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

ECHOLS COUNTY BOARD OF EDUCATION
STATENVILLE, 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

ECHOLS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

3 SCHEDULE OF STATE REVENUE

30

4 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

ECHOLS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATIERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 9, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Echols County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Echols 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 Echols County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Echols 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

The Echols County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
As discussed in Note 2 to the basic financial statements, during fiscal year 2004, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Echols County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004.
In accordance with Government Auditing Standards, we have also issued our report dated March 9, 2005, on our consideration ofthe Echols County Board ofEducation'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 ofour testing ofinternal control over financial reporting and compliance and the results ofthat 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Echols County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 4, 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.
2004ARL-11

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24.
Respectfully submitted,

RWH:as 2004ARL-11

State Auditor

ECHOLS COUNTY BOARD OF EDUCATION

ECHOLS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Deposits and Deferred Revenues Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Purpose of Lease Agreement Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

464,544

545,379

28,975 349,182 28,363
1,693 2,503

29,262 4,966,732
713,963 -1756741

$ ======5;,;;,37=3;,.;,8=5==5

$

106,314

444,247

53,519

60,473 368,906

$

1033459

$

3,584,795

63,594 22,307 67,494 602,206

$

4,340,396

$ ======5-=,3=73;,.;,8=5==5

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

ECHOLS 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 Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes 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

$

3,441,167 $

238,358 359,905
79,716 263,325 237,548
11,176 399,886 240,699
12,021 8,780

319,593 7440

$

5,619,614 $

11,450 33,810
72,615 117 875

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

$

2,680,158

139,187 124,669 61,935 264,058 141,458

199,579 130,473 $

8,780

239,567

$

3,989,864 $

$ 30,358 30 358 $

-749,559
-99,171 -235,236
-17,781 733
-62,280 -11,176 -200,307 -79,868 -12,021
0
-7,411 -7 440
-1,481,517

$

1,110,533

7,529

10,172 491
288,458 -14,275 210,503

$

1613411

$

131,894

4,208,502

$ ===4,;;,,3=4=0"=,3=96=

-5-

ECHOLS COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2004

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Inventories Purpose of Lease Agreement
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

464,044 $

477,885

43,619 349,182
28,363 1,693 2,503

500 $ 67,494

464,544 545,379
43,619 349,182
28,363 1,693 2 503

$ 1,367,289 $

67 994 $ =====1=,4=3=5,=28=3=

$

106,314

444,247

53,519

$

604,080

$

106,314

444,247

53 519

$

604 080

$

63,594

19,804

2,503

$

677,308

$

763,209 $

$ 67,494
500 67,994 $

63,594 19,804 2,503 67,494
677,308 500
831 203

$ 1,367,289 $

67 994 $ =====1=,4=3=5,=28=3=

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

ECHOLS 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 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:
Capital Leases

$

831,203

$

29,262

4,966,732

713,963

-1,756,741

3,953,216

-14,644

-429,379

Net Assets of Governmental Activities (Exhibit "A")

$ ==4'=34=0=,3=9=6

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

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

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation
Capital Outlay Debt Services
Paying Agent Fees Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 1,136,166 10,663
3,584,725 723,955 117,875 2,093 $ 210,503
$ 5,785,980 $

$
-16,368 -16,368 $

1,136,166 10,663
3,584,725 723,955 117,875 -1_4,275 210 503
5,769,612

$ 3,334,553
238,358 359,905
79,716 261,835 237,548
7,468 395,732 194,598
12,021 8,780
308,358 $

56,925 7 440

$ 5,503,237 $

$

282,743 $

$
27,408 500
27,908 $ -44 276 $

3,334,553
238,358 359,905
79,716 261,835 237,548
7,468 395,732 194,598
12,021 8,780
308,358 27,408
500 56,925
7 440
5,531,145
238,467

$

$

-55,862

$

-55,862 $

$

226,881 $

536,328

55,862 $
55,862 $ 11,586 $ 56,408

55,862 -55,862
0 238,467
592,736

Fund Balances - Ending

$

763,209 $

67 994 $ ===8=3=1'=20=3=

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

ECHOLS 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, this amount is:
Depreciation Expense
Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.
Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, this amount consists of:
Capital Lease Payments
Change in Net Assets of Governmental Activities (Exhibit "B")

$

238,467

-145,394 -18,104
56,925 $ ===13=1=,8=9=4

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

ECHOLS 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
$ ====1=4=91=0=
$ ====1=4=91=0=

The notes to the basic financial statements are an integral part of this statement. - 11 -

ECHOLS 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 Echols County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Echols County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
- 12 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Qualified Zone Academy Bond Capital Lease proceeds to be used for the acquisition, construction or renovation of major capital facilities.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless 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 and grants. 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 is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The School District funds certain programs by a combination 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.

RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND

In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $18,469 at July 1, 2003. For fiscal year 2004, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2004. The governmental fund activity ofthe various school activity accounts had a fund balance of $41,019 at July 1, 2003. This change is in accordance with generally accepted accounting principles.

General Fund Balance July 1, 2003

$ 476,840

Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity

18,469 41,019

General Fund Balance July 1, 2003 (Restated) CHANGES IN ACCOUNTING PRINCIPLES

$=====5==36""",3"""2"""'8

The Echols County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004.

The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

- 14 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund (Restated) July 1, 2003 Capital Projects Fund

$ 536,328 56,408

Governmental Funds (Restated) July 1, 2003 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Capital Leases Payable

$ 592,736 5,709,957 -1,611,347 3,460 -486,304

Net Assets Beginning (See Exhibit "B")

$ 4!2081502

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

INVESTMENTS

COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:

(1) Obligations issued by the State of Georgia or by other states,

(2) Obligations issued by the United States government,

(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

- 15 -

ECHOLS 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 Echols County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 26, 2003 (levy date). Taxes were due on February 15, 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 Echols County Tax Commissioner bills and collects the property taxes for the School District 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 $1,128,637.

The tax millage rate levied for the 2003 tax year (calendar year) for the Echols County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

16.655 mills

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (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.

- 16 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

10,000

$

10,000

$

10,000

NIA 15 to 20 years up to 100 years 5 to 25 years

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

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:

- 17 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $958,767. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)
The School District's deposits are classified by risk category at June 30, 2004, as follows:

- 18 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

Risk Category

Bank Balance

1

$ 100,030

2

858,737

3

0

Total

$====9==58-,7===6==7

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.

At June 30, 2004, the carrying value of the School District's total investments was $545,379 s materially the same as fair value. The investments are classified as to risk categories as follows:

Txne of Investment

Risk Categories

1

2

U. S. Government

$

Q $

6.7424 $

Local Government Investment Pools

Total Investments

Carrying

Fair

3

Amount

Value

Q $

67,494 $

67,494

477,885

477,885

$ 545 372 $ 545 372

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

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission (SEC) as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and

- 19 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

-20-

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July 1, 2003

Increases

Decreases

Balances June 30, 2004

Governmental Activities Capital Assets, Not Being Depreciated:
Land

$

29,262

$

29,262

Capital Assets Being Depreciated Buildings and Improvements Equipment

$ 4,966,732 $

0 $

0 $ 4,966,732

713,963

713,963

Less Accumulated Depreciation for: Buildings and Improvements Equipment

1,251,221 360,126

Total Capital Assets, Being Depreciated, Net $ 4,069,348 $

Governmental Activity Capital Assets - Net $ 4,028,610 $

102,673 42,721
-145,394 $
-145,394 $

1,353,894 402,847
0 $ 3,923,954
0 $ 3,953,216

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

Governmental Funds

Buildings Current year depreciation expense by function is as follows:

$====!:3-68=.4~2-1

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

$

89,445

$

1,250

3,111

3,485

38,677

46,523 9,426

Note 6: RESTRICTED ASSETS

$.====1==45=,-39==4

Qualified Zone Academy Bonds (QZAB) escrow account is reported as restricted assets in the Statement of Net Assets because its use is limited by applicable statutory provisions. Restricted assets at June 30, 2004, were as follows:

- 21 -

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

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects QZAB Escrow

Restricted Investments: Debt Services
Note 7: INTERFUND TRANSFERS

$====67='=4===9==4

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

Transfer to

Transfers From General Fund

District-wide Capital Projects

$====55e.c,8=S6S=c2

Transfers are used to move funds to cover Regular Capital Projects and to make QZAB lease payments.

Note 8: RISK MANAGEMENT

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

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

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

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

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

- 22 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

$

0 $

0 $

$

0 $

1 854 $

Claims Paid

End ofYear Liability

0 $

0

1 854 $

0

The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the Safety National Casualty Corporation to provide coverage for potential losses sustained by the Fund in excess of $400,000 loss per occurrence, up to $1,000,000.

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

Position Covered

Amount

Each Employee

$ 100,000

Note 9: LONG-TERM DEBT

CAPITAL LEASES The Echols County Board of Education has entered into various lease agreements as lessee for equipment and renovations. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.

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

Governmental Funds Capital Leases

Balance July 1, 2003

$ 486,304

Deductions Payments

56,925

Balance June 30, 2004
Portion of Long-Term Debt Due within One Year

$====4-29=.3-7===9

- 23 -

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

EXHIBIT"H"

Note 9: LONG-TERM DEBT

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

Capital Leases

Principal

Interest

2005 2006 2015

$

60,473 $

485

368,421

3,751 3

Total Principal and Interest

$ 429,379 $

3 754

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of$50,202 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 $49,690

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 $512

Note 11: 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.

- 24-

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

EXHIBIT"H"

Note 12: SUBSEQUENT EVENTS

On September 21, 2004, the voters of Echols County voted in favor of a Special Purpose Local Option Sales Tax Referendum for education purposes. The imposition of the tax approved by the voters, as stated in part on the Official Ballot of Echols County, is as follows:

"Shall a special one percent sales and use tax for educational purposes be imposed in Echols County for a period not to exceed 12 calendar quarters (3 years) for the purpose ofraising not more than $500,000 of net proceeds by said tax, to be used for adding to, renovating, repairing, improving, demolishing, furnishing and equipping existing school buildings and other buildings and facilities useful and desirable in connection therewith; acquiring new school equipment; acquiring new school buses and vehicles; purchasing land; acquiring any necessary or desirable property, both real and personal, the maximum amount ofthe projects to be paid with sales and use tax proceeds will be $500,000."

Note 13: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$ 275,560 $ 276,752 $ 267,984

- 25 -

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

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation
Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

1,308,302 $

1,308,302 $

1,136,166

3,000

3,000

10,663

3,645,118

3,592,027

3,584,725

697,034

955,327

723,955

97,250

97,250

117,875

3,000

3,000

2,093

20 500

20 500

210 503

$

5 774 204 $

5,979,406 $

5,785,980

$

3,419,861 $

3,578,701 $

3,334,553

206,071 413,139 101,169 296,827 216,537
10,000 439,961 277,649
12,100 12,844 322,324

248,110 456,612 118,869 303,578 218,968
10,000 449,650 280,107
12,100 10,924 322,566

238,358 359,905
79,716 261,835 237,548
7,468 395,732 194,598
12,021 8,780
308,358 64 365

$

5,728,482 $

6 010 185 $

5,503,237

$

45 722 $

-30 779 $

282 743

$

6,000 $

7,500

-28 454

-55 863 $

-55 862

$

-22 454 $

-48 363 $

-55 862

$

23,268 $

-79, 142 $

226,881

606,878

606,878

536,328

-2 280

-2 280

Fund Balances - Ending

$

627,866 $

525456 $

763 209

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.

- 27 -

ECHOLS 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
Corporation for National and Community Service Pass-Through From Georgia Department of Education Learn and Serve America School and Community Based Programs
Education, U.S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First 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
Total U.S. Department of Education
Total Federal Financial Assistance
N/A = Not Available

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

* 10.553 * 10.555

N/A
NIA $
$

(2) 272 611
272,611

10.550

N/A $

14 259 286,870

94.004

NIA $

12 000

84.027 84.173
84.318 84.367 84.357 84.186 84.298 84.010 84.048

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

98.588 8295
106,883
6,897 44,461 56,643
7,249 6,043 245,579 20,122
493 877

$====79=2=7=4=7

- 28-

ECHOLS 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 ($52,733) 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 Echols 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.

- 29-

ECHOLS 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 Leaming Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program 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 Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Preschool Handicapped Program Special Education Low Incidence Grant Statewide Reading Program K-3 Lottery Program Student Information Systems
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 30 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

167,008

181,837 44,555
450,776 133,836 186,180 107,607 324,283 244,014 134,116
15,339 40,246 140,871 30,083
9,898 6,925 10,509 27,648 52,966 61,903 19,547 12,845
233,744 125,349 187,890
128,015 30,358
111,417 32,585 2,654 9,008 3,950 12,010
307,241 21,246 23,407
-152, 181
49,690 3,754 4,102
12,707
34,275
512
$ ======3;;;5..8.=4=7=2.5..

ECHOLS COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM /QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004

SCHEDULE "4"

DESCRIPTION

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) Program

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)

202,921 $ 54,413
500,444 157,464 215,083
122,632 370,349 281,194 152,302 275,255
8,607 13,702 31,496 57 921

143,872 $ 76,107
480,122 163,269 317,941
87,189 375,503 311,129 179,424
24,488 34,498 139,859 33,570
9,855 12,287 42,882 34,827 43644

11,477 $ 2,155 34,355 7,943 16,611
4,626 22,737 10,206
8,667
1,000 2,423 11,298 2,000 3,000 2,213
110 1,690 10 073

155,349 78,262 514,477 171,212 334,552
91,815 398,240 321,335 188,091
25,488 36,921 151,157 35,570 12,855 14,500 42,992 36,517 53 717

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

2,443,783 $ 2,510,466 $

152,584 $

2,663,050

Media Center Program Staff and Professional Development

70,235 14 566

65,274 5544

19,728 9,022

85,002 14566

TOTAL QBE FORMULA FUNDS

$

2,528,584 $ 2,581,284 $

181 334 $===-2,.;,;76=2;,i,;,6;;,;1=8

(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.

- 31 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 9, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members ofthe Echols County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Echols County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Echols County Board of Education's basic financial statements and have issued our report thereon dated March 9, 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 Echols County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a 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 Echols County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6501-04-01.

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 Echols County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and 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 Echols County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
-~~-~
R sell W. Hinton State Auditor
RWH:as 2004YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 9, 2005

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Echols 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 ofEchols County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2004. Echols County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe 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 Echols County Board of Education's management. Our responsibility is to express an opinion on Echols County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Echols 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 Echols County Board of Education's compliance with those requirements.
2004SA-10

In our opinion, the Echols 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 Echols 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 Echols County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
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 ofthe 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 ofthe management, members ofthe Echols County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as 2004SA-10

State Auditor

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

ECHOLS 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-6501-02-02 FS-6501-03-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-6501-03-01

The Echols County Board of Education has complied with GASB 34 reporting requirements according to our schedule for fiscal year 2004.

SECTION IV FINDINGS AND QUESTIONED COSTS

ECHOLS 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 Echols County Board of Education's financial statements was unqualified.

2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Echols County Board of Education disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents

Revenues/Receivables/Receipts

The reportable condition described above is not considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit ofthe Echols County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Echols County Board of Education 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 Echols County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .5 lO(a) of 0MB Circular A-133 The Echols County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) ofOMB 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 $300,000.

9. Low Risk Auditee The Echols County Board ofEducation qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133.

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ECHOLS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6501-04-01 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents Deposit preparation was not separated from the record keeping and cash custody functions. The bank reconciliation function was not separated from the record keeping function.
Revenue/Receivables/Receipts Fifteen out of twenty-five receipts reviewed were not deposited in a timely manner. All twenty-five receipts reviewed had no supporting documentation.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTIONV MANAGEMENT'S RESPONSES

ECHOLS COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6501-04-01
We concur with this finding. The Board is unable to hire the additional staffrequired; however, the Board will be implementing additional procedures to ensure accounting functions ofcustody, record keeping and authorization are segregated. This will require procedures for deposits to include signed verifications from teacher/sponsor; bookkeeper and Principal with supporting documentation and deposited in a timely manner by an assigned administrator. Bank reconciliation will be verified by an administrator. These procedures were implemented in March 2005.
Contact Person: Charles L. Hughes, Superintendent, Phone: (229) 559-5734 Fax Number (229) 559-0484 E-mail Address: hughesl@echols.kl2.ga.us