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

CATOOSA COUNTY BOARD OF EDUCATION
RINGGOLD, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

CATOOSA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 14, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe Catoosa County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Catoosa County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Catoosa County Board of Education, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-l l

The Catoosa County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
In accordance with Government Auditing Standards, we have also issued our report dated June 14, 2005, on our consideration of the Catoosa County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Catoosa County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24.
Respectfully submitted,
~L(}_-;d_k
Russell W. Hinton State Auditor
RWH:gp 2004ARL-11

CATOOSA COUNTY BOARD OF EDUCATION

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

21,310,793

907,458

2,030,448 5,587,599
458,545 377,057 121,973

3,137,948 12,071,996
2,321,071 70,350,572
5,946,483 -21,036,438

$ ===10==3=5'==8=5!5::,.,,05=

$

1,913,921

6,304,113

1,257,985

1,045,409

127 428

$

10 648 856

$

72,791,632

7,205 1,097,175 9,508,918 9 531 719

$

92,936,649

$ ===10;;;,;3:;.;,5:;,;:8;;;;5;;;,5~05~

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

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services

$

50,096,996 $

1,800,659 2,254,732 1,432,835
744,966 4,850,928
478,826 3,481,614 2,538,703
208,458 655,001

4 105 617

Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

$ =====7=2=,6=4=9",3=3=5= $

58,214
298,220 1 817 087 2,173,521

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

The notes to the basic financial statements are an integral part of this statement. -4-

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

33,854,511 $

659,501 1,119,478
938,588 1,193,866 1,902,542
3,803 2,600,210 1,049,400
2,034 109,863

2,253,253

$

45,687,049 $

4,104,573 $
28,049 36,265 1,168,223 166,266
131 776 5,635,152 $

-12,079,698
-1,141,158 -1,135,254
-494,247 448,900 -2,920,337 -438,758 286,819 -1,323,037
91,796 -545,138
96499
-19,153,613

$

17,869,099

5,416

7,893,110 947,047 245,392
3,192,679 472,948
4,860,237

$

35,485,928

$

16,332,315

76,604,334

$ ===9=2=,9=3=6'=64=9=

-5-

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

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 12.163.176 $ 21,500
647,866 5,202,333
458.545 377,057 121,973

9,147,617 $ 885,958
1,393,525 385,266

21,310,793 907,458
2,041,391 5,587,599
458,545 377,057 121 973

$ 18,992,450 $ 11,812,366 $===3=0..,_,8;,;;0.;.4,..,81..6..,.,

$ 1,913,867 $

54 $

6,304,113

1,257,985

1,045,409

127,428

$ 8,345,408 $ 2,303,448 $

1,913,921 6,304,113 1,257,985 1,045,409
127 428
10,648,856

$

7,205

$

975,202

121,973

$ 9,508,918

9,542,662 $ 10,647,042 $

9,508,918 $

7,205 975,202 121,973 9,508,918
9,542,662
20,155,960

$ 18,992,450 $ 11,812,366 $===3=0.,,.,8=04=='=81=6=

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.

$ 20,155,960

$ 3,137,948 12,071,996 2,321,071 70,350,572 5,946,483 -21,036,438

72,791,632

-10 943

Net Assets of Governmental Activities (Exhibit "A")

$ 92,936,649

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

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 17,835,695

$

1,192,439 $ 7,893,110

42,993,363

5,302,620

6,218,897

2,173,521

361,671

111,277

4,860,237

$ 75,635,823 $ 13,307,007 $

17,835,695 9,085,549
48,295,983 6,218,897 2,173,521 472,948 4,860,237
88,942,830

$ 49,121,373

$ 49,121,373

1,762,594 $
2,053,878 1,432,835
668,680 4,844,261
478,826 4,511,512 2,321,920
208,458 655,001 4,074,295

38,065 200,854
90,596
147,696 200,000
11,156,714

1,800,659 2,254,732 1,432,835
759,276 4,844,261
478,826 4,659,208 2,521,920
208,458 655,001 4,074,295 11156714

$ 72,133,633 $ 11,833,925 $ 83,967,558

$ 3,502,190 $ 1,473,082 $

4,975,272

$

17,552 $

$

-17 552

17,552 -17 552

$

-17,552 $

17,552 $

0

$ 3,484,638 $ 1,490,634 $

4,975,272

7,162,404

8,018,284

15,180,688

$ 10,647,042 $ 9,508,918 $ 20,155,960

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

CATOOSA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2004

EXHIBIT"F"

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

$

4,975,272

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

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

Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense

$ 12,578,612 -1,260,389

11,318,223

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

38 820

Change in Net Assets of Governmental Activities (Exhibit "8")

$ 16,332,315

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

CATOOSA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"

AGENCY FUNDS

$

173,811

12,813

$ ==1=86='=62=4=

$ ==1=86='=62=4=

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

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Catoosa County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Catoosa County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation ofmajor capital facilities.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(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

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(8) Obligations of other political subdivisions of the State of Georgia.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Catoosa County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 26, 2003 (levy date). Taxes were due on December 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Catoosa County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $17,830,279.

The tax millage rate levied for the 2003 tax year (calendar year) for the Catoosa County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.6 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $7,893,110 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 On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
- 15 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

10,000 20 to 80 years

$

10,000 20 to 80 years

$

10,000 5 to 20 years

Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum 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 45-8-1 l(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:

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $24,785,365. The amounts ofthe total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)
The School District's deposits are classified by risk category at June 30, 2004, as follows:

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

Risk Category

Bank Balance

1

$ 499,202

2

0

3

24,286,163

Total

$ 24,785,365

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value ofthe School District's total investments was $858,958 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net 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, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years.

- 18 -

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

EXHIBIT"H"

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2003

Increases

Balances Decreases June 30, 2004

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

$ 3,137,948 995,655 $ 11,293,428 $

$ 3,137,948 217,087 12,071,996

Total Capital Assets Not Being Depreciated $ 4,133,603 $ 11,293,428 $ 217,087 $ 15,209,944

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 69,218,662 $ 5,576,122 2,321,071

1,131,910 $ 370,361

0 $ 70,350,572 5,946,483 2,321,071

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

15,711,863 3,363,421
700,765

919,333 284,443
56,613

16,631,196 3,647,864
757,378

Total Capital Assets, Being Depreciated, Net $ 57,339,806 $ 241,882 $

0 $ 57,581,688

Governmental Activity Capital Assets - Net $ 61,473.409 $ 11,535.310 $ 217.087 $ 72,791.632

Current year depreciation expense by function is as follows:

Instruction Support Services
School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 975,623

$

6,667

8,620

238,157

253,444 31,322

$ 1,260.389

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and Georgia State Financing and Investment Commission (GSFIC) funds are reported as restricted assets in the Statement ofNet Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2004, were as follows:

- 19 -

CATOOSA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2004

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions
Restricted Investments: Capital Acquisitions

$ 9,147,617

$

885,958

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$====17-,5"'='5='2

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as a supplemental funding source for capital construction projects.

Note 8: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither 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 of God. The School District has not experienced any losses related to this risk in the past three years.

The School District has established a limited risk management program for workers' compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $250,000 loss per occurrence, up to the statutory limit.

- 20 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

Changes in the workers' compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2003 2004

$

0 $

216,405 $

216,405 $

0

$

0 $

224,101 $

224,101 $

0

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

7 377 $

7 377 $

0

$

0 $

26,347 $

26,347 $

0

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

Position Covered

Amount

Superintendent All Other Employees

$

25,000

$

35,000

Note 9: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $549,950 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $543,666

- 21 -

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

EXHIBIT"H"

Note 9: ON-BEHALF PAYMENTS

Office of Treasury and Fiscal Services Paid to the Public School Employees Retirement System For Public School Employees Retirement (PSERS) Employer's Cost In the amount of $6,284

Note 10: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Funding Available From State

03G/02S-623-009 04-623-004/04G-623-003 Heritage Middle School Sewer Extension Tiger Creek Elementary Classroom Wing
Addition

$ 413,804 $ 359,709

10,356,555

1,352,024

165,048

1,534,860

$ 12!470!267 $ L7IL733

The amounts described in this note are not reflected in the basic financial statements.

Note 11: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

Note 12: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System ofGeorgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and

-22 -

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

EXHIBIT"H"

Note 12: RETIREMENT PLANS

survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$ 3,751,401 $ 3,422,891 $ 3,410,685

- 23 -

CATOOSA COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2004

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES}
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

17,530,946 $

17,530,946 $

17,835,695

582,000

582,000

1,192,439

41,673,414

42,304,019

42,993,363

5,789,875

7,004,766

6,218,897

1,799,412

1,799,412

2,173,521

225,000

225,000

361,671

63 549

4,860,237

$

67,600,647 $

69,509,692 $

75,635,823

$

45,756,043 $

47,249,574 $

49,121,373

1,559,838 1,779,653 1,461,894
511,272 4,609,526
459,646 4,154,151 2,410,106
217,431 141,653 3,627,900

1,462,027 2,204,166 1,461,894
546,827 4,546,431
459,646 4,157,882 2,360,395
217,431 294,772 3,627,900

1,762,594 2,053,878 1,432,835
668,680 4,844,261
478,826 4,511,512 2,321,920
208,458 655,001 4,074,295

$

66,689,113 $

68,588,945 $

72,133,633

$

911 534 $

920 747 $

3,502,190

$

204,491 $

206,747

-232,891

-235 147 $

-17 552

$

-28 400 $

-28 400 $

-17 552

$

883,134 $

892,347 $

3,484,638

7,692,484

7,692,484

7 162 404

Fund Balances - Ending

$

8,575,618 $

8,584,831 $===10=la,6=4=7"'=,04=2=

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 25 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U.S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Smaller Learning Communities Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States
Total U. S. Department of Education
Justice, Georgia Department of Pass-Through From Children and Youth Coordinating Council Abstinence Education Program
Defense, U.S. Department of Direct Department of the Army R.O.T.C. Program

Total Federal Financial Assistance
N/A = Not Available

- 26 -

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A N/A $
$

(2) 3,620,002
3,620,002

10.550

N/A $

192 644 3,812,646

* 84.027 * 84.173

N/A $ N/A
$

1,227,263 63,529
1,290,792

84.215
84.332 84.318 84.367 84.186 84.298 84.010 * 84.287 84.048

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

55,774
173,498 41,821 399,277 50,948 66,092 1,531,882 382,241 76766
4,069,091

93.235

N/A $

60 404

$

97 438

$ ===8='=03=9=,5=7=9

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($415,868) were not maintained separately and are included in the 2004 National School Lunch Program.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Catoosa County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program Family Connection Health Insurance K-3 Statewide Reading Program Mentor Teachers National Teacher Certification PayforPenormance Preschool Handicapped Program School Improvement (Georgia's Choice) Teachers' Retirement Lottery Programs Student Information System - Conversion Student Information System - Reporting

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

728,929

$

728,929

2,537,960 517,617
5,755,832 1,075,666 3,032,832
620,976 5,616,296 3,927,139 1,793,503
496,752 515,983 2,866,203 889,961 131,108 1,164,163
37,690 418,686
64,859 872,219 272,819 179,573
998,522 1,750,808 2,577,433
813,162 166,266 194,444
37,356 63,053 3,340,945 261,649 104,543 -2,027,458
65,565 3,858
543,666 129,972
5,044 22,075 40,680 93,902 60,000 15,884
54,267 43,414

2,537,960 517,617
5,755,832 1,075,666 3,032,832
620,976 5,616,296 3,927,139 1,793,503
496,752 515,983 2,866,203 889,961 131,108 1,164,163
37,690 418,686
64,859 872,219 272,819 179,573
998,522 1,750,808 2,577,433
813,162 166,266 194,444
37,356 63,053 3,340,945 261,649 104,543 -2,027,458
65,565 3,858
543,666 129,972
5,044 22,075 40,680 93,902 60,000 15,884
54,267 43,414

- 28-

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACT Education, Georgia Department of Foreign Language Model Program

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

5,302,620 $

5,302,620

$

6,284

6,284

111,263

111,263

$ 42,993,363 $

5,302,620 $ ==4,;,,;8;,.;,2;;;9=5'=,9=83=

See notes to the basic financial statements.

- 29-

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

SCHEDULE "4"

PROJECT
To build, equip and furnish new schools; to make additions, modifications and renovations to existing schools; to provide computers, computer technology equipment and personnel; to acquire land and pay for site preparation and paving at new and existing schools; to pay for construction, renovation, modifications, additions and repairs of areas and structures that will be jointly used by the School District for instructional, sporting and physical activities; and to pay for the expenses incident to accomplish the foregoing purposes

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 46,500,000 $ 53,974,200 $ 11816374 $ 5,462,787 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 Catoosa County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

- 30 -

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

2,870,397 $ 2,902,182 $

69,442 $

2,971,624

596,095

544,165

18,042

562,207

6,609,232

7,403,206

173,512

7,576,718

1,265,111

1,318,497

32,623

1,351,120

3,469,292

4,211,076

94,905

4,305,981

736,197 6,469,959 4,505,291 2,037,522 5,519,994
1,340,852 61,113
479,251 76,009

766,199 6,441,284 4,759,535 1,914,255
688,927 650,920 3,177,289 684,177
56,902 1,366,052
225,870 898,240 110 390

17,117 183,305 215,621 225,674
67,806 6,843
58,905 43,881 11,017 17,345
1,010 1,839 3,949

783,316 6,624,589 4,975,156 2,139,929
756,733 657,763 3,236,194 728,058
67,919 1,383,397
226,880 900,079 114 339

$

36,036,315 $ 38,119,166 $

1,242,836 $

39,362,002

997,558 205 772

1,273,485 28 876

91,164 176 770

1,364,649 205,646

TOTAL QBE FORMULA FUNDS

$

37 239 645 $ 39,421,527 $

1 510,770 $ ===,;4,;;;,0,_;;;9;;;;32~,2;;;;9~7

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

See notes to the basic financial statements.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 14, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Catoosa County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Catoosa County Board of Education's basic financial statements and have issued our report thereon dated June 14, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Catoosa County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Catoosa County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6231-04-01 and FS-6231-04-02.
2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Catoosa County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Catoosa County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 14, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Catoosa 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 Catoosa 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, 2004. Catoosa 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 Catoosa County Board of Education's management. Our responsibility is to express an opinion on Catoosa 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 of America; 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 Catoosa 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 Catoosa County Board of Education's compliance with those requirements.
2004SA-10

In our opinion, the Catoosa County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Catoosa 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 Catoosa County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relativelylow level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Catoosa County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004SA-10

State Auditor

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

CATOOSA COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6231-03-01 FS-6231-03-02

Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6231-03-01

Catoosa County Schools has purchased the services of Mann, Poarch, Miller, and Key, P.C., to conduct annual audits ofschool accounts. The first ofthese audits was conducted at the end of fiscal year 2003. As a result of these audits, many procedures that were identified as problematic have already been corrected and should not be found in the fiscal year 2004 audit. The accounting manual which guides school-level accounting operations is being revised. A revised manual addressing the weaknesses will be in place by January, 2005. Training sessions have been scheduled with school bookkeepers to ensure their awareness of appropriate procedures. Additionally, principals are being made aware of their responsibilities in assigning and overseeing appropriate personnel to ensure that the key accounting functions of custody, record keeping, and authorization are segregated. The system will evaluate current personnel assigned bookkeeping responsibilities, assess the need for additional personnel, and add personnel where necessary.

The system will purchase and implement new fund accounting software that will integrate system and school accounting and payroll operations allowing for greater control of procedures. The software will be fully operational by the end of fiscal year 2005. School personnel will be thoroughly trained on the use ofthe software and controls will be built in to ensure that proper procedures are being followed.

SECTION IV FINDINGS AND QUESTIONED COSTS

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Catoosa County Board ofEducation's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Catoosa County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements Employee Compensation

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Catoosa 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 Catoosa County Board ofEducation did not disclose any reportable conditions in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Catoosa County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Catoosa County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants 84.287 Twenty-First Century Community Learning Centers

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

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CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Catoosa County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-6231-04-01
Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Of the fifty (50) receipts tested, seven (7) did not contain adequate documentation. Twenty-seven (27) deposits had no receipt documentation with the deposit slip. Eight (8) deposits were not deposited in a timely manner.
Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a test of fifty (50) vouchers, five (5) did not include a signature approving the expense. Six (6) vouchers did not include adequate supporting documentation including an original mvo1ce. Four (4) vouchers were for travel expenses paid directly to employees from the principal accounts and not included in the travel payments submitted to the Georgia Department of Audits and Accounts, as required.
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CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-6231-04-01
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal accounts sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping, and authorization are segregated.
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6231-04-02
During the fiscal year ended June 30, 2004, the School District entered into a contract with Live Oak Consulting, Inc. (LOC). The firm assists local school boards in reducing employer cost associated with health insurance plans administered by the Georgia Department ofCommunity Health (DCH). LOC is paid a fee equal to 50 percent ofthe first year employer cost savings identified by LOC. The School District, following the recommendations of LOC, moved 28 employees from the Health Insurance Plan for Public School Teachers (See O.C.G.A. Title 20, Chapter 2, Article 17, Part 6, Sub Part 1) to the Health Insurance Plan for Public School Employees (See O.C.G.A. Title 20, Chapter 2, Article 17, Part 6, Sub Part 2).
According to DCH, School District employees who are to be included as members of the Health Insurance Plan for Public School Teachers (PST) are either:
1. Employed in a professionally certificated position; employee holds a valid certification; employee is assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System of other public school retirement system.
Or:
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CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6231-04-02
2. Employed in a professionally certificated capacity; employee holds a valid certification; employee is not assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system.
With respect to membership in the Health Insurance Plan for Public School Employees (PSE) Georgia Laws O.C.G.A. 20-2-910 and 47-4-2 (20) provide that the definition of public school employee, for the purpose ofmembership in the Health Insurance Plan for Public School Employees, means classroom aides, paraprofessionals, noncertified administrative and clerical employees, school bus drivers, school lunchroom personnel, school maintenance personnel and school custodial personnel. Generally, in order to determine which School District employees are eligible for the PSE or the PST insurance plans, a comparison should be made of the employee's position and DCH's criteria listed above. Ifthe employee meets either test, then the employee is eligible for the Health Insurance Plan for Public School Teachers. If the employee fails both of the above tests, the employee is eligible for the Health Insurance Plan for Public School Employees.
From information provided by the School District, it is not clear that all ofthese 28 employees who were moved from the PST plan to the PSE plan are eligible for membership in the PSE plan under DCH's criteria.
As ofJune 30, 2004, the School District made payments totaling $36,104.24 to Live Oak Consulting, Inc. Subsequent to the fiscal year-end, additional payments in the amount of$18,052.12 were made to the consultant.
The School District should establish policies and procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with State Laws. Subsequent to the fiscal year-end, the School District was invoiced by DCH for underpayments totaling $109,179.40. The School District is currently disputing this underpayment. Additionally, the School District should consult with its legal counsel regarding obtaining a refund for those employees who should not have been moved to the PSE plan. The amount ofthe refund from LOC could be as much as $54,156.36.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
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SECTION V MANAGEMENT'S RESPONSES

CATOOSA COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6231-04-01
We concur with this finding. The system has recently purchased a new fund accounting program (MUNIS) that integrates system and school accounting and payroll operations allowing for greater control ofprocedures. The manual which guides school-level accounting operations is being revised to reflect changes in procedure. Training sessions have been held with school bookkeepers. Additionally, principals are being made aware oftheir responsibilities in assigning and overseeing appropriate personnel to ensure that the key accounting functions of custody, record keeping, and authorization are segregated. The system has added personnel in some schools to address the issue of segregation of duties; however, funds for additional personnel are limited, making this an ongoing challenge. With these changes in place, we anticipate improvement in this area in fiscal year 2005.
Finding Control Number: FS-6231-04-02
Catoosa County School System does not agree with the findings ofDCH and has responded to those findings with a letter. The classification of employees was appropriate under the existing written guidance received from the DCH at the time this change was implemented by the School District. A direct quote from a document distributed by DCH states: "Even if an employee holds a teaching certificate, he or she also must be employed in a certificated position (italics theirs) before you account for them as a certified employee for monthly billing purposes. Ifthey are not in a certified position, then report them as a non-certified employee". The School District has re-classified the employees in question in accordance with DCH's revised written definitions received in a letter from John Hayes. We are aware that there is litigation regarding this issue with Live Oak Consulting and the Department of Community Health. We are anticipating a resolution before additional action is taken.
Contact Person: Billie Smith, Assistant Superintendent Phone: (706) 965-2297 Fax Number: (706) 965-8913 E-mail Address: bsmith@catoosa.k12.ga.us