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

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

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

10

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

13

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

14

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

15

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

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

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 17, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe 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, 2004, 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 op1mons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Douglas County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated June 17, 2005, 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 grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through 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 of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the 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 the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2004ARL-l 1

State Auditor

DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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, 2004. 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 2004 are as follows:
Net assets increased $20.4 million, which represents a 19.7 percent increase from fiscal year 2003. This total increase was due to governmental activities since the Board has no business-type activities.
General revenues accounted for $85.7 million in revenue or 49.6 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $87.2 million or 50.4 percent of total revenues. Total revenues were $172.9 million.
The Board had $152.6 million in expenses related to governmental activities; only $87.2 million of these expenses were offset by program specific charges for services, grants or contributions. General revenues, primarily taxes, of $85.7 million were adequate to provide for these programs.
Among major funds, the general fund had $151. 7 million in revenues and $144.6 million in expenditures. The general fund's balance increased to $27.8 million from $20.7 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.
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DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
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 2004?" 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. Nonfinancial 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
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DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

fund information helps you determine whether there are more or fewer financial resources that 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 Board is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity accounts. The Board 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 Board 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 2004 compared to fiscal year 2003.

Table 1 Net Assets (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 67,331 146,730

$ 58,645 144,211

Total Assets

$ 214,061 $ 202,856

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 17,056 72,925

$ 17,229 81,930

Total Liabilities

$ 89,981 $ 99,159

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

$ 73,805 23,377 26,898

$ 62,300 20,185 21,212

Total Net Assets

$ 124!080 $ 103!697

Total net assets increased $20.4 million.

Table 2 shows the changes in net assets for fiscal year 2004 compared to the changes in net assets for fiscal year 2003.

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

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Service For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General 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 2004

Year 2003

$ 4,676 82,238 329
$ 87,243

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

$ 50,505 2,681 11
6,156 12,440 2,218
685
4,216 743
6,047
$ 85,702
$ 172,945
$ 97,484
3,485 3,484 3,354 2,049 9,022 1,333 10,088 5,759 3,207
658
902 8,234 3,503
$ 152,562
$ 20,383

$ 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
$ 20,391

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

Governmental Activities

Instruction comprises 63.9 percent of governmental program expenses. Interest expense comprises 2.3 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

Year2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year2004 Year2003

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

$ 97,484 $ 104,053 $ 33,062 $ 31,982

3,485 3,484 3,354 2,049 9,022 1,333 10,088 5,759 3,207
658

3,722 3,053 3,985 1,754 8,974 1,832 9,039 5,614 2,959
591

2,408 1,005 1,512 1,097 4,886 1,216 9,980 3,238 2,819
549

2,893 1,032 2,401
997 5,302 1,832 4,199 3,309 2,647
508

902 8,234 3,503

840 7,920 4,012

-11 54 3,503

-44 422 4,012

Total Expenses

$ 152,562 $ 158,348 $ 65,318 $ 61,492

Although program revenues make up a majority of the revenues, the Board is still dependent upon tax revenues for governmental activities. Over 33.9 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 42.8 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 of $173.6 million and expenditures of $164.1 million. There was an increase of $5.6 million in the capital projects fund due to sales tax collections and investment earnings exceeding current expenditures for capital projects. The

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DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
general fund had an increase of $7.1 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 increased in value during fiscal year 2004. The nonmajor governmental fund indicates a positive change of $2,120 related to this increase 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 2004, 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 $151.7 million exceeded the budgeted amount by $15.8 million. This excess was related primarily to additional state funds received at mid-term due to student growth and the inclusion in our financial statements of the actual amounts of school activity revenue accounts which were not included in our budgeted amounts.
The actual expenditures of $144.6 million for the General Fund exceeded the budgeted amount by $8.3 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 expenditure accounts which were not included in our budgeted amounts.
General Fund revenues exceeded expenditures by $7.1 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 2004, the Board had $146.7 million invested in capital assets, all in governmental activities. Table 4 shows fiscal year 2004 balances compared with fiscal year 2003 balances.
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DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

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

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 20,338 7,412
102,296
14,588
2,096

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

Total

$ 146,730 $ 144,210

The primary changes occurred in Construction in Progress. 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, 2004, the Board had $72.9 million in bonds outstanding with $12.7 million due within one year. Table 5 shows fiscal year 2004 balances compared with fiscal year 2003 balances.

Table 5 Debt at June 30 (in Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2004 Year 2003

General Obligation Bonds

$ 72,925 $ 81,930

Current Issues

The Douglas County School System is financially stable. The School System's current operating millage is 18.4, which produces approximately $3.2 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 continues to be lower than anticipated, and a shortfall is expected in total collections under the current Special Purpose Local Option Sales Tax initiative. Capital projects are being evaluated and re-prioritized in light

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DOUGLAS COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 of available revenue and current needs. However, in spite of the economy, the county's economic outlook continues to be healthy. The continuing 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. k12.ga.us.
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DOUGLAS COUNTY BOARD OF EDUCATION

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

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

37,981,514

12,314,695

4,828,243 9,794,074 1,416,135
202,604 794,104

20,337,833 7,411,762 2,278,747
131,467,274 25,931,500 -40,696,750

$ ===2=14=,0=6=1=,7=35==

$

3,406,563

12,109,743

1,240,953

298,756

12,730,000 60,195,000

$

89,981,015

$

73,805,366

295,402 985,470 3,488,091 18,561,508
47,000 26,897,883

$

124,080,720

$ ===21=4=,0=6=1,=73=5=

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

DOUGLAS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

97,483,894 $

3,484,782 3,483,600 3,354,143 2,048,837 9,022,070 1,333,379 10,088,100 5,759,507 3,206,755
657,605

902,171 8,233,989 3,502,962

$

152,561,794 $

250,423
912,776 3,512,644 4,675,843

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

$

64,171,743

1,077,179 2,478,901 1,842,364
951,507 4,136,123
117,594 107,839 2,191,790 $ 387,774 107,961

4,667,004

$

82,237,779 $

$ 329,752 329 752 $

-33,061,728
-2,407,603 -1,004,699 -1,511,779 -1,097,330 -4,885,947 -1,215,785 -9,980,261 -3,237,965 -2,818,981
-549,644
10,605 -54,341 -3,502,962
-65,318,420

$

50,504,760

2,680,186

10,680

6,155,610 12,439,778 2,218,293
684,795 4,216,098
743,921 6 047 648

$

85,701,769

$

20,383,349

103,697,371

$ ===1=24;,;;,0=8=0-=,7=20=

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

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 28,272,002 $ 6,514,634

1,770,082

10,276,560

1,050,177 9,779,214 1,416,135
202,604 794 104

3,301,684 14,860

Total Assets

$ 43,284,318 $ 20,107,738

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

$ 3,400,042 $ 12,109,743
$ 15,509,785 $

6,521
1,240,953 298,756
1,546,230

$

295,402

623,663

794,104 $

18,561,508

258,169 25,803,195

$ 27,774,533 $ 18,561,508

Total Liabilities and Fund Balances

$ 43,284,318 $ 20,107,738

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

EXHIBIT"C"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$ 3,194,878 213,547 $
56,249

$ 54,506

37,981,514 12,314,695
4,408,110 9,794,074 1,416,135
202,604 794104

$ 3464674 $

54 506 $===6=6:!=,9=1=!1,=23=6=

$

3,406,563

12,109,743

1,240,953

298 756

$

17,056,015

$ 3,464,674 $
$ 3,464,674 $ $ 3,464,674 $

$
47,000
7 506 54,506 $

295,402 623,663 3,464,674 794,104 18,561,508
47,000
258,169
25,803,195 7 506
49,855,221

54 506 $ ===6=6:!=,9=1,,.1'=23=6=

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

EXHIBIT"D"

Total Fund Balances - Governmental Funds (Exhibit "C")
Amounts reported for Governmental Activities in the Statement of Net Assets are different because:
Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of:
Land Construction in Progress 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

$ 49,855,221

$ 20,337,833 7,411,762 2,278,747
131,467,274 25,931,500 -40,696,750

146,730,366

420,133

-72,925,000

Net Assets of Governmental Activities (Exhibit "A")

$ 124,080,720

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, 2004

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
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 51,108,141

2,764,927 $ 12,439,778

76,568,146

10,118,572

4,675,843

304,967

119,163

6,157,512

$ 151,698,108 $ 12,558,941

$ 93,370,168
3,484,782 3,483,600 3,192,889 1,576,037 9,022,070 2,254,462 10,545,045 5,046,272 3,206,755
657,605 902,171 7,882,295
$

6,963,775

$ 144,624,151 $ 6,963,775

$ 7,073,957 $ 5,595,166

20,700,576

12,966,342

Fund Balances - Ending

$ 27,774,533 $ 18,561,508

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

EXHIBIT"E"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$ 2,712,134
6,293,771
317,671 $ $ 9,323,576 $

$
2,120

53,820,275 21,498,476 76,568,146 10,118,572
4,675,843 743,921
6,157,512

2120 $ 173,582,745

$

$

3,475

9,005,000 3,502,962
$ 12,511,437 $ $ -3,187,861 $
6,652,535

0 $ 93,370,168

3,484,782 3,483,600 3,192,889 1,576,037 9,022,070 2,257,937 10,545,045 5,046,272 3,206,755
657,605 902,171 7,882,295 6,963,775

9,005,000 3,502,962

0 $ 164,099,363

2,120 $

9,483,382

52 386

40,371,839

$ 3 464 674 $ =======5=4=5=06= $ 49,855,221

- 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. 2004

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

$ 8,702,725 -6, 170,156

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

In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold.

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

9,483,382
2,532,569 -624,649 -12,953 9,005,000

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

$ 20,383,349

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

DOUGLAS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30. 2004
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ==28=9==,6=38=
$ ==2=89...,6=3=8=

The notes to the basic financial statements are an integral part of this statement. - 14 -

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

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The 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 ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.
- 15 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and Special Purpose Local Option Sales Tax Proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (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 of accounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and
- 16 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year and equity investments are reported at fair value. The Official Code of Georgia 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 of return 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,

- 17 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Douglas County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on November 7, 2003 (levy date). Taxes were due on January 9, 2004 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The 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, 2004, for maintenance and operations amounted to $51,097,461 and for school bonds amounted to $2,712,134.

Tax millage rates levied for the 2003 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

19.77 mills 1.03 mills

20.80 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $18,595,388 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.

- 18 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

CAPITAL ASSETS

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings
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

- 19 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

- 20-

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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

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

CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $44,366,265. 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, 2004, as follows:

Risk Category

Bank Balance

1

$ 4,030,109

2

471,475

3

39,864,681

Total

$ 44,366,265

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

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

- 21 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

At June 30, 2004, the carrying value of the School District's total investments was $12,257,608 which is materially the same as fair value. The investments are classified as to risk categories as follows:

T:yne oflnvestment

U. S. Government

Investment Portfolio

Account

$

Repurchase Agreements

Total

$

Local Government Investment Pools

Total Investments

Risk Categories 2

$

0 $

54,506

54 506 $

$

Carrying

Fair

3

Amount

Value

28,522 $

28,522 $

28,522

213,547

54,506 213,547

54,506 213,547

242.069 $

296,575 $

296,575

11,961,033

11,961,033

$ 12 25:Z 608 $ 12 25:Z 608

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

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (SEC) as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds ofGeorgia'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

- 22 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2003

Increases

Balances Decreases June 30, 2004

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

$ 20,334,038 $

3,795

$ 20,337,833

4,244,237

4,761,199 $ 1,593,674

7,411,762

Total Capital Assets Not Being Depreciated $ 24,578,275 $ 4,764,994 $ 1,593,674 $ 27,749,595

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

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

3,455,718 2,013,457 $
62,230

$ 131,467,274 437,119 25,931,500
2,278,747

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

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

2,720,570 3,337,204
112.382

424,166

29,170,731 11,343,086
182,933

Total Capital Assets, Being Depreciated, Net $ 119,632,475 $ -638,751 $

12,953 $ 118,980,771

Governmental Activity Capital Assets - Net $ 144,210.750 $ 4,126,243 $ 1,606,627 $ 146.730.366

Current year depreciation expense by function is as follows:

- 23 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

$ 4,524,130

$ 147,180 431,536 60,184 673,805

1,312,705 333,321

$ 6!170!156

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), the Endowment Corpus of Permanent Funds and property tax levied specifically for retirement ofoutstanding 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, 2004, were as follows:

District-wide Capital Projects SPLOST

Debt Service Funds

Permanent Fund

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

$ 3,194,878 $ 6,514,634

$
$ 10,276,560

213,547
$

47,000

Note 7: 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 ofloss 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 School District's insurance coverage in any of the past three years.

- 24-

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

EXHIBIT"H"

Note 7: RISK MANAGEMENT

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 ofYear Liability

2003 2004

$

0 $ 245,876 $ 245,876 $

0

$

0 $

363,118 $

363,118 $

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.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

33,309 $

33,309 $

0

$

0 $

69,240 $

69,240 $

0

The School District is self-insured with regard 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:

- 25 -

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

EXHIBIT"H"

Note 7: RISK MANAGEMENT

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2003 2004

$

0 $ 126,691 $ 126,691 $

0

$

0 $ 119,577 $ 119 577 $

0

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

Position Covered

Amount

Superintendent All Other Employees
Note 8: OPERATING LEASES

$ 200,000 $ 500,000

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, 2004, for governmental funds amounted to $372,252. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2005 2006 2007

Total

Note 9: LONG-TERM DEBT

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

Purpose

Interest Rates

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%

$ 397,452 77,596 25,200
$====5==00.,.,,,2'===4='=8
Amount $ 3,230,000
13,895,000 21,200,000
8,945,000 25,655,000 $ 72,925,000

- 26 -

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

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

Governmental Funds General
Obligation Bonds

Balance July 1, 2003

$ 81,930,000

Deductions Debt Retired

9,005,000

Balance June 30, 2004

$ 72,925.000

Portion of Long-Term Debt Due within One Year

$ 12,730,000

At June 30, 2004, 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

2005 2006 2007 2008 2009 2010 - 2014 2015

$ 12,730,000 $ 15,055,000 17,715,000 5,815,000 6,055,000 13,450,000 2,105,000

3,102,791 2,571,271 1,916,139 1,110,111
895,711 1,998,562
97,356

Total Principal and Interest

$ 72,925.000 $ 11,691.941

Note 10: PRIOR YEAR DEFEASEMENT OF DEBT

In fiscal years 1999 and 2003, the School District defeased certain general obligation bonds by placing the proceeds of new 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. At June 30, 2004, $37,885,000 of bonds are outstanding and are considered defeased.

- 27 -

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

EXHIBIT"H"

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $1,034,184 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $1,023,028

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 $11,156

Note 12: SIGNIFICANT COMMITMENTS

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

Project

Unearned Executed Contracts

Annette Winn Elementary School Addition and Renovation Mt. Carmel Elementary School Addition and Renovation North Douglas Elementary School

$ 1,851,651 1,227,249 1,198,382

$ 4,277,282

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

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

- 28 -

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

EXHIBIT"H"

Note 14: SUBSEQUENT EVENTS

In the subsequent fiscal year, the School District issued general obligation bonds in the amount of $78,600,000. The proceeds from these bonds will be used for paying the cost of(i) the acquisition, construction and equipping ofnew schools and the purchase ofthe land to be used as sites for future educational facilities; (ii) the acquisition, construction and equipping of classroom additions, other educational facilities and renovations and mortifications to existing educational facilities; (iii) the acquisition and installation of new instructional, safety and transportation equipment for all educational facilities; and (iv) capitalizing interest on the bonds through April 1, 2007.

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% oftheir 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

2004 2003 2002

100% 100% 100%

$ 7,484,239 $ 7,308,066 $ 6,680,400

- 29-

DOUGLAS COUNTY BOARD OF EDUCATION

SCHEDULE "1"

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

YEAR ENDED JUNE 30. 2004

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
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

50,000,000 $

50,000,000 $

51,108,141

2,764,927

73,855,080

73,855,080

76,568,146

7,073,169

7,073,169

10,118,572

3,588,198

3,588,198

4,675,843

315,166

315,166

304,967

1,037,786

1037786

6,157,512

$

135,869,399 $

135,869,399 $

151,698,108

$

88,057,824 $

88,057,824 $

93,370,168

3,688,400 2,737,644 3,378,293 1,285,999 9,131,087 1,625,817 9,908,701 5,342,883 3,147,340
8,050.418

3,688,400 2,737,644 3,378,293 1,285,999 9,131,087 1,625,817 9,908,701 5,342,883 3,147,340
8,050.418

3,484,782 3,483,600 3,192,889 1,576,037 9,022,070 2,254,462 10,545,045 5,046,272 3,206,755
657,605 902,171 7,882,295

$

136,354.406 $

136,354.406 $

144 624 151

$

-485,007 $

-485,007 $

7,073,957

21,185,194

21,185,194

20,700,576

Fund Balances - Ending

$

20,700,187 $

20,700,187 $ ==2=7=7=7=4=5=33=

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

See notes to the basic financial statements.

- 31 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From DeKalb County Board of Education Twenty-First Century Community Learning Centers Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Pioneer Regional Educational Service Agency Fund for the Improvement of Education
Total U.S. Department of Education
Defense, U. S. Department of Direct Department of the Marines R.O.T.C. Program
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553
. 10.555

N/A

N/A

$

$

(2) 6,839,611
6,839,611

10.550

N/A $

568 421 7,408,032

84.027 84.173

N/A

$

N/A

$

2,633,676 92 796
2,726,472

84.287
84.365 84.318 84.367 84.186 84.298 84.010 84.048
84.215

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

210,558
49,389 70,548 596,854 86,169 66,279 1,906,431 153,577
10 109
5,876,386

$

49 552

$ ===13=-,3=3=3.,;;,9=70=

- 32 -

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($857,774) were not maintained separately and are included in the 2004 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 fund financial statements.

See notes to the basic financial statements.

- 33-

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle 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 Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program At-Risk Summer School Program Health Insurance Limited School Choice Program Mentoring Program National Teacher Certification PayforPenormance Preschool Handicapped Program Special Education Support Cost
- 34 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

1,037,336

4,775,811 655,711
10,503,083 1,943,334 5,375,275 1,181,935
10,631,915 8,089,884 3,078,333
402,858 917,525 5,288,472 1,386,047 160,385 2,643,949 168,167 800,858 388,358 1,623,483 510,906 339,534
1,691,731 3,426,328 4,916,115
1,561,282 329,752 362,780 72,779
3,181,914 471,930 253,085
-3,784,712
42,750 116,212 1,023,027 241,973
19,672 61,353 193,581 263,812 75,000

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004
AGENCY/FUNDING GRANTS Education. Georgia Department of Lottery Program Student Information System Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Education, Georgia Department of Foreign Language Model Program

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

105,316

11,156

28 151

$===7=6=!=,5=6=8!,,;11=46=

See notes to the basic financial statements.

- 35 -

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

SCHEDULE "4"

PROJECT
The payment of principal and interest on the School District's Series 1993 Bonds maturing July 1, 2003 through and including July 1, 2007; the principal and interest on the School District's Series 1995 Bonds maturing July 1, 2003 through and including January 1, 2007; and the principal and interest on the School District's Series 1999 Bonds maturing July 1, 2003 through and including July 1, 2007.
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; the acquisition, construction and equipping of classroom additions, physical education facilities and renovations and modifications to existing educational facilities and renovations and modifications to existing educational facilities; the acquisition of new school buses and transportation equipment.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 30,000,000 $ 30,000,000 $

6,198,514 $

3,283,872 Ongoing

79,000,000

79,000,000

8,523,225

50,303,309 Ongoing

$ 109,000,000 $ 109,000,000 $ 14,721,739 $ 53,587,181

(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) A portion of the Series 1995 Bonds were retired through the sale of Series 1999 Refunding Bond Issue. The School District will utilize the SPLOST proceeds budgeted for this project, plus any excess SPLOST proceeds to retire the Series 1999 Refunding Bond Issue.
The Series 1993 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. 2004

SCHEDULE "5"

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

$

5,546,488 $ 5,279,326 $

104,531 $

5,383,857

819,472

954,954

8,263

963,217

12,343,669

11,864,332

660,652

12,524,984

2,382,371

2,971,404

31,546

3,002,950

6,298,406

6,988,011

156,677

7,144,688

1,432,110 12,496,335
9,526,639 3,662,199 9,532,728
3,109,241 200,710 942,943 439 205

1,567,021 11,719,809 10,527,992
3,312,881
283,865 1,224,003 7,377,851
857,243 54,856
3,929,597 448,724
1,016,399 436,565

13,107 383,671 1,109,350 258,653
13,457 10,840 92,252 22,314
5,195 44,632
1,519 24,316
5 588

1,580,128 12,103,480 11,637,342
3,571,534
297,322 1,234,843 7,470,103
879,557 60,051
3,974,229 450,243
1,040,715 442 153

$

68,732,516 $ 70,814,833 $

2,946,563 $

73,761,396

1,905,832 400 825

2,908,048 125,181

252,437 217 407

3,160,485 342,588

TOTAL QBE FORMULA FUNDS

$

71 039 173 $ 73,848,062 $

3,416,407 $ ====7,;,.7,,;;;26~4;i.,4;;;;6;;;,,9

(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
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 17, 2005

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 INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofDouglas County Board ofEducation as ofand for the year ended June 30, 2004, which collectively comprise Douglas County Board of Education's basic financial statements and have issued our report thereon dated June 17, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered 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 an opinion on the internal control over financial reporting. However, we a noted certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Douglas County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6481-04-01.

2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
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 of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Douglas County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004YB-30

~,...,J.;Q ll>.~
Russell W. Hinton State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 17, 2005

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 U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2004. 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 ofcompliance 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.
2004SA-10

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, 2004.
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.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
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,
~tA~$

RWH:as 2004SA-10

State Auditor

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, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6481-02-01 FS-6481-03-01 FS-6481-03-02

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

CORRECTIVE ACTION/RESPONSES

EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Finding Control Number: FS-6481-03-01

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-6481-03-01

Unresolved - See Corrective Action/Reponses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6481-03-01

The Douglas County School System has implemented guidelines provided by the Georgia Department of Education to set up operational procedures so they can remove fiscal and accounting barriers.

Auditor's Note: The School District has implemented changes to resolve this finding in fiscal year 2005 and this finding will be shown as resolved in the fiscal year 2005 audit report.

SECTION IV FINDINGS AND QUESTIONED COSTS

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
1. Type of Report Issued on the Financial Statements The auditor's opinion on the Douglas County Board ofEducation's financial statements was unqualified.
2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Douglas County Board ofEducation disclosed a financial statement reportable condition related to the following control category.
Expenditures/Liabilities/Disbursements
The reportable condition described above is not 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 did not disclose any reportable conditions in internal control over major programs.
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 ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.
7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $400,019.
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.
- 1-

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over Principal Accounts Reportable Condition Finding Control Number: FS-6481-04-01 Our examination of the principals' accounts disclosed weaknesses in internal control as discussed below: Expenditures/Liabilities/Disbursements - Based on a test of fifty items, twenty voucher packets included purchase request forms which were dated and approved after the invoice date. In addition, three checks were not written in consecutive order. 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. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2-

SECTIONV MANAGEMENT'S RESPONSES

DOUGLAS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6481-04-01
Management performs internal review of all principal accounts and provides written reports of deficiencies and recommendations for improvements. Management will continue to monitor and emphasize the importance of adherence to established procedures related to disbursements from principals' accounts.
Contact Person: Kay Turner, Chief Financial Officer Phone: (770) 651-2000 Fax: (770) 651-2041 Email: kay_tumer@douglas.k12.ga.us