ELBERT COUNTY BOARD OF EDUCATION ELBERTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 10 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 I NOTES TO THE BASIC FINANCIAL STATEMENTS 13 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 31 ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 32 3 SCHEDULE OF STATE REVENUE 34 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 36 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 3 7 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 August 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert 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 I) of the Elbert County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Elbert 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 opm1ons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Elbert County Board of Education, as of June 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Elbert 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, 2003. In accordance with Government Auditing Standards, we have also issued our report dated August 3, 2004, on our consideration ofthe Elbert County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 31 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Elbert County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2003-34ARL-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, ? .........GQ.. 1 1 ) ~ 1 ~sell W. Hinton State Auditor RWH:gp 2003-34ARL-11 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Introduction Our discussion and analysis of the Elbert County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2003 are as follows: The School District implemented GASB 34 for fiscal year 2003. Due to this being the implementation year, many comparisons are not available that will be available in fiscal year 2004. On the district-wide financial statements, the assets of the School District exceeded liabilities by $8.9 million. Of this amount, the School District has a deficit of $2.4 million in unrestricted funds. The School District had $32.5 million in expenses relating to governmental activities; only $21.8 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $8.0 million were not adequate to provide for these programs with the result that Net Assets were reduced by $2.7 million. As stated above, general revenues accounted for $8.0 million or 27.0% of all revenues totaling $29.8 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. Overview of the Financial Statements This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements. The district-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. 1 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Elbert County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements The district-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the district-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. 11 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the district-wide financial statements because it cannot use these assets to finance its operations. Financial Analysis of the School District as a Whole Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available. 111 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets Governmental Activities Fiscal Year 2003 Assets Current and Other Assets Capital Assets, Net $ 6,471,203 18,041,400 Total Assets $24,512,603 Liabilities Current and Other Liabilities Long-Term Liabilities $ 5,690,960 9,853,335 Total Liabilities $15,544,295 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted (Deficit) $ 9,039,738 2,318,319 -2,389,749 Total Net Assets $ 8,968,308 Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available. IV ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Service Intangible Recording Tax Real Estate Grants and Contributions Investment Earnings Miscellaneous Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Expenses Decrease in Net Assets Governmental Activities Fiscal Year 2003 $ 1,194,035 19,505,187 1,157,233 $21,856,455 $ 3,787,403 1,957,456 134,976 23,230 1,366,765 55,231 655,598 $ 7,980,659 $29,837,114 $21,225,279 887,061 825,789 648,747 456,426 2,023,486 232,809 1,720,453 1,718,665 108,233 324,995 1,806,881 565.971 $32,544,795 $ -2.707.681 V ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity. Since this is the first year the School District has prepared financial statements following GASB Statement 34, cost of service comparisons to fiscal year 2002 are not available. Table 3 Governmental Activities Total Cost of Services Fiscal Year 2003 Net Cost of Services Fiscal Year 2003 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $21,225,279 $ 6,219,333 887,061 825,789 648,747 456,426 2,023,486 232,809 1,720,453 1,718,665 108,233 605,500 415,798 299,510 -84,173 1,965,120 -557,407 740,988 424,295 61,083 324,995 1,806,881 565,971 2,950 29,372 565.971 Total Expenses $321544!795 $1016881340 Financial Analysis of the School District's Funds The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $33.7 million and total expenditures and other financing uses of$ 41.2 million. Vl ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2003, the School District amended its general fund budget as needed. For the General Fund, the final actual revenues and other financing sources of $30.1 million exceeded the original budgeted amounts of $28.6 million by $1.5 million. This difference (final actual vs. original budget) was due primarily to additional Federal funds, charges for services and miscellaneous revenues that were larger then the original projected amounts. The actual revenues and other financing sources of $30.1 million exceeded the final budgeted amounts by $.9 million. The final actual expenditures and other financing uses of $32.3 million exceeded the original budgeted amount of $28.5 million by $3.8 million. This difference was primarily due to accruals of expenditures that was not considered in the budget process. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2003, the School District had $18.0 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements $ 1,036,946 10,865,804 4,272,851 1,797,502 68,297 Total $18,041.400 Vil ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Debt At fiscal year ended June 30, 2003, the School District had $8.4 million in bonds outstanding, and $1.5 million in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds and capital leases outstanding. Table 5 Debt at June 30 Governmental Activities Fiscal Year 2003 Bonds Payable Capital Leases $ 8,395,000 1,458,335 Total $ 9,853,335 Current Issues Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations. State Funding Reductions - The State of Georgia has experienced significant reductions in state revenues and has passed a portion of those reductions to school districts by implementing "Austerity" and other cuts. For the fiscal year ended June 30, 2003, the "Austerity" reduction for the School District was $363,407. This is in addition to other smaller cuts in funding for media, transportation and staff development. For the fiscal year ending June 30, 2004, the "Austerity" reduction for the School District is $758,585. These funding reductions have resulted in the School District reducing its certified and classified staff during the fiscal year ending June 30, 2004. Capital Improvements - The School District has undertaken significant capital additions and renovations funded primarily by Special Local Option Sales Taxes and State Capital Funds provided to the School District. A number of these projects have been completed. Others such as the construction of a new middle school and significant improvements to elementary schools are still in process. Deficit Net Assets in Unrestricted Fund - The School District General Fund has operated for several years without a significant fund balance as measured on the modified accrual basis. With the reductions in State Funding and the affects of accruals in the district-wide financial statements, the School District has an Unrestricted Deficit at June 30, 2003 in the amount of $-2,389,749. Vlll ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Phil Pitts, MBA CPA, Finance Director at 706-2134052 or via mail @ Elbert County School District, 50 Laurel Drive, Elberton, Georgia 30635. You may also email your question to Mr. Pitts at ppitts@elbert.k12.ga.us. IX ELBERT COUNTY BOARD OF EDUCATION ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Short-Term Debt Contracts Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Service Unrestricted (Deficit) Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of thi~ statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 936,159 1,465,118 902,568 2,584,750 538,038 19,500 25,070 1,036,946 10,865,804 2,265,375 10,603,827 7,170,696 -13,901,248 $ ===2=4=,5=1=2=,6=03= $ 1,428,052 2,619,264 1,000,000 637,509 6,135 1,737,631 8115 704 $ 15,544,295 $ 9,039,738 125,004 438,386 1,754,929 -2,389,749 $ 8,968,308 $ ===2=4..,,5=1=2,=6=03= ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 EXPENSES CHARGES FOR SERVICES GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 21,225,279 $ 887,061 825,789 648,747 456,426 2,023,486 232,809 1,720,453 1,718,665 108,233 324,995 1,806,881 565 971 340,996 322,045 530,994 Total Governmental Activities 32,544,795 $ 1 194 035 General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -4- EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 14,050,925 $ 281,561 409,991 349,237 540,599 54,231 790,216 976,307 790,911 47,150 1,214,059 $ 19,505,187 $ 614,025 $ 4,135 3,158 503,459 32,456 1,157,233 $ -6,219,333 -605,500 -415,798 -299,510 84,173 -1,965,120 557,407 -740,988 -424,295 -61,083 -2,950 -29,372 -565 971 -10,688,340 $ 3,787,403 1,957,456 134,976 23,230 1,366,765 55,231 655,598 $ 7,980,659 $ -2,707,681 11,675,989 $ =======8..,,9=6=8=,3=08..,. -5- ELBERT COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,857.910 350,506 2,167,656 $ 538,038 19,500 25,070 $ 1.857.910 $ 1,465,118 1,465,118 417,094 290,139 640,645 2,584,750 538,038 19,500 25,070 $ 4,958,680 $ 417 094 $ 1,755,257 $ 7,131,031 LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Short-Term Debt Contracts Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances $ $ 1,413,456 2,619,264 1,000,000 6,135 921,423 $ 14,596 637,509 $ 5,038,855 $ 1,573,528 $ 328 $ 921,751 1,428,052 2,619,264 1,000,000 637,509 6,135 328 $ 6,612,711 $ 125,004 413,316 25,070 $ $ 1,754,929 125,004 413,316 1,754,929 25,070 -643,565 $ -1,156,434 -643,565 -1,156,434 $ -80 175 $ -1,156,434 $ 1,754,929 $ 518,320 $ 4,958,680 $ 417 094 $ 1,755,257 $ 7,131,031 The notes to the basic financial statements are an integral part of this statement. -6- ELBERT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT" " Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities Net Assets of Governmental Activities (Exhibit "A") $ 518.320 $ 1,036,946 10,865,804 2,265,375 10,603,827 7,170,696 -13,901,248 18,041,400 261,923 $ -8,395,000 -1,458,335 -9,853,335 $ ==8,=96=8=,3=0=8 The notes to the basic financial statements are an integral part of this statement. -7- ELBERT COUNTY BOARD OF EDUCATION STATEMENTOF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003 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 Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES} Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 6,910,085 $ 158.206 $ 1,957.456 17,879,795 $ 1,157,233 2,992,157 1,194,035 5,544 38,134 11,553 471 085 184 513 $ 29,610,907 $ 1,379,880 $ 1,969,009 $ 6,910,085 2,115,662 19,037,028 2,992,157 1,194,035 55,231 655,598 32,959,796 $ 20,859,609 $ 20,859,609 887,061 825,789 648,747 456.426 2,036,952 229,599 $ 1,763,571 1,690,947 108,233 324,995 1,815,642 3,210 7,076,831 887,061 825,789 648,747 456.426 2,036,952 232,809 1,763,571 1,690,947 108,233 324,995 1,815,642 7,076,831 282,034 89,063 $ 1,395,000 476,908 1,677,034 565 971 $ 32,018,668 $ 7,080,041 $ 1,871,908 $ 40,970,617 $ -2,407,761 $ -5,700, 161 $ 97 101 $ -8,010,821 $ 523,517 -243 175 $ $ 243,175 $ 280,342 $ 243 175 $ $ -2,127.419 $ -5,700, 161 $ 340,276 $ 2,047,244 4,543,727 1,414,653 523,517 243,175 -243 175 523 517 -7.487,304 8,005,624 Fund Balances - Ending $ -80 175 $ -1, 156,434 $ 1,754,929 $ ===5=1=8'=32=0= The notes to the basic financial statements are an integral part of this statement. -8- ELBERT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ -7,487,304 $ 7,280,120 -531,332 6,748,788 -3,122,682 -523,517 $ 1,395,000 282,034 1,677,034 Change in Net Assets of Governmental Activities (Exhibit "B") $ -2,707,681 The notes to the basic financial statements are an integral part of this statement. -9- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Accounts Payable Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 857 $ 42,092 32,502 $ 33,359 $ ==4,;,;;;2~,0~92~ $ 1,000 $ 42,092 32,359 $ 33,359 $ ==.,;,42;;,i,~09~2= The notes to the basic financial statements are an integral part of this statement. -10- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2003 REVENUES Investment Earnings Interest EXPENSES Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT"H" PRIVATE PURPOSE TRUSTS $ 1 698 $ 1 000 $ 698 31,661 $ ==.;;;,32;;,i,=35=9;.. The notes to the basic financial statements are an integral part of this statement. - 11 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Elbert 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 Elbert 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. - 13 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust funds report trust arrangements under which principal and income may be expended to provide scholarships for selected students. 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 ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and - 14 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt and claims and judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. 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 $478,874 at July 1, 2002. For fiscal year 2003, 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, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$241,808 at July 1, 2002. This change is in accordance with generally accepted accounting principles. - 15 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 1,164,940 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 478,874 241,808 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 2,074,629 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,913,007 General Fund Balance July 1, 2002 (Restated) $ 2,047,244 CHANGES IN ACCOUNTING PRINCIPLES The Elbert County Board ofEducation 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, 2003. The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 2,047,244 4,543,727 1,414,653 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable $ 8,005,624 24,662,528 -13,369,916 3,384,605 -9,790,000 -1,216,852 Net Assets Beginning (See Exhibit "B") $ 11,675.989 - 16 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. - 17 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 Elbert County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on December 5, 2002 (levy date). Taxes were due on March 3, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Elbert County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $6,910,085. The tax millage rate levied for the 2002 tax year (calendar year) for the Elbert County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 16.607 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,957,456 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (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. - 18 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT "I" 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 ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal 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 $ 1 NIA $ 5,000 20 years $ 5,000 50 years $ 5,000 5 to 25 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets. DEFICIT FUND BALANCES Funds reporting a deficit fund balance at June 30, 2003, are as follows: Fund Type/Fund Name Deficit Balances Governmental General Fund District-wide Capital Projects Fund $ 643,565 $ 1,156,434 - 19 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES During the school year 2003-2004, the Elbert County School District took significant steps to reduce operating costs. Fourteen (14) certified positions were not filled when those positions became vacant. Two part-time attendance officer positions were eliminated. There was also a reduction in para-pro positions and one secretarial position. Efforts were made to reduce the costs of service providers to the School District and the School District spent as little as possible on supplies and related areas. The Board of Education also increased the millage rate for the 2003 tax year by mills. This produced approximately $209,000 in additional property tax. The School District is adding to the reduction in personnel by not filling some additional vacated positions for the fiscal year 2004-2005. If the State of Georgia eliminates "Austerity Reductions" to the School District beginning with the fiscal year 2006, the School District will be able to improve its financial condition at a faster pace. The deficit in the capital projects fund continued to grow during the fiscal year ended 2003-2004. This was due to a commitment to complete the new construction and renovation projects that had begun in prior fiscal years. This deficit will be eliminated over several years as the School District allocates a portion of the property tax revenues each year for debt service. 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 ofinsurance, 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 11 Opercent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (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, - 20- ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS (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, 2003, the bank balances were $1,608,801. 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, 2003, as follows: Risk Category Bank Balance 1 $ 364,124 2 1,178,463 3 66,214 Total $ 1,608,801 - 21 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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. AtJune 30, 2003, the carrying value ofthe School District's total investments was $1,465,118 which is materially the same as fair value. The investments are classified as to risk categories as follows: Type of Investment Carrying Amount Fair Value Investments not Subject to Categorization: Mutual Funds $ 1,465.118 $ 1,465.118 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: - 22 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 5: CAPITAL ASSETS Balances July l, 2002 Increases Balances Decreases June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,036,946 $ 3,983,680 $ 6,882,124 0 $ 1,036,946 10,865,804 Total Capital Assets Not Being Depreciated $ 5,020,626 $ 6,882,124 $ 0 $ 11,902,750 Capital Assets Being Depreciated Buildings and Building Improvements Equipment Land Improvements $ 10,558,728 $ 6,817,799 2,265,375 45,099 $ 352,897 0 $ 10,603,827 7,170,696 2,265,375 Less Accumulated Depreciation for: Buildings and Building Improvements Equipment Land Improvements 6,121,221 5,056,023 2,192,672 209,755 317,171 4406 6,330,976 5,373,194 2,197,078 Total Capital Assets, Being Depreciated, Net $ 6,271,986 $ -133,336 $ 0 $ 6,138,650 Governmental Activity Capital Assets - Net $ 11,292.612 $ 6,748.788 $ 0 $ 18,041.400 Capital assets being acquired under capital leases as of June 30, 2003, are as follows: Governmental Funds Buildings Equipment Less: Accumulated Depreciation $ 1,041,240 1,271,971 -510,873 $ 1,802.338 Current year depreciation expense by function is as follows: Instruction Support Services School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 281,923 $ 1,899 1,450 231,158 234,507 14,902 - 23 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Debt Services $ 603,532 $ 1,465,118 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfer From General Fund Debt Service Funds $====2-43!:!:.1~7='=5 Transfers are used to move property tax revenues collected by the General Fund to the Debt Service Fund for payment of bonds principal and interest. 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 ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board'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. - 24 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 8: RISK MANAGEMENT The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 478 $ 478 $ 0 $ 0 $ 0 $ 0 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount All Employees $ 100,000 Note 9: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Temporary Loans $===0 $1,000,000 $===0 $ 1,000.000 Note 10: LONG-TERM DEBT CAPITAL LEASES The Elbert County Board ofEducation has entered into various lease agreements as lessee for energy management, buses and copiers. 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. - 25 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 10: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 2000 4.9% $ 8,395.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2002 $ 1,219,854 $ 9,790,000 $ 11,009,854 Retroactive Restatement of Prior Year Balances -3,002 -3,002 Balance July 1, 2002 Restated $ 1,216,852 $ 9,790,000 $ 11,006,852 Additions Capital Leases 523,517 523,517 Deductions Debt Retired 282,034 1,395,000 1,677,034 Balance June 30, 2003 $ 1,458.335 $ 8,395.000 $ 9,853.335 Portion of Long-Term Debt Due within One Year $ 217,631 $ 1,520,000 $ 1,737,631 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: - 26- ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 Canital Leases Princinal Interest 2004 2005 2006 2007 2008 2009 - 2013 $ 217,631 $ 228,328 197,331 197,717 90,142 527,185 82,561 71,106 59,026 48,112 37,022 87 441 Total Principal and Interest $ 1,458,334 $ 385.268 Fiscal Year Ended June 30 General Obligation Debt Princfoal Interest 2004 2005 2006 2007 2008 $ 1,520,000 $ 1,595,000 1,670,000 1,760,000 1,850,000 411,355 336,875 258,720 176,890 90,650 Total Principal and Interest $ 8,395.000 $ 1.274.490 Note 11: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of$371,523 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $323,006 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 $48,517 - 27 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"!" Note 12: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003. Project Unearned Executed Contracts 01LW/OOS-652-001 Beaverdam Elementary School Renovations $ 1,093,984 191,587 $ 1,285.571 The amounts described in this note are not reflected in the basic financial statements. Note 13: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 14: RELATED PARTY TRANSACTIONS Mr. Phil Pitts, Chief Financial Officer for the Elbert County Board ofEducation, also serves on the Board ofDirectors for Elberton Federal Savings and Loan. During the fiscal year Elberton Federal Savings and Loan was one ofthe participating financial institutions that loaned funds to the Elbert County Board of Education. Mr. Steve Howe, Chairman of the Elbert County Board of Education during the fiscal year, was a loan officer for the Northeast Georgia Bank. The Northeast Georgia Bank along with other banks in Elbert County participated in making short-term line of credit loans to the Elbert County Board of Education. - 28 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 15: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2003 2002 2001 100% 100% 100% $ 1,563,030 $ 1,470,040 $ 1,693,657 -29- ELBERT COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation 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 $ 7,743,613 $ 7,743,613 $ 6,910,085 10,000 10,000 158,206 17,721,082 17,576,450 17,879,795 2,552,564 3,377,273 2,992,157 521,400 521,400 1,194,035 9,000 9,000 5,544 35400 35400 471 085 $ 28,593,059 $ 29,273,136 $ 29,610,907 $ 18,568,891 $ 19,123,209 $ 20,859,609 837,277 624,460 600,420 396,583 2,104,913 267,729 1,839,173 1,331,761 96,856 1,576,754 943,721 947,995 623,776 427,180 2,113,050 267,729 1,837,654 1,355,392 13,836 104,016 1,579,522 887,061 825,789 648,747 456,426 2,036,952 229,599 1,763,571 1,690,947 108,233 324,995 1,815,642 371 097 $ 28,244,817 $ 29,337,080 $ 32,018,668 $ 348,242 $ -63 944 $ -2,407,761 $ 523,517 $ -300,000 $ -300,000 -243 175 $ -300,000 $ -300,000 $ 280,342 $ 48,242 $ -363,944 $ -2,127,419 1,165,368 1,165,368 2,047,244 12,782 12 782 Fund Balances - Ending $ 1,226,392 $ 814,206 $===-~8~0i,,;,1,;,,;75::,. Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements. - 31 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Pass-Through From Bright From the Start: Georgia Department of Early Care and Learning Food and Nutrition Program Summer Food Service Program for Children Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U.S. Department of Agriculture Appalachian Regional Commission Direct Video Production Program Grant Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies School Improvement Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Title IV Safe and Drug-Free Schools and Communities TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Vocational Education - Basic Grants to States High School Program Basic Grant Total U.S. Department of Education - 32 - CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 10.559 N/A $ N/A (2) 1,601,605 N/A $ (2} 1,601,605 10.550 N/A $ 93197 1,694,802 23.001 $ 45 389 84.027 84.173 84.027 NIA $ N/A N/A $ 409,434 31,564 26,005 467,003 * 84.010 * 84.010 84.281 84.318 84.367 84.186 84.298 84.358 84.048 N/A NIA N/A N/A NIA N/A N/A N/A N/A $ 949,538 15,352 7,968 20,046 141,220 29,809 25,607 74,487 55377 1786407 ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Labor. U. S. Department of Pass-Through From Northeast Georgia Regional Development Center Georgia School to Work Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 17.249 N/A $ 1 705 NIA $ 65,939 Total Federal Financial Assistance N/A = Not Available $ ===3,=59=4=,2=4==2 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution 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 Summer Food Service Program ($22,804) and the School Breakfast Program ($240,919) were not maintained separately and are included in the 2003 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Elbert County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 33 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" 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 School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Apprenticeship Program Health Insurance Mentor Teachers Pay for Performance Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options Student Information Systems GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 660,568 $ 660,568 729,073 518,325 1,591,597 906,431 950,126 692,724 2,168,604 1,615,125 671,588 13,355 600,268 657,090 110,340 41,141 471,630 114,625 163,341 97,758 327,186 110,266 67,004 450,300 782,186 957,836 612,006 137,462 19,000 87,654 14,554 24,821 1,050,736 118,176 17,583 -423,661 34,173 57,000 33,250 323,006 4,814 60,800 37,423 416 77,769 393 75,168 729,073 518,325 1,591,597 906,431 950,126 692,724 2,168,604 1,615,125 671,588 13,355 600,268 657,090 110,340 41,141 471,630 114,625 163,341 97,758 327,186 110,266 67,004 450,300 782,186 957,836 612,006 137,462 19,000 87,654 14,554 24,821 1,050,736 118,176 17,583 -423,661 34,173 57,000 33,250 323,006 4,814 60,800 37,423 416 77,769 393 75,168 - 34- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Second Step Program GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,157,233 $ 1,157,233 $ 48,517 48,517 248 248 $ 17,879,795 $ 1,157,233 $ 19,037,028 See notes to the basic financial statements. - 35- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2003 SCHEDULE "4" PROJECT Renovating, repairing, modifying, expanding and equipping four elementary schools and constructing physical education, art and music facilities at three of said schools. Renovating, repairing, modifying, expanding and equipping bus garage and acquiring land therefor. Acquiring, constructing, installing, furnishing and equipping a new middle school and acquiring property both real and personal, necessary therefor and renovating, repairing, modifying, expanding and equipping the Elbert County Comprehensive High School, five elementary schools, central office and bus shop. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) (4) PROJECT STATUS $ 4,970,000 $ 4,970,000 175,000 175,000 $ 3,724,875 Ongoing 1,701 Ongoing 11,580,000 15,750,939 $ 7,488,174 7,204,770 Ongoing $ 16,725,000 $ 20,895,939 $ 7,488,174 $ 10,931,346 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Elbert County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 1,323,232 Current Year 65,565 Total $ 1,388,797 See notes to the basic financial statements. -36- ELBERT COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE} ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 838,218 $ 965,416 $ 12,761 $ 978,177 566,026 442,205 2,924 445,129 1,843,065 2,506,585 44,690 2,551,275 995,855 878,134 5,603 883,737 1,088,267 1,644,803 34,993 1,679,796 756,518 2,458,830 1,847,903 756,439 1,629,056 520,511 128,393 185,494 108,602 558,242 2,841,272 2,447,127 620,089 784,257 1,081,515 21,473 43,120 412,533 71,305 257,385 136,012 3,671 57,285 82,097 65,430 5,004 4,087 737 498 10,508 1,420 209 260 561,913 2,898,557 2,529,224 685,519 789,261 1,085,602 22,210 43,618 423,041 72,725 257,594 136,272 $ 13,723,177 $ 15,711,473 $ 332,177 $ 16,043,650 371,571 76,380 575,776 4,796 22,785 20,197 598,561 24,993 TOTAL QBE FORMULA FUNDS $ 14,171,128 $ 16,292,045 $ 375, 159 $ =~16;:;,i,;;;;66;,;7,i;;,2;;;;04.;. (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 37 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 August 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Elbert County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Elbert County Board ofEducation's basic financial statements and have issued our report thereon dated August 3, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Elbert County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Elbert 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 assurance on the internal 2003-34YB-30 control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Elbert County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6521-03-01, FS-6521-03-02 and FS-6521-03-03. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none ofthe reportable conditions described above is a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Elbert 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:gp 2003-34YB-30 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 August 3, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133 Ladies and Gentlemen: Compliance We have audited the compliance ofElbert 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, 2003. Elbert County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Elbert County Board of Education's management. Our responsibility is to express an opinion on Elbert County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States 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 Elbert 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 Elbert County Board of Education's compliance with those requirements. 2003SA-30 In our opinion, the Elbert County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Elbert 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 Elbert County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Elbert County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6521-03-01. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Elbert County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, W.~ RWH:gp 2003SA-30 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS ELBERT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6521-01-02 FS-6521-01-03 FS-6521-02-01 FS-6521-02-02 FS-6521-02-03 FS-6521-02-04 FS-6521-02-05 Previously Reported Corrective Action Implemented Further Action Not Warranted Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION Failure to Maintain Time and Attendance Records Finding Control Number: FS-6521-02-03 The School District has established procedures whereby a review and analysis will be made to determine which employees perform duties that are subject to time record requirements. These employees will be required to maintain time records. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6521-01-01 FA-6521-02-01 FA-6521-02-02 FA-6521-02-03 FA-6521-02-04 FA-6521-02-05 Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Amount: $6,700 Finding Control Number: FA-6521-02-03 The costs in question were salary supplements paid to the special education director and the system psychologist. These supplements were included in the budget for the Individuals with Disabilities Education Act - Part B - Special Education - Flow Through - 1- ELBERT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Amount: $6,700 Finding Control Number: FA-6521-02-03 (CFDA No. 84.027). That budget was approved at the State level and by the local Board ofEducation. The recipients ofthe supplements were not aware that they needed to keep separate time records for any time spent working with the program. The Finance Director has met and discussed this with the employees and they have established procedures to document their time. ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Amount: $20,840 Finding Control Number: FA-6521-02-04 The School District has established procedures whereby a review and analysis will be made to determine which employees perform duties that are subject to time record requirements. These employees will be required to maintain time records. ELIGIBILITY Failure to Retain Records Finding Control Number: FA-6521-02-05 The records referred to in this finding were to be maintained by a principal that retired and was not available to answer questions regarding the records in question. The School District is taking steps to establish procedures to ensure that appropriate records are maintained and available for review or audit. -2 - SECTION IV FINDINGS AND QUESTIONED COSTS ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Elbert 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 Elbert County Board of Education disclosed financial statement reportable conditions related to the following control categories. Budget Preparation/Execution Cash and Cash Equivalents Employee Compensation Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts None ofthe reportable conditions described above are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Elbert 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 Elbert County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Special Tests and Provisions The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Elbert County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Elbert County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of0MB Circular A-133. This audit finding is included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement - 1- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Elbert County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Deficit Fund Balances Reportable Condition Finding Control Number: FS-6521-03-01 At June 30, 2003, the General Fund and Capital Projects Fund of the Elbert County Board of Education reported a deficit fund balance in the amount of $643,565 and $1,156,434 respectively. These deficit fund balances are considered to be irregularities in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess offunds available in the General Fund and Capital Projects Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit. Management's Response: The School District's administration and Board of Education significantly reduced the number of personnel for the fiscal year ended June 30, 2004 and additional reductions for the fiscal year ending June 30, 2005. These reductions have made significant improvements to the General Fund fund balances. The School District had committed to several capital projects and the completion ofthose projects during fiscal year 2004 added to the deficit in the Capital Projects Fund. The administration and Board ofEducation have discussed this deficit extensively and plan to start a long-term program ofliquidating this deficit. Local property tax funds will be used initially and possibly sales tax funds if a referendum is approved in the future. CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6521-03-02 Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below: -2 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6521-03-02 Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions. Revenue/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing ofsigned checks. 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. Management's Response: The chieffinancial officer has discussed the inadequate separation ofduties with the principals. The principals have been directed to make modifications to the bank reconciliation function. Each school will designate a person other than the bookkeeper to reconcile the bank accounts. The schools are currently in the process of naming the other person and putting those procedures in place. EMPLOYEE COMPENSATION Failure to Maintain Time and Attendance Records Reportable Condition Finding Control Number: FS-6521-03-03 A review of salaries charged to the New Elbert County Middle School Low Wealth Project #OILW/00S-652-001 funded by the Georgia State Financing and Investment Commission (GSFIC) -3 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION Failure to Maintain Time and Attendance Records Reportable Condition Finding Control Number: FS-6521-03-03 revealed that no time or attendance records were maintained by employees, for capital outlay related services, as required by Chapters 11 and 41 ofthe Financial Management for Georgia Local Units of Administration (FMGLUA). Chapter 11 ofFMGLUA states, "Each employee is responsible for maintaining an accurate account of hours worked on a time sheet .... this time sheet aids with the distribution of payroll costs to appropriate cost centers". Chapter 41 states, "Each capital project should be identified separately so that all revenues, expenditures, assets, liabilities and equity including transfers can be traced to the project". This deficiency in internal controls occurred because the School District disregarded State policy requirements. The School District should implement internal controls to ensure that employees, working on GSFIC funded capital outlay projects, prepare time and attendance records that document time worked on each project. Management's Response: The School District currently does not have any capital projects in process. There have been procedures put in place to ensure that appropriate time records are maintained on future projects. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6521-03-01 During the year in review, there were five schools that the School District identified as participating in a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures. -4- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6521-03-01 In accordance with provisions ofU. S. Department ofEducation Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I - Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program of the school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department of Education funded programs in support of a school-wide program, U.S. Department ofEducation Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school-wide program in a reasonable manner. Ifthere is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs. Management's Response: The School District's administration was unaware of the fiscal requirements of School-wide Program. Having been made aware of the requirements, the School District has sent personnel to meetings for appropriate training in this area. Procedures have since been put in place to make the appropriate adjustments and allocations. -5- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Amount: $6,700 Finding Control Number: FA-6521-03-02 A review ofsplit funded salaries charged to the Individuals with Disabilities Education Act - Part B Special Education - Flow Through (CFDA No. 84.027) disclosed that employee time and attendance records were not being utilized as required by Chapter 41 ofthe Financial Management of Georgia Local Units ofAdministration (FMGLUA). This deficiency resulted in a questioned cost of$6,700. This condition occurred because the School District did not have adequate control procedures in place to ensure that all split funded salaries were charged to proper programs and accounts according to time and attendance records. The School District should implement procedures to ensure that all split funded salaries are charged to the accounting records according to time and attendance records as required by Chapter 41 of the FMGLUA. The Georgia Department of Education should review this matter to determine if a refund is appropriate. Management's Response: The ChiefFinancial Officer met with the employees involved to stress the importance ofmaintaining the appropriate records. After examining their records and files, the employees provided information demonstrating that they had kept records of meetings and other time spent on the program. With a little extra compilation, the results should be sufficient to meet the documentation requirements. ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition Nonmaterial Noncompliance U.S. Department of Agriculture Through Georgia Department of Education Amount: $40,977 Finding Control Number: FA-6521-03-03 A review of split funded salaries charged to the National School Lunch Program (CFDA No. 10.555) disclosed that employee time and attendance records were not being utilized as required by Chapter 41 of the Financial Management of Georgia Local Units of Administration (FMGLUA). This deficiency resulted in a questioned cost of $40,977. This condition occurred because the School District did not have adequate control procedures in place to ensure that all split funded salaries were charged to proper programs and accounts according to time and attendance records. The School -6- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized Reportable Condition Nonmaterial Noncompliance U.S. Department of Agriculture Through Georgia Department of Education Amount: $40,977 Finding Control Number: FA-6521-03-03 District should implement procedures to ensure that all split funded salaries are charged to the accounting records according to time and attendance records as required by Chapter 41 of the FMGLUA. The Georgia Department of Education School and Community Nutrition Division should review this matter to determine if a refund is appropriate. Management's Response: The School District acknowledges that complete and concurrent time and attendance records were not maintained during the fiscal year. There was significant administrative time spent attending meetings, reviewing all materials, leading workshops and working with the nutrition staff. At the present, this administrative position has been changed and a full time person has taken over the duties. If there is a split funded situation in the future, the administration will make sure that time records are maintained. -7-