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

JACKSON.COUNTY BOARD OF EDUCATION
. JEFFERSON, 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

JACKSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

27

JACKSON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

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

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

SECTIONN FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

JACKSON 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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 10, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Jackson 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 Jackson County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Jackson County Board ofEducation'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 ofthe Jackson County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated March 10, 2005, on our consideration of the Jackson 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 of our testing of internal control over financial reporting and compliance and the results of that 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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix and page 27 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Jackson 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 ofGeorgia Annotated section 506-24.
Respectfully submitted,
~....QJ ~-~~
~ell W. Hinton State Auditor
RWH:gp 2004ARL-11

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Introduction
Our discussion and analysis of the Jackson County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2004. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. We encourage our readers to also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
Financial Highlights
Key financial highlights for fiscal year 2004 are as follows:
The School District implemented GASB 34 for fiscal year 2003. Due to this being the year following implementation, comparisons are available for the first time.
The School District refinanced the outstanding General Obligation Refunding Bonds, Series 1993, for a net present value savings of approximately $147,555.
On the District-wide financial statements, the assets of the School District exceeded liabilities by 47,729,560. Of this amount, $2,510,002 is unrestricted and is available for spending at the School District's discretion.
The School District had $48,131,330 in expenses relating to governmental activities; only $28,473,203 of these expenses is offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $24,905,901 were adequate to provide the remaining funding for these programs.
As stated above, general revenues accounted for $24,905,901 or 46.6% of all revenues totaling $53,379,104. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest.
Overview Of The Financial Statements
This annual report consists of three parts; management's discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the "Statement of Net Assets" and "Statement of Activities". These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
1

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
The fund financial statements focus on individual parts of the School District, which reports the School District's operation in more detail. The "Governmental Funds" statements disclose how basic services are financed in the short-term as well as what remains for future spending. The "Fiduciary Funds" statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Jackson County School District, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has two nonmajor funds as defined by GASB Statement 34 for the purposes of this report. One fund is a contribution account which consists of contributions from outside sources to be used for the purpose of purchasing awards for system faculty and staff. The other fund is a staff vending fund. Revenue is generated by vending machine commissions and staff donations and is used by consensus of staff to improve the working environment in the central office area.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additional supplementary information (not required) is presented to facilitate understanding of the financial statements.
District-wide Statements
Given that Jackson County School District has no operations that have been classified as "Business Activities", the District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The "Statement of Net Assets" and the "Statement of Activities" provides the basis for answering this question. These financial statements include all of the School District's assets and liabilities. The School District uses the accrual basis of accounting similar to the accounting used by most private-sector companies. The "accrual basis of accounting" takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, status of facility availability, required educational programs, student-teacher ratios, fluctuation in state and Federal funding, and other factors.
The "Statement of Net Assets" and the "Statement of Activities" reflects 100% of the School District's governmental activities.
Fund Financial Statements
The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide
ii

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
detail information about only the School District's significant or major funds. As discussed previously, the School District has two nonmajor funds as defined by GASB Statement 34.
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The difference between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled on Exhibit "D" and Exhibit "F" of the basic financial statements.
Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs, and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.
Financial Analysis of the School District as a Whole
Recall that the Statement of Net Assets provides the perspective of the School District as a whole. The reader can think of the School District's net assets as the difference between its assets (i.e., what the School District owns) and its liabilities (i.e., what the School District owes) at the end of a fiscal year. This balance represents one way to measure the School District's financial health or its financial position. In the case of the Jackson County School District, assets exceeded liabilities by $47,729,560 at June 30, 2004.
To better understand the School District's actual financial position and ability to deliver services in future periods, the reader will need to review the various components of the net asset category. For example, of the $47,729,560 of net assets, $1,375,990 was restricted for debt service and completion on certain ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors.
In addition, the School District also had $43,843,568 (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending.

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

The remaining balance of unrestricted net assets of $2,510,002 may be used to meet the School District's ongoing obligations to citizens and creditors.

Table 1 provides a summary of the School District's net assets for this fiscal year and a comparison to last year (fiscal year 2003).

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 10,043,849 $ 8,297,536

60,179,327

60,275,137

Total Assets

$ 70,223,176 $ 68,572,673

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 5,126,348 $ 5,745,780

17,367,268

20,345,107

Total Liabilities

$ 22,493,616 $ 26,090,887

Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted

$ 43,843,568 1,375,990 2,510,002

$ 40,455,939 1,002,781 1,023,066

Total Net Assets

$ 47,729,560 $ 42,481,786

Table 2 shows the Changes in Net Assets for this fiscal year comparing it to the previous year.

IV

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year2004

Year 2003

$ 1,809,573 25,653,897 1,009,733

$ 2,019,781 27,245,551 128,060

Total Program Revenues

$ 28.473.203 $ 29,393,392

General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Land

$ 17,526,253 $ 15,765,446

1,030,975

940,392

16,147

2,569,495 1,590,521
805,694 99,658
628,253 43,159 545,547
50.199

815,000 2,886,442
810,459 153,983
39,619 427,755

Total General Revenues

$ 24,905,901 $ 21,839,096

Total Revenues

$ 53,379,104 $ 51,232.488

Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations ofNon-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 29,630,890
1,180,990 1,751,162 1,121,520
749,849 3,159,035
339,624 3,103,757 2,105,447
469,699 295,164
146,077 305,138 3,005,521 767,457

$ 27,487,528
3,415,734 1,748,935
815,195 752,852 2,914,284 396,264 3,549,512 2,437,034 450,067 266,048
44,729 278,328 2,783,724 769,376

Total Expenses

$ 48,131,330 $ 48,109,610

Increase in Net Assets

$ 5,247,774 $ 3,122,878

V

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Instruction

$ 29,630,890 $ 27,487,528 $ 10,670,905 $

Support Services

Pupil Services

1,180,990 3,415,734

848,610

Improvement of Instructional Services

1,751,162 1,748,935

930,080

Educational Media Services

1,121,520

815,195

632,560

General Administration

749,849

752,852

36,321

School Administration

3,159,035 2,914,284 2,003,219

Business Administration

339,624

396,264

336,184

Maintenance and Operation of Plant

3,103,757 3,549,512 1,713,993

Student Transportation Services

2,105,447 2,437,034

981,689

Central Support Services

469,699

450,067

464,944

Other Support Services

295,164

266,048

16,016

Operations of Non-Instructional Services

Enterprise Operations

146,077

44,729

20,356

Community Services

305,138

278,328

19,291

Food Services

3,005,521 2,783,724

216,502

Interest on Short-Term and Long-Term Debt

767,457

769,376

767 457

9,914,715
133,844 1,056,269
366,637 91,825
1,851,014 396,007
2,203,952 1,260,595
187,776 266,048
-29,392 6,667
240,885 769,376

Total Expenses

$ 48,131,330$ 48,109.610 $ 19,658.127$ 18,716,218

Financial Analysis of the School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $53,258,194 and total expenditures of $51,996,107 during fiscal year 2004. Included in the $51,996,107 of expenditures was $910,252 of Capital Outlay expenditures. These expenditures were funded primarily through SPLOST revenue, for which proceeds were received monthly.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2004, the School District made amendments to its original General Fund budget.

Vl

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

For the General Fund, the final actual revenues of $47,218,066 exceeded the final budgeted amounts of $46,638,604 by $579,462. This difference (final actual vs. final budget) was due to an increase in state revenues over final budget of $449,836, a decrease in property taxes collected less than budget of $386,016; an increase in sales taxes collected in excess of budget of $31,031, a decrease in Federal revenues less than budget of $209,204, an increase in charges for services over final budget of $588,064; an increase in investment earnings over budget of $8,406; and an increase in miscellaneous revenues over final budget of $97,345.

The final actual expenditures of $46,820,569 exceeded the final budgeted amount of $44,952,268 by $1,868,301. This difference was due to expenditures for Instruction, School Administration, Student Transportation, Other Support Services, Community Services, Food Services Operations, Capital Outlay, and Debt Service collectively exceeding the budget by $3,332,283 and expenditures for Pupil Services, Improvement of Instruction Services, Media Services, General Administration, Business Administration, Maintenance and Operation of Plant, and Central Support Services collectively being less than the budget by $1,463,982.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2004, the School District had $60,179,327 invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances.

Table 4 Capital Assets at June 30

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation

$ 4,753,537 536,722
2,061,997 63,823,936
6,619,935 -17,616,800

$ 4,803,338 9,500,476 2,061,997 53,689,398 6,065,477
-15,845,549

Total

$ 6021792327 $ 6022752137

Additional information on the School District's Capital Assets can be found in the Notes to the Financial Statements.

Vll

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Due to the ongoing growth in the county, at June 30, 2004, the School District completed one elementary school which was opened in August 2003. Construction in progress consisted of a new central warehouse, renovation of a teacher support office, and two physical education classroom additions.

Debt

At fiscal year ended June 30, 2004, the School District had $17,367,268 in long-term liabilities. Of this amount, $792,344 represents capital leases, compensated absences, and promissory notes due within one year; $16,574,924 represents capital leases, compensated absences, general obligation bonds and promissory notes due in more than one year. Table 5 summarizes the School District's long-term liabilities.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year2004

Year 2003

Bonds Payable Promissory Notes Capital Leases Compensated Absences

$ 13,785,000 2,503,002 909,206 170,060

$ 14,840,000 4,980,000 385,539 139,568

Total

$ 1713671268 $ 2013451107

Additional information can be found on the School District's debt in the Notes to the Financial Statements.

Current Issues

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations in future years are as follows:.

For the period under review, State funding for education remained stagnant. It appears the State of Georgia is currently recovering from the previous economic downturn. School districts have been told not to expect recovery of prior year cuts in state funds and are hopeful there will be no additional cuts. However, the State mandated 2% pay increase has the potential to offset any recovery. Despite these challenges, the Jackson County School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.

vm

JACKSON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. A capital outlay bond referendum for $70 million was approved in September 2004. Specific capital expenditure plans have been formalized in conjunction with bond proceeds, anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education, and special local option sales tax revenue to construct a minimum of three new schools and classroom additions to a minimum of four others. The School District regularly monitors anticipated capital outlay needs. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Ms. Betty Varnadore, Accountant for the Jackson County School District, 1660 Winder Highway, Jefferson, GA 30549-5458. You may also email your question to Ms. Varnadore at bvarnadore@jackson.k12.ga.us.
IX

JACKSON COUNTY BOARD OF EDUCATION

JACKSON 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 Notes Receivable Prepaid Items Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries 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
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

$

1,384,166

2,139,510

2,184,024 2,960,574 1,046,248
92,115 100,000
57,007 80,205

4,753,537 536,722
2,061,997 63,823,936
6,619,935 -17 616 800

$ ===7=0=2=2=3=17=6=

$

1,861,299

3,189,536

25,000

50,513

792,344 16 574 924

$

22,493,616

$

43,843,568

486,975 889,015 2,510,002

$

47 729 560

$ ===7=0=,2=2=3,=17=6=

JACKSON COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

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

$

29.630,890 $

1,180,990 1,751,162 1,121,520
749,849 3,159,035
339,624 3,103,757 2,105,447
469,699 295,164

146,077 305,138 3,005,521 767 457

Total Governmental Activities

$ =====4=8=,1=3=1=,3=3=0= $

General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Special Items Gain on Sale of Land

253,315
125,721 285,847 1,144,690 1,809,573

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

The notes to the basic financial statements are an integral part of this statement. -4-

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

18,092,173 $

332,380 821,082 457,434 694,749 1,131,279

1,363,807 907,358

279,148

1,574,487

$

25,653,897 $

614,497 $
31,526 18,779 24,537
3,440 25,957 216,400
4,755
69,842
1,009,733 $

-10,670,905
-848,610 -930,080 -632,560
-36,321 -2,003,219
-336,184 -1,713,993
-981,689 -464,944
-16,016
-20,356 -19,291 -216,502 -767 457
-19,658,127

$

17,526,253

1,030,975

16,147

2,569,495 1,590,521
805,694 99,658
628,253 43,159
545,547

50199

$

24 905 901

$

5,247,774

42 481 786

$ ===4=7=7,=29-56=0=

-5-

JACKSON 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 Notes Receivable Prepaid Items Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Debt Service Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,333,819 $ 1,641,172
710,364 2,960,574 1,046,248
92,115 100,000
57,007 80,205

36,148 $ 497,839
783,769

14,199 $ 499
37,869

1,384,166 2,139,510
1,532,002 2,960,574 1,046,248
92,115 100,000
57,007 80,205

$ 8,021,504 $ 1,317,756 $

52 567 $

9,391,827

$ 1,851,034 $ 3,189,536
50 513
$ 5,091,083 $

10,265 25,000
35,265

$

1,861,299

3,189,536

25,000

50 513

$

5,126,348

$

393,437 $

$

80,205

889,015

2,850,216 39
$ 2,930,421 $ 1,282,491 $

52,567 $ 52 567 $

446,004 80,205
889,015
2,850,216 39
4,265,479

$ 8,021,504 $ 1,317,756 $

52 567 $

9,391,827

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

JACKSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30, 2004

EXHIBIT" "

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

$ 4,265,479

$ 4,753,537 536,722
2,061,997 63,823,936
6,619,935 -17,616,800

60,179,327

652,022

$ -16,288,002 -909,206 -170,060

-17,367,268

Net Assets of Governmental Activities (Exhibit "A")

$ 47,729,560

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

JACKSON 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 Enterprise Operations 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 Refunding Bonds Payment to Bond Refunding Escrow Agent Refunding Bond Issuance Cost Capital Leases Transfers In Transfers Out
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Land
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 17.490,959 852,031 $
22,627,728 3,870,822 1,809,573 33,406 533,547

$ 1,590,521
793,333
6,345

1,023,705 $ 18,514,664

2,622,816

5,065,368

23,421,061

3,870,822

1,809,573

3,408

43,159

533 547

$ 47,218,066 $ 2,390,199 $ 3,649,929 $ 53,258,194

$ 28,594,857

$ 28,594,857

1,180,960 1,746,756 1,063,906
747,460 3,091,620
304,750 3.330,208 2,156,686
468,556 295,164 146,077 305,138 2,901,023
59,051 $

$ 851,201

5,471

1,180,960 1,746,756 1,063,906
747,460 3,091,620
310,221 3,330,208 2,156,686
468,556 295,164 146,077 305,138 2,901,023 910,252

410,726 17 631

3,641,998 676,868

4,052,724 694499

$ 46,820,569 $ 851,201 $ 4,324,337 $ 51,996,107

$

397 497 $ 1,538,998 $ -674 408 $ 1,262,087

$ 2,840,000 $ 2,840,000

-2,802,958

-2,802,958

-26,488

-26,488

$

934,393

934,393

660,000

660,000

$ -660,000

-660,000

$ 934,393 $ -660,000 $ 670,554 $ 944,947

100,000 $ 1,431,890 $
1,498,531

878,998 $ 403493

100 000

-3,854 $ 2,307,034

56,421

1,958,445

Fund Balances - Ending

$ 2,930,421 $ 1,282,491 $

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

-8-

52,567 $ 4,265,479

JACKSON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2004

EXHIBIT"F"

Total Net Change in Fund Balances - Governmental Funds (Exhibit "E")

$

2,307,034

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

$

1,725.242

-1,771,251

-46.009

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.

58,711

In the Statement of Activities. only the gain on the sale of the land 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 cost of the land sold.

-49,801

Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds a capital lease management is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability.

-934,393

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:

Refunding Bonds issued

-2,840,000

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 Note Principal Retirement Capital Lease Payments Payments to Bond Refunding Agent
Total Long-Term Debt Repayments

$

1,165,000

2,476,998

410,726

2,730,000

6,782,724

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

-30,492

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

$ =====-5,=24=7=7, =7=4

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

JACKSON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ ==1=53=,4=6=9=
$ ===15=3 4=69=

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

JACKSON 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 Jackson County Board of Education (School District) was established under the laws of the 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 Jackson 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 ofActivities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.
- 11 -

JACKSON 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 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 grants from the Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term 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 funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, 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
- 12 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,
(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,
(4) Obligations of any corporation of the United States government,
(5) Prime banker's acceptances,

- 13 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services,

(7) Repurchase agreements, and

(8) Obligations of other political subdivisions of the State of Georgia.

RECEIVABLES

Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Jackson County Board ofCommissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 24, 2003 (levy date). Taxes were due on December 30, 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 Jackson 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 $17,474,812 and for school bonds amounted to $1,023,705.

Tax millage rates levied for the 2003 tax year (calendar year) for the Jackson County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations School Bonds

18.5 mills __lQ mills

19.5 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $4,160,016 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.

- 14 -

JACKSON 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 uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
CONSUMABLE SUPPLIES INVENTORY Inventories of consumable supplies are reported on the Combined Balance Sheet at cost (weighted average). Consumable supplies are recorded as expenditures at the time of purchase. The inventories reported on the balance sheet for consumable supplies are equally offset by a reservation offund balance which indicates that this amount does not constitute "available spending resources" even though they are a component of net current assets.
PREPAID ITEMS
Payments made to vendors for services that will benefit periods subsequent to June 30, 2004, are recorded as prepaid items.
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. 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:

- 15 -

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000

20 years

$

5,000 15 to 50 years

$

5,000 5 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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. 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 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. Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination ofthe 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 ofthe State of Georgia,

- 16 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $2,932,478. The amounts of the total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2004, as follows:

Risk Category

Bank Balance

1

$ 429,465

2

2,503,013

3

0

Total

$ 2,932.478

CATEGORIZATION OF INVESTMENTS AtJune 30, 2004, the carrying value ofthe School District's total investments was $2,139,510 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal

- 17 -

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

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS
Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:
The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.
Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2004, was 24 days. The average investment duration for Fund 6 on June 30, 2004, was 0.22 years.
Note 4: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories
Note 5: CAPITAL ASSETS
The following is a summary of changes in the Capital Assets during the fiscal year:

- 18 -

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Balances July 1, 2003

Increases

Decreases

Balances June 30, 2004

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

$ 4,803,338

$

49,801 $ 4,753,537

9,500,476 $ 1,012,976

9,976,730

536,722

Total Capital Assets Not Being Depreciated $ 14,303,814 $ 1,012,976 $ 10,026,531 $ 5,290,259

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 53,689,398 $ 10,134,538 $

6,065,477

554,458

2,061,997

0 $ 63,823,936 6,619,935 2,061,997

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

11,367,243 3,177,601 1,300,705

1,197,961 478,038 95,252

12,565,204 3,655,639 1,395,957

Total Capital Assets, Being Depreciated, Net $ 45,971,323 $ 8,917,745 $

0 $ 54,889,068

Governmental Activity Capital Assets - Net $ 60,275.137 $ 9.930.721 $ 10,026.531 $ 60,179.327

Current year depreciation expense by function is as follows:

Instruction Support Services
Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 1,123,000

$

57,614

34,319

44,842

6,286

47,436

321,427

8,690

520,614 127,637

$ 1,771,251

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement ofoutstanding bond principal, interest and paying agent's fees (Debt Service Funds) 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:

- 19 -

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Debt Service Funds

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions
Restricted Investments: Debt Services Capital Acquisitions

$

$

36,109

$

393,437 $

$

104,402

14,199 499

Note 7: INTERFUND TRANSFERS

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

Transfer to

Transfers From District-wide
Capital Projects

Debt Service Funds

Transfers are used to move Special Purpose Local Option Sales Tax (SPLOST) proceeds from the District-wide Capital Projects Fund as supplemental funding source for debt service requirements.

Note 8: RISK MANAGEMENT

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

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

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

- 20 -

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

EXHIBIT"H"

Note 8: RISK MANAGEMENT

The School District is self-insured with regard to unemployment compensation claims. 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:

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

0 $

0 $

0

$

0 $

1 997 $

1997 $

0

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

Position Covered

Amount

Superintendent All Employees

$

50,000

$ 100,000

Note9: SHORT-TERMDEBT

The School District issues tax anticipation notes in advance ofproperty tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount ofshort-term debt to 75 percent ofthe total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$==~0 $ 5,000,000 $ 5,000.000 $==~0

Note 10: LONG-TERM DEBT

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

- 21 -

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

EXHIBIT"H"

Note 10: LONG-TERM DEBT

COMPENSATED ABSENCES Compensated absences represent obligations ofthe 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.

ADVANCE REFUNDING During fiscal year 2004, the Jackson County Board of Education issued $2,840,000 in General Obligation Refunding Bonds to advance refund $2,730,000 ofoutstanding bonds. The bond issue of $2,840,000 less underwriters and bond issue cost of$26,488 provided net proceeds of$2,813,512. Proceeds totaling $2,802,958 were deposited in an irrevocable trust with an escrow agent to provide for debt service payments on the 1993 Bond issue. As a result, the 1993 Series Bonds are considered defeased, and the liability for these portions has been removed from the District-wide Statement of Net Assets. The Jackson County Board ofEducation refunded the aforementioned bonds to reduce its total Debt Service payments over 4 years beginning subsequent to fiscal year 2004 by $147,555 and to obtain an economic gain (difference between the present values oftotal debt service payments and the old and new debt) of $142,318.

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

Purpose

Interest Rates

Amount

General Government - Refunding - Series 1998 3.50%-4.75% General Government - Refunding - Series 2003 2.04%

$ 11,665,000 2,120,000

$ 13,785.000

Promissory Note - As authorized in a county-wide referendum, the School District has entered into a lending agreement with a commercial lending institution. The debt at June 30, 2004, associated with this agreement was as follows:

Purpose

Interest Rate

Amount

General Government - Sales Tax Note

6.50%

$ 2,503,002

Voters have authorized $12,180,000 in general obligation debt for the funding of capital outlay projects which was not issued as of June 30, 2004.

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

-22 -

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

EXHIBIT "H"

Note 10: LONG-TERM DEBT

Capital Leases

Governmental Funds

Compensated Absences

Promissory Notes

General Obligation
Bonds

Total

Balance July 1, 2003

$ 385,539 $ 139,568 $ 4,980,000 $ 14,840,000 $ 20,345,107

Additions Capital Leases Annual Leave Earned G.O. Bonds

934,393

167,263

2,840,000

934,393 167,263 2,840,000

Deductions Annual Leave Utilized Capital Leases Bonds Defeased Debt Retired

410,726

136,771

2,476,998

2,730,000 1,165,000

136,771 410,726 2,730,000 3,641,998

Balance June 30, 2004

$ 909,206 $ 170.060 $ 2 503.002 $ 13.785 000 $ 17,367,268

Portion of Long-Term Debt

Due within One Year

$

249 357 $

119 985 $

423,002 $

0 $ 792 344

At June 30, 2004, payments due by fiscal year which includes principal and interest for these items are as follows:

Fiscal Year Ended June 30
2005 2006 2007
Total Principal and Interest

Cagital Leases

Princigal

Interest

Promissory Notes

Princigal

Interest

$ 249,357 $ 333,172 326,677

34,184 $ 423,002 $

28,254

2,080,000

10 629

23,002 135,200

$ 909.206 $

73 067 $ 2,503,002 $ 158.202

Fiscal Year Ended June 30
2005 2006 2007 2008 2009 2010 - 2014 2015
Total Principal and Interest

General Obligation

Debt

Princigal

Interest

$ 285,358

$ 1,155,000

554,427

1,180,000

521,447

1,220,000

487,162

1,290,000

442,478

7,295,000

1,267,263

1,645,000

39 069

$ 13,785.000 $ 3,597.204

- 23 -

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

EXHIBIT"H"

Note 11: PRIOR YEAR DEFEASEMENT OF DEBT
In fiscal year 1998, the School District defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the School District's basic financial statements. At June 30, 2004, $11,055,000 ofbonds are outstanding and are considered defeased.
Note 12: ON-BEHALF PAYMENTS
The School District has recognized revenues and costs in the amount of $395,911 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 $391,673
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 $4,238
Note 13: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.
Note 14: SUBSEQUENT EVENTS
In the subsequent fiscal year, voters authorized the School District to issue general obligation bonds in the amount of $70,000,000. The proceeds from these bonds will be used for the construction of three new schools and classroom additions to a minimum of four other schools.
Note 15: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and
- 24 -

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

EXHIBIT"H"

Note 15: RETIREMENT PLANS

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%

$ 2,200,705 $ 2,122,910 $ 1,942,528

- 25 -

JACKSON 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 Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
SPECIAL ITEMS
Proceeds from Sale of Land
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL

FINAL

ACTUAL AMOUNTS (1)

$

18,760.346 $

17,876.975 $

17,490,959

821.000

821,000

852,031

22,064,698

22,177,892

22,627,728

3,827,558

4,080,026

3,870,822

1,221,509

1,221,509

1,809,573

25,000

25,000

33,406

436 202

436 202

533 547

$

47156313 $

46 638 604 $

47 218 066

$

26,008,574 $

26,435,649 $

28,594,857

1,383,027 1,927,945 1,123,520
801,504 2,897,744
487,564 3,842,575 2,079,945 1,486,251
288,758
214,011 2,738,560

1,384,527 2,014,061 1,123,520
801,504 2,896,069
487,564 3,847,675 2,072,643
647,727 288,758
214,011 2,738,560

1,180,960 1,746,756 1,063,906
747,460 3,091,620
304,750 3,330,208 2,156,686
468,556 295,164 146,077 305,138 2,901,023
59,051 428 357

$

45 279 978 $

44 952 268 $

46 820 569

$

1 876 335 $

1 686 336 $

397 497

$

9,802,108 $

10,942,108 $

-9 738 983

-10 838 983

$

63,125 $

103,125 $

934,393 0
934,393

100 000

$

1,939,460 $

1,789,461 $

1,431,890

1,810,083

1,810,083

1,498,531

-14 351

-14 351

0

Fund Balances - Ending

$

3735192 $

3 585 193 $

2 930 421

Notes to the Schedule of Revenues Ex12enditures 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 a=unting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 27 -

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (1)
Total U.S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Pass-Through From Hall County Board of Education d/b/a Piedmont Migrant Education Agency Migrant Education
Total U.S. Department of Education
Labor, U.S. Department of Pass-Through From Northeast Georgia Regional Development Center Northeast Georgia Workforce Development Partnership Workforce Investment Act Youth Activities School to Work Program Pass-Through From Lanier Technical College Workforce Investment Act Youth Activities School to Work Program
Total U. S. Department of Labor
National Science Foundation Pass-Through From University of Georgia Partnership for Reform in Science and Mathematics

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553
. 10.555

N/A N/A $
$

(2) 3,068,071
3,068,071

10.550

N/A
$

154 672 3,222,743

. 84.027
* 84.173

N/A $ NIA
$

811,977 89 796
901,773

84.365 84.318 84.367 84.186 84.298 84.010 84.048
84.011

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

36,014 11,259 271,121 41,643 32,296 974,721 55,788
38 880
2,363,495

17.259 17.259

N/A $
N/A $

47.076

N/A $

822 21 725 22 547
1470

- 28-

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

$ _ _ _ _5_8,~8_00_

Total Federal Financial Assistance N/A = Not Available

$ ===5='=66=9=,0=5=5

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 ($284,377) were not maintained separately and are included in the 2004 National School Lunch Program.

Major Programs are identified by an asterisk (*} in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Jackson 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 -

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Health Insurance Mentor Teachers National Teacher Certification Preschool Handicapped Program Severely Emotionally Disturbed Special Education Low Incidence Grant Special Education Support Cost Student Information System (Upgrade) Student Information System (Reporting)
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
- 30-

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

659,827

$

659,827

1,221,293 411,400
3,076,628 568,873
1,530,576 312,107
3,042,505 2,500,518
427,706
238,772 503,324 1,703,075 454,176
63,330 194,330
43,609 227,147 108,876 458,342 144,736
95,799
637,771 1,110,998 1,363,807
860,368 216,400
19,500 118,038
21,095 36,030 232,340 149,788 261,267 -1, 148,305
391,673 4,372 6,654
64,779 35,404 90,276 36,687 62,760 27,760

1,221,293 411,400
3,076,628 568,873
1,530,576 312,107
3,042,505 2,500,518
427,706
238,772 503,324 1,703,075 454,176
63,330 194,330
43,609 227,147 108,876 458,342 144,736
95,799
637,771 1,110,998 1,363,807
860,368 216,400
19,500 118,038
21,095 36,030 232,340 149,788 261,267 -1, 148,305
391,673 4,372 6,654
64,779 35,404 90,276 36,687 62,760 27,760

$

793,333

4,238

793,333 4,238

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2004

SCHEDULE "3"

AGENCY/FUNDING
CONTRACT University of Georgia Georgia Systemic Teachers' Education Program
OTHER Georgia Children's Trust Fund Commission Local Assistance Grant

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

12,000

$

12,000

25079

25 079

$ 22,627,728 $

793,333 $ 23,421,061

See notes to the basic financial statements.

- 31 -

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2004

SCHEDULE "4"

PROJECT
Construction of two new elementary schools, parking area and grounds, including acquisition of real estate, furnishings, equipment and fixtures
Construction of additional classrooms, instructional and support space, remodeling and renovating existing classrooms, instructional and support space, recreational fields and grounds and furnishings, equipment and fixtures for such areas at North Jackson, South Jackson, Jackson County and Maysville Elementary Schools, East and West Jackson Middle Schools, Jackson County Comprehensive High School and Gordon Street School
Paying all or portion of the debt service on outstanding Series 1993 General Obligation Bonds, unrefunded Series 1994 General Obligation Bonds previously issued and Series 1998 Refunding General Obligation Bonds
Acquiring, constructing and equipping new school buildings and other buildings or facilities useful or desirable in connection therewith, acquiring new school equipment, adding to, renovating, repairing, improving, and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith, and acquiring any property necessary or desirable therefore, 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

$ 12,000,000 $ 14,923,364

$ 14,923,364 Completed

9,000,000

5,922,844

5,922,844 Completed

8,835,838

9,830,561 $ 1,743,691

1,439,593 Ongoing

27,765,100 28,558,433

851 201

3,083,842 Ongoing

$ 57,600,938 $ 5912351202 $ 215941892 $ 25,369,643

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

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

Prior Years

$

178,126

Current Year

98177

Total

$ ==2=7=6=3=0=3

See notes to the basic financial statements.

- 32 -

JACKSON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2004

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 II

Category Ill

Category IV

CategoryV

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

1,456,725 $ 535,749
3,744,112 696,994
1,936,441
311,679 3,717,483 2,956,108
598,085 3,594,663
246,452 57,086
274,731 128,236

1,477,308 $ 601,507
3,694,882 649,054
2,163,224
436,031 3,794,260 3,239,480 1,153,958
629,677 2,903,532
46,556 43,240 163,080 26,026 376,545 125,867

61,714 $ 2,699
220,105 3,603
110,155
865 333,701 173,872 155,171
10,540 254,844
1,879
8,556 607
1,744 1 751

1,539,022 604,206
3,914,987 652,657
2,273,379
436,896 4,127,961 3,413,352 1,309,129
640,217 3,158,376
48,435 43,240 171,636 26,633 378,289 127,618

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

20,254,544 $ 21,524,227 $

1,341,806 $

22,866,033

Media Center Program Staff and Professional Development

556,733 116 595

820,005 64054

225,626 55,004

1,045,631 119,058

TOTAL QBE FORMULA FUNDS

$

20,927,872 $ 22,408,286 $

1,622,436 $ ===2=4,=03=0=,7=2==2

(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.

- 33-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 10, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Jackson 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 ofJackson County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Jackson County Board of Education's basic financial statements and have issued our report thereon dated March 10, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Jackson County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Jackson County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6781-04-01.

2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Jackson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, 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 Jackson County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004YB-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
March 10, 2005

Honorable Sonny Perdue, Governor Members ofthe General Assembly Members of the State Board of Education
and Superintendent and Members of the Jackson 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 ofJackson County Board ofEducation with the types ofcompliance requirements described in the U.S. 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. Jackson County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Jackson County Board of Education's management. Our responsibility is to express an opinion on Jackson 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-Pro.fit 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 Jackson 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 Jackson County Board of Education's compliance with those requirements.
2004SA-40

In our opinion, the Jackson 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. The results ofour auditing procedures disclosed an instance ofnoncompliance with those requirements, which is required to be reported in accordance with 0MB Circular A-133 and which is described in the accompanying Schedule ofFindings and Questioned Costs as item FA6781-04-01.
Internal Control Over Compliance
The management of Jackson 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 Jackson 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.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Jackson County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6781-04-01.
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 ofrisk that noncompliance with the applicable requirements of laws, 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. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use of the management, members of the Jackson 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,
~~~ Russell W. Hinton State Auditor
RWH:gp 2004SA-40

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

JACKSON 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-6781-03-01 FS-6781-03-02

Unresolved - See Corrective Action/Responses Further Action Not Warranted

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENT Inadequate Separation of Duties Finding Control Number: FS-6781-03-01

Due to the late audit for fiscal year 2003, we were unable to resolve this finding in fiscal year 2004.

Subsequent to receiving our fiscal year 2003 audit, the Jackson County Board ofEducation has implemented a separation of duties plan for school activities accounts. This plan is in place for fiscal year 2005.

SECTION IV FINDINGS AND QUESTIONED COSTS

JACKSON 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 Jackson County Board ofEducation's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

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

3. Noncompliance Material to the Financial Statements The audit of the Jackson County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements.

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

6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Jackson County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of0MB Circular A-133. This audit finding is included in section IV of this report.

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

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JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Jackson County Board ofEducation 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 REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-6781-04-01 Our examination ofthe Principal's accounts disclosed weaknesses in internal controls as discussed below:
Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment function.
Revenues/Receivables/Receipts 1) Deposit preparation was not separated from the record keeping and cash custody functions. 2) Cash receipts could not be traced to deposit slips.
Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should implement procedures to ensure that the key accounting functions of custody, record keeping and authorization be segregated.
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JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES PERIOD OF AVAILABILITY OF FEDERAL FUNDS Expenditures After Grant Period Reportable Condition Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Amount: $39,600.00 Finding Control Number: FA-6781-04-01
The Jackson County School District's internal controls were deficient for the Title I, Part A funds, (CFDA 84.010) in ensuring that charges for services were performed within the funding period and determining allowability ofcosts charged. An expenditure for contracted testing services, for a three year period of service, was identified as having been paid from current year grant funding. Only services received during the period July 1, 2003, through June 30, 2004, should have been paid from grant funds for the fiscal year audited. In accordance with provisions of 0MB Circular A-133, Compliance Supplement, Part 3, Section H, states that "where a funding period is specified, a nonFederal entity may charge to the award only costs resulting from obligations incurred during the funding period..". This deficiency occurred because management disregarded program funding period requirements.
Additionally, these testing services were provided to all students at a school identified as having a school-wide program. While Federal provisions prescribe that multiple funding sources (Federal, State or Local) are required to support a school-wide program, we noted that the Title I program was identified as the only funding source supporting the school-wide program concept at the participating school and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school-wide program in a reasonable manner. If there is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. This deficiency occurred because management failed to create a cost allocation plan to determine a reasonable basis for charging expenditures to the Title I, Part A program.
The School District should implement procedures to ensure that charges against the Title I program fall within the funding period and to assure that if the Title I program continues to be the only funding source in support of a school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. Ifmore than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs.
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JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES PERIOD OF AVAILABILITY OF FEDERAL FUNDS Expenditures After Grant Period Reportable Condition Nonmaterial Noncompliance U.S. Department of Education Through Georgia Department of Education Amount: $39,600.00 Finding Control Number: FA-6781-04-01 In the subsequent period, and during audit fieldwork, the School District refunded $30,000.00 to the Georgia Department ofEducation. These funds represented the charges against the Title I program that were outside ofthe grant period. Georgia Department ofEducation should review the remaining $9,600.00 of charges to determine what portion ofexpenditures were allowable to be charged to the Title I program.
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SECTIONV MANAGEMENT'S RESPONSES

JACKSON COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6781-04-01
We concur with the finding. Effective with fiscal year 2005, the Board implemented a separation of duties plan for school Principal's accounts.
Finding Control Number: FA-6781-04-01
We concur with this finding. In the subsequent period, and during audit fieldwork, the School District refunded $30,000 to the Georgia Department ofEducation. Additionally, the School District is working with the Georgia Department of Education to ensure that charges against the Title I program fall within the funding period and to assure that ifmultiple funding sources (Federal, State, or Local) are not involved, that Title I funds be only used to support costs that specifically relate to the Title I program as specified in 0MB Circular A-87.
Contact Person: Betty Varnadore, Accountant Phone: (706) 367-5151 Fax Number (706) 367-9457 E-mail Address: bvarnadore@jackson.kl2.ga.us