COOK COUNTY BOARD OF EDUCATION ADEL, 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 COOK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 COOKCOUNTYBOARDOFEDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 30 3 SCHEDULE OF STATE REVENUE 32 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 34 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 35 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 ill 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 June 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Cook 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 Cook 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 of the Cook County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. 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 ofthe Cook County Board ofEducation, as ofJune 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 The Cook 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 Cook 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 June 14, 2004, on our consideration ofthe Cook 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 29 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 Cook 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, ill-JS RWH:as 2003-34ARL-11 State Auditor COOK COUNTY BOARD OF EDUCATION COOK 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 Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs 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 $ 847,370 9,864,522 450,897 1,603,318 338,236 34,823 15,666 793,599 330,014 1,014,505 17,858,768 2,216,728 -5,519,641 $ ===2=9=,8=4=8,,..80=5= $ 1,136,459 1,901,389 56,111 979,846 6,645,000 $ 10,718,805 $ 15,493,100 122,774 532,173 2,176,809 805 144 $ 19,130,000 $ ===2=9=,8=4=8=,8=05= COOK 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 Community Services Food Services Interest on Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 14,369,834 $ 1,155,165 674,781 354,620 548,553 1,427,221 99,134 1,911,988 940,310 32,347 85,200 183,836 1,290,763 278 560 $ 23,352,312 $ 107,410 121,236 73,562 282,846 585,054 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 $ 10,379,212 $ 1,432,468 417,839 261,186 194,359 470,603 478,342 16,674 451,449 799,970 63,851 1,009,848 $ 15,975,801 $ 91,626 $ 15,967 263 123 3,470 35,317 11,482 158,248 $ -3,791,586 293,270 -256,942 -93,434 -354,194 -956,355 379,331 -1,891,844 -453,544 767,623 -21,349 -62,600 73,562 13,413 -278 560 -6,633,209 $ 3,990,570 1,717,532 1,340 15,288 1,359,165 135,212 358 614 $ 7 577 721 $ 944,512 18,185,488 $ ======19=,1=3=0=,00==0= -5- COOK 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 Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects Unreserved Undesignated Reported in: Debt Service General Fund Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 735,388 $ 1,697,837 111,982 $ 8,166,685 146,336 1,603,318 338,236 34,823 15,666 301,499 0 $ 847,370 9,864,522 447,835 1,603,318 338,236 34,823 15,666 $ 4,571,604 $ 8,580,166 $ $ 1,072,269 $ 1,901,389 56111 $ 3,029,769 $ 64,190 64190 $ 1,136,459 1,901,389 56 111 $ 3,093,959 $ 122,774 516,507 15,666 $ 8,515,976 $ 886,888 $ 1,541,835 $ 8,515,976 $ $ 4,571,604 $ 8,580,166 $ $ 122,774 516,507 15,666 8,515,976 0 0 $ 0 886,888 10,057,811 0 $ ====13=1=5=1=7=70= The notes to the basic financial statements are an integral part of this statement. -6 - COOK COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT" " Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District"s property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 10,057,811 $ 793,599 330,014 1,014,505 17,858,768 2,216,728 -5,519,641 16,693,973 3,062 $ -7,600,000 -24 846 -7,624,846 $ 19,130,000 The notes to the basic financial statements are an integral part of this statement. -7- COOK COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,977,800 16,628 $ 14,592,248 2,742,718 361,458 22,863 582,210 $ 22,295,925 $ 377,560 $ 158,248 $ 1,339,972 112,349 648,157 $ 1,339,972 $ 3,977,800 1,734,160 14,750,496 2,742,718 361,458 135,212 582,210 24,284,054 $ 14,107,553 1,109,458 674,781 354,620 546,686 $ 1,426,898 99,160 1,843,156 989,047 32,347 85,200 183,836 1,274,742 31,192 2,898 $ 22,761,574 $ $ -465,649 $ $ 1,060 58,900 673,663 $ 1,070,000 275,662 733,623 $ 1,345,662 $ -85,466 $ -5,690 $ 14,107,553 1,109,458 674,781 354,620 547,746 1,426,898 99,160 1,902,056 989,047 32,347 85,200 183,836 1,274,742 673,663 1,101,192 278,560 24,840,859 -556,805 $ 250,692 $ -250,692 $ 250,692 $ -250,692 $ -214,957 $ -336,158 $ 1,756,792 8,852,134 $ $ -5,690 $ 5,690 250,692 -250,692 0 -556,805 10,614,616 Fund Balances - Ending $ 1,541,835 $ 8,515,976 $ 0 $ 10,057,811 The notes to the basic financial statements are an integral part of this statement. -8- COOK 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 $ $ 873,379 -486,024 $ 1,070,000 31,192 -556,805 387.355 12,770 1,101,192 Change in Net Assets of Governmental Activities (Exhibit "B") $===94=4"=5=12= The notes to the basic financial statements are an integral part of this statement. -9 - COOK 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 $ 55,040 10 340 $===6=5'=38=0= $===6=5'=3=80= The notes to the basic financial statements are an integral part of this statement. - 11 - COOK 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 Cook 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 Cook County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: - 12 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and 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 taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless 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 which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. - 13 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. 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 $509,350 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$129,354 atJuly 1, 2002. This change is in accordance with generally accepted accounting principles. - 14 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 1,474,290 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 509,350 129,354 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,592,356 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,948,558 General Fund Balance July 1, 2002 (Restated) $ 1,756.792 CHANGES IN ACCOUNTING PRINCIPLES The Cook County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions ofGASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 1,756,792 8,852,134 5 690 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable $ 10,614,616 21,340,235 -5,033,617 -9,708 -8,670,000 -56,038 Net Assets Beginning (See Exhibit "B") $ 18,185,488 - 15 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates 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 - 16 - COOK 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 Cook County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 7, 2002 (levy date). Taxes were due on December 20, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Cook 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 $3,977,800. The tax millage rate levied for the 2002 tax year (calendar year) for the Cook County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.15 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,717,532 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 - 17 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements All Equipment Any Amount $ 10,000 $ 10,000 $ 5,000 NIA 15 to 60 years 25 to 60 years 5 to 30 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 ofNet Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value ofsecurities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. - 18 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 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 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 $2,195,898. The amounts of the 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 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Risk Category Bank Balance 1 $ 351,181 2 188,013 3 1,656,704 Total $ 2,195.898 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $9,864,522 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. -20 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2002 Increases Balances Decreases June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 793,599 $ 0 $ 330,014 0 $ 793,599 330,014 Total Capital Assets Not Being Depreciated $ 793,599 $ 330,014 $ 0 $ 1,123,613 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 17,492,083 $ 2,040,048 1,014,505 366,685 $ 176,680 0 $ 17,858,768 2,216,728 1,014,505 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 3,114,956 1,357,881 560,780 303,284 134,318 48,422 3,418,240 1,492,199 609,202 Total Capital Assets, Being Depreciated, Net $ 15,513,019 $ 57 341 $ 0 $ 15,570,360 Governmental Activity Capital Assets - Net $ 16.306.618 $ 387.355 $ 0 $ 16,693.973 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 281,409 $ 49,040 807 378 10,656 108,468 169,349 35.266 $.===ad4~86~,0~2~4 - 21 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 6: RESTRICTED ASSETS General obligation bond proceeds and Georgia State Financing and Investment Commission (GSFIC) 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 Bond Proceeds GSFIC Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ $ 8,166,685 191,323 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 General Fund $====2=50-,6=9~2 Transfers are used to move bond proceeds from the District-wide Capital Projects Fund to the General Fund for reimbursement of capital construction expenditures reported in the General Fund. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and flood (acts of God). The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God except flood. The School District has not experienced any losses related to these risks in the past three years. - 22 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: RISK MANAGEMENT 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: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 575 $ 318 $ 893 $ 0 $ 0 $ 14 455 $ 12,685 $ 1 770 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Scheduled Employees Bus Driver Training $ 10,000 $ 40,000 $ 2,500 Note 9: OPERATING LEASES Cook County Board ofEducation has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2003, for governmental funds amounted to $88,266. Future minimum lease payments for these leases are as follows: - 23 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 9: OPERATING LEASES Year Ending Governmental Funds 2004 2005 2006 2007 2008 $ 89,504 66,423 23,355 15,314 6,604 Total $ 201,200 Note 10: LONG-TERM DEBT CAPITAL LEASES The Cook County Board ofEducation has entered into various lease agreements as lessee for energy management system. 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 oftheir inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2001 2.75% - 3.75% $ 7,600,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: -24- COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 10: LONG-TERM DEBT Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2002 $ 75,816 $ 8,670,000 $ 8,745,816 Retroactive Restatement of Prior Year Balances -19 778 -19 778 Balance July 1, 2002 Restated $ 56,038 $ 8,670,000 $ 8,726,038 Deductions Debt Retired 31,192 1,070,000 1,101,192 Balance June 30, 2003 $ 24,846 $ 7,600.000 $ 7,624.846 Portion of Long-Term Debt Due within One Year $ 24,846 $ 955,000 $ 979,846 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 CaQital Leases PrinciQal Interest 2004 $ 24,846 $ 721 Fiscal Year Ended June 30 General Obligation Debt PrinciQal Interest 2004 2005 2006 2007 2008 $ 955,000 $ 1,260,000 1,665,000 1,755,000 1,965,000 234,711 205,515 164,475 106,594 36,844 Total Principal and Interest $ 7,600.000 $ 748,139 - 25 - COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 11: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $285,941 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 $218,717 Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employers Cost In the amount of $24,185 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$43,039 Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available: Project Unearned Executed Contracts Funding Available From State Cook County Elementary School $ 7,373,513 $ 1,751,666 The amounts described in this note are not reflected in the basic financial statements. Note 13: 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. -26- COOK COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 14: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2003 2002 2001 100% 100% 100% $ 1,174,141 $ 1,130,812 $ 1,304,941 -27 - COOK 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 Food Services Operation Capital Outlay 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 $ 3,838,932 $ 3,838,932 $ 3,977,800 25,000 25,000 16,628 14,398,418 14,439,390 14,592,248 2,957,288 2,484,917 2,742,718 291,445 291,445 361,458 59,176 59,176 22,863 13 000 13,000 582 210 $ 21,583,259 $ 21,151,860 $ 22,295,925 $ 14,318,125 $ 13,864,408 $ 14,107,553 977,116 595,558 378,729 623,538 1,386,116 94,252 1,796,375 948,897 31,206 84,184 1,245,634 869,183 409,965 378,729 547,710 1,381,016 94,252 1,384,450 956,397 31,206 64,876 1,245,634 5,000 1,109,458 674,781 354,620 546,686 1,426,898 99,160 1,843,156 989,047 32,347 85,200 183,836 1,274,742 34 090 $ 22,479,730 $ 21,232,826 $ 22,761,574 $ -896,471 $ -80,966 $ -465 649 $ 18,000 $ 18,000 $ 250,692 -108,000 -108 000 $ -90,000 $ -90,000 $ 250,692 $ -986,471 $ -170,966 $ -214,957 1,920,635 1,920,635 1,756,792 -346,362 -346 362 Fund Balances - Ending $ 587 802 $ 1 403 307 $ ===1;,;,;5=4=1,..,8=35= 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. - 29 - COOK 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 National School Snack 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 Capacity Building Improvement Flow Through Preschool Total Special Education Cluster Other Programs Pass-Through From Coastal Plains Regional Educational Service Agency d/b/a Southern Pine 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 Grants to Local Educational Agencies State School Improvement Grants Title II Enhancing Education Through Technology Improving Teacher Quality TitleV Innovative Education Program Strategies Title VI 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 Total Federal Financial Assistance N/A = Not Available - 30- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.555 N/A N/A $ N/A $ (2) 1,101,569 (2) 1,101,569 10.550 N/A $ 63 345 1164 914 84.027 84.027 84.173 N/A $ N/A N/A $ 11,585 434,169 51 030 496,784 84.011 . 84.010 84.218 84.318 84.367 84.298 84.358 84.186 84.048 N/A 27,736 N/A N/A N/A N/A N/A N/A N/A N/A $ 919,722 7,489 26,511 219,888 15,419 44,301 25,355 47476 1,830,681 $ 2,995,595 COOK COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($208,505) and the National School Snack Program ($6,207) were not maintained separately and are included in the 2003 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Cook 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. - 31 - COOK COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program $ 925,278 $ Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 National Teacher Certification PayforPenormance Post Secondary Options Preschool Handicapped Program Teachers Retirement Lottery Programs Assistive Technology Computers in the Classroom Student Information System 890,009 103,096 1,702,791 692,664 823,574 180,017 297,055 1,284,517 1,377,748 442,141 20,564 300,549 533,614 28,317 11,056 220,396 19,693 126,915 261,166 89,006 53,242 376,812 470,921 799,970 351,015 87,744 19,000 74,502 11,455 19,317 1,324,619 94,196 88,327 -312, 171 218,717 31,799 201,400 1,180 33,707 24,185 7,709 62,748 31,156 TOTAL 925,278 890,009 103,096 1,702,791 692,664 823,574 180,017 297,055 1,284,517 1,377,748 442,141 20,564 300,549 533,614 28,317 11,056 220,396 19,693 126,915 261,166 89,006 53,242 376,812 470,921 799,970 351,015 87,744 19,000 74,502 11,455 19,317 1,324,619 94,196 88,327 -312, 171 218,717 31,799 201,400 1,180 33,707 24,185 7,709 62,748 31,156 - 32 - COOK COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia Institute of Technology Student Information System Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Education. Georgia Department of After School Programs Reading First Program Human Resources, Georgia Department of Family Connection GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 25,964 $ 25,964 $ 158,248 43,039 158,248 43,039 27,808 38,221 55 500 27,808 38,221 55,500 $ 14,592,248 $ 158,248 $ 14,750,496 See notes to the basic financial statements. - 33 - COOK COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2003 SCHEDULE 411 11 PROJECT Acquisition, construction and equipping of a new elementary school, bus maintenance and support facility and a central administrative facility including the acquisition of any property necessary or desirable therefor, both real and personal; and renovations, additions and improvements to existing schools including the acquisition of any property necessary or desirable therefor, both real and personal ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 10,000,000 $ 10,000,000 $ 1,009,286 $ 414 143 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 Cook 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. See notes to the basic financial statements. - 34- COOK 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 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) 973,941 $ 115,016 1,891,910 734,229 897,984 227,495 285,063 1,517,225 1,547,799 502,418 1,002,168 238,610 24,174 142,892 770,805 $ 80,865 1,725,827 617,070 1,130,440 183,450 1,821,913 1,982,437 543,702 27,253 152,491 619,062 41,523 45,453 260,677 36,111 222,372 19191 34,748 $ 887 108,671 7,734 60,552 2,258 112,978 118,088 39,051 3,827 12,603 2,702 215 1,864 9 805,553 81,752 1,834,498 624,804 1,190,992 185,708 1,934,891 2,100,525 582,753 27,253 156,318 631,665 41,523 45,453 263,379 36,326 224,236 19 200 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 10,100,924 $ 10,280,642 $ 506,187 $ 10,786,829 Media Center Program Staff and Professional Development 290,754 59 560 323,471 29114 19,937 24,380 343,408 53494 TOTAL QBE FORMULA FUNDS $ 10,451,238 $ 10,633,227 $ 550,504 $ ===1.1.,..,18=3,,.,,7.,.3==1 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 35- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 June 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Cook 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 Cook County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Cook County Board ofEducation's basic financial statements and have issued our report thereon dated June 14, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part ofobtaining reasonable assurance about whether Cook County Board ofEducation'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 of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results 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 Cook County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we a noted certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Cook 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-6371-03-01. 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 Cook 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 lt)~ 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 June 14, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members ofthe State Board of Education and Superintendent and Members of the Cook 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 Cook 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 its major Federal program for the year ended June 30, 2003. Cook County Board of Education's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of Cook County Board of Education's management. Our responsibility is to express an opinion on Cook 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 ofStates, 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 Cook 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 Cook County Board of Education's compliance with those requirements. 2003SA-30 In our opinion, the Cook 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 ofCook County Board ofEducation 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 Cook 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 Cook 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-6371-03-01. 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 Cook 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, ~-4~ ssell W. Hinton State Auditor RWH:as 2003SA-30 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS COOK 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-6371-01-02 FS-6371-02-01 FS-63 71-02-02 Further Action Not Warranted Previously Reported - Corrective Action Implemented Previously Reported - Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS COOK 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 Cook 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 Cook County Board of Education disclosed a financial statement reportable condition related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/LiabilitieslDisbursements The reportable condition described above is not considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit ofthe Cook 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 Cook 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 Cook 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 Cook 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. 7. Major Programs The Federal award audited as a major program is as follows: 84.010 Elementary and Secondary Education Act- Title I- Grants to Local Educational Agencies 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- COOK COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Cook County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6371-03-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the cash receipting, record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on a sample of 50 items, 18 were not deposited in a timely manner. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a sample of40 items, 4 items could not be determined ifthe item was charged to the appropriate activity and/or code, 5 items could not be determined ifcorrect amount was paid to the vendor, 10 items did not have original invoices attached and 17 items were not properly approved. 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. -2- COOK 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-6371-03-01 Management's Response: We concur with this recommendation. We are currently reviewing policy and procedures to implement system-wide that will address separation of duties and to ensure controls are followed as stated. 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-6371-03-01 During the year in review, there were two 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 -3 - COOK 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-6371-03-01 Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support 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. Management's Response: In response to your findings regarding the Title I School-wide Program, the Cook County School System during the 2004-2005 will co-mingle its funds in its allocations to individual schools. As you know, we were not informed by Title I that this process had to be implemented. We are planning on using Title II-A funds and possibly some of Title VI funds to accomplish this. I can assure you that we will make every effort to ensure that this process is in place throughout the next school year. -4-