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

BURKE COUNTY BOARD OF EDUCATION
WAYNESBORO, 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

BURKE 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

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

BURKE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

26

4 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

27

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

BURKE 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
May 2, 2005

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
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, 2004, 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 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 of the Burke County Board of Education, as of June 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-l l

In accordance with Government Auditing Standards, we have also issued our report dated May 2, 2005, 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 grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat 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 vii 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.
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,
~~-~ Russell W. Hinton State Auditor
RWH:as 2004ARL-11

BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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, 2004. 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 2004 are as follows:
The Board's financial status did not change significantly during fiscal year 2004. In total, net assets decreased $1.02 million, which represents a 1.1 percent decrease from fiscal year 2003. This total decrease was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $20.2 million in revenue or 51 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $19.5 million or 49 percent of total revenues. Total revenues were $39.7 million.
The Board had $40.7 million in expenses related to governmental activities; only $19.5 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues and primarily taxes of $20.2 million provided for the remaining balance.
Among major funds, the general fund had $39.9 million in revenues and $39.3 million in expenditures. The general fund's balance increased to $25 million from $23.4 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.
The Statement ofNet Assets and Statement ofActivities 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.
- 1-

BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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 2004?" The Statement ofNet Assets and the Statement ofActivities answer this question. These statements include all assets and all liabilities using the accrual basis of accounting similar to the accounting used by most privatesector 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 District-wide Capital Projects Fund.
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 year-end 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.
- 11 -

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

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 1 provides a summary of the Board's net assets for fiscal year 2004 compared to fiscal year 2003.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 33,387 63,087

$ 35,439 62,445

Total Assets

$ 96,474 $ 97,884

Liabilities Current and Other Liabilities

$ 3,937 $ 4,329

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

$ 63,087 481
28.969

$ 62,445 617
30,493

Total Net Assets

$ 92,537 $ 93,555

Total net assets decreased $1.02 million.

Table 2 shows the changes in net assets for fiscal year 2004 compared to fiscal year 2003.

- 111 -

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

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Real Estate 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 Community Services Food Services
Total Expenses
Increase (Decrease) in Net Assets

Governmental Activities

Fiscal

Fiscal

Year2004

Year 2003

$ 795 18,462 204
$ 19,461

$ 218 17,999
$ 18,217

$ 18,875 22
45 86
314 481 399
$ 20,222
$ 39,683
$ 24,432
1,354 876 657
1,638 2,420
325 2,967 3,287
103 161
252 2,229
$ 40,701
$ -1,018

$ 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
$ 8,407

- iv -

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

Governmental Activities

Instruction comprises 60 percent of governmental program expenses. The combined expenditures for instruction, pupil services, improvement of instructional services and educational media services account for 67.1 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 for both fiscal years 2004 and 2003. That is, 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

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 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 of Non-Instructional Services Community Services Food Services

$ 24,432 $ 18,938 $ 11,816 $

1,354 876 657
1,638 2,420
325 2,967 3,287
103 161

1,415 727 482
1,722 2,139
107 787 2,142
60 205

1,108 529 370
1,325 1,598
13 2,095 2,156
99 12

252

112

19

2,229

1,880

100

6,705
1,193 541 231
1,471 1,605 -196
-32 1,013
51 14
60 -157

Total Expenses

$ 40.701 $ 30,716 $ 21.240 $ 12.499

Although tax revenues are significant, the Board is still dependent upon program revenues for governmental activities. Over 48.3 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 52.2 percent.

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 $39.9 million and expenditures of $41.4 million. There was a decrease of $3 million in the capital projects fund due to capital funds on hand being expended and funds transferred to the general fund. The general fund had an increase of $1.6 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.

-v-

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

General Fund Budgeting Highlights

The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.

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 2004, the Board had budgeted general fund expenditures exceeding general fund revenues by $0.4 million, thereby using accumulated surplus to fund the shortfall. Actual revenues exceeded budgeted revenues by $1.3 million due to an increase in state, Federal and local revenue. Actual expenditures exceeded budgeted expenditures by $0.3 million. Thus for fiscal year 2004, general fund revenues exceeded expenditures by $0.6 million.

Capital Assets

At the end of fiscal year 2004, the Board had $63.1 million invested in capital assets, all in governmental activities. Table 4 indicates balances in capital assets at June 30, 2004 and June 30, 2003.

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

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

$ 1,410 779
54,899 4,346 1,653

$ 1,410 15,242 40,954 3,601 1,238

Total

$ 63~087 $ 62A45

The primary increases occurred in Buildings and Improvements with the transfer of assets from Construction in Progress upon completion.

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 6.73 percent from 1999 to 2003. 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.

- vi -

BURKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 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 or email at cdday@burke.kl2.ga.us.
- Vll -

BURKE COUNTY BOARD OF EDUCATION

BURKE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable. Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable
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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

1.917.664

28.427.839

559,243 1,462,926
671,572 294.861
52,305

1,410,019 779,370
2,804,895 63,416,889
9,944,793 -15,268,821

$ ===9=6=,4=7=3=,5=55=

$

973,650

2,810.745

152 467

$

3,936,862

$

63,087,145

480,556 28,968,992

$

92,536,693

$ ===9=6=,4=7==!3,=55=5=

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

BURKE 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 Community Services Food Services
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

24,431,837 $

1,353,630 876.317 656,967
1,638,140 2,420,086
324,852 2,966,887 3,286,585
103,412 161,154

252,422 2,229,467

$

40,701,756 $

15,650
28,194 281,717
60,038
233,779 176 009 795 387

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

$

12,600,549

245,764 347,184 258,816 312,946 539,833 311,470 812,097 926,705 $
3,910 149,398

1,953,342

$

18,462,014 $

$ 204,118 204 118 $

-11,815,638
-1,107,866 -529, 133 -369,957
-1,325,194 -1,598,536
-13,382 -2,094,752 -2,155,762
-99,502 -11,756
-18,643 -100 116
-21,240,237

$

18,875,074

21,753

85,919 45,528 313,665 481,308 398,859

$

20,222,106

$

-1,018,131

93,554,824

$ ===9=2=,5=3=6'=6=93=

-5-

BURKE 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 Due From Other Funds Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable Due To Other Funds
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

$ 1,891,183 $ 24,275,273
339,379 1,462,926
671,572 127,986
52,305

26,481 $ 4,152,566
166,875 184,383

1,917,664 28,427,839
339,379 1,462,926
671,572 294,861 184,383
52 305

$ 28,820,624 $ 4,530,305 $ ===33=,3=5=0=,9=29=

$

860,067 $

2,810,745

184,383

$ 3,855,195 $

113,583 $ 152,467
266,050 $

973,650 2,810,745
152,467 184 383
4 121 245

$

428,251

$

52,305

24,484,873 $
$ 24,965,429 $

4,264,255 4,264,255 $

428,251 52,305
24,484,873 4,264,255
29,229,684

$ 28,820,624 $ 4,530,305 $ ===3=3:!:,3=5=0!=,9=29=

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

BURKE 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 Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.

$ 29,229.684

$ 1,410,019 779,370
2,804.895 63,416,889
9,944,793 -15,268,821

63,087,145

219,864

Net Assets of Governmental Activities (Exhibit "A")

$ 92,536,693

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

BURKE 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 Community Services Food Services Operation
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 19,097,678 131,447
13,379,049 5,600,748 795,387 440,999 $ 405 083
$ 39,850,391 $

$
40,309 40,309 $

19,097,678 131,447
13,379,049 5,600,748 795,387 481,308 405 083
39,890,700

$ 22,865,574

$

1,353,630 876,317 596,095
1,585,260 2,500,892
305,478 2,953,604 3,553,955
103,412 161,154 252,422 2,165,063
$

2,077,302

$ 39,272,856 $ 2,077,302 $

$

577,535 $ -2,036,993 $

22,865,574
1,353,630 876,317 596,095
1,585,260 2,500,892
305,478 2,953,604 3,553,955
103,412 161,154 252,422 2,165,063 2,077,302
41,350,158
-1,459,458

$ 1,010,421

$

$ -1,010,421

$ 1,010421 $ -1,010,421 $

$ 1,587,956 $ -3,047,414 $

23,377,473

7,311,669

1,010,421 -1,010,421
0 -1,459,458 30,689,142

$ 24,965,429 $ 4,264,255 $ 29,229,684

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

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. 2004

EXHIBIT"F"

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

$

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense

$ 2,606,761 -1,958,359

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

In the Statement of Activities, only the gain on the sale of equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold.

-1,459,458
648,402 -200,851
-6 224

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

$ ==-==-1=01=8=-=1=3=1

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

BURKE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Other
Total Assets
LIABILITIES Accounts Payable Salaries Payable Funds Held for Others
Total Liabilities

EXHIBIT "G"

AGENCY FUNDS

$

60,066

41 576

$ ====1=0::::!1,=64=2=

$

1,927

6,463

93,252

$ =~10;,,;,1~,64~2=

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

BURKE 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 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.
The School District reports the following major governmental funds:
- 12 -

BURKE 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 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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. 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 policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and equity investments 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 of return 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
(8) Obligations of other political subdivisions of the State of Georgia.

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on December 19, 2003 (levy date). Taxes were due on February 20, 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 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, 2004, for maintenance and operations amounted to $19,075,925.

The tax millage rate levied for the 2003 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

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 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

- 15 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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 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. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(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 $24,723,366. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2004, as follows:

Risk Category

Bank Balance

1

$ 8,278,642

2

14,095,795

3

2,348,929

Total

$ 24,723,366

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the fair value of the School District's total investments was $6,771,002 and this entire amount consisted of U. S. Government Securities which was insured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.

- 17 -

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

EXHIBIT"H"

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2003

Increases

Decreases

Balances June 30, 2004

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

$ 1,410,019 15,241,683 $

$ 1,410,019

779 370 $ 15,241,683

779 370

Total Capital Assets Not Being Depreciated $ 16,651,702 $ 779 370 $ 15,241,683 $ 2,189,389

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 48,408,529 $ 15,008,360

8,579,202

1,527,154 $

2,271,335

533,560

$ 63,416,889

161,563

9,944,793

2,804,895

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

7,454,063 4,977,994 1,033,744

1,064,062 776,062 118,235

155,339

8,518,125 5,598,717 1,151,979

Total Capital Assets, Being Depreciated, Net $ 45,793,265 $ 15,110,715 $

6,224 $ 60,897,756

Governmental Activity Capital Assets - Net $ 62,444,967 $ 15,890,085 $ 15,247,907 $ 63,087,145

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 Student Transportation Services Food Services

$ 1,037,635

$ 40,327 59,676 31,499 12,835 8,800
644,688

797,825 122,899

$ 129582359

- 18 -

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

EXHIBIT"H"

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, 2004, consisted of the following:

Due From Other Funds

Due To Other Funds

General Fund District-wide Capital Projects

$ 184,383 $ 184,383

$ 184~383 $ 184~383

Transfers are used to move property tax revenues to provide supplemental funding for capital construction projects.

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

General Fund

$ 1,010,421

Transfers are used to move excess local funds in the District-wide Capital Projects Fund to the General Fund.

Note 8: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significant!y reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

- 19 -

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

EXHIBIT "H"

Note 8: 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:

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

9 034 $

872 $

9 906 $

0

$

0 $

15 719 $

15 594 $

125

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

Position Covered

Amount

Superintendent Principals

$

20,000

$

5,000 - $

10,000

For the current fiscal year, due to a clerical error, the School District significantly reduced coverage for the JTPA Coordinator.

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $417,566 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 $413,596

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 $3,970

- 20-

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

EXHIBIT"H"

Note 10: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004:

Project

Unearned Executed Contracts

Bus and Transportation Shop

$ 1,071,910

The amount described in this note is not reflected in the basic financial statements.

Note 11: 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 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%

$ 1,888,368 $ 1,807,622 $ 1,705,455

- 21 -

BURKE 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 Community Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES
Other Sources
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS (1)

$

20,323,272 $

20,323,272 $

19,097,678

131,447

11,900,385

11,998,963

13,379,049

5,359,476

5,411,180

5,600,748

162,700

162,700

294,500

110,000

110,000

439,641

401 783

$

37,855,833 $

38,006,115 $

39,344,846

$

22,239,746 $

22,472,705 $

22,865,574

1,111,219 756,993 628,716
1,433,542 2,363,381
222,545 3,383,474 3,517,117
85,501 83,887
2,113,555

1,163,837 812,439 628,716
1,542,214 2,342,581
222,545 3,383,474 3,527,117
90,856 110,157
5,000 2118771

1,353,630 876,317 566,541
1,585,260 2,207,616
305,478 2,953,604 3,553,955
103,412 161,154 41,384 2,165,063

$

37,939,676 $

38,420,412 $

38,738,988

$

-83,843 $

-414,297 $

605,858

1 010 421

$

-83,843 $

-414,297 $

1,616,279

24,665,381

24,665,381

23,284,660

997 989

997 989

Fund Balances - Ending

$

25,579,527 $

25,249,073 $ =====2=4=,9=0=0'=93=9=

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.
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.

- 23 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants Rural Education Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U.S. Department of Education
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
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

NIA

NIA

$

$

(2) 1 871 389
1,871,389

10.550

NIA $

138,886 2,010,275

* 84.027 * 84.173

N/A

$

N/A

$

453,652 25434
479,086

84.287
84.318 84.213 84.367 84.358 84.186 84.298 * 84.010 84.048

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

535,215
49,423 331,530 404,077
75,373 61,366 18,125 1,830,463 45288
3,829,946

17.250

N/A $

37 597

$

48 255

$ ===5:o.9=2=6"'=,0=73=

- 24-

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($364,232) 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 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 fund financial statements.

See notes to the basic financial statements.

- 25 -

BURKE 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 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 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 Pay for Performance Preschool Handicapped Program Lottery Programs Computers in the Classroom Student Information System
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

$

893,653

445,885 417,281 1,375,719 901,520 759,181 505,031 1,934,390 1,311,685 380,652
28,140 283,035 614,275
66,033 2,845
65,747 29,589 132,123 259,524 84,623 54,349
311,960 494,401 787,872
866,194 204,118
19,500 97,761 16,448 145,246 35,928 -894,877
37,608 47,813 413,596 10,088 10,758 110,818 73,571
968 40,028
3 970
$ ===1=3;i,;3;,;,7,;;,9.;;0.4..9=

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

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 Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

798,827 $

949,038 $

50,826 $

999,864

652,771

453,725

3,513

457,238

2,275,877

2,310,959

161,153

2,472,112

1,504,237

1,323,162

14,705

1,337,867

1,283,866

1,467,814

59,399

1,527,213

834,773 3,228,198 2,196,489
634,898 1,642,209
113,998 48,868
220 647

735,101 3,272,660 2,969,022
725,895
555,304 907,598
130,000 90,925
397,375

3,330 146,969 102,168 162,207
13,021 6,318 431 2,612 1,057 7 830

738,431 3,419,629 3,071,190
888,102
568,325 913,916
431 132,612
91,982 405,205

$

15,435,658 $ 16,288,578 $

735,539 $

17,024,117

432,492 90,820

514,961 31 364

43,281 80675

558,242 112,039

TOTAL QBE FORMULA FUNDS

$

15,958,970 $ 16,834,903 $

859,495 $ =====1=-7,;;;,69=4=li,3=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.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
May 2, 2005

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 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 Burke County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Burke County Board ofEducation's basic financial statements and have issued our report thereon dated May 2, 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 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 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 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-6171-04-01, FS-6171-04-02 and FS-6171-04-03.
2004YB-40

A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider item FS-6171-04-03 to be a material weakness.
Compliance and Other Matters
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 of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Burke County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~w.4A_::k Russell W. Hinton State Auditor
RWH:as 2004YB-40

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
May 2, 2005

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 ofBurke County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Burke 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 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 ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General 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.
2004SA-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 of its major Federal programs for the year ended June 30, 2004.
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 of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, 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. 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,
~~-~ Russell W. Hinton State Auditor
RWH:as 2004SA-10

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, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6171-03-01 FS-6171-03-02 FS-6171-03-03

Partially Resolved - See Corrective Action/Responses Umesolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6171-03-01

The Board is continuing to work with the schools to ensure that adequate internal control procedures are implemented. In particular, it has been stressed that all expenditures must be properly authorized by the appropriate personnel.

EMPLOYEE COMPENSATION Salary Overpayments Amount: $29,028 Finding Control Number: FS-6171-03-02

This finding was discovered very late in the 2003/2004 school year, thus the problem ofan erroneous job category was repeated for that year. However, this problem was corrected for the 2004/2005 school year.

SECTION IV FINDINGS AND QUESTIONED COSTS

BURKE 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 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 Employee Compensation Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements General Ledger

Ofthe reportable conditions described above, General Ledger is considered to be a material weakness.

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 of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) ofOMB Circular A-133 The Burke 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 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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, 2004
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-6171-04-01
A review ofthe School District's internal control policies and procedures revealed that there was no administrative review ofbank reconciliations to determine ifthey were correct and that all required adjustments had been made.
In addition, our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks.
Based on a review of25 items, seventeen had no documentation indicating prior approval of purchases included with voucher packets.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should review the accounting procedures in place and 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, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Salary Overpayments Reportable Condition Amount: $35,150 Repeated From Prior Year Finding Control Number: FS-6171-04-02
A review of payroll records for two individuals who were overpaid in the prior fiscal year revealed that those individuals were overpaid in the current fiscal year as noted below:
Salary payments in excess of approved salary schedules totaling $17,150 were made to the Superintendent's son, John Giles Day.
Salary payments in excess of approved salary schedules totaling $18,000 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.
GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6171-04-03
The following deficiencies were noted in regard to the School District's accounting procedures related to the general ledger process:
(1) The School District's general ledger did not agree with the financial data submitted to the Georgia Department of Audits. Adjusting journal entries were made by the auditors to correct identified variances of $184,383 between the general ledger and the financial data submitted by the School District.
(2) The School District's general ledger included invalid Accounts Payable of $13,964 in the General Fund. In addition, accounts payable for the District-wide Capital Projects Fund in the amount of $266,050 were incorrectly recorded in the General Fund. These deficiencies resulted from management's failure to follow established accounting procedures and to reconcile general ledger accounts with subsidiary records.
-3-

BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-6171-04-03
(3) The School District's general ledger improperly reflected accounts receivable for Agency Funds of $21,800 and Federal Programs Fund of $4,059 in the General Fund. This deficiency resulted from management's failure to follow established accounting procedures and to reconcile general ledger accounts with subsidiary records.
(4) The School District's Federal programs, reported in the General Fund, had deficit balances at June 30, 2004, totaling $111,955. There were no revenues or related receivables recorded for these deficit balances. This condition occurred because management failed to monitor Federal program expenditures and request appropriate funds from Federal agencies.
Management should implement procedures to ensure that all financial data is properly recorded in the general ledger and reconciled to subsidiary records. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-4-

SECTIONV MANAGEMENT'S RESPONSES

BURKE COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6171-04-01
We concur with this finding. There will be administrative review of all bank reconciliations. In addition, for the principal accounts the separation ofduties will be implemented as much as possible, and in the functions that separation is not possible, there will be administrative review and oversight. The following are the minimum actions to be taken at all locations:
1. Principal/designee will receive, open and review all bank statements, and he/she will also review/initial all bank reconciliations.
2. All deposits are to be made in a timely manner by someone other than the office manager. 3. Both an approved check request form and an approved invoice for the expenditure will
support all expenditures.
In addition, central office personnel will periodically visit each location to verify that these procedures are being followed.
Finding Control Number: FS-6171-04-02
We concur with this finding. The Board has approved the subsequent specific salaries for the applicable individual(s), and the Board has determined not to recover these overpayments. The Board will ensure that all employees will be paid according to the applicable salary schedule and any deviations will be approved by recorded Board action.
Finding Control Number: FS-6171-04-03
We concur with this finding. The accounting personnel will ensure that all data is properly and timely recorded, and where applicable general ledger accounts are reconciled to the subsidiary records.
Contact Person: Les Peel, Business Manager Phone: (706) 554-8050 Ext. 227 Fax Number: (706) 554-8095 E-mail Address: lpeel@burke.kl2.ga.us