not issued as of June 30, 2004.

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

$ 15,640,000

Additions G.O. Bonds

38,000,000

Deductions Debt Retired

775,000

Balance June 30, 2004

$ 52,865.000

Portion of Long-Term Debt Due within One Year

$ 7,615,000

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

- 21 -

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

EXHIBIT "H"

Note 8: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2005 2006 2007 2008 2009 2010 - 2014 2015 - 2015

$ 7,615,000 $ 1,982,541

8,420,000

1,579,706

8,615,000

1,339,281

8,815,000

1,101,316

9,050,000

782,945

5,910,000

2,129,973

4,440,000

474,863

Total Principal and Interest

$ 52,865.000 $ 9,390.625

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $638,174 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 $631,354

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 $6,820

Note 10: 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.

Note 11: SUBSEQUENT EVENTS

In the subsequent fiscal year, the School District issued general obligation bonds in the amount of $12,835,000. The proceeds from these bonds will be used for refunding the eligible portion of its Series 1996 and Series 1997 General Obligation Bonds.

- 22 -

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

EXHIBIT"H"

Note 12: 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%

$ 3,607,371 $ 3,646,557 $ 3,493,822

- 23 -

BULLOCH 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
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

9,935.126 $

9,935.126 $

9.553, 147

8,188.872

8,188.872

8.813,399

36,974.987

36.951,885

36.824.394

8,222.863

8.222,863

9.167.596

1,048.500

1.048,500

2.558,314

126.000

126.000

128,170

572 936

572 936

757 443

$

65 069 284 $

65 046 182 $

67 802 463

$

42,125,516 $

43.253.646 $

43,804.722

2.732.639 1.146.072 1,496.768
653.960 4,014.479
235.845 4.736.652 3,170,779
554.619 663.282
3,777.040 10 000

2.774.904 1.389.213 1.440.326
727,551 4.002,314
235,845 4.780.465 3.216.922
566,572 816,789
3.777.040

2,848.515 1,120.475 1.359.506
580.208 4.276.044
198.800 4.598,033 2,607.956
438.952 575.760 523.442 3.884.805
7 284

$

65 317 651 $

66 981 587 $

66 824 502

$

-248 367 $

-1 935 405 $

977 961

$

290.500 $

180,500

-290 000

-180 000

$

500 $

500

$

-247.867 $

-1,934.905 $

977.961

4.135,269

4,135.269

4.124.966

212 459

212 459

$

4 099 861 $

2 412 823 $

5 102 927

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 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
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 Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Fund for the Improvement of Education Literacy Through School Libraries Pass-Through From First District Regional Educational Service Agency d/b/a Live Oak Migrant Education Agency Migrant Education Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Rural Education State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U.S. Department of Education
Justice, U.S. Department of Pass-Through From Office of Justice Programs Drug-Free Communities Support Program Grants

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

NIA NIA $
$

(2) 3 401 981
3,401,981

10.550

NIA $

286,808 3,688,789

94.004

NIA $

5,588

84.027 84.173

NIA $ NIA
$

1,349,721 47,563
1,397,284

84.215 84.364
84.011
84.332 84.365 84.318 84.367 84.338 84.358 84.298 * 84.010 84.287 84.048

NIA
NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA
$

154,152 64,066
50,867
181,100 9,850
50,399 525,772 578,433 236,320
70,167 2,322,430
372,082 109 497
6,122,419

16.729

NIA

$

82 295

- 26 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
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

17.249

N/A

$ _ _ _ _1c..c1..c.5.=:2..c.30"-

$ _ _ _ _1~4~1'-"3~16"-

Total Federal Financial Assistance
N/A = Not Available

$ ===1=0=15=5=6=3=7

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 ($675,273) 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 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 fund financial statements.

See notes to the basic financial statements.

- 27 -

BULLOCH 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 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 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 Mentor Teachers National Teacher Certification Preschool Handicapped Program Lottery Program Student Information System
Office of Treasury and Fiscal Services Public School Employees Retirement
- 28 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

731,322

2,170,642 584,146
4,329,350 1,431,434 2,143,377
963,701 4,934,970 4,165,550 1,165,255
185,421 842,290 2,264,540 875,047 163,722 500,728
35,662 384,194 217,439 736,995 237,627 148,781
875,615 1,733,579 2,109,641
1,217,224 274,066 166,704 31,732
1,529,213 220,552 164,553
-1,860,308
58,833 118,789 631,354
5,044 105,028 119,501
58,392
6,820

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING CONTRACT Human Resources, Georgia Department of Family Connection

SCHEDULE "3"
GOVERNMENTAL FUND TYPE GENERAL FUND
$ _ _ _ _4_5~8_69_
$ =====36=,8=2=4=,3=94=

See notes to the basic financial statements.

- 29 -

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

SCHEDULE "4"

PROJECT
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 of William James Middle School to the existing Statesboro High School and the renovation and equipping of the facilities for use as a middle school; a new central auditorium on the campus of the new Statesboro High School to be used by all Bulloch County students; and site improvements, improvements to facilities, and technology upgrades throughout the Bulloch County School System

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 49,800,000 $ 45,000,000 $

43 000 $

0 Ongoing

(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 project. Includes all cost from project inception to completion.
(3) The voters of Bulloch County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds. state. local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 30 -

BULLOCH 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 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

$

2,514,866 $ 1,939,840 $

120,761 $

2,060,601

683,103

844,881

26,649

871,530

5,106,551

5,638,246

295,472

5,933,718

1,695,649

2,162,836

75,484

2,238,320

2,538,591

2,986,622

183,040

3,169,662

1,121,793 5,824,191 4,894,809 1,402,683 5,152,737
608,047 41,623
452,238 248 097

896,445 5,881,573 5,715,983 1,529,917
64,577 655,123 3,540,978 475,424 603,953
9,313 577,681 124,792

43,965 450,300 331,449 128,381
135 3,652 79,538 7,966 12,448
15,691 23,693

940,410 6,331,873 6,047,432 1,658,298
64,712 658,775 3,620,516 483,390 616,401
9,313 593,372 148 485

$

32,284,978 $ 33,648,184 $

1,798,624 $

35,446,808

866,378 175,171

1,154,344 90 017

107,733 60,131

1,262,077 150 148

TOTAL QBE FORMULA FUNDS

$

33,326,527 $ 34,892,545 $

1,966,488 $ =====3=6'-=8=59=1=,0=3=3

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

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
April 13, 2005

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 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 Bulloch County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Bulloch County Board of Education's basic financial statements and have issued our report thereon dated April 13, 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 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 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 Bulloch 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-6161-04-01, FS-6161-04-02 and FS-6161-04-03.
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 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 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 Bulloch 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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
April 13, 2005

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 CIRCULARA-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 of its major Federal programs for the year ended June 30, 2004. Bulloch 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 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 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 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_
2004SA-30

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, 2004.
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.
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 Bulloch 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-6161-04-01.
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 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,
~~~=ls. Russell W. Hinton State Auditor
RWH:as 2004SA-30

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, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6161-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6161-03-01

Principal/Student Activity Accounts guidelines are in the process of being revised to ensure segregation of duties between accounting functions at the school level. In addition, annual internal reviews are being conducted for each school to ensure that these procedures are being followed.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6161-02-02 FA-6161-03-01

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequate Inventory Records Child Nutrition Cluster (CFDA 10.553 and 10.555) Finding Control Number: FA-6161-03-01

Steps have been taken to further ensure 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 it 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, 2004

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 financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Employee Compensation Capital Assets

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 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 ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement.

Equipment and Real Property Management

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 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 disclosed an audit finding required to be reported by section .510(a) ofOMB 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 84.010 Title I Grants to Local Educational Agencies

- 1-

BULLOCH 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 $304,669.
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-6161-04-01
An examination of the internal accounting control procedures of the School District revealed weaknesses as discussed below:
Central Office Accounts Expenditures/Liabilities/Disbursements
Based on a review of 30 items, four vouchers did not contain an original invoice and one voucher contained no purchase order or purchase request.
Principal Accounts Cash and Cash Equivalents
The bank reconciliation was not reviewed by an administrator not directly connected with cash operations.
Three principal accounts had unidentified variances on the June 2004 bank reconciliations. One ofthe three principal account reconciliations also erroneously contained an outstanding check which had actually cleared the bank in June 2004.
Eight certificates of deposit held by one school were not recorded on the school's general ledger.
-2-

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6161-04-01
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a review of 25 items, the following deficiencies were noted: o Two receipts were not deposited timely. o Two receipts contained a variance between the deposit amount and the receipt documentation. o Eight receipts lacked sufficient supporting documentation. o Pre-numbered receipts were not used after April 2004.
Expenditures/Liabilities/Disbursements Based on a review of 25 items, the following deficiencies were noted: o Seven blank, signed checks were issued. o Nine vouchers contained school purchase orders which lacked approval signatures by the school principal. o Two vouchers contained school purchase orders dated after the invoice date. o Seven vouchers lacked sufficient supporting documentation. o Check numbers were not always issued in numerical sequence.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for 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 are segregated and that appropriate accounting controls are utilized.
-3 -

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6161-04-02
During the fiscal year ended June 30, 2004, the School District utilized a process to reduce employer cost associated with health insurance plans administered by the Georgia Department ofCommunity Health (DCH). The School District, moved/classified employees from the Health Insurance Plan for Public School Teachers (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 1) to the Health Insurance Plan for Public School Employees (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 2).
According to DCH, School District employees who are to be included as members of the Health Insurance Plan for Public School Teachers (PST) are either:
1. Employed in a professionally certificated position; employee holds a valid certification; employee is assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system.
Or:
2. Employed in a professionally certificated capacity; employee holds a valid certification; employee is not assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member ofthe Teachers Retirement System or other public school retirement system.
With respect to membership in the Health Insurance Plan for Public School Employees (PSE) Georgia Laws OCGA 20-2-910 and 47-4-2 (20) provide that the definition of public school employee, for the purpose ofmembership in the Health Insurance Plan for Public School Employees, means classroom aides, paraprofessionals, noncertified administrative and clerical employees, school bus drivers, school lunchroom personnel, school maintenance personnel and school custodial personnel. Generally, in order to determine which School District employees are eligible for the PSE or for the PST insurance plans, a comparison should be made ofthe employee's position and DCH's criteria listed above. Ifthe employee meets either test, then the employee is eligible for the Health Insurance Plan for Public School Teachers. If the employee fails both of the above tests, the employee is eligible for the Health Insurance Plan for Public School Employees.
-4-

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6161-04-02
From information provided by the School District, it is not clear that all of these employees who were moved/classified from the PST plan to the PSE plan are eligible for membership in the PSE plan under DCH's criteria.
The School District should establish policies and procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with State Laws. In addition, the School District should contact the Georgia Department of Community Health to determine whether the employees who were moved from the PST plan were moved in error. If employees were moved in error the affected employees should be returned to the PST plan and the School District should make payment to DCH for those employees.
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6161-04-03
A review of the School District's Capital Assets policies and procedures and the related Capital Assets records noted deficiencies as discussed below:
The School District did not update Capital Assets records for activity occurring during fiscal year 2004 until February 2005.
Three items were noted on the Capital Assets records which did not meet capitalization thresholds.
During a review of current year additions, it was noted that one item was added at the incorrect cost. Two additional items were not assigned an estimated useful life and were not being depreciated.
During a review ofcurrent year deletions, it was noted that three items disposed ofduring the current fiscal year were not removed from the Capital Assets records. Two additional items were incorrectly removed from the Capital Assets records.
Depreciation expense was not calculated in accordance with the School District's policy for current year additions and deletions. Depreciation expense for current year additions and deletions was calculated based on the month placed in service. The School District's depreciation policy states that depreciation expense will be calculated using the one-halfyear convention.
-5 -

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition Finding Control Number: FS-6161-04-03
These deficiencies were a result ofmanagement's failure to establish adequate controls related to the Capital Assets. The School District should reassess internal control procedures for Capital Assets to ensure that Capital Assets records are updated timely, reflect actual purchases of Capital Assets, reflect actual deletions of Capital Assets, and depreciation expense is calculated in accordance with the School District's policy. An administrative review should be performed to ensure the accuracy of inventory records and amounts recorded in the general ledger at the close of each fiscal year.
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-6161-04-01
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 of Administration (FMGLUA), or as outlined in 7 CFR 3015.169. A review of26 items selected at two locations revealed the following deficiencies:
Two out offour tray dispensers listed as a lump sum on the equipment records were disposed of during the current fiscal year, but the cost on the equipment listing was not adjusted to reflect the disposal.
Three items which did not have tag numbers listed on the equipment records were found to have tag numbers attached.
A review ofproperty management records revealed that numerous items were not assigned a cost.
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.
-6-

SECTIONV MANAGEMENT'S RESPONSES

BULLOCH COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6161-04-01
We concur with this finding. The identified weaknesses have been addressed and proper documentation for disbursements is required prior to disbursement of funds. "Review controls" at the school and central level are being revised to ensure that school principal's accounts bank reconciliations are prepared and reviewed on a timely basis. Also, as of July 1, 2005, school principal's accounts are being incorporated into the school system accounting software program to ensure proper recording of assets and review of school principal's accounts. Separation of duties among school personnel, pertaining to school principal's accounts, is being addressed. This will require involving more existing personnel in the cash custody, record keeping and review functions but can be accomplished with adequate support from the central office and school principal. Strict accountability at the school level and additional review at the system level will increase internal controls over the collection, disbursement and recording offunds in the school principal's accounts.
Finding Control Number: FS-6161-04-02
We concur with this finding. However, the school system utilized this process to reduce employer costs associated with health insurance plans after an exhaustive process to gain clarification from various state agencies on related guidelines. After almost two years of seeking guidance as to whether this school system could reduce employer health insurance costs, this process was implemented in June 2004, which represents one month ofthe fiscal year. In October 2004, the state attorney general's office issued an opinion that clarified the guidelines on this issue. It is our goal to fully abide by state legal and ethical guidelines while attempting to maximize local, state and Federal funds in the best interest of our community. Therefore, this issue will not occur in the future, nor would it have ever occurred, had proper guidance been granted on a timely basis. The Georgia Department of Community Health will be contacted to determine ifreimbursement is necessary.
Finding Control Number: FS-6161-04-03
We concur with this finding. Our school system has recently begun recording capital assets in its financial records. Current procedures are being revised to ensure that capital assets are recorded accurately and timely. In addition, the school system is currently implementing a financial accounting system that will allow the inclusion of capital assets in the perpetual accounting records, as well as more efficient tracking and depreciation of current assets. Revised internal controls, in addition to an improved accounting system, will lead to effective capital assets recording procedures.
Finding Control Number: FA-6161-04-01
We concur with this finding. In conjunction with the implementation of overall capital assets policies for the school system, the School Nutrition Department is reviewing school-level procedures to accurately reflect property records.
Contact Person: Charles Wilson, Assistant Superintendent for Business and Finance Phone: (912) 764-1603 E-mail Address: cwilson@bulloch.kl2.ga.us