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

DOUGLAS COUNTY BOARD OF EDUCATION
DOUGLASVILLE, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

DOUGLAS 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

9

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

12

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

13

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

14

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

31

DOUGLAS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

32

3 SCHEDULE OF STATE REVENUE

34

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

36

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

3 7

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
May 6, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Douglas 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 Douglas County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Douglas County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
As discussed in Note 2 to the financial statements, management has not recognized in the governmental activities and general fund a portion of salaries and corresponding employer's cost of related benefits which were earned for contractual services. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day employment contracts and the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record expenditures for
2003-34ARL-13

salaries and fringe benefits earned by employees though June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. No adjustment was made for the similar salaries and benefits earned in fiscal year 2002 but recorded in fiscal year 2003 as this information was not readily available. The net effect of the above accounting treatment resulted in the accompanying financial statements reflecting fourteen months ofexpenditures for a majority ofGeneral Fund salaries and fringe benefits and fourteen months ofrevenue from the State to fund these contracts. Generally accepted accounting principles require that expenditures be recorded when incurred, rather than when funds are received or disbursed.
In our opinion, except for the effects of not properly recognizing revenues and costs for certain salaries in the governmental activities and general fund as described in the proceeding paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities and general fund ofthe Douglas County Board ofEducation, as of June 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe district-wide capital projects fund, the debt service fund, and the aggregate remaining fund information ofthe Douglas County Board ofEducation, as of June 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated May 6, 2004, on our consideration of the Douglas County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 31 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States ofAmerica. 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 Douglas 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
2003-34ARL-13

the basic financial statements, and in our opinion, except for the effects of the matters referred to in the third paragraph, such information, 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,
S),.,_.O{ ~-~
~sell W. Hinton State Auditor
RWH:gp 2003-34ARL-13

DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis of the Douglas County Board of Education's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2003 are as follows:
The Board refinanced the 1993 general obligation bonds for a net present value savings of approximately $1.5 million.
Net assets increased $20.4 million, which represents a 24 percent increase from fiscal year 2002. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $81.8 million in revenue or 45 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $96.9 million or 55 percent of total revenues. Total revenues were $178.7 million.
The Board had $158.3 million in expenses related to governmental activities; only $96.9 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $81.8 million were adequate to provide for these programs.
Among major funds, the general fund had $156.6 million in revenues and $150.5 million in expenditures. The general fund's balance increased to $20.7 million from $14.5 million.
Using the Basic Financial Statements
This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Douglas County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds with all other nonmajor funds presented in total in one column. In the case of the Douglas County Board of Education, the general fund is by far the most significant fund.

DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Reporting the Board as a Whole
Statement ofNet Assets and Statement ofActivities
While these documents contain the large number of funds used by the Board to provide programs and activities, the view of the Board as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2003?" The Statement ofNet Assets and the Statement of Activities answer this question. These statements include all assets and all liabilities using the accrual basis ofaccounting similar to the accounting used by most privatesector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader whether, for the Board as a whole, the financial position of the Board has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Non-financial factors include the Board's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All of the Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the general fund, the district-wide capital projects fund, and the debt service fund.
Governmental Funds: Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that
11

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

can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunds is reconciled in the financial statements.

Fiduciary Funds: The district is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The district is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The district excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole

The perspective of the Statement of Net Assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for fiscal year 2003 compared to fiscal year 2002.

Table 1 Net Assets (in Thousands)

Assets Current and Other Assets Capital Assets, Net
Total Assets
Liabilities Current and Other Liabilities Long-Term Liabilities
Total Liabilities
Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted
Total Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2003 Year 2002

$ 58,645 144,211
$ 202,856

$ 54,548 132,226
$ 186,774

$ 17,229 81,930
$ 99,159

$ 22,248 81,220
$ 103,468

$ 62,300 20,185 21,212
$ 103!697

$ 50,806 19,611 12,889
$ 83!306

Total net assets increased $20.4 million.

Table 2 shows the changes in net assets for fiscal year 2003 compared to the changes in net assets for fiscal year 2002.

ll1

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

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

Governmental Activities

Fiscal

Fiscal

Year 2003

Year 2002

$ 4,509 91,790 557
$ 96,856

$ 4,450 77,915 6,095
$ 88,460

$ 49,753 2,640
17,201 1,848 697
4,292 763
4,689
$ 81,883
$ 178,739
$ 104,053
3,722 3,053 3,985 1,754 8,974 1,832 9,039 5,614 2,959
591
840 7,920 4,012
$ 158,348
$ 20,321

$ 40,227 2,141 12
10,156 7,258 1,814
6,231 1,111 3,231
$ 72,181
$ 160,641
$ 86,129
3,078 3,158 3,246 1,245 8,164 1,299 8,717 4,775 2,772
538
759 7,604 3,510
$134,994
$ 25,647

lV

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

Governmental Activities

Instruction comprises 65.7 percent of governmental program expenses. Interest expense comprises 2.5 percent of governmental program expenses. Interest expense was attributable to the outstanding bonds for capital projects.

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2003 Year 2002

Net Cost of Services

Fiscal

Fiscal

Year 2003 Year 2002

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

$104,053
3,722 3,053 3,985 1,754 8,974 1,832 9,039 5,614 2,959
591
840 7,920 4,012

$ 86,129
3,078 3,158 3,246 1,245 8,164 1,299 8,717 4,775 2,772
538
759 7,604 3,510

$ 31,982
2,893 1,032 2,401
997 5,302 1,832 4,199 3,309 2,647
508
-44 422 4,012

$ 22,614
2,186 2,419 1,386 -865 4,995 1,299 3,978 1,812 2,772
467
-26 -13 3,510

Total Expenses

$158,348 $134,994 $ 61.492 $ 46,534

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 30.7 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 38.8 percent.

The Board's Funds

The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $177.6 million and expenditures and other financing uses of $182.1 million. There was a decrease of $15.3 million in the capital projects fund due to capital funds on hand being expended. The

V

DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
general fund had an increase of $6.2 million and the debt service fund had an increase of $4.6 million. The positive change in the fund balance of the general fund for the year indicates that the Board was able to meet current costs from current revenues. The Board has one Nonmajor Governmental Fund which is used to account for the Perpetual Trust of Winston Elementary. The corpus of this trust is invested in stocks, which decreased in value during fiscal year 2003. The nonmajor governmental fund indicates a negative change of $1,722 related to this decrease in market value.
General Fund Budgeting Highlights
The Board's budget is prepared according to Georgia law. The most significant budgeted fund is the General Fund.
During the course of fiscal year 2003, the Board did not amend its general fund budget. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the actual revenues of $156.6 million exceeded the budgeted amount by $24.6 million. This excess was primarily related to additional state funds received at mid-term due to student growth.
The actual expenditures of $150.5 for the General Fund exceeded the budgeted amount by $18.3 million. This was due to the additional expenditures related to student growth and the inclusion in our financial statements of the actual amounts of school activity accounts which were not included in our budgeted amounts.
General Fund revenues exceeded expenditures by $6.2 million. The Board has made a concerted effort to raise fund balance in anticipation of future needs, continued decline in state funding, and continued student growth. This result is evidence of their work.
Capital Assets and Debt Administration
Capital Assets
At the end of fiscal year 2003, the Board had $144.2 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2003 balances compared with fiscal year 2002 balances.
VI

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

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

Governmental Activities

Fiscal

Fiscal

Year 2003 Year 2002

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 20,334 4,244
101,561 15,925 2,146

$ 14,418 32,877 77,408 7,228 295

Total

$ 144,210 $ 132,226

The primary changes occurred in Buildings and Improvements and in Construction in Progress. Several projects were completed during fiscal year 2003 that were included in Construction in Progress at June 30, 2002. Due to the ongoing growth in the county, the Board continues to have numerous construction projects including new buildings, additions and renovations.

Debt

At June 30, 2003, the Board had $81.9 million in bonds outstanding with $9.0 million due within one year. The Board maintains an Aa2 bond rating with Moody's and an AA bond rating with Standard and Poor's. Table 5 shows fiscal year 2003 balances compared with fiscal year 2002 balances.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2003 Year 2002

General Obligation Bonds

$ 8L930 $ 93,675

Current Issues

The Douglas County School System is financially stable. The School System's current operating millage is 19.767, which produces approximately $2.6 million per mill. Douglas County, and the Douglas County School System, has suffered economic setbacks in line with a state and national economy that is declining in growth. Sales tax revenue growth is lower than anticipated, and a shortfall is expected in total collections under the current Special Purpose Local Option Sales

Vll

DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Tax initiative. Capital projects are being evaluated and re-prioritized in light of the current revenue shortfall. However, in spite of the economy, the county's economic outlook continues to be healthy. The tax digest increased 80 percent between 1997 and 2002, including growth, reassessment and reappraisals. Population growth is continuing at an extremely high rate. The population growth is expected to be reflected in school system enrollment growth for several years to come, and is a significant factor in the Board's annual budget and planning processes. Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional information, contact Kay R. Turner, CPA, Chief Financial Officer at the Douglas County Board of Education, 9030 Highway 5, Douglasville, Georgia 30134. You may also email your questions to kay_turner@douglas. kl2.ga.us.
vm

DOUGLAS COUNTY BOARD OF EDUCATION

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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

26,337,017

14,709,893

5,413,179 9,876,823 1,177,171
297,322 834,553

20,334,038 4,244,237 2,216,517
128,011,556 24,355,162 -34,950,760

$ =====2=0;,;:::2.,;;,8=56:!,=70=8~

$

4,821,058

11,834,171

411,582

162,526

9,005,000 72,925,000

$

99 159 337

$

62,299,528

483,545 6,707,900 12,947,564
47,000 21,211,834

$

103,697,371

$ =====2=02='=85=6.,;7,,=08=

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

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

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

$

104,053,299 $

3,722,271 3,053,267 3,984,580 1,754,087 8,974,290 1,831,635 9,039,159 5,613,490 2,959,115
591,103

840,114 7,920,173 4 011 756

200,151
884,059 3,425,336

Total Governmental Activities

$ =====1=58=,-3"4"8"',=3=39= $

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

4,509,546

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

$

71,463,064 $

829,052 2,021,212 1,568,322
727,216 3,671,872

4,831,613 2,238,047
312,444 82,883

4,043,801

$

91,789,526 $

408,235 $
15,800 29,633
8,232 66,833
28,787 557,520 $

-31,981,849
-2,893,219 -1,032,055 -2,400,458
-997,238 -5,302,418 -1,831,635 -4,199,314 -3,308,610 -2,646,671
-508,220
43,945 -422,249 -4 011 756
-61,491,747

$

49,752,510

2,639,724

17,200,705 1,848,018 697,797 4,291,958 763,369 4,689,038

$

81,883,119

$

20,391,372

83,305,999

$===1=03..,.6=9=7.,.,3=7=1

-5-

DOUGLAS COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2003

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 21,936,031 $
1,886,658
1,361,885 9,861,963 1,177,171
297,322 834,553

669,483 9,922,964
2,933,365 14,860

$ 37,355,583 $ 13,540,672

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects Permanent Funds
Unreserved Designated for Self-Insurance Designated for Equipment Purchase Undesignated Reported in: General Fund Permanent Funds
Total Fund Balances

$ 4,820,836 $
11,834,171
$ 16,655,007 $

222
411,582 162,526
574,330

$

141,106

834,553
$

12,966,342

251,225 92,304
19,381,388

$ 20,700,576 $ 12,966,342

Total Liabilities and Fund Balances

$ 37,355,583 $ 13,540,672

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

EXHIBIT"C"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$ 3,731,503 2,847,885 $
73,147

$ 52,386

26,337,017 14,709,893
4,368,397 9,876,823 1,177,171
297,322 834,553

$ 6,652,535 $

52,386 $===5=7=,6=0==1,=17==6==

$

4,821,058

11,834,171

411,582

162,526

$

17,229,337

$ 6,652,535 $
$ 6,652,535 $ $ 6,652,535 $

$ 47,000
5386 52,386 $

141,106 6,652,535
834,553 12,966,342
47,000
251,225 92,304
19,381,388 5386
40,371,839

52 386 $ ====5=7,6=01=, 1=76=

-7 -

DOUGLAS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2003

EXHIBIT "D"

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

$ 40.371.839

$ 20,334,038 4,244.237 2,216,517
128,011,556 24,355,162 -34,950,760

144,210,750

1,044.782

-81,930,000 $ 103,697,371

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

DOUGLAS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 48,649,163 2,419,468 86,953,014 $ 9,128,470 4,509,546 286,217 4,689,038
$ 156,634,916 $

557,520 433,087 990 607

$ 100,499,092

3,722,271 3,053,267 3,847,086 1,496,217 8,974,290 1,333,282 9,122,775 6,346,212 $ 2,959,115
591,103 840,114 7,669,674

1,270,925 14,077,163

$ 150,454,498 $ 15,348,088 $ 6,180,418 $ -14,357,481

$

-949,215

$

-949,215

$ 6,180,418 $ -15,306,696

14,520,158

28,273,038

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

$ 20,700,576 $ 12,966,342

EXHIBIT"E"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$ 2,580,703 17,327,052
44,050 $ $ 19,951,805 $

$ 15

51,229,866 19,746,520 87,510,534
9,128,470 4,509,546
763,369 4,689,038

15 $ 177,577,343

$

$

5,261

12,610,000 3,669,706
$ 16,284,967 $
$ 3,666,838 $

$

5,544

26,720,000

765,600

-26,968, 194

-512,111

949,215

$

960,054

$ 4,626,892 $

2,025,643

$ 6,652,535 $

1,737 $ 100,500,829
3,722,271 3,053,267 3,847,086 1,496,217 8,974,290 1,338,543 9,122,775 7,617,137 2,959,115
591,103 840,114 7,669,674 14,077,163
12,610,000 3,669,706
1 737 $ 182,089,290
-1 722 $ -4511947

$

5,544

26,720,000

765,600

-26,968,194

-512, 111

949,215

-949 215

$

10 839

-1,722 $ -4,501,108

54108

44,872,947

52 386 $ 40,371,839 - 11 -

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

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")
Amounts reported for Governmental Activities in the Statement of Activities are different because:
Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:
Capital Outlay Depreciation Expense
Excess of Capital Outlay over Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
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:
Refunding Bonds Issued
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of:
Bond Principal Retirements Payments to Bond Refunding Agent
Total Long-Term Debt Repayments

$ -4,501,108

$ 16,721,604 -4,736,492

11,985,112

1,162,368

-26,720,000

$ 12,610,000 25,855,000

38,465,000

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

$ 20,391,372

The notes to the basic financial statements are an integral part of this statement. - 12 -

DOUGLAS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ==3=1=8=,3=84=
$ ==3=1=8=,3=84=

The notes to the basic financial statements are an integral part of this statement. - 13 -

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

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Douglas County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Douglas County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofintemal 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. All remaining governmental funds are aggregated and reported as nonmajor funds.
- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds, grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental 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 of accounting. 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
- 15 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. This change is in accordance with generally accepted accounting principles. No adjustment was made for the similar salaries and benefits earned in fiscal year 2002 but recorded in fiscal year 2003 as this information was not readily available.
The net effect ofthe above accounting treatment resulted in the accompanying financial statements reflecting fourteen months of costs for a majority of General Fund salaries and fringe benefits and the related revenue due from the State to fund these contracts. Generally accepted accounting principles require that revenues be recorded when earned or available and measurable as appropriate and that expenditures or expenses as appropriate be recorded when incurred, rather than when funds are received or disbursed.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia

- 16 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 ofGeorgia, Office of Treasury and Fiscal Services,
(7) Repurchase agreements, and
(8) Obligations of other political subdivisions of the State of Georgia.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
PROPERTY TAXES
The Douglas County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 21, 2002 (levy date). Taxes were due on December 23, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Douglas County Tax Commissioner bills and collects the property taxes for the School District, withholds 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, 2003, for maintenance and operations amounted to $48,649,163 and for school bonds amounted to $2,580,703.
- 17 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Tax millage rates levied for the 2002 tax year (calendar year) for the Douglas County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

18.55 mills _}fl mills

19.52 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $17,200,705 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

CONSUMABLE SUPPLIES On the basic financial statements, consumable supplies are reported at cost (first-in, first-out). 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.

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

CAPITAL ASSETS

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

- 18 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings
Temporary Permanent Building Improvements Equipment

All

$

10,000

NIA 20 years

$

10,000

25 years

$

50,000

50 years

$

10,000 7 to 30 years

$

10,000 4 to 20 years

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

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

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
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,

- 19 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $32,475,817. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

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

Risk Category

Bank Balance

1

$ 4,764,505

2

642,348

3

27,068,964

Total

$ 32,475.817

-20-

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

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

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

At June 30, 2003, the carrying value of the School District's total investments was $14,518,789 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type of Investment

U. S. Government

Investment Portfolio

Account

$

Repurchase Agreements

Total

$

Local Government Investment Pools

Total Investments

Risk Categories

2

3

Carrying Amount

Fair Value

$

0 $

28,361 $

28,361 $

28,361

52,386

2,847,885

52,386 2,847,885

53,045 2,847.885

52 386 $

$ 2 876 246 $ 2,928,632 $ 2,929,291

11,590,157

11,590,157

$ 14,518,782 $ 14 5]2448

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 of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety ofcapital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a

- 21 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

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

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

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

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

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

$ 14,417,858 $ 5,916,180

$ 20,334,038

32,876,542

3,502,833 $ 32,135,138

4,244,237

Total Capital Assets Not Being Depreciated $ 47,294,400 $ 9,419,013 $ 32,135,138 $ 24,578,275

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 101,601,170 $ 26,492,805 $

13,323,976 11,031,186

302,779

1,913,738

82,419 $ 128,011,556 24,355,162 2,216,517

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

24,193,448 6,095,670 7 569

2,339,132 2,334,378
62,982

82,419

26,450,161 8,430,048 70 551

Total Capital Assets, Being Depreciated, Net $ 84,931,238 $ 34,701,237 $

0 $ 119,632,475

Governmental Activity Capital Assets - Net $ 132,225.638 $ 44,120.250 $ 32,135.138 $ 144,210,750

-22 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

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

$ 3,468,219

$ 134,233 251,754 69,938 567,790

1,023,715 244,558

$ 4,736,492

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, the Endowment Corpus of Permanent Funds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants, statutory provisions or trust agreements. Restricted assets at June 30, 2003, were as follows:

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

District-wide Capital Projects

Bond

Debt Service

SPLOST

Proceeds

Funds

Permanent Fund

$

41,045 $

$ 9,894,603 $

$ 3,731,503 628,438

$ 28,361

2,847,885 $

47,000

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Funds

$====9==49='=.2==1==5

- 23 -

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

EXHIBIT"H"

Note 7: INTERFUND TRANSFERS

Transfers are used to move sales tax revenues collected by the District-wide Capital Projects Fund to Debt Service Funds for the retirement of outstanding bond principal, interest and paying agent's fees.

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; unemployment compensation and vision plan.

The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any ofthe past three years.

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years.

The School District has established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $250,000 loss per occurrence, up to the statutory limit.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2002 2003

$

0 $

172,987 $

172 987 $

0

$

0 $

245,876 $

245,876 $

0

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

- 24-

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

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

2002 2003

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

10,423 $

10,423 $

0

$

0 $

33,309 $

33,309 $

0

The School District is self-insured with regards to vision claims. The School District accounts for claims within the General Fund with expenditures and liabilities being reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated.

Changes in the vision claims liability during the year are as follows:

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2002 2003

$

0 $

123,084 $

123,084 $

0

$

0 $

126,691 $

126,691 $

0

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

Position Covered

Amount

Superintendent All Other Employees

$ 200,000 $ 500,000

Note 9: OPERATING LEASES

Douglas County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2003, for governmental funds amounted to $319,156. Future minimum lease payments for these leases are as follows:

- 25 -

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

EXHIBIT"H"

Note 9: OPERATING LEASES

Year Ending

Governmental Funds

2004 2005 2006

$ 354,252 354,252 35,096

Total

$ 743,600

Note 10: LONG-TERM DEBT

ADVANCE REFUNDING During fiscal year 2003, the Douglas County Board of Education issued $26,720,000 in General Obligation Refunding Bonds to advance refund $25,855,000 ofoutstanding bonds. The bond issue of $26,720,000 plus premium of $765,600 less underwriters and bond issue cost of $512,111 provided net proceeds of$26,973,489. $26,968,194 ofthe total net proceeds were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the 1993 Refunding Bond issue. As a result, the 1993 Refunding Series Bonds are considered defeased, and the liability for this issue has been removed from the District-wide Statement of Net Assets. The Douglas County Board of Education refunded the aforementioned bonds to reduce its total Debt Service payments over 8 years beginning fiscal year 2003 by $1,556,990 and to obtain an economic gain (difference between the present values oftotal debt service payments and the old and new debt) of $1,483,492.

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

Purpose

Interest Rates

Amount

General Government - Series 1995

4.35%- 5.45%

General Government - Refunding - Series 1999 3.10% - 5.0%

General Government - Series 2001

3.625% - 5.25%

General Government - Series 2002

3.0%-5.0%

General Government - Refunding - Series 2002A 2.5%-5.0%

$ 4,085,000 16,385,000 25,700,000 9,195,000 26,565,000

$ 81,930,000

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

-26-

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

EXHIBIT"H"

Note 10: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2002

$ 93,675,000

Additions G.O. Bonds

26,720,000

Deductions Debt Retired Bonds Defeased

12,610,000 25,855,000

Balance June 30, 2003

$ 81,930,000

Portion of Long-Term Debt Due within One Year

$ 9,005,000

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

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2004 2005 2006 2007 2008 2009 - 2013 2014 - 2015

$ 9,005,000 $ 12,730,000 15,055,000 17,715,000 5,815,000 17,535,000 4,075,000

3,502,964 3,102,791 2,571,271 1,916,139 1,110,111 2,698,416
293,213

Total Principal and Interest

$ 81,930,000 $ 15,194,905

- 27 -

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

EXHIBIT"H"

Note 11: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal year 1999, the School District defeased certain general obligation bonds by placing the proceeds ofnew bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. AtJune 30, 2003, $13,050,000 ofbonds are outstanding and are considered defeased.

Note 12: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of$1,166,010 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $947,292

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 $218,718

Note 13: SIGNIFICANT COMMITMENTS

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

Project North Douglas Elementary

Unearned Executed Contracts
$ 6,130.967

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

Note 14: 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.

- 28 -

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

EXHIBIT"H"

Note 15: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2003 2002 2001

100% 100% 100%

$ 7,308,066 $ 6,680,400 $ 7,593,473

- 29-

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

42,627,485 $

42,627,485 $

48,649,163

250,000

250,000

2,419,468

75,342,269

75,342,269

86,953,014

7,998,862

7,998,862

9,128,470

3,664,502

3,664,502

4,509,546

228,403

228,403

286,217

1,945,915

1,945,915

4,689,038

$

132,057,436 $

132,057,436 $

156,634,916

$

83,987,448 $

83,987,448 $

100,499,092

3,914,575 3,189,203 3,271,474 1,268,592 8,903,070 1,363,941 9,728,653 5,194,721 3,149,746
477,427
7,690,583

3,914,575 3,189,203 3,271,474 1,268,592 8,903,070 1,363,941 9,728,653 5,194,721 3,149,746
477,427
7,690,583

3,722,271 3,053,267 3,847,086 1,496,217 8,974,290 1,333,282 9,122,775 6,346,212 2,959,115
591,103 840,114 7,669,674

$

132,139,433 $

132,139,433 $

150,454,498

$

-81,997 $

-81,997 $

6,180,418

12,338,065

12,338,065

14,520,158

-191 865

-191 865

Fund Balances - Ending

$

12,064,203 $

12,064,203 $ ===2=0'=7=00=-,5=7===6

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Fresh Produce Program (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement
Total Special Education Cluster
Other Programs Pass-Through From DeKalb County Board of Education Title IV 21st Century Community Learning Centers Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies Title II Enhancing Education Through Technology Improving Teacher Quality Title Ill Immigrant Education Title IV Safe and Drug-Free Schools and Communities TitleV Innovative Education Program Strategies Vocational Education - Basic Grants to States High School Program Basic Grant
Total U.S. Department of Education
- 32-

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA N/A $
$

(2) 6,680,854
6,680,854

10.550 10.551

N/A N/A
$

449,637 67159
7,197,650

* 84.027 * 84.173 * 84.027

NIA $ N/A N/A
$

2,080,145 118,929 69253
2,268,327

84.287

N/A

291,584

* 84.010 84.318
* 84.367 84.365 84.186 84.298
84.048

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

2,093,651 31,584
456,828 35,193 91,004 86,384
151 461 5,506,016

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services, U. S. Department of Pass-Through From Georgia Department of Education Block Grants for Prevention and Treatment of Substance Abuse Grant-in-Aid
Defense, U. S. Department of Direct Department of the Marines R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

93.959

N/A

$ _ _ _ _1~5~24_8_

$ _ _ _ _4~9~2_86_

Total Federal Financial Assistance N/A = Not Available

$ ===1=2=,7=6=8,==2=00=

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program and Fresh Produce 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 ($716,447) were not maintained separately and are included in the 2003 National School Lunch Program.

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

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

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Douglas County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements.

See notes to the basic financial statements.

- 33 -

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program Health Insurance National Teacher Certification PayforPeITormance Preschool Handicapped Program School Snack Special Education Support Cost Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options
Georgia Institute of Technology Lottery Program State Data and Research Center

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 4,850,517 1,059,768
11,834,462 2,823,286 5,936,867 1,601,170 11,738,906 9,033,065 3,676,336
419,780 1,101,922 5,653,794 1,347,992
108,988 2,928,689
206,773 897,703 311,462 1,780,491 606,161 325,941
1,792,123 3,599,501 4,745,302
1,623,111 328,079 346,212 72,653 133,874
3,549,683 482,318 95,295
-1,947,827
42,750 947,292
31,300 300,200 263,812
30,393 54,000
29,116 364,861
4,522
87,763

$ 4,850,517 1,059,768
11,834,462 2,823,286 5,936,867 1,601,170
11,738,906 9,033,065 3,676,336
419,780 1,101,922 5,653,794 1,347,992
108,988 2,928,689
206,773 897,703 311,462 1,780,491 606,161 325,941
1,792,123 3,599,501 4,745,302
1,623,111 328,079 346,212 72,653 133,874
3,549,683 482,318 95,295
-1,947,827
42,750 947,292
31,300 300,200 263,812
30,393 54,000
29,116 364,861
4,522
87,763

- 34-

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

SCHEDULE "3"

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

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

557,520 $ 557,520

$

1,032,711

1,032,711

218,718

218,718

134,073 110,453 216,653

134,073 110,453 216,653

20,000

20,000

$ 86,953,014 $

557,520 $ 87,510,534

- 35-

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

SCHEDULE "4"

PROJECT
Fund the repayment of principal and interest on the School District's Series 1986 Bonds completely as they mature. the principal and interest on the School District's Series 1993 Bonds maturing January 1, 1998 through and including January 1, 2003 and the principal and interest on the School District's Series 1995 Bonds maturing January 1, 1998 through and including January 1, 2003.
Funding the acquisition, construction and equipping of phase II of the new high school, a new middle school and a new elementary school, the purchase of land for future schools and renovations and additions to existing schools, including the acquisition of all necessary property.
Funding the repayment of principal and interest on the School District's Series 1993 Bonds maturing July 1, 2003 through and including July 1, 2007 and the principal and interest on the School District's Series 1999 Bonds maturing January 1, 2003 through and including January 1, 2007.
Funding the acquisition and installation of new technology and equipment at all educational facilities; the acquisition, construction and equipping of three new schools and the purchase of land to be used as sites for future educational facilities and additions renovations and modifications to existing educational facilities and the acquisition of new school buses and transportation equipment.

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4) (5)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 34,000,000 $ 34,000,000 $

1,769,177 $ 20,221,465 Completed

29,000,000

43,641,247

43,641,247 Completed

30,000,000

30,000,000

3,283,872

Ongoing

79,000,000

79,000,000

15 348 088

31 977 478 Ongoing

$ 172,000,000 $ 186 641 247 $

20 401 137 $ 95,840,190

(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 Douglas 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

$ 3,343,033

Current Year

1,890,069

Total

$ 5,233,102

(5) The Series 1986 Bonds and a portion of the Series 1995 Bonds were retired through the sale of Series 1999 Refunding Bond Issue. The School District will utilize the SP LOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 1999 Refunding Bond Issue.

The Series 1993 Refunding Bonds were retired through the sale of Series 2002A Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 2002A Refunding Bond Issue.

See notes to the basic financial statements.

-36 -

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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)
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

$

4,851,446 $

4,693,613 $

117,595 $

4,811,208

1,059,442

1,020,728

11,416

1,032,144

11,847,501

11,107,911

500,867

11,608,778

2,823,547

2,735,019

28,262

2,763,281

5,944,028

7,183,876

124,245

7,308,121

1,600,610 11,749,028 9,068,255
3,724,921 8,646,310
2,931,091 206,722 897,999 311,092

1,331,298 10,252,611 10,820,073
3,030,479
280,970 1,163,938 6,956,809
823,432 54,350
3,367,247 446,366
1,014,499 328,770

9,013 650,628 631,781 362,111
16,669 15,422 89,655 25,404
6,940 47,353
1,758 24,190
5,090

1,340,311 10,903,239 11,451,854
3,392,590
297,639 1,179,360 7,046,464
848,836 61,290
3,414,600 448,124
1,038,689 333,860

$

65,661,992 $ 66,611,989 $

2,668,399 $

69,280,388

1,808,066 380,432

2,880,527 161,434

436,202 206,535

3,316,729 367,969

TOTAL QBE FORMULA FUNDS

$

67,850,490 $ 69,653,950 $

3,311,136 $ ====7=2,=96=5=,0=8=6

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

See notes to the basic financial statements.

- 37-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
May 6, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Douglas County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofDouglas County Board ofEducation as ofand for the year ended June 30, 2003, which collectively comprise Douglas County Board of Education's basic financial statements and have issued our report thereon dated May 6, 2004. This report was qualified for a departure from generally accepted accounting principles, as identified in the auditor's report on the basic financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Douglas County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.

2003-34YB-30

Internal Control Over Financial Reporting
In planning and performing our audit, we considered Douglas County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 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 Douglas County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6481-03-01 and FS-6481-03-02.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use of the management, members of the Douglas 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.~

RWH:gp 2003-34YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
May 6, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Douglas 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 Douglas 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 ofits major Federal programs for the year ended June 30, 2003. Douglas County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Douglas County Board of Education's management. Our responsibility is to express an opinion on Douglas County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Douglas 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 Douglas County Board of Education's compliance with those requirements.
2003SA-30

In our opinion, the Douglas County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003.
Internal Control Over Compliance
The management of Douglas 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 Douglas County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing 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 Douglas 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-6481-03-01.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Douglas 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.
~ ~ . a Respectfully submitted,
Rus ell W. Hinton State Auditor
RWH:gp 2003SA-30

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

DOUGLAS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6481-02-01

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-6481-02-01

Improvements have been made to ensure compliance with established controls related to Local School Purchase Request forms. Funding constraints continue to limit the number of staff available for accounting functions. Management will continue to monitor and emphasize the importance of adherence to established policies related to receipts and disbursements of the Principals' accounts.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6481-02-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements
The auditor's opinion on the Douglas County Board ofEducation's financial statements was qualified for a departure from generally accepted accounting principles. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Douglas County Board of Education disclosed financial statement reportable conditions related to the following control categories. Expenditures/Liabilities/Disbursements Employee Compensation None ofthe reportable conditions described above are considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Douglas 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 Douglas County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Special Tests and Provisions The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Douglas 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 Douglas County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of0MB Circular A-133. This audit finding is included in section IV of this report.
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DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $383,046.
9. Low Risk Auditee The Douglas 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
EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Reportable Condition Finding Control Number: FS-6481-03-01
Our examination of the principals' accounts disclosed weaknesses in internal controls over the voucher package process. Based on a test of 100 items, thirty-seven voucher packets included purchase request forms which were dated and approved after the invoice date. In addition, five voucher packets did not include an invoice.
These deficiencies were a result of management's failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that controls are revised and/or monitored to provide reasonable assurance that transactions are processed according to established procedures.
Management's Response:
Management will continue to monitor and emphasize the importance of adherence to established procedures related to disbursements from the Principals' accounts.
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DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION Inadequate Internal Controls Reportable Condition Finding Control Number: FS-6481-03-02
A review ofthe School District's internal control policies and procedures for employee compensation noted deficiencies in the monitoring ofestablished controls. Testing ofpayroll transactions revealed the following conditions:
(1) The state salary amount for certificate level T-5 step 5 did not agree with the Georgia Department of Education approved state salary schedule due to a transposition error. This transposition error resulted in 31 employees being overpaid $450 each, for a total overpayment of $13,950 for the year ended June 30, 2003.
(2) One employee tested was overpaid a nominal amount due to the incorrect pay step being entered into the payroll system.
These conditions occurred because management failed to ensure that established controls were operating effectively. Management should implement procedures to ensure that controls are revised and/or monitored to provide reasonable assurance that data entered into the payroll system is accurate. The Board should review this matter and determine if recovery of these overpayments is appropriate.
Management's Response:
Management will continue to monitor data entered into the payroll system to provide reasonable assurance that the information is accurate.
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6481-03-01
During the year in review, the School District identified three schools that participated in a schoolwide program. Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program. The Title I program, the Title II Enhancing Education Through Technology program, the Title II Improving Teacher Quality program, the Title III Immigrant Education program, the Title IV Safe and Drug-Free School and Communities program
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DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6481-03-01
and the Title V Innovative Education Program Strategies program supported the school-wide program at 3 of the District's schools. Although required by U. S. Department of Education and 0MB A-133 Compliance Supplement provisions, we found that the School District had not consolidated the different Federal funds for each ofthose schools that participated in a school-wide program. Furthermore, we noted that the School District arbitrarily charged each Federal fund with individual school-wide expenditures rather than using a prescribed cost allocation plan to distribute school-wide program expenditures to each funding source.
In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a school-wide program, U.S. Department ofEducation Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school-wide program in a reasonable manner. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. To distribute such costs, provisions of 0MB Circular A-87, Attachment E, F.3 state that a cost allocation plan should be developed, documented, maintained for audit. The School District personnel were unaware ofthese requirements and it was the School District's understanding that school-wide program expenditures lose their identity and therefore any school-wide program cost can be charged to Title I and other Federal funding programs.
The School District should implement procedures to (1) combine such funds as prescribed by U. S. Department of Education and (2) in line with 0MB Circular A-87 provisions allocate such schoolwide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6481-03-01 Management's Response: Management has been, and will continue to be, diligent in following required procedures. In reviewing 0MB Circular A-87, it was not interpreted that costs should be allocated as outlined above. Even though this Circular was last amended in 1997, previous audits by the Georgia Department of Audits had not disclosed errors in our procedures for combining and allocating school-wide program expenditures to Federal programs. Furthermore, the Georgia Department of Education (GDOE) provided no guidance suggesting that a different method of allocating costs should be implemented. Based on these facts, there was no reason for management to change the cost allocation method being used. Now that management has been made aware of a different interpretation of 0MB Circular A-87, and the resulting change in required fiscal procedures, immediate steps have been taken to identify and adopt the new procedures. The GDOE has been contacted, and a draft version of their guidelines has been obtained. When these guidelines are finalized by the GDOE, management will implement the required fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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