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

FLOYD COUNTY BOARD OF EDUCATION
ROME, 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

FLOYD COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

Page

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

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
July 28, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Floyd County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Floyd 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 Floyd 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 financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Floyd 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-11X

The Floyd County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
As discussed in Note 2 to the basic financial statements, during fiscal year 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 Floyd 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 July 28, 2003, on our consideration ofthe Floyd 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 29 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Floyd 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-11X

A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24.
Respectfully submitted,
~u, fl w:-4d-...:ik
\~sell W. Hinton State Auditor
RWH:as 2003-34ARL-11X

FLOYD COUNTY BOARD OF EDUCATION

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003
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
Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

17,349,800

3,238,723 6,188,640
824,933 8,504
152,841

2,410,814 532,432
3,323,331 82,280,544
9,187,022 -23,793,864

$ ===10=1=,7=0=3=,7=20=

$

1,351,474

1,849,377

6,391,314

503,898

8,054,415 14,773,571

$

32,924,049

$

51,112,293

487,428 9,656,067
70,371 7,453,512

$

68,779,671

$ ===10=1=,7=0=3=7,,..20=

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

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2003

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

EXPENSES

CHARGES FOR SERVICES

$

53,521,621 $

2,722,732 1,572,332 1,899,439 1,766,596 6,844,938
606,320 5,937,961 3,260,361
682,744 278,391

254.921 4,270,321 1,422,815

$

85,041,492 $

1,689,411
1,658,174 3 347 585

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

$

37,247,939 $

721,772 546,041 901,903 1,197,197 2,180,238
6,720 2,573,644 1,502,027
82,274 98,481

2,232,636

$

49,290,872 $

484,116 $
205 5,041 2,910 14,967 20,256
32,228 468,466
97 3,934
50,970
1 083 190 $

-14, 100,155
-2,000,755 -1,021,250
-994,626 -554,432 -4,644,444 -599,600 -3,332,089 -1,289,868 -600,373 -175,976
-254,921 -328,541 -1,422,815
-31,319,845

$

25,754,440

8,760,155 603,651 78,997
1,795,085 209,593
1,681,608

$

38,883,529

$

7,563,684

61,215,987

$

68 779 671

-5-

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

EXHIBIT"C"

ASSETS
Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Due From Other Funds Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 9,052,790 $
468,964 5,614,887
824,933 8,504
147,006 152,841

147,800 $ 573,753

8.149,210 $ 1,506,857

17,349,800
1,975,821 6,188,640
824,933 8,504
147,006 152 841

Total Assets

$ 16,269,925 $

721,553 $ 9,656,067 $ ===2=6;,i;,6;,,;4,;,,7,~54=5=

LIABILITIES AND FUND BALANCES

LIABILITIES

Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Due To Other Funds

$ 1,351,196 $ 1,849,377 6,391,314

Total Liabilities

$ 9,591,887 $

FUND BALANCES

Reserved for: Continuation of Federal Programs Debt Service Inventories Capital Projects
Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund

$

334,587

152,841 $

128,658

6,061,952

Total Fund Balances

$ 6,678,038 $

278

$

503,898 147 006

651 182

$

$ 70,371

$ 9,656,067

70 371 $ 9,656,067 $

1,351,474 1,849,377 6,391,314
503,898 147 006
10,243,069
334,587 9,656,067
152,841 70,371
128,658
6,061,952
16 404,476

Total Liabilities and Fund Balances

$ 16,269,925 $

721,553 $ 9,656,067 $ ===2=6;,i;,6=4=7~,54=5=

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

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

EXHIBIT"D"

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

$ 16,404,476

$ 2,410,814 532,432
3,323,331 82,280,544
9,187,022 -23,793,864

73,940,279

1,262,902

$ -15,820,000 -7,007,986

-22,827,986

$ 68,779,671

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

FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF 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 Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES}
Sale of Equipment Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 24,646,188 682,648
45,137,250 $ 6,269,484 3,347,585 152,768 1,584,615
$ 81,820,538 $

$ 762,413

$ 8,760,155

3,630

53,195

766,043 $ 8,813,350 $

24,646,188 9,442,803
45,899,663 6,269,484 3,347,585 209,593 1 584 615
91,399,931

$ 51,988,658

$

2,722,060 1,555,817 1,889,906 1,717,563 6,849,452
545,104 5,832,381 2,776,522
688,276 265,504 254,921 4,103,340
$

3,959,777

372,770 $ 469 347

7,440,000 953,468

$ 81,189,504 $ 4,801,894 $ 8,393,468 $

$

631 034 $ -4,035,851 $

419,882 $

51,988,658
2,722,060 1,555,817 1,889,906 1,717,563 6,849,452
545,104 5,832,381 2,776,522
688,276 265,504 254,921 4,103,340 3,959,777
7,812,770 1,422,815
94,384,866
-2,984,935

$

96,993

$

96,993

$ 1,784,313

1,784,313

941,642

941,642

-605,166

$ -336,476

-941 642

$

-508, 173 $ 2,725,955 $ -336 476 $

1,881,306

$

122,861 $ -1,309,896 $

83,406 $ -1, 103,629

6,555,177

1,380,267

9,572,661

17,508,105

$ 6,678,038 $

70 371 $ 9,656,067 $ 16,404,476

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

FLOYD 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

$ -1, 103,629

$ 3,834,678 -2,304,074

1,530,604 1,108,252

-1,784,313

$ 7,440,000 372,770

7,812,770

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

$ ==7=,5=6=3=,6=84=

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

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

EXHIBIT"G"
AGENCY FUNDS
$ ====14=2=,8=87=
$ =====1=42='=88=7=

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

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

EXHIBIT"H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Floyd 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 Floyd County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.
- 11 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds 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 of general longterm principal, interest and paying agent's fees.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various school activity accounts.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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.

- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific 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 $503,062 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 of the various school activity accounts had a fund balance of $1,281,255 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 6,585,254

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

503,062 1,281,255

Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 Inventory - Purchase to Consumption Method

5,315,410 108,752

Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

7,238,556

General Fund Balance July 1, 2002 (Restated)

$ 6,555,177

CHANGES IN ACCOUNTING PRINCIPLES

The Floyd 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 of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund

$ 6,555,177 1,380,267 9,572,661

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable

$ 17,508,105 93,899,465 -21,489,790 154,650 -23,260,000 -5,596,443

Net Assets Beginning (See Exhibit "B")

$ 61,215,987

- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia 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.

- 15 -

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

EXHIBIT "H"

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 Floyd County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on August 21, 2002 (levy date). Taxes were due on November 15, 2002 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Floyd 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 $24,646,188.

The tax millage rate levied for the 2002 tax year (calendar year) for the Floyd County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

17.691 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $8,760,155 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 ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District converted to a single inventory system effective July 1, 2002. For items that are both donated food commodities and purchased foods, the higher price of the item is reported on the single inventory. 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 expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenditures are recorded as the inventory items are used.

- 16 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time 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, half-year convention. 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

All

NIA

$

5,000 20 to 80 years

$

5,000 10 to 80 years

$

5,000 3 to 20 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. 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.

Note 3: DEPOSITS AND INVESTMENTS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance.

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(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 $1,456,015. 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.)
- 18 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

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

Risk Category

Bank Balance

1

$ 614,228

2

729,570

3

112,217

Total

$ 1,456.015

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

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

At June 30, 2003, the carrying value of the School District's total investments was $17,349,800 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type of Investment

U.S. Government

$

Repurchase Agreements

Total Investments $

Risk Categories 2
0 $ 17,269,800 $
$ 17 269 800 $

Carrying

Fair

3

Amount

Value

$ 17,269,800 $ 17,432,827

80,000

80 000

83 068

80 000 $ 17 349.800 $ 17.515.895

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

- 19 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

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

Balances July 1, 2002

Increases

Decreases

Balances June 30, 2003

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

$ 2,410,814

$ 2,410,814

1,005,069 $ 3,510,533 $ 3,983,170

532,432

Total Capital Assets Not Being Depreciated $ 3,415,883 $ 3,510,533 $ 3,983,170 $ 2,943,246

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 78,297,374 $ 8,862,877 3,323,331

3,983,170 $ 324,145

0 $ 82,280,544 9,187,022 3,323,331

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

14,003,354 5,245,312 2,241,124

1,365,369 815,556 123 149

15,368,723 6,060,868 2,364,273

Total Capital Assets, Being Depreciated, Net $ 68,993,792 $ 2,003,241 $

0 $ 70,997,033

Governmental Activity Capital Assets - Net $ 72,409,675 $ 5 513 774 $ 3,983,170 $ 73,940,279

Capital assets being acquired under capital leases as of June 30, 2003, are as follows:

Governmental Funds

Buildings Construction in Progress Less: Accumulated Depreciation

$ 2,515,861 532,432 20 966

$ 3,027,327

- 20 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Improvements of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services

$ 1,463,038

$

620

15,235

8,794

45,232

61,216

97,395

446,328

293

11 888

687,001 154,035

$ 2,304,074

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) is reported as a restricted asset in the Statement of Net Assets because its use is limited by applicable bond covenants or statutory provisions. The restricted asset at June 30, 2003, was as follows:

Debt Service Funds

Restricted Investments: Debt Services

$ 8,149,210

Note 7: INTERFUND ASSETS AND LIABILITIES

Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2003, consisted of the following:

Due From Other Funds

Due To Other Funds

General Fund District-wide Capital Projects

$ 147,006 $ 147 006

$ 147 006 $ 147 006

- 21 -

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

EXHIBIT"H"

Note 8: INTERFUND TRANSFERS

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

Transfer to

Transfers From

General

Debt Service

Fund

Funds

District-wide Capital Projects

$ 605,166 $===3==3=':;6,-47==6

Transfers are used to move other local revenues collected by the General Fund to the District-wide Capital Projects Fund to fund local capital projects and to move SPLOST collections as needed to the District-wide Capital Projects Fund.

Note 9: 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage.

The School District has elected to self-insure for all losses related to acts of God.

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

- 22 -

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

EXHIBIT "H"

Note 9: RISK MANAGEMENT

Changes in the workers' 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 $

327,782 $

327,782 $

0

$

0 $

432,694 $

432,694 $

0

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

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2002 2003

$

0 $

3 504 $

3 504 $

0

$

0 $

2,828 $

2,828 $

0

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

Position Covered

Amount

Superintendent

$ 100,000

Note 10: LONG-TERM DEBT

CAPITAL LEASES The Floyd County Board ofEducation has entered into a lease agreement as lessee for construction and energy management systems. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of its inception.

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

- 23 -

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

EXHIBIT "H"

Note 10: LONG-TERM DEBT

Purpose

Interest Rates

Amount

General Government - Series 1999 General Government - Series 1999

4.35% - 5.00% 5.00% - 5.25%

$ 5,205,000 10,615,000

$ 15,820.000

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

$ 5,596,443 $ 23,260,000 $ 28,856,443

Additions Capital Leases

1,784,313

1,784,313

Deductions Debt Retired

372 770

7,440,000

7,812,770

Balance June 30, 2003

$ 7,007.986 $ 15,820.000 $ 22,827.986

Portion of Long-Term Debt Due within One Year

$ 309 415 $ 7,745,000 $ 8,054,415

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

Fiscal Year Ended June 30

Capital Leases

Principal

Interest

2004 2005 2006 2007 2008 2009 - 2013 2014 - 2018 2019 - 2023

$ 309,415 $ 357,110

325,894

340,631

343,250

323,275

361,531

304,994

380,785

285,740

2,230,602

1,102,026

2,891,310

441,315

165 199

1 434

Total Principal and Interest

$ 7,007.986 $ 3,156.525

- 24 -

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

EXHIBIT "H"

Note 10: LONG-TERM DEBT

Fiscal Year Ended June 30

General Obligation

Debt

Principal

Interest

2004 2005

$ 7,745,000 $ 8,075,000

582,944 195,237

Total Principal and Interest

$ 15,820,000 $ 778.181

Note 11: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $719,713 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 $619,940

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 $99,773

Note 12: 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 13: SUBSEQUENT EVENTS

On November 4, 2003, the voters ofFloyd County voted in favor ofa Special Purpose Local Option Sales Tax Referendum for educational purposes. The imposition ofthe tax by the voters, as stated in part on the Official Ballot of Floyd County, is as follows:

- 25 -

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

EXHIBIT "H"

Note 13: SUBSEQUENT EVENTS
"Shall the special 1 percent sales and use tax for educational purposes currently imposed in Floyd County be reimposed commencing upon the expiration ofthe current 1 percent sales and use tax and continuing for a period of time not to exceed 20 consecutive calendar quarters for the raising of not more than $75,000,000 for the purpose of (i) for the Floyd County School District, providing funds to construct, replace, add to, renovate, remove, repair, modify, improve and equip existing school buildings and other buildings and facilities useful or desirable in connection therewith, including Alto Park Elementary, Armuchee Elementary, Armuchee Middle, Armuchee High, Cave Spring Elementary, Coosa Middle, Coosa High, Floyd County Education Center, Floyd County Technical High School, Garden Lakes Elementary, Glenwood Elementary, Johnson Elementary, McHemy Elementary, Midway Elementary, Model Elementary, Model Middle, Model High, Pepperell High, Pepperell Middle, Pepperell Primary, Pepperell Elementary and the central office, acquire system-wide technology improvements, acquire school buses, acquire the necessary property therefore, both real and personal, and to pay or reimburse the expenses of the Floyd County School District necessary to accomplish the foregoing, at a maximum cost of $48,340,000, and providing funds for the retirement of previously incurred general obligation indebtedness of the Floyd County School District at a maximum cost of $410,000..... .
If the imposition of the special tax is approved by the voters, such vote shall also constitute approval of the issuance of general obligation debt of the Floyd County School District in an aggregate principal amount not to exceed $40,140,000 for the above purposes."
On December 23, 2003, the Floyd County Board of Education issued General Obligation Bonds School Bonds, Series 2003, in the amount of $5,000,000 (of an authorized issue of $40,140,000). Proceeds ofthe bonds are to be used for the purposes described in the Special Purpose Local Option Sales Tax Referendum for educational purposes approved by the voters on November 4, 2003.
Additionally, the Floyd County Board of Education adopted a resolution dated June 14, 2004, to issue $2,000,000 (of an authorized issue of $40,140,000) of Qualified Zone Academy Bonds. Proceeds ofthe bonds are to be used for the purposes described in the Special Purpose Local Option Sales Tax Referendum for educational purposes approved by the voters on November 4, 2003.
Note 14: 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.
- 26 -

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

EXHIBIT "H"

Note 14: RETIREMENT PLANS

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%

$ 4,286,509 $ 4,043,926 $ 4,432,042

- 27 -

FLOYD 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 Community Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Sale of Equipment Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1}

FINAL (1}

ACTUAL AMOUNTS

$

24,483.570 $

24,483.570 $

24,646.188

682,648

44,142.488

42,931.712

45,137,250

5,115,232

3,655,508

6,269,484

3,347,585

465,000

465,000

152,768

2,035,000

2,005,000

1584615

$

76,241,290 $

73,540 790 $

81,820,538

$

51,130,861 $

51,666,037 $

51,988.658

1,729,885 1,203,983 1,898.802 1,229,808 5,981,986
552,499 5,740,808 2,532,876
721,117 206,695
15,436 3,827,419

2,006,686 1,506,903 1,920,618 1,586,986 6,033,083
552,499 5,747,144 2,785,183
720,746 328,325
15,436 5,639,620

2,722,060 1,555,817 1,889,906 1,717,563 6,849,452
545,104 5,832,381 2,776,522
688,276 265,504 254,921 4,103,340

$

76,772,175 $

80,509,266 $

81,189,504

$

-530,885 $

-6,968,476 $

631 034

$

96,993

$

-500,000 $

-500,000

-605, 166

$

-500 000 $

-500 000 $

-508 173

$

-1,030,885 $

-7,468,476 $

122,861

5 012 771

5,378,278

6,555,177

$

3,981,886 $

-2,090, 198 $ ===6'"=,6=7=-8,'=03=8=

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.

- 29 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Capacity Building Flow Through Preschool
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Comprehensive School Reform Demonstration Grant Even Start Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality Title Ill Limited English Proficient Title IV 21st Century Community Learning Centers TitleV Innovative Education Program Strategies School Renovation - Schools Vocational Education - Basic Grants to States High School Program Basic Grant
Total U. S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A

N/A

$

$

(2) 3,539,981
3,539,981

10.550 10.665

N/A N/A
$

197,602 (3)
3,737,583

84.027 84.027 84.173

N/A

$

N/A

N/A

$

47,168 1,417,037
105,903
1,570,108

84.332 84.213
.. 84.010 84.010
. 84.318 84.367
84.365
. 84.287
84.298 84.352
84.048

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

75,603 337,145 1,425,442
29,955
29,750 314,751
16,371
378,615
42,557 9,321
89,320
4,318 938

Total Federal Financial Assistance N/A = Not Available

- 30 -

$ ===="8=05;;,;;6.,,;;5~2,;,.1

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount 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 School Breakfast Program ($433,722) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Funds earned on the National Forest Reserve Funds, in the amount of $3,114, do not require reporting of expenditures.
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 Floyd 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.

- 31 -

FLOYD 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 Learning Pre-Kindergarten Program
Community Affairs, Georgia Department of Local Assistance Grant
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Apprenticeship Program Health Insurance Mentor Teachers National Teacher Certification Pay for Performance Post Secondary Options Preschool Handicapped Program Special Education Low Incidence Grant
- 32 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 1,089,207 52,000

$

1,089,207

52,000

2,099,536 735,000
5,561,041 1,724,336 2,885,241
792,172 6,157,306 3,703,348 1,846,225
257,861 553,685 3,506,728 898,223 125,504 1,018,862 245,042 424,810
76,216 882,669 293,718 178,682
976,414 2,069,477 2,535,723
1,337,075 320,777 203,025 39,921 82,661
1,698,440 285,204 105,518
-1,150,047
71,394 124,052
52,250 619,940
22,742 54,069
-349 5,309 128,217 20,020

2,099,536 735,000
5,561,041 1,724,336 2,885,241
792,172 6,157,306 3,703,348 1,846,225
257,861 553,685 3,506,728 898,223 125,504 1,018,862 245,042 424,810
76,216 882,669 293,718 178,682
976,414 2,069,477 2,535,723
1,337,075 320,777 203,025 39,921 82,661
1,698,440 285,204 105,518
-1,150,047
71,394 124,052
52,250 619,940
22,742 54,069
-349 5,309 128,217 20,020

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Lottery Programs Assistive Technology Computers in the Classroom
Georgia Institute ofTechnology Student Information System
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Natural Resources, Georgia Department of Wildlife Resources Division Arrowhead Environmental Education Center
Office of Treasury and Fiscal Services Public School Employees Retirement

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

18,932

210,714

57,056

$

18,932

210,714

57,056

$

762,413

762,413

41,531 99,773

41,531 99 773

$ 45,137,250 $

762,413 $ =====45=,8=9=9=,6=63=

See notes to the basic financial statements.

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

SCHEDULE "4"

PROJECT
Acquiring, constructing and equipping school buildings and other buildings and facilities useful or desirable in connection therewith, including, but not limited to, four new schools, acquiring real property for new school buildings and related facilities, adding to, repairing, renovating, improving and equipping existing buildings, structures and facilities of the Floyd County School District and acquiring the necessary property therefor, both real and personal

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 35,700,000 $ 43,572,104 $

1,930,632 $ 37,223,989 Ongoing

(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 project. Includes all cost from project inception to completion.

(3) The voters of Floyd County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above project as follows:

Prior Years

$ 2,961,732

Current Year

953,468

Total

$ 3,915,200

See notes to the basic financial statements.

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

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle 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)

2,460,523 $ 851,542
6,528,612 1,945,479 3,416,965
875,011 7,124,466 4,324,034 2,183,770 6,124,539
1,132,277 272,367 494,892 93400

2,925,021 $ 294,582
7,723,676 1,615,094 4,446,068
375,590 7,642,566 6,597,368 1,816,489
140,925
5,122,247 120,145 28,274
1,184,840 235,761 587,929 95 084

9,141 $ 300,321 122,152
315,257 483,367 223,232
2,101 124,047
80,480 25,289

2,934,162 294,582
8,023,997 1,615,094 4,568,220
375,590 7,957,823 7,080,735 2,039,721
140,925 2,101
5,246,294 200,625 28,274
1,210,129 235,761 587,929 95 084

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

37,827,877 $ 40,951,659 $

1,685,387 $

42,637,046

Media Center Program Staff and Professional Development

1,028,451 209 904

1,626,759 49 768

99,441 152,214

1,726,200 201,982

TOTAL QBE FORMULA FUNDS

$

39,066,232 $ 42,628,186 $

1,937,042 $ =====4=4'!::56=5:e,2=2=8

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

See notes to the basic financial statements.

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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
July 28, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Floyd 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 Floyd County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Floyd County Board ofEducation's basic financial statements and have issued our report thereon dated July 28, 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 Floyd County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Floyd 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 a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in our judgment, could adversely affect Floyd County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as item FS-6571-03-01 and FS-6571-03-02.

A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.

This report is intended solely for the information and use ofthe management, members ofthe Floyd County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully submitted,

-

RWH:as 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
July 28, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Floyd County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofFloyd 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. Floyd 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 Floyd County Board of Education's management. Our responsibility is to express an opinion on Floyd County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Floyd 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 Floyd County Board of Education's compliance with those requirements.
2003SA-10

In our opinion, the Floyd 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 Floyd 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 Floyd County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, 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 ofperforming their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use ofthe management, members ofthe Floyd 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,
~. ( J l . ~ ~ill w. Hinton State Auditor
RWH:as 2003SA-10

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

FLOYD 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-6571-01-01 FS-6571-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

FLOYD 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 Floyd 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 Floyd County Board of Education disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements Employee Compensation

None ofthe reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit ofthe Floyd County Board of Education 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 Floyd County Board of Education did not disclose any reportable conditions in internal control over major programs.

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Floyd County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The Floyd County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 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 84.287 Elementary and Secondary Education Act - Title IV - 21st Century Community Leaming Centers 84.367 Elementary and Secondary Education Act - Title II - Improving Teacher Quality

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.

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FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Floyd 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
CASH AND CASH EQUIVALENTS REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6571-03-01
Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents It cannot be determined if the bank reconciliation function is separated from the record keeping and voucher payment functions in accordance with the school activity policy guide. Five ofthe nine bank reconciliations did not include a signature ofthe individual performing the reconciliation. One included the signature of the bookkeeper as the one performing the reconciliation. One ofthe nine principal accounts did not include a reconciliation between the general ledger and the bank statement for period ended June 30, 2003. A combined reconciliation was prepared for June and July 2003 to reconcile to the July 2003 bank statement. One of the nine principal accounts reconciliations between the bank statement and the general ledger at June 30, 2003 does not agree with the financial statement's ending balance that was provided to the auditors for review. The total variance discovered between the reconciled amount per the bank reconciliation and the ending cash balance per the financial statement is $13 0. One bank account reconciliation indicated a check issued for $50 cleared the bank but was not posted to the general ledger. Two bank accounts are listed under a separate tax identification number at the banking institution. The total bank balance of these accounts at June 30, 2003 is $125,687. Eight bank accounts were discovered during external confirmation procedures that were not included in the financial statements. The balances ofthe eight accounts at June 30, 2003 are $24,336.
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FLOYD 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-6571-03-01
Revenues/Receivables/Receipts
Deposit preparation is not separated from the record keeping and cash custody functions . Based on a sample of 40 items, 32 receipts did not contain the necessary supporting
documentation.
Receipts are not categorized by revenue type on the financial statements. The two schools tested did not have adequate documentation to ensure deposits were made in
a timely manner.
Six receipts for athletic event gate sales did not include the required documentation as set
forth in the policy manual. There was no reconciliation between ticket sales and deposit available for review.
Expenditures/Liabilities/Disbursements Based on a sample of40 items, none ofthe disbursements contained the necessary supporting documentation indicating the approval of a purchase order and the authorization for payment of invoice before the payment was issued. Disbursements are not categorized by expenditure type on the financial statements. Two disbursements were issued by the school without an invoice on file. Two disbursements could not be traced to the school's check register by check number.
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.
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6571-03-02
During the fiscal year ended June 30, 2003, the School District entered into a contract with Live Oak Consulting, Inc. (LOC). The firm assists local school boards in reducing employer cost associated with health insurance plans administered by the Georgia Department of Community Health (DCH).
-3-

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6571-03-02
The School District, following the recommendations of LOC, moved various employees from the Health Insurance Plan for Public School Teachers (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 1) to the Health Insurance Plan for Public School Employees (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 2).
According to DCH, School District employees who are to be included as members of the Health Insurance Plan for Public School Teachers (PST) are either:
1. Employed in a professionally certificated position; employee holds a valid certification; employee is assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system.
Or:
2. Employed in a professionally certificated capacity; employee holds a valid certification; employee is not assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member ofthe Teachers Retirement System or other public school retirement system.
With respect to membership in the Health Insurance Plan for Public School Employees (PSE) Georgia Laws OCGA 20-2-910 and 47-4-2 (20) provide that the definition of public school employee, for the purpose ofmembership in the Health Insurance Plan for Public School Employees, means classroom aides, paraprofessionals, noncertified administrative and clerical employees, school bus drivers, school lunchroom personnel, school maintenance personnel and school custodial personnel. Generally, in order to determine which School District employees are eligible for the PSE or for the PST insurance plans, a comparison should be made ofthe employee's position and DCH's criteria listed above. Ifthe employee meets either test, then the employee is eligible for the Health Insurance Plan for Public School Teachers. If the employee fails both of the above tests, the employee is eligible for the Health Insurance Plan for Public School Employees.
From information provided by the School District, it is not clear that all of these employees who were moved from the PST plan to the PSE plan are eligible for membership in the PSE plan under DCH's criteria.
-4-

FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6571-03-02 The School District should establish policies and procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with State Laws. In addition, the School District should contact the Georgia Department of Community Health to determine whether the employees who were moved from the PST plan were moved in error. Ifemployees were moved in error the affected employees should be returned to the PST plan and the School District should make payment to DCH for those employees. If all above referenced employees should have remained in the PST plan the amount due to DCH would be $134,753. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-5-