LAURENS COUNTY BOARD OF EDUCATION DUBLIN, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor LAURENSCOUNTYBOARDOFEDUCATION - 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 1 O H NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 30 LAURENS COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING 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 SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 2 I4 Atlanta, Georgia 30334-8400 March 11, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Laurens 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 of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Laurens County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Laurens County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the 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 op1mons. As discussed in Note 2 to the financial statements, management has not recognized in the governmental activities and general fund a portion ofsalaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2003. Also funds received, subsequent to June 30, 2003, from the Georgia Department of Education for the State's share ofthese unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar salary costs and related revenues for contractual services completed 2003-34ARL-13 prior to June 30, 2002, were improperly recorded in the year ended June 30, 2003. Accounting principles generally accepted in the United States ofAmerica require that revenues be recorded when available and measurable or earned, as appropriate, and that costs be recorded when liabilities are incurred, rather than when funds are received or disbursed. The aggregate effect on the financial statements of this variance or omission has not been determined, but is believed to be material. In our opinion, except for the effects of not properly recognizing revenues and costs for certain salaries in the governmental activities and general fund as described in the proceeding paragraph, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe governmental activities and general fund ofthe Laurens County Board ofEducation, as of June 30, 2003, 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. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position ofthe district-wide capital projects fund, the debt service fund, and the aggregate remaining fund information ofthe Laurens County Board ofEducation, as of June 30, 2003, 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. The Laurens County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. As discussed in Note 2 to the basic financial statements, during fiscal year 2003, 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 Laurens 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, 2003. In accordance with Government Auditing Standards, we have also issued our report dated March 11, 2004, on our consideration of the Laurens County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. 2003-34ARL-13 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Laurens 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, except for the effects ofthe matters referred to in the third paragraph, such information, 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 2003-34ARL-13 State Auditor LAURENS COUNTY BOARD OF EDUCATION LAURENS COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Retainages Payable Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 3,713,357 1,224,318 1,346,670 55,536 675,137 150 54,760 1,105,628 14,322,903 35,154,137 5,297,054 -11 835 458 $ ======5=-1=11=4.,,;1=92~ $ 195,773 549,216 10,000 6,654 2,442,542 10,196,218 $ 13 400 403 $ 33,711,602 489,993 334,782 190 1,776,976 1400246 $ 37 713 789 $ =====i5~1;,;1,=14,;.,,~19;,;;;,,2 LAURENS COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 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 Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 29.056,086 $ 1,342,674 383,718 775,795 849.830 2,130,542 217,214 2,014,502 1.933,602 21,514 349,380 32.012 2,604.227 580,235 674,135 15,318 1,372 646 8,594 195,737 17,935 531,049 Total Governmental Activities $ =====4=2=,=2=91=,=3=3=1= $ General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous 1444786 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 $ 21,658,352 $ 414,217 216,567 525,389 852,258 1,041,286 1,576,971 1,140,977 21,153 2,057,873 $ 29,505,043 $ 97,010 $ 1,198 240 38,716 11,720 148 884 $ -6,626,589 -928,457 -167,151 -235,088 3,626 -1,089,256 -217,214 -435,919 -753,263 8,233 -153,643 -14,077 -3,585 -580 235 -11, 192,618 $ 7,919,417 144 3,653,211 423,670 27,639 2,506,939 166,000 827 973 $ 15,524,993 $ 4,332,375 33,381,414 $ ====3=7.,.71=3=7=89= -5- LAURENS COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,766,290 $ 1,946,954 $ 1,224,308 333,377 55,536 675,137 150 54 760 743,430 113 $ 3,713,357 10 1,224,318 1,076,807 55,536 675,137 150 54 760 Total Assets $ 2,885,250 $ 3,914,692 $===1=2=3 $ 6,800,065 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Retainages Payable Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Total Fund Balances $ 195,773 549,216 $ 6654 10,000 $ 751,643 $ 10,000 $ 195,773 549,216 10,000 6654 $ 761,643 $ 489,993 280,022 $ 54,760 $ 3,904,692 1,308,832 $ 2,133,607 $ 3,904,692 $ $ 123 489,993 280,022 123 54,760 3,904,692 1,308,832 123 $ 6,038,422 Total Liabilities and Fund Balances $ 2,885,250 $ 3,914,692 $===1=2=3 $ 6,800,065 The notes to the basic financial statements are an integral part of this statement. -6- LAURENS COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 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 Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities $ 6,038,422 $ 1,105,628 14,322,903 35,154,137 5,297,054 -11,835,458 44,044,264 269,863 $ -12.450,000 -188 760 -12,638,760 Net Assets of Governmental Activities (Exhibit "A") $ 37,713,789 The notes to the basic financial statements are an integral part of this statement. -7- LAURENS COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 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 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} Sale of Equipment Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTALS $ 7,796,988 27,639 $ 27,700,115 4,311,867 1,444,786 28,765 816,473 $ 42,126,633 $ $ 423,670 148,884 129,494 39 $ 3,653,211 7,741 7,797,027 4,104,520 27,848,999 4,311,867 1,444,786 166,000 816,473 702,048 $ 3,660,991 $ 46,489,672 $ 28,672,170 $ 28,672,170 1,342,674 383,718 775,795 736,969 $ 2,130,542 213,134 1,954,001 1,780,382 21,514 349,380 32,012 2,612,606 121,580 4,080 59,550 4,973,987 1,342,674 383,718 775,795 858,549 2,130,542 217,214 2,013,551 1,780,382 21,514 349,380 32,012 2,612,606 4,973,987 169,854 16 347 $ 3,685,000 563,888 3,854,854 580,235 $ 41,191,098 $ 5,159,197 $ 4,248,888 $ 50,599,183 $ 935,535 $ -4,457,149 $ -587,897 $ -4, 109,511 $ 11,500 $ 11,500 20,459 20,459 672 $ 23,753 24,425 $ -24,425 -24,425 $ 32,631 $ -24,425 $ 23,753 $ 31 959 $ 968,166 $ -4,481,574 $ -564,144 $ -4,077,552 1,139,342 8,386,266 564,267 10,089,875 26,099 26,099 Fund Balances - Ending $ 2,133,607 $ 3,904,692 $ The notes to the basic financial statements are an integral part of this statement. -8- 123 $ 6,038,422 LAURENS 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. 2003 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. Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements $ Capital Lease Payments Total Long-Term Debt Repayments Food Inventories are expensed on the District-Wide Statements using the consumption method while on the fund level Food Inventories are recorded as expenditures when purchased. In the current period this difference amounts to: $ -4,077,552 5,322,391 -924 153 4,398,238 122,534 -20,459 3,685,000 169,854 3,854,854 54,760 Change in Net Assets of Governmental Activities (Exhibit "B") $ =====4=,3=3=2=,3=75== The notes to the basic financial statements are an integral part of this statement. -9 - LAURENS COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ ===2=5=,0=7=5 $ ===2=5=,0=7=5 The notes to the basic financial statements are an integral part of this statement. - 10 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Laurens County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Laurens 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 ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 11 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 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 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, clubs and individuals. BASIS OF ACCOUNTING The basis of accounting 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 and grants. 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 is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized - 12 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 2003, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2003, compensation under these employment contracts had been earned, but two of the twelve monthly payments, due for July and August 2003, had not been made. Payments for these two months were made and recorded as costs by the School District subsequent to June 30, 2003. Also, the State's portion ofthe compensation paid in July and August 2003 was received and recorded as revenue in the fiscal year subsequent to June 30, 2003. Conversely, the similar costs and related revenues for contractual services completed prior to June 30, 2002, were recorded in the year ended June 30, 2003. Generally accepted accounting principles require that revenues be recorded when earned or available and measurable as appropriate and that expenditures or expenses as appropriate be recorded when incurred, rather than when funds are received or disbursed. 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 and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $324,739 at July 1, 2002. For fiscal year 2003, 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, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$237,754 atJuly 1, 2002. This change is in accordance with generally accepted accounting principles. - 13 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July l, 2002 $ 576,849 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 324,739 237,754 General Fund Balance July 1, 2002 (Restated) $ 1,139,342 CHANGES IN ACCOUNTING PRINCIPLES The Laurens County Board of Education 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, 2003. The provisions of GASB Statement No. 34 require the inclusion ofa Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 1,139,342 8,386,266 564,267 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds Payable Capital Leases Payable Food Inventories Costing Differences $ 10,089,875 50,557,331 -10,911,305 147,329 -16,135,000 -338,155 -28,661 Net Assets Beginning (See Exhibit "B") $ 33,381,414 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 Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. - 14 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year and equity investments are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate of return 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, (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. - 15 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY TAXES The Laurens County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on November 7, 2002 (levy date). Taxes were due on February 1, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Laurens 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, 2003, for maintenance and operations amounted to $7,796,988 and for school bonds amounted to $39. The tax millage rate levied for the 2002 tax year (calendar year) for the Laurens County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 13.047 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $4,076,881 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 ofpurchase. 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 fair market value on the date donated. Disposals are deleted at - 16 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES depreciated recorded cost. The cost ofnormal 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 and Land Improvements Improvements Other than Buildings Buildings and Improvements Equipment All NIA $ 100,000 20 years $ 100,000 25 to 50 years $ 5,000 5 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. In addition, general obligation bonds have been issued to refund existing general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee ofinsurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe 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: - 17 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws ofthe 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, 2003, the bank balances were $8,340,078. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) The School District's deposits are classified by risk category at June 30, 2003, as follows: - 18 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS Risk Category Bank Balance 1 $ 447,433 2 6,913,886 3 978,759 Total $ 8,340.078 CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below: Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name. Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name. Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name. At June 30, 2003, the carrying value ofthe School District's total investments was $1,224,318 which is materially the same as fair value. The investments are classified as to risk categories as follows: T~ne of Investment U. S. Government $ Repurchase Agreements Total Investments $ Risk Categories 2 0 $ 208,582 $ 1,015,736 Q $ 1,224,318 $ Carrying Fair 3 Amount Value 0 $ 208,582 $ 208,582 1,015,736 1,015,736 0 $ 1,224,318 $ I 224 318 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: - 19 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 5: CAPITAL ASSETS Balances July l, 2002 Increases Balances Decreases June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,105,628 $ 9,013,971 $ 5,308,932 0 $ 1,105,628 14,322,903 Total Capital Assets Not Being Depreciated $ 10,119,599 $ 5,308,932 $ 0 $ 15,428,531 Capital Assets Being Depreciated Buildings and Improvements Equipment $ 35,154,137 5,283,595 $ $ 13,459 0 $ 35,154,137 5,297,054 Less Accumulated Depreciation for: Buildings and Improvements Equipment 6,946,412 3,964,893 631,334 292,819 7,577,746 4,257,712 Total Capital Assets, Being Depreciated, Net $ 29,526,427 $ -910 694 $ 0 $ 28,615,733 Governmental Activity Capital Assets - Net $ 39,646.026 $ 4,398,238 $ 0 $ 44,044,264 Capital assets being acquired under capital leases as of June 30, 2003, are as follows: Governmental Funds Equipment Less: Accumulated Depreciation $ 339,106 105,969 $.=~2-33~-~13~7 Current year depreciation expense by function is as follows: Instruction Support Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 602,159 $ 7,435 1,492 240,320 249,247 72 747 $.=~9~24~.~15~3 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 - 20 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 6: RESTRICTED ASSETS (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds $ 113 $ 1,950,876 $ 1,015,737 $ $ 208,571 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfers From District-wide Capital Projects General Fund Debt Service Funds $ 672 23,753 Total $===24=.4===2==5 Transfers are used to move (1) residual funds from a construction project to the General Fund and to, (2) move prior year accrued interest on bonds sold from the District-wide Capital Projects Fund to the Debt Service Fund. 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 participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the - 21 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 8: RISK MANAGEMENT system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage. 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: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability $ 0 $ 607 $ 607 $ 0 $ 0 $ 4 769 $ 4 769 $ 0 The School District participates in the Georgia School Boards Association Workers' Compensation Fund, a public entity risk pool organized on July 1, 1992, to develop, implement, and administer a program ofworkers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Fund for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Fund with the United States Fidelity and Guaranty Company to provide coverage for potential losses sustained by the Fund in excess of $350,000 loss per occurrence, up to $1,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Employees' Blanket Bond $ 50,000 $ 100,000 Note 9: LONG-TERM DEBT CAPITAL LEASES The Laurens County Board of Education has entered into various lease agreements as lessee for buses and equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. - 22 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Refunding - Series 2002 2.40% - 3.70% $ 12,450,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2002 $ 338,155 $ 16,135,000 $ 16,473,155 Additions Capital Leases 20,459 20,459 Deductions Debt Retired 169,854 3,685,000 3,854,854 Balance June 30, 2003 $ 188,760 $ 12,450,000 $ 12,638,760 Portion of Long-Term Debt Due within One Year $ 92,542 $ 2,350,000 $ 2,442,542 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 Cagital Leases Princigal Interest 2004 2005 2006 $ 92,542 $ 11,918 94,892 5,973 1,326 107 Total Principal and Interest $ 188,760 $ 17 998 - 23 - LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: LONG-TERM DEBT Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 Total Principal and Interest Note 10: PRIOR YEAR DEFEASEMENT OF DEBT $ 2,350,000 $ 2,405,000 2,485,000 2,575,000 2,635,000 409,875 353,475 267,140 187,620 97 495 $ 12A501000 $ 11315!605 In fiscal year 2002, the School District defeased certain general obligation bonds and certificates of participation by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds and certificates. Accordingly, the trust account assets and the liabilities for the defeased instruments are not included in the School District's basic financial statements. At June 30, 2003, $2,945,000 ofthe bonds are outstanding and considered defeased, and $3,045,000 of the certificates are outstanding and considered defeased. Note 11: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $373,864 for health insurance and retirement contributions paid on the Board'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 $308,522 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 $65,342 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. - 24- LAURENS COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 13: 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 2003 2002 2001 100% 100% 100% $ 2,179,919 $ 2,074,655 $ 2,404,539 - 25 - LAURENS COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 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 Other Support Services Enterprise Operations Community Services Food Services Operation Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 8,053,412 $ 8,053,412 $ 7,796,988 50,000 50,000 27,639 26,408,717 26,463,428 27,700,115 2,008,862 2,054,205 4,311,867 785,724 785,724 1,444,786 23,502 23,502 28,765 128,319 128,319 816 473 $ 37,458,536 $ 37,558,590 $ 42,126,633 $ 25,133,993 $ 28,461,440 $ 28,672,170 1,247,629 314,124 786,985 597,311 2,207,088 263,165 1,999,897 2,107,589 2,599,813 1,528,239 496,747 786,985 752,847 2,207,088 263,165 2,042,179 2,146,484 11,960 2,605,600 1,342,674 383,718 775,795 736,969 2,130,542 213,134 1,954,001 1,780,382 21,514 349,380 32,012 2,612,606 186 201 $ 37,257,594 $ 41,302,734 $ 41,191,098 $ 200,942 $ -3 744144 $ 935,535 $ 65,000 $ 65,000 $ -65,000 -65,000 32,631 $ 0 $ 0 $ 32 631 $ 200,942 $ -3,744,144 $ 968,166 9,215,880 9,215,880 1,139,342 2 861 -41 830 26,099 Fund Balances - Ending $ 9,419,683 $ 5,429,906 $ ===2=!'=13=3a!aa,6=0=7 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. See notes to the basic financial statements. - 27 - LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Pass-Through From First District Regional Educational Service Agency d/b/a Live Oak Migrant Education Agency Elementary and Secondary Education Act Title I Migrant Education Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies School Improvement Title II Eisenhower Professional Development Enhancing Education Through Technology Improving Teacher Quality Technology Literacy Challenge Fund Grants Title VI Innovative Education Program Strategies Rural and Low Income Schools CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 2,460,464 (3) 2,460,464 10.550 N/A $ 146 354 2,606,818 84.027 84.173 84.027 N/A $ N/A N/A $ 592,809 31,012 17 420 641,241 84.011 N/A * 84.010 N/A * 84.010 N/A 84.281 NIA 84.318 N/A 84.367 N/A 84.318 N/A 84.298 NIA 84.358 N/A 33,465 1,029,590 22,466 9,263 99,130 274,288 27,002 37,292 118,701 -28- LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Education. U. S. Department of Other Programs Pass-Through From Georgia Department of Education Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 84.186 84.048 N/A $ N/A $ 48,224 85209 2,425,871 Total Federal Financial Assistance N/A = Not Available $ ======5'=03=2=,6=8=9 Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($517.998) was not maintained separately and are included in the 2003 National School Lunch Program. (3) Expenditures for this program include State and/or Other Funds. Expenditures are not maintained by fund source. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Laurens County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. -29- LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Migrant Education Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program Health Insurance Mentor Teachers National Teacher Certification Post Secondary Options Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Exceptional Growth-Capital Outlay GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,440,017 352,175 3,468,608 864,864 1,921,620 338,426 3,442,022 2,411,036 901,261 135,748 772,846 1,401,173 113,330 31,626 349,604 223,365 245,541 54,759 525,389 177,014 104,072 702,722 1,018,989 1,534,804 931,286 174,697 19,000 126,378 22,297 37,175 852 151,709 1,988,932 166,106 136,753 -549,674 3,800 308,522 6,474 7,865 2,851 54,711 8,729 122,472 $ $ 1,440,017 352,175 3,468,608 864,864 1,921,620 338,426 3,442,022 2,411,036 901,261 135,748 772,846 1,401,173 113,330 31,626 349,604 223,365 245,541 54,759 525,389 177,014 104,072 702,722 1,018,989 1,534,804 148,884 931,286 174,697 19,000 126,378 22,297 37,175 852 151,709 1,988,932 166,106 136,753 -549,674 3,800 308,522 6,474 7,865 2,851 54,711 8,729 122,472 148,884 - 30- LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement CONTRACTS Education, Georgia Department of After School Programs Reading First Program Technology, Georgia Institute of Student Information System OTHER Community Affairs, Georgia Department of Local Assistance Grant GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 1,239,142 65,342 $ 1,239,142 65,342 34,054 57,277 37,354 34,054 57,277 37,354 15,000 15 000 $ 27,700,115 $ 148 884 $ 27,848,999 See notes to the basic financial statements. - 31 - LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT Acquiring land, constructing and equipping two new elementary schools (Northwest and Southwest Laurens Elementary Schools); renovating, improving and adding to East Laurens High School; acquiring, constructing and equipping renovations to East Laurens Elementary School; making improvements to the physical education and athletic facilities at East Laurens and West Laurens High Schools; and retiring previously incurred general obligation debt. Completion of East Laurens Elementary Annex. Purchase Buses. Additions, renovations and improvements to Southwest Laurens Elementary, East Laurens Elementary, Middle and High School Complex and West Laurens Middle and High Schools Complex, including the physical education and athletic facilities. Technology improvements. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS (3) PROJECT STATUS $ 21,343,650 $ 21,792,626 $ 2,064,414 $ 19,728,212 Completed 4,000,000 800,000 4,000,000 800,000 3,063,586 394,848 Ongoing Ongoing 17,530,491 1,000,000 17,530,491 1,000,000 Ongoing Ongoing $ 44,674,141 $ 45,123,117 $ 5,128,000 $ 20,123,060 (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 costs for the projects. Includes all costs from project inception to completion. (3) The voters of Laurens County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows: Prior Years $ 0 Current Year 409,875 Total $ ======40=9='=,8=7=5 See notes to the basic financial statements. - 32 - LAURENS COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM /QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 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 Ill 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 $ 1,612,430 $ 1,498,679 $ 9,848 $ 1,508,527 394,341 448,060 2,253 450,313 3,883,904 3,593,880 95,623 3,689,503 968,414 1,048,348 9,174 1,057,522 2,151,695 2,266,936 61,800 2,328,736 378,946 3,854,134 2,699,709 1,009,169 2,748,627 391,462 250,108 274,940 61,315 381,525 4,206,034 4,174,333 1,103,815 2,499,869 339,222 202,466 382,797 47,777 2,787 143,695 152,740 113,847 11,571 4,606 724 6,412 524 384,312 4,349,729 4,327,073 1,217,662 2,511,440 343,828 203,190 389,209 48,301 $ 20,679,194 $ 22,193,741 $ 615,604 $ 22,809,345 588,294 116,532 716,347 25,477 23,393 86,939 739,740 112,416 TOTAL QBE FORMULA FUNDS $ 21,384,020 $ 22,935,565 $ 725,936 $ ===2~3,.;;,66=1;,i,;,5=0=1 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 33- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 March 11, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Laurens County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Laurens County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Laurens County Board of Education's basic financial statements and have issued our report thereon dated March 11, 2004. This report was qualified for a departure from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether Laurens County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. 2003-34YB-40 Internal Control Over Financial Reporting In planning and performing our audit, we considered Laurens County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance 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 Laurens County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6871-03-01, FS-6871-03-02 and FS-6871-03-03. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, ofthe reportable conditions described above, we consider items FS-6871-0302 and FS-6871-03-03 to be material weaknesses. This report is intended solely for the information and use of the management, members of the Laurens County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2003-34YB-40 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 March 11, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Laurens County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Laurens County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Laurens 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 Laurens County Board of Education's management. Our responsibility is to express an opinion on Laurens County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular Al 33, 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 Laurens 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 Laurens County Board of Education's compliance with those requirements. 2003SA-10 In our opinion, the Laurens 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, 2003. Internal Control Over Compliance The management of Laurens 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 Laurens County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose ofexpressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Laurens County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2003SA-10 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS LAURENS COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6871-01-02 FS-6871-01-03 FS-6871-02-01 FS-6871-02-02 Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES GENERAL LEDGER Inadequate Control Procedures Finding Control Number: FS-6871-02-01 The School District feels it has provided for the most appropriate assignment of duties with the number of personnel available to perform the accounting functions. SECTION IV FINDINGS AND QUESTIONED COSTS LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Laurens County Board ofEducation's financial statements was qualified for a departure from generally accepted accounting principles. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Laurens County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger Ofthe reportable conditions described above, Revenues/Receivables/Receipts, Expenditures/ Liabilities/Disbursements and General Ledger are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Laurens County Board of Education disclosed no instances of noncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Laurens County Board of Education did not disclose any reportable conditions in internal control over major programs. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Laurens County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Laurens County Board ofEducation's audit did not disclose audit findings required to be reported by section .510(a) of 0MB Circular A-133. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program-Food Services-National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. - 1- LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 9. Low Risk Auditee The Laurens County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. 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-6871-03-01 Our examination of the principals' accounts disclosed weaknesses in internal controls as discussed below: Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions, and there is no separate approval of bank reconciliations. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Based on testing of26 items, none ofthe receipts contained supporting documentation other than copies from the receipt book. There is not sufficient reconciliation and/or internal controls over the gate receipts received during athletic events. Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping function or processing of signed checks. Based on testing of 27 items, only four check vouchers showed documentation of proper approval, and twelve checks had no original voucher or invoice attached. 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 separated. -2- LAURENS COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Failure to Accrue Salaries and Fringe Benefits Reportable Condition - Material Weakness Finding Control Number: FS-6871-03-02 At June 30, 2003, the Laurens County Board ofEducation chose not to report expenditures incurred, but not paid, for General Fund teacher and bus driver contracts, including related employer benefits. In addition, the School District did not report revenues available from the Georgia Department of Education for the State's share of these contracts. This omission of material amounts, by management, is considered to be a financial irregularity in accordance with O.C.G.A. 20-2-67 and results in the basic financial statements of the School District being incomplete and not in accordance with generally accepted accounting principles. The School District should establish appropriate policies and procedures designed to ensure the School District properly reports expenditures for General Fund teacher and bus driver contracts and associated revenues available from the Georgia Department of Education for the State's share of these contracts. GENERAL LEDGER Inadequate Control Procedures Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6871-03-03 The School District did not provide for adequate separation of duties in the performance of accounting functions and related procedures. Journal entries were not appropriately reviewed and approved by someone independent of the general ledger posting and maintenance functions. In addition, the journal entries were not always adequately documented and/or described. This condition was a result of management's decision to limit the responsibilities of the existing administrative staff made responsible for accounting functions relating to journal entries. Management should periodically review this decision to determine if employee duties can be reassigned to achieve a higher degree of internal control with existing staff. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -3-