FLOYD COUNTY BOARD OF EDUCATION ROME, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor 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 11 H NOTES TO THE BASIC FINANCIAL STATEMENTS 12 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION I SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 30 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS FLOYD COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 22, 2005 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, 2004, 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 opm10ns. 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, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2004ARL-l 1 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. In accordance with Government Auditing Standards, we have also issued our report dated August 22, 2005, on our consideration ofthe Floyd County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the 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. 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, RWH:as 2004ARL-11 State Auditor FLOYD COUNTY BOARD OF EDUCATION FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable 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 Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 22,183,888 323,832 3,001,279 7,032,706 980,936 15,765 121,881 2,410,814 3,020,385 3,404,914 82,658,862 10,456,337 -25,300,795 $ ===11==0=3==1='o=80==4= $ 2,098,621 7,318,119 524,848 16,305 19,497 8,396,845 15 723 850 $ 34,098,085 $ 58,916,817 301,432 488,935 10,874,246 32,600 5,598,689 $ 76,212,719 $ ===1=10=3=1=0=8=04= FLOYD COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2004 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes 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 (Restated) Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 52,340,079 $ 2,764,840 1,525,727 1,870,318 1,879,564 7,484,847 551,700 6,042,251 2,565,153 678,666 87,417 276,809 4,818,577 1,032,437 $ 83,918,385 $ 1,918,925 1,736,132 3,655,057 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 $ 37,216,862 664,680 596,343 924,211 1,828,331 2,412,157 5,826 3,007,240 1,425,153 $ 4,817 50,126 280 2,638,521 $ 50 774 547 $ $ 302,228 302 228 $ -13,204,292 -2,100,160 -929,384 -946,107 -51,233 -5,072,690 -545,874 -3,035,011 -837,772 -673,849 -37,291 -276,529 -443,924 -1,032 437 -29, 186,553 $ 25,550,371 27,090 9,504,963 581,075 148,359 1,446,491 141,432 1,644,029 $ 39,043,810 $ 9,857,257 66,355,462 $ ===7=6=2=1=2=7=19== -5- FLOYD COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2004 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Due From Other Funds Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 8,860,583 $ 4,135,223 $ 9,188,082 $ 323,832 625,934 6,458,953 980,936 15,765 147,006 121 881 573,753 1,686,164 22,183,888 323,832 2,312,098 7,032,706 980,936 15,765 147,006 121,881 Total Assets $ 17,534,890 $ 4,708,976 $ 10,874,246 $===3=3;,i.,1=1=8.,;,1,.;,12= LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Due To Other Funds Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 2,098,621 $ 7,318,119 $ 524,848 16,305 147,006 19,497 $ 9,436,237 $ 688,159 $ $ 301,432 $ 367,054 $ 10,874,246 121,881 $ 3,989,262 156,372 7,151,914 31,555 $ 8,098,653 $ 4,020,817 $ 10,874,246 $ 2,098,621 7,318,119 524,848 16,305 147,006 19,497 10,124,396 301,432 367,054 10,874,246 121,881 3,989,262 156,372 7,151,914 31,555 22,993,716 Total Liabilities and Fund Balances $ 17,534,890 $ 4,708,976 $ 10,874,246 $===3=3:!:,1=1=8..1..=12= 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. 2004 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Construction in Progress Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Compensated Absences Total Long-Term Liabilities $ 22,993,716 $ 2,410,814 3,020,385 3,404,914 82,658,862 10,456,337 -25,300,795 76,650,517 689,181 $ -15,075,000 -6,615,363 -2,430,332 -24, 120,695 Net Assets of Governmental Activities (Exhibit "A") $ 76,212,719 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. 2004 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Long-Term Capital-Related Debt-Par Value 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 $ 26,151,182 729,434 45,091,055 7,432,211 3,655,057 95,275 $ 1,927,239 $ 85,081,453 $ $ $ 9,504,963 4,998 41,159 4,998 $ 9,546,122 $ 26,151,182 10,234,397 45,091,055 7,432,211 3,655,057 141,432 1,927,239 94,632,573 $ 51,970,818 $ 500,319 $ 2,764,468 1,551,868 1,864,220 1,901,279 7,567,011 534,907 5,882,864 2,567,132 605,246 235,108 276,809 4,839,108 46,656 27,950 269,775 1,716,747 75,633 675,355 392,623 $ 7,745,000 449,494 582,943 $ 82,560,838 $ 4,154,552 $ 8,327,943 $ $ 2,520,615 $ -4 149,554 $ 1,218,179 $ 52,471,137 2,764,468 1,551,868 1,864,220 1,947,935 7,567,011 562,857 6,152,639 4,283,879 680,879 235,108 276,809 4,839,108 675,355 8,137,623 1,032,437 95,043,333 -410 760 $ 7,000,000 $ 1,100,000 $ -1, 100,000 $ -1, 100,000 $ 8,100,000 $ $ 1,420,615 $ 3,950,446 $ 1,218,179 $ 6,678,038 70 371 9,656,067 7,000,000 1,100,000 -1, 100,000 7,000,000 6,589,240 16,404,476 Fund Balances - Ending $ 8,098,653 $ 4,020,817 $ 10,874,246 $ 22,993,716 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 BALANCE TO THE STATEMENT OF ACTIVITIES JUNE 30. 2004 EXHIBIT"F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities. the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. In the Statement of Activities, only the gain on the sale of the equipment is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the equipment sold. Bond proceeds provide current financial resources to Governmental Funds; however. issuing debt increases long-term liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds Issued, Series 2003 Qualified Zone Academy Bonds Issued, Series 2004 Total Bond Proceeds 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 Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in Governmental Funds. These activities consist of: Increase in Compensated Absences $ 6.589.240 $ 5,492,693 -2,499,245 2,993,448 -573,721 -283,210 $ -5,000,000 -2,000,000 -7,000,000 $ 7,745,000 392,623 8,137,623 -6 123 Change in Net Assets of Governmental Activities (Exhibit "B") $ 9,857,257 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. 2004 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ =====2=06=!'=99=5= $ =====2=06=!'=99=5= The notes to the basic financial statements are an integral part of this statement. - 11 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Floyd County Board of Education (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. The School District reports the following major governmental funds: - 12 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds 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 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 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 compensated absences, 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. - 13 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. CHANGES IN ACCOUNTING PRINCIPLES In prior years, the School District's accumulated compensated absences liability was not reported. For fiscal year 2004, the School District began recording the accumulated compensated absences liability. The accumulated compensated absences liability had a balance of $2,424,209 at June 1, 2003. This change is in accordance with generally accepted accounting principles. 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 School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) 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 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, - 14 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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. 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 of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on August 26, 2003 (levy date). Taxes were due on November 17, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The 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, 2004, for maintenance and operations amounted to $26,124,092. The tax millage rate levied for the 2003 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 $9,504,693 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. - 15 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 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. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method, 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 - 16 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 of Net Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money 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 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (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. - 17 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $26,538,737. The amounts ofthe total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2004, as follows: Risk Category Bank Balance 1 $ 545,007 2 25,982,395 3 11,335 Total $ 26,538.737 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. Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool. At June 30, 2004, the carrying value ofthe School District's total investments was $84,934 which is materially the same as fair value. The investments are classified as to risk categories as follows: - 18 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Type of Investment Repurchase Agreements Risk Categories 2 $.===~O $===~ $ Carrying Fair 3 Amount Value 84 934 $ 84,934 $'==="8~5e,e!56~2 Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2003 Increases Balances Decreases June 30, 2004 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 2,410,814 532,432 $ 3,020,385 $ $ 2,410,814 532,432 3,020,385 Total Capital Assets Not Being Depreciated $ 2,943,246 $ 3,020,385 $ 532,432 $ 5,431,199 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 82,280,544 $ 9,187,022 3,323,331 725,575 $ 2,197,582 81,583 347,257 $ 82,658,862 928,267 10,456,337 3,404,914 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 15,368,723 6,060,868 2,364,273 1,522,023 852,817 124,405 192,190 800,124 16,698,556 6,113,561 2,488,678 Total Capital Assets, Being Depreciated, Net $ 70,997,033 $ 505,495 $ 283,210 $ 71,219,318 Governmental Activity Capital Assets - Net $ 73,940.279 $ 3,525.880 $ 815.642 $ 76,650.517 Capital assets being acquired under capital leases as of June 30, 2004, are as follows: Governmental Funds Buildings Less: Accumulated Depreciation $ 3,241,435 74 990 $ 3,166.445 - 19 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 5: CAPITAL ASSETS Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration Student Transportation Services Food Services $ 1,896,422 $ 10,123 9,105 495,520 514,748 88,075 $ 2,499.245 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, 2004, were as follows: District-wide Capital Projects Bond Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions $ 9,188,082 $ 4,135,223 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, 2004, 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 Transfers are used to move sales tax and property tax revenues as required matching funds or to provide supplemental funding for capital construction projects. - 20 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 8: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2004, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $ 1,100,000 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. 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 established a limited risk management program for workers' compensation claims. A premium is charged when needed by the General Fund to each user program on the basis of the percentage of that program's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $250,000 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability 2003 2004 $ 0 $ 432,694 $ 432,694 $ 0 $ 0 $ 323,480 $ 323,480 $ 0 - 21 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" Note 9: RISK MANAGEMENT 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 2003 2004 $ 0 $ 2,828 $ 2,828 $ 0 $ 0 $ 18 035 $ 18,035 $ 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. COMPENSATED ABSENCES Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the General Fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences. For fiscal year 2004, the School District began recording the accumulated compensated absences liability at June 30 in the District-wide financial statements. This is a change in accounting principle. - 22 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 10: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Series 1999 General Government - Series 1999 General Government - Series 2003 General Government - Series 2004 - QZAB 4.35% - 5.00% 5.00% - 5.25% 2.49% 0.00% $ 2,655,000 5,420,000 5,000,000 2,000,000 $ 15,075.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows: Capital Leases Governmental Funds General Compensated Obligation Absences {I) Bonds Total Balance July 1, 2003 $ 7,007,986 $ 0 $ 15,820,000 $ 22,827,986 Retroactive Restatement of Prior Year Balances 2,424,209 2,424,209 Balance July 1, 2003 Restated $ 7,007,986 $ 2,424,209 $ 15,820,000 $ 25,252,195 Additions Annual Leave Earned G.O. Bonds 1,018,769 7,000,000 1,018,769 7,000,000 Deductions Annual Leave Utilized Debt Retired Balance June 30, 2004 392,623 1,012,646 7,745,000 1,012,646 8,137,623 $ 6,615.363 $ 2 430 332 $ )5 075 000 $ 24 120 695 Portion of Long-Term Debt Due within One Year $ 321,845 $ 0 $ 8,075,000 $ 8,396,845 (I) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements. At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows: - 23 - FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT"H" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 Ca:Qital Leases Princi:Qal Interest 2005 2006 2007 2008 2009 2010 - 2014 2015 - 2019 $ 321,846 $ 338,987 357,040 376,055 396,083 2,320,215 2,505,137 336,400 319,259 301,206 282,191 262,163 971,015 292,408 Total Principal and Interest Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 - 2014 2015 - 2019 Total Principal and Interest $ 6,615.363 $ 2,764,642 General Obligation Debt Princi:Qal Interest $ 8,075,000 $ 970,000 990,000 1,010,000 1,030,000 1,000,000 2,000,000 332,879 112,424 88,021 63,122 37,723 12,450 $ 15,075.000 $ 646,619 Note 11: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $667,355 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $662,045 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 $5,310 - 24- FLOYD COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "H" 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 September 16, 2004, the Floyd County Board of Education issued General Obligation Bonds, School Bonds, Series 2004, in the amount of $33,140,000 (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. 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. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 4,014,947 $ 4,286,509 $ 4,043,926 - 25 - FLOYD COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2004 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction 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 USES Other Uses Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1} FINAL (1) ACTUAL AMOUNTS $ 25.372.613 $ 25,372.613 $ 26,151.182 35,000 35.000 729.434 42,985.489 43,248.196 45,091.055 6,851.063 7,693.291 7,432.211 1,693.000 1,810.000 3,655.057 209.000 115.000 95.275 180 000 200.000 1,927.239 $ 77,326,165 $ 78 474.100 $ 85,081.453 $ 50,851.873 $ 51,923.853 $ 51,970.818 2,088.175 2,123.569 2,764.468 1.481.489 1,504.348 1,551.868 1,941.702 1,868.012 1,864.220 1,842.577 1,930.668 1,901.279 6,074.396 6,035.328 7,567.011 524.808 541.808 534.907 5,786.102 5,978.341 5,882.864 3,021.841 3,094.555 2,567.132 668.919 632.985 605.246 262.892 259.125 235.108 15.436 15.436 276.809 3,869.469 4,038.702 4,839,108 $ 78,429.679 $ 79,946.730 $ 82,560,838 $ -1.103.514 $ -1.472.630 $ 2,520.615 -750.000 -750.000 -1 100.000 $ -1.853.514 $ -2.222.630 $ 1.420.615 6,793.710 6,793.710 6,678.038 133 998 133 998 Fund Balances - Ending $ 5 074 194 $ 4 705 078 $ ===8=,0=9=8!=,6=53== Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues. expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 27 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) 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 Part B - Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Even Start Improving Teacher Quality State Grants State Grants for Innovative Programs Title I Grants to Local Educational Agencies Twenty-First Century Community Learning Centers Vocational Education - Basic Grants to States Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD . 10.553 . 10.555 N/A N/A $ $ (2) 4,527,946 4,527,946 10.550 10.665 N/A N/A $ 202,864 (3) 4,730,810 84.027 84.173 NIA $ NIA $ 1,568,732 94178 1,662,910 84.332 84.365 84.318 84.213 84.367 84.298 84.010 84.287 84.048 NIA NIA N/A NIA N/A N/A N/A N/A NIA $ 75,505 27,715 28,569 338,985 433,393 62,335 1,473,672 870,453 96441 5,069,978 Total Federal Financial Assistance N/A = Not Available $ ====-9,~80=0;;,,b,7;,,;;8~8 - 28- FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2004 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($574,157) were not maintained separately and are included in the 2004 National School Lunch Program. (3) Funds earned on the National Forest Reserve Funds, in the amount of $3,152 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 fund financial statements. See notes to the basic financial statements. - 29 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program 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 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 Preschool Handicapped Program Special Education Low Incidence Grant - 30- SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 1,071,208 5,502 2,346,619 769,959 5,367,469 1,664,423 2,783,188 816,753 5,829,781 3,829,098 1,645,582 281,010 542,277 3,859,932 1,242,642 66,018 1,660,377 198,604 408,263 110,186 897,272 271,053 184,383 1,248,052 2,302,593 2,971,330 1,253,843 302,228 197,453 39,226 1,437,838 269,742 181,489 -2,300,147 65,177 134,417 52,250 662,045 7,398 64,889 128,217 44,933 FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004 AGENCY/FUNDING GRANTS Lottery Program Financial Management System Office of Treasury and Fiscal Services Public School Employees Retirement SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 171,173 5,310 See notes to the basic financial statements. - 31 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2004 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 Construct, replace, add to, renovate, 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 School, 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, McHenry Elementary, Midway Elementary, Model Elementary, Model Middle, Model High, Pepperell Middle, Pepperell Primary, Pepperell Elementary, and the central office, acquire systemwide technology improvements, acquire school buses, acquire the necessary property therefor, both real and personal, and to pay or reimburse the expenses of the Floyd County School District necessary to accomplish the foregoing, and providing funds for the retirement of previously incurred general obligation indebtedness evidenced by the Floyd County School District General Obligation School Bonds, Series 1999 ORIGINAL ESTIMATED COST(1) CURRENT ESTIMATED COSTS(2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 35,700,000 $ 43,572,104 $ 39,154,621 Completed 48,750,000 48, 750,000 $ __4"""'-"-05"-'0C.Z.,5""8""3'- Ongoing $ 84,450,000 $ 92,322,104 $ 4,050,583 $ 39,154,621 (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 Floyd 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. See notes to the basic financial statements. -32- FLOYD COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004 SCHEDULE "5" DESCRIPTION Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL $ 2,716,595 $ 2,606,482 $ 103,370 $ 2,709,852 898,285 606,072 606,072 6,333,735 7,098,285 420,894 7,519,179 1,955,702 1,786,328 1,786,328 3,289,848 4,017,097 141,527 4,158,624 948,636 6,889,327 4,462,221 1,944,361 6,905,973 1,834,422 239,197 482,117 124,510 796,512 7,572,151 6,947,961 1,759,966 134,567 5,607,368 131,089 24,798 977,658 111,276 432,422 96,678 284,135 223,195 227,014 35,070 145,591 96,935 20,675 1,386 216 796,512 7,856,286 7,171,156 1,986,980 134,567 35,070 5,752,959 228,024 24,798 998,333 112,662 432,422 96 894 $ 39,024,929 $ 40,706,710 $ 1,700,008 $ 42,406,718 1,036,792 217 597 1,663,820 47 403 80,513 111 930 1,744,333 159 333 TOTAL QBE FORMULA FUNDS $ 40,279,318 $ 42,417,933 $ 1,892,451 $ =~4.;.4,~31,;,,;;0;,.;,3~8;,;.4 (1) Comprised of State Funds plus Local Five Mill Share. (?) Allnfm,:t,nt~ rln nnt inrli 1rl,::,, the impar.t nf the ~t;:ate hudgP.t ::II ~tP.rity rP.rt11r.tinn. See notes to the basic financial statements. - 33- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 22, 2005 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 INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Floyd County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Floyd County Board ofEducation's basic financial statements and have issued our report thereon dated August 22, 2005. 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. 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 an opinion on the internal 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 corning to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Floyd 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-6571-04-01 and FS-6571-04-02. 2004YB-30 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. Compliance and Other Matters 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 grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Floyd County Board of Education and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2004YB-30 State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 22, 2005 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 CIRCULARA-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, 2004. 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 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 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. 2004SA-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 of its major Federal programs for the year ended June 30, 2004. 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 of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use 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, ~~oo~-~ Russell W. Hinton State Auditor RWH:as 2004SA-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, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6571-03-01 FS-65 71-03-02 Unresolved - See Corrective Action/Reponses Unresolved - See Corrective Action/Reponses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-03-01 Several weaknesses in internal control in the area of the principal's local school accounts were of concern and brought to our attention during the audit for the two schools that were selected for audit. These concerns will be addressed with additional training and followup for our local school bookkeepers. Floyd County Schools has a School Based Accounting Manual which sets forth guidelines and procedures relative to the proper handling ofcash, cash receipts, and cash disbursements. The auditors found the manual to be adequate for ensuring proper accounting procedures at the local school level. We believe with additional training and guidance, the concerns listed in this finding will be addressed appropriately. It should be noted that this is the first year that the Georgia Department of Audits has reviewed procedures and internal controls based on the same auditing standards used in performing the audit for the Central Office accounting. Although to fully implement training and follow up would require hiring such personnel as an internal auditor, we believe in the interim we can work with the four middle and four high schools, have stand alone databases and work independently at the local schools to achieve a higher level ofinternal control and separation ofduties. It should also be noted that no findings were issued in the area of the elementary schools principals' accounts where the accounting function is consolidated for cash disbursements at the Central Office level by one District-wide Elementary Bookkeeper. - 1- FLOYD COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6571-03-02 Pursuant to published Department of Community Health guidelines, the Floyd County Schools submitted one or more employees that held certification under the category of classified employees. These submissions were for state health insurance purposes and in 2002 conformed to the guidelines for such classification resulting from information from a DCH publication. Upon being notified by the Department of Community Health that they had received an opinion from the State Attorney General declaring this practice as not proper, Floyd County Schools immediately ceased this practice in December 2004. Subsequent payments to the Department of Community Health have been in compliance with newly published Department of Community Health guidelines. -2- SECTION IV FINDINGS AND QUESTIONED COSTS FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the 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 financial statement reportable conditions 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 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 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: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Floyd County Board of Education qualified as a low risk auditee as defined by Section .530 ofOMB Circular A-133. - 1- FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-6571-04-01 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. Six ofthe nine bank reconciliations did not include a signature ofthe individual performing the reconciliation. One of the nine principal accounts reconciliations between the bank statement and the general ledger at June 30, 2004, 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 $130. Revenues/Receivables/Receipts Deposit preparation is not separated from the record keeping and cash custody functions. Based on a review of 50 items, 37 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. Expenditures/Liabilities/Disbursements Based on a review of 50 items, 11 of the disbursements did not contain 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. 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. -2 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated from Prior Year Finding Control Number: FS-6571-04-02 During the fiscal year ended June 30, 2004, the School District entered into a contract with Live Oak Consulting, Inc. (LOC). The firm assists local school boards in reducing employer costs associated with health insurance plans administered by the Georgia Department ofCommunity Health (DCH). 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 apposition 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 certified 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 of the 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 ofpublic school employee, for the purpose of membership 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 of the 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 of the Health Insurance Plan for Public School Employees. -3 - FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated from Prior Year Finding Control Number: FS-6571-04-02 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. As of June 30, 2004, the School District had made payments totaling $40,000 to Live Oak Consulting, Incorporated. 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. Ifall the above referenced employees should have remained in the PST plan the amount due to DCH would be $267,262. Additionally, the School District should consult with its legal counsel regarding obtaining a refund for those employees who should not have been moved to the PSE plan. The amount of the refund could be as much as $40,000. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -4- SECTIONV MANAGEMENT'S RESPONSES FLOYD COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2004 Finding Control Number: FS-6571-04-01 We partially concur with this finding. Separation of duties is occurring but the required documentation was not part ofthe process. Several weaknesses in internal control in the area ofthe principals' local school accounts were ofconcern and brought to our attention during the audit for the two schools that were selected for audit. These concerns will be addressed with additional training and follow-up for our local school bookkeepers. Floyd County Schools has a School Based Accounting Manual which sets forth guidelines and procedures relative to the proper handling of cash, cash receipts, and cash disbursements. The auditors found the manual to be adequate for ensuring proper accounting procedures at the local school level. We believe with additional training and guidance, the concerns listed in this finding will be addressed appropriately. It should be noted that this is the second year that the Georgia Department of Audits has reviewed procedures and internal controls based on the same auditing standards used in performing the audit for the Central Office accounting. Although to fully implement training and follow-up would require hiring such personnel as an internal auditor, we believe in the interim we can work with the four middle and four high schools which have stand alone databases and work independently at the local schools to achieve a higher level ofinternal control and separation ofduties. It should be also noted no findings were issued in the area ofthe elementary schools principals' accounts where the accounting function is consolidated for cash disbursements at the Central Office level by on District-wide Elementary Bookkeeper. Finding Control Number: FS-6571-04-02 We do not concur with this finding. Pursuant to published Department of Community Health guidelines, the Floyd County Schools submitted one or more employees that held certification under the category of classified employees. These submissions were for state health insurance purposes, and in 2002, conformed to the guidelines for such classification resulting from information from a DCH publication. Upon being notified by the Department of Community Health that they had received an opinion from the State Attorney General declaring this practice as not proper, Floyd County Schools immediately ceased this practice in December of2004. Subsequent payments to the Department of Community Health have been in compliance with newly published Department of Community Health guidelines. Contact Person: Chris Toles, Executive Director of Financial Services Phone: (706) 234-1031 Fax Number: (706) 236-1816 E-mail Address: ctoles@floydboe.net