Dougherty County Board of Education, Albany, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

DOUGHERTY COUNTY BOARD OF EDUCATION
ALBANY, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

DOUGHERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

DOUGHERTY COUNTY BOARD OF EDUCATION - 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

37

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

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

DOUGHERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

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
March 16, 2005

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, 2004, 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 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 financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Dougherty County Board ofEducation, as ofJune 30, 2004, 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.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2005, 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 grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. 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 x and page 29 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 of Georgia Annotated section 506-24.
Respectfully submitted,
~~-~ Russell W. Hinton State Auditor
RWH:as 2004ARL-11

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Management's discussion and analysis of the Dougherty County School Board's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2004. The intent of this discussion and analysis is to present the Board's overall financial performance. Readers should also review the financial statements and notes to the financial statements to further enhance their understanding of the Board's financial performance.
Financial Highlights
Financial highlights for 2004 are as follows:
Total net assets increased by $6.4 million. This represents a 3.85 percent increase from fiscal year 2003. This increase was due entirely to governmental activities since the Board has no business-type activities.
Total revenues were $149.5 million. General revenues, which include revenues from General Funds, Capital Project Funds, and the Debt Service Fund, accounted for $60.9 million, or 40.7 percent of this total. Program specific revenues, in the form of Charges for Services, Operating Grants and Contributions and Capital Grants and Contributions accounted for $88.6 million or 59.3 percent of the total.
The Board incurred $143.0 million in expenses related to governmental activities; however, $88.6 million of these expenses were offset by revenues from program specific Charges for Services, Operating Grants and Contributions and Capital Grants and Contributions. General revenues (primarily taxes) of $60.9 million funded the balance of the remaining $54.5 million of expenditures and the increase in net assets of $6.4 million referenced above.
Among major funds, the General Fund recorded $136.0 million in revenues and other financing sources, and $136.3 million in expenditures and other financing uses. The General Fund's fund balance decreased from $1.0 million to $0.7 million for a net reduction of $0.3 million.
During fiscal year 2004 the Board issued General Obligation Sales Tax Bonds in the amount of $25.0 million. The principal and interest on these bonds are payable from a one percent sales and use tax. The proceeds of these bonds will be used for constructing and equipping three elementary schools, renovating and improving one middle school, four high schools, and five elementary schools. These funds will also be used for providing technology upgrades and additions, and for safety and security equipment for all facilities.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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 Board of Education as a complete operating entity.
These financial statements generally present the Board's most significant funds both separately and with all funds combined. For the Dougherty County Board of Education, 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 of Activities provide consolidated financial data for the large number of funds used by the Board to monitor programs and activities. These consolidated statements give a summary view of all financial activities and assist the reader in assessing the financial position of the Board as a whole for the fiscal year ending June 30, 2004.
All of the Board'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 ofNet Assets and Statement ofActivities report the Board'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 Board 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 Board'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 Board as a whole. The Statement of Activities reports consolidated Revenues and Expenditures and the beginning and ending Net Assets of the Board as a whole.
Fund Financial Statements
The Balance Sheet reports Assets, Liabilities, and Fund Balances for the General Fund, District Wide Capital Project Funds, and the Debt Service Funds both separately and in total with all funds combined.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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.
Fund Types
Governmental Funds
Most of the Board'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 Board'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 Board 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 Board 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 Board 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, 2004, were $45,243.
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 2003 and fiscal year 2004.
Statement of Net Assets
As previously mentioned, the Statement ofNet Assets presents consolidated financial data for the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2003 and fiscal year 2004.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year2004 Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 73,091 146,310

$ 45,060 140,132

Total Assets

$ 219,401 $ 185,192

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 18,341 27,502

$ 17,838 223

Total Liabilities

$ 45,843 $ 18,061

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

$ 143,533 32,861 -2,836

$ 140,132 27,781 -782

Total Net Assets

$ 173~558 $ 167~131

Total Net Assets increased $6.4 million in fiscal year 2004. Capital assets, net of related debt, contributed $3.4 million to the increase. Restricted assets contributed $5.l million to the increase. The increase in Total Net Assets was offset by an increase of $2.1 million in the deficit of Unrestricted Net Assets.
Restricted assets are assets that must be used for a specific purpose. These include: funds restricted for bus replacement: $0.7 million; funds restricted for the continuation of Federal programs: $0.7 million; funds restricted for debt service: $7.1 million; and funds restricted for capital projects: $24.4 million.

The Unrestricted Assets (Deficit) of $2.8 million reported in the Net Asset section of Table 1 above is primarily due to a deficit fund balance in the Child Nutrition Program. Factors contributing to the deficit were addressed by the System in fiscal year 2005. For several years prior to fiscal year 2004, breakfast was served to all students free of charge. Beginning in fiscal year 2004, the System implemented the Federally funded free lunch program in addition to the free breakfast program. The loss of revenues associated with the implementation of the free lunch program proved to be much greater than anticipated. In order to restore the System to a more equitable funding status, the Board terminated its participation in the free lunch program as

- IV -

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
of February 1, 2005. The costs of food and labor continued to rise during fiscal year 2004 which necessitated the need for the System to increase the price of meals for adults in November, 2004, and for student lunches in February, 2005. The prices charged by surrounding systems was the guide used by the Board in making the final price decision. The System is working in collaboration with the Georgia Department of Education in evaluating and identifying areas of potential cost reduction, and where inefficiencies might exist. The System is committed to eliminating the deficit in the Child Nutrition Program without compromising the quality of service provided the students of Dougherty County. This balance also includes a deficit in the Capital Projects Funds in the amount of $406,000. This deficit will be funded by budgeted transfers from the General Fund in the amount of $203,000 in each of fiscal years fiscal year 2005 and fiscal year 2006. The increase in current assets of $28.0 million is due to the investment of proceeds from the $25.0 million General Obligation Bond issuance. Note, however; this increase in net assets is offset by a corresponding increase in Long-Term Liabilities primarily for the repayment of the bonds. Statement of Activities Table 2 shows the changes in net assets for fiscal year 2003 and fiscal year 2004 as reported on the Statement ofActivities.
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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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
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 Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Expenses
Increase in Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

$ 1,735 86,484 332
$ 88,551

$ 2,052 87,370
$ 89,422

$ 35,506
7,060 9,111
376 126
5,348 485
2,907
$ 60,919
$ 149,470
$ 88,041
5,387 4,443 3,165 9,842 1,912 10,837 5,143 2,157
394 873 10,898 -49
$ 143,043
$ 6,427

$ 32,710 36
7,987 7,445
451 74
4,126 -890 2,417
$ 54,356
$ 143,778
$ 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

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Governmental Activities

Table 3 shows, for governmental activities, the total cost of services and the net cost of services for fiscal year 2003 and fiscal year 2004. This information is presented on the Statement of Activities.

For fiscal year 2004, Instructional activities comprised 61.55 percent of the total governmental program cost of services. Support Services comprised 29.99 percent, noninstructional services comprised 8.50 percent, and Interest expense comprised -0.04 percent.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

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

$ 88,041 $ 86,521 $ 24,800 $ 24,184

5,387 4,443 3,165 1,321 8,521 1,912 10,837 5,143 2,108
49

5,324 5,022 3,259 1,334 8,541 1,679 10,760 5,014 2,215
29

3,383 1,887 1,622 -575 5,299 1,912 6,466 3,089 2,057
8

3,269 1,921 1,660 -546 5,339 1,679 6,333 2,828 2,012
4

394 873 10,898 -49

590 951 9,413 238

394 871 3,328 -49

590 881 1,076 238

Total Expenses

$ 143.043 $ 140,890 $ 54.492 $ 51,468

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 28.2 percent of instructional activities are supported through taxes and other general revenues. For all governmental activities, general revenue support is 38.1 percent.

The Board'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 $178.8 million and expenditures and other financing uses of $149.8 million. The combined increase in Fund Balances for the General Fund, Capital Project Funds and Debt Service Funds was $29.0 million.

-Vll -

DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

General Fund Budgeting Highlights

The Board's budget is prepared according to Georgia law and in compliance with Georgia Department of Education requirements. During fiscal year 2004, the Board amended its general fund budget as needed. The Board 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 $136.3 million exceeded the original budgeted amount of $130.2 million by $6.1 million. This difference was primarily due to an increase in state revenues budgeted of $0.9 million, and an increase in Federal revenues budgeted of $4.8 million. Actual revenues and other financing sources of $136.0 million were essentially the same as the final budgeted amount.

The final budgeted expenditures and other financing uses of $137.8 million exceeded the original budgeted amount of $130.7 million by $7.1 million. This difference was primarily due to an increase in budgeted Instructional expenditures of $4.8 million, an increase in budgeted Support Services expenditures of $1.7 million, and an increase in Food Service Operations of $0.4 million. The increase in budgeted instructional expenditures of $4.8 million was funded primarily by the $4.8 million in additional Federal revenues referenced above. The increase in Support Services expenditures of $1.7 million was partially funded by the $0.9 million additional state revenues referenced above. Actual expenditures and other financing uses of $136.3 million were $1.5 million less that the final budgeted amount.

Capital Assets and Debt Administration

Capital Assets

At the end of fiscal year 2004 the Board had $146.3 million invested in capital assets. All of these assets were in governmental activities. Table 4 shows fiscal year 2003 and fiscal year 2004 balances.

Table 4 Capital Assets at June 30 (Net of Depreciation, in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment

$ 9,553 11,510
119,280 5,967

$ 9,084 8,010
118,352 4,686

Total

$ 146!310 $ 140!132

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Capital Assets increased by $6.2 million versus fiscal year 2003. All categories of capital assets increased. These increases reflect the continuation of an aggressive program of capital improvements, which include renovations for instructional improvement at numerous facilities, as well as new construction projects. These increases also include capital expenditures for additions and upgrades in technology, and the installation of security and access systems that will improve safety for schools and other facilities.

Debt

Table 5 summarizes the Long-Term debt outstanding at June 30 for fiscal year 2003 and fiscal year 2004.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

General Obligation Bonds Unamortized Bond Premium Capital Leases Claims Payable - Workers' Compensation

$ 25,000 810
1,491 201

$_ _2=2=-3

Total

$ 27,502 $==2=2=3

The General Obligation Bond debt shown above reflects the $25.0 million General Obligation Bond issuance previously mentioned, plus $0.8 million in rm-amortized bond premiums.

The $1.5 million for capital leases shown above is primarily due to the lease/purchase of 23 buses to upgrade the school bus fleet.

The Dougherty County Board of Education is self insured for Workers' Compensation claims. The Claims Payable for Workers' Compensation of $0.2 million shown above represents estimated reserves for payments of existing claims at June 30, 2004.

Current Issues

Reductions in both state and local funding continue to be a major concern for the Dougherty County Board of Education. State QBE funding for fiscal year 2004 reflected an "austerity reduction" of $3.4 million. The "austerity reduction" for fiscal year 2005 was an additional $3.7 million. Preliminary state funding projections for fiscal year 2006 indicate this reduction in funding will not be restored, but will remain at the current level. "Austerity reductions" for fiscal year 2003, fiscal year 2004, and fiscal year 2005 combined have totaled in excess of $8.9 million.

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DOUGHERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
In addition to the loss of state funding, the local tax digest has declined for the past two years and is not expected to increase in fiscal year 2005 and beyond. The reductions in QBE formula earnings referenced above have been partially offset by increases in state equalization grant funding. Equalization funding is designed to reduce the disparity between wealthy systems and relatively poorer systems based on local wealth per student. Dougherty County has experienced a decrease in wealth per student primarily due to the lack of growth in the local tax base (digest). During the same period, other systems have become wealthier, thus further increasing the disparity in local wealth. It is unlikely the Dougherty County School System will continue to experience significant increases in equalization funding in future periods; therefore, it is critical that state funding be restored. In spite of the adverse funding issues mentioned above, the Board, Superintendent, and all system personnel are committed to providing the highest quality of instruction and support to the children of Dougherty County through the efficient allocation and use of available funds. Contacting the Board's Financial Management This management's discussion and analysis report is designed to provide our citizen's, taxpayers, investors, and creditors with a general overview of the Board's finances, and to document the Board'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 and Operations, at the Dougherty County Board of Education, 200 Pine Avenue, Albany, Georgia 31702. You may also email your questions to robert.lloyd@dougherty.kl2.ga.us
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DOUGHERTY COUNTY BOARD OF EDUCATION

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2004
Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Prepaid Items Inventories Capital Assets Land Construction in Progress Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit)
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

54,123,464

4,185,756 8,990,866 4,399,999
351,524 166,251 872,881

9,553,309 11,509,724 197,134,663 14,895,860 -86,783,199

$ ===21=9=,4=0='1,=09=8=

$

2,396,257

3,481,240

11,557,658

273,430

561,864

71,265

8,499,973 19 001,840

$

45 843,527

$

143,532,449

676,742 660,530 7,066,976 24,457,170 -2,836,296

$

173,557,571

$ ==2=1=9,.,.,4=0=-1,=09=8=

The notes to the basic financial statements are an integral part of this statement. -3-

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2004

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
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

88,040,450 $

5,387,364 4,443,137 3,165,232 1,321,407 8,519,700 1,912,239 10,836,340 5,142,738 2,108,367
49,219

394,217 873,240 10,898,193 -48,705

$

143,043 138 $

978,182
756,380 1 734,562

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

$

62,262,485

2,004,518 2,556,475 1,543,149 1,896,633 3,220,546

4,370,474 1,722,195 $
51,106 40,731

2,560 6,813,757

$

86 484 629 $

$ 331,818 331 818 $

-24,799,783
-3,382,846 -1,886,662 -1,622,083
575,226 -5,299,154 -1,912,239 -6,465,866 -3,088,725 -2,057,261
-8,488
-394,217 -870,680 -3,328,056
48,705
-54,492, 129

$

35,505,587

7,059,678 9,111,286
376,444 125,709 5,347,977 484,754 2,907,310

$

60 918 745

$

6,426,616

167,130,955

$ ===1=7=3<=5=57~57=1=

-5-

DOUGHERTY COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Prepaid Items Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

207,326 $

1,475 $

$

902,878

47,379,703

5,840,883

2,947,754 8,990,866 4,399,999
349,966 166,251 872,881

1,565,926 1,558

1,224,618

208,801 54,123,464
5,738,298 8,990,866 4,399,999
351,524 166,251 872 881

Total Assets

$ 18,630,595 $ 49,154,513 $ 7,066,976 $ ===7=4=!:,8=5=2,=08=4=

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 Debt Service Inventories Capital Projects Private Sources
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects
Total Fund Balances

$ 2,605,058

$

3,481,240

11,557,658

200,751

$

273,430

561,864

71 265

$ 17,915,972 $

835,294

$

$

676,742

$

872,881

$ 48,725,219

127,715

1,367,717

-2,330,432

-406,000

$

714 623 $ 48,319,219 $

$ 7,066,976
7,066,976 $

2,605,058 3,481,240 11,557,658
200,751 273,430 561,864
71 265
18 751 266
676,742 7,066,976
872,881 48,725,219
127,715
1,367,717
-2,330,432 -406,000
56,100,818

Total Liabilities and Fund Balances

$ 18,630,595 $ 49,154,513 $ 7,066,976 $ ===7=4=!:,8=5=2,=08=4=

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

DOUGHERTY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

EXHIBIT "D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress Buildings Equipment Accumulated Depreciation
Total Capital Assets
Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures.
Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of:
Bonds Payable Capital Leases Unamortized Bond Premiums
Total Long-Term Liabilities
Net Assets of Governmental Activities (Exhibit "A")

$ 56,100,818

$ 9,553,309 11,509,724
197,134,663 14,895,860 -86,783,199

146,310,357

-1,552,542

$ -25,000,000 -1,491,300 -809,762

-27,301,062

$ 173,557,571

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

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

EXHIBIT"E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Proceeds of Long-Term Capital - Related Debt - Par Value Premiums on Bonds Sold Capital Leases 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

$ 36,678,671

$

502,153 $ 9,111,286 $ 7,059,678

72,063,399

20,308,257

1,734,562

135,585

343,329

5,840

2,862,044

61 618

36,678,671 16,673,117 72,063,399 20,308,257
1,734,562 484,754
2,923,662

$ 134,284,671 $ 9,516,233 $ 7,065,518 $ 150,866,422

$ 82,634,887

$

0 $ 82,634,887

5,374,597 4,357,109 2,898,077 1,315,128 8,262,959 1,691,460 $ 10,439,787 5,638,803 2,038,908
49,219 362,743 873,240 9,815,495

300,280 215,221
13,018,730

5,374,597 4,357,109 2,898,077 1,315,128 8,262,959 1,991,740 10,655,008 5,638,803 2,038,908
49,219 362,743 873,240 9,815,495 13,018,730

227,995 24 910

227,995 24 910

$ 136,005,317 $ 13,534,231 $

0 $ 149,539,548

$ -1,720,646 $ -4,017,998 $ 7,065,518 $

1,326,874

$ 25,000,000 883,377
$ 1,719,295 305,422
-305,422

$ 25,000,000 883,377
1,719,295 305,422 -305,422

$ 1,413,873 $ 26,188,799

$ 27,602,672

$

-306,773 $ 22,170,801 $ 7,065,518 $ 28,929,546

1,021,396

26,148,418

1 458

27,171,272

Fund Balances - Ending

$

714 623 $ 48,319,219 $ 7,066,976 $ 56,100,818

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

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. 2004

EXHIBIT"F"

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

$ 28.929,546

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

$ 10,107,841 -3 913 041

6,194,800

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.

-1,380,316

In the Statement of Activities, only the gain on the sale of the 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 equipment sold.

-16,352

Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from:

General Obligation Bonds issued, including a premium of $883,377

-25,883,377

Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.

-1,719,295

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:

Amortized Bond Premium Capital Lease Payments
Total Long-Term Debt Repayments

$

73,615

227,995

301 610

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

$ =====6,=42=6=,6=1=6

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

DOUGHERTY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Other
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"

AGENCY FUNDS

$

7,658

37,585

$ ==4=5a!::,2=43=

$ ===45:!.'=24=3=

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

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Dougherty County Board ofEducation (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the 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 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:
- 11 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (sales) legally restricted for the payment of general 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 of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and 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.
- 12 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
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 School District 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

- 13 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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 2003 tax digest year (calendar year) on September 3, 2003 (levy date). Taxes were due on December 20, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Dougherty County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.1 % of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $36,678,671.

The tax millage rate levied for the 2003 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

19.0 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $16,170,964 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 (weighted average). The School District uses the consumption method to account for

- 14 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2004, 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 of purchase (including ancillary charges). 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 estimated 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 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:

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.

- 15 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL OBLIGATION BONDS

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

DEFICIT FUND BALANCES

Funds reporting a deficit fund balance and deficit net assets at June 30, 2004, are as follows:

Fund Type/Fund Name

Deficit Balances

Governmental Fund Type General Fund Capital Projects Fund

$ 2,330,432 $ 406,000

The deficit in the General Fund is a result ofthe Child Nutrition program incurring expenditures in excess of available state and Federal funds and revenues from meal sales. With guidance from the Georgia Department ofEducation, the Board is evaluating the cost effectiveness ofall aspects ofits Child Nutrition operations. The decision to implement the Federal free lunch program along with the already existing free breakfast program was reexamined. The loss of revenues associated with the implementation of the free lunch program in fiscal year 2004 proved to be greater than anticipated. In mid-year of fiscal year 2005, the Board terminated the free lunch program which provided lunches to all students free of charge. However, the Board elected to continue the free breakfast program. Meal prices charged to adults and students were adjusted to compensate for the continuing rise in food and labor costs. Prices charged by school systems in surrounding areas and of comparable sizes were used as a guide for the price adjustment. The Board will continue to take the necessary steps to eliminate the Child Nutrition program deficit while maintaining a high standard of service to the students of the Dougherty County School System.

The balance ofthe deficit in the Capital Projects Funds will be funded by transfers from the General Fund in the amount of $203,000 in fiscal year 2005 and $203,000 in fiscal year 2006.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face

- 16 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
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, 2004, the bank balances were $3,924,325. The amounts of the total bank balances are classified into three categories of credit risk:

- 17 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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, 2004, as follows:

Risk Category

Bank Balance

1

$ 506,732

2

0

3

3,417,593

Total

$ 3,924,325

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

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

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

At June 30, 2004, the carrying value of the School District's total investments was $54,123,464 which is materially the same as fair value. The investments are classified as to risk categories as follows:

- 18 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Type of Investment U. S. Government
Local Government Investment Pools Total Investments

Risk Categories

2

3

Carrying Amount

Fair Value

$ I 451.164 $.======="'O $.======="0' $ 1,451,164 $ 1,451,164

52,672,300

52,672,300

$ 54 123 464 $ 54,123,464

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

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (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 weekly 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, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 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

- 19 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 5: CAPITAL ASSETS

The following is a summary of changes in the Capital Assets during the fiscal year:

Balances July 1, 2003

Increases

Balances Decreases June 30, 2004

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

$ 9,083,876 $ 469,433

$ 9,553,309

8,009,689

6,388,811 $ 2,888,776 11,509,724

Total Capital Assets Not Being Depreciated $ 17,093,565 $ 6,858,244 $ 2,888,776 $ 21,063,033

Capital Assets Being Depreciated Buildings and Improvements Equipment

$ 193,418,503 $ 3,716,160

13,255,629

2,422,213 $

$ 197,134,663 781,982 14,895,860

Less Accumulated Depreciation for: Buildings and Improvements Equipment

75,066,269 8,569,519

2,787,648 1,125,393

765,630

77,853,917 8,929,282

Total Capital Assets, Being Depreciated, Net $ 123,038,344 $ 2,225,332 $

16,352 $ 125,247,324

Governmental Activity Capital Assets - Net $ 140,131.909 $ 9,083.576 $ 2,905.128 $ 146,310.357

Capital assets being acquired under capital leases as of June 30, 2004, are as follows:

Governmental Funds

Equipment Less: Accumulated Depreciation

$ 1,958,642 266,457

$ 1,692.185

Current year depreciation expense by function is as follows:

- 20 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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

$ 2,313,378

$

5,403

36,408

120,898

2,657

114,353

68,490

89,878

658,086

31,964

13,320

1,141,457 458,206

$ 3,913,041

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, 2004, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$

$

21,236 $ 592,090

1,475

$ 5,840,883 $ 23,022,015 $ 24,357,688

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2004, consisted of the following:

Transfer to

Transfers From General Fund

District-wide Capital Projects

$====3==05=-"',4==2==2

- 21 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 7: INTERFUND TRANSFERS

Transfers are used to move property tax revenues collected by the General Fund to (1) the Districtwide Capital Projects Fund to correct deficit in the Capital Projects Fund, and to (2) cover a portion of employees salaries not funded as a part of Special Purpose Local Option Sales Tax (SPLOST) projects.

Note 8: RISK MANAGEMENT

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

The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage.

The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/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 $300,000 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

EndofYear Liability

2003 2004

$ 350,740 $ 419,254 $ 547,202 $ 222,792 $ 222,792 $ 593,708 $ 615 749 $ 200,751

- 22 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

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 ofthat loss can be reasonably estimated.

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

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0 $

32,984 $

32,984 $

0

$

0 $

53,241 $

53,241 $

0

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

Position Covered

Amount

Superintendent All Other Employees

$

50,000

$ 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 $ 10.000.000 $ 10.000.000 $=====0

- 23 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 10: LONG-TERM DEBT

CAPITAL LEASES The Dougherty County Board of Education has entered into various lease agreements as lessee for buses and a point of sale 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 of their inception.

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

Purpose

Interest Rates

Amount

General Government - Series 2004

2.00% - 4.00% $ 25,000.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows:

Capital Leases

Governmental Funds

General

Claims

Obligation

Payable

Bonds

Unamortized Bond
Premium

Total

Balance July 1, 2003

$

0 $ 222,792 $

0 $

0 $ 222,792

Additions Capital Leases Claims and Changes In Estimates G. 0. Bonds Unamortized Bonds

1,719,295

593,708

25,000,000

883,377

1,719,295
593,708 25,000,000
883,377

Deductions Debt Retired Claims Paid Bond Premiums Amortized

227,995

615,749

73 615

227,995 615,749
73 615

Balance June 30, 2004

$ 1 421 3QQ $ 200 751 $ 25,00Q QQQ $ 809,762 $ 27,501,813

Portion of Long-Term Debt Due within One Year

$ 498 609 $

90,520 $ 7,690 QQQ $ 22Q,844 $ 8,422,273

At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows:

- 24-

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 10: LONG-TERM DEBT

Fiscal Year Ended June 30

Canital Leases

Princinal

Interest

2005 2006 2007 2008

$ 498,609 $ 353,481 361,998 277,212

34,824 20,556 12,038
3 316

Total Principal and Interest

$ 1,491,300 $

70 734

Fiscal Year Ended June 30

General Obligation

Debt

Princinal

Interest

Unamortized Bond
Premium

2005 2006 2007 2008

$ 7,690,000 $ 7,955,000 8,265,000 1,090,000

789,772 $ 623,025 317,325
24,525

220,844 220,844 220,844 147,230

Total Principal and Interest $ 25,000.000 $ 1,754.647 $ 809.762

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,325,381 for health insurance and retirement contributions paid on the School District'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$1,310,937

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 $14,444

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available:

- 25 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 12: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

04-647-026 Security and Access
Control System

$ 3,258,637 $ 1,134,284 861,906

$ 4,120,543 $ 1,134.284

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.

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

- 26 -

DOUGHERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 14: RETIREMENT PLANS
Fiscal Year 2004 2003 2002

Percentage Contributed
100% 100% 100%

Required Contribution
$ 7,044,211 $ 6,901,145 $ 6,536,755

- 27 -

DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2004

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (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

$

35,161,173 $

35,161,173 $

36,678,671

85,000

85,000

502,153

71,437,646

72,334,187

72,063,399

19,074,415

23,892,891

20,308,257

1,499,478

1,580,483

1,734,562

94,000

94,000

135,585

1333307

1593407

2 862 044

$

128,685,019 $

134 741 141 $

134 284 671

$

80,406,846 $

85,171,333 $

82,634,887

4,902,559 4,577,915 2,965,786 1,712,252 7,745,437 1,796,927 9,970,827 4,460,854 2,201,434
14,200 326,700 869,228 8,212,601

5,170,664 5,602,694 3,004,888 1,814,992 7,776,901 1,868,399 10,081,098 4,502,310 2,196,541
63,712 409,582 957,173 8,633,546
4,657

5,374,597 4,357,109 2,898,077 1,315,128 8,262,959 1,691,460 10,439,787 5,638,803 2,038,908
49,219 362,743 873,240 9,815,495
252,905

$

130,163,566 $

137,258,490 $

136 005 317

$

-1 478 547 $

-2517349 $

-1 720 646

$

1,497,500 $

1,520,345 $

1,719,295

-538 000

-538 000

-305 422

$

959 500 $

982 345 $

1413873

$

-519,047 $

-1,535,004 $

-306,773

3,823,688

3,825,171

1,021,396

9813111

9813111

Fund Balances - Ending

$

13117752 $

12,103,278 $

714 623

Notes to the Schedule of Revenues Exi;ienditures 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.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 29 -

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Direct Impact Aid Fund for the Improvement of Education Pass-Through From Georgia Department of Education Education for Homeless Children and Youth Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First State Grants Safe and Drug-Free Schools and Communities Special Education State Program Improvement Grants for Children with Disabilities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Georgia Department of Human Resources Safe and Drug-Free Schools and Communities
Total U.S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Georgia Department of Human Resources Child Care School Age Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A N/A $
$

(2) 9,091,508
9,091,508

10.550

N/A $

348,335 9,439,843

84.027 84.173

N/A $ N/A
$

3.575,000 112 903
3,687.903

84.041 84.215
84.196 84.318 84.367 84.357 84.186
84.323 84.298 84.010 84.048
84.186

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

(3) 6,617
30,000 256,021 1,615,124 279,846 159,854
25,843 202,394 6,877,406 223,815
15,000
13,379,823

93.525

N/A $

2 250

- 30 -

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Labor, U.S. Department of Pass-Through From Southwest Georgia Regional Development Center Workforce Investment Act Providing Rewarding Youth Achievement Services (RYA) Youth (YETP) Youth Opportunity Grants
Total U.S. Department of Labor
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program Department of the Marine Corps R.O.T.C. Program
Total U. S. Department of Defense

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

17.998 17.255 17.263

N/A

$

N/A

NIA

161,024 74,336 50 188

$ _ _ _ _2_8_5~,5_48_

$

48,308

78,424

$ _ _ _ _1_2~6~,7~32~

Total Federal Financial Assistance N/A = Not Available

$ ===2=3e!:2=3=4=1=96=

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation 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 ($1,681,624) were not maintained separately and are included in the 2004 National School Lunch Program.
(3) Funds earned on the Impact Aid program, in the amount of $207,232, do not require reporting of expenditures.

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

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

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the 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 fund financial statements.

See notes to the basic financial statements.

- 31 -

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
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 Migrant Education 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 Mentor Teachers National Teacher Certification Preschool Handicapped Program School Improvement (Georgia"s Choice) Severely Emotionally Disturbed
- 32 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

940,626

5,155,922 332,769
11,246,923 1,075,243 5,292,691 627,813 1,370,912 7,777,484 6,929,204 1,696,158
318,615 3,000,848 2,703,105
654,092 169,578 997,534 386,211 665,197
39,678 1,474,569
464,754 284,395
1,493,563 3,130,023 4,230,316
1,588,217 331,818 310,804 60,400 5,926
5,347,978 450,802 156,726
-3,418,370
47,500 87,468 1,310,937 247,139 12,000 139,239
2,018 5,440 235,907 240,000 2,169,771

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2004
AGENCY/FUNDING
GRANTS Education, Georgia Department of Lottery Program Computers in the Classroom
Office of the Governor Georgia Challenge Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACT Education, Georgia Department of Foreign Language Model Program
OTHER Community Affairs, Georgia Department of Local Assistance Grant

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

51,106

40,000

14,444

165,906

2 000

$ ===7-2,=06=3,,.,,3=9=9

See notes to the basic financial statements.

- 33 -

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2004

SCHEDULE "4"

PROJECTS

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED
COST(2)

AMOUNT EXPENDED IN CURRENT YEAR(3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

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

$ 88,653,060 $ 106,999,207 $

6,166,855 $ 100,832,352 Ongoing

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 associates 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

95,000,000

95,000,000

7,162,899

579,232 Ongoing

$ 183,653,060 $ 201,999,207 $ 13,329,754 $ 101,411,584

- 34-

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2004

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 to provide advance funding for the above projects as follows:

Prior Years

$ 4,470,124

Current Year

0

Total

$ 4470,124

See notes to the basic financial statements.

- 35 -

DOUGHERTY COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2004

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

$

5,995,624 $ 5,512,145 $

74,313 $

5,586,458

391,410

221,847

1,877

223,724

13,157,032

11,121,055

339,017

11,460,072

1,227,355

809,207

19,978

829,185

6,173,676

8,217,540

57,095

8,274,635

737,377 1,588,950 9,067,362 8,037,940 1,971,862 8,028,834
1,169,283 460,109 772,180 46 330

767,317 1,753,796 10,740,658 10,211,261 2,398,497
345,026 3,055,923 3,953,216
352,602 892,957
944,595 99404

3,437 24,130 113,135 168,112 223,267
11,530 43,478 49,772 15,338 19,571
223,933 4 086

770,754 1,777,926 10,853,793 10,379,373 2,621,764
356,556 3,099,401 4,002,988
367,940 912,528
1,168,528 103 490

$

58,825,324 $ 61,397,046 $

1,392,069 $

62,789,115

1,714,310 331 000

2,393,177 62,085

156,188 115,926

2,549,365 178,011

TOTAL QBE FORMULA FUNDS

$

60,870,634 $ 63,852,308 $

1,664,183 $ =====6,..5,..,5=16='=.4=9=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.

- 37 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 16, 2005

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 INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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, 2004, which collectively comprise Dougherty County Board ofEducation's basic financial statements and have issued our report thereon dated March 16, 2005. 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 of the United States.
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 an opinion on the internal 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-6471-04-01, FS-6471-04-02 and FS-6471-04-03.
2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud 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.
Compliance and Other Matters
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 of laws, regulations, contracts and grant agreements, 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 of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the audit committee, management and members of the Dougherty County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004YB-30

ssell W. Hinton 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
March 16, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Dougherty 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 Dougherty County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2004. Dougherty County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility ofDougherty County Board of Education's management. Our responsibility is to express an opinion on Dougherty County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Dougherty 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 Dougherty County Board ofEducation's compliance with those requirements.
2004SA-30

In our opinion, the Dougherty County Board ofEducation 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, 2004.
Internal Control Over Compliance
The management of Dougherty County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Dougherty County Board of Education'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 Dougherty 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-6471-04-01.
A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements of laws, regulations, contracts and grants caused by error or fraud 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 ofthe 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 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,
~W.~
Russell W. Hinton State Auditor
RWH:as 2004SA-30

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

DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6471-01-01 FS-6471-02-01 FS-64 71-02-02 FS-6471-03-01 FS-6471-03-02 FS-64 71-03-03

Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-6471-03-01

The deficit in the Capital Projects-Regular Projects Funds occurred in prior years when the Federal Emergency Management Agency, the funding source for certain capital projects, deducted amounts equal to required insurance coverage from its reimbursements to the System for capital projects costs. The System was unaware of FEMA's insurance requirements in 1995; consequently, insurance proceeds totaling $1,015,000 for building damage incurred during the flood of 1994 were deposited into the General Fund. To resolve the deficit in the Capital Projects Funds, the Dougherty County Board ofEducation approved a plan to repay the amount of the insurance proceeds by transferring $203,000 from the General Fund to the Capital Projects Funds for five consecutive years beginning in fiscal year 2002. The remaining deficit of $406,000 will be funded in fiscal year 2005 and 2006.

The deficit fund balance for the General Fund is a result of the Child Nutrition Program incurring expenditures in excess ofavailable Child Nutrition funds. With assistance from the Georgia Department of Education, the Board is evaluating all aspects of the current Child Nutrition operations. The Board will take the necessary steps to resolve the funding deficiencies ofthe Child Nutrition Program while maintaining a high standard ofservice to the students of the Dougherty County School System.

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DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-6471-03-02
Although the Board has not limited the number of administrative staff in the schools, additional staffing for the purpose of segregating accounting functions is not practical due to limited funding. However, the Board will revise procedures and reassign accounting responsibilities in order to maximize compensating controls for the School Activity Accounts. In addition, the Board implemented a new School Activity accounting software program that will be used by all high schools and middle schools by the end of fiscal year 2006. The software program provides the central office internal auditor the ability to review each school's account activity online via the intranet. This will facilitate a more timely review of the operation of these accounts.
EMPLOYEE COMPENSATION Salary Overpayments/Underpayments Inadequate Personnel File Maintenance Inadequate Leave Records Finding Control Number: FS-6471-03-03
The Board continues to develop new procedures to improve the processing of payroll information from the schools and through the Human Resources department. A procedure requiring a supervisory review of all special payroll calculations was implemented in fiscal year 2004. In addition, the Board has purchased a new Payroll accounting software program that will assist in providing more processing controls. The new accounting program is currently targeted for implementation on July 1, 2005.
The System is seeking current time and attendance software technology that will assist with the accurate recording, tracking and processing of employee leave at all sites.
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DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6471-02-01 FA-6471-03-01 FA-6471-03-02 FA-6471-03-03 FA-6471-03-04 FA-6471-03-05

Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Acton Implemented Previously Reported Corrective Acton Implemented Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COST/COST PRINCIPLES Improper Expenditure Amount: $47,740 Finding Control Number: FA-6471-03-01

The expenditures questioned were paid by a Federal, special education funding source. These expenditures were determined to be improper due to insufficient supporting documentation. The expenditures were for repairs and maintenance to Dougherty County School System facilities which house the main operational site for the Oaktree Psychoeducational Center, and two other service sites. In addition to serving the students of Dougherty County, these sites also serve students from Lee, Terrell, Worth and Baker counties. The System is researching these expenditures and will submit appropriate documentation to the Georgia Department of Education for final resolution.

ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COST/COST PRINCIPLES Inaccurate Indirect Cost Calculation Amount: $23,424 Finding Control Number: FA-6471-03-02

The indirect costs questioned were calculated on the basis of a state fund indirect cost regulation, but were erroneously posted to a Federal fund. Both funds were funding sources for the Oaktree Psychoeducational Program. The Oaktree Program has sites in Albany, Arlington and Blakely that serve students with special needs in eight counties, including Dougherty, Lee, Terrell, Worth, Baker, Miller, Early and Calhoun. The system will document expenditures as they should have been reported and submit this information to the Georgia Department of Education for final resolution.

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DOUGHERTY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6471-03-05 In fiscal year 2003, the year for which this finding was issued, the System was in compliance with the Georgia Department of Education's requirements regarding implementation ofthe Title I school-wide program. The Department ofAudits, however, determined that the state's requirements "were in contrast with Federal requirements" and directed the state and school systems to implement proper "fiscal procedures for combining and allocating school-wide program expenditures to Federal programs" by the end of fiscal year 2005. During fiscal year 2004, the School System sought the guidance of the Georgia Department of Education and fully implemented the state's recommended procedures in fiscal year 2005. The School System anticipates that this finding will be resolved in fiscal year 2005. Auditor's Note: The School District has implemented changes to resolve this finding in fiscal year 2005 and this finding will be shown as resolved in the fiscal year 2005 audit report.
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SECTION IV FINDINGS AND QUESTIONED COSTS

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Dougherty 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 Dougherty County Board ofEducation disclosed financial statement reportable conditions related to the following control categories.

Budget Preparation/Execution Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts

Cash and Cash Equivalents Employee Compensation

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

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

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Dougherty County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement.

Program Income

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 Dougherty 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 Dougherty County Board of Education's audit disclosed an audit finding required to be reported by section .51 0(a) of 0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $703,243.

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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Dougherty County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Repeated From Prior Year Finding Control Number: FS-6471-04-01
At June 30, 2004, the General Fund and Capital Projects - Regular Projects Fund ofthe Dougherty County Board of Education reported deficit fund balances in the amount of $2,330,432 and $406,000, respectively which is considered to be an irregularity in accordance with O.C.G.A. 20-267. This condition occurred because management approved expenditures in excess of funds available in the General Fund and Capital Projects - Regular Projects Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit.
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Repeated From Prior Year Finding Control Number: FS-6471-04-02
Our examination ofprincipal accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents (1) The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts (1) Deposit preparation was not separated from the record keeping and cash custody Functions.
(2) Receipts testing at one of the schools revealed, six deposits were not made in a timely manner, ten receipts lacking sufficient documentation, and one receipt not agreeing to the deposit slip by $10.
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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Repeated From Prior Year Finding Control Number: FS-6471-04-02
Expenditures/Liabilities/Disbursements (1) The check writing function was not separated from record keeping or processing ofsigned checks.
(2) Nineteen voucher packages for two of the three schools tested, lacked approval of expenditures prior to checks being written. In addition, it was noted that at one of the three schools tested, checks were written out ofsequence, and one ofthe schools issued a signed blank check for the purchase of supplies for which no prior approval of the expenditure was noted.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization be segregated. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed to established procedures.
EMPLOYEE COMPENSATION Salary Overpayments/Underpayments Inadequate Leave Records Reportable Condition Repeated From Prior Year Finding Control Number: FS-6471-04-03
A sample offorty-two employee's payroll records was selected and examined to test for accuracy of payroll records of the Dougherty County Board of Education. The following deficiencies were noted:
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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Salary Overpayments/Underpayments Inadequate Leave Records Reportable Condition Repeated From Prior Year Finding Control Number: FS-6471-04-03
Salary Overpayments/Underpayments The Board overpaid one employee a total of $1,313. The overpayment was the result of paying the employee based on the wrong years of experience.
The Board underpaid two employees a total of $336. The underpayment was the result of paying the employees an incorrect hourly rate.
Inadequate Leave Records Sick leave was incorrectly accrued and/or credited to ten employees' sick leave balances.
Supporting documentation for sick leave could not be located or provided in a timely manner for ten employees.
These deficiencies occurred due to the School District's failure to adequately monitor administrative procedures regarding sick leave records.
The School District should implement procedures to ensure that all payroll disbursements are based on approved contracts, salary schedules and time worked. Leave records should be accurate and maintained in accordance with the School District's sick, personal and vacation leave policies.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
PROGRAM INCOME Inadequate Accounting Procedures Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6471-04-01
A review of accounting controls and procedures for catering activities administered by the School District's Child Nutrition Services revealed the following deficiencies:
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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
PROGRAM INCOME Inadequate Accounting Procedures Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6471-04-01
1. The invoicing for catering events were rarely recorded as accounts receivable on the general ledger or maintained in subsidiary records which makes it difficult to allow for proper tracking and collection of revenues. This was a deficiency noted both by billings done by the central office and those handled at individual school lunchrooms.
2. All invoices, based on a sequential numbering system, could not be accounted for by the Board.
3. Catering functions were not always billed or collected. A review of documentation indicated that no charge applied to some events or there was no indication ofan amount to be charged.
4. There did not appear to be any standardized price list as to what to charge for meals and other incidentals.
5. Expenditures for food and labor could not be readily identifiable for numerous catering events making it impossible to determine if the event provided sufficient funds to cover costs.
6. Labor was often performed during normal school hours and these charges were absorbed by individual lunchroom accounts.
7 CFR paragraph 210.14(a) requires that "revenues received by the nonprofit school food service be used only for operation or improvement ofsuch food service... ". The effect ofthe above-mentioned deficiencies means that school food service funds are being used to support activities outside the scope of school food service programs.
These conditions are a result ofthe School District's failure to implement adequate internal controls for monitoring and accounting ofcatering activities. The School District should implement controls to ensure proper billing, recording and collection of all catering functions, as well as, accounting for all expenditures on an event-by-event basis in order to determine if the catering function is selfsupporting.
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SECTIONV MANAGEMENT'S RESPONSES

DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6471-04-01
We concur with this finding. The deficit in the Capital Projects - Regular Projects Funds occurred in prior years when the Federal Emergency Management Agency, the funding source for certain capital projects, deducted amounts equal to required insurance coverage from its reimbursements to the System for capital projects costs. The System was unaware ofFEMA's insurance requirements in 1995; consequently, insurance proceeds totaling $1,015,000 for building damage incurred during the flood of 1994 were deposited into the General Fund. To resolve the deficit in the Capital Projects Funds, the Dougherty County Board of Education approved a plan to repay the amount of the insurance proceeds by transferring $203,000 from the General Fund to the Capital Projects Funds for five consecutive years beginning in fiscal year 2002. The remaining deficit of $406,000 will be funded in fiscal year 2005 and 2006.
The deficit fund balance for the General Fund is a result of the Child Nutrition Program incurring expenditures in excess of available Child Nutrition Funds. With assistance from the Georgia Department of Education, the Board is evaluating all aspects of the current Child Nutrition operations. The Board will take the necessary steps to resolve the funding deficiencies ofthe Child Nutrition Program while maintaining a high standard of service to the students of the Dougherty County School System.
Finding Control Number: FS-6471-04-02
We concur with this finding. Although the Board has not limited the number of administrative staff in the schools, additional staffing for the purpose ofsegregating accounting functions is not practical due to limited funding. However, the Board will revise procedures and reassign accounting responsibilities in order to maximize compensating controls for the School Activity Accounts. In addition, the Board implemented a new School Activity accounting software program that will be used by all high schools and middle schools by the end of fiscal year 2006. The software program provides the central office internal auditor the ability to review each school's account activity online via the intranet. This will facilitate a more timely review of the operation of these accounts.
Finding Control Number: FS-6471-04-03
We concur with this finding. The Board continues to develop new procedures to improve the processing of payroll information from the schools and through the Human Resources Department. A procedure requiring a supervisory review of all special payroll calculations was implemented in fiscal year 2004. In addition, the Board has purchased a new payroll accounting software program that will assist in providing more processing controls. The new accounting program is currently targeted for implementation on July 1, 2005.
The System is seeking current time and attendance software technology that will assist with the accurate recording, tracking and processing of employee leave at all sites.
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DOUGHERTY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004
Finding Control Number: FA-6471-04-01 This finding agrees with the findings previously identified by the Dougherty Process Management internal audit team in fiscal year 2004. As ofNovember, 2004, catering activities were temporarily ceased until sufficient accounting procedures were developed. Beginning in February, 2005, catering activities were reinstated on a limited basis for certain schools and in-system catering functions. Procedures were enforced which provided for the separate reporting and proper identification of expenditures and revenues for all such activities. To ensure that all catering activities are selfsupporting, procedures requiring central office administration approval and review of proposed activities and budgets, as well as, central office control ofbillings for all catering activities was also implemented. All catering funds are maintained in a separate bank account from regular school food service activities. Contact Person: Robert Lloyd, Executive Director of Finance and Operational Services, Telephone: (229) 431-1234, Fax: (229) 438-3521 Email: robert.11oyd@dougherty.k12.ga.us
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