Chattooga County Board of Education, Summerville, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003

CHATTOOGA COUNTY BOARD OF EDUCATION SUMMERVILLE, 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

CHATTOOGA 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

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

CHATTOOGA COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

31

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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
April 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Chattooga 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 Chattooga County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Chattooga County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm10ns.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Chattooga County Board of Education, as of June 30, 2003, 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.
2003-34ARL-11

The Chattooga County Board ofEducation 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.
As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Chattooga County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated April 12, 2004, on our consideration of the Chattooga 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, 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. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Chattooga 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.
2003-34ARL-11

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,
w.~

RWH:gp 2003-34ARL-11

State Auditor

CHATTOOGA COUNTY BOARD OF EDUCATION

CHATTOOGA COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable. Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

5.949,261

5,688,374

941,447 1,710,672
358,589 898
28,428

222,700 278,415 653,283 13,918,958 2,497,042 -7,024,859

$

683,115

2,241,273

236,398

26,213

16,703

1,108,677 7,306,308

$

11618687

$

9,071,676

212,088 426,002 1,654,361 1,358,059 882,335

$

13,604,521

$ ======2=-5,=22=3=,2=0=8

CHATTOOGA COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2003

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 Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities

$

16,758,373 $

976,065 938,901 529,488 386,446 1,385,269 173,319 1,199,274 823,675
64,705 409,498

21,518 41,114 1,334,787 221,852

25,264,284 $

32,620
341,210 394,324 768154

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Local Option Sales Tax Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

12,384,527

538,121 657,878 263,054 416,098 756,104
3,001 785,628 471,790 $
462 370,837

9,398 927,413

$

17584,311 $

$ 93,430 93 430 $

-4,341,226
-437,944 -281,023 -266,434
29,652 -629,165 -170,318 -413,646 -258,455
-64,243 -38,661
319,692 -31,716 -13,050 -221 852
-6,818,389

$

3,566,128

188

1,448,049

1,485,543 95,003 17,302
740,501 289,658 269 357

$

7 911 729

$

1,093,340

12511181

$ ====13='=60=4=,5=2==1

-5-

CHATTOOGA COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2003

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,672,794 $ 2,848,221 $ 1,428,246 $ 5,949,261

6,538

5,681,836

5,688,374

509,195 1,710,672
358,589 898
28,428

225,927

735,122 1,710,672
358,589 898
28,428

Total Assets

$ 4,287,114 $ 8,530,057 $ 1,654,173 $ 14,471,344

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 Debt Service Inventory Reserves Capital Projects
Unreserved Undesignated Reported in: General Fund
Total Fund Balances

$ 683,115
2,241,273
$
16,703
$ 2,941,091 $

236,398 26,213
262,611

$ 683,115
2,241,273 236,398 26,213 16,703
$ 3,203,702

$ 212,088

$ 212,088

397,574

397,574

$ 1,654,173

1,654,173

28,428

28,428

$ 8,267,446

8,267,446

707,933

707,933

$ 1,346,023 $ 8,267,446 $ 1,654,173 $ 11,267,642

Total Liabilities and Fund Balances

$ 4,287,114 $ 8,530,057 $ 1,654,173 $ 14471,344

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

CHATTOOGA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School 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.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 11,267,642

$

222,700

278,415

653,283

13,918,958

2,497,042

-7,024,859

10,545,539

206,325

$ -7,670,000 -744,985

-8,414,985

$ 13 604 521

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

CHATTOOGA COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,703,980 1,560,354
14,523,019 3,855,875 768,154 23,042 $ 308,705
$ 24,743,129 $

$ $ 1,485,543

239,792

26,824

239,792 $ 1,512,367 $

3,703,980 3,045,897 14,523,019 3,855,875
768,154 289,658 308 705
26,495,288

$ 16,419,698

976,065 938,901 529,488 382,556 1,385,269 171,783 $ 1,184,694 689,765
64,705 409,498
21,518 41,114 1,313,933 27,750

58,732 47 912

$ 24,663,381 $

$

79 748 $

$

25 $

1,511

323,363

1,120,000 173 940

323,388 $ 1,295,451 $

-83,596 $

216,916 $

16,419,698
976,065 938,901 529,488 382,556 1,385,269 173,319 1,184,694 689,765
64,705 409,498
21,518 41,114 1,313,933 351,113
1,178,732 221,852
26,282,220
213,068

$

$

$

79,748 $

1,266,275

269,662 $
269,662 $ 186,066 $ 8,081,380

$ -269,662
-269,662 $ -52,746 $
1,706,919

269,662 -269,662
0 213,068 11,054,574

Fund Balances - Ending

$ 1,346,023 $ 8,267.446 $ 1,654,173 $ 11,267,642

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

CHATTOOGA COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003

EXHIBIT "F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Capital Lease Payments
Total Long-Term Debt Repayments

$

213,068

$

325,123

-485 919

-160,796 -137,664

$

1,120,000

58 732

1,178,732

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

$ ====-1,=09=3='=,3=4=0

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

CHATTOOGA COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT G 11 11
AGENCY FUNDS
$ ===8=6=,0=6=7
$ ===8=6!c:,0=67=

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

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Chattooga 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 Chattooga County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 11 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond and SPLOST Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various school activity accounts.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized
- 12 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.
The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $377,599 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of $97,886 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 13 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 1,435,858

Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity Change in Inventory Method

377,599 97,886 36,706

Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

1,666,417

Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

2,348,191

General Fund Balance July 1, 2002 (Restated)

$ 1,266.275

CHANGES IN ACCOUNTING PRINCIPLES

The Chattooga County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.

The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund

$ 1,266,275 8,081,380 1,706,919

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable

$ 11,054,574 17,245,275 -6,538,940 343,989 -8,790,000 -803,717

Net Assets Beginning (See Exhibit "B")

$ 12,511.181

- 14 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) 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
(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
- 15 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Chattooga 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 the governmental funds for fiscal year 2003. The Chattooga County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $3,703,980.

The tax millage rate levied for the 2002 tax year (calendar year) for the Chattooga County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

10.492 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $1,448,049 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,485,543 and is to be used for 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 of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

- 16 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment Computer Applications

All

NIA

$

25,000 20 to 80 years

$

25,000 10 to 60 years

$

5,000 5 to 20 years

$

5,000

5 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the 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.

- 17 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $12,297,752. The amounts ofthe total bank balances are classified into three categories of credit risk:
Category I - 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.

- 18 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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

$ 345,764

2

10,311,205

3

1,640,783

Total

$ 12,297.752

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $284,318 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type of Investment U.S. Government

Risk Categories

2

3

Carrying Amount

Fair Value

$ 284318 $===="'0 $===== $ 284 318 $ 284.318

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:

- 19 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

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

$ 222,700

$

0 $ 278,415

0 $ 222,700 278,415

Total Capital Assets Not Being Depreciated $ 222,700 $ 278,415 $

0 $ 501,115

Capital Assets Being Depreciated Building and Building Improvements Equipment Land Improvements

$ 13,918,958 2,478,084 $ 625,533

18,958 27,750

$ 13,918,958 2,497,042 653,283

Less Accumulated Depreciation for: Buildings and Building Improvements Equipment Land Improvements

4,466,253 1,454,887
617,800

316,417 165,219
4283

4,782,670 1,620,106
622,083

Total Capital Assets, Being Depreciated, Net $ 10,483,635 $ -439,211

$ 10,044,424

Governmental Activity Capital Assets - Net $ 10,706.335 $ -160,796 $

0 $ 10,545,539

Capital assets being acquired under capital leases as of June 30, 2003, are as follows:

Governmental Funds

Building and Building Improvements Less: Accumulated Depreciation

$ 893,340 79,852

Current year depreciation expense by function is as follows:

$.====:e,;8~13~.4,g,8~8

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

$ 321,481

$

3,693

13,840

127,110

19 795

164,438

$.=~4~85~,9~1~9

- 20 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows:

District-wide Capital Projects Bond Proceeds

Debt Service Funds

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

$ 1,428,246 $ 2,848,221
$ 5,681,836

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2003, consisted of the following:

Transfer to

Transfers From
Debt Service Funds

District-wide Capital Projects

$====2==69'=-c.6"""6"=2

Transfers are used to move SPLOST collections as needed to the Capital Projects Fund.

Note 8: RISK MANAGEMENT

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

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

- 21 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 8: RISK MANAGEMENT

The School District has elected to self-insure for all losses related to acts ofGod (flood). 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. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. The School District accounts for claims 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.

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 $

2,682 $

2,682 $

0

$

0 $

6 058 $

6,058 $

0

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

Position Covered

Amount

Superintendent Each Principal

$

20,000

$

5,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Chattooga County Board of Education has entered into a lease agreement as lessee for energy management system. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - QZAB - Series 2002A General Government - Series 2002B

0% 3.37%

$ 2,035,000 5,635,000

$ 7,670.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows:

- 22 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2002

$ 811,643 $ 8,790,000 $ 9,601,643

Retroactive Restatement of Prior Year Balances

-7 926

-7 926

Balance July 1, 2002 Restated

$ 803,717 $ 8,790,000 $ 9,593,717

Deductions Debt Retired

58,732

1,120,000

1,178,732

Balance June 30, 2003

$ 744.985 $ 7,670.000 $ 8,414.985

Portion of Long-Term Debt Due within One Year

$

63,677 $ 1,045,000 $ 1,108,677

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

Principal

Interest

2004 2005 2006 2007 2008 2009 - 2013

$

63,677 $

67,605

71,774

76,201

80,901

384,827

42,967 39,039 34,870 30,443 25,743 49 941

Total Principal and Interest

$ 744,985 $ 223,003

- 23 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30
2004 2005 2006 2007 2008 2009 - 2013 2014 - 2018
Total Principal and Interest

General Obligation

Debt

Principal

Interest

$ 1,045,000 $ 1,085,000 1,125,000 1,170,000 1,210,000 0 2,035,000

172,291 136,401 99,162 60,492 20,388
0 0

$ 7,670,000 $ 488,734

Note 10: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $223,630 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $186,851

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 $36,779

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003:

Project
Chattooga High Menlo Elementary Summerville Elementary Summerville Middle

Unearned Executed Contracts
$ 245,008 48,223 66,205
221,705
$=~5=8~1,~14_1

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

-24 -

CHATTOOGA COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 12: 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 a legal proceeding pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthis proceeding is not presently determinable, but is not believed to be material to the basic financial statements.

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

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

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 1,267,115 $ 1,160,804 $ 1,304,981

- 25 -

CHATTOOGA COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2003

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

3.713,267 $

3,713,267 $

3,703,980

1,438,560

1,438,560

1,560,354

14,413,714

14,549,890

14,523,019

2,629,490

4,179,058

3,855,875

376,900

376,900

768,154

12,800

12,800

23,042

82,000

113 400

308 705

$

22,666,731 $

24,383,875 $

24,743,129

$

15,237,741 $

16,085,327 $

16,419,698

1,085,167 628,542 534,521 394,636
1,369,472 248,339
1,405,293 861,270 75,196 262,536
23,437 1,230,987

1,086,449 1,024,202
534,521 394,636 1,369,472 249,401 1,394,023 839,721
75,196 469,438
37,100 1,232,487

976,065 938,901 529,488 382,556 1,385,269 171,783 1,184,694 689,765
64,705 409,498
21,518 41,114 1,313,933 27,750 106 644

$

23,357,137 $

24,791,973 $

24,663,381

$

-690,406 $

-408,098 $

79,748

1,506,656

1,506,656

1,266,275

Fund Balances - Ending

$

816,250 $

1,098,558 $ ======-1,534=6:1,;,0=2=3

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.

See notes to the basic financial statements.

- 27-

CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U. S. Department of Agriculture
Appalachian Regional Commission Direct Parent Child Teacher Force 3 Grant Telecommunications Programs Community Connection Grant
Total Appalachian Regional Commission
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Capacity Building Improvement Flow Through Preschool
Total Special Education Cluster
Other Programs Direct Elementary and Secondary Education Act Title IV 21st Century Community Learning Centers Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Even Start Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality Title IV 21st Century Community Learning Centers
- 28 -

CFDA
NUMBER

PASS-
THROUGH ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 1235109
1.235.109

10.550 10.665

NIA N/A
$

67.673 (3) 1,302,782

23.011 23.002

$

49,905

166 972

$

216 877

84.027 84.027 84.173

N/A $ N/A N/A
$

11,066 420,395
56 689
488,150

84.287

84.213

N/A

* 84.010

N/A

84.010

N/A

84.318

N/A

84.367

N/A

84.287

N/A

295,141
222,550 780,969
24,339 24,446 162,663 184,137

CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U.S. Department of Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title VI Innovative Education Program Strategies Rural and Low Income Schools Reading Excellence - Local Reading Improvement Vocational Education - Basic Grants to States High School Program Basic Grant Pass-Through From Georgia Department of Human Resources Safe and Drug-Free Schools and Communities
Total U.S. Department of Education
Health and Human Services, U.S. Department of Pass-Through From Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse Grant-in-Aid
Labor, U.S. Department of Pass-Through From Coosa Valley Regional Development Commission Workforce Investment Act

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

84.298 84.358 * 84.338
84.048
84.186

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

6,142 30,301 432,763
37,774 26138 2,715,513

93.959

N/A $

1,867

17.259

N/A

$

82 413

Total Federal Financial Assistance N/A = Not Available

$ ===4='=31=9=,4=5=2

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($201,298) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Funds earned on the National Forest Reserve, in the amount of $9,139. do not require reporting of expenditures.

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 Chattooga County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements.

See notes to the basic financial statements.

-29-

CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I 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 Sparsity 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 K-3 Statewide Reading Program Health Insurance Post Secondary Options Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Student Information System Conversion
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACT Human Resources, Georgia Department of Family Connection

See notes to the basic financial statements.

- 30 -

SCHEDULE "3"
GOVERNMENTAL FUND TYPES GENERAL FUND

$

734,449

210,606

1,394,659

994,264

705,672

444,654

555,178

1,031,035

1,030,079

500,229

2,091,941 213,091 64,128 113,536 30,384 257,540 83,735 56,334

410,791 685,241 748,035

376,224 93,430 34,095 70,617 12,063 17,520
804,935 83,258
192,223 -344,068
25,546 51,496 186,851
2,064 34,777
9,598 58,275 23,025

358,926

36,779

39 804

$

14 523 019

CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2003

SCHEDULE "4"

PROJECT
Adding to, renovating, repairing, improving and equipping existing school buildings and other buildings, facilities and grounds useful or desirable in connection therewith, acquiring instructional and administrative technology improvements for existing schools and acquiring any necessary property therefore, both real and personal
Acquisition, construction and equipping of a new elementary school; acquiring any necessary property therefore, both real and personal; rehabilitating, adding to, repairing, renovating, extending and improving Pennville Elementary School, North Summerville Elementary School, Summerville Elementary School, Lyerly School, Chattooga High School, Summerville Middle School and Menlo School and related facilities useful or desirable in connection therewith, including without limitation roof replacements and repairs, mechanical system repairs and replacements, additional parking and paving, and security systems; system-wide technology additions and improvements; and purchasing school furnishings, equipment and fixtures.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 4,800,000 $ 6,303,958 $

47,377 $ 5,026,559 Ongoing

8,550,000

8,550,000

449 951

464,820 Ongoing

$ 13,350,000 $ 14,853,958 $

497 328 $ 5,491,379

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

See notes to the basic financial statements.

- 31 -

CHATTOOGA COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003

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 Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

717,713 $

660,875 $

17,227 $

678,102

230,295

385,197

1,944

387,141

1,366,357

1,575,603

51,558

1,627,161

989,005

1,027,945

3,638

1,031,583

696,339

1,227,212

42,412

1,269,624

454,399 535,186 1,026,835 1,031,389 490,120 2,061,064
215,175 63,459 113,042 33,545

426,204 777,294 1,331,525 1,729,691 716,711
7,742 298,806 1,480,972 179,848 335,899
63,789 138,954 63,678

1,228 40,432 41,037 66,695 46,480
60 2,106 79,286 1,079 3,621
892 3,415
536

427,432 817,726 1,372,562 1,796,386 763,191
7,802 300,912 1,560,258 180,927 339,520
64,681 142,369 64,214

$

10,023,923 $ 12,427,945 $

403,646 $

12,831,591

255,145 56,334

499,214 19,182

17,483 45,247

516,697 64,429

TOTAL QBE FORMULA FUNDS

$

10,335,402 $ 12,946,341 $

466,376 $===:,;,1;;,:3=41=2~,7=17=

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

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Chattooga County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofChattooga County Board ofEducation as ofand for the year ended June 30, 2003, which collectively comprise Chattooga County Board of Education's basic financial statements and have issued our report thereon dated April 12, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Chattooga 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 grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our 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 Chattooga 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
2003-34YB-30

control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Chattooga County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6271-0301.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Chattooga County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~-~

RWH:gp 2003-34YB-30

State Auditor

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Chattooga 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 Chattooga 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. Chattooga 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 Chattooga County Board of Education's management. Our responsibility is to express an opinion on Chattooga County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Chattooga 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 Chattooga County Board ofEducation's compliance with those requirements.
2003SA-30

In our opinion, the Chattooga County Board ofEducation 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 Chattooga 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 Chattooga County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
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 Chattooga 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-6271-03-01 and FA-6271-03-02.
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 Chattooga County Board of Education, 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,
~~.~
R sell W. Hinton State Auditor
RWH:gp 2003SA-30

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

CHATTOOGA 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-6271-01-01 FS-6271-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6271-02-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

CHATTOOGA 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 Chattooga County Board of Education's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

The reportable condition described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the Chattooga 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 Chattooga County Board of Education disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Allowable Costs/Cost Principles

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 Chattooga 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 .5 lO{a) of 0MB Circular A-133 The Chattooga 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.

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CHATTOOGA 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: 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 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.287 Elementary and Secondary Education Act-Title IV - 21 st Century Community Learning Centers 84.338 Reading Excellence - Local Reading Improvement
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Chattooga County Board ofEducation did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6271-03-01
Our examination of the various 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. One school did not reconcile the June bank statement to the general ledger. There is no approval or review of the bank reconciliations by someone independent of the record keeping function.
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CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6271-03-01
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a sample of20 items, six receipts did not contain adequate receipt documentation. Nine receipts 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 sample of 25 items, one voucher did not include an original invoice, three vouchers did not include documentation, via signature approval, that the goods had been received, seven vouchers included approval, via purchase order, after the invoice date and one payment included sales tax.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal's accounts sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions ofcustody, record keeping, and authorization are segregated.
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-6271-03-01
During the year in review, the School District identified five schools that participated in a schoolwide program. Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program. The Title I program (CFDA No. 84.010) and other various programs supported the school-wide program at the District's schools. Although required by
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CHATTOOGA 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-6271-03-01
U. S. Department of Education and 0MB A-133 Compliance Supplement provisions, we found that the School District had not consolidated the different Federal funds for each of those schools that participated in a school-wide program. Furthermore, we noted that the School District arbitrarily charged each Federal fund with individual school-wide expenditures rather than using a prescribed cost allocation plan to distribute school-wide program expenditures to each funding source.
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. 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. To distribute such costs, provisions of 0MB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented and maintained for audit. The School District personnel were unaware of these requirements and it was the School District's understanding that school-wide program expenditures lose their identity and therefore any school-wide program cost can be charged to Title I and other Federal funding programs.
The School District should implement procedures to (1) combine such funds as prescribed by U. S. Department of Education and (2) in line with 0MB Circular A-87 provisions, allocate such schoolwide program costs to the respective Federal fund in a reasonable manner. The School District should seek guidance from the Georgia Department ofEducation in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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CHATTOOGA COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Lack of Internal Controls Regarding Payroll Records Reportable Condition U. S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6271-03-02
The School District could not provide documentation to support the activities of the split-funded and/or hourly employees that were charged to the Title I - Grants to LEAs (CFDA 84.010), Special Education Cluster (CFDA 84.027 and 84.173) and the Reading Excellence (CFDA 84.338) programs during the fiscal year under review. Supporting documentation is required by 0MB Circular A-87, which states, in part, as follows:
"Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation [that] meets the following standards:
(a) They must reflect an after-the-fact distribution of the actual activity of each employee,
(b) They must account for the total activity for which the employee is compensated, (c) They must be prepared at least monthly and must coincide with one or more pay
periods, and (d) They must be signed by the employee. Such documentary support will be required where employees work on: (a) More than one Federal award, or (b) A Federal award and a non-Federal award."
This noncompliance occurred because of the School District's failure to require timesheets and/or time schedules for employees that were either split-funded between Federal programs and other programs or were compensated based on an hourly rate. Procedures should be established to ensure that adequate time records that support the basis for compensation are maintained for all split funded and hourly Federally funded employees.
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