Liberty County Board of Education, Hinesville, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2003

LIBERTY COUNTY BOARD OF EDUCATION
HINESVILLE, 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

LIBERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

7

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

8

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

9

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

LIBERTY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

26

3 SCHEDULE OF STATE REVENUE

28

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

30

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

31

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 214 Atlanta, Georgia 30334-8400
June 8, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Liberty 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 Liberty 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 Liberty County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Liberty County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-11

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, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Liberty 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.
In accordance with Government Auditing Standards, we have also issued our report dated June 8, 2004, on our consideration ofthe Liberty County Board ofEducation'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.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through x and page 25 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Liberty 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.
2003-34ARL-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 ofGeorgia Annotated section 506-24.
Respectfully submitted,
w.<1th
State Auditor
RWH:as 2003-34ARL-11

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis ofLiberty County Board ofEducation's financial performance provides an overall review of the Board's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the Board's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the Board's financial performance.
Financial Highlights
Key financial highlights for 2003 are as follows:
The Board implemented GASB 34 for 2003. Due to this being the implementation year, many comparisons are not available that will be available for 2004.
In total, net assets increased $8.1 million from 2002. This total increase was due to governmental activities since the Board has no business-type activities.
D General revenues accounted for $35.8 million in revenue or 39% of all revenues. Program
specific revenues in the form of charges for services and sales, grants and contributions accounted for $55.7 million or 61 % of total revenues of $91.5 million.
The Board had $83.4 million in expenses related to governmental activities; only $55.7 million ofthese expenses were offset by program specific charges for services, grants or contributions. General revenues of $35.8 million were adequate to provide for these programs.
Among major funds, the General Fund has $84.0 million in revenues and $81.4 million in expenses. The General Fund's fund balance increased to $16.1 million from $15.2 million.
Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the Liberty County Board of Education as a financial whole, or as an entire operating entity.
The Statement ofNet Assets and Statement ofActivities provide information about the activities of the whole Board, presenting both an aggregate view of the Board's finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the Board's most significant funds. In the case of the Liberty County Board of Education, the General Fund is by far the most significant fund.

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Reporting the Board as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number offunds used by the Board to provide programs and activities for the schools, the view ofthe Board as a whole looks at all financial transactions and asks the question, "How did we do financially during 2003?" The Statement of Net Assets and the Statement of Activities answers this question. These statements include all assets and liabilities using the economic resources focus and accrual basis ofaccounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all ofthe current year's revenues and expenses regardless ofwhen the cash is received or paid.
These two statements report the Board's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the Board as a whole, thefinancial position of the Board has improved or diminished. The causes ofthis change may be the result ofmany factors, some financial, some not.
In the Statement ofNet Assets and the Statement of Activities, the Board has one distinct type of activity:
Governmental Activities - All ofthe Board's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, principals' accounts and various others.
Reporting the Board's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the Board's major funds. The Board uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the Board's most significant funds. The Board's major governmental funds are the General Fund and the District-wide Capital Project Funds.
Governmental Funds Most of the Board's activities are reported in governmental funds, which focus on how money flows into and out ofthose funds and the balances left at year-end available for spending in future periods. These funds are reported using the current financial resources measurement focus and the modified accrual accounting method, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Board's general government operations and the basic services it provides. Governmental fund information helps determine whether there is adequate financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements.
11

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Fiduciary Funds

The Board is the trustee, or fiduciary, for assets that belong to others, such as the funds that are generated through school clubs and organizations within the principals' accounts. The Board is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The Board excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations.

The Board as a Whole

The perspective of the statement of net assets is of the Board as a whole. Table 1 provides a summary of the Board's net assets for 2003. Since this is the first year the Board has prepared financial statements following GASB Statement 34, net assets comparisons to fiscal year 2002 are not available.

Table 1 Net Assets (in Thousands)

Governmental Activities Fiscal Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 33,855 82,421

Total Assets

$ 116,276

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 10,713 0

Total Liabilities

$ 10,713

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

$ 82,422 5,138 18,003

Total Net Assets

$ 105,563

Total net assets increased $8.1 million to $105.6 million. Of the Board's liabilities, 66% are comprised of salaries payable. At June 30, 2003, the Board had no long-term liabilities.

Table 2 shows the changes in net assets for fiscal year 2003. Since this is the first year the Board has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available.

111

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
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
Total Revenues
Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation ofPlant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Community Services Food Services
Total Expenses
Increase in Net Assets

Governmental Activities Fiscal Year 2003

$

1,529

52,198

2,007

$ 55,734

$ 18,687
5,124 258 24
10,617 334 733
$ 35,777
$ 91,511
$ 53,997
3,068 3,008 1,702
928 5,076
285 5,573 3,666
416 555
439 4,698
$_~8~3,~41~1
$_=8-==10==0

lV

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Figure A shows the funding sources for the revenues. Of the Board's revenues, 62% are derived from state grants. Property Taxes make up 12% of the total funding, while an additional 6% is earned from the county's sales taxes. In addition, Federal funds account for 17% of revenues.
Figure A Sources of Revenue for Fiscal Year 2003
State Funds 62%

Federal Funds 17%
Charges for Services 2%

- - - - Sales Taxes 6%
R"operty Taxes 12%
1%

As shown in Figure B, Instruction comprised 64.7% of governmental program expenses. Administration and Other Services (3.2%) consist of the General Administration, Business Administration, Central Support, Community Services, and other Support Services of the Board.

V

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Figure B Functional Expenses for Fiscal Year 2003
Instruction 64.7%

Food Services
Maintenance and Operati 6.7%

School Administratio 6.1%

Pupil Services 3.7%
Improvement of Instructional Services
3.6% Educational Media Services
2.0% Administration & Other
Services 3.2%

Governmental Activities
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost ofservices and the net cost of services. That is, it identifies the cost ofthese services supported by tax revenue and unrestricted State entitlements. Since this is the first year the Board has prepared financial statements following GASB Statement 34, the cost ofservice comparisons are not available for fiscal year 2002.

Vl

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

Table 3 Governmental Activities
(in Thousands)

Total Cost of Services Fiscal Year 2003

Net Cost of Services Fiscal Year 2003

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 Community Services Food Services

$ 53,997 $ 13,908

3,068 3,008 1,702
928 5,076
285 5,573 3,666
416 555

2,434 1,341
686 710 3,060 280 2,467 1,803 399
68

439

32

4,698

488

Total Expenses

$ 83.411 $ 27.676

Although program revenues make up a majority ofthe funding, the Board is still dependent upon tax revenues for governmental activities. Over 25.7% of instruction activities are supported through taxes and other general revenues, and for all governmental activities general revenue support is 33.2%.

The Board's Funds

The Board's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues of $91.3 million and expenditures of $94.0 million. There was a decrease in the fund balance totaling $2.6 million for the governmental funds as a whole. The General Fund had an increase of$0.9 million while the Capital Projects Funds had a decrease of$3.5 million. The positive change in the fund balance of the general fund for the year reflects that the Board was able to meet current costs.

Vll

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003

General Fund Budgeting Highlights

The Board's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the General Fund.

During the course of fiscal year 2003, the Board amended its General Fund budget as needed. The Board uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.

The actual revenues and other financing sources for the General Fund of$83.9 million exceeded the budgeted amount by $5 .2 million. The additional revenues were mainly the result of the Board obtaining additional Federal funds, conservative budgeting for property and sales taxes, and the inclusion ofthe individual school and principal accounts that were not included in the final budget.

The final budgeted expenditures and other financing uses for the General Fund of$83.0 million fell below the original budgeted amount of $86.0 million by $3.0 million.

General Fund revenues and other financing sources exceeded the expenditures and other financing uses by $0.9 million. This increase in fund balance is due to a concerted effort by the Board to closely control and monitor both revenues and expenditures.

Capital Assets and Debt Administration

Capital Assets

At the end of fiscal 2003 the Board had $82.4 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal 2003 balances. Since this is the first year the Board has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available.

Table 4 Capital Assets (Net of Depreciation, in Thousands)

Governmental Activities Fiscal Year 2003

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$

2,485

13,777

61,247

3,678

1,234

Total

$====8=2,==42===1

vm

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
At June 30, 2003, capital assets were recorded at $82.4 million. This figure, net of related depreciation expense, represented a $10.5 million increase from the prior fiscal year. The majority of the increase was due to increased construction in progress.
Debt
At June 30, 2003, the Board did not have amounts outstanding associated with debt. Furthermore, the Board did not participate in capital leases and does not allow for compensated absences.
Current Issues
The Liberty County School System consists of 15 campuses located in Liberty County, a fastgrowing area with a population of 61,610. Current enrollment is approximately 10,293 students in grades PK-12.
The Quality Basic Education Act was enacted into law by the 1985 session of the Georgia General Assembly. The Act set out the provisions for educational funding for grades kindergarten through twelve in the State of Georgia. The funding is based on student counts with the expectation that local school districts fund part ofthe cost with local tax monies. The Board receives approximately 61 % of the required funds for general operations from the State. The Board, through austerity reductions, actually received fewer funds than its true entitlement. The reductions in State funding are due to economic downturn in the State and it is unclear how long the funding reductions will last.
Liberty County is home to Fort Stewart. Employing 16,000 soldiers and 3,400 civilians, Fort Stewart had an enormous economic impact in the South Georgia area, with Liberty County being by far the largest beneficiary ofthat impact. Other large employers located in the county include the Board of Education, Chemtall, Inc., Coastal Communications, Interstate Paper LLC, NCF Manufacturing, Inc., and Georgia Power.
Liberty is Georgia's fifteenth largest county in total area. As one of the fastest growing counties in Georgia, Liberty had a40.3% population increase from 1980-1990 and a 16.8% increase from 19902000.
Liberty has three municipalities: Hinesville, Midway, and Riceboro. The county also includes the communities of Allenhurst, Flemington, Gum Branch, Fleming and Walthourville.
The median household income as of 1997 was $29,508 per year. As of2003, the per capita income was $16,494. About 13.4 percent of the county's adult population has an education level ranging from some college to professional or doctorate degree.
IX

LIBERTY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Contacting the Board's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the Board's finances and to show the Board's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Linda J. Hodges, Director of Finance at the Liberty County Board of Education, 110 South Gause Street, Hinesville, Georgia 31313. You may also email your questions to lhodges@liberty.k12.ga.us.
X

LIBERTY COUNTY BOARD OF EDUCATION

LIBERTY 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 Prepaid Items Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenues
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Bus Replacement Continuation of Federal Programs 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

$

7,880,865

16,913,783

1,419,069 5,891,854 1,382,108
334 303,011
63,764

2,485,385 13,777,214
3,592,000 74,677,059
8,247,688 -20,357,964

$ ===1=16=='=27=6::::l:::1, =7=0

$

2,011,124

7,057,728

671,480

926,346

46 651

$

10,713,329

$

82,421,382

201,457 89,067
4,847,640 18,003,295

$

105,562,841

$ ===1=16=='=27=6::::l:::1, =7=0

LIBERTY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30 2003

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 Community Services Food Services
Total Governmental Activities
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
Net Assets - End of Year

EXPENSES

CHARGES FOR SERVICES

$

53,997,251

3,067,832 3,008,119 1,701,945
927,970 5,075,667
284,930 5,573,285 3,665,904
416,466 554,568

438,845 $ 4!698,288

$

83!4111070 $

406,730 1,122,444
1!5291174

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

$

39,036,427 $

633,581 1,662,554
949,423 210,266 1,974,643

3,049,424 1,362,157
15,518 335,786

21968z724

$

5211981503 $

1,052,963 $
4,210 66,270
7,924 41,022
5,655 56,476 501,018
1,687 150,518
118 915
210061658 $

-13,907,861
-2,434,251 -1,341,355
-686,252 -709,780 -3,060,002 -279,275 -2,467,385 -1,802,729 -399,261
-68,264
-32,115 -4881205
-27 ,676, 735

$

18,687,448

5,124,187 257,942 24,017
10,617,015 333,721 733,365

$

35,777,695

$

8,100,960

97,461,881

$ ===1=0==51=56=2==18=4=1

-5-

LIBERTY 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 Prepaid Items Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

260,428 $

16,913,783

402,130 5,891,854 1,382,108
334 303,011
63 764

7,620,437 $ 959,515

7,880,865 16,913,783
1,361,645 5,891,854 1,382,108
334 303,011
63 764

Total Assets

$ 25,217,412 $

8,579,952 $ 33,797,364

LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Bus Replacement Continuation of Federal Programs Inventories Capital Projects
Unreserved Undesignated Reported in: General Fund Capital Projects Fund
Total Fund Balances
Total Liabilities and Fund Balances

$

2,011,124

7,057,728

$

46 651

$
671,480 926,346

2,011,124 7,057,728
671,480 926,346
46 651

$

9,115,503 $

1,597,826 $

10,713,329

$

201,457

$

201,457

25,303

25,303

63,764

63,764

$

4,847,640

4,847,640

15,811,385 $ 16, 101,909 $

2,134,486 6,982,126 $

15,811,385 2,134,486
23,084,035

$ 25,217,412 $

8,579,952 $

33,797,364

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

LIBERTY 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")

$ 23,084,035

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

$ 2,485,385 13,777,214 3,592,000 74,677,059 8,247,688 -20,357 ,964

82,421,382

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.

57,424

Net Assets of Governmental Activities (Exhibit "A")

$ 105,562,841

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

LIBERTY 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 Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 11,364,845

$

281,959 $ 5,124,187

54,369,729

2,006,658

15,383,370

172,705

1,529,174

282,630

51,091

733,365

$ 83,945,072 $ 7,354,641 $

11,364,845 5,406,146
56,376,387 15,556,075
1,529,174 333,721 733,365
91,299,713

$ 52,967,276

$

3,067,832 3,003,724 1,632,761
919,698 5,045,422
279,026 5,514,326 3,156,855
414,706 397,430 438,845 4,574,144
$

12,556,810

$ 81,412,045 $ 12,556,810 $

$

2,533,027 $ -5,202, 169 $

52,967,276
3,067,832 3,003,724 1,632,761
919,698 5,045,422
279,026 5,514,326 3,156,855
414,706 397,430 438,845 4,574,144 12,556,810
93,968,855
-2,669, 142

$ 1,666,000 $ $ -1,666,000

$ -1,666,000 $ 1,666,000 $

$

867,027 $ -3,536,169 $

15,234,882

10,518,295

1,666,000 -1,666,000
0 -2,669,142 25,753,177

Fund Balances - Ending

$

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

23,084,035

LIBERTY 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.

$ -2,669,142

$ 12,652,683 -2,094,898

10,557,785 212,317

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

$ ======8,=10=0=,9=6=0

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

LIBERTY 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 $ ===16=1=7,=9=2
$ ==1=6=1=7,=9=2

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

LIBERTY 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 Liberty 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 Liberty County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds.
The School District reports the following major governmental funds:
- 11 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
The School District reports the following fiduciary fund type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred. Capital asset acquisitions are reported as expenditures in governmental funds.
The School District funds certain programs by a combination of specific 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.
- 12 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003.

The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance.

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 $568,422 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$217,907 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

General Fund Balance July 1, 2002

$ 17,075,970

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

568,422 217,907

Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

5,746,226

Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002

8,373,643

General Fund Balance July 1, 2002 (Restated)

$ 15,234.882

- 13 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGES IN ACCOUNTING PRINCIPLES

The Liberty 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

$ 15,234,882 10,518,295

Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences

$ 25,753,177 90,126,663 -18,263,066 -154,893

Net Assets Beginning (See Exhibit "B")

$ 97A61~881

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.

INVESTMENTS

COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following:

(1) Obligations issued by the State of Georgia or by other states,

- 14 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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.

PROPERTY TAXES

The Liberty County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on November 26, 2002 (levy date). Taxes were due on February 4, 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 Liberty County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $11,364,845.

The tax millage rate levied for the 2002 tax year (calendar year) for the Liberty County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

17.492 mills

- 15 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

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 $5,124,187 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 of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

PREPAID ITEMS

Payments made to vendors for services that will benefit periods subsequent to June 30, 2003, are recorded as prepaid items.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time 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 depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

All

NIA

$

10,000 up to 60 years

$

10,000 up to 60 years

$

10,000 10 to 50 years

- 16 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives.
Note 3: DEPOSITS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee 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. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

- 17 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 3: DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $10,979,381. 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, 2003, as follows:

Risk Category

Bank Balance

1

$ 204,850

2

8,219,022

3

2,555,509

Total

$ 10,979,381

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $16,858,788 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State of Georgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows:

The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 of the Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash

- 18 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and 'deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund.

Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years.

Note 4: NON-MONETARY TRANSACTIONS

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

Note 5: CAPITAL ASSETS

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

Balances July 1, 2002

Increases

Balances Decreases June 30, 2003

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

$ 2,197,978 $ 287,407 $ 2,776,107 11,001,107

0 $ 2,485,385 13,777,214

Total Capital Assets Not Being Depreciated $ 4,974,085 $ 11,288,514 $

0 $ 16,262.599

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 73,408,763 $ 8,178,396 3,565,419

1,268,296 $ 69,292 26,581

0 $ 74,677,059 8,247,688 3,592,000

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

12,111,451 3,999,844 2,151,771

1,319,540 568,912 206,446

13,430,991 4,568,756 2,358.217

Total Capital Assets, Being Depreciated, Net $ 66,889,512 $ -730,729 $

0 $ 66,158.783

Governmental Activity Capital Assets - Net $ 71!863!597 $ 10 557 785 $

0 $ 82 421 382

- 19 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT "H"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Improvements 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 Food Services

$ 1,099,267

$

4,395

69,184

8,272

42,826

5,904

58,959

523,049

1,760

157~138

871,487 124,144

$ 2,094,898

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST) are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable statutory provisions. Restricted assets at June 30, 2003, were as follows:

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions

$ 3,888.125

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2003, consisted of the following:

Transfer to

Transfers From General Fund

Capital Projects - GSFIC

$ 1,666.000

- 20 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 7: INTERFUND TRANSFERS

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as supplemental funding source for capital construction projects.

Note 8: RISK MANAGEMENT

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

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

The School District has elected to self-insure for all losses related to acts of God. 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 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 ofYear Liability

$

0 $

10,112 $

10,112 $

0

$

0 $

24,947 $

24,947 $

0

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

Position Covered

Amount

All Employees (Per Loss)

$

50,000

Note 9: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $625,507 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

- 21 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 9: ON-BEHALF PAYMENTS

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $492,476

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$133,031

Note 10: SIGNIFICANT COMMITMENTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2003, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

01-LW005-689-003 SAO 15-689-115 SA015-689-116 Bradwell Institute Paving Jordye Bacon Electrical Lewis Frazier Storage Building Midway Middle School

$ 1,851,126 $ 174,167 100,289 80,514 115,486 517,686 19,137

290,000 46,667 55,255

$ 2.858.405 $=====3====9===-1.===92==,2 The amounts described in this note are not reflected in the basic financial statements.

Note 11: 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.

The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance ofroutine School District operations. The ultimate disposition ofthese proceedings is not presently determinable, but is not believed to be material to the basic financial statements.

- 22 -

LIBERTY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2003

EXHIBIT"H"

Note 12: 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%

$ 4,208,422 $ 3,937,341 $ 4,451,279

- 23 -

LIBERTY 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 Central Support Services Other Support Services Community Services Food Services Operation
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Other Uses
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL {1}

FINAL {1}

ACTUAL AMOUNTS

$

10,843,158 $ 10,843,158 $ 11,364,845

281,959

54,582,617

54,582,617

54,369,729

11,743,658

11,743,658

15,383,370

1,137,090

1,137,090

1,529,174

407,500

407,500

282,630

53,645

53!645

733,365

$

78,767,668 $ 78,767!668 $ 83,945,072

$

55,090,126 $ 55,090,126 $ 52,967,276

2,794,883 2,364,171 1,783,478 1,112,229 5,552,097
352,442 5,990,288 4,160,148
751,281 124,000
4,278,901

2,794,883 2,364,171 1,783,478 1,112,229 5,552,097
352,442 5,990,288 4,160,148
751,281 124,000
4,278,901

3,067,832 3,003,724 1,632,761
919,698 5,045,422
279,026 5,514,326 3,156,855
414,706 397,430 438,845 4,574,144

$

84,354,044 $ 84,3541044 $ 81,412,045

$

-5,586,376 $ -5,586,376 $ 2,533,027

-1,666!000

-1,666,000

-1,666!000

$

-7,252,376 $ -7,252,376 $

867,027

17,330! 138

17,330,138

15!234,882

Fund Balances - Ending

$

10,077,762 $ 10,077,762 $ 16,101,909

Note 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.

- 25 -

LIBERTY 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 Capacity Building Improvement Flow Through Preschool
Total Special Education Cluster
Other Programs Direct Impact Aid Pass-Through From First District Regional Educational Service Agency Title Ill Limited English Proficient Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies Title II Enhancing Education Through Technology Improving Teacher Quality TitleV Innovative Education Program Strategies Title VI Rural and Low Income Schools Reading Excellence - Local Reading Improvement Safe and Drug-Free Schools and Communities Vocational Education - Basic Grants to States High School Program Basic Grant Professional Development
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 4,048,683
4,048,683

10.550

N/A
$

189,729 4,2381412

84.027 84.027 84.173

N/A $ N/A N/A
$

38,400 1,184,157
45 533
1,268,090

84.041

(3)

84.365

N/A

10,664

84.010
84.318 84.367
84.298
84.358 84.338 84.186
84.048 84.174

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

2,769,192
75,539 498,408
74,537
229,054 394,225
60,117
128,154 3,451
5,511,431

- 26-

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

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

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

$ _ _ _ _1_2_7_,9_18_

Total Federal Financial Assistance N/A = Not Available

$ =====9,=87=7:::!:::7, =6=1

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts 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 ($640,172) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Funds earned on the Impact Aid Program, in the amount of $7,282,992, 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 Liberty 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 basic financial statements.

See notes to the basic financial statements.

- 27 -

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003

SCHEDULE "3"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

GRANTS

Bright from the Start:

Georgia Department of Early Care and Learning

Pre-Kindergarten Program

$

1,185,582

$

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 Grades (6-8) 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 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 Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Health Insurance National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Special Education Supplemental Speech Lottery Programs Assistive Technology Computers in the Classroom

1,927,031 1,385,237 6,198,723 1,233,650 3,057,525
804,524 73,793
6,665,911 5,506,315 1,373,013
298,277 1,034,669 2,486,208
237,605 34,225
694,801 7,757
502,958 73,334
953,659 326,816 201,665
1,118,886 1,872,814 3,013,821
1,028,372 219,945 222,451 41,689 57,165 384,830
9,619,187 321,770 29,194
-1, 124,223
100,563 137,376 492,476
12,194 289,581
4,817 8,025
16,188 65,611

- 28 -

TOTAL
1,185,582
1,927,031 1,385,237 6,198,723 1,233,650 3,057,525
804,524 73,793
6,665,911 5,506,315 1,373,013
298,277 1,034,669 2,486,208
237,605 34,225
694,801 7,757
502,958 73,334
953,659 326,816 201,665
1,118,886 1,872,814 3,013,821
1,028,372 219,945 222,451 41,689 57,165 384,830
9,619,187 321,770 29,194
-1, 124,223
100,563 137,376 492,476
12,194 289,581
4,817 8,025
16,188 65,611

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30 2003

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Education, Georgia Department of After School Programs
Georgia Institute of Technology Student Information System

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 2,006,658 $

2,006,658

$

133,031

133,031

37,500 3,188

37,500 3188

$ 54,369,729 $ 2,006,658 $ ======56='=37=6=,3=87=

See notes to the basic financial statements.

- 29 -

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30 2003

SCHEDULE "4"

PROJECT

ORIGINAL ESTIMATED
COST {1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

New Elementary School

$ 5,486,055 $ 8,800,000 $

99,974 $ 8,410,696 Completed

New Middle School

6,835,876

13,900,000

279,785

13,502,591 Completed

New ROTC Classroom at Bradwell Institute

390,000

510,510

390,000

Completed

Paving at Bradwell Institute

390,000

429,000

390,000

Ongoing

New Addition to Liberty County High School

952,380

1,850,076

1,778,516

71,560 Completed

Construction of Storage Buildings at Taylor's Creek, Frank Long, Snelson-Golden and Lewis Frazier Schools

442,000

486,000

22,527

66,400 Ongoing

Renovation of Button Gwinnett, Lyman Hall, Jordye Bacon and Bradwell Institute Schools

4,290,000

4,719,000

269,254

4,026,036 Completed

Modification of Jordye Bacon and Bradwell Institute Schools

754,000

829,400

754,000 Completed

Reroofing at Button Gwinnett, Lyman Hall, Jordye Bacon, and Bradwell Institute Schools

2,059,954

2,265,949

1,296,933

766,022 Completed

Adding to, renovating, repairing, improving and equipping existing school buildings or other buildings or facilities useful or desirable in connection therewith, including the Bradwell Institute and Liberty County High School: acquiring, constructing and equipping new buildings or facilities useful or desirable in connection therewith, including additional classrooms and a school vehicle maintenance facility: acquiring new school buses; acquiring any property necessary or desirable therefore, both real and personal, including system-wide technology, the maximum amount of the projects to be paid with sales and use tax proceeds will be $35,000,000

35,000,000

41,682,000

8,029,821

Ongoing

$ 56,600,265 $ 75,471,935 $ 121556,810 $ 27,597,305

(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 Liberty 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.

- 30 -

LIBERTY COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE}
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003

SCHEDULE "5"

DESCRIPTION

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

Direct Instructional Programs

Kindergarten Program

$

Kindergarten Program-Early Intervention Program

Primary Grades (1-3) Program

Primary Grades-Early Intervention (1-3) Program

Upper Elementary Grades (4-5) Program

Upper Elementary Grades-Early Intervention (4-5)

Program

Middle Grades (6-8) 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

Category V

Gifted Student - Category VI

Remedial Education Program

Alternative Education Program

English Speakers of Other Languages (ESOL)

2,031,484 $ 1,543,635 6,598,967 1,360,681 3,321,397
818,651 79,089
7,146,838 5,935,055 1,491,057 4,338,014
743,778 10,148
540,437 71 496

1,712,179 $ 1,709,760 7,573,666 1,824,416 4,262,469
621,656 92,972
7,724,512 7,351,780 1,926,372
389,680 1,122,140 2,308,889
371,833 32,520
741,583 31,022
566,257 1131057

124,296 $ 90,583 356,431 233,136 166,811
146,117 65
780,903 586,635 176,539
4,308 28,908 60,019
5,977 1,790 41,937 8,359
4478

1,836,475 1,800,343 7,930,097 2,057,552 4,429,280
767,773 93,037
8,505,415 7,938,415 2,102,911
393,988 1,151,048 2,368,908
377,810 34,310
783,520 39,381
566,257 1171535

TOTAL DIRECT INSTRUCTIONAL PROGRAMS

$

36,030,727 $ 40,476,763 $

2,817,292 $

43,294,055

Media Center Program Staff and Professional Development

1,023,895 217,667

1,318,456 83,338

291,830 1531889

1,610,286 2371227

TOTAL QBE FORMULA FUNDS

$

37,272,289 $ 41,878,557 $

3,263,011 $ ==4=5'=14=1=,5=6=8

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

See notes to the basic financial statements.

- 31 -

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
June 8, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Liberty 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 Liberty County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Liberty County Board of Education's basic financial statements and have issued our report thereon dated June 8, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Liberty County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Liberty County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2003-34YB-30

control over financial reporting. However, we noted a certain matter involving the internal control over financial reporting and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect Liberty County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. The reportable condition is described in the accompanying Schedule ofFindings and Questioned Costs as item FS-6891-03-01.
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, we believe the reportable condition described above is not a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Liberty 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:as 2003-34YB-30

State Auditor

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
June 8, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Liberty 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 ofLiberty County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Liberty 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 Liberty County Board of Education's management. Our responsibility is to express an opinion on Liberty 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 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 Liberty 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 Liberty County Board of Education's compliance with those requirements.
2003SA-30

In our opinion, the Liberty 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 Liberty 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 Liberty County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133.
We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Liberty County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-6891-03-01, FA-6891-03-02, FA-6891-03-03 and FA-6891-0304.
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 of risk that noncompliance with the applicable requirements oflaws, 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 of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
This report is intended solely for the information and use ofthe management, members ofthe Liberty 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:as 2003SA-30

State Auditor

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

LIBERTY 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-6891-01-01 FS-6891-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

LIBERTY 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 Liberty County Board ofEducation's financial statements was unqualified.

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

Cash and Cash Equivalents Employee Compensation Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements General Ledger

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

3. Noncompliance Material to the Financial Statements The audit of the Liberty 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 Liberty County Board ofEducation disclosed reportable conditions in internal control over major programs for the following compliance requirements.

Allowable Costs/Cost Principles Eligibility

Reporting Special Tests and Provisions

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

5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Liberty 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 Liberty County Board of Education's audit disclosed an audit finding required to be reported by section .5 lO(a) of0MB Circular A-133. This audit finding is included in section IV of this report.

- 1-

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
I SUMMARY OF AUDITOR'S RESULTS
7. Maj or 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 84.027 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.027 Individuals with Disabilities Education Act - Part B - Special Education Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $514,823.
9. Low Risk Auditee The Liberty 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
CASH AND CASH EQUIVALENT REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Accounting/ Internal Control Deficiencies Reportable Condition Finding Control Number: FS-6891-03-01
During the year under review, our examination ofthe internal control procedures disclosed that the School District did not provide adequate internal controls in the performance of the following accounting and related procedures:
Principal's Accounts: Bank reconciliations were not reviewed and approved by an individual independent of cash operations. Cash custody and receipting functions were not separated from cash disbursement and general ledger functions.
-2 -

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENT REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Accounting/ Internal Control Deficiencies Reportable Condition Finding Control Number: FS-6891-03-01
Deposit preparation functions were not separated from cash receipting functions. Based on a sample of 50 receipts, 43 lacked supporting documentation. Check writing function was not separated from the record keeping or processing of signed
checks. Based on a sample of 50 vouchers, 2 lacked supporting documentation and 18 were not
approved.
School Food Service: Lunchroom deposit preparation functions were not separated from cash custody and daily sales/meal count functions. Voucher preparation functions were not separated from processing of signed checks, bank reconciliation and general ledger functions. Payroll check preparation functions were not separated from maintenance of employee personnel records, bank reconciliation and general ledger functions. Bank reconciliations, journal entries, payroll salary adjustments and timesheets were not reviewed and approved by someone independent of general ledger function. Journal entries, manual checks, and payroll data for July 2002 through January 2003 were not recorded on general ledger until February 2003. The journal entries for June 2003 could not be located. Bank reconciliations and monthly financial closings were not performed for more than 180 days.
These deficiencies were the result ofmanagement's failure to assign employees duties in a manner to adequately safeguard assets, to provide trained personnel for key accounting/management positions, to promote efficiency in accounting functions and to ensure controls were functioning as designed. Management should implement additional procedures to ensure efficiency and timeliness in accounting functions, trained personnel are in key accounting positions and internal controls are in place and operational.
-3 -

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENT REVENUE/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS EMPLOYEE COMPENSATION GENERAL LEDGER Accounting/ Internal Control Deficiencies Reportable Condition Finding Control Number: FS-6891-03-01
Management's Response:
Principals' Accounts The Liberty County School District recognizes the importance of separating key accounting functions. However, due to limitations with funding, it is not always feasible to have separate persons assigned to different accounting functions. Therefore, the Liberty County School District relies on compensating controls to adequately safeguard the assets of the School District. Each school is required to follow the policies and procedures as outlined in the Liberty County Board of Education School Internal Accounting Handbook. The assistant directors of finance monitor principal accounts on a periodic basis. In addition, the School District contracts with an external auditor to review all receipts and disbursements of each school.
School Food Service School food service functions have undergone a major reorganization. A new school nutrition director was hired in September 2003. This new director came to the Liberty County School District with over fourteen years experience in school nutrition and three years experience with the Georgia Department of Education food service program. The school food service bookkeeping function has been brought under the direction and supervision of the finance department and other duties have been reassigned in order to ensure efficiency and timeliness within the school nutrition department. Monthly closings are performed in a timely manner and the school nutrition department meets the reporting deadlines as set forth by the Georgia Department of Education. The school nutrition director reviews and approves all invoices, bank reconciliations, journal entries, and employees timesheets. Lunchroom cashiers complete a cashier report before remitting their collections to the lunchroom clerks.
-4-

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-01
For the year under review, a sample oftwenty expenditure vouchers for the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed the following deficiencies:
Four vouchers were not approved. Fifteen vouchers lacked purchases orders and/or requisition requests. One voucher lacked indication of receipt of goods. Four vouchers were for improper expenditures.
These conditions were the result ofmanagement's failure to implement appropriate internal controls to ensure compliance in accordance with Federal guidelines. The School District should implement policies and procedures to ensure that expenditures are approved, properly documented and for proper program purposes.
Management's Response:
Management has implemented internal controls in order to ensure that all expenditures have sufficient supporting documentation, are properly approved, and are for allowable expenditures. The school nutrition director reviews and approves all orders before the orders are placed with vendors. Invoices are then approved by the school nutrition director and are also reviewed by the assistant directors of finance before payments are remitted to vendors.
ELIGIBILITY Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-02
A review ofthe School District's eligibility procedures for the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed the following deficiencies:
-5-

LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-02
A sample of 50 free and reduced meal applications selected for testing, revealed that: 1) One student on the master list as direct certification lacked supporting documentation. The student was receiving free meals instead of paid meals resulting in question cost of $100.88. 2) Income was incorrectly calculated for one student who received free meals instead of paid meals resulting in question cost of $477.85. 3) Two student applications were missing. The students were receiving free meals instead of paid meals resulting in question cost of $768.74.
Notations on the master list indicated 81 additional missing applications. A list of these missing applications was given to management. After 15 days, all but 2 missing applications were found and/or were supported by sibling applications. Twelve of these applications lacked approval.
Management failed to correctly maintain a system to update eligibility status for transfers and/or withdrawals made after the initial approval process.
The number offree students on the master list for May 2003 was overstated by three because students with the same name, application number and status code were recorded twice.
These conditions were the result ofmanagement's failure to implement appropriate internal controls for maintenance ofa system to correctly approve student eligibility as required by Federal regulations (7CFR210.7c(l)ii and 7CFR245). Management should ensure that appropriate internal controls are in place and operational. The School District should implement policies and procedures to ensure compliance with the Federal requirements over eligibility. In addition, documentation substantiating eligibility determinations must be maintained on file for three years after the date ofthe fiscal year to which it pertains, except if audit findings have not been resolved, this documentation must be maintained until the issues are resolved.
Management's Response:
The Liberty County School District has implemented policies and procedures in order to ensure compliance with the Federal regulations with regards to eligibility. All applications are reviewed by the school nutrition record keeper. The school nutrition director recalculates income requirements and makes an eligibility determination. Management periodically compares the master roster ofeach school to supporting applications and direct certification listings. The Department of Audits
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LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-02
performed tests on the two schools that were tested by the CRE auditors. After the Department of Audits had finished fieldwork, management was presented with a list ofmissing applications. It was determined that the majority ofthe applications that were selected during the CRE had not been filed back with their respective schools. As mentioned in your finding, management produced all but two of the requested applications.
REPORTING Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-03
For the year under review, the Georgia Department of Education (GDOE) performed a follow-up Coordinated Review Effort (CRE) in December 2002 in accordance with 7CFR210.18 for the Child Nutrition Cluster(CNC) (CFDA 10.553 and 10.555). The original review was performed in March 2002. During the follow-up, GDOE found the School District had failed to correct critical area problems that were identified in the first review. As a result and in accordance to Federal regulation 7CFR210.l 8(1 ), the School District was suspended on May 20, 2003 from receiving Federal reimbursements until corrective action was demonstrated. In the subsequent period, the School District was reinstated to receive Federal reimbursements.
A review of internal controls for certifying students for free and reduced meals with regards to counting and claiming procedures revealed the following deficiencies:
The School District purchased a new point of sale software system to capture the required data for information required to meet Federal regulations for administering the CNC Programs. 1) A test run was not performed before the system was placed into operation resulting in system and program problems throughout the year. 2) The system's record keeper and other system operators lacked adequate training with the new software system and Federal regulations.
Testing performed on two schools for May 2003 disclosed the number of active free and reduce applications on the master list failed to support the numbers on the DEl 18.
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LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
REPORTING Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-03
These deficiencies were the result ofmanagement's failure to perform test runs to ensure the system and program were functioning properly and to ensure personnel were adequately trained and supervised as required by Federal regulations. The School District should provide a sound environment for capturing data, training and supervision of personnel.
Management's Response:
The Liberty County School District began utilizing the WinSnap point of sale system at the beginning of the 2002-2003 school year. While on an on-site test run was not performed, the WinSnap system underwent rigorous beta-site testing at numerous other school districts. Four technicians closely monitored the conversion process. Key lunchroom personnel received sixteen hours ofextensive hands on training prior to the implementation ofthe new system. The lunchroom managers, as well as the school nutrition record keeper, will continue to compare the DE-118 to the master roster in order to make certain that the correct number of students are claimed for reimbursement.
As mentioned in the finding, Federal reimbursements were reinstated due to the fact that the Liberty County School District demonstrated corrective action in every deficient area that was brought to its attention by CRE auditors.
SPECIAL TEST AND PROVISIONS Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-04
A review of the School District's verification procedures for the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed the following deficiencies:
The master list for October 31, 2002 was not available for review. Seven schools failed to complete two or more sections of the Verification Summary Sheet. It could not be determined that management had verified 3% of the free and reduced meal application as required.
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LIBERTY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
SPECIAL TEST AND PROVISIONS Accounting/Internal Control Deficiencies U.S. Department of Agriculture Through Georgia Department of Education Reportable Condition Finding Control Number: FA-6891-03-04
Verification testing was performed by the auditors for two schools which included 41 free and reduced meal applications. The following deficiencies were noted: 1. Three students selected for verification were not on the master list or the School District's Student Information System. 2. Eligibility status changes were not made on the master list as recorded on the Record of Action resulting in 11 students receiving free meals and 3 receiving reduced meals instead of paid. 3. Supporting documentation was missing for numerous changes and correspondence. 4. Status changes for siblings identified on the free and reduced meal applications selected for verification were not made resulting in 7 students receiving free meals and 4 receiving reduced meals instead of paid. 5. Sibling eligibility status changes due to verification were not made system-wide.
These errors resulted in questioned cost of $1,712.85 for breakfast and $3.417.02 for lunch.
These conditions were the result ofmanagement's failure to implement appropriate internal controls to ensure compliance in accordance with Federal guidelines. The School District should implement policies and procedures to ensure that the verification process is accurately completed, all students affected in the process are properly updated and required documentation is retained. The School District should contact the Georgia Department of Education for determination of required procedures to be performed for resolution of this finding.
Management's Response:
Management has instituted internal controls in order to ensure that the verification process is completed accurately and in a timely manner. These same deficiencies were brought to the attention ofthe School District during the recent CRE. During fiscal year 2004, the School District returned $5,267.04 through a reduction in the January 2004 Federal reimbursement. The School District will contact the Georgia Department of Education in order to determine if further restitution is required.
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