CLARKE COUNTY BOARD OF EDUCATION ATHENS, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor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ashington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 July 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Clarke County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Clarke 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 Clarke County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons. 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 Clarke County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated July 14, 2004, on our consideration ofthe Clarke 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. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Clarke 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, RWH:as 2003-34ARL-11 State Auditor CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Introduction The discussion and analysis of Clarke County Board of Education's financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and the financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2003 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $113 .9 million. Of this amount, $1.4 million is unrestricted and is available for spending at the School District's discretion. The School District has $116.3 million in expenses relating to governmental activities; only $60.4 million of these expenses are offset by program specific charges for services, grants, and contributions. General revenues (primarily property and sales taxes) of $63.6 million were adequate to provide for these programs. As stated above, General revenues accounted for $63.6 million or 51% of all revenues totaling $124 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements. The District-wide financial statements include the 'Statement of Net Assets' and 'Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The 'Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The 'Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Clarke County School District, the General Fund, District-wide Capital Projects Fund and Debt Service Fund are the most significant funds. CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further. explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements Since Clarke County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, "Are we in a better financial position than last year?" The 'Statement of Net Assets' and the 'Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The 'Statement of Net Assets' and the 'Statement of Activities' reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The difference between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. 11 CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal year 2003 compared to fiscal year 2002. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2003 Year 2002 Assets Current and Other Assets Capital Assets, Net $ 70,842,221 $ 70,859,440 93,862,890 88,173,017 Total Assets $ 164,705,111 $ 159,032,457 Liabilities Current and Other Liabilities Long-Term Liabilities $ 14,202,413 $ 14,837,107 36,583,893 38,018,362 Total Liabilities $ 50,786,306 $ 52,855,469 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 90,923,598 $ 80,634,313 21,543,922 17,901,748 1,451,285 7,640,927 Total Net Assets $113!918!805 $ 106! 176!988 Table 2 shows the changes in net assets for fiscal year 2003 compared to the changes in net assets for fiscal year 2002. 111 CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Loss on Disposal of Building Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Increase in Net Assets Governmental Activities Fiscal Fiscal Year 2003 Year 2002 $ 2,569,591 57,867,540 $ 60,437,131 $ 2,623,010 55,839,822 802,858 $ 59,265,690 $ 40,903,838 17,040,092 965,615 188,298 1,419,273 1,237,075 1,858,113 $ 63,612,304 $124,049,435 $ 37,681,650 2,035 34,228 17,297,347 868,606 324,368 1,824,035 955,079 2,656,443 -1,268,681 $ 60,375,110 $119,640,800 $ 68,504,483 3,800,427 2,822,341 1,829,292 1,784,114 5,700,392 2,508,017 9,232,651 8,421,037 3,264,686 540,233 333,057 997,713 5,293,701 1,275,475 $116,307,619 $ 7,741,816 $ 62,692,803 3,420,908 2,762,749 1,859,267 1,178,057 5,499,918 3,065,816 9,010,213 7,190,086 2,199,744 673,095 386,247 876,991 5,213,566 857,294 $106,886,754 $ 12,754,046 lV CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Government Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2003 with fiscal year 2002. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2003 Year2002 Net Cost of Services Fiscal Fiscal Year 2003 Year2002 Instruction $ 68,504,483 $ 62,692,803 $ 25,810,767 $ 22,195,901 Support Services Pupil Services 3,800,427 3,420,908 2,224,282 2,112,949 Improvement of Instructional Services 2,822,341 2,762,749 1,588,272 1,505,791 Educational Media Services 1,829,292 1,859,267 912,475 902,016 General Administration 1,784,114 1,178,057 91,365 -900,854 School Administration 5,700,392 5,499,918 3,589,220 3,475,081 Business Administration 2,508,017 3,065,816 2,490,132 3,049,797 Maintenance and Operation of Plant 9,232,651 9,010,213 6,541,256 6,298,943 Student Transportation Services 8,421,037 7,190,086 7,092,053 5,754,718 Central Support Services 3,264,686 2,199,744 3,259,788 2,199,744 Other Support Services 540,233 673,095 74,157 105,466 Operations of Non-Instructional Services Enterprise Operations 333,057 386,247 -41,386 31,588 Community Services 997,713 876,991 858,187 15,130 Food Services 5,293,701 5,213,566 104,445 17,499 Interest on Short-Term and Long-Term Debt 1,275,475 857,294 1,275,475 857,295 Total Expenses $116,307.619 $106,886.754 $ 55,870.488 $ 47,621,064 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $130 million and total expenditures and other financing uses of $129 million. General Fund Budgeting Highlights The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2003, the School District amended its general fund budget as needed. V CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 For the General Fund, the final actual revenues and other financing sources of $107.6 million exceeded the original budgeted amount of $103.2 million by $4.4 million. This difference (final actual vs. original budget) was primarily due to an increase in state revenues over original budget of $1.2 million, sales tax revenues over original budget of $1.2 million, charges for services over original budget of $1.7 million, and other financing sources over original budget of $1.5 million. The actual revenues and other financing sources of $107.6 million exceeded the final budgeted amounts by $1.2 million. Conservative budgeting for property taxes, sales taxes and state funds more than offset any shortfall in other revenue categories. The final budgeted expenditures and other financing uses of $112.2 million exceeded the original budgeted amount of $108.9 million by $3.3 million. This difference was due to our school principal's accounts not being included in the original budget process. The School District had to use financial reserves to balance its fiscal year 2003 budget. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year end June 30, 2003 the School District had $124 million invested in capital assets, all in governmental activities. Table 4 reflects fiscal year 2003 balances compared to fiscal year 2002. Table 4 Capital Assets at June 30 (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2003 Year 2002 Land Construction in Progress Buildings Equipment Land Improvements $ 125,000 8,325,603 80,621,042 3,836,055 955,190 $ 125,000 3,269,497 79,699,380 4,105,334 973,806 Total $ 93,862,890 $ 88,173.017 The School District has numerous construction projects including new buildings, additions and renovations. Vl CLARKE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Debt At fiscal year end June 30, 2003, the School District had $34 million in bonds outstanding and $2.6 million in other long-term debt. Table 5 shows fiscal year 2003 balances compared with fiscal year 2002 for the School District's debt for general obligation bonds, capital leases and compensated absences outstanding. Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2003 Year 2002 General Obligation Bonds Capital Leases Compensated Absences Long-Term Notes Payable $ 34,000,000 2,027,060 479,415 77 418 $ 36,700,000 814,699 416,567 87,095 Total $ 36.583.893 $ 38.018.361 At June 30, 2003, the School District's assigned bond ratings were "Aa2" and "AA" as determined by Moody's Investor Service, Inc. and Standard and Poor's Rating Services. Current Issues Athens-Clarke County is the cultural and business center of Northeast Georgia, fifty miles from Atlanta at the foot of the North Georgia Mountains. It is home to the University of Georgia, a strong manufacturing base, and growing high tech and biotech industries. Major international fortune 500 companies as well as home-grown entrepreneurs have found Athens' business climate, educational institutions, location and quality of life conducive to success in business as well as a great place for families. The county has population of 101,000 with a labor force of 46,800. Unemployment was 2.9% in May 2003, well below the state average for the same date. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional information, contact Tom Guthrie, Director of Finance and Business Services at Clarke County School District, 240 Mitchell Bridge Road, Athens, Georgia or email at guthriet@clarke.k 12. ga. us. Vll CLARKE COUNTY BOARD OF EDUCATION CLARKE 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 Prepaid Items 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 Continuation of Federal Programs Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 12,962,536 46,651,054 3,462,784 5,931,316 1,510,599 90,674 18,784 214,474 125,000 8,325,603 1,084,070 102,909,033 11,338,985 -29,919,801 $ ===16=4=7=0=5=11=1= $ 5,036,375 8,082,035 334,708 655,650 93,645 8,319,069 28,264,824 $ 50,786,306 $ 90,923,598 1,670,496 19,873,426 1,451,285 $ 113,918,805 $ ===164==!.,7=0=5.,.1,=11= The notes to the basic financial statements are an integral part of this statement. -3- CLARKE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30 2003 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTSAND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS 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 $ 68,504,483 $ 3,800,427 2,822,341 1,829,292 1,784,114 5,700,392 2,508,017 9,232,651 8,421,037 3,264,686 540,233 333,057 997,713 5,293,701 1 275 475 881,400 $ 35,849 374,443 1,277,899 41,812,316 $ 1,576,145 1,234,069 916,817 1,692,749 2,111,172 17,885 2,655,546 1,328,984 4,898 466,076 139,526 3,911,357 -25,810,767 -2,224,282 -1,588,272 -912,475 -91,365 -3,589,220 -2,490,132 -6,541,256 -7,092,053 -3,259,788 -74,157 41,386 -858, 187 -104,445 -1275475 Total Governmental Activities $ 116,307,619 $ General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 2,569,591 $=======57==8=6'7==5=4=0= $ $ -55,870,488 40,903,838 493,851 16,546,241 965,615 188,298 1,419,273 1,237,075 1 858113 Total General Revenues $ _ _ _6_3~6_12~30_4_ Change in Net Assets $ 7,741,816 Net Assets - Beginning of Year 106 176 989 Net Assets - End of Year $ ===11,..3..9...,1,..8,..80=5= The notes to the basic financial statements are an integral part of this statement. -4- CLARKE 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 Prepaid Items Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Loss Contingency Payable - Arbitrage Rebate Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Court Ordered Restitution Payments Designated for Dental Plan Designated for Self-Insurance Undesignated Reported in: General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 7,786,587 $ 5,175,949 $ 4,286,888 42,364,166 846,569 5,931,316 1,510,599 90,674 8,784 214 474 2,859,713 10,000 0 $ 12,962,536 46,651,054 3,706,282 5,931,316 1,510,599 90,674 18,784 214,474 s 20,675,891 s 50.409,a2a s ===o= s ?1,oa5,719 $ 4,614,678 $ 8,082,035 93645 113,665 334,708 655,650 308,032 $ 12,790,358 $ 1,412,055 $ 4,728,343 8,082,035 334,708 655,650 308,032 93 645 $ 14,202,413 $ 1,553,853 $ 214,474 $ 48,997,773 37,428 753,462 65,913 5,260,403 $ 7,885,533 $ 48,997,773 $ $ 1,553,853 0 0 214,474 48,997,773 37,428 753,462 65,913 5,260,403 0 $ 56,883,306 s 20,675,891 s 50,409,a2a s ===o= s 71,085,719 The notes to the basic financial statements are an integral part of this statement. -5- CLARKE 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 Compensated Absences Long-Term Notes Payable Total Long-Term Liabilities $ 56,883,306 $ 125,000 8,325,603 1,084,070 102,909,033 11,338,985 -29,919,801 93,862,890 -243.498 $ -34,000,000 -2.027.060 -479,415 -77 418 -36,583,893 Net Assets of Governmental Activities (Exhibit "A") $ 113,918,805 The notes to the basic financial statements are an integral part of this statement. -6- CLARKE 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} Proceeds of Long-Term Debt - Par Value Capital Leases Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 40,894,076 1,153,913 $ 16,546,241 $ 47,566,523 11,762,999 2,569,591 258,487 978,588 1,858,113 $ 106,063,702 $ 17,524,829 $ $ 493,851 40,894,076 18,194,005 47,566,523 11,762,999 2,569,591 1,237,075 1,858,113 493,851 $ 124,082,382 $ 64,281,550 $ 64,281,550 3,795,273 2,748,623 1,829,292 1,474,950 $ 207,154 5,698,424 2,104,121 401,532 9,316,988 8,073,121 2,897,177 539,803 333,057 981,091 5,289,587 10,687,426 3,795,273 2,748,623 1,829,292 1,682,104 5,698,424 2,505,653 9,316,988 8,073,121 2,897,177 539,803 333,057 981,091 5,289,587 10,687,426 349,652 45 897 $ 6,700,000 1,229,578 7,049,652 1,275,475 $ 109,758,606 $ 11,296,112 $ 7,929,578 $ 128,984,296 $ -3,694,904 $ 6,228,717 $ -7,435,727 $ -4 901,914 $ 4,000,000 $ $ 1,552,336 $ 1,552,336 $ 4,000,000 $ $ -2,142,568 $ 10,228,717 $ -7,435,727 $ 10,028,101 38,769,056 7,435,727 4,000,000 1,552,336 5,552,336 650,422 56,232,884 $ 7,885,533 $ 48,997,773 $ 0 $ 56,883,306 The notes to the basic financial statements are an integral part of this statement. -7- CLARKE 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. Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds Issued Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. 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 Payments to Bond Refunding Agent Total Long-Term Debt Repayments Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Increase in Compensated Absences $ 650,422 $ 9,056,732 -3,366,859 5,689,873 -32,947 -4,000,000 -1,552,336 $ 6,700,000 339,975 9 677 7,049,652 -62,848 Change in Net Assets of Governmental Activities (Exhibit "B") $ 7,741,816 The notes to the basic financial statements are an integral part of this statement. -8- CLARKE 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" AGENCY FUNDS $ =====1=87='=48=8= $ =====1=8=7'=48=8= The notes to the basic financial statements are an integral part of this statement. -9- CLARKE 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 Clarke County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Clarke 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 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 ofintemal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: - 10 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and Special Purpose Local Option Sales Tax 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 ofgeneral 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 funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. 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. - 11 - CLARKE 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 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. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate 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, - 12 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Clarke County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on July 2, 2002 (levy date). Taxes were due on October 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 Clarke County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $40,894,076. The tax millage rate levied for the 2002 tax year (calendar year) for the Clarke County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 18.75 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $17,040,092 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. - 13 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVENTORIES CONSUMABLE SUPPLIES INVENTORY Inventories of consumable supplies are reported at weighted average cost. The School District uses the consumption method to account for consumable supplies inventory whereby supplies are recorded as an asset when purchased and expenses are recorded as the inventory items are used. FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All $5,000 or more $5,000 or more $5,000 or more NIA 15 to 99 years up to 99 years 3 to 10 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. - 14 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (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 - 15 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (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 $16,207,035. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 361,403 2 15,665,013 3 180,619 Total $ 16,207,035 CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name. Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. - 16 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $46,624,148 which is materially the same as fair value. The investments are classified as to risk categories as follows: Tx11e of Investment Risk Categories 2 3 U. S. Government $ 26.928 027 $ $ Local Government Investment Pools Total Investments Carrying Amount Fair Value $ 26,928,027 $ 26,928,027 19,696,121 19,696,121 $ 46,624 148 $ 46 624 148 The carrying amounts shown above includes amounts maintained in an investment pool by the State ofGeorgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State of Georgia, 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 ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission 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 ofcapital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. - 17 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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, 2002 Increases Decreases Balances June 30. 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 125,000 $ 125,000 3,269,497 $ 7,761,183 $ 2,705,077 8,325,603 Total Capital Assets Not Being Depreciated $ 3,394,497 $ 7,761,183 $ 2,705,077 $ 8,450,603 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 99,826,938 $ 10,461,183 1,043,341 3,082,095 $ 877,802 40,729 0 $ 102,909,033 11,338,985 1,084,070 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 20,127,558 6,355,849 69,535 2,160,433 1,147,081 59345 22,287,991 7,502,930 128,880 Total Capital Assets, Being Depreciated, Net $ 84,778,520 $ 633,767 $ 0 $ 85,412,287 Governmental Activity Capital Assets - Net $ 88,173.017 $ 8,394.950 $ 2,705.077 $ 93,862,890 Capital assets being acquired under capital leases as of June 30, 2003, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 1,459,187 255,280 $ 1,203.907 - 18 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Improvements of Instructional Services General Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 2,465,696 36,613 54,676 79,342 479,410 228,437 22,685 $ 3,366.859 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 SPLOST Proceeds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ 1,044,176 $ 4,131,773 $ 15,436,252 $ 26,927,914 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; unemployment compensation and dental, optical and hearing care. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by - 19 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 7: RISK MANAGEMENT the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage. 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 dental, optical and hearing insurance claims. A premium is charged by the General Fund to each user fund on the basis of employee participation in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with 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 dental, optical and hearing 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 2002 2003 $ 0 $ 659,368 $ 659,368 $ 0 $ 0 $ 885,087 $ 885,087 $ 0 The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user program on the basis ofthe percentage of that fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with 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 of Year Liability 2002 2003 $ 0 $ 5 980 $ 5 980 $ 0 $ 0 $ 21,907 $ 21,907 $ 0 - 20 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 7: RISK MANAGEMENT The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the United States Fidelity and Guaranty Company to provide coverage for potential losses sustained by the Fund in excess of $350,000 loss per occurrence, up to $1,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Board President Board Vice-President All Employees $ 250,000 $ 25,000 $ 25,000 $ 250,000 Note 8: LONG-TERM DEBT CAPITAL LEASES The Clarke County Board ofEducation has entered into various lease agreements as lessee for buses and computer equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception. COMPENSATED ABSENCES Compensated absences represent obligations ofthe School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. The School District uses the vesting method to compute compensated absences. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2002 General Government - Series 2003 2.00% - 4.00% 2.38% $ 30,000,000 4,000,000 $ 34,000.000 - 21 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: LONG-TERM DEBT The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Capital Leases Governmental Funds Compensated Long-Term Absences Notes Payable General Obligation Bonds Total Balance July 1, 2002 $ 814,699 $ 416,567 $ 87,095 $ 36,700,000 $ 38,018,361 Additions Capital Leases Annual Leave Earned G.O. Bonds 1,552,336 386,052 4,000,000 1,552,336 386,052 4,000,000 Deductions Annual Leave Utilized Debt Retired 339,975 323,204 9677 6,700,000 323,204 7,049,652 Balance June 30, 2003 $ 2 021060 $ 472,415 $ 11,418 $ 34 000 000 $ 36 583 823 Portion of Long-Term Debt Due within One Year $ 611,187 $ 323,205 $ 9 677 $ 7,375,000 $ 8,319,069 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 2004 2005 2006 2007 2008 2009 - 2013 Total Principal and Interest Fiscal Year Ended June 30 Cagital Leases Princigal Interest $ 611,187 $ 601,367 630,692 183,814 58,370 68,191 38,864 8,255 Long-Term Notes Payable Princigal Interest $ 9,677 $ 0 9,677 9,677 9,677 9,677 29,033 $ 2,027,060 $ 173.680 $ 77 418 $ 0 General Obligation Debt Princigal Interest 2004 2005 2006 2007 2008 $ 7,375,000 $ 7,660,000 7,975,000 8,310,000 2,680,000 923,862 701,580 457,255 191,332 31,892 Total Principal and Interest $ 34,000,000 $ 2,305,921 - 22 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of$1,476,730 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 $1,318,748 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 $157,982 - 23 - CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 10: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available: Project Unearned Executed Contracts Funding Available From State Alps Road Elementary School 04-629-009 Barnett Shoals Elementary School 04-629-011 Barrow Elementary School Burney-Harris-Lyons Middle School Bus Shop Cedar Shoals High School Chase Street Elementary School 04-629-012 Clarke Central High School 04-629-008 Clarke County Middle School Classic City Learning Performance Center Cleveland Road Elementary School W.R. Coile Middle School Fourth Street Elementary School Fowler Drive Elementary School Gaines Road Elementary School H. T. Edwards Building Hilsman Middle School Ogelthorpe Avenue Elementary School Old Winterville High School Plant Services Rutland Psych-Ed Center Timothy Road Elementary School 04-629-010 Whit Davis Elementary School Whitehead Road Elementary School Winterville Road Elementary School $ 6,118,068 1,884,500 $ 272,928 2,597,607 253,738 312,343 1,528,953 2,061,978 3,051,640 1,632,811 599,636 6,230,463 1,268,538 2,742 397,587 1,034,689 1,109,592 2,225,798 6,343,579 4,426,268 46,710 3,624,774 20,833 1,930,086 2,004,282 3,493,718 1,420,948 59,048 1,327,450 936,504 $ 55,763.923 $ 2,453.888 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. -24- CLARKE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 11: SIGNIFICANT CONTINGENT LIABILITIES 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: ACCUMULATED EMPLOYEES' LEAVE Full-time twelve month employees earn annual leave ranging from ten to fifteen days each year depending upon the employees' length of continuous School District service with a maximum accumulation ofthirty days. Employees are paid at their current rate ofpay for unused accumulated annual leave upon retirement or termination of employment. 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% $ 5,211,277 $ 4,799,435 $ 5,572,456 - 25 - CLARKE 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 Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES Other Sources Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 41,555,473 $ 41,555,473 $ 40,894,076 1,153,913 46,390,909 46,712,305 47,566,523 11,580,224 14,447,762 11,762,999 849,000 860,000 2,569,591 460,000 400,700 258,487 2,380,720 2,475,033 1,858 113 $ 103,216,326 $ 106,451,273 $ 106,063,702 $ 65,933,056 $ 67,128,726 $ 64,281,550 3,778,968 2,757,210 1,861,724 1,505,933 5,647,533 1,257,962 9,631,258 6,693,453 2,949,357 175,995 1,017,712 5,668,125 35,000 4,171,713 3,281,191 2,013,031 1,666,679 5,698,603 1,258,622 9,824,168 6,760,828 2,948,747 685,522 1,004,286 5,675,151 35,000 3,795,273 2,748,623 1,829,292 1,474,950 5,698,424 2,104,121 9,316,988 8,073,121 2,897,177 539,803 333,057 981,091 5,289,587 395 549 $ 108,913,286 $ 112,152,267 $ 109,758,606 $ -5,696,960 $ -5,700,994 $ -3,694,904 1,552,336 $ -5,696,960 $ -5,700,994 $ -2,142,568 10,763,001 10,763,086 10,028,101 85 Fund Balances - Ending $ 5,066,126 $ 5,062,092 $===7:,.,,8~8;;;;5.,;;,5;,;;;3;;;,: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 - CLARKE 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) Fresh Produce Program (1) Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Direct Impact Aid Smaller Learning Communities Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Even Start Grants to Local Educational Agencies State School Improvement Grants Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Reading Excellence Title Ill English Language Acquisition Grants TitleV Innovative Education Program Strategies Title VII Immigrant Education Learn and Serve America Safe and Drug-Free Schools and Communities 21st Century Community Learning Centers Stewart 8. McKinney Homeless Assistance Act Vocational Education High School Program Basic Grant - 28- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 4,758,883 4,758,883 10.550 10.550 NIA N/A $ 173,747 46 276 4,978,906 * 84.027 * 84.173 * 84.027 N/A $ N/A N/A $ 1,863,224 77,811 69 745 2,010,780 84.041 84.215 (3) 40,886 84.213 N/A * 84.010 N/A * 84.010 N/A 84.281 N/A 84.318 N/A * 84.367 N/A 84.338 N/A 84.365 N/A 84.298 N/A 84.162 N/A 94.004 N/A 84.186 N/A 84.287 N/A 84.196 N/A 84.048 N/A 543,525 2,630,635 57,101 26,968 174,534 560,078 340,383 68,911 120,840 26,463 8,314 97,221 85,623 68,538 127,777 CLARKE 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 Hall County Board of Education d/b/a Piedmont Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Total U.S. Department of Education Health and Human Services, U. S. Department of Direct Early Head Start Pass-Through From Georgia Department of Human Resources Child Care and Development Block Grant Early Connection Total U.S. Department of Health and Human Services Labor, U. S. Department of Pass-Through From Northeast Georgia Regional Development Center Job Training Partnership Act Pathways to Success Defense, U.S. Department of Direct Department of the Army ROTC Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 84.011 N/A $ $ 126,233 7114810 93.600 93.575 $ N/A $ 672,307 139 949 812,256 17.250 N/A $ 12 960 $ 365 548 (4) Total Federal Financial Assistance N/A = Not Available $ ===1=3,=28=4,,,,.4=8=0 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program and Fresh Produce 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 ($834,363) were not maintained separately and are included in the 2003 National School Lunch Program. (3) Funds earned on the Impact Aid Program, in the amount of $42,709, do not require reporting of expenditures. (4) Expenditures for this program were supported by $132.144 in Federal assistance and the balance from State, and/or local funds. 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 Clarke 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- CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Resource Coordinator 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 Apprenticeship Program At-Risk Summer School Program Health Insurance Mentor Teachers National Teacher Certification Post Secondary Options Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom - 30- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,977,574 367,710 2,759,857 200,727 6,176,385 800,646 2,905,332 787,174 4,864,225 4,503,711 1,240,002 329,765 1,428,041 4,346,226 708,251 128,142 2,098,365 88,485 392,200 768,358 898,021 281,698 191,593 1,299,974 2,019,615 2,612,173 1,042,205 246,540 219,204 45,371 47,956 262,301 309,208 49,816 -1,304,502 38,000 108,100 1,318,748 14,276 29,718 5,604 217,742 20,078 229,341 CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 AGENCY/FUNDING GRANTS Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Education, Georgia Department of Middle School After School Program Georgia"s Reading Challenge Through Northwest Georgia Regional Educational Service Agency Georgia's Choice Georgia Institute of Technology Student Information System OTHER Community Affairs, Georgia Department of Governor's Emergency Funds SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 157,982 30,500 167,538 55,923 60,208 20416 $ ===4=7=,5=6=6=,5=23== See notes to the basic financial statements. - 31 - CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT Providing funds to pay the costs of acquiring, constructing and equipping a new Cedar Shoals High School. Adding to, renovating, repairing improving and equipping Clarke Central High School. Acquiring any necessary real or personal property and equipment and adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District and paying expenses incident thereto, at a cost of approximately $68,000,000 Providing funds for the purpose of replacing approximately 80 portable classrooms with permanent classrooms, which may involve additions to existing schools or may involve the construction of new school facilities, renovations and/or additions to Clarke Central High School, Clarke Middle School, Alps Road Elementary School, Gaines Elementary School, Cedar Shoals High School, Barnett Shoals Elementary School, Barrow Elementary School, Burney-Harris-Lyons Middle School, Chase Street Elementary School, Cleveland Road Elementary School, Coile Middle School, Fourth Street Elementary School. Fowler Drive Elementary School, H.T. Edwards Building, Hilsman Middle School, Oglethorpe Avenue Elementary School, Timothy Road Elementary School, West Broad School Building (which currently houses the Rutland Center), Whit Davis Road Elementary School, Whithead Road Elementary School, Winterville Elementary School. the acquisition, construction and equipping of an alternative learning center. acquiring any necessary real or personal property and equipment (including acquiring improved or unimproved land and existing buildings to renovate for future school sites) and adding to, renovating, repairing, improving and equipping other existing educational buildings. properties and facilities of the School District, including, without limitation, Old Winterville High School, athletic, transportation, maintenance and plant services facilities, and technology upgrades to all School District facilities, and paying expenses incident thereto, at a cost of approximately $87,849.000 ORIGINAL ESTIMATED COST(1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 68,000,000 $ 62,284,524 $ 7,249,890 $ 51,364,246 Ongoing 87,849,000 87,849,000 3 645 690 67196 Ongoing $ 155,849,000 $ 150,133,524 $ 10,895,580 $ 51,431,442 - 32- CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" (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 Clarke 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. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 8,105,796 Current Year 1,229,578 Total $ 9 335 374 See notes to the basic financial statements. - 33 - CLARKE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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) 3.434.916 $ 270.639 7,671,816 1,081,709 3,608,461 2,789.838 $ 403,392 8,753,127 1,391,495 5,455,250 1,005,223 6,029,531 5,621,552 1,523,978 8,596,672 2,630,396 95,050 487,355 919,919 738,915 8,191,871 6,272,513 1,184,394 123,707 671,395 6,942,822 281,761 64,395 2,852,098 66,708 482,577 848,554 63.204 $ 3,342 291,027 62,738 138,697 5,905 314,897 431,051 287,618 5,495 20,629 188,111 16,569 3,364 44,647 3,229 2,827 2.853,042 406,734 9,044,154 1,454,233 5,593,947 744,820 8,506,768 6,703,564 1,472,012 129,202 692,024 7,130,933 298,330 67,759 2,896,745 66,708 485,806 851,381 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 42,977,217 $ 47,514,812 $ 1,883,350 $ 49,398,162 Media Center Program Staff and Professional Development 1,119,702 240,188 1,658,687 60 627 121,545 131 457 1,780,232 192 084 TOTAL QBE FORMULA FUNDS $ 44 337 107 $ 49,234,126 $ 2,136,352 $ =~5;,,;,1,.;;;3,;,,;70;;,i;.4;;,;7.;;;.8 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 35 - 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 July 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Clarke County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Clarke County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Clarke County Board of Education's basic financial statements and have issued our report thereon dated July 14, 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 Clarke County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Clarke County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Clarke County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6291-03-01 and FS-6291-03-02. 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 the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Clarke 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, ~*""QQ '0~~~ ~!ell W. Hinton State Auditor RWH:as 2003-34YB-30 RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 July 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Clarke County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance ofClarke County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Clarke County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Clarke County Board of Education's management. Our responsibility is to express an opinion on Clarke 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 Clarke 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 Clarke County Board of Education's compliance with those requirements. 2003SA-30 In our opinion, the Clarke County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Clarke 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 Clarke County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Clarke 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-6291-03-01 and FA-6291-03-02. 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 ofthe management, members ofthe Clarke 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, LD~~ RWH:as 2003SA-30 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS CLARKE 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-6291-01-02 FS-6291-02-01 FS-6291-02-02 FS-6291-02-03 FS-6291-02-04 FS-6291-02-05 Further Action Not Warranted Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES INVENTORIES Inadequate Inventory Procedures Finding Control Number: FS-6291-02-01 The inventory procedures were changed to enhance better control of inventory items. During fiscal year 2003 - 2004, the School District experienced more turnover in personnel. This turnover slowed the improvement of procedures. A new warehouse manager will be hired in July 2004 and the School District will again proceed to correctthe shortfalls in warehouse management. GENERAL LEDGER Outstanding Loan Finding Control Number: FS-6291-02-04 The School District directed that the loan be fully repaid on May 19, 2004. SECTION IV FINDINGS AND QUESTIONED COSTS CLARKE 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 Clarke 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 Clarke County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Inventories Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Clarke County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Clarke County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements. Activities Allowed or Unallowed Special Tests and Provisions Allowable Costs/Cost Principles 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 Clarke 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 Clarke County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. - 1- CLARKE 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 - State School Improvement Grants 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $393,000. 9. Low Risk Auditee The Clarke County Board ofEducation qualified 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 REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6291-03-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a sample of 67 items, ten receipts did not contain supporting documentation. -2- CLARKE 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 REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6291-03-01 Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a sample of75 items, twelve vouchers were missing the original invoice to support expenditure and twenty items did not contain proper authorizing documentation. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account 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. Management's Response: The School District will assess the needs for additional procedures and staff to separate duties in order to provide satisfactory internal control over the school's bookkeeping function. INVENTORIES Inadequate Inventory Procedures Reportable Condition Finding Control Number: FS-6291-03-02 A review ofthe School District's Central Supply Inventory revealed that controls were not in place to provide adequate internal control over the Central Supply Inventory. The following problem areas were noted: 1. Of the 21 items selected, five did not agree with the perpetual records. 2. There was no evidence of performance of a reconciliation between the annual physical count to either the perpetual inventory system or to general ledger amounts. 3. Inventory listings contained items with no assigned value. -3- CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS INVENTORIES Inadequate Inventory Procedures Reportable Condition Finding Control Number: FS-6291-03-02 The School District should reassess internal control procedures for inventories to ensure they are in place and operating effectively. An annual physical count should be performed and reconciled to the inventory listing and variances should be documented and explained. Administrative review should be performed to ensure the accuracy of inventory records and amounts recorded in the general ledger. Management's Response: The inventory procedures will be changed to enhance better control ofinventory items. During fiscal year 2003-2004 the School District experienced more employee turnover which slowed the improvement process. A new experienced warehouse manager was hired in July 2004 to correct the shortfalls in warehouse management. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES 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-6291-03-01 During the year in review, there were seven schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures. In accordance with provisions ofU. S. Department of Education Instructions and 0MB Circular A13 3, 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 ofthe school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department ofEducation funded programs in support ofa school-wide program, U. S. Department of Education Instructions provide that specific school-wide program -4 - CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES 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-6291-03-01 costs lose their identity but only in those circumstances when funds are combined in a schoolwide 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. If there is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support of a school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department of Education and (2) in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs. Management's Response: The School District plans to develop procedures to consolidate the funding sources of the schoolwide program and allocate the school-wide program costs to the respective Federal funds in a reasonable manner. -5- CLARKE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Conduct an Assessment of Professional Development/Hiring Needs Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6291-03-02 The Clarke County School District's internal controls related to developing and conducting a local needs assessment for the Title II, Part A, Improving Teacher Quality Program (CFDA 84.367) were determined to be insufficient to ensure that the required needs assessment was performed. As set forth in 20 USC 2122 (b) and (c)and 0MB Circular A-133, Part 4, Section III, an assessment of local needs for professional development and hiring, as identified by the School District and school staff, must be conducted in order to be eligible to receive Title II, Part A funds. The needs assessment must be conducted with the involvement of teachers, including teachers who work in Title I, Part A Target Assistance programs and School-wide Program schools. This deficiency occurred because management failed to establish internal controls to ensure that the required needs assessment was conducted. The School District should establish and implement internal controls to ensure that the required local needs assessment for professional development and hiring is conducted. Management's Response: The Clarke County School District has participated in major evaluative and planning initiatives which involved all stakeholders in assessing the District's needs. The information from all these processes will be used to assure that all students are provided the same content and academic achievement standards. In addition, the District has developed a recruitment plan in an effort to recruit and retain staff that is more reflective of its diverse student population. -6-