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

LAMAR COUNTY BOARD OF EDUCATION
BARNESVILLE, 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

LAMAR 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

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

Page
3 4 6 7 8 9 10 11
25

LAMAR COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

27

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

LAMAR COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 10, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lamar 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 Lamar County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Lamar County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Lamar County Board of Education, as of June 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated June 10, 2005, on our consideration ofthe Lamar County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 25 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 Lamar County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code of Georgia Annotated section 506-24.
Respectfully submitted,

RWH:gp 2004ARL-11

State Auditor

LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Introduction
Our discussion and analysis of the Lamar 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. Readers should also review the financial statements and the notes to the statements to enhance their understanding of the School District's financial performance.
This is the second year the School District has prepared its annual financial report using the new government financial reporting model. The reporting model is a combination of both government-wide financial statements and fund financial statements. The basic financial statements contain three components:
1) District-wide financial statements including the Statement of Net Assets and the Statement of Activities, which provide both short-term and long-term overviews of the School District's finances.
2) Fund financial statements including the balance sheets that provide a greater level of detail and focus on how well the School District has performed in the short-term in the most significant or major funds.
3) Notes to the Financial Statements.
Financial Highlights
Key financial highlights for fiscal year 2004 are as follows:
On the District-wide financial statements:
Total assets of the School District exceeded liabilities by over $21.4 million. This represented an increase of $4.0 million in net assets when compared to the prior year. Of this amount, $5.4 million is unrestricted and available for spending at the School District's discretion.
The School District had $18.3 million in expenses relating to governmental activities; only $14.4 million of these expenses were offset by program specific charges for services, grants, and contributions. However, general revenues (primarily property and sales taxes) of almost $8.0 million were adequate to provide for these programs.
As stated above, general revenues accounted for $8.0 million or about 36% of all revenues totaling over $22.3 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues.
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LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
On the fund financial statements:
Among major funds, the General Fund had almost $18.7 million in revenues and $17.4 million in expenditures. The general fund balance of almost $5.4 million at June 30, 2004, increased about $1.3 million when compared to the prior year.
Another major fund, the Capital Projects Fund, has $2.2 million in fund balance at June 30, 2004. This fund balance decreased over $5.1 million during the year as payments were made on the new elementary school. The fund balance represents the amount which remained unexpended at fiscal year end to cover payments incurred in fiscal year 2005.
The Debt Service Fund had an increase in fund balance of $1.0 million. The local option sales tax for education and interest revenue on the funds exceeded the payments due on the principal and interest of the two bonds during the year by the amount of the increase.
Overview of the Financial Statements
This annual report consists of several parts including 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.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statement provides information about the financial relationships in which the School District acts as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Lamar County School District, the General Fund, District-wide Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The School District has no nonmajor funds as defined by GASB Statement 34 for the purposes of this report.
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 which further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
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LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
District-wide Statements
Since Lamar 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 now than last year? The Statement ofNet Assets and the Statement ofActivities provide the basis for answering this question. These financial statements include all School District's assets and liabilities and use the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors.
The Statement of Net Assets and the Statement of Activities reflect the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the School District has no nonmajor Funds as defined by generally accepted accounting principles.
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 be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. Because it cannot use these assets to finance its operations, these activities are excluded from the District-wide financial statements
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LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Financial Analysis of the School District as a Whole Recall that the Statement ofNet 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 Lamar County School District, assets exceeded liabilities in excess of $21.4 million 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 $21.4 million of net assets, $4.2 million was restricted for continuation of Federal programs, debt service, and completion of 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 had in excess $11.8 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). These capital assets are used to provide educational services to students served by the School District. Because of the nature and continuing use of the assets reported in this component of net assets, it must be recognized that this portion of the net assets is not available for future spending. The remaining balance of unrestricted net assets of $5.4 million 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 as compared to the prior fiscal year.
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LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 12,394,277 $ 14,661,038

19,962,758

13,339,288

Total Assets

$ 32,357,035 $ 28,000,326

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 2,516,984 $ 1,955,275

8,420,000

8,650,000

Total Liabilities

$ 10,936,984 $ 10,605,275

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

$ 11,805,916 $ 8,234,787

4,228,909

4,132,235

5,385,226

5,028,029

Total Net Assets

$ 21,420,051 $ 17,395,051

The above comparison reflects that although total net assets increased about $4.0 million, the increase in unrestricted net assets was less than $0.4 million. The increase in unrestricted net assets at June 30, 2004, does result in some increase in financial flexibility for the School District in the subsequent fiscal year.

Table 2 shows the Change in Net Assets for this fiscal year as compared to the prior fiscal year and summarizes the revenues and expenses that caused the increase.

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LAMAR 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 and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

$

283,889

11,820,663

2,253,440

$ 285,952 12,693,886

Total Program Revenues

$ 14,357,992 $ 12,979,838

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 5,240,340 $ 4,247,364

For Debt Service

43

2

Railroad Cars

12,330

Sales Taxes

Special Purpose Local Option Sales Tax

1,381,130

1,277,565

Intangible Recording Tax

135,924

102,639

Real Estate

51,095

18,132

Grants and Contributions not Restricted to

Specific Programs

728,533

635,819

Investment Earnings

157,037

216,369

Miscellaneous

282,804

245,480

Total General Revenues

$ 7,989,236 $ 6,743,370

Total Revenues

$ 22,347,228 $ 19,723,208

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 of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 11,255,468
889,865 587,371 304,946 399,161 827,156 145,114 1,056,904 1,003,106 270,958 66,101
3,847 31,519 1,087,801 392 911

$ 11,777,967
1,010,119 573,503 303,126 373,895 926,980 145,004
1,177,452 827,516 348,792 133,786
1,105,339 366 384

Total Expenses

$ 18,322,228 $ 19,069,863

Increase in Net Assets

$ 4!025!000 $ 65\345

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

Governmental Activities

The Statement ofActivities 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. It identifies the cost of these services supported by tax revenue and unrestricted state entitlements. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year.

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

$ 11,255,468 $ 11,777,967 $

Support Services

Pupil Services

889,865 1,010,119

Improvement of Instructional Services

587,371

573,503

Educational Media Services

304,946

303,126

General Administration

399, 16 I

373,895

School Administration

827,156

926,980

Business Administration

145,114

145,004

Maintenance and Operation of Plant

1,056,904 1,177,452

Student Transportation Services

1,003,106

827,516

Central Support Services

270,958

348,792

Other Support Services

66,101

133,786

Operations of Non-Instructional Services

Enterprise Operations

3,847

Community Services

31,519

Food Services

1,087,801 I, I05,339

Interest on Short-Term and Long-Term Debt

392 911

366,384

1,361,775 $
416,406 202,469
87,498 36,442 316,655 138,940 363,726 472,764 215,128 25,250
3,847 31,519 -101,094 392 9 I 1

3,301,621
439,493 202,183
83,012 14,896 406,561 145,004 519,371 250,158 286,190 36,360
38,792 366 384

Total Expenses

$ 18,322,228 $ 19,069,863 $ 3,964,236 $ 6,090,025

The table above shows that the School District did a good job in holding expenses down to handle the effects of continued reductions in funding by the State of Georgia. The decrease in the net costs of services was due to the funding received from the State for the construction of the new school.

Financial Analysis of the School District's Funds

Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $22.3 million and total expenditures of almost $25.2 million in fiscal year 2004. Included in the expenditures of $25.2 million were $7.2 million of capital outlay expenditures related to the construction of the new elementary school.

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

General Fund Budget 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 amended its general fund budget as needed. The School District budget is adopted at the functional level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well.

For the General Fund, the final actual revenues of $18.7 million exceeded the final budgeted amount of $17.6 million by about $1.1 million. This difference (final actual vs. final budget) was primarily due to an increase in the millage rate on the 2003 digest after the budget had been adopted and miscellaneous unbudgeted revenues. The final actual expenditures of $17.4 million were less than the final budgeted amount by less than $0.2 million.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2004, the School District had almost $20.0 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation as compared to the prior fiscal year.

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$

521,056

7,290,208

10,901,763

1,107,809

141,922

$ 521,056 327,758
11,153,822 1,172,071 164 581

Total

19,962,758 $ 13,339,288

The significant increase in capital assets is in the category of Construction in Progress. These costs were incurred in the construction and equipping of the new elementary school for grades 3 through 5. The building was completed and opened after the beginning of fiscal year 2005. At that point, the existing elementary school was converted to a primary school for Pre-K through grade 2.

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

Debt

At fiscal year ended June 30, 2004, the School District had $8.4 million in bonds outstanding. There was no other long-term debt. Table 5 summarizes the School District's debt as compared to the prior fiscal year.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Bonds Payable

$ 8,420,000 $ 8,650,000

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:

Funding Reductions - During fiscal year 2004, the State of Georgia implemented additional QBE revenue formula funding reductions for all state school districts. These 2004 reductions were on top of QBE and state grant funding reductions made in prior fiscal years. The state austerity reductions in funding, coupled with mandated state and Federal program and remediation requirements, resulted in an additional burden on local taxpayers funded by an increase in the local millage rate in fiscal year 2004. Educational funding from the State of Georgia is expected to remain at a conservatively low level due to ongoing concerns about smaller projected state tax revenues and increased Medicaid and other health care costs at the State level. Considering the stagnant economy of the past few years, continuing formula funding reductions may challenge the long-term financial stability of the School District. Despite these conditions, the Lamar County School District is strong financially and we remain confident in the ability to maximize resources to provide the best possible educational experience for all of our students.

Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. Bond repayment requirements are continuing to be met by local option sales tax for education revenues.

Contacting the School District's Financial Management

This financial report is designed to provide our citizen's 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

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LAMAR COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 additional financial information, contact Ms. Deborah Johnston, Director of Finance, Lamar County Board of Education, 3 Trojan Way, Barnesville, Georgia, 30204. You may also email your questions to Ms. Johnston at djohnstn@lamar.kl2.ga.us.
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LAMAR COUNTY BOARD OF EDUCATION

LAMAR COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2004
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted
Total Net Assets
Total Liabilities and Net Assets
The notes to the basic financial statements are an integral part of this statement. -3-

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

3,298,432

7,047,279

581,588 1,174,782
210,719 38,963 42,514

521,056 7,290,208
358,419 14,129,259 2,679,012 -5015196

$ ===3=2~,3~5,;,,7,~0~35~

$

598,963

1,382,907

227,249

307,865

1,035,000 7 385 000

$

10 936 984

$

11,805,916

185,572 2,107,141 1,936,196 5,385,226

$

21420051

$ ===3=2=',3=5=7'=,0=35==

LAMAR 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

$

11,255,468 $

889,865 587,371 304,946 399,161 827,156 145,114 1,056,904 1,003,106 270,958
66,101

3,847 31,519 1,087,801 392 911

120,272 220,981
72,027
282,253

Total Governmental Activities

18,322,228 $

695 533

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 Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

EXHIBIT "B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

7,759,088 $

252,478 384,902 217,448 362,719 438,474

648,023 438,367
55,830 40,851

810,839

$

11,409,019 $

2,014,333 $
6,174 45,155 91,975
95,803 2,253,440 $

-1,361,775
-416,406 -202,469
-87,498 -36,442 -316,655 -138,940 -363,726 -472,764 -215,128 -25,250
-3,847 -31,519 101,094 -392 911
-3,964,236

$

5,240,340

43

12,330

1,381,130 135,924 51,095 728,533 157,037 282 804

$

7 989 236

$

4,025,000

17 395 051

$ ===2=1=,4=2=0=,0=5=1

-5-

LAMAR 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 Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs 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

$ 1,095,752 $ 2,026,879 $ 175,801 $ 3,298,432

4,611,556

740,533

1,695,190

7,047,279

199,323 1,174,782
210,719 38,963 42 514

236,150

435,473 1,174,782
210,719 38,963 42 514

$ 7,373,609 $ 2,767,412 $ 2,107,141 $ 12,248,162

$ 598,963 1,382,907 $

227,249 307,865

$ 1,981,870 $ 535 114

$

598,963

1,382,907

227,249

307,865

$ 2,516,984

$ 143,058

$

143,058

$ 2,107,141

2,107,141

42,514

42,514

$ 1,936,196

1,936,196

5,206,167

296,102

5,206,167 296,102

$ 5,391,739 $ 2,232,298 $ 2,107,141 $ 9,731,178

$ 7,373,609 $ 2,767,412 $ 2,107,141 $ 12,248,162

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

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

EXHIBIT"D"

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

$

9,731,178

$

521,056

7,290,208

358,419

14,129,259

2,679,012

-5 015 196

19,962,758

146,115 -8,420.000

Net Assets of Governmental Activities (Exhibit "A")

$ 21,420,051

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

LAMAR 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)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 5,219,984 187,019
10,260,758 $ 1,968,769 283,889 52,454 694,448

$

43 $ 5,220,027

1,381,130

1,568,149

2,161,465

12,422,223

1,968,769

283,889

92,058

12,525

157,037

694,448

$ 18,667,321 $ 2,253,523 $ 1,393,698 $ 22,314,542

$ 10,850,383

$ 10,850,383

889,865 587,371 304,946 399,161 827,156 143,212 1,042,995 900,374 270,958
66,101 3,847
31,519 1,058,291
$

7,176,608

889,865 587,371 304,946 399,161 827,156 143,212 1,042,995 900,374 270,958
66,101 3,847
31,519 1,058,291 7,176,608

$ 230,000 392,911

230,000 392,911

$ 17 376 179 $ 7,176,608 $ 622,911 $ 25,175,698

$ 1 291,142 $ -4,923,085 $ 770 787 $ -2,861, 156

$ 229,949 $ $ -229,949

229,949 -229,949

$ -229,949 $ 229,949 $

0

$ 1,291,142 $ -5, 153,034 $ 1,000,736 $ -2,861, 156

4,100,597

7,385,332

1,106,405

12,592,334

Fund Balances - Ending

$ 5391739 $ 2,232,298$ 2107141 $ 9731178

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

LAMAR 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")

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital Outlay

$

Depreciation Expense

Excess of Capital Outlay over Depreciation Expense

Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues.

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.

$ -2.861,156

7,075,106 -451 636

6,623,470 32,686

230,000

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

$ =====-4'=02=5==,o=oo=

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

LAMAR 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
$ ======7,=64=3=
$ ===7='=64=3=

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

LAMAR 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 Lamar County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Lamar County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.

- 11 -

LAMAR 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 Bond Proceeds, Special Purpose Local Option Sales Tax and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities.
Debt Service Fund accounts for taxes (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 -

LAMAR 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 claims and judgments, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities 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 -

LAMAR 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 Lamar County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 30, 2003 (levy date). Taxes were due on December 31, 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 Lamar County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes 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 $5,207,654 and for school bonds amounted to $43.

The tax millage rate levied for the 2003 tax year (calendar year) for the Lamar County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

16.2 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,381,130 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 -

LAMAR 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 of meals 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.

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 of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows:

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

5,000 10 to 60 years

$

5,000 20 to 60 years

$

5,000 3 to 15 years

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

GENERAL OBLIGATION BONDS

The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets.

- 15 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use 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 $6,027,552. The amounts of the total bank balances are classified into three categories of credit risk:

- 16 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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

$ 675,800

2

5,351,752

3

0

Total

$ 6,027.552

CATEGORIZATION OF INVESTMENTS At June 30, 2004, the carrying value ofthe School District's total investments was $6,030,396 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 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.

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

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:

Balances July I, 2003

Increases

Balances Decreases June 30, 2004

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

$ 521,056

$

327,758 $ 6,962,450

0 $ 521,056 7,290,208

Total Capital Assets Not Being Depreciated $ 848,814 $ 6,962,450 $

0 $ 7,811,264

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 14,129,259 2,574,094 $ 358,419

112,656 $

$ 14,129,259

7,738

2,679,012

358,419

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,975,437 1,402,023
193,838

252,059 176,918 22,659

7,738

3,227,496 1,571,203
216,497

Total Capital Assets, Being Depreciated, Net $ 12,490,474 $ -338,980 $

0 $ 12,151,494

Governmental Activity Capital Assets - Net $ 13,339,288 $ 6,623,470 $

0 $ 19,962,758

Current year depreciation expense by function is as follows:

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Business Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 274,786

$

1,290

9,435

146,107

156,832 20,018

$ 451,636

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (Debt Service Funds) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows:

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

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

$ 175,801 $ 902,099 $ 1,021,263
$ 1,695,190 $ 547,948

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

$=====2==29-,9==4==9

Transfers are used to move Special Purpose Local Option Sales Tax reported as revenue in a prior fiscal year in the District-wide Capital Projects to the Debt Service Funds to be used for payment of principal and interest on the Series 1995 General Obligation Bonds.

- 19 -

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

EXHIBIT "H"

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.

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 of Year Liability

$

0 $

2 548 $

2 548 $

0

$

0 $

8 454 $

8 454 $

0

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

Position Covered
Superintendent All Employees

Amount

$

50,000

$ 100,000

Note 9: LONG-TERM DEBT

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

Pumose
General Government - Series 1995 General Government - Series 2002

Interest Rates
3.85%- 5.40% 3.82%

Amount
$ 4,420,000 4,000,000
$ 8,420,000

- 20 -

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

EXHIBIT "H"

Note 9: LONG-TERM DEBT

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

Governmental Funds General
Obligation Bonds

Balance July 1, 2003

$ 8,650,000

Deductions Debt Retired

230,000

Balance June 30, 2004

$ 8,420.000

Portion of Long-Term Debt Due within One Year

$ 1,035,000

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

General Obligation

Debt

Principal

Interest

2005 2006 2007 2008 2009 2010 - 2014 2016

$ 1,035,000 $ 1,145,000 1,345,000 1,610,000 330,000 1,110,000 1,845,000

381,785 340,090 293,794 239,428 174,422 418,312 256,770

Total Principal and Interest

$ 8,420.000 $ 2,104.601

Note 10: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $137,793 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

- 21 -

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

EXHIBIT "H"

Note 10: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $135,917

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 $1,876

Note 11: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

New Lamar Elementary

$

19.268 $====2==40-,1==6==3

The amounts described in this note are not reflected in the basic financial statements.

Note 12: SIGNIFICANT CONTINGENT LIABILITIES

Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position.

Note 13: SUBSEQUENT EVENTS

In the subsequent fiscal year, the School District issued general obligation refunding bonds in the amount of $4,135,000 dated February 17, 2005. The proceeds from these bonds will be used for refunding a portion of School bonds dated December 1, 1995.

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple

- 22 -

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

EXHIBIT "H"

Note 14: RETIREMENT PLANS

employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.

TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$ 866,872 $ 903,318 $ 860,450

- 23 -

LAMAR 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
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

4,823,763 $

4,823,763 $

5,219,984

187,019

10,017,443

10,199,829

10,260,758

1,738,245

2,199,352

1,968,769

284,600

284,600

283,889

30,500

30,500

52,454

22,300

22,300

694 448

$

16,916,851 $

17,560,344 $

18,667,321

$

10,570,830 $

10,793,458 $

10,850,383

640,794 424,307 290,229 379,997 883,877 144,360 1,175,459 962,076 248,415
69,150
1,087,358 40000

750,735 657,117 315,229 392,735 885,069 144,860 1,176,759 968,004 257,992
71,651
1,089,358 40 000

889,865 587,371 304,946 399,161 827,156 143,212 1,042,995 900,374 270,958
66,101 3,847
31,519 1,058,291

$

16,916,852 $

17,542,967 $

17,376 179

$

-1 $

17,377 $

1,291,142

4,400,427

4,401,064

4,100,597

10 714

9,150

Fund Balances - Ending

$

4411140 $

4 427 591 $ ==.;;5;.,;,3;,;;;9.;.1b7=39=

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual

(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 25 -

LAMAR 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 Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading First 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
Total U.S. Department of Education
Health and Human Services, U. S. Department of Pass-Through From Children and Youth Coordinating Council Abstinence Education Block Grant

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA

(2)

NIA

$ _ _ _ _8_7_9~.4_9_3

$

879.493

10.550

N/A

58 642

$ _ _ _ _9_3_8~1,_3_5

* 84.027 84.173

N/A

$

N/A

$

319,881 14,937
334,818

84.318 84.367 84.357 84.186 84.298 84.010 84.048

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

16,132 149,117
34,535 16,453 16,824 625,649 (3) 31 476
1225004

93.235

N/A

$ _ _ _ _ _6~,3_1_5

Total Federal Financial Assistance N/A = Not Available

$ ====2=16=9=4=5=4

Notes to the Schedule of Expenditures of Federal Awards

(1) The amount shown for the Food Donation Program represents the Federally assigned value of non monetary 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 ($136,850) were not maintained separately and are included in the 2004 National School Lunch Program.
(3) Includes Federal Assistance of $5,777 provided to subrecipients.

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

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Lamar 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.

- 26 -

LAMAR 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 Education Equalization Funding Grant Food Services Austerity Reduction Other State Programs After School Program (4-8) Apprenticeship Program Extended Day - Agriculture Extended Year - Agriculture Extended Day - Technology/Career Education Extended Year - Technology/Career Education Health Insurance Industry Certification - Technology/Career Education Mentor Teachers Preschool Handicapped Program School Improvement (Georgia"s Choice) Statewide Reading (K-3) Program Student Information System Supervision - Technology/Career Education Lottery Program Student Information System Conversion
Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 27 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

373,867

$

373,867

560.445 134,754 1,206,285 218,058 704,508 223,858 1,486,156 1,131,723 311,954
39,900 167.442 571.460 102.183
77,500 18,918 111,845 202,171 66,170 41,710
331,408 403,167 625,304
428,868 91,975 34,907 63,897 9,044
590,740 70,394
-499.403
10,097 1,900 5,544 2,801 9,710 365
135,917 15,000 1,850 29,954 55.470 28,337 18,984 18,015
23,730

560,445 134,754 1,206,285 218,058 704,508 223,858 1,486,156 1,131,723 311,954
39,900 167,442 571,460 102,183
77,500 18,918 111,845 202,171 66,170 41,710
331,408 403,167 625,304
428,868 91,975 34,907 63,897 9,044
590,740 70,394
-499,403
10,097 1,900 5,544 2,801 9,710 365
135,917 15,000 1,850 29,954 55,470 28,337 18,984 18,015
23,730

$

2,161.465

1 876

2,161,465 1 876

$ 10,260,758 $

2,161,465 $ 12,422,223

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

SCHEDULE "4"

PROJECT
Retiring a portion of the Series 1995 General Obligation Bonds from August, 1998 through and including February, 2003 and, to the extent that funds are available, funding an escrow account to retire additional portions of the Bonds.
Remodeling, renovating, improving and equipping existing classrooms, instructional and support space and grounds at existing School District facilities, including re-roofing and replacing HVAC system at the high school, acquiring and necessary personal property, including technology equipment and furnishings for the middle school and paying any expenses incident thereto.
Payment of a portion of the principal of and interest on the Lamar County School District's General Obligation School Bonds, Series 1995.
Acquisition, construction, equipping and furnishing of a new school and additions, renovations and improvements at existing schools and facilities, including the acquisition of any property necessary or desirable therefor.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$ 5,100,000 $ 2,900,000 $

467,175 $ 2,074,629 Ongoing

4,000,000

4,000,000

2,443,930

2,443,930

2,642,799 Ongoing Ongoing

5,056,070

7,750,000

7 176 608

327 758 Ongoing

$ 16,600,000 $ 17,093,930 $ 7 643 783 $ 5 045 186

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

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

Prior Years

$

117,147

Current Year

Total

$ =====2=6=9-=9;,,;4,;,.7

See notes to the basic financial statements.

-28 -

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

SCHEDULE "5"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Gifted Student - Category VI Remedial Education Program Alternative Education Program
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

653,313 $

685,940 $

10,369 $

696,309

166,093

154,120

3,527

157,647

1,470,199

1,663,641

33,069

1,696,710

255,954

256,773

2,062

258,835

859,277

1,057,025

11,931

1,068,956

255,165 1,782,909 1,326,059
392,203 1,019,954
96,548 24,457 132 511

232,591 1,772,554 1,521,106
417,752
137,149 676,283
56,164 15,396
42 675

2,934 58,041 113,470 41,993
29,063 2,803
61 720

235,525 1,830,595 1,634,576
459,745
137,149 705,346
58,967 15,396 104 395

$

8,434,642 $ 8,689,169 $

370,982 $

9,060,151

241,624 49,575

262,502 4,250

26,818 11,387

289,320 15 637

TOTAL QBE FORMULA FUNDS

$

8 725 841 $ 8,955,921 $

409187 $==,;;,9,~36;;;5;,i.,1;,,;;0;;;;.8

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

See notes to the basic financial statements.

- 29 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 10, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lamar County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Lamar County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Lamar County Board of Education's basic financial statements and have issued our report thereon dated June 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 Lamar County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters 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 Lamar County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6851-04-01 and FS-6851-04-02.
2004YB-30

A material weakness is a reportable 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 caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Lamar 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 Lamar County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~.-4d-~ Russell W. Hinton State Auditor
RWH:gp 2004YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S. W., Suite 1-156 Atlanta, Georgia 30334-8400
June 10, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lamar 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 ofLamar County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2004. Lamar County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Lamar County Board of Education's management. Our responsibility is to express an opinion on Lamar County Board of Education's compliance based on our audit.
We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Lamar 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 Lamar County Board of Education's compliance with those requirements.
2004SA-30

In our opinion, the Lamar County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Lamar 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 Lamar 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 certain matters involving the internal control over compliance 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 compliance that, in our judgment, could adversely affect the Lamar County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6851-04-01, FA-6851-04-02 and FA-6851-04-03.
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 none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Lamar County Board of Education, 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-30

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

LAMAR 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-6851-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Finding Control Number: FS-6851-03-01

Although some procedures to enhance accounting controls and documentation have been implemented, adequate segregation of duties in the school principal accounts is not possible due to limited clerical staff in each location. At this time, there are no funds available for the additional staffing necessary for adequate separation of duties at the school level.

SECTION IV FINDINGS AND QUESTIONED COSTS

LAMAR 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 Lamar County Board of Education's financial statements was unqualified.

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

Cash and Cash Equivalents Revenues/Receivables/Receipts Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements Employee Compensation

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

3. Noncompliance Material to the Financial Statements The audit ofthe Lamar County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements.

4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Lamar County Board of Education disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Eligibility Special Tests and Provisions

Reporting

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Lamar 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 Lamar County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are 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

- 1-

LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Lamar County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) EMPLOYEE COMPENSATION Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-6851-04-01
An examination of the internal accounting control procedures revealed that the School District did not maintain adequate separation of duties for the following accounting functions and related procedures:
Accounting Controls (Overall) 1) Access controls in the Financial System do not prevent users from accessing accounting functions that are outside of their area of responsibility.
Employee Compensation 1) The personnel and payroll functions were not separated. The same individual enters employee information in the personnel system, enters salary and accounting information into the payroll system, processes payroll transactions, posts information to the general ledger and reconciles salary expense at fiscal year-end.
Separation of duties involving key accounting functions is the basis for achieving an adequate system of internal control. These deficiencies were a result of the School District's decision to limit the number of administrative staff made responsible for accounting functions and failure to ensure established controls were functioning as designed. Management should periodically review this decision to determine if employee duties can be reassigned to achieve a higher degree of internal control with the existing staff and should also implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. Additionally, management should ensure that the access controls in the accounting information system complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties.
-2-

LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Separation of Duties Reportable Condition Finding Control Number: FS-6851-04-02
Our examination of the principals' accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents 1) The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts 1) Deposit preparation was not separated from the record keeping and cash custody functions.
2) Based on a review of 25 items, one receipt was not deposited to the bank account in a timely manner; twenty receipts did not contain documentation to support the amount.
3) Pre-numbered receipt books were not used at all.
Expenditures/Liabilities/Disbursements 1) The check writing function was not separated from record keeping or processing of signed checks.
2) Based on a review of 25 items, two voucher packets did not contain an invoice and one voucher package contained a faxed copy of the invoice.
These deficiencies were a result ofthe School District's decision to limit the number of clerical staff made responsible, at the various principal sites, 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. Additionally, controls should be revised and monitored to provide reasonable assurance that transactions are processed according to established procedures.
-3 -

LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Accounting/Internal Control Deficiencies Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6851-04-01
A review ofthe School District's eligibility procedures for the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed the following deficiencies:
The Lamar County Comprehensive High School master list of students eligible for free and reduced meals was not maintained in accordance with U. S. Department of Agriculture's Eligibility Guidance for School Meals Manual, as required by the Georgia Department of Education. The master list for the school, as presented for examination, did not contain a complete listing of all students who participated in the program during the year and did not include information concerning dates of withdrawal, denial, approval and status changes of students.
A review ofthirty free and reduced-price meal applications selected for testing revealed that three student applications for the Lamar County Comprehensive High School were missing.
These conditions occurred because management failed to become familiar with Georgia Department of Education requirements as outlined in the Eligibility Guidance for School Meals Manual and management failed to implement appropriate internal controls for maintenance of a system to maintain student eligibility documentation as required by Federal guidelines. Management should develop adequate internal controls to ensure that master lists are updated regularly and maintained according to established guidelines. In addition, documentation substantiating eligibility determination must be maintained on file for three years after the date of fiscal year to which it pertains, except if audit findings have not been resolved, this documentation must be maintained until the issues are resolved.
REPORTING Failure to Maintain Documentation for Special Reporting - FTE Summary of Child Counts Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6851-04-02
The School District could not provide documentation to support the December 2, 2003, FTE Summary of Child Counts as required by the special reporting requirements ofthe Special Education Cluster programs (CFDA 84.027 and CFDA 84.173) and submitted to the Georgia Department of
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LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
REPORTING Failure to Maintain Documentation for Special Reporting - FTE Summary of Child Counts Reportable Condition U. S. Department of Education Through Georgia Department of Education Finding Control Number: FA-6851-04-02
Education. The School District was unable to provide underlying documentation to ensure that all applicable data elements were properly included in the above child counts. The auditors were unable to verify that underlying data was properly accumulated and summarized in accordance with the required or stated criteria and methodology. As provided for in Part 4 (84.027) IIl.1.3. ofthe OMB's Compliance Supplement, the Georgia Department of Education is required to report to the U. S. Department of Education Secretary an unduplicated count of children with disabilities receiving special education and related services.
This condition was a result ofthe School District's failure to ensure that the December 2, 2003 FTE Summary of Child Counts was accurate and supporting documentation was maintained for audit purposes. The School District should establish procedures to ensure that the required FTE Summary of Child Counts are complete, accurate and that proper documentation is maintained in compliance with the special reporting requirements for the Special Education Cluster. Also, the Georgia Department ofEducation should review this matter to determine ifa reclaim offunds is appropriate.
SPECIAL TESTS AND PROVISIONS Failure to Maintain Documentation for Student's Status Changes After Verification Process Reportable Condition U. S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6851-04-03
A review ofthe School District's verification process of free and reduced-price meal applications for the School Breakfast Program (CFDA 10.553) and the National School Lunch Program (CFDA 10.555) disclosed that documentation supporting the status changes ofstudents after the completion ofthe verification process was not maintained. The School District could not provide a master list of students eligible for free and reduced-price meals after the completion of the verification process. The School District properly verified the correct number of applications, but could not provide a master list supporting the changes of status of students as required by eligibility and verification process procedures.
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LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SPECIAL TESTS AND PROVISIONS Failure to Maintain Documentation for Student's Status Changes After Verification Process Reportable Condition U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-6851-04-03 This condition was a result of the School District's failure to ensure that documentation supporting the verification process and the resulting student status changes was maintained for audit purposes. The School District should establish procedures to ensure that the documentation supporting the verification of free and reduced-price meal applications and any resulting student status changes is maintained in accordance with the eligibility requirements. The Georgia Department ofEducation should review this matter to determine if a reclaim of funds is appropriate.
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SECTIONV MANAGEMENT'S RESPONSES

LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6851-04-01
We concur with this finding. There is inadequate separation of duties in several of the accounting functions, but due to the limited number of staff members, constraints of the GENESIS Financial System, and limited budget, these inadequacies cannot be corrected at this time. Although primary areas ofresponsibility are divided among the three business office users ofthe GENESIS system, the users must also be cross-trained to cover absences and to assist each other in times of extremely heavy work load. Due to the limited staff, the ability to access all of the accounting functions is necessary for the performance of the business employees' duties.
There is separation in many of the personnel and payroll functions, but not within the GENESIS system. A new employee must be set up in the payroll function before information may be added to the personnel function. Salaries are calculated by personnel and given to payroll for input. Payroll then enters all personnel and payroll information into the financial system. Again, the limited staff and budget and the constraints of the GENESIS Financial System do not allow an adequate separation of duties at the present time.
Contact Person: Deborah Johnston, Director of Finance Phone: (770) 358-5891 Fax Number: (770) 358-5897 E-mail Address: djohnstn@lamar.k12.ga.us
Finding Control Number: FS-6851-04-02
We concur with this finding. Adequate separation of duties in the school principal accounts is not possible due to limited clerical staff in each location. There are no funds available at this time for the additional clerical staffing necessary for adequate separation of duties at each school.
Contact Person: Deborah Johnston, Director of Finance Phone: (770) 358-5891 Fax Number: (770) 358-5897 E-mail Address: djohnstn@lamar.kl2.ga.us
Finding Control Number: FA-6851-04-01
We concur with this finding. The School Nutrition program did not keep the monthly nutrition master lists for each school once the next month had been printed. The master list does not identify new or withdrawn students. That information is obtained from a query of the student information system and entered into the free and reduced-price system by the nutrition office. The updated information is then exported to the school lunchroom. A withdrawn student would not print on the next school listing. Starting with the fiscal year 2006 school year, the school nutrition monthly master lists and the queries from the student information system will be kept on file.
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LAMAR COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FA-6851-04-01 The school nutrition department is keeping all free and reduced-price meal applications on file, even those that are duplicates or incomplete. This practice had already been implemented during fiscal year 2005 school year and will be continued. Contact Person: Lynn Yates, Director of School Nutrition Phone: (770) 358-5891 Fax Number: (770) 358-5897 E-mail Address: lyates@lamar.k12.ga.us Finding Control Number: FA-6851-04-02 We concur with this finding. A procedure for maintaining the underlying documentation for the FTE Summary of Child Counts of children with disabilities receiving special education and related services was implemented in fiscal year 2005 and will continue to be followed. Contact Person: Terry Mermann, Director of Student Services Phone: (770) 358-5891 Fax Number: (770) 358-5897 E-mail Address: tmermann@lamar.kl2.ga.us Finding Control Number: FA-6851-04-03 We concur with this finding. Records were changed after the last master list was printed, and there was documentation to support the changes, but the department was not aware at the time that another master list had to be printed to reflect those changes. A master list after final completion of verification was printed for fiscal year 2005 and will continue to be printed in the future. Contact Person: Lynn Yates, Director of School Nutrition Phone: (770) 358-5891 Fax Number: (770) 358-5897 E-mail Address: lyates@lamar.kl2.ga.us
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