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

LANIER COUNTY BOARD OF EDUCATION
LAKELAND, 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

LANIER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

LANIER COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

29

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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

LANIER 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 23, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lanier 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 Lanier 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 Lanier 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 Lanier 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

The Lanier County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
As discussed in Note 2 to the basic financial statements, during fiscal year 2004, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Lanier County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004.
In accordance with Government Auditing Standards, we have also issued our report dated June 23, 2005, on our consideration ofthe Lanier 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.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 25, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Lanier 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.
2004ARL-11

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,
~w.~
Russell W. Hinton State Auditor
RWH:gp 2004ARL-11

LANIER COUNTY BOARD OF EDUCATION

LANIER COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2004
ASSETS
Cash and Cash Equivalents 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 Short-Term Debt Contracts Payable Retainages Payable Deposits and Deferred Revenues
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs Unrestricted (Deficit)
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

$

622,027

179,609 856,280 594,321
10,455 7,854

353,960 1,242,208
651,279 7,331,147
944,771 -2,975,091

$ ===9==,8=1=8,=82=0=

$

744,324

959,454

675,000

91,277

119,358

11 243

$

2,600,656

$

7,548,274

70,432 92,773 -493,315

$

7 218 164

$ =======9=,8=1=8,=82=0=

LANIER 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 Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities

$

7,507,568 $

937,305 494,197 194,753 399,846 630,587 230,323 667,654 337,759 118,942
37,667

29,251 725,074
24 765

12,335,691 $

101,078
185,840 286,918

General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year (Restated)

Net Assets - End of Year

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

$

6,123,591 $

608,455 294,219 138,896 468,276 339,334
19,320 417,803 168,914
145 37,666

15,606 538,918

$

9,171,143 $

837,312 $ 172,823
18,096 138,036
25,364 27,154
9,264
48,566
1,276 615 $

-445,587
-156,027 -199,978
-55,857 86,526 -153,217 -211,003 -224,487 -141,691 -109,533
-1
-13,645 48,250 -24 765
-1,601,015

$

1,549,229

397,902 45,246 12,861
1,407,493 4,758
175 859

$

3,593,348

$

1,992,333

5,225,831

$

7,218164

-5 -

LANIER COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2004

EXHIBIT"C"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Short-Term Debt Contracts Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Inventories
Unreserved Undesignated Reported in: General Fund Capital Projects (Deficit)
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

587,046 $

69,892 856,280 498,755
10,455 7 854

34,981 $
64,875 95,566

622,027
134,767 856,280 594,321
10,455 7 854

$

2,030,282 $

195,422 $

2,225,704

============

$

744,324

959,454

$

11 243

$

1,715,021 $

$
675,000 91,277
119,358
885,635 $

744,324 959,454 675,000
91,277 119,358
11 243
2,600,656

$

70,432

84,919

7,854

$

70,432

84,919

7,854

152,056
$

-690 213

152,056 -690,213

$

315,261 $

-690,213 $

-374,952

$

2,030,282 $

195,422 $ =====2=,2=25='=70=4=

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

LANIER 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.
Net Assets of Governmental Activities (Exhibit "A")

$

-374,952

$

353,960

1,242,208

651,279

7,331,147

944,771

-2,975,091

7,548,274

44,842

$ ====7=21=8=1=64=

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

LANIER 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 Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning (Restated)
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 1,402,517

$

58,107 $

397,902

8,482,711

2,125,940

1,249,461

286,918

4,147

611

175 859

$ 12,536,199 $ 1647974 $

1,402,517 456,009
8,482,711 3,375,401
286,918 4,758
175 859
14184173

$ 7,382,551 $

2,674 $

909,246 494,197 194,753 395,077 608,176 230,323 666,636 352,722
10,376 37,667 29,251 736,354 75,900

1,831 122,106 1,272,350

9,219 282

24483

$ 12,132,730 $ 1423444 $

$

403,469 $

224,530 $

-88 208

-914 743

7,385,225
909,246 494,197 194,753 396,908 608,176 230,323 666,636 352,722 132,482
37,667 29,251 736,354 1,348,250
9,219 24 765
13,556,174
627,999
-1,002,951

$

315,261 $ -690,213 $ ===-3=74=='=95=2=

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

LANIER 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, this amount consist of:
Capital Lease Payments

$

627,999

$

1,458,005

-246 741

1,211,264 143,851

9 219

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

$ ===='1,'=99=2a!=,3=3=3

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

LANIER COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30. 2004
ASSETS Accounts Receivable. Net
Other
LIABILITIES Cash Overdraft Accounts Payable Funds Held for Others
Total Liabilities

EXHIBIT"G"

AGENCY FUNDS
$ ===13='==68=6=

$

19,690

822

-6,826

$ ====13=,6=8=6=

The notes to the basic financial statements are an integral part of this statement.
- 11 -

LANIER 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 Lanier 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 Lanier County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement of Activities 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.

- 12 -

LANIER 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 Special Purpose Local Option Sales Tax and grants from U. S. Department of Education to be used for the acquisition, construction or renovation of major capital facilities.
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 of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources.
- 13 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND

In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs, Federal Programs and Other Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $103,617 at July 1, 2003. For fiscal year 2004, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2004. The governmental fund activity ofthe various school activity accounts had a fund balance of$16,302 at July 1, 2003. This change is in accordance with generally accepted accounting principles.

General Fund Balance July 1, 2003

$ -208,127

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

103,426 191
16,302

General Fund Balance July 1, 2003 (Restated) CHANGES IN ACCOUNTING PRINCIPLES

$==-==88-,2=0~8

The Lanier County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2004.

The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following:

- 14 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund (Restated) July 1, 2003 Capital Projects Fund

$ -88,208 -914 743

Governmental Funds (Restated) July 1, 2003 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Capital Leases Payable

$ -1,002,951 9,065,360 -2,728,350 -99,009 -9 219

Net Assets Beginning (See Exhibit "B")

$ 5!225!831

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.

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 Lanier County Board of Commissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on September 24, 2003 (levy date). Taxes were due on December 20, 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 Lanier 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 $1,402,517.

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

School Operations

17.16 mills

- 15 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $397,902 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District 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 ofassets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

Any Amount

$

10,000

$

10,000

$

5,000

NIA 20 years 25 to 60 years 5 to 25 years

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

- 16 -

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEFICIT FUND BALANCES

Funds reporting a deficit fund balance and deficit net assets at June 30, 2004, are as follows:

Fund Type/Fund Name

Deficit Balances

Governmental District-wide Capital Project Funds Federal Special Purpose Local Option Sales Tax

$ 119,358 $ 570,855

The Lanier County Board of Education plans to liquidate the deficit in the District-wide Capital Project Funds with SPLOST funds as collected.

Note 3: DEPOSITS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.l)the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.

Acceptable security for deposits consists of any one of or any combination of the following:

(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,

(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,

(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,

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

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

- 17 -

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

EXHIBIT "H"

Note 3: DEPOSITS

(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 $1,166,881. The amounts ofthe total bank balances are classified into three categories of credit risk:

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

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

Risk Category

Bank Balance

1

$ 100,000

2

588,000

3

478,881

Total

$ 1,166.881

Note 4: NON-MONETARY TRANSACTIONS

The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories

Note 5: CAPITAL ASSETS

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

- 18 -

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

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Balances July 1, 2003

Increases

Decreases

Balances June 30, 2004

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

$ 323,818 $

30,142 $

0

1,242,208

0 $ 353,960 1,242,208

Total Capital Assets Not Being Depreciated $ 323,818 $ 1,272,350 $

0 $ 1,596,168

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 7,255,247 $ 835,016 651,279

75,900 $ 109,755

0 $ 7,331,147 944,771 651,279

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

1,784,052 540,922 403,376

153,438 57,182 36,121

1,937,490 598,104 439 497

Total Capital Assets, Being Depreciated, Net $ 6,013,192 $

-61 086 $

0 $ 5,952,106

Governmental Activity Capital Assets - Net $ 6,337.010 $ 1,211.264 $

0 $ 7,548.274

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$ 135,943

$

28,059

2,938

22,411

4,118

43,883

1 504

102,913 7 885

$.=~2==46~,7~4~1

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) is reported as restricted assets in the Statement of Net Assets because its use is limited by applicable statutory provisions. Restricted assets at June 30, 2004, were as follows:

- 19 -

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

EXHIBIT "H"

Note 6: RESTRICTED ASSETS

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions

$

39,270

Note 7: 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 of loss associated with torts and assets. 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 ofthe past three years.

The School District has elected to self-insure for all losses related to acts of God. In addition, the School District has elected to self-insure for errors or omissions, which includes, among other risks, risks for sexual harassment and discrimination. The School District has not experienced any losses related to these risks 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 same fund that the employee's salary and benefits were paid. Claims are accounted for with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. The School District has not experienced any claims related to this risk in the past three years.

The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $400,000 loss per occurrence, up to $2,000,000.

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

- 20 -

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

EXHIBIT "H"

Note 7: RISK MANAGEMENT

Position Covered

Amount

Superintendent Each Principal Each Bookkeeper Each Nutrition Manager Each Nutrition Cashier

$

25,000

$

5,000

$

4,000

$

3,000

$

2,000

Note 8: OPERATING LEASES

Lanier County Board of Education has entered into various leases as lessee for copy machines. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2004, for governmental funds amounted to $35,973. Future minimum lease payments for these leases are as follows:

Year Ending

Governmental Funds

2005 2006 2007 2008

$

35,973

35,973

35,973

29 978

Total Note 9: SHORT-TERM DEBT

$==1==37='=8"'=9='=7

The School District obtains temporary loans in advance of Special Purpose Local Option Sales Tax collections, depositing the proceeds in its District-wide Capital Projects Fund. This short-term debt is to provide cash for capital outlay until Special Purpose Local Option Sales Tax are received. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

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

Beginning Balance

Issued

Redeemed

Ending Balance

Temporary Loans

$ 950.100 $=====0 $ 275,100 $ 675,000

- 21 -

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

EXHIBIT "H"

Note 10: LONG-TERM DEBT

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

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

Balance July 1, 2003

Governmental Funds Capital Leases

$

23,472

Retroactive Restatement of Prior Year Balances

-14 253

Balance July 1, 2003 Restated

$

9,219

Deductions Debt Retired

9 219

Balance June 30, 2004 Note 11: ON-BEHALF PAYMENTS

$====-0

The School District has recognized revenues and costs in the amount of$87,055 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $86,227

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 $828

- 22 -

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

EXHIBIT "H"

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant 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 Federal Grant

04/FED-686-040

$ 219~423 $ 375A59

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

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

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

Note 14: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2004 2003 2002

100% 100% 100%

$ 625,576 $ 607,979 $ 527,960

- 23 -

LANIER 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 Food Services Operation
Capital Outlay Debt Service
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning (Restated)
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

1.448.953 $

1.448,953 $

1.402,517

20,000

20,000

58,107

8,146,316

8,430,393

8.482,711

1,450,735

2.425,318

2,125,940

181,296

181,296

286,918

1,300

1,300

4,147

15 300

15,300

175 859

$

11,263,900 $

12,522,560 $

12,536,199

$

7,323,109 $

7,526,358 $

7,382,551

880,267 335,027 204,536 329,825 585,213 134,277 576,521 379,767
5,000 49,609 11,645 694,809

950,806 525,112 208,536 405,962 585,015 134,277 593,687 385,975
5,145 43,024 18,606 690,509 75,000

909,246 494,197 194,753 395,077 608,176 230,323 666,636 352,722
10,376 37,667 29,251 736,354 75,900
9 501

$

11,509,605 $

12,148,012 $

12,132,730

$

-245,705 $

374,548 $

403,469

281,105

281,105

-88,208

-63 969

-63 969

Fund Balances - Ending

$

-28 569 $

591 684 $ =====3=15=,2=61=

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-

LANIER 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 and Nutrition Program 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 Direct Impact Aid Pass-Through From Coastal Plains Regional Educational Service Agency Migrant Education Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Reading Excellence - Local Reading Improvement Rural Education Safe and Drug-Free Schools and Communities School Renovation - Schools State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U.S. Department of Education
Justice, U. S. Department of Pass-Through From Georgia Department of Juvenile Justice Children and Youth Coordinating Council After School Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

NIA NIA $
$

(2) 666 316
666,316

10.550

NIA $

27 316 693,632

84.027 84.173

NIA $ NIA
$

173,747 7954
181,701

84.041
84.011
84.318 84.367 84.338 84.358 84.186 * 84.352 84.298 84.010 84.048

NIA
NIA NIA NIA NIA NIA NIA NIA NIA NIA
$

(3)
13,867
85,514 109,664 449,729
35,806 13,102 1,449,961 4,650 495,189 22 490
2,861,673

16.540

NIA $

14 673

Total Federal Financial Assistance NIA = Not Available

-26-

$ ======3,=56=9=,9=7=8

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

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($127,014) were not maintained separately and are included in the 2004 National School Lunch Program.
(3) Funds earned on the Impact Aid program, in the amount of $2,861, do not require reporting of expenditures.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Lanier 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.

- 27 -

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

AGENCY/FUNDING
GRANTS Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program Health Insurance National Teacher Certification Preschool Handicapped Program Statewide After School Program 4-8 Statewide Reading Program K-3 Lottery Program Student Information System - Conversion
Office of Treasury and Fiscal Services Public School Employees Retirement

See notes to the basic financial statements.

- 28 -

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

370,774

465,448 47,576
903,205 140,345 459,262
85,663 839,000 606,814 273,992
38,024 112,572 533,786
76,255 153,053 236,627
20,119 63,392
7,216 137,712
42,138 28,366
331,544 340,956 400,582
154,096 27,154
118,441 45,187
5,481 1,299,108
42,072 175,580 -294,844
42,700 86,227
6,244 11,242 12,000 18,667
18,107
828
$ ====8=4=82===71=1=

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

SCHEDULE "4"

PROJECT
Construction of six classrooms and two restrooms at Lanier County Elementary School, addition to dining area at Lanier County Elementary School, eight classrooms and two restrooms at Lanier County High School, renovations, modifications and upgrading of technology at Lanier County Elementary School and Lanier County High School together with equipping of same, acquisition of all property, both real and personal.
Adding to, renovating, improving and equipping existing school buildings, grounds and facilities, including athletic and classroom facilities; acquiring and installing certain technology and transportation equipment and improvements, including school buses and other school vehicles; refunding a construction loan with Farmers and Merchants Bank, Lakeland, Georgia in the estimated principal amount of $675,000; and acquiring any property necessary or desirable therefor, both real and personal.

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS(2)

AMOUNT EXPENDED IN CURRENT YEAR(3)

AMOUNT EXPENDED
IN PRIOR YEAR (3)

PROJECT STATUS

$ 1,811,845 $ 2,979,401 $

18,941 $ 2,960,460 Complete

2,400,000

2,400,000

35684

Ongoing

$ 4,211,845 $ 5,379,401 $ ===5=4:!:,6=2=5 $ 2,960,460

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

See notes to the basic financial statements.

- 29-

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

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

486,409 $

443,802 $

10,028 $

453,830

51,330

64,651

42

64,693

947,084

1,129,543

24,636

1,154,179

145,340

71,756

555

72,311

482,939

508,600

17,635

526,235

93,156 886,046 636,225 288,434 953,362
254,136 25,296 66,449 7 641

46,446 1,065,385
880,359 281,980
67,258 58,452 446,142 120,541 130,755 16,437 75,704 76,762
6 928

147 56,961 38,192 32,948
246 1,001 7,178
46 1,340 2,875

46,593 1,122,346
918,551 314,928
67,504 59,453 453,320 120,587 132,095 19,312 75,704 76,762
6,928

$

5,323,847 $ 5,491,501 $

193,830 $

5,685,331

144,620 30,197

171,893 2,280

12,322 42,567

184,215 44,847

TOTAL QBE FORMULA FUNDS

$

5,498,664 $ 5,665,674 $

248,719 $ ===5,..,9=14;,.;,3=9=3

(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.

- 31 -

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 23, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lanier 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 Lanier County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Lanier County Board of Education's basic financial statements and have issued our report thereon dated June 23, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Lanier 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 Lanier 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-6861-04-01 and FS-6861-04-02.
2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Lanier County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Lanier County Board of Education and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004YB-30

State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
June 23, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Lanier County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofLanier 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 its major Federal program for the year ended June 30, 2004. Lanier County Board of Education's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of Lanier County Board of Education's management. Our responsibility is to express an opinion on Lanier County Board ofEducation'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 Lanier 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 Lanier County Board of Education's compliance with those requirements.
2004SA-65

As described in item FA-6861-04-01 in the accompanying Schedule of Findings and Questioned Costs, Lanier County Board of Education did not comply with requirements regarding Matching, Level ofEffort and Earmarking that are applicable to its School Renovation School Program (CFDA 84.352). Compliance with such requirements is necessary, in our opinion, for Lanier County Board of Education to comply with requirements applicable to that program.
In our opinion, except for the noncompliance described in the preceding paragraph, the Lanier County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Lanier 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 Lanier County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Lanier County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6861-04-01.
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 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, the reportable condition noted above is also considered to be a material weakness.
2004SA-65

This report is intended solely for the information and use ofthe management, members ofthe Lanier County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~~ Russell W. Hinton State Auditor
RWH:gp 2004SA-65

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

LANIER 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-6861-02-01 FS-6861-02-02 FS-6861-03-01 FS-6861-03-02 FS-6861-03-03

Further Action Not Warranted Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

BUDGET PREPARATION/EXECUTION Deficit Fund Balance Finding Control Number: FS-6861-03-01

SPLOST funds are being collected and used to clear the deficit in the Capital Projects Fund.

GENERAL LEDGER Outstanding Loan Finding Control Number: FS-6861-03-02

SPLOST funds are being collected and used to pay the outstanding construction loan balance. The School District is striving to pay the balance on the construction loan as quickly and efficiently as possible.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6861-03-01

Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6861-03-01

The School District is implementing procedures to combine and allocate school-wide program expenditures to Federal programs in compliance with 0MB Circular A-87 requirements. These procedures should be in place by the year ended June 30, 2005.

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LANIER COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Finding Control Number: FA-6861-03-01 Auditor's Note: The School District has implemented changes to resolve this finding in fiscal year 2005 and this finding will be shown as resolved in the fiscal year 2005 audit report.
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SECTION IV FINDINGS AND QUESTIONED COSTS

LANIER 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 Lanier 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 Lanier County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Budget Preparation/Execution Cash and Cash Equivalents General Ledger

Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts

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

3. Noncompliance Material to the Financial Statements The audit ofthe Lanier 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 Lanier County Board of Education disclosed a reportable condition in internal control over the major program for the following compliance requirement.

Matching, Level of Effort and Earmarking

The reportable condition described above is considered to be a material weakness.

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

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

7. Major Programs Federal awards audited as major programs are as follows: 84.352 School Renovation - Schools

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

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LANIER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
I SUMMARY OF AUDITOR'S RESULTS
9. Low Risk Auditee The Lanier 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
BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Repeated From Prior Year Finding Control Number: FS-6861-04-01
At June 30, 2004, the District-wide Capital Projects Fund ofthe Lanier County Board of Education reported a deficit fund balance in the amount of$690,213 which is considered to be an irregularity in accordance with O.C.G.A. 20-2-67. This condition occurred because management approved expenditures in excess of funds available in the Capital Projects Fund. The School District should establish appropriate policies and procedures designed to ensure that in future periods the School District does not report a deficit.
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6861-04-02
Our examination of the principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents The bank reconciliation function is not separated from the cash receipting, record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.
Based on a review of 25 items, the following problems were noted: o Twenty-two items did not contain supporting documentation. o Twenty-three items could not be determined to have been deposited in a timely manner.
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LANIER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6861-04-02
Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks.
Based on a review of 25 items, the following problems were noted: o Eleven items did not contain original invoices. o Eight items could not be determined if the check amount agreed to the invoice amount. o Seven items were not properly approved.
The agency school activity accounts at two of the three schools carried a year end deficit funds held for others balance.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. Also, management should implement procedures to ensure that agency school activity accounts do not expend funds in advance of receipts.
EXPENDITURES/LIABILITIES/DISBURSEMENTS Conflict of Interest Nonmaterial Noncompliance Finding Control Number: FS-6861-04-03
In the year under review, a payment totaling $11,505 was made from the School District's General Fund to a Board member. This transaction occurred in the following chronological order:
In November 2000, cabinets were installed by Connell Cabinets in the Lanier County Elementary School and Central Office. At that time, the owner of Connell Cabinets was serving as a Board member.
In January 2001, the Board member refunded the system the funds that his company had received in payment for the cabinets.
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LANIER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURES/LIABILITIES/DISBURSEMENTS Conflict of Interest Nonmaterial Noncompliance Finding Control Number: FS-6861-04-03
In March 2003, the current Board members motioned and approved to pay Connell Cabinets for those same cabinets at a time the owner was no longer serving on the Board.
In June 2005, the owner of Connell Cabinets cashed the check that was issued his company in March 2003. Since January 2005, he has been serving as the Board Chairperson.
This practice is considered to be a conflict of interest as described in an Opinion of the Attorney General dated 1960-61 p. 149 as follows:
"It is illegal for a county board of education to do business with a private enterprise, corporation, or partnership either partly or wholly owned by a member ofthe county board of education."
Appropriate action should be taken by the School District to discontinue this practice.
GENERAL LEDGER Outstanding Loan Nonmaterial Noncompliance Repeated From Prior Year Finding Control Number: FS-6861-04-04
On December 31, 2003, the District-wide Capital Projects Fund had an unpaid loan outstanding. Article IX, Section V, Paragraph V of the Constitution of the State of Georgia provides, in part, as follows:
"The governing authority of any county, municipality or other political subdivision of this state may incur debt by obtaining temporary loans in each year to pay expenses... Such loans shall be payable on or before December 31 of the calendar in which such loan is made... "
This condition occurred because the School District did not have adequate cash available to retire the loan on December 31, 2003, as required. Repayment of loans should be made in conformity with constitutional limitations.
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LANIER COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
MATCHING, LEVEL OF EFFORT AND EARMARKING Failure to Meet Supplement, Not Supplant, Requirements Reportable Condition - Material Weakness Material Noncompliance U.S. Department of Education Through Georgia Department of Education Questioned Costs: $71,129.70 Finding Control Number: FA-6861-04-01
Our examination of the School Renovation Grants program (CFDA 84.352), revealed the School District did use School Renovation Grants funds to supplant state, local and other funds. 34 CFR section 300.230 requires that School Renovation Grants funds be used to supplement State, local and other Federal funds and not to supplant these funds. In addition, provisions of the Georgia Department of Education (GDOE) approved application state that funds are to be used to supplement and not supplant state and local funds. The following deficiencies were noted in relation to the School Renovation Grants program:
The School District used School Renovation Grants funds to pay for salaries and benefits for six various positions which were funded in the prior year with state, local and other Federal funds. Total amount of the salaries and benefits were $71,129.70.
The School District continued to fund these same six positions with state, local and other Federal funds after December 31, 2003, which was the grant period ending date for the School Renovation Grants funds.
This situation occurred because management failed to follow requirements set forth by 34 CFR section 300.230 of Supplement, not Supplant. The School District should implement procedures to ensure program expenditures from Federal funds meet the Supplement, not Supplant, requirement as outlined in 34 CFR section 300.230. The Georgia Department of Education should review this matter to determine if a refund is appropriate.
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SECTIONV MANAGEMENT'S RESPONSES

LANIER COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-6861-04-01
We concur with this finding. The School District is using SPLOST funds being collected to clear the deficit in the Capital Projects Fund.
Finding Control Number: FS-6861-04-02
We concur with this finding. The School District is unable, for funding reasons, to increase the administrative staff responsible for the accounting functions at the schools. However, the School District and School Administration will implement procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated as much as possible. Procedures are being developed that will prevent agency school activity accounts from expending more funds than received. Procedures and forms have been developed that will provide the necessary documentation for receipts and disbursements.
Finding Control Number: FS-6861-04-03
We concur with this finding. The School District has implemented procedures to ensure that this type of transaction will not occur.
Finding Control Number: FS-6861-04-04
We concur with this finding. SPLOST funds are being collected and used to pay the outstanding construction loan balance. The School District is striving to pay the balance on the construction loan as quickly and efficiently as possible.
Finding Control Number: FA-6861-04-01
The School District is implementing procedures to ensure program expenditures from Federal Funds meet the Supplement, not Supplant requirements. The Federal School Renovation Grant this finding applies to expired in fiscal year 2004 and will not be received again.
Contact Person: Rhonda Metts, Finance Director Phone: (229) 482-3966 Fax Number: (229) 482-3020 E-mail Address: rmetts@lanier.kl2.ga.us