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

COLQU/Tr COUNTY BOARD OF EDUCATION MOULTRIE, 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

COLQUITT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

I

NOTES TO THE BASIC FINANCIAL STATEMENTS

13

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

31

COLQUITT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

32

3 SCHEDULE OF STATE REVENUE

34

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

36

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

37

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
May 17, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Colquitt 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 I) of the Colquitt 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 Colquitt 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 opinions.
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 Colquitt 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

The Colquitt County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Colquitt 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 May 17, 2004, on our consideration of the Colquitt County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 31 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Colquitt County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
2003-34ARL-11

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

RWH:as 2003-34ARL-11

State Auditor

COLQUITT COUNTY BOARD OF EDUCATION

COLQUITT 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 Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

11,699,972

9,907,345

1,443,611 4,845,415 1,039,133
417 63,028

925,992 1,209,690 48,856,101 7,183,758 -14,451z793

$===7...,2,...,7..,2...,2,=66=9=

$

1,179,928

5,241,964

666,392

78,168

3,297,227 9,130,229

$

19,593,908

$

35,504,756

98,053 265,199 11,201,448
58,234 6,001,071

$

53,128,761

$===7..,2..,7...,2,..2,=66=9=

COLQUITT 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 Enterprise Operations Food Services Interest on Short-Tenn and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Local Option Sales Tax Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Changes in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 41,010,574
2,615,002 1,870,377 1,324,563
732,472 3,448,040
994,073 4,912,637 2,036,120
363,284 150,451
302,020 3,964,978 $
345,924
$ 64,070,515 $

857,464 857464

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

33,239,310 $

817,853 1,066,232

730,418 2,032,975

2,221,672 1,396,805
913,963 45,464

2,927,503

$

45,392,195 $

49,052 $
850 47
5,599 562
4,160 136
16,460 20,208
253
8,734
106 061 $

-7,722,212
-1,796,299 -804,098
-1,318,964 -1,492
-1,410,905 -993,937
-2,674,505 -619,107 550,679 -104,734
-302,020 -171,277 -345 924
-17,714,795

$

5,236,900

10,683

3,978,721 200,000
4,169,908 106,073 29,829
6,272,800 371,000
1,967,229

$

22,343,143

$

4,628,348

48,500,413

$ ====53.,.,=12=8,.,,7,=61===

-5-

COLQUITT 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 Claims Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

1,963,023 $

1,204,424 $ 8,532,525 $ 11,699,972

4,459,674

5,447,671

9,907,345

927,158 4,739,354 1,039,133
417 63,028

106,061

700,896

1,628,054 4,845,415 1,039,133
417 63,028

$ 13,191,787 $ 6,758,156 $ 9,233,421 $ 29,183,364

$ 1,179,928 5,241,964 10,247 $
$ 6,432,139 $

666,392 78168
744,560

$ 1,179,928 5,241,964 10,247 666,392 78168
$ 7,176,699

$

98,053

$

98,053

202,171

202,171

$ 1,968,027 $ 9,233,421

11,201,448

63,028

63,028

4,045,569

4,045,569

1,371,925

1,371,925

5,024,471

5,024,471

$ 6,759,648 $ 6,013,596 $ 9,233,421 $ 22,006,665

$ 13,191,787 $ 6,758,156 $ 9,233,421 $ 29,183,364

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

COLQUITT 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 Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Compensated Absences
Total Long-Term Liabilities

$ 22,006,665

$

925,992

1,209,690

48,856,101

7,183,758

-14,451,793

43,723,748

-184,443

$ -7,000,000 -5,206,327 -210,882

-12,417,209

Net Assets of Governmental Activities (Exhibit "A")

$ 53,128,761

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

COLQUITT COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENT FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT"E"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 5,303,236 4,305,810 $
43,793,668 7,871,327 857,464 89,754 1,955,789
$ 64,177,048 $

200,000 $ 106,061

$ 3,978,721

225,670

55,576

531,731 $ 4,034,297 $

5,303,236 8,484,531 43,899,729 7,871,327
857,464 371,000 1,955,789
68,743,076

$ 40,429,374

$

2,610,021

1,872,277

1,255,759

720,313

3,417,914

999,196

$

545

4,776,796

2,056,585

363,061

147,159

302,020

3,858,314

$ 2,592,042

102,226 15,301

2,955,000 330,623

$ 62,926,316 $ 2,592,042 $ 3,286,168 $

$ 1,250,732 $ -2,060,311 $ 748,129 $

40,429,374
2,610,021 1,872,277 1,255,759
720,313 3,417,914
999,741 4,776,796 2,056,585
363,061 147,159 302,020 3,858,314 2,592,042
3,057,226 345,924
68,804,526
-61 450

$

11,440

$ 831,485

-831,485

$

11,440

831,485

-831,485

$ -820,045 $ 831,485

$

11 440

$

430,687 $ -1,228,826 $ 748,129 $

-50,010

6,328,961

7,242,422

8,485,292

22,056,675

Fund Balances - Ending

$ 6,759,648 $ 6,013,596 $ 9,233,421 $

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

-8-

22,006,665

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

EXHIBIT"F"

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

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

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

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

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

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

Bond Principal Retirements

$

Capital Lease Payments

Total Long-Term Debt Repayments

Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. This activity consists of:

Increase in Compensated Absences

$
2,903,769 -1,216,470
2,955,000 102,226

-50.010
1,687,299 -55,653
3,057,226 -10 514

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

$ ======4=,6=28,..,3..,4...,8

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

COLQUITT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30. 2003

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Certificate of Deposit
Total Assets
LIABILITIES Funds Held for Others
NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

8,012 $

185,716

99,954 33,648

$

193,728 $==1=3=3,=6=02=

$ _ _1;..;;3..;;;.3,=6=02=--

$ _ _1....c9...c..3,'-'-7=28"--

$

193,728 $==1=3=3=,6=02=

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

COLQUITT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT H 11 11

REVENUES Contributions Donors Investment Earnings Interest Total Revenues
EXPENSES Scholarships Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

11,500

4402

$

15,902

$

12,236

$

3,666

190,062

$ ==1=9=3'!.::7=28,,...

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

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

EXHIBIT "I"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Colquitt County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Colquitt 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:
- 13 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for sales taxes legally restricted for the payment of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund types:
Private - Purpose Trust fund reports various trust arrangements to provide scholarships to various individuals. Some under which principal and interest may be expended, and some where only income can be spent and principal must be invested and preserved intact.
Agency funds account for assets held by the School District as an agent for various funds or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund
- 14 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
liability is incurred, except for principal and interest on general long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.
The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.
RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND
In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $160,945 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$286,259 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 15 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 5,361,007

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

160,945 1,133,513
286,259

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

4,641,611

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

5,254,374

General Fund Balance July 1, 2002 (Restated)

$ 6,328,961

CHANGES IN ACCOUNTING PRINCIPLES

The Colquitt 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 ofGASB 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

$ 6,328,961 7,242,422 8,485,292

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

$ 22,056,675 55,271,772 -13,235,323 -128,790 -9,955,000 -5,308,553 -200,368

Net Assets Beginning (See Exhibit "B")

$ 48,500,413

- 16 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia
Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among
options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,
(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(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
- 17 -

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

EXHIBIT "I"

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 Colquitt County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on August 26, 2002 (levy date). Taxes were due on December 10, 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 Colquitt County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $5,292,553.

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

School Operations

8.9 mills

SALES TAXES

Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $4,169,908 and was recorded in the General Fund. Local Option Sales Tax is to be used for the maintenance and operation of the School District.

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $4,178,721 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

- 18 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

$

5,000

NIA

$

5,000

25 years

$

5,000 25 to 60 years

$

5,000 7 to 25 years

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

GENERAL OBLIGATION BONDS

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

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance.

- 19 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or ofthe State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities ofthe 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 ofthe bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $15,161,811. 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.)
- 20 -

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

EXHIBIT"I"

Note 3: DEPOSITS AND INVESTMENTS

The School District's deposits are classified by risk category at June 30, 2003, as follows:

Risk Category

Bank Balance

1

$ 8,680,796

2

0

3

6,481,015

Total

$ 15,161.811

CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below:

Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name.

Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.

At June 30, 2003, the carrying value ofthe School District's total investments was $9,896,794 which is materially the same as fair value. The investments are classified as to risk categories as follows:

T:y11e of Investment

Risk Categories 2

U.S. Government

$ 1268 027 $

0 $

Local Government Investment Pools

Total Investments

Carrying

Fair

3

Amount

Value

0 $ 1,968,027 $ 1,968,027

7,928,767

7,928,767

$ 2 826124 $ 2,826 724

The carrying amounts shown above includes amounts maintained in an investment pool by the State ofGeorgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The

- 21 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS

pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

Investments in Georgia Fund 1and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years.

Note 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 l, 2002

Increases

Balances Decreases June 30, 2003

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

$ 925,992

$ 925,992

4,375.260 $ 2,505,237 $ 5,670,807

1,209,690

Total Capital Assets Not Being Depreciated $ 5,301,252 $ 2,505,237 $ 5,670,807 $ 2,135,682

Capital Assets Being Depreciated Buildings and Improvements Equipment

$ 43,185,294 $ 5,670,807 $

6,785,226

398,532

0 $ 48,856,101 7,183,758

Less Accumulated Depreciation for: Buildings and Improvements Equipment

10,138,464 3,096,859

844,955 371,515

10,983,419 3,468,374

Total Capital Assets, Being Depreciated, Net $ 36,735,197 $ 4,852,869 $

0 $ 41,588,066

Governmental Activity Capital Assets - Net $ 42,036,449 $ 7,358,106 $ 5,670,807 $ 43,723,748

- 22 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

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

Governmental Funds

Buildings Less: Accumulated Depreciation

$ 1,620,916 67 069

$ 1,553.847

Current year depreciation expense by function is as follows:

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

$ 562,601

$

9,753

533

64,221

6,449

47,718

1,557

188,785

231,772

2 907

553,695 100 174

$ 1,216.470

Note 6: RESTRICTED ASSETS

Certain capital lease proceeds, general obligation bond proceeds 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:

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

District-wide Cagital Projects

QZAB

Bond

Cagital Lease

Regular

Debt Service Funds

$

148,494 $

533,597

$ 8,532,525

$ 1,968,027 $ 3,479,644

- 23 -

COLQUITT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$======8=31=.4-8:!:5

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

Note 8: RISK MANAGEMENT

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

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe 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 has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program'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 and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of$1,000,000 loss per occurrence, up to the statutory limit.

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

-24 -

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

EXHIBIT "I"

Note 8: RISK MANAGEMENT

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2002 2003

$

18 354 $

273,790 $

220,656 $

71 488

$

71 488 $

174,003 $

235,244 $

10,247

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund 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 ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2002 2003

$

0 $

1,542 $

1,542 $

0

$

0 $

15,521 $

15,521 $

0

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

Position Covered

Amount

Superintendent Each Employee (Per Loss)

$ 100,000 $ 300,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Colquitt County Board of Education has entered into various lease agreements including a Qualified Zone Academy Bond lease as lessee for air conditioning, equipment, computers and construction projects. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. The School District uses the vesting method to compute compensated absences.

- 25 -

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

EXHIBIT "I"

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rates

Amount

General Government - Series 1998 General Government - Series 1999

3.9% 3.9%

$ 4,270,000 2,730,000

$ 7,000.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows:

Balance July 1, 2002
Retroactive Restatement of Prior Year Balances
Balance July 1, 2002 Restated
Additions Annual Leave Earned
Deductions Annual Leave Utilized Debt Retired
Balance June 30, 2003
Portion of Long-Term Debt Due within One Year

Capital Leases

Governmental Funds

General

Compensated Obligation

Absences

Bonds

Total

$ 5,308,553 $

0 $ 9,955,000 $ 15,263,553

200,368

200,368

$ 5,308,553 $

200,368 $ 9,955,000 $ 15,463,921

247,218

247,218

102,226 $ 5.206 327 $

236,704

2,955,000

236,704 3,057,226

210 882 $ 7 000.000 $ 12,417.209

$

92,130 $

9 850 $ 3,185,000 $ 3,286,980

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

- 26 -

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

EXHIBIT"!"

Note 9: LONG-TERM DEBT

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2004 2005 2006 2007 - 2015

$

92,130 $

97,424

16,773

5,000,000

9,214 3,919
118

Total Principal and Interest

$ 5,206,327 $

13,251

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2004 2005

$ 3,185,000 $ 3,815,000

210,893 74,392

Total Principal and Interest

$ 7,000,000 $ 285,285

Note 10: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $745,669 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 $647,461

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 $98,208

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:

-27 -

COLQUITT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30. 2003

EXHIBIT "I"

Note 11: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Stringfellow Elementary School Hamilton Elementary School

$ 2,079,481 1,668.681

$ 3,748.162

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

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: SUBSEQUENT EVENTS

On September 16, 2003, the voters of Colquitt County voted in favor of a Special Purpose Local Option Sales Tax referendum for education purposes. The imposition of the tax approved by the voters, as stated in part on the Official Ballot of Colquitt County, is as follows:

"Shall a one percent sales and use tax continue to be imposed in the Colquitt County School District for a period of time not to exceed twenty consecutive calendar quarters and for the raising ofnot more than $23,500,000 for the purposes of acquiring, constructing, renovating, repairing, improving and equipping existing school buildings, athletic facilities and other buildings and facilities useful or desirable in connection therewith, including the acquisition of all equipment and other real and personal property necessary therefore, including system-wide technology?

If continued imposition of the tax is approved by the voters, such vote shall also constitute approval ofthe issuance of general obligation debt ofthe Colquitt County School District in the principal amount of $14,420,000 for the above capital outlay purposes."

- 28 -

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

EXHIBIT "I"

Note 14: ACCUMULATED EMPLOYEES' LEAVE

Twelve month employees of the School District earn two weeks leave annually. Eleven month employees ofthe School District earn one week ofleave annually. Maximum accumulation allowed is four weeks. Upon retirement or termination ofemployment, employees are paid for unused leave, up to the maximum accumulation allowed, at their current rate of pay. See Note 9 - Long-Term Debt

Note 15: 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 ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 3,336,142 $ 3,156,632 $ 3,639,483

-29 -

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

SCHEDULE "1"

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

$

5,220,000 $

5,220,000 $

5,303,236

4,254,000

4,254,000

4,305,810

43,568,386

43,140,647

43,793,668

7,368,376

8,667,127

7,871,327

868,600

868,600

857,464

115,000

115,000

89,754

198 704

198 704

1,955,789

$

61,593,066 $

62 464,078 $

64177 048

$

39,659,136 $

40,806,666 $

40,429,374

2,518,248 1,572,376 1,177,742
800,952 3,195,157
930,750 5,020,847 2,095,634
271,148 179,404
127,112 3,647,765

2,575,476 2,105,676 1,176,342
832,421 3,227,035
914,510 4,984,593 2,178,072
344,225 175,420
3,537,804

2,610,021 1,872,277 1,255,759
720,313 3,417,914
999,196 4,776,796 2,056,585
363,061 147,159 302,020
3,858,314 117 527

$

61,196,271 $

62,858,240 $

62,926,316

$

396 795 $

-394 162 $

1,250,732

$

553,119 $

553,119 $

11,440

-754 229

-754 229

-831 485

$

-201 110 $

-201 110 $

-820,045

$

195,685 $

-595,272 $

430,687

5,854,650

5,854,650

6,328,961

29407

29 407

Fund Balances - Ending

$

6 079 742 $

5,288,785 $ ===6=,7=5=9'=64=8=

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.

- 31 -

COLQUITT 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)
Total U. S. Department of Agriculture
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Grant
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies State School Improvement Grants Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title Ill Limited English Proficient TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Vocational Education - Basic Grants to States High School Program Basic Grant Pass-Through From Berrien County Board of Education d/b/a Southern Pine Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 3,328,617
3,328,617

10.550

N/A $

231 472 3,560,089

84.027 84.173 84.027

N/A $ N/A N/A
$

876,392 75,376 34 752
986,520

84.010

N/A

84.010

N/A

84.281

N/A

84.318

N/A

84.367

N/A

84.365

N/A

84.298

N/A

84.358

N/A

84.048

N/A

2,604,001 38,007 20,586
159,614 482,063
54,048 71,486 154,050
104,338

* 84.011

N/A $

326 772 5,001,485

- 32 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Justice, U. S. Department of Pass-Through From Children and Youth Coordinating Council Communities in Schools Expansion
Labor, U.S. Department of Pass-Through From Georgia Department of Labor Job Training Partnership Act Workforce Investment Act
Defense, U. S. Department of Direct Department of the Navy R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

16.540

NIA

$

39,335 (3)

17.259

NIA

$

92 094

$

46132

Total Federal Financial Assistance NIA= Not Available

$ ======'8,=73=9=1' =3=5

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($613,928) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Federal Assistance of $39,335 provided to subrecipients.

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

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Colquitt 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.

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COLQUITT 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 Alternative Education Program Remedial Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance K-3 Statewide Reading Program 4-8 Statewide Afterschool Program National Teacher Certification Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Georgia Institute of Technology Student Information System
Northwest Georgia Regional Educational Service Agency Georgia"s Choice
- 34 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

1.850.809

922.862

4.539.642

2.068.512

2.135.504

1.051.048

4.218.520

3,398.704

1,232.515

42.607 1,547.238 1,753.311
483,353 202.794 858.685 323,405 348.649 305.820 734.301 240.785 155,012

902.852 1.597.357 2.168.127

1.071.999 253.352 11.400 163.680 32.001 43,801
5.531.838 235.826 430,470 -893.822
647,461 125.779
86.996 13.133 147.319
19,061 165.417
1.573

$

1.850.809

922.862

4,539.642

2.068,512

2.135.504

1,051,048

4,218.520

3,398.704

1.232.515

42,607 1.547.238 1.753.311
483.353 202.794 858,685 323.405 348.649 305.820 734.301 240,785 155.012

902.852 1.597.357 2.168, 127

1,071.999 253,352 11.400 163.680 32.001 43.801
5,531.838 235.826 430.470 -893.822
647.461 125.779
86.996 13.133 147.319
19.061 165.417
1,573

$ 87.914 671.438

106,061

106,061 87.914
671.438

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

1,766,412

98208

$

1,766,412

98208

$ 43,793,668 $

106 061 $

431899?29

See notes to the basic financial statements.

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

SCHEDULE "4"

PROJECT
The acquiring of real property for new facilities; renovating, repairing, improving and equipping existing school buildings, other buildings and facilities, including furniture and equipment, acquiring property for new school facilities and system-wide technology acquisitions and improvements. The expenditure limit for the project is $23,600,000

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 23,600,000 $ 23,600,000 $

2,505,492 $

16,834,038 Ongoing

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion.

(3) The voters of Colquitt County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds. state, local property taxes and/or other funds over the life of the project.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above project as follows:

Prior Years

$ 1,648,173

Current Year

330,623

Total

$ =====1,=97=8=7, =9=6

See notes to the basic financial statements.

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle School (6-8) Program

High School General Education (9-12) Program

Vocational Laboratory (9-12) Program

Students with Disabilities

Category I

Category II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

2,004,718 $ 985,477
4,857,068 2,268,227 2,326,453
1,077,085 4,590,992 3,713,367 1,328,278 4,315,734
926,691 381,401 352,310 331 593

2,239,839 $ 804,919
4,491,547 2,046,010 2,613,274
965,104 5,094,300 4,650,337 1,221,498
1,715,592 2,118,917
271,021 182,608 877,758 340,857 424,401 297,607

39,760 $ 12,445 151,272 47,091 88,303
13,545 230,514 256,330 108,369
195 23,265 37,936
9,688 3,898 15,323 4,358 55,890 3 021

2,279,599 817,364
4,642,819 2,093,101 2,701,577
978,649 5,324,814 4,906,667 1,329,867
195 1,738,857 2,156,853
280,709 186,506 893,081 345,215 480,291 300,628

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

29,459,394 $ 30,355,589 $

1,101,203 $

31,456,792

Media Center Program Staff and Professional Development

793,907 168 486

1,030,446 32,683

77,008 139,951

1,107,454 172 634

TOTAL QBE FORMULA FUNDS

$

30 421 787 $ 31,418,718 $

1,318,162 $

32,736,880

(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.

- 37-

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
May 17, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Colquitt 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 Colquitt County Board ofEducation as of and for the year ended June 30, 2003, which collectively comprise Colquitt County Board of Education's basic financial statements and have issued our report thereon dated May 17, 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 Colquitt County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Colquitt County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2003-34YB-30

control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Colquitt County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6351-03-01 and FS-6351-03-02.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use of the management, members of the Colquitt 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
May 17, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education
and Superintendent and Members of the Colquitt County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of Colquitt County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Colquitt County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Colquitt County Board of Education's management. Our responsibility is to express an opinion on Colquitt County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Colquitt 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 Colquitt County Board of Education's compliance with those requirements.
2003SA-30

In our opinion, the Colquitt County Board of Education complied, in all material respects, with the
requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2003.
Internal Control Over Compliance
The management of Colquitt 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 Colquitt County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Colquitt County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6351-03-01 and FA-6351-03-02.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use of the management, members of the Colquitt County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
w.~
Ru sell W. Hinton
RWH:as 2003SA-30

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

COLQUITT 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-6351-01-01 FS-6351-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

COLQUITT 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 Colquitt County Board ofEducation's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/LiabilitieslDisbursements Employee Compensation

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

3. Noncompliance Material to the Financial Statements The audit of the Colquitt County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Colquitt County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Eligibility

Special Tests and Provisions

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

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

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Colquitt County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report.

- 1-

COLQUITT 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: 84.027 Individuals with Disabilities Act - Part B - Special Education - Flow Through 84.173 Individuals with Disabilities Act - Part B - Special Education - Preschool 84.027 Individuals with Disabilities Act - Part B - Special Education - Capacity Building Improvement Grant 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - State School Improvement Grant 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality 84.011 Elementary and Secondary Education Act - Title I - Migrant Education
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Colquitt County Board of Education 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 Separation of Duties Reportable Condition Finding Control Number: FS-6351-03-01
Our examination ofprincipal 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.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping of checks.
-2-

COLQUITT 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 Separation of Duties Reportable Condition Finding Control Number: FS-6351-03-01
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions, at the various school sites, and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions ofcustody, record keeping and authorization be segregated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed to established procedures.
Management's Response:
We are currently in the process of redesigning and reviewing the accounting systems and control procedures at all of the schools as software upgrades are installed. Procedures will be written for separation of duties at each school.
EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Reportable Condition Amount: $18,455 Finding Control Number: FS-6351-03-02
Our examination of compensation paid to senior management of the School District revealed a significant error in the amount reported as salary to the Department of Audits and Accounts. The School District failed to include the payment of $18,455 for various fringe benefits paid on the superintendent's behalf. These payments were in accordance with the contract between the superintendent and the School District.
The School District reported a salary of $108,510 for Superintendent Mr. Leonard McCoy in its salary and travel report for the period ended June 30, 2003. The actual compensation for Mr. McCoy totaled $126,966, which includes the $18,455 in additional payments referenced above.
The School District should implement procedures to ensure that all employee compensation is included in the salary total reported to the Department of Audits and Accounts.
-3-

COLQUITT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Inaccurate Reporting of Senior Management Compensation Reportable Condition Amount: $18,455 Finding Control Number: FS-6351-03-02
Management's Response:
Accounting records have been given to staffso that the Superintendent's compensation can be added to the Salary and Travel report. This finding will be resolved at the close of fiscal year 2004.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6351-03-01
The documentation provided by the School District for the 2003 Elementary and Secondary Education Act - Title I Grants to Local Educational Agencies (CFDA 84.010) Program to support section IV of the Title I application pertaining to the determination of eligible and participating attendance areas and school allocations was deficient as follows:
Neither home schooled children or privately schooled children were included in the total resident children count on the application submitted to Georgia Department of Education.
As provided for in the grant application and required by 34 CFR 76.730, the School District assured the Georgia Department of Education that it will keep records and provide information as may be required for audit purposes.
This condition was a result of the School District's failure to implement internal controls for monitoring compliance with Federal guidelines. The School District should review the Federal compliance procedures in place, design procedures which would enhance monitoring compliance with Federal guidelines and proper internal control relative to the above Federal compliance requirements and implement those procedures to strengthen the internal control over Federal programs. Also, the Georgia Department of Education should review this matter to determine if a reclaim of funds is appropriate.
-4-

COLQUITT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Failure to Maintain Documentation for Eligible Attendance Areas Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6351-03-01
Management's Response:
Office of Federal Programs has corrected this condition in fiscal year 2004.
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-6431-03-02
During the year in review, there were ten schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures.
In accordance with provisions ofU. S. Department of Education Instructions and 0MB Circular 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 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 District's understanding that costs related to a school-wide program lose
their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program.
-5 -

COLQUITT 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-6431-03-02 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 Federal Department ofEducation and (2), in line with 0MB Circular A87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs. Management's Response: Systems have complied with all of the guidelines/requirements currently set forth by the Georgia Department ofEducation. The system is waiting on additional guidance from the State on how the LEA should implement funding and operational procedures to remove fiscal and accounting barriers under the current accounting system ofGeorgia. We expect this finding to be resolved by fiscal year 2005.
-6-