Johnson County Board of Education, Wrightsville, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2001

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JOHNSON COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS-

SECTION I

FINANCIAL

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

EXHIBITS

GENERAL-PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS - OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

3

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

4

D NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

5

ADDITIONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

14

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

16

SCHEDULES

1 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

18

2 SCHEDULE OF STATE REVENUE

21

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

3

BY PROGRAM

22

4

BY SITE

23

JOHNSON COUNTY BOARD OF EDUCATION -TABLE OF CONTENTS-
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WfTII GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WTI1I REQUIREMENTS APPLICABLE TO EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE wrrn
0MB CIRCULAR A-133
SECTION ill AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION! FINANCIAL

Rus,<,EI.I W. H1N roN
STATE AUDITOR /404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wa~hmglon Streel. SW., Suite 214 Atlanta, Georgia 30334-8400
May 22, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Johnson County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general-purpose financial statements of the Johnson County Board of Education, as of and for the year ended June 30, 2001, as listed in the table of contents. These general-purpose financial statements are the responsibility of the Johnson County Board of Education's management. Our responsibility is to express an opinion on these general-purpose 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 opm1on.
As described in the notes to the general-purpose financial statements, the Board of Education's financial statements have been prepared using certain accounting practices and policies which, in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:

2001ARL-13

* The general-purpose financial statements of the Board of Education did not contain a
General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles.
* School activity accounts maintained at the individual schools are not included in the
general-purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general-purpose financial statements.
* The Board of Education did not recognize as expenditures, in the year ended
June 30, 2001, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2001. Also funds received, subsequent to June 30, 2001, from the Georgia Department of Education for the State's share of these unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were improperly recorded in the year ended June 30, 2001. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general-purpose financial statements of these variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general-purpose financial statements of the matters referred to in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material resp~cts, the financial position of the Johnson County Board of Education as ofJune 30, 2001, and the results ofits operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated May 22, 2002, on our consideration of the Johnson County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the Johnson County Board of Education taken as a whole. The accompanying combining statements (Exhibits E and F) and the financial schedules (Schedules 1 through 4), which includes the Schedule ofExpenditures ofFederal Awards as required by U. S. Office ofManagement 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 general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the
2001ARL-13

audit of the general-purpose financial statements and in our opinion, except for the effects of the matters referred to in the third paragraph, such information is fairly stated, in all material respects, in relation to the general-purpose 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,
w4...k

RWH:gp 2001ARL-13

State Auditor

JOHNSON COUNTY BOARD OF EDUCATION

JOHNSON COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET ALL FUND TYPES JUNE 30, 2001

EXHIBIT "A"

ASSETS
Cash and Cash Equivalents
Investments
Accounts Receivable
Inventories Food Donated Commodities Purchased Food

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTALS (Memorandum Onl:r:l JUNE 301 2001 JUNE 301 2000

$ 225,697.84 $ 163,177.61 $ 388,875 45 $ 465,177.45

650,000.00

70,000.00

720,000.00

650,000.00

24,728.13

99,112.62

123,840.75

158,564.39

12,362.13 5,565.90

12,362.13 5,565.90

12,081.16 5,390.59

Total Assets

$ 900,425.97 $ 350,218.26 $ 1,250,644.23 $ 1,291,213.59

LIABILITIES AND FUND EQUITY
LIABILITIES
Accounts Payable Salaries Payable
Total Liabilities
FUND EQUITY
Fund Balances Reserved For Bus Replacement Funds For Continuation of Federal Programs For Inventories Food Donated Commod1t1es Purchased Food Unreserved Undes1gnated
Total Fund Equity

$ 36,450.41 $ 118?83.72
$ 155,234.13 $

36,450.41 $ 118,783.72
155,234.13 $

37,504.92 113,848.20
151,353.12

$ 37,463.33

$

37,463.33 $

43,220.87

141.75

$ 12,362.13 5,565.90

12,362.13 5,565.90

12,081.16 5,390.59

862,962.64

177,056.10

1,040'18.74

1,079,026 10

$ 900,425.97 $ 194,984.13 $ 1,095,410.10 $ 1,139,860.47

Total L1abilit1es and Fund Equity

$ 900,425 97 $ 350,218.26 $ 1,250,644.23 $ 1,291,213.59

The notes to the general-purpose financial statements are an integral part of this statement. -2-

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "B"

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of lnstrucllonal Services Educational Media SeMces General Administration School Administration Business Administrabon Maintenance and Operation of Plant Student Transportation SeMces Other Support Services Food Services Operation Community Services Operabons
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
FUND BALANCE JULY 1
Food Inventory - Net Change in Penod Donated Commodities Purchased Food

GENERAL FUND

SPECIAL REVENUE
FUND

TOTALS {Memorandum Onl:z:l
YEAR ENDED JUNE 30, 2001 JUNE 30, 2000

$ 6,684,859.69 $ 407,576.96 $

29,000.00

1,566,337.72

1,283,582.19

108,339.17

116,496.91

s 7,092,436.65
1,595,337.72 1,283,582.19
224,836.08

6,773,695.54 1,470,487.30 1,370,223.31
199,074.27

$ 8,105,781.05 $ 2,090,411.59 $ 10,196,192.64 $ 9,813,480.42

$ 5,280,005.70 $ 1,155,510.91 $ 6,435,516.61 $ 6,062,092.70

263,166.83 178,109.21 185,984.56 179,350.17 633,669.30
75,599.16 666,153.32 579,393.70
9,232.45
78,377.99

28,890.99 145,395.39
4,230.00 34,578.16
6,058.19
5,520.32 494.68
20,628.50 710,749 76

292,057.82 323,504.60 190,214.56 213,928.33 639,727.49
75,599.16 671,673.64 579,888.38
29,860.95 710,749.76
78,377.99

347,939.86 316,920.93 182,413.82 193,776.34 551,888.05
73,314.65 656,758.77 504,277.63
67,049.95 702,944.64
8,745.51 111,181.69

$ 8,129,042.39 $ 2,112,056.90 $ 10,241,099.29 $ 9,779,304.54

$ -23,261.34 $ -21,645.31 $

-44,906.65 $

34,175.88

923,687.31

216,173.16

1,139,860.47

1,105,440.50

280.97 175.31

280.97 175 31

1,259.43 -1,015.34

FUND BALANCE JUNE 30

$ 900,425.97 $ 194,984.13 $ 1,095,410.10 $ 1,139,860.47

The notes to the general-purpose financial statements are an Integral part of this statement. -3-

JOHNSON COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - CNON-GAAP BASIS\ GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30. 2001

EXHIBIT "C"

GENERAL FUND

ACTUAL

(BUDGET

BUDGET

BASIS}

REVENUES

State Funds Federal Funds Taxes Other Funds

$ 6,455,846.00 $ 6,684,859.69

29,000 00

1,214,000.00

1,283,582.19

100,000.00

108,339.17

Total Revenues EXPENDITURES

$ 7,769,846.00 $ 8,105,781.05

Current lnstrucbon Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Admimstrallon Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support SeMces Food Services Operation
Csp1tal Outlay

$ 5,206,512.00 $ 5,280,005.70

237,713.00 171,275.00 180,007.00 169,951.00 610,938.68
74,245.00 640,630 00 541,432 00
27,716 00 1,500.00
50,000 00

263,166.83 178,109.21 185,984.56 179,350.17 633,669.30
75,599.16 666,153.32 579,393.70
9,232.45
78,3n.ss

Total Expenditures

$ 7,911,919.68 $ 8,129,042.39

Excess of Revenues over (under) Expenditures $ -142,073.68 $ -23,261.34

EUND ~ALA!:::ICE JULY 1 2000
AdJustments Food Inventory - Net Change in Penod
Donated Commod1t1es Purchased Food

901,975.33

923,687.31

FUND BALA!:::!CE JUNE 30, 2001

s s 1591901.65

90M25.97

SPECIAL REVENUE FUND

ACTUAL

(BUDGET

BUDGET

BASIS}

$ 388,497.00 $ 407,576.96

1,558,953.00

1,566,337.72

125,300 00

116,496.91

$ 2,072,750.00 $ 2,090,411.59

$ 1,134,082.00 $ 1,155,510 91

22,780.00 120,954.00
13,877.00 36,815.00

28,890.99 145,395.39
4,230.00 34,578.16
6,05819

3,000.00 19,442.00 715,181.00

5,520.32 494.68
20,628.50 710,749.76

$ 2,066,131.00 $ 2,112,056.90

$

6,619.00 $ -21,645.31

215,729.96

216,173.16

6700

28097 175.31

$ 222:415 96 $ 1941984 13

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

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The Johnson 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 School District 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.
FUND ACCOUNTING
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.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general-purpose financial statements.
The general-purpose financial statements account for all State, Federal, Taxes and Other funds under control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of a School District's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the School District except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. These funds are received primarily from the Georgia Department ofEducation and from the Federal government to accomplish specific educational objectives.

-5 -

- - - - - - - - - - - - - - - - ----

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds.
Governmental funds are accounted for using the modified accrual basis ofaccounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available and therefore susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Expenditures are generally recognized when the related fund liability is incurred.
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 2001, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2000 and ending in early June 2001. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 2000 and ending in August 2001. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2001, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 2001, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30, 2001. Also, the State's portion ofthe compensation paid in July and August 2001 was received and recorded as revenue in the fiscal year subsequent to June 30, 2001. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2000, were recorded in the year ended June 30, 2001. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed.
-6-

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUDGET
The Johnson County Board of Education's budget is a complete financial plan for the School District's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the School District's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regular meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
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 of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:
(1) Obligations issued by the State of Georgia or by other states,
(2) Obligations issued by the United States government,

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(3) Obligations fully insured or guaranteed by the United States government or a United States government agency,

(4) Obligations of any corporation of the United States government,

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

RECEIVABLES

Receivables consist of 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 general-purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The Johnson County Board of Commissioners fixed the property tax levy for the 2000 tax year (calendar year) on October 12, 2000 (levy date). Taxes were due on February 2, 2001 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end are reported as revenue in fiscal year 2001. The Johnson 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 during the fiscal year ended June 30, 2001 for maintenance and operations amounted to $1,274,096.03.

The tax millage rate levied for the 2000 tax year (calendar year) for the Johnson County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

UM mills

INVENTORIES

FOOD INVENTORIES Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded

-8-

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time ofpurchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.
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. No liability has been recorded in the individual funds for the current portion of this obligation as this amount is deemed immaterial to the general-purpose financial statements.
Additionally, the dollar value of accumulated compensated absences at June 30, which will be payable from future resources has not been recorded in a General Long-Term Debt Account Group as this liability is also deemed to be immaterial to the fair presentation ofthese financial statements.
INTERFUND TRANSACTIONS
The School District has the following type of interfund transactions:
Reimbursements ofexpenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions ofexpenditures in the fund that is reimbursed.
MEMORANDUM ONLY - TOTAL COLUMNS
Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
Note 2: DEPOSITS
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. If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe
-9-

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO TIIE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 2: DEPOSITS
securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2001, the bank balances were $2,127,993.83. Theamountsofthetotal 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.)
- 10 -

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2001

Note 2: DEPOSITS

The School District's deposits are classified by risk category at June 30, 2001, as follows:

Risk Category

Bank Balance

1

$ 200,000.00

2

0.00

3

1,927,993.83

Total

$ 2,127,993.83

Note 3: 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 1 - Inventories

Note 4: RISK MANAGEMENT

The School Distri~t is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors or omissions; job related illness or injuries to employees; natural disaster and unemployment compensation.

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions, job related illness or injuries to employees and natural disaster. The School District has not incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

For the current fiscal year, due to the costs of available coverage, the School District has significantly reduced coverage for natural disaster (floods).

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenditure and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. There were no unemployment compensation claims made or paid in either the previous fiscal year or the current fiscal year.

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

Position Covered

Amount

Superintendent All Employees

$ 100,000.00 $ 100,000.00

- 11 -

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 5: OPERATING LEASES

Johnson County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2001, amounted to $29,064.00. Future minimum lease payments for these leases are as follows:

Year Ending

Amount

2002 2003 2004 2005

$ 29,064.00 29,064.00 29,064.00 18,410.00

Total

$ 105,602.00

Note 6: ON-BEHALF PAYMENTS

The School District has recognized revenues and expenditures in the amount of $132,635.15 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 ofNon-Certified Personnel In the amount of $102,365.77

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $10,964.38

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 $19,305.00

Note 7: 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 expenditures which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

- 12 -

JOHNSON COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30. 2001

Note 8: ACCUMULATED EMPLOYEES' LEAVE

Non-certificated employees who are not members ofthe Teachers Retirement System and who have accumulated the maximum number ofleave days for their position will be offered one-halfthe cost of a substitute for their position if they opt to continue in their position for the number of days they have accumulated. See Note 1 - Compensated Absences

Note 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school districts are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 11.29% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2001 2000 1999

100% 100% 100%

$ 611,917.36 $ 597,785.57 $ 599,843.15

- 13 -

JOHNSON COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPECIAL REVENUE FUND JUNE 30, 2001

ASSETS Cash and Cash Equivalents Investments Accounts Receivable Inventories
Food Donated Commodities Purchased Food
Total Assets
LIABILITIES AND FUND EQUITY LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable
Total Liabilities FUND EQUITY
Fund Balances Reserved For Continuation of Federal Programs For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated Total Fund Equity
Total Liabilities and Fund Equity
See notes to the general-purpose financial statements. 14 -

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

113,753.15 $

50,439.82

70,000.00

12,362.13 5 1565.90

$

201.681.18 $ =-==-5_0:!:::,4::i,39==82=

$

2,522.05 $

11,559.16

4175.00

38,880.66

$

6,697.05 $

50,439.82

$

12,362.13

5,565.90

177,056.10 $

0.00

$

194.984.13 $

0.00

$

201,681.18 $ =-==5=0=,4=39==82=

EXHIBIT "E"

FEDERAL PROGRAMS

TOTALS

JUNE 30, 2001

JUNE 30, 2000

$

164,192.97 $

252,520.35

70,000.00

$

99,112.62

99,112.62

122,698.47

12,362.13 5,565.90

12,081.16 5,390.59

$

99,112.62 $

351,233.62 $ ==c:=3=9=2:!::,6=90=-=57...,

$

1,015.36 $

22,369.20

75,728.06

$ ______9_9,._1__1__2.62 $

1,015.36 $ 36,450.41 118,783.72
156,249.49 $

25,164.29 37,504.92 113,848.20
176 517.41

$

141.75

$

12,362.13

5,565.90

12,081.16 5,390.59

$

0.00

177,056.10

198,559.66

$

0.00 $

194,984.13 $

216,173.16

$

99,112.62 $

351,233.62 $ ==3=9=2l1a:6..,90=.5=7=

- 15 -

JOHNSON COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2001

REVENUES
State Funds Federal Funds Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
FUND BALANCE JULY 1
Food Inventory - Net Change in Period Donated Commodities Purchased Food

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

44,914.00 $ 362,662.96

527,835.29

116,496.91

$

689,246.20 $ 362,662.96

$ 321,245.31
28,890.99 453.47

6,058.19 5,520.32
494.68

$

710 749.76

$

710,749.76 $ 362,662.96

$

-21,503.56 $

0.00

216,031.41

0.00

280.97 175.31

FUND BALANCE JUNE 30

$

194,984.13 $ ===-0==00=

See notes to the general-purpose financial statements. - 16 -

EXHIBIT"F"

FEDERAL PROGRAMS

TOTALS

YEAR ENDED

JUNE 301 2001

JUNE 30, 2000

$ $ 1,038,502.43
$ 1,038,502.43 $

407,576.96 $ 1,566,337.72
116,496.91
210901411.59 $

430,604.61 1,457,987.30
115,063.57
2,003,655.48

$ 834,265.60 $ 1,155,510.91 $ 1,106,871.59

144,941.92 4,230.00
34,578.16
20,628.50

28,890.99 145,395.39
4,230.00 34,578.16
6,058.19 5,520.32
494.68 20,628.50 710,749.76

56,164.34 78,627.14
1,270.27 22,791.39 17,550.78 10,000.00
155.70 35,947.04 7001977.63

$ 11038,644.18 $ 211121056.90 $ 21030,355.88

$

-141.75 $

-21,645.31 $

-26,700.40

141.75

216,173.16

242,629.47

280.97 175.31

1,259.43 -1 015.34

$

0.00 $

194,984.13 $ ==2,..1=6'=17=3=.1_6=

- 17 -

JOHNSON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2001

SCHEDULE "1"

FUNDING AGENCY PROGRAM/GRANT
Agnculture, U. S Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U S. Department of Agriculture
Education, U S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool capacity Building Improvement
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act TIHe I
Grants to Local Educational Agencies
Title II Eisenhower Professional Development
Title Ill Technology Literacy Challenge Fund Grants
Tille VI Innovative Education Program Strategies Class SIZ8 Reduction
Goals 2000 State and Local Education Systemic Improvement Grants
Safe and Drug-Free Schools and Communllles Vocatlonal Education - Basic Grants to States
High School Program Basic Grant
Total U. S Department of Education
Health and Human Services, U.S. Department of Pass-Through From Georgia Department of Human Resources Block Grants for Prevention and Treatment of Substance Abuse

CFDA NUMBER
. 10.553 . 10.555
10.550
84 027 84.173 84173
. 84.010
84.281 84.318 84 298 84.340 84 276 84 186 84.048
93.959

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

NIA $ 155,894.30

NIA

338,795.35 $

$ 494,689.65 $

(2) 677,604.12 (3)
677,60412

NIA

33,145.64

$ 527,835.29 $

33,145.64 710 749.76

NIA $ 109,182.93 $

NIA

26,084.00

NIA

3,099.00

$ 138,365.93 $

109,182 93 26,084.00
3,099 00
138,365.93

NIA

447,939.27

447,939.27

NIA

16,000 00

16,000.00

NIA

165,988.67

166,130.42

NIA

13,307.00

NIA

64,294.00

13,307.00 64,294.00

NIA

132,934.56

132,934.56

NIA

26,927.00

26,927.00

NIA

32,746 00

32,746 00

$ 1,038,502 43 $ 1,038,644.18

NIA $ 29,000.00 $

29,000 00

Total Federal Financial Assistance NIA= Not Available

- 18-

$ 1,595.337 72 $ 1,778.393 94

JOHNSON COUNlY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2001

SCHEDULE "1"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amounts shown for the Food Distribution Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system dunng the current fiscal year
(2) Expenditures for the School Breakfast Program were not maintained separately and are Included In the 2001 National School Lunch Program.
(3) Expenditures for this program include State and/or Other Funds Expenditures are not maintained by fund source
Major Programs are Identified by an asterisk (") in front of the CFDA number.
The School District did not provide Federal Assistance to any Subreclplent
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Johnson County Board of Education and Is presented on the modified accrual basis of accounting which Is the basis of accounbng used In the presentation of the general-purpose financial statements.

See notes to the general-purpose financial statements

19-

JOHNSON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2001

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Pnmary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades {4-5) Program Middle School (6-8) Program High School General Education {9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities categQfY II category Ill category IV Gifted Student - categOfY VI Remedial Education Program Alternative Education Program Media Center Program Staff and Professional Development Indirect Cost Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Pnncipal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services VocatlonalEducation Other State Programs At-Risk Summer School Program Environmental Science Program Health Insurance Innovative Programs Preschool Handicapped Program Remedial Summer School Teachers' Retirement Lottery Programs Computers In the Classroom
Human Resources, Georgia Department of Family Connection
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of Georgia's Reading Challenge Reading First Program

GOVERNMENTAL FUND TYPES

SPECIAL

GENERAL

REVENUE

FUND

FUND

TOTAL

$ 317,958.00 24,779.00
691,454.00 161,919.00 366,353.00 668,558.00 616,646.00 291,284.00
212,057.00 278,218.00
28,728.00 193,154.00 101,088.00
55,672.00 124,207.00 34,075.00 953,983.00

$ 317,958.00 24,779.00
691,454.00 161,919.00 366,353.00 668,558.00 616,646.00 291,284.00
212,057.00 278,218.00
28,728.00 193,154.00 101,088.00
55,672.00 124,207.00
34,075.00 953,983.00

283,971.00 86,285.00
214,890.00 44,537.00
5,577.00 9,848.00 56,465 00 492,243.00
$ 96,218.00
3,238.29 750.00
102,365.77 5,000.00 19,974.00 2,390.25 10,964.38

44,914.00 28,208.00

283,971.00 86,285.00
214,890.00 44,537.00 s,5n.oo 9,848.00 56,465.00
492,243.00 44,914.00 96,218.00
3,238.29 750.00
102,365.77 5,000.00
19,974.00 2,390.25 10,964.38
28,208.00

50,000.00

50,000.00

334,454.96

334,454.96

19,305.00

19,305.00

39,275.00 21,430.00

39,275.00 21,430.00

See notes to the general-purpose financial statements.

$ 61684,859 69 $ 4071576.96 $ 7,092,436.65 - 21 -

JOHNSON COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2001

SCHEDULE "3"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Pnmary Grades (1-3) Program Pnmary Grades-Early Intervention (1-3) Program Upper Elementary Grades (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 Gifted Student - category VI Remedial Educahon Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

348,268.00 $ 270,719 46 $

1,768 41 $ 272,487.87

27,141.00

105,553 41

105,553 41

757,367 00

668,652.62

8,963.84

677,616.46

177,354.00

355,305.49

355,305.49

401,276.00

392,117.59

4,870.92

396,988.51

732,289.00

817,915.75

17,653 41

835,569.16

675,428 00

767,870.61

16,407.77

784,278.38

319,051.00

320,17812

320,178 12

568,477.00

203,32646

21,641.47

224,967.93

306,212 76

26,629.24

332,842.00

52,540.61

22,223.33

74,763 94

211,567.00

144,094.11

312.89

144,407.00

110,724 00

60,519.07

12744

60,646.51

60,979 00

72,12844

72,128 44

$

s 4,389,921.00 $ 4,537,134.50 $ 120,598.72

4,657,733.22

136,047.00 37,323 00

149,340 14 9,646 51

25,720.70 27,676.49

175,060.84 37,323 00

TOTAL QBE FORMULA FUNDS

$

4,563,291.00 $ 4,696,121.15 $ 173,99591 $ 4,870,117.06

(1) Compnsed of State Funds plus Local Five Mill Share.

See notes to the general-purpose financial statements.

- 22-

JOHNSON COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY SITE
YEAR ENDED JUNE 30, 2001

SCHEDULE 4"

Johnson County Middle School Johnson County Elementary School Johnson County High School CrossRoads Program/Evening School Central Office (Alternative Education Program)
TOTAL
(1) Comprised of State Funds plus Local Five Mill Share.

ALLOTMENTS FROM GEORGIA DEPARTMENT OF
EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

$

970,224.00 $ 1,020,797.55

2,095,391.00

2,192,609.79

1,263,327.00

1,335,420.83

72,128.44

60,979.00

36,776.61

$

4,389,921.00 $ ===4=,6=57=,7=33=.2=2

See notes to the general-purpose financial statements. - 23-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Rusl>l:.I 1. \\'. H1N roN
STATE AUDITOR (404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wu~hmgton Street, S W., Suite 214 Atlanta, Georgia 30334-8400
May 22, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Johnson County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of Johnson County Board of Education as of and for the year ended June 30, 2001, and have issued our report thereon dated May 22, 2002. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Johnson County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Johnson County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2001YB-40

control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Johnson County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6831-01-01 and FS-6831-01-02.

A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration 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, the reportable conditions described above are also considered to be material weaknesses.

This report is intended solely for the information and use of the management, members of the Johnson 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,

Rus State Auditor

I.cl~~

RWH:gp 2001YB-40

RussEu. "' H1NTON STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S W., Suite 214 Atlanta. Georgia 30334-8400
May 22, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Johnson 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 of Johnson County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2001. Johnson County Board ofEducation's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Johnson County Board of Education's management. Our responsibility is to express an opinion on Johnson 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 of America; 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 Johnson 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 Johnson County Board ofEducation's compliance with those requirements.
2001SA-10

In our opinion, the Johnson County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2001.
Internal Control Over Compliance
The management of Johnson 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 Johnson County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the Johnson County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~-~ ~
RWH:gp 2001SA-10

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

JOHNSON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2001

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6831-99-01 FS-6831-99-02 FS-6831-00-01 FS-6831-00-02

Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUNALENTS GENERAL LEDGER Inadequate Separation of Duties Finding Control Number: FS-6831-00-01

Due to budgetary constraints, the Board ofEducation is unable to hire additional staff. We feel that with rotation of duties we have satisfied this finding as far as possible.

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-6831-00-02

Due to current staffing limitations and budgetary considerations prohibiting the hiring of additional staff, the Board ofEducation has decided not to pursue the recording ofgeneral fixed assets on our financial statements.

SECTION IV FINDINGS AND QUESTIONED COSTS

JOHNSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Johnson County Board ofEducation's financial statements was qualified for various departures from generally accepted accounting principles.

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

Cash and Cash Equivalents General Ledger

Employee Compensation General Fixed Assets

All of the reportable conditions described above are considered to be material weaknesses.

3. Noncompliance Material to the Financial Statements The audit of the Johnson 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 Johnson 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 Johnson County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

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

7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies

8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.

9. Low Risk Auditee The Johnson County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

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JOHNSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS EMPLOYEE COMPENSATION GENERAL LEDGER Inadequate Separation ofDuties Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6831-01-01
A review of the School District's internal control policies and procedures noted deficiencies in providing for adequate internal control over the following functions and related procedures:
The School District has two employees who alternately perform the general ledger, check preparation, check signing, and bank reconciliation functions. In addition, they both perform the deposit preparation and deposit recording functions and all employee compensation functions.
Blank checks, including payroll checks, are accessible, without supervision, to both employees described above.
Bank reconciliations are not reviewed by an individual independent of cash operations.
Journal entries are not supported by adequate documentation and/or explanations. In addition, journal entries are not reviewed and approved by someone independent ofjournal entry preparation and posting.
These conditions were a result ofmanagement's decision to limit the number of administrative staff made responsible for accounting functions. The School District should review the accounting procedures in place, design procedures that would enhance segregation ofduties relative to the above control categories and implement those procedures to strengthen the internal control over the accounting functions.
Management's Response:
We are considering hiring additional staff to help clear this finding. We feel that with rotation of duties we have satisfied this finding as well as possible at this time with the current staff.
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JOHNSON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2001
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6831-01-02 The Johnson County Board of Education did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general-purpose financial statements ofthe School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for maintenance of a General Fixed Assets Account Group. Subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained ofall additions and deletions to the General Fixed Assets Account Group. Management's Response: At this time, the Board has decided not to require the recording of general fixed assets on our financial statements. We are aware that GASB 34 will require us to do so in the future. ID FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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