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. - 1- 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. -2- 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