CALHOUN COUNTY BOARD OF EDUCATION MORGAN, 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 CALHOUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS GENERAL-PURPOSE FINANCIAL STATEMENTS COMBINED STATEMENTS - OVERVIEW A COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUP 2 B COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES 4 C COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS 7 D NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS 8 ADDITIONAL FINANCIAL INFORMATION COMBINING STATEMENTS SPECIAL REVENUE FUND E COMBINING BALANCE SHEET 20 F COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 22 CAPITAL PROJECTS FUND G COMBINING BALANCE SHEET 24 H COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES 25 SCHEDULES 1 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 2 SCHEDULE OF STATE REVENUE 28 3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 29 4 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 31 CALHOUN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS 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 June 7, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Calhoun County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying general-purpose financial statements of the Calhoun County Board of Education, as of and for the year ended June 30, 2003, as listed in the table of contents. These general-purpose financial statements are the responsibility of the Calhoun County Board of Education's management. Our responsibility is to express an opinion on these general-purpose 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 opm10n. As described in the notes to the general-purpose financial statements, the Board of Education's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows: 2003ARL-13 * The general-purpose financial statements of the Board of Education did not contain a General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles. * School activity accounts maintained at the individual schools are not included in the general-purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general-purpose financial statements. * The School District did not properly record revenues and expenditures for the Debt Service fund. Sales tax revenues were overstated by $91,710 and debt service expenditures were overstated in the amount of $149,670. This results in the generalpurpose financial statements being incomplete and not in accordance with generally accepted accounting principles. The aggregate effects on the general-purpose financial statements of these variances or omissions have not been determined, but are believed to be material. In our opinion, except for the effects on the general-purpose financial statements of the matters referred to in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the Calhoun County Board of Education as ofJune 30, 2003, and the results ofits operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated June 7, 2004, on our consideration of the Calhoun County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the Calhoun County Board of Education taken as a whole. The accompanying combining statements (Exhibits E through H) and the financial schedules (Schedules 1 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 of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe general-purpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such information is fairly stated, in all material respects, in relation to the general-purpose financial statements taken as a whole. 2003ARL-13 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 ofGeorgia Annotated Section 506-24. Respectfully submitted, ~-~~ sell W. Hinton State Auditor RWH:as 2003ARL-13 CALHOUN COUNTY BOARD OF EDUCATION CALHOUN COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUP JUNE 30 2003 Cash and Cash Equivalents Investments Accounts Receivable Inventories Food Donated Commodities Purchased Food Amount Available in Debt Service Fund Amount to be Provided in Future Years For Payment of: Bond Debt Capital Lease Agreements GENERAL FUND GOVERNMENTAL FUND TYPES SPECIAL CAPITAL REVENUE PROJECTS FUND FUND $ 72,768.63 $ 256,432.28 9,856.35 $ 4,210.93 391,431.27 134,398.81 82,042.00 3,790.40 1,344.82 Total Assets $ 474,056.25 $ 395,966.31 $ ======8..,6,!..2.5..2....9.,.3.,. LIABILITIES AND FUND EQUITY LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable Deferred Revenue Capital Lease Agreements General Obligation Bonds Payable Total Liabilities FUND EQUITY Fund Balances Reserved For Bus Replacement Funds For Debt Service For Inventories Food Donated Commodities Purchased Food For Purpose of Bond Issue Unreserved Designated for Self-Insurance Undesignated Deficit Total Fund Equity $ $ 320,601.50 $ 141,858.12 562,560.35 94,587.25 2,084.12 50,505.57 78,292.00 $ 885,245.97 $ 286,950.94 $ 78,292.00 $ 26,838.05 $ 3,790.40 1,344.82 $ 10,689.73 0.00 -448,717.50 103,880.15 $ -411,189.72 $ 109,015.37 $ 7,960.93 0.00 7,960.93 Total Liabilities and Fund Equity $ 474,056.25 $ The notes to the general-purpose financial statements are an integral part of this statement. -2- 395,966.31 $ ===8=6'=2=52=.9=3= EXHIBIT"A" DEBT SERVICE FUND $ 535.65 253,100.63 63,960.96 ACCOUNT GROUP GENERAL LONG-TERM DEBT TOTALS (Memorandum Only) JUNE 30, 2003 JUNE 30, 2002 $ 329,736.56 $ 743,072.78 267,167.91 446,333.33 671,833.04 662,536.52 3,790.40 1,344.82 4,199.05 1,431.08 $ 317,597.24 317,597.24 387,661.93 427,402.76 40,357.56 427,402.76 40,357.56 682,338.07 78,001.62 $ 317,597.24 $ 785 357.56 $ 2,059,230.29 $ 3,005,574.38 $ 78,292.00 $ 25,812.54 462,459.62 515,334.60 657,147.60 534,818.83 86,754.38 52,589.69 $ 40,357.56 40,357.56 78,001.62 745,000.00 745,000.00 1,070,000.00 $ 785,357.56 $ 2,035,846.47 $ 2,310,721.97 $ 317,597.24 0.00 $ 317,597.24 $ 317,597.24 $ $ 26,838.05 $ 89,958.29 317,597.24 387,661.93 3,790.40 1,344.82 7,960.93 10,689.73 103,880.15 -448,717.50 $ 23,383.82 $ 4,199.05 1,431.08 30,799.10 10,689.73 170,113.23 694,852.41 785,357.56 $ 2,059,230.29 $ 3,005,574.38 -3- CALHOUN COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30. 2003 REVENUES State Funds Federal Funds Taxes Other Funds 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 Food Services Operation Community Services Operations Capital Outlay Debt Service Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Operating Transfers In Operating Transfers Out Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses FUND BALANCE JULY 1 Food Inventory - Net Change in Period Donated Commodities Purchased Food GENERAL FUND SPECIAL REVENUE FUND $ 3,712,951.58 $ 1,493,594.02 93,585.36 $ 5,300,130.96 $ 160,859.40 1,199,025.78 13,884.02 1,373,769.20 $ 3,502,967.61 $ 174,108.41 74,257.12 143,645.54 352,298.39 507,295.72 97,084.59 499,500.52 393,843.87 687,607.16 67,261.75 94,315.47 52,235.77 56,600.68 31,833.70 1,565.20 463,048.04 37,644.06 4.855.38 $ 5,787,501.21 $ 1,454,467.77 $ -487,370.25 $ -80,698.57 $ $ -29,463.06 $ -29,463.06 $ 19,461.06 19,461.06 $ -516,833.31 $ 105,643.59 -61,237.51 170,747.79 -408.65 -86.26 FUND BALANCE JUNE 30 $ -411,189.72 $ ======1=09=,0=1=5.=37= The notes to the general-purpose financial statements are an integral part of this statement. -4- EXHIBIT"B" CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTALS (Memorandum Only) YEAR ENDED JUNE 30, 2003 JUNE 30, 2002 $ 82,042.00 $ 3,955,852.98 $ 4,602,402.97 1,199,025.78 980,776.28 $ 438,122.16 1,931,716.18 1,950,427.80 558.03 2,330.11 110,357.52 133,691.83 $ 82,600.03 $ 440,452.27 $ 7,196,952.46 $ 7,667,298.88 $ 4,190,574.77 $ 4,347,528.03 $ 115,440.20 241,370.16 168,572.59 195,881.31 408,899.07 539,129.42 97,084.59 499,500.52 395,409.07 463,048.04 115,440.20 175,049.76 170,247.69 135,684.69 364,339.74 637,057.27 82,341.52 425,214.48 309,866.67 468,241.68 1,452.00 100,059.00 $ 438,824.46 71,692.50 476,468.52 76,547.88 330,516.95 55,073.74 $ 115,440.20 $ 510,516.96 $ 7,867,926.14 $ 7,602,673.22 $ -32,840.17 $ -70,064.69 $ -670,973.68 $ 64,625.66 $ 10,002.00 $ 10,002.00 $ 29,463.06 $ -29,463.06 $ 0.00 $ 6,679.03 -6,679.03 0.00 $ -22,838.17 $ -70,064.69 $ -670,973.68 $ 64,625.66 30,799.10 387,661.93 694,852.41 628,533.74 -408.65 -86.26 1,661.42 31.59 $ 7 960.93 $ 317,597.24 $ 23,383.82 $ ==6=94=,8=5=2=.4=1 -5- CALHOUN COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"C" GENERAL FUND BUDGET ACTUAL REVENUES State Funds Federal Funds Taxes Other Funds $ 3,783,364.70 49,953.00 1,588,554.00 36,739.00 $ 3,712,951.58 1,493,594.02 93,585.36 Total Revenues $ 5,458,610.70 $ 5,300,130.96 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 Other Support Services Food Services Operation Debt Service $ 3,471,982.63 $ 3,502,967.61 149,121.30 81,960.00 116,295.00 276,070.00 455,950.70 87,878.00 390,691.89 321,709.17 6,600.00 174,108.41 74,257.12 143,645.54 352,298.39 507,295.72 97,084.59 499,500.52 393,843.87 42,499.44 Total Expenditures $ 5,358,258.69 $ 5,787,501.21 Excess of Revenues over (under) Expenditures $ 100,352.01 $ -487,370.25 OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) $ -26,200.00 $ -29,463.06 $ -26,200.00 $ -29,463.06 Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses FUND BALANCE JULY 1. 2002 $ 74,152.01 $ -516,833.31 158,957.08 105,643.59 Adjustments Food Inventory - Net Change in Period Donated Commodities Purchased Foods -95,782.63 FUND BALANCE JUNE 30. 2003 $ 137,326.46 $ -411,189.72 SPECIAL REVENUE FUND BUDGET ACTUAL $ 190,901.30 $ 1,296,487.87 160,859.40 1,199,025.78 19,950.00 13,884.02 $ 1,507,339.17 $ 1,373,769.20 $ 748,389.08 $ 73,495.85 136,086.08 54,669.00 63,264.54 30,703.22 500.00 7,589.81 408,450.00 687,607.16 67,261.75 94,315.47 52,235.77 56,600.68 31,833.70 1,565.20 463,048.04 $ 1,523,147.58 $ $ -15,808.41 $ 1,454,467.77 -80,698.57 $ $ -6,010.99 $ -6,010.99 $ 19,461.06 19,461.06 $ -21,819.40 $ 291,199.55 -105,319.11 -61,237.51 170,747.79 -408.65 -86.26 $ 164,061.04 $===10;,;;9.,.0=1=5.=37= The notes to the general-purpose financial statements are an integral part of this statement. -7- CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY The Calhoun County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The School District 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. FUND ACCOUNTING The School District uses funds and an account group to report on its financial position and the results ofits 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. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect expendable available financial resources. General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types. Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general-purpose financial statements. The School District has overstated debt service fund revenues and expenditures by $91,710.73 and $149,670.71, respectively. To conform to generally accepted accounting principles, revenues and expenditures should be accurately reported. See Finding Control Number: FS-6191-03-04. The general-purpose financial statements account for all State, Federal, Taxes and Other funds under control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds and the account group presented in this report are as follows: GOVERNMENTAL FUND TYPES - are used to account for all or most of the School District's educational activities. Governmental Fund Types include: GENERAL FUND - the fund used to account for all financial resources of the School District except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education. -8- CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department of Education and from the Federal government to accomplish specific educational objectives. CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities. DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees. ACCOUNT GROUP GENERAL LONG-TERM DEBT ACCOUNT GROUP - A financial reporting device used to account for general obligation debt outstanding and capital lease obligations. BASIS OF ACCOUNTING The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources. Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds. Other liabilities, which are not expected to be financed from available spendable resources, are reported in the General Long-Term Debt Account Group. Governmental funds are accounted for using the modified accrual basis of accounting under which: Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, local option sales taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year the resources are received or susceptible to accrual. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. -9- CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30. 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures are generally recognized when the related fund liability is incurred. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit expenditures and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. BUDGET The Calhoun County Board of Education's budget is a complete financial plan for the School District's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles. The budget process begins when the School District's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper ofgeneral circulation in the locality. At the next regular meeting ofthe Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end. 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 - 10 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" -NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and in selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of 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 general-purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Calhoun County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on September 10, 2002 (levy date). Taxes were due on December 20, 2002 (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 fiscal year 2003. The Calhoun County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues during the fiscal year ended June 30, 2003 for maintenance and operations amounted to $1,468,513.25. - 11 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The tax millage rate levied for the 2002 tax year (calendar year) for the Calhoun County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 14.95 mills SALES TAXES Special Purpose Local Option Sales Tax revenue during the year amounted to $438,122.16 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time ofpurchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. Bond premiums and discounts, as well as issuance costs, are recognized in the financial statements during the year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit ofthe government. The outstanding amount of these bonds is recorded in the General Long-Term Debt Account Group. INTERFUND TRANSACTIONS The School District has the following types of interfund transactions: Reimbursements ofexpenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed. Operating transfers are recorded for all interfund transactions and reimbursements. - 12 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES MEMORANDUM ONLY -TOTAL COLUMNS Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. DEFICIT FUND BALANCE The fund reporting a deficit fund balance position at June 30, 2003, is as follows: Fund Type/Fund Name Deficit Balance Governmental Fund Type General Fund $ 448.717.50 To help fund this deficit, the School District increased the millage rate from 14.95 to 15.55 mills. Note 2: 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 ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, - 13 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 2: 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 ofdevelopment authorities created by the laws ofthe 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 $542,745.75. 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, 2003, as follows: Risk Category Bank Balance 1 $ 109,856.35 2 0.00 3 432,889.40 Total $ 542,745.75 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $290,166.16 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and - 14 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30. 2003 Note 2: DEPOSITS AND INVESTMENTS Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia. Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. Note 3: 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 1 - Inventories Note 4: 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. - 15 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 4: RISK MANAGEMENT The School District has obtained commercial insurance for risk ofloss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts ofGod. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user fund on the basis ofthe percentage ofthat fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenditure and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0.00 $ 1,746.15 $ 1,746.15 $ 0.00 $ 0.00 $ 7,738.77 $ 7,738.77 $ 0.00 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000.00 loss per occurrence, up to $2,000,000.00. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Each Principal $ 50,000.00 $ 10,000.00 - 16 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 5: GENERAL LONG-TERM DEBT CAPITAL LEASES The Calhoun County Board of Education has entered into various lease agreements as lessee for school buses. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 1999 3.95% $ 745,000.00 The changes in General Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Capital Leases General Obligation Bonds Total Balance July 1, 2002 $ 78,001.62 $1,070,000.00 $ 1,148,001.62 Deductions Debt Retired 37,644.06 325,000.00 362,644.06 Balance June 30, 2003 $ 40,357.56 $ 745,000.00 $ 785.357.56 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Capital Leases General Obligation Bonds Total Debt 2004 2005 $ 22,135.94 $ 377,416.25 $ 399,552.19 22,135.94 397,702.50 419,838.44 Total Principal and Interest $ 44,271.88 $ 775.118.75 $ 819,390.63 Deduct: Imputed Interest 3,914.32 Net Present Value of Future Minimum Lease Payments $ 40,357.56 - 17 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30, 2003 Note 6: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Beginning Balance Additions Payments Ending Balance Temporary Loans $====o'==.o"""o $ 160,1so.oo $ 160,1so.oo $====o'==.o"""o Note 7: 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 expenditures which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the general-purpose financial statements. Note 8: SUBSEQUENT EVENTS On November 3, 2003, the voters of Calhoun County voted in favor of a Special Purpose Local Option Sales Tax referendum for education purposes. The imposition of the tax approved by the voters, as stated in part on the Official Ballot of Calhoun County, is as follows: "Shall a special one percent sales and use tax be imposed in Calhoun County for a period of time not to exceed 20 calendar quarters and for the raising ofnot more than $2,000,000 for the purposes of (i) funding the payment of principal and interest on the Calhoun County School District General Obligation Bonds, Series 1999, coming due on October 1, 2004 in an amount up to $100,000 (ii) rehabilitating, adding to, repairing, renovating, extending and improving Calhoun County Elementary School and Calhoun County Middle/High School, and related facilities useful or desirable in connection therewith, including without limitation, roof replacements and repairs, mechanical system repairs and replacements, wiring and infrastructure modifications, renovations and improvements to physical education and athletic facilities, additional parking and paving, and security systems; acquiring any necessary property therefore, both real and personal, and acquiring any necessary or desirable rights in - 18 - CALHOUN COUNTY BOARD OF EDUCATION EXHIBIT "D" NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS JUNE 30. 2003 Note 8: SUBSEQUENT EVENTS connection therewith; renovations and repairs to the School District's bus shop; the acquisition and installation of technology additions and improvements; the acquisition of school buses; and purchasing school furnishings, equipment and fixtures; and (iii) paying costs incident to accomplishing the foregoing in an amount of $2,000,000. If imposition of the tax is approved by the voters, such vote shall also constitute approval of the issuance ofgeneral obligation debt ofthe Calhoun County School District in the principal amount ofup to $1,200,000, repayable from the proceeds ofthe aforesaid sales and use tax, for the purpose offunding such portions ofthe above projects as may be acquired, constructed and equipped with the proceeds ofgeneral obligation debt, and to pay capitalized interest on such debt through October 1, 2004, inclusive." Note 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school districts 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 ofTrustees 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 2003 2002 2001 100% 100% 100% $ 329,604.25 $ 311,389.60 $ 370,481.90 - 19 - CALHOUN COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30, 2003 ASSETS Cash and Cash Equivalents Accounts Receivable Inventories Food Donated Commodities Purchased Food SCHOOL FOOD SERVICES FUND LOTTERY PROGRAMS $ 124,831.22 $ 6,458.00 9,440.70 3,790.40 1,344.82 Total Assets $ 129,966.44 $===1=5=,8=98==70= LIABILITIES AND FUND EQUITY LIABILITIES Accounts Payable Salaries Payable Expired Grant Balances Payable Deferred Revenue Total Liabilities FUND EQUITY Fund Balances Reserved For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated Total Fund Equity $ 6,036.90 $ 4,818.50 14,914.17 11,080.20 $ 20,951.07 $ 15,898.70 $ 3,790.40 1,344.82 103,880.15 $ $ 109,015.37 $ 0.00 0.00 Total Liabilities and Fund Equity $ 129,966.44 $===1=5=,8=9=8.,.,.70= See notes to the general-purpose financial statements. -20- EXHIBIT"E" FEDERAL PROGRAMS TOTALS JUNE 30, 2003 JUNE 30, 2002 $ 125,143.06 $ 256,432.28 $ 300,078.15 124,958.11 134,398.81 80,752.98 3,790.40 1,344.82 4,199.05 1,431.08 $ 250,101.17 $ 395,966.31 $ ==3=8=6=,4=6=1.=26= $ 131,002.72 $ 141,858.12 $ 68,592.88 94,587.25 50,505.57 50,505.57 73,843.49 64,489.64 77,380.34 $ 250,101.17 $ 286,950.94 $ 215,713.47 $ $ _ _ _ _0._00_ $ 0.00 $ 3,790.40 $ 1,344.82 4,199.05 1,431.08 103,880.15 165,117.66 109,015.37 $ _ _1_7...a.0.,7_,_47_._79;;_ $ 250,101.17 $ 395,966.31 $==3=8==6=,4==6=1.,..26.,., - 21 - CALHOUN COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2003 REVENUES State Funds Federal Funds Other Funds Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Student Transportation Services Food Services Operation Community Services Operations Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Operating Transfers In Excess of Revenues and Other Financing Sources over (under) Expenditures FUND BALANCE JULY 1 Food Inventory - Net Change in Period Donated Commodities Purchased Food SCHOOL FOOD SERVICES FUND LOTTERY PROGRAMS $ 26,330.00 $ 134,529.40 361,596.51 13,884.02 $ 401,810.53 $ 134,529.40 $ 75,659.57 60,097.43 5,910.16 3,081.00 $ 463,048.04 $ 463,048.04 $ 144,748.16 $ -61,237.51 $ -10,218.76 $ -61,237.51 $ 170,747.79 -408.65 -86.26 10,218.76 0.00 0.00 FUND BALANCE JUNE 30 $ 109,015.37 s=======o=.o=o= See notes to the general-purpose financial statements. -22- EXHIBIT"F" FEDERAL PROGRAMS TOTALS YEAR ENDED JUNE 30, 2003 JUNE 30, 2002 $ 160,859.40 $ 137,627.73 $ 837,429.27 1,199,025.78 968,533.77 13,884.02 19,980.96 $ 837,429.27 $ 1,373,769.20 $ 1,126,142.46 $ 611,947.59 $ 687,607.16 $ 541,684.84 7,164.32 88,405.31 52,235.77 53,519.68 31,833.70 1,565.20 67,261.75 94,315.47 52,235.77 56,600.68 31,833.70 1,565.20 463,048.04 20,812.38 76,328.55 28,327.48 18,787.34 1,899.24 468,007.61 1,452.00 $ 846,671.57 $ 1,454,467.77 $ 1,157,299.44 $ -9,242.30 $ -80,698.57 $ -31,156.98 9,242.30 19,461.06 6,679.03 $ 0.00 $ -61,237.51 $ -24,477.95 0.00 170,747.79 193,532.73 -408.65 -86.26 1,661.42 31.59 $=======0.=00= $ 109,015.37 $ 170,747.79 - 23- CALHOUN COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET CAPITAL PROJECTS FUND JUNE 30. 2003 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Accounts Receivable BOND PROCEEDS GEORGIA STATE FINANCING AND INVESTMENT COMMISSION TOTALS JUNE 30, 2003 JUNE 30, 2002 $ 3,750.00 $ 3,750.00 4,210.93 4,210.93 $ 143,770.64 $ 82,042.00 82,042.00 Total Assets $ 7,960.93 $ 82,042.00 $ 90,002.93 $ ==1=4=3,=7=70=.6=4= LIABILITIES AND FUND EQUITY LIABILITIES Cash Overdraft Accounts Payable Total Liabilities FUND EQUITY Fund Balances Reserved For Purpose of Bond Issue $ Unreserved Undesignated Total Fund Equity $ $ $ 7,960.93 0.00 $ 7,960.93 $ 82,042.00 $ 82,042.00 $ 82,042.00 $ 82,042.00 $ 25,812.54 87,159.00 112,971.54 $ 0.00 0.00 $ 7,960.93 $ 0.00 7,960.93 $ 30,799.10 0.00 30,799.10 Total Liabilities and Fund Equity $ 7,960.93 $ 82,042.00 $ 90,002.93 $ ==1=4=3=7,=7=0.=64= See notes to the general-purpose financial statements. -24 - CALHOUN COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2003 EXHIBIT "H" BOND PROCEEDS GEORGIA STATE FINANCING AND INVESTMENT COMMISSION TOTALS YEAR ENDED JUNE 30, 2003 JUNE 30, 2002 REVENUES State Funds Other Funds $ $ 558.03 82,042.00 $ 82,042.00 558.03 $ 3,716.21 Total Revenues $ 558.03 $ 82,042.00 $ 82,600.03 $ 3,716.21 EXPENDITURES Capital Outlay Building and Building Improvements Equipment $ 23,396.20 $ 30,010.00 $ 62,034.00 53,406.20 $ 62,034.00 100,059.00 Total Expenditures $ 23,396.20 $ 92,044.00 $ 115,440.20 $ 100,059.00 Excess of Revenues over (under) Expenditures $ -22,838.17 $ -10,002.00 $ -32,840.17 $ -96,342.79 OTHER FINANCING SOURCES Operating Transfers In 10,002.00 10,002.00 Excess of Revenues and Other Financing Sources over (under) Expenditures $ -22,838.17 $ 0.00 $ -22,838.17 $ -96,342.79 FUND BALANCE JULY 1 30,799.10 0.00 30,799.10 127,141.89 FUND BALANCE JUNE 30 $ 7,960.93 $ 0.00 $ 7,960.93 $=====3=0=,7=99==10= See notes to the general-purpose financial statements. -25 - CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "1" 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 Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Accountability Grants Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Vocational Education - Basic Grants to States High School Program Basic Grant Total u. S. Department of Education Labor, U. S. Department of Pass-Through From Georgia Department of Labor Workforce Investment Act Total Federal Financial Assistance NIA= Not Available -26 - CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 418,774.06 418,774.06 10.550 N/A $ 17,943.98 436,718.04 84.027 84.173 84.027 NIA $ NIA N/A $ 126,225.64 810.79 5,293.00 132,329.43 84.348 . 84.010 . 84.010 84.318 84.367 84.298 84.358 84.048 N/A 669.67 N/A 466,833.53 N/A 7,821.12 N/A 60,799.99 N/A 115,937.11 N/A 4,232.89 N/A 10,608.09 N/A $ 20,711.00 819,942.83 17.259 N/A $ 17,486.44 $ =====1,=27=4=,1=4=7=3=1 CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "1" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Distribution Program represent 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 ($94,315.96) 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 Calhoun 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 general-purpose financial statements. See notes to the basic financial statements. - 27 - CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "2" AGENCY/FUNDING GOVERNMENTAL FUND TYPES SPECIAL CAPITAL GENERAL REVENUE PROJECTS FUND FUND FUND GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program $ 90,472.30 $ 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 (4-5) Program - Early Intervention Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program Staff and Professional Development Indirect Cost Twenty Days Additional Instruction Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Mid-term Adjustment Hold-Harmless Other State Programs K-3 Statewide Reading Program 4-8 Statewide After School Reading Program Preschool Handicapped Program Student Information Systems 112,866.00 90,082.00 278,366.00 353,931.00 146,511.00 116,891.00 333,288.00 266,727.00 139,627.00 12,081.00 166,060.00 115,068.00 31,704.00 30,446.00 7,924.00 29,147.00 66,070.00 12,642.00 604,007.00 14,009.00 152,260.00 37,459.00 244,816.00 33,188.00 2,766.00 4,155.00 126,233.00 68,228.38 -89,631.00 117,294.00 11,400.00 9,360.27 37,475.98 26,330.00 9,440.70 Georgia State Financing and Investment Commission Reimbursement on Construction Projects $ 82,042.00 CONTRACTS Education. Georgia Department of Middle School/After School Program 30,499.95 Georgia Institute of Technology Student Information Systems 34,616.40 TOTAL 90,472.30 112,866.00 90,082.00 278,366.00 353,931.00 146,511.00 116,891.00 333,288.00 266,727.00 139,627.00 12,081.00 166,060.00 115,068.00 31,704.00 30,446.00 7,924.00 29,147.00 66,070.00 12,642.00 604,007.00 14,009.00 152,260.00 37,459.00 244,816.00 33,188.00 2,766.00 4,155.00 126,233.00 26,330.00 68,228.38 -89,631.00 117,294.00 11,400.00 9,360.27 37,475.98 9,440.70 82,042.00 30,499.95 34,616.40 See notes to the general-purpose financial statements. $ 3,712,951.58 $ 160,859.40 $ 82,042.00 $ 3,955,852.98 -28- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "3" PROJECT The acquisition, construction and equipping of modifications, extensions, renovations, and repairs to the facilities and equipment of the Calhoun County Middle/High School, including, but not limited to the cafeteria, gymnasium, and athletic facilities; the acquisition, construction and equipping of modifications, extensions, renovations, and repairs to the facilities and equipment of the Calhoun County Elementary School, including, but not limited to the lunchroom, gymnasium and athletic facilities; and acquiring, constructing and equipping and adding to, renovating, repairing, improving and equipping instructional and support facilities, existing school buildings, and other buildings and facilities useful or desirable in connection therewith; and acquiring any necessary property therefor, both real and personal, and acquiring any necessary or desirable rights in connection therewith ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COST(2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) $ 2,000,000.00 $ 2,000,000.00 $ 23,396.20 $ 1,644,256.38 PROJECT STATUS Ongoing (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Calhoun County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for the project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above project as follows: Prior Years $ 169,850.00 Current Year 35,846.25 Total $ 205,696.25 See notes to the general-purpose financial statements. -29- CALHOUN COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "4" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program 133,997.00 $ 109,528.00 315,014.00 420,610.00 181,054.00 141,435.32 $ 147,709.40 290,428.67 455,775.73 308,967.48 125,812.00 387,491.00 315,590.00 155,428.00 386,131.00 36,771.00 10,981.00 33,653.00 71,679.35 393,416.94 375,676.66 145,708.90 19,666.44 355,527.17 155,452.36 45,345.07 28,369.89 16,109.91 61,661.77 255.32 $ 3,958.24 2,380.80 3,058.71 119.96 26,245.41 19,368.94 14,218.88 113.40 981.68 6,510.07 141,690.64 147,709.40 294,386.91 458,156.53 312,026.19 71,799.31 419,662.35 395,045.60 159,927.78 19,779.84 356,508.85 161,962.43 45,345.07 28,369.89 16,109.91 61,661.77 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 2,612,060.00 $ 3,012,931.06 $ 77,211.41 $ 3,090,142.47 Media Center Program Staff and Professional Development 70,070.00 14,578.00 109,183.32 6,429.04 27,262.22 9,215.93 136,445.54 15,644.97 TOTAL QBE FORMULA FUNDS $ 2,696,708.00 $ 3,128,543.42 $ 113,689.56 $ 3,242,232.98 (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 general-purpose financial statements. - 31 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 7, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Calhoun 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 Calhoun County Board of Education as of and for the year ended June 30, 2003, and have issued our report thereon dated June 7, 2004. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. 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 Calhoun County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results 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 Calhoun County Board ofEducation'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 2003YB-40 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 Calhoun County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6191-03-01, FS-6191-03-02, FS-6191-03-03, FS-6191-03-04 and FS-6191-03-05. 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, ofthe reportable conditions described above, we consider items FS-6191-0302, FS-6191-03-03, FS-6191-03-04 and FS-6191-03-05 to be material weaknesses. This report is intended solely for the information and use of the management, members of the Calhoun 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, w.4:k.. RWH:as 2003YB-40 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 7, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Calhoun 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 Calhoun County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Calhoun County Board ofEducation'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 Calhoun County Board of Education's management. Our responsibility is to express an opinion on Calhoun County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Calhoun 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 Calhoun County Board ofEducation's compliance with those requirements. 2003SA-30 In our opinion, the Calhoun County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Calhoun 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 Calhoun County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted certain matters involving the internal control over compliance 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 compliance that, in our judgment, could adversely affect the Calhoun County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6191-03-01, FA-6191-03-02, FA-6191-03-03, FA-6191-03-04, FA-6191-03-05 and FA-6191-03-06. 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 of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the management, members of the Calhoun 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. r;;,,._ \b,...J Respectfully submitted, 00 ~-iJell W. Hinton State Auditor RWH:as 2003SA-30 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CALHOUN 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-6191-01-02 FS-6191-01-03 FS-6191-01-04 FS-6191-01-06 FS-6191-02-01 FS-6191-02-02 Further Action Not Warranted Previously Reported Corrective Action Implemented Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-6191-02-01 Cash and Cash Equivalents Bank accounts for the general operating and U. S. Bank trust accounts will be properly reconciled to the general ledger, beginning July 1, 2004. Expenditures/Liabilities/Disbursements Beginning July 1, 2004, all expenditures will be properly documented, properly coded, checked for accuracy, within the allowable period, and properly approved before disbursement of funds. Employee Compensation Beginning July 1, 2004, adequate procedures will be in place to ensure employee compensation expenditures are properly calculated and approved before disbursement of funds. General Ledger Beginning July 1, 2004, adequate procedures will be in place to ensure that journal entries are properly documented and contain administrative approval before posting to the general ledger. - 1- CALHOUN 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 CORRECTIVE ACTION/RESPONSES GENERAL FIXED ASSETS Failure to Maintain General Fixed Asset Account Group Finding Control Number: FS-6191-02-02 The Calhoun County Board of Education hired The Valuation Advisory Group, Inc. and has all assets on disk and are downloaded on desktop, as well. The inventory and training process is ongoing and should be completed in fiscal year 2004. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6191-01-01 FA-6191-02-01 FA-6191-02-02 Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH MANAGEMENT Excessive Cash Balances Amount: $1,491.80 Finding Control Number: FA-6191-02-01 Draw downs are based on needs. Excessive draw downs of cash are prohibited. The excessive interest has been returned to the State Department. ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Finding Control Number: FA-6191-02-02 All needed information for eligible attendance areas has been identified and is being maintained in a timely and up-to-date manner. Title one staff have been instructed on proper procedures. -2- SECTION IV FINDINGS AND QUESTIONED COSTS CALHOUN 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 Calhoun County Board ofEducation's financial statements was qualified for various departures from generally accepted accounting principles. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Calhoun County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts Procurement Expenditures/Liabilities/Disbursements General Fixed Assets General Ledger All of the reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Calhoun County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Calhoun County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements. Allowable Costs/Cost Principles Eligibility Cash Management Special Tests and Provisions None ofthe reportable conditions described above are considered to be material weaknesses. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Calhoun 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) of 0MB Circular A-133 The Calhoun County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. - 1- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 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 84.010 Elementary and Secondary Education Act - Title I - School Improvement 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00. 9. Low Risk Auditee The Calhoun County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-6191-03-01 At June 30, 2003, the General Fund of the Calhoun County Board of Education reported a deficit fund balance in the amount of $448,71 7.50 which is considered to be an irregularity in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess of funds available in the General Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit. -2 - CALHOUN 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 EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6191-03-02 Accounting procedures of the Calhoun County Board of Education were insufficient to provide adequate internal controls over the following control categories. The following deficiencies were noted: Cash and Cash Equivalents The School District did not have procedures in place to ensure bank accounts for the U.S. Bank escrow accounts were reconciled to the general ledger. A review of checks issued for the general operating account, disclosed that checks were issued out of sequence and check numbers recorded in the accounting system did not always agree with pre-printed check numbers. Revenues/Receivables/Receipts The School District did not have procedures in place to ensure accounts receivables were recorded correctly on the general ledger. The Quality Basic Education (QBE) accounts receivable on the general ledger for the General Fund, as presented for examination, was overstated by $136,782.04. Extensive audit procedures were performed by the auditors to identify items that were needed to properly reflect the QBE revenue received from the Georgia Department of Education on the School District's financial statements. Expenditures/Liabilities/Disbursements The School District did not have procedures in place to ensure all expenditures were; adequately documented, properly coded, checked for accuracy, or properly approved before disbursement of funds. Our tests of operating expenditures revealed numerous instances where funds were disbursed without proper coding, approval or proper documentation to support the expenditure. -3- CALHOUN 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 EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6191-03-02 Employee Compensation The School District did not have adequate procedures in place to ensure employee compensation expenditures were properly calculated and approved before disbursement of funds. Our tests of employee compensation records for fifteen employees revealed one instance of an employee being underpaid. General Ledger The School District did not have adequate procedures in place to ensure that journal entries were properly documented before posting to the general ledger. Our tests oftwenty journal entries posted to the general ledger revealed that three did not have adequate supporting documentation. The deficiencies noted above occurred because of management's failure to implement controls adequate to ensure; bank statements are reconciled to the general ledger, checks are issued sequentially, revenues are recorded correctly, expenditures are properly documented, processed, approved, and receipt of goods confirmed before disbursement of funds, employee compensation expenditures are properly processed and approved before disbursement offunds, andjournal entries are adequately documented before posting to the general ledger. The School District should establish and implement appropriate procedures to strengthen internal controls over; reconciliation of bank statements to the general ledger, recording accounts receivables, processing expenditures, processing employee compensation and posting journal entries to the general ledger. -4- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS PROCUREMENT Failure to Maintain Documentation of Legal Compliance Reportable Condition - Material Weakness Finding Control Number: FS-6191-03-03 An examination ofthe School District's expenditures revealed that the School District had entered into a multi-year capital lease agreement for office equipment. The School District was unable to produce adequate supporting documentation ofthis agreement to determine the financing terms. The School District could not document that the lease agreement contained termination and renewal provisions which are required by the Official Code of Georgia Annotated Section 20-2-506 as follows: "(a) Except as otherwise provided in this Code section, each county, independent, or area school system in this State shall be authorized to enter into multiyear lease, purchase, or lease purchase contracts of all kinds for the acquisitions of goods, materials, real and personal property, services, and supplies, provided that any such contract shall contain provisions for the following: (1) The contract shall terminate absolutely and without further obligation on the part of the school system at the close of the calendar year in which it was executed and at the close ofeach succeeding calendar year for which it may be renewed as provided in this Code section. (2) The contract may provide for automatic renewal unless positive action is taken by the school system to terminate such contract, and the nature of such action shall be determined by the school system and specified in the contract; ... " The deficiency noted above occurred because ofmanagement's failure to implement controls over the procurement process. The School District should implement controls to ensure that all contracts entered into by the School District comply with Georgia Law are documented in the School District's files, which should include the original agreement and all related addendums. Additionally, lease agreements should be amended to include the required terminated and renewal provisions noted above. -5 - CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Failure to Properly Record Debt Service Activities Reportable Condition - Material Weakness Finding Control Number: FS-6191-03-04 The School District uses a fiscal agent, U. S. Bank, to directly receive all Special Purpose Local Option Sales Tax (SPLOST) receipts and make principal and interest payments on debt related to 1999 Bond Series. The School District receives a monthly statement from the fiscal agent, from which monthly activity should be recorded on the general ledger. A review ofDebt Service activity for the year ended June 30, 2003, revealed that the accounting procedures ofthe School District were insufficient to provide adequate general ledger control. The following deficiencies were noted during the review of the Debt Service Fund: 1) A review of the general ledger for June 30, 2003 noted that cash amounts recorded on the general ledger did not reconcile to the cash balance held in the bank by $29,097.05. 2) The School District failed to correctly record accounts receivable activity and understated accounts receivable by $63,960.96 on the general ledger. 3) The Special Purpose Local Option Sales Tax (SPLOST) revenue for the 12 month period was overstated in the amount of $91,710.73. Review of the general ledger noted that the revenue amounts recorded on the general ledger for the 12 month period during fiscal year 2003 did not agree to the amount of revenue on the confirmation from the Georgia Department of Revenue. 4) A review of the debt service general ledger revealed that expenditures recorded on the general ledger were $149,670.71 in excess of amounts actually paid. The failure ofmanagement to properly record material revenues and expenditures is considered to be a financial irregularity in accordance with O.C.G.A. 20-2-67 and results in the general-purpose financial statements being incomplete and not in accordance with generally accepted accounting principles. No audit adjustments were posted to correct the errors noted. These deficiencies occurred because ofmanagement's failure to establish procedures to reconcile the activity occurring in the escrow account to the general ledger. The School District should review the accounting procedures in place and design and implement procedures relative to the above deficiencies to strengthen the internal controls over the debt service fund accounting functions. -6- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS Failure to Maintain General Fixed Asset Account Group Reportable Condition - Material Weakness Repeated from Prior Year Finding Control Number: FS-6191-03-05 The Calhoun County Board of Education did not maintain a system-wide General Fixed Asset Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general-purpose financial statements ofthe School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for maintenance ofa General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include but may not be limited to date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained ofall additions and deletions to the General Fixed Assets Account Group. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COSTS PRINCIPLES Time and Attendance Records Not Utilized Properly Reportable Condition U.S. Department of Education Through Georgia Department of Education Amount: $46,069.46 Finding Control Number: FA-6191-03-01 A review of split funded salaries charged to the Title I - Grants to Local Educational Agencies Program (CFDA 84.010) disclosed that employee time and attendance records were not being utilized as required by Chapter 41, of the Financial Management of Georgia Local Units of Administration (FMGLUA). This deficiency resulted in a questioned cost of $46,069.46. This condition occurred because the School District did not have adequate control procedures in place to ensure that all split funded salaries were charged to proper programs and accounts according to time and attendance records. The School District should implement procedures to ensure that all split funded salaries are charged to the accounting records according to time and attendance records as required by Chapter 41, ofthe FMGLUA. The Georgia Department ofEducation should review this matter to determine if a refund is appropriate. -7- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CASH MANAGEMENT Excessive Cash Balances Reportable Condition U.S. Department of Education Through Georgia Department of Education Repeated From Prior Year Finding Control Number: FA-6191-03-02 A review ofcash management procedures for the Elementary and Secondary Education Act - Title 1 - Grants to Local Educational Agencies (CFDA 84.010) Program disclosed that cash draws were made in advance ofimmediate cash needs, resulting in the accumulation ofexcessive cash balances. During fiscal year 2003, the program had an average cash balance of$13,995.34 and had excessive ending monthly cash balances in four months. The excessive cash balances are a result of management's failure to accurately forecast the cash needs of this program. The School District should implement procedures to minimize the time elapsing between the transfer offunds from the Georgia Department ofEducation and disbursement of such funds. ELIGIBILITY Failure to Maintain Master List of Eligible Students Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6191-03-03 The Calhoun County Elementary School master list of students eligible for free and reduced meals for the Child Nutrition Cluster Programs (CFDA 10.553 and 10.555), was not maintained in accordance with U. S. Department ofAgriculture's Eligibility Guidance for School Meals Manual, as required by the Georgia Department of Education. The master list for the school, as presented for examination, did not contain a complete listing of all students who participated in the program during the year and did not include information concerning dates ofwithdrawal, denial, approval and status changes of students. This condition occurred because management failed to become familiar with Georgia Department of Education requirements as outlined in the Eligibility Guidance for School Meals Manual. Management should develop adequate internal controls to ensure that master lists are updated regularly and maintained according to established guidelines. -8- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Reportable Condition U.S. Department of Education Through Georgia Department of Education Repeated From Prior Year Finding Control Number: FA-6191-03-04 The School District could not provide accurate documentation to support section IV of the Title I application pertaining to the determination ofeligible and participating attendance areas and school allocations for the Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies (CFDA 84.010) Program. As provided for in the grant application and required by 34 CFR 76.730, the School District assures the Georgia Department ofEducation that it will keep records and provide information as may be required for audit purposes. This condition was a result of the School District's failure to ensure that the grant application was accurate and supporting documentation was maintained for audit purposes. The School District should establish procedures to ensure that applications are complete, accurate and that proper documentation is maintained in compliance with the requirements of the grant application and 34 CFR 76.730. Also, the Georgia Department ofEducation should review this matter to determine ifa reclaim of funds is appropriate. SPECIAL TESTS AND PROVISIONS Failure to Verify Required Number of Applications Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6191-03-05 A review ofthe School District's verification process offree and reduced-price meal applications for the School Breakfast Program (CFDA 10.553) and the National School Lunch Program (CFDA 10.555) disclosed that applications were not verified, in accordance with the U.S. Department of Agriculture's Eligibility Guidance for School Meals Manual and 7 CFR 245.6a. -9- CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Verify Required Number of Applications Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6191-03-05 This condition occurred because the School District failed to perform the verification process. Procedures should be implemented to ensure that verification of free and reduced-price meal applications is performed in accordance with eligibility requirements. The Georgia Department of Education should evaluate the School District's compliance with program requirements and determine amounts to be reclaimed, if any. SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6191-03-06 During the year in review, there were two schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures. In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a school-wide program, U. S. Department ofEducation Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school wide program in a reasonable manner. Ifthere is only one Federal funding source, then costs should be charged to the - 10 - CALHOUN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6191-03-06 Federal program based on the specific benefits derived from that cost. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U. S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs. - 11 -