BURKE COUNTY BOARD OF EDUCATION WAYNESBORO, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor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ashington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 25, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members of the Burke County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Burke County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Burke County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Burke County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-l l As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Burke County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. In accordance with Government Auditing Standards, we have also issued our report dated June 25, 2004, on our consideration ofthe Burke County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 23 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 Burke County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 4, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2003-34ARL-11 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:gp 2003-34ARL-11 State Auditor BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The discussion and analysis of the Burke County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance. Financial Highlights Key financial highlights for fiscal year 2003 are as follows: The Governmental Accounting Standards Board (GASB) issued GASB Statement 34 on June 30, 1999, requiring governments to comply with a new reporting model for financial statements. Based upon total revenues, the Burke County Board of Education was a Phase Two implementer, and was required to implement GASB Statement 34 beginning in fiscal year 2003. Due to this being the implementation year for GASB Statement 34, many comparisons are not available that will be available for fiscal year 2004. The Board's financial status improved substantially during fiscal year 2003. In total, net assets increased $8.4 million, which represents a 10 percent increase from fiscal year 2002. This total increase was due to governmental activities since the Board has no business-type activities. General revenues accounted for $20.9 million in revenue or 54 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $18.2 million or 46 percent of total revenues. Total revenues were $39.1 million. The Board had $30.7 million in expenses related to governmental activities; only $18.2 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $20.9 million were adequate to provide for these programs. Among major funds, the general fund had $38.9 million in revenues and $37.3 million in expenditures. The general fund's balance increased to $23.4 million from $21.8 million. Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Burke County Board of Education as a financial whole, or as an entire operating entity. 1 BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The Statement of Net Assets and Statement of Activities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, theses statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds with all other nonmajor funds presented in total in one column. In the case of the Burke County Board of Education, the general fund is by far the most significant fund. Reporting the Board as a Whole Statement ofNet Assets and Statement ofActivities While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during the fiscal year 2003 ?" The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity: Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation; food service, after school program, school activity accounts and various other. Reporting the Board's Most Significant Funds Fund Financial Statements Fund Financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund and the Capital Projects Fund. 11 BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. Fiduciary Funds: The Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board 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 Board excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. The Board as a Whole The perspective of the Statement of Net Assets is of the Board as a whole. Table I provides a summary of the Board's net assets for fiscal year 2003. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available. 111 BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets (in Thousands) Governmental Activities Fiscal Year2003 Assets Current and Other Assets Capital Assets, Net $ 35,439 62,445 Total Assets $ 97,884 Liabilities Current and Other Liabilities $ 4,329 Net Assets Invested in Capital Assets Restricted Unrestricted $ 62,445 617 30,493 Total Net Assets $ 93.555 Total net assets increased $8.4 million. Table 2 shows the changes in net assets for fiscal year 2003. Since this is the first year the Board has been required to prepare financial statement following GASB 34, revenue and expense comparisons to fiscal year 2002 are not available. IV BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets (in Thousands) Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations Sales Taxes Real Estate Transfer Tax Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Total Expenses Increase in Net Assets Governmental Activities Fiscal Year 2003 $ 218 17.999 $ 18.217 $ 18,938 17 98 525 424 904 $ 20,906 $ 39.123 $ 18,938 1,415 727 482 1,722 2,139 107 787 2,142 60 205 112 1,880 $ 30.716 $ 8A07 V BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Activities Instruction comprises 61.7 percent of governmental program expenses. The combined expenditures for instruction, pupil services, improvement of instructional services and educational media services account for 70.2 percent of governmental program expenses. The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, costs of service comparisons to fiscal year 2002 are not available. Table3 Governmental Activities (in Thousands) Total Cost of Services Fiscal Year 2003 Net Cost of Services Fiscal Year 2003 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services $ 18,938 $ 1,415 727 482 1,722 2,139 107 787 2,142 60 205 112 1,880 6,705 1,193 541 231 1,471 1,605 -196 -32 1,013 51 14 60 -157 Total Expenses $ 30,716 $ 12,499 Although tax revenues make up a majority of the revenues, the Board is still dependent upon program revenues for governmental activities. Over 35.4 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 40.7 percent. Vl BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The Board's Funds The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues of $39.0 million and expenditures of $45.0 million. There was a decrease of $7.5 million in the capital projects fund due to capital funds on hand being expended. The general fund had an increase of $1.5 million. The positive change in the fund balance of the general fund for the year indicates that the Board was able to meet current costs from current revenues. General Fund Budgeting Highlights The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2003, the Board did not amend its general fund budget. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management. For fiscal year 2003, the Board had budgeted general fund expenditures exceeding general fund revenues by $1.4 million, thereby using accumulated surplus to fund the shortfall. Actual revenues exceeded budgeted revenues by $4.7 million due to an increase in state, Federal and local revenue. Actual expenditures exceeded budgeted expenditures by $1.8 million. Thus for fiscal year 2003, general fund revenues exceeded expenditures by $1.5 million. Capital Assets At the end of fiscal year 2003, the Board had $62.4 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2003. Since this is the first year the Board has been required to prepare financial statements following GASB Statement 34, capital asset comparisons to fiscal year 2002 are not available. Table 4 Capital Assets (Net of Depreciation, in Thousands) Governmental Activities Fiscal Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 1,410 15,242 40,954 3,601 1,238 Total $ 62,445 Vll BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The primary increases occurred in Equipment and in Construction in Progress. Current Issues Burke County hasn't been impacted by state revenue shortfalls as severely as most school systems. This is due to the fact that local tax receipts supply the majority of General Fund revenues. Though the Board is currently on very sound financial footing, there is cause for prudent planning. The net tax digest declined 11.6 percent from 1998 to 2002. This decline was due to a decrease in the utility digest. This decline is expected to continue, however it is not possible to predict what the rate of decline will be in the future. Contacting the Board's Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact C. Doug Day, Superintendent of the Burke County Board of Education, 789 Perimeter Road, Waynesboro, Georgia 30830. You may also call the Board office at (706)-554-5101. Vlll BURKE COUNTY BOARD OF EDUCATION BURKE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 16,431,163 16,110,684 611,730 1,582,014 649,118 15,894 37,986 1,410,019 15,241,683 2,271,335 48,408,529 8,579,202 -13,465,801 $ ===9=7=,8=8.,.3,=55=6= $ 827,198 2,654,924 254,757 558,125 33,728 $ 4,328,732 $ 62,444,967 617,340 30,492,517 $ 93,554,824 $ ===9=7=,8=8=3,=55=6= BURKE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Instruction Suppart 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 Community Services Food Services Total Governmental Activities $ 18,938,413 1,414,645 726,794 481,941 1,722,467 2,139,222 107,264 786,894 2,142,303 59,711 204,887 111,917 $ 1,880,090 $ 3oi7161548 $ $ 12,233,444 $ 221,434 185,902 251,126 251,150 533,831 302,815 819,310 1,129,360 9,024 190,673 52,300 166 082 1 871 286 218,382 $======1-7=,9=9-9=,3=5=5= $ -6,704,969 -1, 193,211 -540,892 -230,815 -1,471,317 -1,605,391 195,551 32,416 -1,012,943 -50,687 -14,214 -59,617 157 278 -12,498,811 General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous $ 18,938,023 98,054 16,765 525,056 424,339 904170 Total General Revenues Change in Net Assets $ 8,407,596 Net Assets - Beginning of Year 85,147,228 Net Assets- End of Year $ ======93=554;.;,;,;;8;;;24.;.. The notes to the basic financial statements are an integral part of this statement. -4- BURKE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Due From Other Funds Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Due To Other Funds Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Inventories Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 7,686,234 $ 14,825,993 191,015 1,582,014 649,118 15,894 1,905,069 37,986 8,744,929 $ 16,431,163 1,284,691 16,110,684 191,015 1,582,014 649,118 15,894 1,905,069 37,986 $ 26,893,323 $ 10,029,620 $ 36,922,943 $ 827,198 $ 827,198 2,654,924 2,654,924 $ 254,757 254,757 558,125 558,125 1,905,069 1,905,069 33,728 33,728 $ 3,515,850 $ 2,717,951 $ 6,233,801 $ 579,354 37,986 $ 579,354 37,986 22,760,133 $ $ 23,377,473 $ 7,311,669 22,760,133 7,311,669 7,311,669 $ 30,689,142 $ 26,893,323 $ 10,029,620 $ 36,922,943 The notes to the basic financial statements are an integral part of this statement. -5- BURKE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School Districts property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. Net Assets of Governmental Activities (Exhibit "A") $ 30,689,142 $ 1,410,019 15,241,683 2,271,335 48,408,529 8,579,202 -13,465,801 62,444,967 420,715 $ 93,554,824 The notes to the basic financial statements are an integral part of this statement. -6- BURKE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND TOTAL $ 18,831,427 114,819 13,145,325 5,329,361 218,382 298,591 $ 953,895 $ 38,891,800 $ $ 125,748 125,748 $ 18,831,427 114,819 13,145,325 5,329,361 218,382 424,339 953,895 39,017,548 $ 22,072,620 $ 1,426,645 726,794 604,593 1,882,826 2,229,100 144,585 2,789,492 2,847,138 59,711 204,887 111,917 2,248,298 $ 7,644,622 $ 37,348,606 $ 7,644,622 $ $ 1,543,194 $ -7,518,874 $ 21,834,279 14,830,543 22,072,620 1,426,645 726,794 604,593 1,882,826 2,229,100 144,585 2,789,492 2,847,138 59,711 204,887 111,917 2,248,298 7,644,622 44,993,228 -5,975,680 36,664,822 $ 23,377,473 $ 7,311,669 $ 30,689,142 The notes to the basic financial statements are an integral part of this statement. -7- BURKE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2003 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. Change in Net Assets of Governmental Activities (Exhibit "B") $ -5,975,680 $ 15,976,018 -1,699,338 14,276,680 106,596 $ ===8,=40=7a!=,5=96= The notes to the basic financial statements are an integral part of this statement. -8- BURKE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 53,251 15,426 $===68=,6=7=7= $===68='=67=7= The notes to the basic financial statements are an integral part of this statement. -9- BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Burke County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Burke 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 of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 10 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. 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 ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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 grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. 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 - 11 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $814,651 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of $90,203 at July 1, 2002. This change is in accordance with generally accepted accounting principles. General Fund Balance July 1, 2002 $ 22,264,611 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 814,651 90,203 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,520,684 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 2,855,870 General Fund Balance July 1, 2002 (Restated) $ 21,834.279 - 12 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CHANGES IN ACCOUNTING PRINCIPLES The Burke County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments, as of June 30, 2003. The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund $ 21,834,279 14,830,543 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences $ 36,664,822 60,410,750 -12,242,463 314,119 Net Assets Beginning (See Exhibit "B") $ 8521472228 CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, - 13 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 (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 Burke County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on November 7, 2002 (levy date). Taxes were due on January 6, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Burke 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, 2003, for maintenance and operations amounted to $18,831,427. The tax millage rate levied for the 2002 tax year (calendar year) for the Burke County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.75 mills - 14 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA $ 5,000 20 years $ 5,000 50 years $ 5,000 5 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Note 3: DEPOSITS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face - 15 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 3: DEPOSITS 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, 2003, the bank balances were $34,035,909. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. - 16 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 824,059 2 23,191,948 3 10,019,902 Total $ 34,035,909 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 l, 2002 Increases Decreases Balances June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,410,019 $ 0 $ 15,241,683 0 $ 1,410,019 15,241,683 Total Capital Assets Not Being Depreciated $ 1,410,019 $ 15,241,683 $ 0 $ 16,651,702 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 48,408,529 8,320,867 $ 2,271,335 734,335 $ $ 48,408,529 476,000 8,579,202 2,271,335 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 6,534,709 4,776,445 931,309 919,354 677,549 102,435 476,000 7,454,063 4,977,994 1,033,744 Total Capital Assets, Being Depreciated, Net $ 46,758,268 $ -965,003 $ 0 $ 45,793,265 Governmental Activity Capital Assets - Net $ 48,168.287 $ 14,276.680 $ 0 $ 62,444.967 - 17 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Food Services $ 903,073 $ 35,340 46,205 25,897 10,753 571,976 690,171 106,094 $ 126992338 Note 6: INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2003, consisted of the following: Due From Other Funds Due To Other Funds General Fund District-wide Capital Projects $ 1,905,069 $ 1,905,069 $ 1,9052069 $ 1,9052069 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 torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. - 18 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 7: RISK MANAGEMENT The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning ofYear Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 2 046 $ 22,128 $ 15,140 $ 9 034 $ 9 034 $ 872 $ 9906 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Principals JTPA Coordinator $ 20,000 $ 5,000 - $ 10,000 $ 20,000 Note 8: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $475,331 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $404,120 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 $71,211 Note 9: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available: - 19 - BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: SIGNIFICANT COMMITMENTS Project Unearned Executed Contracts Funding Available From State 03G/02S-617-00S/SA01S-617-038 Sardis Elementary School Burke County Central Office $ 427,539 $ 1,072,227 84,901 1 644 $ 514!084 $ 1!072!227 The amounts described in this note are not reflected in the basic financial statements. 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: 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% oftheir 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: -20- BURKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 11: RETIREMENT PLANS Fiscal Year 2003 2002 2001 Percentage Contributed 100% 100% 100% Required Contribution $ 1,807,622 $ 1,705,455 $ 1,991,136 - 21 - BURKE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Total Expenditures Net Change in Fund Balance Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL FINAL ACTUAL AMOUNTS (1) $ 18,507,708 $ 18,507,708 $ 18,831,427 114,819 12,447,221 12,447,221 13,145,325 2,327,669 2,327,669 5,329,361 117,450 117,450 218,382 130,000 130,000 296,031 365 753 $ 33,530,048 $ 33,530,048 $ 38,301,098 $ 19,550,505 $ 19,550,505 $ 22,072,620 1,250,370 434,199 663,959 1,420,078 2,269,593 152,523 3,190,574 3,239,326 88,503 2,692,350 1,250,370 434,199 663,959 1,420,078 2,269,593 152,523 3,190,574 3,239,326 88,503 2,692,350 1,244,520 726,794 573,019 1,568,458 2,229,100 144,585 2,789,492 2,847,138 59,711 204,887 51,892 2,248,298 $ 34,951,980 $ 34,951,980 $ 36,760,514 $ -1,421,932 $ -1,421,932 $ 1,540,584 22,824,995 22,824,995 21,744,076 -4 325 -4 325 Fund Balances - Ending $ 21,398,738 $ 21,398,738 $==2=3=,2=8=4=,6=60== Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Actual amounts have been adjusted to exclude the governmental activity from the various principal accounts. See notes to the basic financial statements. - 23 - BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Capacity Building Improvement Flow Through Preschool Total Special Education Cluster Other Programs Direct Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Even Start Grants to Local Educational Agencies Title II Enhancing Education Through Technology Improving Teacher Quality TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Safe and Drug-Free Schools and Communities Vocational Education-Basic Grants to States High School Program Basic Grant Total U.S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 1958279 1,958,279 10.550 N/A $ 125 242 2,083,521 84.027 84.027 84.173 N/A $ NIA N/A $ 2,897 410,049 32 664 445,610 * 84.287 477,767 84.213 * 84.010 84.318 * 84.367 84.298 84.358 84.186 84.048 N/A NIA N/A N/A NIA NIA N/A N/A $ 195,862 1,748,712 52,822 339,138 39,223 81,812 52,557 103 679 3 537 182 - 24 - BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Labor, U. S. Department of Pass-Through From Richmond/Burke Job Training Authority Job Training Partnership Act Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 17.250 N/A $ _ _ _ _4_4~9_95_ $ _ _ _ _4_1~02_0_ Total Federal Financial Assistance N/A = Not Available $ ===5=7=0=6=7=18= Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($371,999) were not maintained separately and are included in the 2003 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Burke County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 25 - BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 AGENCY/FUNDING GRANTS 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 Supplemental Speech Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Children Intervention School Service-Medicaid Health Insurance Mentor Teachers Preschool Handicapped Program Student Information System Lottery Program Computers in the Classroom Georgia Institute Of Technology Student Information System Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. - 26- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 665,186 231,665 1,219,974 877,495 794,211 473,159 1,874,303 1,274,811 360,495 16,684 274,304 547,069 45,483 13,725 3,117 80,916 25,807 127,412 251,746 86,784 52,069 294,649 473,979 768,082 902,367 205,508 19,000 102,885 17,124 24,147 19,960 160,092 18,404 -469,637 15,935 62,979 35,232 404,120 11,288 72,554 60,044 94,456 -23,795 508,326 71 211 $ 13,145,325 BURKE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "4" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 1,132,358 $ 1,164,144 $ 24,260 $ 1,188,404 374,266 364,610 1,798 366,408 2,126,717 2,062,238 93,324 2,155,562 1,486,670 1,458,891 14,985 1,473,876 1,377,479 1,611,601 54,613 1,666,214 775,843 3,194,771 2,222,869 625,934 1,516,850 139,602 45,148 219,534 596,206 3,155,641 2,923,655 704,907 525,560 883,894 133,654 90,476 404,644 1,522 4,864 140,807 201,691 88,612 408 22,618 3,738 746 7,191 601,070 3,296,448 3,125,346 793,519 525,968 906,512 137,392 91,222 411,835 1,522 $ 15,238,041 $ 16,081,643 $ 659,655 $ 16,741,298 432,013 89,575 513,783 20,743 46,456 87,618 560,239 108,361 TOTAL QBE FORMULA FUNDS $ 15,759,629 $ 16,616,169 $ 793,729 $ =~1,;,.7,.;,40;;,;9;1,;,8;,;;9~8 (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. - 27- 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 June 25, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Burke County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Burke County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Burke County Board ofEducation's basic financial statements and have issued our report thereon dated June 25, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Burke County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Burke County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted 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 Burke County Board of Education'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-6171-03-01, FS-6171-03-02 and FS-6171-03-03. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none ofthe reportable conditions described above is a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Burke County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~ RWH:gp 2003-34YB-30 RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 25, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Burke County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Burke County Board of Education 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, 2003. Burke County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Burke County Board of Education's management. Our responsibility is to express an opinion on Burke County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 Burke 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 Burke County Board of Education's compliance with those requirements. 2003SA-10 In our opinion, the Burke County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Burke 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 Burke 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 ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use ofthe management, members ofthe Burke County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2003SA-10 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS BURKE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6171-01-02 FS-6171-02-01 FS-6171-02-02 Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6171-02-01 FA-6171-02-02 Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Burke County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Burke County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Employee Compensation None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Burke County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Burke County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Burke 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 Burke County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.287 Twenty-First Century Community Leaming Centers 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Burke County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6171-03-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the general ledger and voucher payment functions. There is no approval of bank reconciliations. Revenues/Receivables/Receipts Deposit preparation was not separated from the general ledger and cash custody functions. Based on a sample of25 items, sixteen receipts were not deposited to the bank account in a timely manner. Expenditures/Liabilities/Disbursements The check writing function was not separated from general ledger or processing of signed checks. Based on a sample of25 items, twenty-three had no documentation indicating prior approval of purchases included with voucher packets. These deficiencies were a result of management's decision to limit the number of administrative staff, at the various school sites, made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization be segregated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed according to established procedures. -2- BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6171-03-01 Management's Response: The above comments have been reviewed with the appropriate personnel, and the following actions have been taken: 1. All disbursements require documentation that has written authorization from appropriate personnel. All checks are signed by hand by the principal. 2. Deposits are made on a regular basis. Deposits are made by someone not involved with the accounting function. 3. Bank statements are received and opened by the principal, and the principal reviews and signs off on bank reconciliations. EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Amount: $29,028 Finding Control Number: FS-6171-03-02 A sample ofthirty-two employees' payroll records was selected and examined to test the accuracy of payroll records ofthe Burke County Board ofEducation. The sample revealed two overpayments as noted below: Salary payments in excess of approved salary schedules totaling $16,028 were made to the Superintendent's son, John Giles Day. Salary payments in excess of approved salary schedules totaling $13,000 were made to Mercedes Hamilton. These deficiencies occurred because management used an incorrect salary base rate in calculating the individuals pay. The School District should implement procedures to ensure that all payroll disbursements are based on approved contracts, salary scales and time worked. The School Board should review this matter and determine if any funds should be recovered from these individuals. -3 - BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Amount: $29,028 Finding Control Number: FS-6171-03-02 Management's Response: The superintendent and the Board will take written, recorded action on any individuals that are not paid according to the approved salary schedule. EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Reportable Condition Amount: $7,036 Finding Control Number: 6171-03-03 Our examination of compensation paid to senior management of the School District revealed a significant error in the amount reported as salary to the Department of Audits and Accounts. The School District failed to include $7,036 for the employees' portion ofthe Social Security tax paid on the superintendent's behalf. This payment was in accordance with the contract between the superintendent and the School District. The School District reported a salary of $114,691 for Superintendent C. Doug Day in its salary and travel report for the period ended June 30, 2003. The actual compensation for Mr. Day totaled $121,727, which includes the $7,036 payment referenced above. The School District should implement procedures to ensure that all employee compensation is included in the salary total reported to the Department of Audits and Accounts. Management's Response: Payroll taxes paid to the Board on behalf ofthe Superintendent will be included in the gross wages disclosed on the CS-1 for June 30, 2004 and future years. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4 -