DOUGHERTY COUNTY BOARD OF EDUCATION ALBANY, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor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ashington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 March 5, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Dougherty 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) ofthe Dougherty 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 Dougherty 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 of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm10ns. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Dougherty County Board of Education, as of June 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated March 5, 2004, on our consideration of the Dougherty County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through xi and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Dougherty County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:as 2003-34ARL-11 11).~ State Auditor DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Management's discussion and analysis of the Dougherty County School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to present the District's overall financial performance. Readers should also review the financial statements and notes to the financial statements to further enhance their understanding of the District's financial performance. Financial Highlights Financial highlights for 2003 are as follows: Total net assets increased by $2.9 million. This represents a 1.76 percent increase from fiscal year 2002. This increase was due entirely to governmental activities since the District has no business-type activities. Total revenues were $143.8 million. General revenues, which include revenues from General Funds, Capital Project Funds and the Debt Service Fund, accounted for $54.4 million, or 37.8 percent of this total. Program specific revenues, in the form of Charges for Services, and Operating and Grants and Contributions, accounted for $89.4 million or 62.2 percent of the total. The District incurred $140.9 million in expenses related to governmental activities; however, $89.4 million of these expenses were offset by revenues from program specific Charges for Services, and Operating Grants and Contributions. General revenues (primarily taxes) of $54.4 million funded the balance of the remaining $51.5 million of expenditures and the increase in net assets of $2.9 million referenced above. Among major funds, the General Fund recorded $130.8 million in revenues and other finance sources, and $135.4 million in expenditures and other financing uses. The General Fund's fund balance decreased from $5.6 million to $1.0 million for a net reduction of $4.6 million. Contributing to this decrease in fund balance were: "austerity reductions" in state funding of $1.8 million, and a $0.3 million reduction in local revenues due to the rollback of the millage rate from 17.7 mills to 17.55 mills. During fiscal year 2003 the District made final principal and interest payments on General Obligation bonds issued in 1998 for various Capital Addition and Improvement projects. At June 30, 2003 the District had no outstanding long-term bond indebtedness. Using the Basic Financial Statements The annual report consists primarily of a series of financial statements and notes to those statements. These statements are organized and presented in a manner intended to assist the reader in understanding the Dougherty County School District as a complete operating entity. 1 DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 These financial statements generally present the District's most significant funds both separately and with all funds combined. For the Dougherty County School District, the General Fund is by far the most significant fund. A brief discussion of these statements is presented below. District-Wide Statements The Statement of Net Assets and Statement ofActivities provide consolidated financial data for the large number of funds used by the District to monitor programs and activities. These consolidated statements give a summary view of all financial activities and assist the reader is assessing the financial position of the District as a whole for the fiscal year ending June 30, 2003. All of the District's programs and activities included in the Statement of Net Assets and the Statement of Activities are reported as Governmental Activities. These include instruction, support services, staff development, operation and maintenance of facilities, pupil transportation, food service, after school programs, school administration, and various others functions. These statements report all assets and liabilities using the accrual basis of accounting. The basis of accounting determines when transactions are reported on the financial statements. The accrual basis of accounting records revenues when they are earned regardless of when payment (cash) is received. Expenditures are recorded at the time the liability is incurred regardless of when the actual payment is made. The Statement of Net Assets and Statement of Activities report the District's net assets and changes to net assets. The change in net assets is significant because this change indicates whether the financial position of the District has improved or diminished. The reasons for the change in net assets may be the result of many factors, some financial, some not. Nonfinancial factors may include the District's property tax base, facility conditions, required educational programs, and other factors. The Statement of Net Assets reports the consolidated Assets, Liabilities, and Net Assets of the District as a whole. The Statement of Activities reports consolidated Revenues and Expenditures and the beginning and ending Net Assets of the District as a whole. Fund Financial Statements The Balance Sheet reports Assets, Liabilities, and Fund Balances for the General Fund, Districtwide Capital Project Funds, and the Debt Service Funds both separately and in total with all funds combined. The Statement of Revenues, Expenditures and Changes in Fund Balances reports Revenues, Expenditures, and Other Financing Sources for the General Fund, District-wide Capital Project Funds, and the Debt Service Funds. It also reports the beginning, ending, and net change in fund balances for these groups of funds. This information is presented for each group both separately and in total. 11 DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Fund Types Governmental Funds Most of the District's financial activities are reported in governmental funds. These funds record how money flows into and out of these funds in the current period, and the balances remaining at year-end available for spending in future periods. The governmental fund statements provide a detailed short-term view of the District's general governmental operations and the basic services they provide. This governmental fund information can be used to identify financial resources available for financing educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds The District is the trustee, or fiduciary, for assets that belong to others. An example is funds belonging to school clubs and organizations whose records are maintained at the individual schools. These funds are generally referred to as "Activity Funds". The District is responsible for ensuring that the assets recorded in these funds are used only for their intended purposes and only by those to whom the assets belong. The District excludes these fund activities from the district-wide financial statements because these fund assets cannot be used to finance operations. Fiduciary fund balances are reported on the Statement of Fiduciary Net Assets. Fiduciary Fund assets at June 30, 2003 were $93,630. Presentation of Financial Data The next section of this discussion will provide more specific information as reported on the financial statements discussed above. For comparison purposes, this information will be presented for both fiscal year 2002 and fiscal year 2003. Statement of Net Assets As previously mentioned, the Statement ofNet Assets presents consolidated financial data for the District as a whole. Table 1 provides a summary of the District's net assets for fiscal year 2002 and fiscal year 2003. l1l DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets (in Thousands) Governmental Activities Fiscal Fiscal Year 2003 Year 2002 Assets Current and Other Assets Capital Assets, Net $ 45,060 140,132 $ 55,523 132,494 Total Assets $ 185,192 $ 188,017 Liabilities Current and Other Liabilities Long-Term Liabilities $ 17,838 223 $ 15,673 8,101 Total Liabilities $ 18,061 $ 23,774 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 140,132 27,781 -782 $ 130,989 27,125 6,129 Total Net Assets $ 1671131 $ 164,243 Total net assets increased $2.9 million in fiscal year 2003. Statement of Activities Table 2 shows the changes in net assets for fiscal year 2002 and fiscal year 2003 as reported on the Statement ofActivities. DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets (in Thousands) Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Gain on Sale of Building Gain on Sale of Land Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General and School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central and Other Support Services Operations of Non-Instructional Services Enterprise Operations Communio/ Services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Increase in Net Assets Governmental Activities Fiscal Fiscal Year 2003 Year 2002 $ 2,052 87,370 $ 89,422 $ 2,241 93,101 893 $ 96,235 $ 32,710 36 $ 31,339 40 7,987 7,445 451 74 4,126 -890 2,417 $ 54,356 $ 143,778 3,979 11,496 480 78 6,175 1,038 2,607 329 389 $ 57,950 $ 154,185 $ 86,521 5,324 5,022 3,259 9,875 1,679 10,760 5,014 2,244 590 951 9,413 238 $ 140,890 $ 2,888 $ 90,608 4,986 4,799 3,639 10,232 1,829 9,808 4,859 2,274 477 861 8,363 593 $ 143,328 $ 10,857 V DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Activities Table 3 shows, for governmental activities, the total cost of services and the net cost of services for both fiscal year 2002 and fiscal year 2003. This information is presented on the Statement of Activities. For fiscal year 2003, Instructional activities comprised 61.40 percent of the total governmental program cost of services. Support Services comprised 30.65 percent, Non-instructional services comprised 7.78 percent, and Interest expense comprised .1 7 percent. Interest expense was attributable to the outstanding bonds issued for capital project expenditures. Table 3 Governmental Activities (in Thousands) Total Cost of Services Fiscal Fiscal Year2003 Year2002 Net Cost of Services Fiscal Fiscal Year2003 Year2002 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 86,521 5,324 5,022 3,259 1,334 8,541 1,679 10,760 5,014 2,215 29 590 951 9,413 238 $ 90,608 4,986 4,799 3,639 1,524 8,708 1,829 9,808 4,859 2,203 71 477 861 8,363 593 $ 24,184 3,269 1,921 1,660 -546 5,339 1,679 6,333 2,828 2,012 4 590 881 1,076 238 $ 21,355 3,193 2,239 1,789 -700 5,315 1,829 5,320 2,535 2,203 43 454 638 287 593 Total Expenses $140,890 $143,328 $ 51,468 $ 41,093 Although program revenues make up the majority of total revenues, the District is still dependent upon tax revenues for governmental activities. Over 27.9 percent of instruction activities are supported through taxes and other general revenues. For all governmental activities, general revenue support is 36.5 percent. The District's Funds As reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances, total governmental funds recorded revenues and other financing sources of $144.8 million and expenditures and other financing uses of $156.6 million. The combined decrease in Fund Balances for the General Fund and the Capital Project Funds was $11.8 million. vi DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Total expenditures for the Capital Project Funds were $1.3 million lower than in fiscal year 2002. However, there were several transactions that negatively impacted the fiscal year 2003 fund balance. During fiscal year 2003, the school district paid $1.4 million to the IRS for arbitrage associated with the 1998 bond issuance. This payment resulted in a negative investment earnings balance. Actual total fiscal year 2003 earnings on investments were $0.4 million less than fiscal year 2002. This reduction in investment earnings was primarily due to lower interest rates. The District also reimbursed FEMA and GEMA for disqualified costs incurred in the rebuilding of facilities following the flood of 1994. This payment of $1.0 million resulted in negative revenue balances for state and federal funds. A portion of the decrease in fund balance for the Capital Project Funds can be attributed to the change in the reporting of sales tax revenues for the year. In the financial report for fiscal year 2001, special purpose local option sales tax (SPLOST) revenues equal to the amount of the first debt payment for fiscal year 2002 were allocated and reserved in the Debt Service Fund. In fiscal year 2002 the allocation of revenues for the first debt payment in fiscal year 2003 was not recorded. Therefore, when comparing sales tax revenues reported in Table 2, the fiscal year 2002 revenue allocated to debt service is $4.0 million less than the allocation for fiscal year 2003. The difference is equal to the amount of one debt payment. Conversely, the amount of sales tax revenues allocated to capital projects is greater by the same amount. This resulted in an additional decrease in fund balance for the Capital Project Funds in fiscal year 2003. Fund Balance for the General Fund decreased $4.6 million. Approximately $1.0 million of the decrease in fund balance is due to Child Nutrition Service operations. Total Child Nutrition Service revenues increased approximately 6 percent while expenditures increased approximately 12 percent. Although state and federal reimbursements for meals increased approximately 4 and 5 percent respectively, student meal participation levels decreased steadily throughout the year from 67 percent to 48 percent. The most significant increases in expenditures occurred in the areas of salaries and benefits for lunchroom personnel, and costs for food and equipment purchases. The increase in equipment expenditures included $0.2 million for the setup and leasepurchase costs of a new Child Nutrition Service accounting system. Other salaries and benefits increased as a result of Child Nutrition Services assuming the cost of warehouse support personnel as of January 2003. The costs of these additional personnel were approximately $0.1 million. Administration is examining all Child Nutrition Service activities to identify potential labor, food, and supply cost savings. Emphasis will continue to be given to increasing student meal participation in all schools. The remaining decrease in fund balance is due to general operations. With the initial adoption of the fiscal year 2003 budget, the District anticipated utilizing $0.8 million of the available fund balances to complete the fiscal year. Shortly thereafter, the District voted to roll back the millage rate by .15 mills, thereby reducing revenues and available fund balances by an additional $0.3 million. Although both revenues and expenditures decreased substantially versus fiscal year 2002, expenditures exceeded revenues by $4.3 million in fiscal year 2003. This was primarily Vll DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 due to decreases in state revenues that could not be absorbed through corresponding reductions in expenditures within the fiscal year. To recover fund balance reserves, the District voted to increase local ad valorem taxes by 1.45 mills for fiscal year 2004. This is expected to generate approximately $2.7 million in additional revenues. Further cost reductions in excess of $2.0 million were also identified and implemented. General Fund Budgeting Highlights The District's budget is prepared according to Georgia law and in compliance with Georgia Department of Education requirements. During the course of fiscal 2003, the District amended its general fund budget as needed. The District uses site-based budgeting. The budgeting process is designed to control site budgeted expenditures while providing spending flexibility to site administration. For the General Fund, the final budgeted revenues and other financing sources of $131.6 million exceeded the original budgeted amount of $124.7 million by $6.9 million. This difference was primarily due to an increase in state revenues budgeted of $1.6 million, and an increase in federal revenues budgeted of $3.9 million. Actual revenues and other financing sources of $129.9 million were $1.7 million below the final budgeted amount. The final budgeted expenditures and other financing uses of $133.9 million exceeded the original budgeted amount of $125.8 million by $8.1 million. This difference was primarily due to an increase in budgeted Instructional expenditures of $5.9 million, and an increase in budgeted Support Services expenditures of $2.0 million for Support Service activities. Actual expenditures and other financing uses of $134.5 million exceeded the final budgeted amount by $0.6 million. Capital Assets and Debt Administration Capital Assets At the end of fiscal 2003 the District had $140.1 million invested in capital assets. All of these assets were in governmental activities. Table 4 shows fiscal year 2002 and fiscal year 2003 balances. Vlll DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands) Governmental Activities Fiscal Fiscal Year 2003 Year 2002 Land Construction in Progress Buildings and Building Improvements Equipment $ 9,084 8,010 118,352 4,686 $ 9,025 24,838 94,039 4,592 Total $ 140,132 $ 132A94 Capital Assets increased by $7.6 million versus fiscal year 2002. The primary increases occurred in Buildings and Building Improvements. This increase was primarily due to the completion of two new middle schools, and the completion of Athletic Field Houses at two of the high schools. As shown, the completion of these projects resulted in a decrease in the Construction in Progress category. Debt Table 5 summarizes the long-term debt outstanding at June 30 for fiscal year 2002 and fiscal year 2003. Table 5 Debt at June 30 (in Thousands) Governmental Activities Fiscal Fiscal Year 2003 Year 2002 General Obligation Bonds Claims Payable - Workers' Compensation $_~22~3 $ 7,750 351 Total $====2="2'=3 $ 8,101 As previously noted, during fiscal year 2003 the District retired the balance of the General Obligation Bonds outstanding at June 30, 2002. The Dougherty County School District is self insured for Workers' Compensation claims. The Claims Payable for Workers' Compensation shown above represents estimated reserves for payments of existing claims at June 30, 2003. lX DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Current Issues In 1997, the first Special Purpose Local Option Sales Tax for educational purposes (SPLOST) was initiated by the citizens of Dougherty County. This 1% sales tax generated approximately $84 million which was used for facility improvements and significant upgrades to instructional and athletic facilities. In March 2002, voters in Dougherty County approved the continuation of this 1% sales tax. This Sales Tax for Educational Purposes (STEP II) will generate up to $95 million over the next five years and will fund the continuation of major renovation and new construction projects. In February 2004, the District issued General Obligation Sales Tax Bonds in the amount of $25 million. This will facilitate the continuation of an aggressive capital improvement program, which will include the building of three new elementary schools. There will also be substantial expenditures for renovations for instructional improvements, technology, and for safety and security for schools and other facilities. A current concern of the Dougherty County School District has been the recent lack of growth in the local tax digest. For the five years prior to 2003, the increase in local tax revenues from ad valorem taxes increased an average of $1.2 million per year. In 2002 the local digest increased by 3.76 percent; however, virtually all of this increase was due to the revaluation of properties. In 2003 the digest declined by 1.58 percent. This is significant in that approximately one-third of General Fund revenues come from ad valorem taxes. The digest is not expected to grow significantly over the next several years. Compounding this problem has been the reduction in state funding resulting from the downturn in the state economy. Declining state revenues have resulted in substantial reductions in state funding for school systems and other state agencies. The reduction in the local tax base combined with the reduction in state funding required the District to increase the millage rate for the first time since 1994 to fund the fiscal year 2004 budget. Another factor that has adversely affected funding has been the gradual decline in student enrollments. Virtually all state funding is directly related to the number of students served. Student enrollments in Dougherty County have declined in eight of the past nine years. However, based on more recent FTE counts, indications are that student enrollments will increase slightly for fiscal year 2005. This will have a favorable effect on state funding in future periods. The adverse funding circumstances mentioned above have required the District to reduce expenditures and seek additional sources of revenue. Expenditure reductions include the review of staffing assignments that seek to maximize class sizes in compliance with state guidelines, and eliminating all nonessential expenditures. To date, reductions in spending have been accomplished with no adverse effect on instructional programs. In an effort to identify and obtain additional funding, the District has appointed existing staff members and consultants to serve as grant writers. It is anticipated this will generate significant additional funding to implement new instructional programs, and help assure the continuation of existing programs. X DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Contacting the Board's Financial Management This management's discussion and analysis report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the District's finances, and to document the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Robert Lloyd, Executive Director of Business & Operations, at the Dougherty County Board of Education, 200 Pine Avenue, Albany, Georgia 31701. You may also e-mail your questions to robert.lloyd@dougherty.kl2.ga.us XI DOUGHERTY COUNTY BOARD OF EDUCATION DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Construction in Progress Buildings and Improvements Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets Restricted for Bus Replacement Continuation of Federal Programs Capital Projects Unrestricted (Deficit) 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 $ 673,887 26,859,853 4,221,932 9,093,996 2,643,486 494,139 190,888 882,082 9,083,876 8,009,689 193,418,503 13,255,629 -83,635, 788 $ ===1=85=,1=9=2,=17=2= $ 4,518,802 11,746,639 876,484 693,939 2,561 102,244 120 548 $ 18 061 217 $ 140,131,909 438,433 585,056 26,757,418 -781 861 $ 167,130,955 $ ===1=85='=19=2=1,=72= DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 EXHIBIT"B" EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 86,520,495 $ 5,323,876 5,021,539 3.258,567 1,334,388 8,541,288 1,678,721 10,760,198 5,013,649 2,214,502 29,301 590,300 951,167 9,413,348 238 381 618,251 $ 1,433,486 61,718,565 $ 2,055,048 3,100,048 1,598,673 1,880,540 3,202,509 4,427,032 2,185,265 202,320 25,328 70,631 6,903,815 -24, 183,679 -3,268,828 -1,921,491 -1,659,894 546,152 -5,338,779 -1,678,721 -6,333,166 -2,828,384 -2,012,182 -3,973 -590,300 -880,536 -1,076,047 -238 381 Total Governmental Activities $ 140,889,720 $ 2 051 737 $ 87 369 774 $ _ _ _-_5_1~4_68~,_20_9_ 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 Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous $ 32,710,198 36,423 7,986,565 7,445,031 451,003 74,409 4,125,959 -890,198 2417 052 Total General Revenues $ _ _ _5_4~3_5~6~44_2_ Change in Net Assets $ 2,888,233 Net Assets - Beginning of Year 164 242 722 Net Assets - End of Year $ ===16.7...1=3='0..,95=5= The notes to the basic financial statements are an integral part of this statement. -4- DOUGHERTY COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,495,314 $ $ 3,294,354 23,565,499 1,744,304 9,093,996 2,643,486 485,965 190,888 882,082 2,649,854 8,174 1,458 $ 1,496,772 26,859,853 4,394,158 9,093,996 2,643,486 494,139 190,888 882,082 $ 18,335,075 $ 27,718,841 $ 1 458 $ 46,055,374 LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Claims Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Inventories Capital Projects Private Sources Unreserved Designated for Self-Insurance Undesignated Reported in: Debt Service Deficit Reported in: General Fund Capital Projects Total Fund Balances $ 822,885 4,518,802 11,746,639 222,792 $ 2,561 876,484 693,939 $ 17,313,679 $ 1,570,423 $ 822,885 4,518,802 11,746,639 222,792 876,484 693,939 2,561 $ 18,884,102 $ 438,433 882,082 $ 26,757,418 168,955 1,220,203 $ -1,688,277 -609,000 $ 1,021,396 $ 26,148,418 $ $ 438,433 882,082 26,757,418 168,955 1,220,203 1,458 1,458 -1,688,277 -609,000 1,458 $ 27,171,272 Total Liabilities and Fund Balances $ 18,335,075 $ 27,718,841 $ The notes to the basic financial statements are an integral part of this statement. -5- 1 458 $ 46,055,374 DOUGHERTY 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. $ 27,171,272 $ 9,083,876 8.009,689 193,418,503 13,255,629 -83,635,788 140,131,909 -172,226 Net Assets of Governmental Activities (Exhibit "A") $ 167,130,955 The notes to the basic financial statements are an integral part of this statement. -6- DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Insurance Proceeds 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 $ 33,145.792 $ 33.145,792 525,412 $ 7,445,031 $ 7,986,565 15,957,008 73,467,917 -103,276 73,364,641 19,307,167 -934,644 18,372,523 2,051,737 2,051,737 132,774 -1,023,717 745 -890, 198 2,176,153 131,367 2,307,520 $ 130,806,952 $ 5,514,761 $ 7,987,310 $ 144,309,023 $ 83,196,285 $ 83,196,285 5,315,226 4,962,851 3,081,800 1,330,089 8,340,974 1,591,150 $ 10,322,357 4,154,342 2,245,445 29,301 586,290 951,167 8,948,147 2,421 45,902 356,854 12,870,124 5,315,226 4,962,851 3,081,800 1,330,089 8,340,974 1,637,052 10,679,211 4,154,342 2,245,445 29,301 586,290 951,167 8,948,147 12,872,545 $ 7,750,000 238,381 7,750,000 238,381 $ 135,057,845 $ 13,272,880 $ 7,988,381 $ 156,319,106 $ -4,250,893 $ -7,758,119 $ -1 071 $ -12,010,083 $ 17,302 $ 142,320 315,568 -324,213 $ -306,911 $ 457,888 $ -4,557,804 $ -7,300,231 $ 5,579,200 33,448,649 $ 159,622 315,568 -324,213 $ 150,977 -1,071 $ -11,859,106 2,529 39,030,378 Fund Balances - Ending $ 1,021,396 $ 26,148,418 $===1=45=8= $ 27,171,272 The notes to the basic financial statements are an integral part of this statement. -7- DOUGHERTY 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. In the Statement of Activities, only the gain on the sale of the building and equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the building and equipment sold. 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 $ -11,859, 106 $ 11,126,014 -3.446,628 7,679,386 -640,602 -41,445 7,750,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==2=,8=8=8=,2=33= The notes to the basic financial statements are an integral part of this statement. -8- DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 57,186 36,444 $ ===9=3=!=,6=3=0 $ ===9=3=,6=30= The notes to the basic financial statements are an integral part of this statement. -9- DOUGHERTY 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 Dougherty County Board of Education (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 Dougherty County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 11 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency funds account for assets held by the School District as an agent for various funds 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, and claims and - 12 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES judgments, 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. A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one 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, - 13 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 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 Dougherty County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on September 12, 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 Dougherty County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.1 % oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $33,109,369. The tax millage rate levied for the 2002 tax year (calendar year) for the Dougherty County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 17.55 mills - 14 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $15,431,596 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 (weighted average). 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. CONSUMABLE SUPPLIES On the basic financial statements, consumable supplies are reported at cost (weighted average). The School District uses the consumption method to account for the consumable supplies inventory whereby an asset is recorded when supplies are purchased and expenses are recorded at the time the supplies are consumed. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2003, are recorded as prepaid items. 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 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 ofassets or materially extend the useful lives ofthe 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: - 15 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Land and Land Improvements Buildings and Improvements Equipment Any Amount $ 5,000 $ 5,000 NIA 20 to 80 years 4 to 12 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. DEFICIT FUND BALANCES Funds reporting a deficit fund balance and deficit net assets at June 30, 2003, are as follows: Fund Type/Fund Name Deficit Balances Governmental Fund Type General Fund Governmental Fund Type Capital Projects Fund $ 1,688,277 $ 609,000 The fiscal year 2003 total General Fund unreserved, undesignated deficit fund balance of$ l,688,277 is comprised of a $0.6 million deficit from general operating activities and a $1.1 million deficit from school food services activities. To recover unreserved, undesignated fund balances for general operating activities, the School District voted to increase the local ad valorem tax by 1.45 mills to provide additional tax revenues ofapproximately $2.7 million for fiscal year 2004. The Board also identified an additional $2.0 million in cost savings for fiscal year 2004. Administration is examining all school food service activities to identify potential savings in labor, food and supply costs. Focus will continue to be given to increasing student meal participation in all schools. During fiscal year 2001, the Dougherty County Board of Education approved the plan to fund the deficit in the Capital Projects - Regular Projects Funds by transferring $203,000 from the General Fund to the Capital Projects Fund each year for five years. As ofthe date ofthis report, transfers for fiscal years 2002, 2003 and 2004 have been completed. Transfers will continue to be made for fiscal year 2005 and 2006 until the deficit is fully funded. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than - 16 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: ( 1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $4,907,710. 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. - 17 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 580,407 2 0 3 4,327,303 Total $ 4,907.710 CATEGORlZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $26,859,853 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury 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 of Georgia, Office of Treasury 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 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 - 18 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS 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 1, 2002 Increases Balances Decreases June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 9,025,404 $ 58,472 $ 9,083,876 24,837,538 7,258,959 $ 24,086,808 8,009,689 Total Capital Assets Not Being Depreciated $ 33,862,942 $ 7,317,431 $ 24,086,808 $ 17,093,565 Capital Assets Being Depreciated Buildings and Improvements Equipment $ 166,624,824 $ 26,857,305 $ 12,595,106 1,038,086 63,626 $ 193,418,503 377,563 13,255,629 Less Accumulated Depreciation for: Buildings and Improvements Equipment 72,585,917 8,002,987 2,520,347 926,281 39,995 359,749 75,066,269 8,569,519 Total Capital Assets, Being Depreciated, Net $ 98,631,026 $ 24,448,763 $ 41445 $ 123,038,344 Governmental Activity Capital Assets - Net $ 132.493.968 $ 31.766,194 $ 24,128.253 $ 140,131.909 Current year depreciation expense by function is as follows: - 19 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 5: CAPITAL ASSETS 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 Central Support Services Enterprise Operations Food Services $ 2,061,949 $ 5,347 36,276 109,262 2,657 123,817 25,756 75,709 541,399 33,331 2 479 956,033 428,646 $ 3,446,628 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ 1,322,148 $ $ 22,824,328 $ 782,166 741,171 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 All Others $ 315,568 8 645 Total $=====3==24-,2=1eae,3 - 20 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 7: INTERFUND TRANSFERS Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund to correct deficit in the Capital Projects Fund. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District 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. For the current fiscal year, due to the costs of available coverage, the School District significantly reduced property coverage for Federal terrorism. 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/expenditures 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 $250,000 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2002 2003 $ 92.595 $ 708 477 $ 450.332 $ 350.740 $ 350.740 $ 419.254 $ 547.202 $ 222.792 - 21 - DOUGHERTY 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. 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: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 14 449 $ 13,782 $ 28,231 $ 0 $ 0 $ 32,984 $ 32,984 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Other Employees $ 100,000 $ 250,000 Note 9: SHORT-TERM DEBT The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Tax Anticipation Notes $=====0 $9,500,000 $ 9,500,000 $=====0 - 22 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 10: LONG-TERM DEBT Voters authorized $25,000,000 in general obligation debt for acquisition, construction and equipping of capital outlay projects as of June 30, 2003. The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Claims Obligation Payable Bonds Total Balance July 1, 2002 $ 350,740 $ 7,750,000 $ 8,100,740 Additions Claims and Changes in Estimates 419,254 419,254 Deductions Debt Retired Claims Paid 547,202 7,750,000 7,750,000 547,202 Balance June 30, 2003 Portion of Long-Term Debt Due within One Year $ 222,792 $====0 $==2==22""".7===9==2 $ 102,244 $_ _ _ _0 $_~10~2,~24~4 Note 11: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of$1,476,047 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $1,236,983 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 $239,064 - 23 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2003: Project Unearned Executed Contracts Bond Projects SPLOST Projects $ 74,329 1,948,187 $ 2,022.516 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 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: - 24 - DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 14: RETIREMENT PLANS Fiscal Year 2003 2002 2001 Percentage Contributed 100% 100% 100% Required Contribution $ 6,901,145 $ 6,536,755 $ 7,915,385 - 25 - DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Capital Outlay 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 FINAL ACTUAL AMOUNTS (1} $ 33,337,900 $ 33,337,900 $ 33,145,792 85,000 85,000 525,412 72,960,848 74,520,917 73,467,917 14,397,094 18,253,111 19,307,167 1,829,721 2,040,447 1,987,861 160,000 160,000 120,736 776 774 2,009,018 1,342,298 $ 123,547,337 $ 130,406,393 $ 129,897,183 $ 75,924,463 $ 81,779,436 $ 83,161,440 4,549,385 4,732,331 3,014,796 1,751,228 7,785,865 1,940,213 9,934,893 4,193,341 2,118,060 26,597 326,700 773,480 8,169,616 4,906,777 5,432,701 3,289,131 1,711,949 7,929,443 1,781,524 10,361,225 4,268,356 2,282,208 41,787 555,991 870,976 8,181,616 2 430 5,206,968 4,962,851 3,005,833 1,330,089 7,748,045 1,591,150 10,293,240 4,154,342 2,245,445 29,301 586,290 951,167 8,931,172 2421 $ 125,240,968 $ 133,395,550 $ 134,199,754 $ -1,693,631 $ -2,989,157 $ -4,302,571 $ 1,187,000 $ 1,196,147 $ -549180 -549 180 $ 637,820 $ 646 967 $ $ -1,055,811 $ -2,342,190 $ 233,422,027 233,422,027 12,240,245 12,240,245 17,302 -324,213 -306 911 -4,609,482 5,260,260 Fund Balances - Ending $ 244,606.461 $ 243,320,082 $====65=0=1=7=7=8 Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Actual amounts have been adjusted to exclude the governmental activity from the various principal accounts. See notes to the basic financial statements. - 27 - DOUGHERTY 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 Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Ed.ucation Act Part B - Special Education Flow Through Georgia Learning Resources System Preschool Severely Emotionally Disturbed Special Project - High School/High Tech Capacity Building Improvement Capacity Building - GLRS Capacity Building - SEO Total Special Education Cluster Other Programs Direct Impact Aid Pass-Through From Chattahoochee-Flint Regional Educational Service Agency d/b/a Two Rivers 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 School Improvement Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title VI Innovative Education Program Strategies Individuals with Disabilities Education Act Special Education PartB State Program Improvement Grants for Children with Disabilities Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 NIA N/A $ $ (2) 9 064 033 (3) 9,064,033 10.550 N/A $ 342 313 9406 346 94.004 NIA $ 750 84.027 84.027 84.173 84.027 84.027 84.027 84.027 84.027 84.041 N/A $ N/A N/A NIA N/A N/A N/A N/A $ 1,892,359 142,544 123,195 194,346 96,247 (3) 60,787 48,245 15 000 2,572,723 (4) 84.011 NIA 84.010 N/A 84.010 N/A 84.281 N/A 84.318 NIA 84.367 N/A 84.298 N/A 84.323 N/A 84.186 N/A 84.048 N/A 10,995 (3) 6,978,943 57,403 86,535 428,267 1,374,210 156,489 41,364 127,128 247,388 -28- DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Education. U. S. Department of Other Programs Pass-Through From Georgia Department of Human Resources Safe and Drug Free Schools and Communities Total U.S. Department of Education Federal Emergency Management Agency Pass-Through From Office of the Governor Disaster Assistance Health and Human Services, U. S. Department of Pass-Through From Georgia Department of Human Resources Child Care School Age Program Labor, U. S. Department of Pass-Through From Southwest Georgia Regional Educational Development Center Workforce Investment Act Service Learning Youth (YETP) Providing Rewarding Youth Achievement Services (RYA) Total U.S. Department oflabor Defense, U. S. Department of Direct Department o the Air Force R.O.T.C. Program Department of the Marine Corps R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 84.186 83.516 N/A $ _ _ _--'2=5'-'-'0=-=0=-0 $ _ ___;_1=,2...:..10=-:6:.,...4.:...4=5 N/A (6) 93.525 N/A $ 25 101 (3) 17.249 17.255 17.998 N/A $ N/A N/A 64,096 76,059 193 234 $ _ _ _--=33:;.:3;.c:,3:.::8-=-9 (5) (5) Total Federal Financial Assistance N/A = Not Available $ ===2d1,..87=2:!.0=3=1 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 ($2,010,596) were not maintained separately and are included in the 2003 National School Lunch Program. (3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source. (4) Funds earned on the Impact Aid program, in the amount of $241,431, do not require reporting of expenditures. (5) Expenditures on this program were not maintained by fund source. Expenditures for this program were supported by $129,499 in Federal assistance ($45,839 Air Force ROTC and $83,660 Marine Corps ROTC) and the balance from State, and/or local funds. (6) A refund of Disaster Assistance Funds, in the amount of $934,644, was made for grant expenditures disallowed in prior years. 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 Dougherty County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 29 - DOUGHERTY 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 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) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program Georgia Learning Resources System Health Insurance K-3 Statewide Reading Program K-3 Statewide Reading Program - SED 4-8 Statewide After School Program National Teacher Certification Preschool Handicapped Program Severely Emotionally Disturbed Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options Student Information System Grant GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 5,076,200 336,778 11,494,665 902,412 5,266,545 651,110 1,338,163 7,629,922 6,597,056 1,640,558 458,929 3,135,935 2,982,579 431,174 90,115 1,037,324 445,605 637,001 43,184 1,462,598 483,947 281,423 1,484,602 3,078,395 4,191,648 1,675,446 359,173 320,019 62,790 67,498 98,445 4,118,935 478,968 99,919 -1,793,568 47,500 90,112 1,236,983 238,424 11,400 164,215 3,531 235,907 2,137,994 25,039 345,408 4,522 102,212 $ 5,076,200 336,778 11,494,665 902,412 5,266,545 651,110 1,338,163 7,629,922 6,597,056 1,640,558 458,929 3,135,935 2,982,579 431,174 90,115 1,037,324 445,605 637,001 43,184 1,462,598 483,947 281,423 1,484,602 3,078,395 4,191,648 1,675,446 359,173 320,019 62,790 67,498 98,445 4,118,935 478,968 99,919 -1,793,568 47,500 90,112 1,236,983 238,424 11,400 164,215 3,531 235,907 2,137,994 25,039 345,408 4,522 102,212 - 30 - DOUGHERTY 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 Grant Office of the Governor Governor's Emergency Fund Georgia Challenge Program Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Education, Georgia Department of After School Programs Foreign Language Model Program Northwest Georgia Regional Educational Service Agency Georgia's Choice GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 85,177 $ 85,177 $ 25,000 -103,276 -103,276 25,000 973,297 973,297 239,064 239,064 11,766 153,906 670,967 11,766 153,906 670,967 $ 73 467 917 $ -103,276 $ 73,364,641 See notes to the basic financial statements. - 31 - DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30 2003 SCHEDULE "4" PROJECTS The acquisition, construction and equipping of six new elementary physical education facilities, two new middle schools, supply services freezer, completion of expansion program at five schools, roof replacement on 24 buildings, technology power upgrade on 30 buildings, ceilings and lights in 27 buildings, HVAC upgrades on 24 buildings, four new high school field houses, three support facilities for new elementary schools, renovation of McIntosh Teacher Academy, renovation of five schools, Highland conversion, underslab plumbing replacement in 17 buildings, asbestos removal at 48 sites, lawn revitalization at 30 sites, facilities department shops, tower, media service center, security lighting at 28 sites, sports field lighting at four sites and 41 new vehicles, including the acquisition of all necessary property, the maximum cost of such projects not to exceed $88,653,060.00. The acquisition, construction and equipping of three elementary schools, renovation and improvements of one middle school, renovation and improvements of four high schools, renovation and improvements of five elementary schools, provision of gifted, special education and alternative education sites, capital funding necessary for compliance with Individuals with Disabilities Education Act (IDEA) for children with disabilities, renovation of existing school buildings, four Pre-K facilities in each of four quadrants in the Dougherty County School System, additional technology (hardware and software), including teacher and student classroom computers, peripheral devices and wiring, mobile wireless computer labs, accessory support technology, wireless connectivity for portable classrooms and technology associated with distance and foreign language labs, safety equipment including, but not limited to, upgrading locks on all school buildings, installation of cameras and other devices on schools and school buses and security/attendance card system, upgrade of school vehicles and maintenance equipment, funding certain financing and project management cost for implementation of capital programs funded through SPLOST 11, the maximum cost of such projects not to exceed $95,000,000. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COST (2) AMOUNT EXPENDED IN CURRENT YEAR(3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 88,653,060 $ 102,229,305 $ 12,442,473 $ 88,389,879 Ongoing 95,000,000 95,000,000 579,232 Ongoing 13,021,705 $ 88,389,879 - 32 - DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Dougherty County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest expense to provide advance funding for the above projects as follows: Prior Year $ 4,231,743 Current Year 238,381 Total $ ===-4.4..7...0"=1=2=4 See notes to the basic financial statements. - 33 - DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBEl ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle Grades (6-8) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 5.826.185 $ 5.643.758 $ 72,798 $ 5,716,556 406.817 369,068 2,316 371,384 13,260,439 11,634,665 421.405 12,056,070 1,054,788 787,799 8,952 796,751 6,116,827 8,268,164 251,119 8,519,283 760,111 1,512,915 8,952,076 7,694,704 1,913,390 8,193,931 1,191,491 512,584 743,666 46 121 532,670 1,525,995 10,328,707 10,000,446 2,530,076 339,858 3,066,587 3,608,484 354,319 855,750 6,536 857,777 48,998 3,411 57.191 332,910 347,475 211,825 13,371 44,398 54,981 18,388 18,783 172,683 536,081 1,583,186 10,661,617 10,347,921 2,741,901 353,229 3,110,985 3,663,465 372,707 874,533 6,536 1,030,460 48 998 $ 58,186,045 $ 60,759,657 $ 2,032,006 $ 62,791,663 1,695,543 327 361 2,442,654 138,252 137,357 105,673 2,580,011 243,925 TOTALQBEFORMULAFUNDS $ 60,208,949 $ 63,340,563 $ 2,275,036 $ 65,615,599 (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 March 5, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Dougherty 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 Dougherty County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Dougherty County Board ofEducation's basic financial statements and have issued our report thereon dated March 5, 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 Dougherty 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 of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Dougherty County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Dougherty County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6471-03-01, FS-6471-03-02 and FS-6471-03-03. 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 audit committee, management, members ofthe Dougherty 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, ~l