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

COFFEE COUNTY BOARD OF EDUCATION
DOUGLAS, 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

COFFEE COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS-

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

COFFEE COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

32

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

33

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April8,2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coffee 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 Coffee 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 Coffee County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 Coffee 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

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Coffee County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated April 8, 2004, on our consideration ofthe Coffee County Board ofEducation'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 xi and page 27 respectively, are not a required part ofthe 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 Coffee County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2003-34ARL-11

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24.
Respectfully submitted,
~....az.w.~
Russell W. Hinton State Auditor
RWH:as 2003-34ARL-11

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis ofCoffee County Board ofEducation's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding ofthe Board's financial performance.
Financial Highlights
Key financial highlights for 2003 are as follows:
The Board implemented GASB 34 for 2003. Due to this being the implementation year, many comparisons are not available that will be available for 2004.
In total, net assets decreased by $1.0 million which represents a 2.3 percent decrease from 2002. This total decrease was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $16.4 million in revenue, or 28 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $43 million or 72 percent of total revenues of $59.4 million.
The Board had $60.5 million in expenses related to governmental activities; only $43 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily property taxes) of$16.4 million were not adequate to provide for these programs, leaving a requirement of $1 million that was funded from fund equity.
Among major funds, the General Fund had $59 million in revenues, $60.2 million in expenditures. In fiscal year 2003 this activity resulted in a net decrease $1.2 million in fund balance from $5.8 million to $4.6 million.
The district maintains a very low level of debt with only $0.6 million outstanding, on $36 million in capital assets in place.
Using the Basic Financial Statements
This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Coffee County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view ofthe Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for
1

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
future spending. The fund financial statements also look at the Board's most significant funds. In the case of the Coffee County Board of Education, the General Fund is by far the most significant fund.
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number offunds used by the Board to provide programs and activities for the schools, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2003 ?" The Statement ofNet Assets and the Statement ofActivities answers this question. These statements include all assets and liabilities using the economic resources focus and accrual basis ofaccounting 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 the cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not. Nonfinancial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, principal's accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund, Capital Projects Fund and the Debt Service Fund.
Governmental Funds Most ofthe Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using the current financial resources measurement focus and the modified accrual accounting method, which measures cash and all otherfinancial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the
11

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Board's general government operations and the basic services it provides. Governmental fund information helps determine whether there is adequate financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement ofNet Assets and the Statement ofActivities) and governmental funds is reconciled in the financial statements.

Fiduciary Funds The Board is the trustee, orfiduciary, for assets that belong to others, such as the employee benefit programs, and school clubs and organizations within the principals' accounts. The 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 district excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for 2003. Since this is the first year the Board has prepared financial statements following GASB Statement 34, net assets comparisons to fiscal year 2002 are not available.

Table 1 Net Assets (in Thousands)

Governmental Activities Fiscal Year 2003

Assets Current and Other Assets
Capital Assets, Net

$ 15,775,622 35,978,391

Total Assets

$ 51,754,013

Liabilities Current and Other Liabilities
Long-Term Liabilities

$ 6,665,821 625,942

Total Liabilities

$ 7,291,763

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

$ 35,378,468 5,442,641 3,641,141

Total Net Assets

$ 44,462,250

Table 2 shows the $1 million change in net assets as a result of operations for fiscal year 2003, largely as a result of a $847,480 austerity reduction to the state QBE program revenue.

iii

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table2 Change in Net Assets
(in Thousands)
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 Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and O.tJeration of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Decrease in Net Assets

Governmental Activities Fiscal Year 2003
$ 925,390 41,626,686 449,625
$43,001,701
$ 10,382,218 11,873
34,141 2,463
35,644
3,896,821 403,054
1,665.459
$ 16,431,673
$ 59,433,374
$ 39,884,143
3,217,446 2,514,525 1,243,936
672,783 2,640,502
438,828 3,302,111 2,009,256
255,860 282,826
3,947,554 65,178
$ 60,474,948
$ -1.041.574

lV

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Figure A shows the funding sources for the revenues. Seventy-one percent ofthe Board's revenues are derived from state grants. Property taxes make up seventeen percent ofthe total funding, while an additional seven percent is earned from the Federal sources.

Figure A SOURCES OF REVENUE FOR FISCAL YEAR 2003

Federal Funds 7%
Sales Tax
1%

Other Revenue

Debt Service 1%

Property Taxes 17%

Charges for Services 2%

State Funds 69%

V

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
As shown in Figure B, expenditures for instruction accounted for sixty-seven percent of governmental program expenses. Expenses related to general and school administration and other services comprised only seven percent of the system expenditures.
Figure 8 EXPENSES BY FUNCTION FOR FISCAL YEAR 2003

Instruction 66%
Interest Deb,~t_ _ __ 1%
Food Services 7% Student Transportatio 3%

Pupil Services 5%

Improvement of Instruction
4%
Media Services 2%

General Administration
1% School
Administration 4%

Administration and Other

Services

Maintenance and

2%

Operations

5%

VI

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost of services. That is, the net cost of service identifies the cost of these services supported by local tax revenue ($10.4 million) and unrestricted State entitlements, such as the equalization grant ($3.7 million). Since this is the first year the Board has prepared financial statements following GASB Statement 34, the cost ofservice comparisons are not available for fiscal year 2002.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Food Services Interest on Short-Term and Long-Term Debt

$ 39,884,143 $ 9,641,130

3,217,446 2,514,525 1,243,936
672,783 2,640,502
438,828 3,302,111 2,009,256
255,860 282,826

1,726,183 1,434,793
564,548 -346,842 1,164,283 438,828 1,271,556 734,794 248,270
89,657

3,947,554 65,178

440,869 65,178

Total Expenses

$ 60A74~948 $ 17~473~247

Although program revenues make up a majority of the funding, the Board is still dependent upon local tax revenues and other general revenue for governmental activities. Approximately 24.1 percent of instructional spending and 28.9 percent oftotal expenditures are supported through local taxes and other general revenues.

vu

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The Board's Funds
The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $59.5 million and expenditures and other financing uses of $63 .5 million. There was a decrease in the fund balance totaling $4 million for the governmental funds as a whole. The General Fund had a decrease of $1.2 million as operating expenses exceeding revenue; the Capital Projects Fund balance decreased $2.8 million as SPLOST funds were used to fund various capital improvements and a $299,000 transfer to the Debt Service Fund was used to satisfy the principal and interest payment on the Board's outstanding GOB debt, in accordance to the referendum. The negative change in the balance ofthe General Fund for the year reflects that the Board was unable to meet current costs ofoperations from current income, and therefore was required to rely on a portion of its $5.8 million beginning fund balance to meet the additional operating requirements, leaving an ending fund balance of $4.6 million.
General Fund Budgeting Highlights
The Board's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the General Fund.
For the General Fund, the final budgeted revenues of$59.3 million exceeded the original budgeted amount of $57.5 million by $1.8 million or 3 percent. This difference was primarily due to a $1.7 million, or 26 percent, increase in the Federal revenues budget item due to new grant funds and the availability of funds carried over from fiscal year 2002. These Federal funds are held at the state level and recognized as revenue by the district when ordered as reimbursement for expenditures. The actual Federal revenue was $1.1 million less than the final budgeted amount, indicating that the district will have grant funds to carry over for fiscal year 2004. The actual revenues for fiscal year 2003 of $59 million fell short of the final budgeted amount by $332,000, or less than 1 percent. However, there were some differences between the final budgeted and actual revenues items when considered individually. Miscellaneous revenue was actually $1.8 million, as compared to final budgeted amount of $0.3 million. This is a result of the GASB 34 requirement to include the $1.2 million of revenue recorded in individual school and principal accounts, which were not originally included in the final budget amount.
The final budgeted expenditures of $62.6 million exceeded the original budgeted amount of $60.2 million by $2.3 million. This difference was due mainly to budgeted increases in state and Federal grant expenditures of$1.3 million on instruction, $0.6 million on pupil services, and $0.3 million on improvement of instructional services. The actual expenditures of$60.2 million were $2.4 million less than the final budgeted amount due to the budgeting expenditures to offset the revenue from Federal grants carried over from fiscal year 2002. Conservative spending in these areas allowed a portion of fiscal year the revenue to be carried over to fiscal year 2004.
General Fund expenditures exceeded revenues by $1.2 million. This was a result of the Board's continued commitment to low class sizes and current program offerings, despite state budget cuts.
vm

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Capital Assets and Debt Administration

Capital Assets

At the end of fiscal year 2003 the Board had $36 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal year 2003 balances. Since this is the first year the Board has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available.

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

Governmental Activities Fiscal Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements Accumulated Depreciation

$ 709,722 1,733,955
39,919,028 5,510,835 1,644,763
-13,539,912

Total

$ 35,978.391

The overall capital assets increased in fiscal year 2003 by $2.8 million due to various capital expenditures totaling $3.9 million from SPLOST funds; offset by depreciation expense for the year totaled $1.1 million.

Debt

Table 5 summarizes that at June 30, 2003, the Board had $600,000 in 1980 series bonds outstanding with $290,000 due within one year and $25,942 in capital leases outstanding with $19,201 due within one year. The payment on the bond debt was made from SPLOST funds as provided for in the referendum.

lX

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 5 Debt at June 30 (in Thousands)

Governmental Activities Fiscal Year 2003

General Obligation Bonds Capital Leases

$ 600,000 25,942

Total

$ 625,942

The State of Georgia limits issuance ofgeneral obligation bonds by school districts to no more than 10 percent of the assessed values of all the property within the local government's jurisdiction. At June 30, 2003, the Board's overall legal bonding authority was approximately $70 million based on the net bond digest as of December 31, 2003. In addition, the State of Georgia limits the amount available to be spent each year on multiyear leases, purchase, or lease purchase contracts to 7.5 percent ofthe locally generated taxes for the maintenance and operation ofthe school system. Both the current year payments and subsequently scheduled payments are well below the $779,000 threshold.

Current Issues

The Coffee County School System consists of 12 campuses located in Coffee County, with a current enrollment ofapproximately 7,600 students in grades PK-12. Among Georgia's 159 counties, Coffee ranks 49th in population. In 2002, Coffee County had a population of37,851, up 27.9% from 29,592 in 1990. This growth results in an average school system enrollment increase ofaround 65 students per year. Coffee County has four municipalities: Douglas, the county seat, with a population of 10,629; Broxton with 1,428; and Nicholls with 1,008. The county also includes the communities of Satilla, West Green, and Bridgetown. Of 180 school systems in Georgia, Coffee County ranks 57th in millage rate, at 16.03 for 2003.

The county has suffered some losses during the recent downturn in the economy. The factory closings ofTecumseh and several Fleetwood Homes plants have largely impacted the unemployment rate of the county. Large employers located in the county include the Board of Education, Golden Poultry, PCC, Wayne Farms, and Wal-Mart Distribution.

The median household and per capita income for Coffee as of 1999 was $30,710 and $15,530 respectively. These fall well below the State averages of$42,433 for median household and $21,154 per capita incomes. In 2000, approximately 64.8% of the population over twenty-five were high school graduates, compared to the state average of78.6%. Only about 10% ofthe same population have a bachelor's degree or higher, as compared to 24.3% on the state level.

X

COFFEE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Contacting the Board's Financial Management This financial report is designed to provide our citizen's, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Gabe Evans, Comptroller at the Coffee County Board of Education, P. 0. Drawer 1290, Douglas, Georgia 31534. You may also email your questions to gabeevans@coffee.kl2.ga.us.
Xl

COFFEE COUNTY BOARD OF EDUCATION

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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

9,789,978

5,000

976,144 4,590,329
53,863 288,007
72,301

709,722 1,733,955 1,644,763 39,919,028 5,510,835 -1315391912

$ ===5=1=,7=5=4,=0=13=

$

1,510,882

5,088,859

33,141

9,848

23,091

309,201 316 741

$

7,291,763

$

35,378,468

1,396,301 386,756
3,659,584 3 641 141

$

44,4621250

$ ===5=1=,7=5=4,=0=13=

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - Ending of Year

EXPENSES

CHARGES FOR SERVICES

$

39,884,143 $

3,217,446 2,514,525 1,243,936
672,783 2,640,502
438,828 3,302,111 2,009,256
255,860 282,826

3,947,554 65,178

$

6014741948 $

175,701
749,689 9251390

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

29,760,864 $

1,491,263 1,079,349
678,773 1,012,839 1,476,219

2,018,993 1,184,647
7,590 190,137

2,726,012

$

41!6261686 $

306,448 $
383 615 6,786
11,562 89,815
3,032 30,984
449 625 $

-9,641, 130
-1,726,183 -1,434,793
-564,548 346,842 -1, 164,283 -438,828 -1,271,556 -734,794 -248,270 -89,657
-440,869 -65, 178
-17,473,247

$

10,382,218

11,873

34,141 2,463
35,644 3,896,821
403,054 1,665,459

$

16,431,673

$

-1,041,574

45,503,824

$ ===4=4=A=6:::::!21=25=0=

-5-

COFFEE COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30 2003

EXHIBIT "C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 5,966,218 $ 3,437,837 $ 385,923 $ 9,789,978

5,000

5,000

532,078 4,590,329
53,863 25,734 72,301

2,463 262,273

833

535,374

4,590,329

53,863

288,007

72,301

$ 11,245,523 $ 3,702,573 $ 386,756 $ 15,334,852

$ 1,510,882 5,088,859 $
23,091
$ 6,622,832 $

33,141 9,848
42,989

$ 1,510,882 5,088,859 33,141 9,848 23,091
$ 6,665,821

$ 1,324,000

$ 1,324,000

$ 386,756

386,756

72,301

72,301

$ 3,659,584

3,659,584

3,226,390

3,226,390

$ 4,622,691 $ 3,659,584 $ 386,756 $ 8,669,031

$ 11,245,523 $ 3,702,573 $ 386,756 $ 15,334,852

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

COFFEE 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 and Notes Payable Capital Leases
Total Long-Term Liabilities

$

8,669,031

$

709,722

1,733,955

1,644,763

39,919,028

5,510,835

-13,539,912

35,978,391

440,770

$

-600,000

-25,942

-625,942

Net Assets of Governmental Activities (Exhibit "A")

$ 44,462,250

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

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 10,497,080 35,644 $
38,348,346 7,174,681 749,689 329,791 1,835,875
$ 58,971,106 $

$ 2,463 449,625
57,180
509,268 $

3,825 $ 34,141
16,083 54,049 $

10,500,905 72,248
38,797,971 7,174,681 749,689 403,054 1,835,875
59,534,423

$ 39,401,455

3,217,446 2,523,002 1,242,395
655,784 2,640,502
438,065 3,341,543 2,264,247
255,860 293,231 3,886,347
$

$ 3,017,521

17,755 2,801

$ 60,180,433 $ 3,017,521 $

$ -1,209,327 $ -2,508,253 $

$
763
270,000 62,377
333,140 $ -279,091 $

39,401,455
3,217,446 2,523,002 1,242,395
655,784 2,640,502
438,828 3,341,543 2,264,247
255,860 293,231 3,886,347 3,017,521
287,755 65,178
63,531,094
-3,996,671

$ $ -299,000

$ -299,000 $

$ -1,209,327 $ -2,807,253 $

5,832,018

6,466,837

299,000 $
299,000 $ 19,909 $
366,847

299,000 -299,000
0 -3,996,671 12,665,702

$ 4,622,691 $ 3,659,584 $

386,756 $==8=,6=6=9':::::::::03==1=

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

COFFEE 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.

Addition for Delinquent Taxes

$

Deduction to Restate Prior Year Fund Balance

Excess of Revenue

$
3,885,405 -111091030
440,770 -5491803

-3,996,671
2,776,375 -109,033

Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:

Bond Principal Retirements

$

Capital Lease Payments

Total Long-Term Debt Repayments

270,000 17,755

287 755

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

$ -1,041,574

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

COFFEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2003
ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT "G"

AGENCY FUNDS

$

157,438

85,049

$ ==2=4=2=,4=8=7

$ ==2=4=2=,4=8=7

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

COFFEE 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 Coffee 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 Coffee County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds.
The School District reports the following major governmental funds:
- 12 -

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

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
judgments, 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.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.
The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $1,681,136 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$261,956 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 5,086,561

Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity

1,681,136 261,956

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

4,322,498

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

5,520,133

General Fund Balance July 1, 2002 (Restated)

$ 5,832.018

CHANGES IN ACCOUNTING PRINCIPLES

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

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

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

$ 5,832,018 6,466,837 366,847

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

$ 12,665,702 45,632,898 -12,430,882 549,803 -870,000 -43,697

Net Assets Beginning (See Exhibit "B")

$ 45,503.824

- 15 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash 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,
(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
- 16 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Coffee County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 9, 2002 (levy date). Taxes were due on December 1, 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 Coffee 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 $10,497,080 and for school bonds amounted to $3,825.

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

School Operations

16.033 mills

SALES TAXES

Special Purpose Local Option Sales Tax revenue during the year amounted to $36,604 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories 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

- 17 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Any Amount

$

10,000

$

10,000

$

5,000

NIA 20 to 80 years up to 80 years
5 to 50 years

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

GENERAL OBLIGATION BONDS

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

Note 3: DEPOSITS

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

- 18 -

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

EXHIBIT"H"

Note 3: DEPOSITS
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $13,034,285. 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:

- 19 -

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

EXHIBIT"H"

Note 3: DEPOSITS

Risk Category

Bank Balance

1

$ 861,505

2

3,947,098

3

8,225,682

Total

$ 13,034.285

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

Balances Decreases June 30, 2003

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

$ 709,722

$

187,832 $ 1,546,123

0 $ 709,722 1,733,955

Total Capital Assets Not Being Depreciated $ 897,554 $ 1,546,123 $

0 $ 2,443,677

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 38,464,958 $ 4,625,623 1,644,763

1,454,070 $ 885,212

0 $ 39,919,028 5,510,835 1,644,763

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

9,415,134 2,221,899
793,849

730,006 319,092
59,932

10,145,140 2,540,991
853,781

Total Capital Assets, Being Depreciated, Net $ 32,304,462 $ 1,230,252 $

0 $ 33,534,714

Governmental Activity Capital Assets - Net $ 33!202!016 $ 2!776!375 $

0 $ 35!978!391

- 20 -

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Improvements of Instructional Services Educational Media Services General Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services

$ 755,900
943 1,517 16,738 28,516 221,520 7,478 76,418

$ 1,109.030

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), Georgia State Financing and Investment Commission (GSFIC) funds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net 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 SPLOST

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions

$
$ 3,608,494

385,923

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Funds Transfers are used for payment of bonds.

$====2===9-0====00====0

- 21 -

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

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk of loss associated with assets.

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 and 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 ofclaims 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 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 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 ofYear Liability

2002 2003

$

0 $

2,232 $

2,232 $

0

$

0 $

1,962 $

1,962 $

0

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:

- 22 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

Position Covered

Amount

Superintendent All Other Employees

$ 100,000 $ 100,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Coffee County Board of Education has entered into various lease agreements as lessee for 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 ofthe date oftheir inception.

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

Purpose

Interest Rate

Amount

General Government - Series 1980

8.5%

$==6=0===:;;0,-00=====0

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

Governmental Funds

General

Capital

Obligation

Leases

Bonds

Total

Balance July 1, 2002

$

43,697 $ 870,000 $ 913,697

Deductions Debt Retired

17,755

270,000

287,755

Balance June 30, 2003

$

25.942 $ 600,000 $==6==25-,9====4==2

Portion of Long-Term Debt Due within One Year

$

19,201 $ 290,000 $_ _3;;...;.0.;._;9,~20;..;;.1

At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows:

- 23 -

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30
2004 2005

Capital Leases

Principal

Interest

$

19,201 $

6 741

1,355 111

Total Principal and Interest

$

25.942 $

1.466

Fiscal Year Ended June 30
2004 2005
Total Principal and Interest

General Obligation

Debt

Principal

Interest

$ 290,000 $ 310,000

38,675 13,175

$ 600.000 $

51.850

Note 10: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $639,272 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 $548,889

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 $90,383

Note 11: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

West Coffee Middle School Renovations

$======35: i!:.7==4==4

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

- 24 -

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

EXHIBIT"H"

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

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

The School District is a defendant in 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 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%

$ 3,164,383 $ 2,855,685 $ 3,252,001

- 25 -

COFFEE 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 Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$ 10,913,720 $ 10,632,075 $ 10,497,080

50,000

50,000

35,644

38,585,465

38,975,089

38,348,346

6,584,213

8,272,932

7,174,681

748,100

748,100

749,689

320,000

320,000

329,791

304,950

304,950

1,835,875

$ 57,506,448 $ 59,303,146 $ 58,971,106

$ 38,579,780 $ 39,893,266 $ 39,401,455

3,020,389 2,450,472 1,292,193
715,907 2,797,455
459,053 4,138,618 2,363,811
298,931 305,454 3,876,344

3,613,724 2,744,586 1,293,274
747,562 2,797,455
459,053 4,142,618 2,384,646
308,931 308,465 3,876,844

3,217,446 2,523,002 1,242,395
655,784 2,640,502
438,065 3,341,543 2,264,247
255,860 293,231 3,886,347
20,556

$ 601298,407 $ 621570,424 $ 60,180,433

$

-2,791,959 $ -31267,278 $

-1,209,327

$

265,000 $

265,000

-1901000

-190,000

$

75 000 $

75,000

$

-2,716,959 $ -3,192,278 $

-1,209,327

8,555,301

8,555,301

5,832,018

373

373

0

Fund Balances - Ending

$

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 -

COFFEE 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 Capacity Building Improvement Flow Through Preschool Project Winning Team
Total Special Education Cluster
Other Programs Direct Impact Aid Pass-Through From Coastal Plains Regional Educational Service Agency d/b/a Southern Pines Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Grants to Local Educational Agencies School Improvement Title II Eisenhower Professional Development Enhancing Education Through Technology Competitive Grant Formula Grant Improving Teacher Quality Technology Integration Standards Professional Development Title Ill Limited English Proficient
- 28 -

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

N/A

$

$

(2) 3,738,685 (3)
3,738,685

10.550 10.550

N/A N/A
$

142,559 4,606
3,885,850

* 84.027 * 84.027 * 84.173 * 84.027

N/A

$

N/A

N/A

N/A

$

12,859 867,944 (3)
84,449 61,739 (3)
1,026,991

84.041

(4)

84.011

N/A

* 84.332

N/A

* 84.010

N/A

* 84.010

N/A

84.281

N/A

84.318

N/A

84.318

N/A

* 84.367

NIA

84.318

N/A

84.365

N/A

148,444
649,080 (3) 1,876,172
17,774 (3) 4,616
59,550 61,671 (3) 382,979
3,222 (3) 39,641

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Education, U. S. Department of Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title VI Innovative Education Program Strategies Rural and Low Income Schools Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant
Total U. S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Children and Youth Coordinating Council of Georgia Abstinence Education Block Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

84.298 84.358 84.186
84.048

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

55,538 153,580
50,010
107,343 (3) 41636,611

93.235

N/A $

201163 (3)

Total Federal Financial Assistance N/A = Not Available

$ ===8=1=54=2=16=24=

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program and Fresh Produce Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. In addition, commodities valued in the amount of $4,153 were received during the current fiscal year and were not recorded in the School District's financial statements.
(2) Expenditures for the funds earned on the School Breakfast Program ($585,019) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source.
(4) Funds earned on the Impact Aid program, in the amount of $2,219., do not require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Coffee 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 -

COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Mentor Teachers National Teacher Certification Outdoor Classrooms Preschool Handicapped Program Statewide After School Program (4-8) Statewide Reading Program (K-3) Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options Technology Installation

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

1,265,756

1,456,339

3,563,451

2,891,470

1,606,503

2,078,902 4,616,631 3,074,427
881,109

55,528 1,043,923 1,720,394
320,833 24,890
392,631 101,867 315,554 197,263 682,708 227,662 146,755

809,102 1,396,190 2,018,824

982,469 195,498
19,000 154,761
30,791 36,613 19,600 3,713,251 231,290 137,660 -847,480
548,889 19,920 21,969 1,000
156,744 71,809
112,570
13,195 155,148
1,081 16,255

$

1,265,756

1,456,339

3,563,451

2,891,470

1,606,503

2,078,902 4,616,631 3,074,427
881,109

55,528 1,043,923 1,720,394
320,833 24,890
392,631 101,867 315,554 197,263 682,708 227,662 146,755

809,102 1,396,190 2,018,824

982,469 195,498
19,000 154,761
30,791 36,613 19,600 3,713,251 231,290 137,660 -847,480
548,889 19,920 21,969 1,000
156,744 71,809
112,570
13,195 155,148
1,081 16,255

- 30 -

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of After School Programs
Human Resources, Georgia Department of Family Connection
OTHER Community Affairs, Georgia Department of Local Assistance Grant

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

449,625 $

449,625

$

1,480,874

1,480,874

90,383

90,383

36,344 50,000

36,344 50,000

10,000

10,000

$ 38,348,346 $

449,625 $ ==38=,7=9=7=9,7=1=

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "4"

PROJECT
Acquiring, constructing, and equipping the following capital outlay projects at a total maximum cost of $11,299,425: (i) a new elementary school, (ii) renovations and improvements to Ambrose Elementary, Eastside Elementary, Westside Elementary, Satilla Elementary, West Green Elementary, Nicholls Elementary, Broxton Elementary, East Coffee Middle School, West Coffee Middle School, (iii) installation of air conditioning in the gymnasium and construction of new track and storage facilities at Coffee County High School, and (iv) a new central office for the school system
The retirement of all previously incurred general obligation debt of the school system in a maximum amount of $2,700,575

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 11,299,425 $ 11,299,425 $ 2,549,275 $

8,671,051 Ongoing

2,700,575

2,700,575

333,141

1,717,734 Ongoing

$

14,000,000 $

14,000,000 $

s 2,aa2,416 ==1o=,3=8=8=1,=a=s

(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 Coffee County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 32 -

COFFEE 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 Grades (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

Category V

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,438,677 $ 1,536,629 3,888,900 3,199,419 1,755,502
2,297,736 5,049,455 3,423;410
988,369 3,493,285
441,957 116,114 347,782 215,719

1,934,258 $ 821,568
4,349,895 2,788,345 2,413,043
1,890,893 4,925,565 4,220,209
906,351
9,706 1,288,640 2,145,435
303,133 6,691
540,470 105,434 431,398 294,797

137,078 $ 9,636
323,766 25,171
224,099
18,407 241,933 279,429 154,941
1,068 12,360 50,707
7,832 1,062 35,365 4,156 3,034 2,882

2,071,336 831,204
4,673,661 2,813,516 2,637,142
1,909,300 5,167,498 4,499,638 1,061,292
10,774 1,301,000 2,196,142
310,965 7,753
575,835 109,590 434,432 297,679

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

28,192,954 $ 29,375,831 $

1,532,926 $

30,908,757

Media Center Program Staff and Professional Development

751,560 162,751

1,146,269 11,809

69,503 165,549

1,215,772 177,358

TOTAL QBE FORMULA FUNDS

$

29,107,265 $ 30,533,909 $

1,767,978 $ ======3=='2,=30=1=,8=8=7

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

See notes to the basic financial statements.

- 33 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 8, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coffee 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 Coffee County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Coffee County Board of Education's basic financial statements and have issued our report thereon dated April 8, 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 Coffee County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.

2003-34YB-30

Internal Control Over Financial Reporting
In planning and performing our audit, we considered Coffee 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 control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in our judgment, could adversely affect Coffee County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6341-03-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Coffee County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2003-34YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
April 8, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Coffee 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 ofCoffee County Board ofEducation with the types ofcompliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Coffee County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Coffee County Board of Education's management. Our responsibility is to express an opinion on Coffee County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General 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 Coffee 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 Coffee County Board of Education's compliance with those requirements.
2003SA-30

In our opinion, the Coffee 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 Coffee 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 Coffee 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 a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Coffee County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6341-03-01.
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 the reportable condition described above is not a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Coffee 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.

RWH:as 2003SA-30

State Auditor

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

COFFEE 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-6341-01-01 FS-6341-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

COFFEE 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 Coffee 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 Coffee County Board of Education disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

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

3. Noncompliance Material to the Financial Statements The audit ofthe Coffee 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 Coffee County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement.

Special Tests and Provisions

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Coffee 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 Coffee County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) ofOMB Circular A-133. This audit finding is included in section IV of this report.

- 1-

COFFEE 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 - School Improvement 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.332 Elementary and Secondary Education Act - Title I - Comprehensive School Reform Demonstration Grant 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.027 Individuals with Disabilities Education Act - Part B - Special Education Project Winning Team 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Coffee 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 REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6341-03-01
Our examination of the schools' activity accounts (Principals Accounts) disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents - The bank reconciliation function was 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.
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COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6341-03-01
Expenditures/Liabilities/Disbursements 1) The check writing function was not separated from record keeping or processing of signed checks.
2) Based on a test of 40 items, two voucher packets could not be located and ten voucher packets did not include any supporting 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.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6341-03-01
During the year in review, the School District identified eight schools as participating in a schoolwide program. While Federal provisions prescribe that multiple funding sources (Federal State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures.
In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program 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
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COFFEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6341-03-01
program, U. S. Department of Education Instructions provide that specific school-wide program 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 Districts understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program.
The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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