McDuffie County Board of Education, Thomson, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002

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MCDUFFIE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

GENERAL-PURPOSE FINANCIAL STATEMENTS

COMBINED STATEMENTS-OVERVIEW

A

COMBINED BALANCE SHEET

ALL FUND TYPES

2

B

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES

4

C

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

(NON-GAAP BASIS)

GENERAL AND SPECIAL REVENUE FUNDS

7

D NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

8

ADDITIONAL FINANCIAL INFORMATION

COMBINING STATEMENTS

SPECIAL REVENUE FUND

E

COMBINING BALANCE SHEET

20

F

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

22

CAPITAL PROJECTS FUND

G

COMBINING BALANCE SHEET

24

H

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

25

DEBT SERVICE FUND

COMBINING BALANCE SHEET

26

J

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

27

SCHEDULES

I SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

28

2 SCHEDULE OF STATE REVENUE

30

3 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

33

MCDUFFIE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

ADDITIONAL FINANCIAL INFORMATION

SCHEDULES

ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

4

BY PROGRAM

34

5

BY SITE

35

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

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

SECTION 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
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON GENERAL-PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying general-purpose financial statements of the McDuffie County Board of Education, as of and for the year ended June 30, 2002, as listed in the table of contents. These general-purpose financial statements are the responsibility of the McDuffie County Board of Education's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1on.
As described in the notes to the general-purpose financial statements, the Board of Education's financial statements have been prepared using certain accounting practices and policies which. in our opinion, vary in some respects from generally accepted accounting principles. These variances are described as follows:

2002ARL-13

* The general-purpose financial statements of the Board of Education did not contain a General Fixed Assets Account Group to account for property and equipment owned by the Board of Education which should be included to conform to generally accepted accounting principles.
* School activity accounts maintained at the individual schools are not included in the general-purpose financial statements. To conform to generally accepted accounting principles, these accounts should be included in the general-purpose financial statements.
* The Board of Education did not recognize as expenditures, in the year ended June 30, 2002, a portion of salaries and the corresponding employer's cost of related benefits earned for contractual services completed prior to June 30, 2002. Also funds received, subsequent to June 30, 2002, from the Georgia Department of Education for the State's share of these unrecorded salaries and related benefits were not recorded as revenue in the year under review. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2001, were improperly recorded in the year ended June 30, 2002. To conform to generally accepted accounting principles, revenues should be recorded when available and measurable and expenditures should be recorded when incurred, rather than when funds are received or disbursed.
The aggregate effects on the general-purpose financial statements of these variances or omissions have not been determined, but are believed to be material.
In our opinion, except for the effects on the general-purpose financial statements of the matters referred to in the preceding paragraph, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of the McDuffie County Board of Education as ofJune 30, 2002, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
In accordance with Governrnent Auditing Standards, we have also issued our report dated August 5, 2003, on our consideration of the McDuffie County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Governrnent Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the McDuffie County Board of Education taken as a whole. The accompanying combining statements (Exhibits E through J) and the financial schedules (Schedules I 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 of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the general-purpose financial statements. Such information has been subjected to the auditing
2002ARL-13

procedures applied in the audit ofthe general-purpose financial statements and in our opinion, except for the effects ofthe matters referred to in the third paragraph, such information is fairly stated, in aJI material respects, in relation to the general-purpose financial statements taken as a whole.
A copy ofthis report has been filed as a pennanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated Section 50~ 6~24.
------Respectfully submitted,
l,Q~
sell W. Hinton
State Auditor
RWH:gp
2002ARL-13

MCDUFFIE COUNTY BOARD OF EDUCATION

MCDUFFIE COUNTY BOARD OF EDUCATION COMBINED BALANCE SHEET ALL FUND TYPES JUNE 30. 2002

ASSETS
Cash and Cash Equivalents
Investments
Accounts Receivable
lnventones Food Donated Commodities Purchased Food
Amount Available in Debt Service Fund
Amount to be Provided in Future Years For Payment of Capital Lease Agreements

GOVERNMENTAL FUND

SPECIAL

GENERAL

REVENUE

FUND

FUND

$ 4,266,051 77

16,215 93

647,667 77 $ 2,081,51864

12,66847 8,54516

Total Assets

$ 4,929,935 47 $ 2,102,732 27

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salanes Payable Expired Grant Balances Payable Contracts Payable Retainages Payable Deferred Revenue Capital Lease Agreements General Obhgat1on Bonds Payable
Total L1ab1ht1es
FUND EQUITY
Fund Balances Reserved For Bus Replacement Funds For Debt Service For lnventones Food Donated Commodities Purchased Food For SPLOST Pro1ects Unreserved Designated for Self-Insurance Undes19nated
Total Fund Equity

$

593,403 39

$

622,260 96

98,024 80

283,353 27

8,630 44

7,003 72

$

622,260 96 $

990,415 62

$

199,424 55

$

12,66847

8,545 16

9,703.80 4,098,546 16

1,091,103 02

$ 4,307,674 51 $ 1,112,316 65

Total L1ab1ht1es and Fund Equity

$ 4,929,935 47 $ 2,102,732 27

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

EXHIBIT "A"

TYPES CAPITAL
PROJECTS FUND
$ 2,815,399 17 $
639,454 32

DEBT SERVICE
FUND

TOTALS

(Memorandum On~)

JUNE 30, 2002

JUNE 30, 2001

000 $ 7,081,450 94 $ 8,136,261 02

16,215 93

15,829 06

3,368,640 73

3,005,979 41

12,668 47 8,54516

12,397 89 5,540 28
2,075,000 00
B 313 74

$ 3,454,85349 $=====0=00= $ 10,487,521 23 $ 13,259,32140

$

119,433 31

80,96045

$

200,393 76

$

593,403.39 $

744,850 50

720,285 76

664,144 36

283,353 27

196,586 61

8,630 44

7,970 42

119,433 31

38,593 80

80,960 45

7,003 72

49,525 97

8,313 74

2,075,000 00

$ 1,813,070 34 $ 3,784,985 40

$ 3,254,459 73 0 00 $
$ 3,254,459 73 $
$ 3,454,853 49 $

$

199,424 55 $

16,472 55

2,176,739 77

0 00 0 00 $

12,668 47 8,54516
3,254,459 73
9,703 BO 5,189,64918
8,674,450 89 $

12,397.89 5,540 28
3,175,394 43
11,979 BO 4,075,811 28
9,474,336 00

0 00 $ 10,487,521 23 $ 13,259,321.40

- 3-

-------------------------- - ------ ----
MCDUFFIE COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30. 2002

REVEN!.!ES
State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Current lnstrucbon Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Adm1mstratIon School Adm1mstratIon Business AdmImstrallon Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Services Operations
Capital Outlay Debi Service
Pnnc1pal Interest Paying Agent Fees
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES {USES}
Operating Transfers In Operating Transfers Out
Total Other F1nanc1ng Sources (Uses)
Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1
Food Inventory - Net Change in Period Donated CommodItIes Purchased Food

GENERAL FUND

SPECIAL REVENUE
FUND

$ 19,439,231 64 $ 39,810 28
5,689,684 91 315,638 75
$ 25,484,365 58 $

714,451 91 3,858,771 39
395,897 69
4,969,120 99

$ 17,163,957.24 $
565,903.70 625,388 66 609,660 85 426,564 92 1,757,003 43 264,070 12 1,890,951 41 937,905 75
75,137 15 48,580 69
18,040 04

2,350,804 00
100,797 99 120,862 77
123,746 26
51,702 75 33,350 26
272 33 1,430,481 19
551,915 31

2,286 28 8,313 74

$ 24,393,763 98 $ $ 1,090,601 60 $

4,763,932 86 205,18813

$

-1,275 83

$

-1,275 83

$ 1,089,325 77 $ 3,218,348 74

205,18813 903,853 06

270 58 3,004 88

FUND BALANCE JUNE 30

$ 4,307,674 51 $ 1,112,316 65

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

EXHIBIT "B"

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTALS

(Memorandum Only}

YEAR ENDED

JUNE 30, 2002

JUNE 30, 2001

$

496,363 50

2,875,246 39 $ 124,899 75

$ 3,496,509 64 $

$
6023 622 78

20,650,047 05 $ 3,898,581 67 8,564,991 53 837,058 97

19,669,636.48 3,417,981 18 8,331,125 52 1,1201285 84

683 01 $ 33,950,679.22 $ 32,539,029 02

$

455,036 33

$ 19,969,797 57 $ 19,100,63917

1,575 00 2,960,105 78

666,701.69 746,251 43 609,660 85 550,311 18 1,757,00343 265,64512 1,942,654 16 971,256 01
75,137 15 48,853 02 1,430,48119 569,955 35 2,960,105 78

638,427 89 855,758 04 618,867 21 474,582 65 1,746,350 69 292,441 84 1,916,289 17 1,073,710 97
90,098 75 32,931 44 1,349,41818 511,343 38 1,713,73348

$ 2,075,000 00 104,425 84

2,077,286 28 112,739 58

368,313 74 116,476 28
1,275 83

$ 3416,71711 $ 2,179,425 84 $ 34,753,839 79 $ 30,900,658 71

$

79,792 53 $ -2,178,742 83 $

-803,160 57 $ 1,638,370 31

$

2,003 06 $

2,003 06 $ 2,625,511 33

$

-727 23

-2,003 06

-2,625,511 33

$

-727 23 $

2,003 06 $

000 $

000

$

79,065 30 $ -2,176,739 77 $

-803,160 57 $ 1,638,370 31

3,175,394 43

2,176,739 77

9,474,336 00

7,837,811 50

27058 3,004 88

-1,953 07 107 26

$ 3,254,459 73 $=====0=00- $ 8,674,450 89 $ 9,474,336 00

-5-

MCDUFFIE COUNTY BOARD OF EDUCATION COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL - (NON-GAAP BASIS) GENERAL AND SPECIAL REVENUE FUNDS
YEAR ENDED JUNE 30. 2002

EXHIBIT "C"

GENERAL FUND

BUDGET

ACTUAL

REVENUES
State Funds Federal Funds Taxes Other Funds
Total Revenues
EXPENDITURES

$ 19,006,378 11 $ 19,439,231 64

39,810 28

5,530,623.00

5,689,684 91

569,322 00

315,638 75

$ 25,106,323 11 $ 25,484,365 58

Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Adm1rnstrat1on Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Community Servtces Operations
Debt Service

$ 17,282,748 11 $ 17,163,957 24

1,157,092 36 656,085 57 665,609 73 433,690 45
1,973,692 13 282,579 00
1,904,478 78 929,756 79 93,346 40 42,089 00

565,903 70 625,388 66 609,660 85 426,564 92 1,757,003 43 264,070 12 1,890,951 41 937,905 75
75,137 15 48,580 69

16,000 00

18,040 04 10,600 02

Total Expenditures

$ 25,437,168 32 $ 24,393,763 98

Excess of Revenues over (under) Expenditures $ -330,845 21 $ 1,090,601 60

OTHER FINANCING USES Other Uses

-1,275 83

Excess of Revenues over (under) Expenditures

and Other Financing Uses

$ -330,845 21 $ 1,089,325 77

FUND BALANCE JULY 1. 2001

1,433,826 11

3,218,348 74

FUND BALANCE JUNE 30. 2002

$ 1,102,98090 $ 4,307,67451

SPECIAL REVENUE FUND

BUDGET

ACTUAL

$ 626,625 63 $ 714,451 91

3,876,021 68

3,858,771 39

412,867 30

395,897 69

$ 4,915,514 61 $ 4,969,120 99

$ 1,965,094 73 $ 2,350,804 00

52,047 51 191,766 86
8,239 00 237,262 02

100,797 99 120,862 77
123,746 26

24,960 00 30,318 00
5,200 00 1,656,589 54
650,076 14

51,702 75 33,350 26
272 33 1,430,481 19
551,915 31

$ 4,821,553 80 $ 4,763,932 86

s $ 93.960 81

205,18813

$ 93,960 81 $ 205,188 13

815,800 10

885,914 89

$ 909,76091 $ 1,091,10302

The notes to the general-purpose financial statements are an integral part of this statement -7-

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
The McDuffie County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The School District is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
FUND ACCOUNTING
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
General Fixed Assets are recorded as expenditures in the various funds at the time of purchase. A General Fixed Assets Account Group is not presently maintained by the School District. To conform to generally accepted accounting principles, a General Fixed Assets Account Group should be maintained for reporting the cost of assets acquired by governmental fund types.
Although "school activity accounts" are maintained at the individual schools, neither the assets, liabilities and fund equity, nor the revenues, expenditures and changes in fund balances of these accounts are reflected in these financial statements. To conform to generally accepted accounting principles, these accounts should be recorded in the general-purpose financial statements.
The general-purpose financial statements account for all State, Federal, Taxes and Other funds under control of the School District, in compliance with generally accepted accounting principles applicable to governmental units, unless otherwise disclosed in these notes. Funds presented in this report are as follows:
GOVERNMENTAL FUND TYPES - are used to account for all or most of the School District's educational activities. Governmental Fund Types include:
GENERAL FUND - the fund used to account for all financial resources of the School District except those required to be accounted for in another fund. These transactions relate to resources obtained and used for services provided by a board of education.
SPECIAL REVENUE FUND - the fund used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally restricted to expenditures for specified purposes. These fur,ds are received primarily from the Georgia Department of Education and from the Federal government to accomplish specific educational objectives.

- 8-

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL PROJECTS FUND - the fund used to account for financial resources to be used for the acquisition or construction of major capital facilities.
DEBT SERVICE FUND - the fund used to account for the accumulation ofresources for, and the payment of, general long-term principal, interest and paying agent fees.
BASIS OF ACCOUNTING
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements ofthese funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Their reported fund balance is considered a measure of available spendable resources.
Liabilities which are expected to be financed from available spendable resources are reported as liabilities in the governmental funds.
Governmental funds are accounted for using the modified accrual basis ofaccounting under which:
Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The School District considers receivables collected within sixty days after yearend to be available. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, local option sales taxes, intergovernmental grants and donations. Revenue for property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year the resources are received or susceptible to accrual. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Expenditures are generally recognized when the related fund liability is incurred.
A departure from the above definitions is the accounting treatment afforded the final two payments on General Fund teachers' and bus drivers' contracts, and the resources available from the Georgia Department of Education for the State's share of these contracts. During fiscal year 2002, a substantial number ofpersonnel ofthe School District were employed for a one hundred and ninety day period beginning in August 2001 and ending in early June 2002. Personnel contracts for this employment period specify that compensation be paid in twelve equal monthly payments beginning in September 200 I and ending in August 2002. State grants to fund the State's share of these contracts were disbursed from the Georgia Department of Education to the School District in the same twelve months. As of June 30, 2002, compensation under these employment contracts had
-9-

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

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
been earned, but two of the twelve monthly payments, due for July and August 2002, had not been made. Payments for these two months were made and recorded as expenditures by the School District subsequent to June 30, 2002. Also, the State's portion ofthe compensation paid in July and August 2002 was received and recorded as revenue in the fiscal year subsequent to June 30, 2002. Conversely, the similar expenditures and related revenues for contractual services completed prior to June 30, 2001, were recorded in the year ended June 30, 2002. Generally accepted accounting principles require that revenues be recorded when available and measurable and that expenditures be recorded when incurred, rather than when funds are received or disbursed.
BUDGET
The McDuffie County Board of Education's budget is a complete financial plan for the School District's fiscal year and is based upon estimates of expenditures together with probable funding sources. There is no statutory prohibition regarding overexpenditure ofthe budget at any level. The budget for all governmental funds is prepared by fund, function and object. The legal level of budget control was established by the Board at the aggregate level. The budget for governmental funds was prepared on a basis other than generally accepted accounting principles.
The budget process begins when the School District's administration prepares a tentative budget for the Board's approval. After approval ofthis tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality. At the next regular meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final school budget. This final budget is then submitted, in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual presents actual and budgeted data for the Special Revenue Fund. To facilitate comparison with the budget, the following adjustments have been made to fund balance as reflected on Exhibit "B" ofthis report:

- 10 -

.. _....

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Special Revenue
Fund

FUND BALANCE JULY 1, 2001

$ 903,853.06

Adjustments Inventories - July 1, 2001 Food Donated Commodities Purchased Foods

-12,397.89 -5,540.28

Fund Balance July 1, 2001 (Budget Basis)

$ 885,914.89

Excess of Revenues and Other Financing Sources over (under) Expenditures and Other Financing Uses

205,188.13

FUND BALANCE JUNE 30, 2002 (Budget Basis)

$ 1,091,103.02

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.

INVESTMENTS

COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds and 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:

- 11 -

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

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(2) Obligations issued by the United States government,

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

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

(5) Prime banker's acceptances,

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

(7) Repurchase agreements, and

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

RECEIVABLES

Receivables consist of grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the general-purpose financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.

PROPERTY TAXES

The McDuffie County Board of Commissioners fixed the property tax levy for the 2001 tax digest year (calendar year) on October 16, 2001 (levy date). Taxes were due on December 20, 2001 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2001 tax digest are reported as revenue in fiscal year 2002. The McDuffie 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 oftaxes collected to the School District. Property tax revenues during the fiscal year ended June 30, 2002 for maintenance and operations amounted to $5,489,056.38 and for school bonds amounted to $60.23.

The tax millage rate levied for the 2001 tax year (calendar year) for the McDuffie County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

H..5.0 mills

- 12 -

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SALES TAXES
Special Purpose Local Option Sales Tax revenue during the year amounted to $2,875,246.39 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 Inventories of donated food commodities used in the preparation of meals are reported on the Combined Balance Sheet at their Federally assigned value. Purchased foods inventories are reported on the Combined Balance Sheet at cost (first-in, first-out). Donated food commodities are recorded as revenues and expenditures at the time commodity items are received. Purchased foods inventories are recorded as expenditures at the time ofpurchase. The inventories reported on the balance sheet for donated food commodities and for purchased foods are equally offset by reservations of fund balance which indicates that these amounts do not constitute "available spendable resources" even though they are a component of net current assets.
COMPENSATED ABSENCES
Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount is deemed immaterial to the general-purpose financial statements.
Additionally, the dollar value of accumulated compensated absences at June 30, which will be payable from future resources has not been recorded in the General Long-Term Debt Account Group as this liability is also deemed to be immaterial to the fair presentation ofthese financial statements.
INTERFUND TRANSACTIONS
The School District has the following types of interfund transactions:
Reimbursements ofexpenditures initially made from a fund that are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.
Operating transfers are recorded for all interfund transactions other than reimbursements.

- 13 -

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

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MEMORANDUM ONLY - TOTAL COLUMNS
Total columns on the general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position or results ofoperations in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. lnterfund eliminations have not been made in the aggregation of this data.
Note 2: 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 of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use 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

- 14 -

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 2: DEPOSITS AND INVESTMENTS

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS At June 30, 2002, the bank balances were $7,485,817.92. 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, 2002, as follows:

Risk Category

Bank Balance

l

$ 210,620.99

2

7,275,196.93

3

0.00

Total

$ 7,485,817.92

CATEGORIZATION OF INVESTMENTS At June 30, 2002, the carrying value ofthe School District's total investments was $16,215.93 which is materially the same as fair value. This investment consisted entirely offunds invested in the Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description of the Primary Liquidity Portfolio is as follows:

- 15 -

. - - - - - - - - - - - - - - - - ---- -- - - --

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 2: DEPOSITS AND INVESTMENTS
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 ofthe Investment Company Act of 1940 and is considered to be a Rule 2a7 like pool. 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 weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed based on $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost which approximates fair value. The pool does not issue any legally binding guarantees to support the value ofthe 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, 2002, was 0.12 years. The average investment duration for Fund 6 on June 30, 2002, was 0.75 years.
Note 3: NON-MONETARY TRANSACTIONS
The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 1 - Inventories
Note 4: RISK MANAGEMENT
The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation.
The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions,job related illness or injuries to employees and acts ofGod. However, the errors or omissions policy excludes coverage for sexual harassment and discrimination. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

- 16 -

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 4: RISK MANAGEMENT

The School District is self-insured with regard to unemployment compensation claims. A premium is charged when needed by the General Fund to each user fund on the basis ofthe percentage ofthat fund's payroll to total payroll in order to cover estimated claims budgeted by management based on known claims and prior experience. The School District accounts for claims with expenditure and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

Changes in the unemployment compensation claims liability during the last two fiscal years are as follows:

2001 2002

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

$

0.00 $

2,821.77 $

I 489.77 $

1,332.00

$

1,332.00 $

5,492.03 $

2,176.00 $

4,648.03

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

Position Covered

Amount

Superintendent

$ 15,000.00

Note 5: GENERAL LONG-TERM DEBT

GENERAL OBLIGATION DEBT OUTSTANDING The changes in General Long-Term Debt during the fiscal year ended June 30, 2002, were as follows:

Capital Leases

General Obligation
Bonds

Total

Balance July 1, 2001

$ 8,313.74 $ 2,075,000.00 $ 2,083,313.74

Deductions Debt Retired

8,313.74 2,075,000.00 2,083,313.74

Balance June 30, 2002

$

Q,0Q $

Q,QQ $

Q.0Q

- 17 -

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 6: ON-BEHALF PAYMENTS

The School District has recognized revenues and expenditures in the amount of $369,805.04 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of$31 l,147.23

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $21,652.81

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 $37,005.00

Note 7: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2002, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

SA 01S-697-117 SA 0lS-697-119

$ 147,949.96 $ 42,424.20

61,216.91

12,727.30

$ 2Q2i166,8Z $ 552151.SQ

The amounts described in this note are not reflected in the general-purpose financial statements.

Note 8: CONTINGENT LIABILITIES

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

- 18 -

, -

MCDUFFIE COUNTY BOARD OF EDUCATION

EXHIBIT "D"

NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS

JUNE 30, 2002

Note 9: SUBSEQUENT EVENTS

On September 17, 2002, the voters of McDuffie County voted in favor of a Special Purpose Local Option Sales Tax referendum for education purposes. The reimposition of the tax approved by the voters, as stated on the Official Ballot of McDuffie County, is as follows:

"Shall a special one percent sales and use tax be imposed in McDuffie County for a period of time not to exceed 60 months (5 years) and for the raising of not more than $16,000,000 for the purpose of funding technology improvements, adding to, renovating, repairing, improving, equipping and making modifications to all existing schools, including the acquisition of all necessary property and acquiring, constructing and equipping a new elementary/middle school for the school district?"

Note I0: ACCUMULATED EMPLOYEES' LEAVE

Annual leave for full-time twelve month employees is earned on a fiscal year basis and is credited at the beginning of the fiscal ye3:r. A maximum of IO working days of unused leave not including designated holidays may be accumulated from one fiscal year to the next. Upon retirement or termination of employment, an employee will be compensated at their current rate of pay for no more than IO days of accumulated annual leave. See Note 1 - Compensated Absences

Note 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)

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

IRS 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 IRS at rates adopted by the IRS 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
2002 2001 2000

Percentage Contributed
100% 100% 100%

Required Contribution
$ 1,647,807.20 $ 1,958,667.05 $ 1,853,752.84

- 19 -

- - - - - - - - - - - - - - - - - - - ------- - --------- -------------------------
MCDUFFIE COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET SPEC~LREVENUEFUND JUNE 30, 2002

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

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$ 1,134,874 99

3,534.00 $

117,557.00

12,668.47 8,545.16

Total Assets

$ 1,159,622.62 $ =--=1=1=7=,5=5=7.=00=

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Accounts Payable Salaries Payable Expired Grant Balances Payable Deferred Revenue
Total Liabihties
FUND EQUITY
Fund Balances Reserved For Inventories Food Donated Commodities Purchased Food Unreserved Undesignated
Total Fund Equity
Total Liabilities and Fund Equity

$

38,533.89

$

7,653.30

18,385.82

39,652.67

60,153.64

483.65

$

47,305.97 $

117,557 00

$

12,668 47

8,545.16

1,091.103.02 $

0.00

$ 1, 1121316 65 $

0.00

$ 1,159,622.62 $ =-1=1=7=,5=5=7.=00=

See notes to the general-purpose financial statements - 20-

EXHIBIT "E"

FEDERAL PROGRAMS

TOTALS

JUNE 30, 2002

JUNE 30, 2001

$ 1,134,87499 $

951,95010

$ 1,960,427 64

2,081,518.64

1,971,819 51

12,668 47 8,545.16

12,397.89 5,540.28

$ 1,960,42764 $ 3,237,60726 $ 2,941,707.78

$ 1,689,744.49 $ 1,728,27&38 $ 1,696,800 60

71,985 68

98,024 80

87,312.13

183,546.96

283,353 27

196,586.61

8,146 79

8,630.44

7,629 41

7,003 72

7,003.72

49,525.97

$ 1,960,427 64 $ 2,125,290.61 $ 2,037,854 72

$
$ - - - - -0 0-0
$ _ _ _ _ _0-'-00_ $

12,668.47 $ 8,545.16
1,091,103 02
1,112,31665 $

12,397.89 5,540.28
885,914.89
903,85306

$ 1,960,427 64 $ 3,237,607.26 $ 2,941,707.78

- 21 -

-- - - - - ---- -- - - - - - - - - - - - - - - - - - - - - -
MCDUFFIE COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
SPECIAL REVENUE FUND YEAR ENDED JUNE 30, 2002

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

SCHOOL FOOD
SERVICES FUND

LOTTERY PROGRAMS

$

114,752.00 $

1,165,934.57

383,591.75

$ 1,664,278.32 $

599,699.91 599,699 91

$

529,639 87

63,212.94 2,580.96

$

28,609.00

4,26614

1,430,481 19

$ 1,459,090.19 $

$

205,18813 $

903,853.06

599,699.91 0.00 0.00

270 58 3,004 88

FUND BALANCE JUNE 30

$ 1,112,31665 $====0=.0=0=

See notes to the general-purpose financial statements - 22 -

EXHIBIT"F"

FEDERAL PROGRAMS

TOTALS

YEAR ENDED

JUNE 30, 2002

JUNE 30, 2001

$

714,451.91 $

723,380 77

$ 2,692,836 82

3,858,771.39

3,355,377.73

12,305 94

395,897.69

402,483.61

$ 2,705,142.76 $ 4,969,120.99 $ 4,481,242 11

$ 1,821,164.13 $ 2,350,804 00 $ 1,998,631 22

37,585 05 118,281.81
123,746.26 18,827.61 33,350.26 272.33
551,915.31

100,797.99 120,862.77
123,746.26 51,702.75 33,350 26 272.33
1,430,481.19 551,91531

82,984.98 169,516.71
139.00 119,017 86
52,422.58 4,169.55 5,264.99
1,349,418.18 496,502 98

$ 2,705,142 76 $ 4,763,932.86 $ 4,278,068 05

$

0 00 $

205,188.13 $

203,174.06

0.00

903,853 06

702,524 81

270.58 3,004.88

-1,953.07 107.26

$

0.00 $ 1,112,316.65 $

903,853.06

- 23-

MCDUFFIE COUNTY BOARD OF EDUCATION
COMBINING BALANCE SHEET CAPITAL PROJECTS FUND
JUNE 30. 2002

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Accounts Receivable

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS JUNE 30, 2002 JUNE 30, 2001

$ 2,929,944 87 $ 2,929,944 87 $ 2,836,691 47

$

114,545 70

524,908 62

639,454 32

477,750 40

Total Assets

$

114,545 70 $ 3,454,853 49 $ 3,569,399 19 $ 3,314,441 87

LIABILITIES AND FUND EQUITY
LIABILITIES
Cash Overdraft Contracts Payable Reta1nages Payable
Total L1ab1ht1es
FUND EQUITY
Fund Balances Reserved For SPLOST Pro1ects Unreserved Undes19nated
Total Fund Equity

$

114,545.70

$ 114,545 70 $ 100,453 64

$

119,433 31

119,433 31

38,593 80

80,960 45

80,96045

$

114,545 70 $

200,393 76 $ 314,939 46 $ 139,047 44

$ 3,254,459 73 $ 3,254,459 73 $ 3.175,394 43

$

0 00

0 00

0 00

000

$

0 00 $ 3,254,459 73 $ 3,254,459 73 $ 3,175,394 43

Total Llab1ht1es and Fund Equity

$

114,545 70 $ 3,454,853 49 $ 3,569,399 19 $ 3,314,441 87

See notes to the general-purpose financial statements

- 24 -

MCDUFFIE COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES
CAPITAL PROJECTS FUND YEAR ENDED JUNE 30 2002

EXHIBIT "H"

REVENUES
State Funds Taxes Other Funds
Total Revenues
EXPENDITURES
Current Instruction Support Services Student Transportation Services
Capital Outlay Land and Land Improvements BuIld1ng and Bu1ld1ng Improvements Equipment
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING USES
Operating Transfers Out
Excess of Revenues over (under) Expenditures and Other Financing Uses
FUND BALANCE JULY 1

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS YEAR ENDED JUNE 30. 2002 JUNE 30. 2001

$

496,363 50

$ 496,363 50

$ 2,875,246 39

2,875,246 39 $ 2,818,036 96

124,899 75

124,899 75

236,912 12

$

496,363 50 $ 3,000,146 14 $ 3,496,509 64 $ 3,054,949 08

$

455,036 33 $ 455,036 33

1,575 00

1,575 00

$

496,363 50

180,000 00 2,217,292 02
66,450 26

180.000 00 $ 2,713,655 52
66,450 26

255,730 82 673.180 00 784,822 66

$

496,363 50 $ 2,920,353 61 $ 3,416,717 11 $ 1,713,733 48

$

0 00 $

79,792 53 $

79,792 53 $ 1,341,215 60

-727 23

-727 23

-2,625,511 33

$

000 $

79,065 30 $

79.065 30 $ -1.284.295 73

0 00

3. 175.394 43

3,175,394 43

4,459.690 16

FUND BALANCE JUNE 30

s =====o=o=o= s

s s 3.254,459 73

3,254.459 13

3,115.394 43

See notes to the general-purpose financial statements

- 25-

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

MCDUFFIE COUNTY BOARD OF EDUCATION COMBINING BALANCE SHEET DEBT SERVICE FUND
JUNE 30 2002

EXHIBIT"!"

ASSETS Cash and Cash Equivalents Accounts Receivable
Total Assets

PROPERTY TAXES FOR BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS

JUNE 30, 2002

JUNE 30, 2001

$

000 $

0 00 $

0 00 $ 2,176,647 33

9244

$

0 00 $

o oo $===-o...o=o= $ 2,176,73911

FUND EQUITY

Fund Balances

Reserved

For Debt Service

Unreserved

Undes1gnated

$

Total Fund Equity

$

000 $ 0 00 $

$ 2,176,739 77

0 00 $ _ _ _ _0;;....00~

000

0 00 $=======0=00= $ 2,176,739 77

See notes to the general-purpose financial statements

-26-

MCDUFFIE COUNTY BOARD OF EDUCATION COMBINING STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES
DEBT SERVICE FUND
YEAR ENDED JUNE 30 2002

EXHIBIT J"

PROPERTY TAXES FOR BOND DEBT

SPECIAL PURPOSE LOCAL OPTION SALES TAX

TOTALS YEAR ENDED JUNE 30. 2002 JUNE 30, 2001

REVENUES

Taxes Other Funds
Total Revenues
EXPENDITURES

$

60.23 $

622 78

$

683 01 $

0 00 $ 0 00 $

60 23 $ 622 78
683 01 $

2,412 39 1,316 31
3,728 70

Debt SeMce Pnnopal Interest Paying Agent Fees
Total Expenditures
Excess of Revenues over (under) Expenditures

$

000 $ 2,075,000 00 $ 2,075,000 00 $ 360,000 00

104,425 84

104,425 84

114,19000

1,275 83

$

0 00 $ 2,179,425 84 $ 2,179,425 84 $ 475,465 83

$

68301 $ -2, 179,425 84 $ -2,178,742 83 $ -471,737 13

OTHER FINANCING SOURCES /USES)
Operating Transfers In Operating Transfers Out
Total Other Fmancmg Sources (Uses)

$ $ -26, 101 45
$ -26,101 45 $

28,104 51 $ 28,104 51 $

28,104 51 $ 2,626,787.16

-26, 101 45

-1,275 83

2,003 06 $ 2,625,511 33

Excess of Revenues and Other Fmanong Sources over (under) Expenditures and Other F1nancmg Uses $ -25,418 44 $ -2, 151,321 33 $ -2.176,739 77 $ 2,153,774 20

FUND BALANCE JULY 1

25,418 44

2,151,321 33

2,176,739 77

22,965 57

FUND BALANCE JUNE 30

$

0 00 $

000 $==---=-,...;;,0..,00"'3 $ 2,176,73977

See notes to the general-purpose financaal statements

- 27 -

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

FUNDING AGENCY PROGRAM/GRANT

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

Agnculture, U S Department of Child Nutrlt10n Cluster Pass-Through From Georgia Department of Education Food and Nutnt1on Program Food Services School Breakfast Program National School Lunch Program

10.553 10 555

NIA $ 233,998 89

NIA

835,104.26 $

(2) 1,367,445 69 (3)

Total Child Nutntlon Cluster

$ 1,069,103 15 $

1,367,445 69

Other Programs

Pass-Through From Georgia Department of Education

Food and Nutnt1on Program

Food D1stnbut1on Program (1)

10 550

NIA

Fresh Produce Program (1)

10 550

NIA

Pass-Through From Office of School Readiness

Food and Nutnt1on Program

Child and Adult Care Food Program

10 558

NIA

78,122.78 13,521 92
5,186 72

78,122 78 13,521 92
(2)

Total U S Department of Agnculture

$ 1,165,934 57 $

1,459,090 39

Education, U S Department of

Special Education Cluster

Pass-Through From Georgia Department of Education

lnd1vKluals with D1sab1ht1es Education Act Part B - Special Education Capacity Building Improvement Flow Through Preschool

. 84173 .. 84027
84173

NIA $

9,800 00 $

NIA

565,758 56

NIA

27,065.83

9,800 00 565,758 56
27,065 83

Total Special Education Cluster

$ 602,624 39 $

602,624 39

Other Programs

Direct Impact Aid Twenty-First Century Community Leaming Centers

. 84 041 84 287

Drug and Violence Prevention Coordinators for

Middle Schools

84184

Pass-Through From Georgia Department of Education

Elementary and Secondary Education Act Title I Grants to Local Educational Agencies

. 84 010

Title II

Eisenhower Professional Development

84 281

T1tlelll

Technology Literacy Challenge Fund Grants

84 318

TltleVI

Innovative Education Program Strategies

84298

Class Size Reductton

84 340

Educate Amenca Act

Goals 2000

84 276

Safe and Drug-Free Schools and Communities

84186

Vocational Education - Basic Grants to States

High School Program

Basic Grant

84.048

187 23 537,430 56
64,82310

(4) 549,736 50 (3)
64,82310

NIA

1,017,41118

1,017,41118

NIA

14,221 59

14,221.59

NIA

118,320 56

118,320 56

NIA

31,419 00

31,419 00

NIA

158,181 00

158,181 00

NIA

62,98518

62,985 18

NIA

17,800 00

17,800 00

NIA

57,192 07

57,192 07

Total U S Department of Education

$ 2,682,595 86 $

2,694,714 57

- 28 -

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

FUNDING AGENCY PROGRAM/GRANT
Justice, U S. Department of Pass-Through From Georgia Department of Juvenile Justice Children and Youth Coordmatmg Council Targeted Case Management for Females
Labor, U S. Department of Pass-Through From East Central Georgia Consortium Workforce Improvement Act Youth Works Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

FEDERAL REVENUE IN PERIOD

EXPENDITURES IN PERIOD

16 540

NIA $ 39,623 05 $

39,623 05

17 259

NIA $ 10,428 19 $

10,428 19

Total Federal Financial Assistance

$ 3.898,581 67 $

4,203,856 20

NIA = Not Available

to Notes the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food D1stnbut1on Program and Fresh Produce Program represent the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system dunng the current fiscal year
(2) Expenditures for the Child and Adult Care Food Program and the School Breakfast Program were not maintained separately and are included in the 2002 National School Lunch Program
(3) Expenditures for this program include State, and/or Other Funds Expenditures are not maintained by fund source
(4) Funds earned on this program do not require reporting of expenditures

MaJor Programs are identified by an astensk (*) In front of the CFDA number

The School D1stnct did not provide Federal Assistance to any Subrecip1ent

The accompanying schedule of expenditures of Federal awards Indudes the Federal grant actIvIty of the McDuffie County Board of Education and Is presented on the modified accrual basis of accounting which 1s the basis of accounting used m the presentation of the general-purpose financial statements

See notes to the general-purpose finanaal statements

-29-

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30 2002

SCHEDULE "2"

AGENCY/FUNDING

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

GENERAL

REVENUE

PROJECTS

FUND

FUND

FUND

TOTAL

GRANTS

Educabon, Georgia Department of

Quality Basic Education

Direct Instructional Cost

Kmdergarten Program

$

997,457 00

Kindergarten Program - Early Intervention Program

184,362 00

Pnmary Grades (1-3) Program

2,405,808 00

Pnmary Grades - Early Intervention (1-3) Program

646,937 00

Upper Elementary Grades (4-5) Program

1,414,830 00

Upper Elementary Grades - Early Intervention (4-5)

Program Middle School (6-8) Program

219,463 00
2,212,512 00

High School General Education (9-12) Program

1,893,729 00

Vocational Laboratory (9-12) Program

810,054 00

Students with D1sab11it1es

Category I

35,466 00

Category II

313,146 00

Category Ill

1,108,599 00

Category IV

249,139 00

CategoryV Gifted Student - Category VI

12,406 00
135,887 00

Remedial Education Program

60,601 00

Altematlve Education Program

181,133 00

English Speakers of Other Languages (ESOL)

41,74600

20 Days Add1t1onal Instruction

125,844 00

Media Center Program

403,495 00

Staff and Professional Development

72,865 00

Indirect Cost

2,504,772 00

Categoncal Grants

Pupil Transportation

Regular

613,170 00

Bus Replacement

173,552 00

Sparsity

35,889 00

Nursing Services

96,555 00

Principal Supplements

17,275 00

Vocational Supervisors

32,682 00

Mid-term AdJustment Hold-Harmless

283,025 00

Education Equalizatlon Fundmg Grant

1,512,540 00

Food Services

$ 114,752 00

Vocational Education

34,30000

Other State Programs

Apprenticeship Program

35,000 00

At-Risk Summer School Program

44,218 40

Health Insurance

311,147 23

K-3 Statewide Reading Program

57,641 20

Mentor Teachers

7,803 00

Preschool Handicapped Program

57,570 00

Special Education Low Incidence Grant

17,955 00

Teachers' Rellrement

21,652 81

Lottery Programs

Ass1stive Technology

9,38200

Computers m the Classroom

108,175 00

$

997,457 00

184,362 00

2,405,808 00

646,937 00

1,414,830 00

219,463 00 2,212,512 00 1,893,729 00
810,054 00

35,466 00
313,14600 1,108,599 00
249,139 00 12,406 00
135,887 00 60,601 00 181,13300 41,746 00 125,844 00
403,495 00 72,865 00
2,504,772 00

613,17000 173,552 00
35,889 00 96,555 00 17,275 00 32,682 00 283,025 00 1,512,540 00 114,752 00 34,30000
35,000 00 44,218 40 311,147 23 57,641 20
7,803 00 57,570 00 17,955 00 21,652 81
9,382 00 108,175 00

Natural Resources, Department of McDuffie County Environmental Educabon Center

20,000 00

20,000 00

- 30-

MCDUFFIE COUNTY BOARD OF EDUCATION
SCHEDULE OF STATE REVENUE
YEAR ENDED JUNE 30 2002

SCHEDULE "2"

AGENCY/FUNDING
GRANTS Georgia State F1nanc1ng and Investment Comm1ss1on Reimbursement on Construction ProJects
Office of School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Rebrement

GOVERNMENTAL FUND TYPES

SPECIAL

CAPITAL

GENERAL

REVENUE

PROJECTS

FUND

FUND

FUND

TOTAL

$ 496,363 50 482,142 91 37,005 00

496,363 50 482,142 91
37,005 00

$ 19,439,231 64 $ 714 451 91 $ 496,363 50 $ 20,650,047 05

See notes to the general-purpose finanoal statements

- 31 -

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30 2002

SCHEDULE "3"

PROJECT
Repaying general obligation school debt
Technology improvements, purchase of school buses. renovating, repainng, ImprovIng, equipping and making mod1ficat1ons to all existing schools and acquIsIbon of all necessary property and acquInng, constructing and equIppIng a new elementary/middle school for the school d1stnct and to pay for the cost of acquinng real estate

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 3,800,000 00 $ 3,583,284 49 $ 2,179,425 84 $ 1,403,858 65 Completed

8,900,000 00

8,900,000 00

3,416 717 11

1,158,97925 Ongoing

$ 12,700,000 00 $ 12,483,284 49 $ 5,596,142 95 $ 2,562,837 90

(1) The School o,stnct's ong,nal cost esbmate as spec1fied in the resolu1Ion calling for the imposition of the Local Option Sales Tax
(2) The School D1stncrs current estimate of total cost for the projects Includes all cost from proj8CI Incepbon to complebon
(3) The voters of McDuffie County approved the 1mposItion of a 1% sales tax to fund the above projects and rebre aSSOC1ated debt Amounts expended for these pro,ects may indude sales tax proceeds, state, local property taxes and/or other funds over the hfe of the projects

See notes to the general-purpose finanoal statements

-33-

MCDUFFIE COUNTY BOARD OF EDUCATION
GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM !QBEl ALLOTMENTS AND EXPENDITURES - BY PROGRAM
YEAR ENDED JUNE 30. 2002

SCHEDULE "4"

DESCRIPTION
Direct Instructional Programs Kindergarten Program Kindergarten Program-Early Intervention Program Pnmary Grades (1-3) Program Pnmary Grades-Earty 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 Educalton (9-12) Program Vocaltonal Laboratory (9-12) Program Students with D1sab1ht1es Category II Category Ill Category IV Gifted Student - Category VI Remedial Education Program Altemattve Educalton Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

1,115,244 00 $ 1,085,100 31 $

8,474 14 $ 1,093,574 45

206,133.00

143,928 75

143,928 75

2,689,903.00

3,006,980.77

98,302 52

3,105,283 29

723,331 00

480,465 67

480,465.67

1,581,90300

1,617,927 07

66,304 82

1,684,231 89

245,379 00
2,473,781 00 2,117,35400
905,711 00 1,921,721 00
151,933 00 67,757 00
202,522.00 46,677 00

146,213 41 420,250 61 2,178,299 00 2,306,858 04 800,011 37
117,249 91 1,544,279 70
82,522.32 185,178 58 103,305 90 176,895 99
38,538 24

109,863 06
217,743 49 34,807 44
5,655 94 3,301 08
1,344 31 2,498 29 6,322 09

146,213 41 530,11367 2,178,299 00 2,524,601 53 834,818 81
122,905.85 1,547,580.78
82,522.32 186,522 89 105,804 19 183,218 08
38,538 24

$

14,449,349 00 $ 14,434,005 64 $ 554,617 18 $ 14,988,622 82

451,141 00 8146800

503,870 06 35,988 83

67,430 94 58479 74

571,301 00 94,468 57

TOTAL QBE FORMULA FUNDS

$

14,981,958 00 $ 14,973,864 53 $ 680,527 86 $ 15.654,392 39

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

See notes to the general-purpose flnanaal statements

- 34 -

MCDUFFIE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE}
ALLOTMENTS AND EXPENDITURES - BY SITE YEAR ENDED JUNE 30, 2002

SCHEDULE "5"

SITE
Maxwell Elementary School Deanng Elementary School Thomson High School Thomson Middle School Noms Elementary School Thomson Elementary School CrossRoads Leaming Center Central Office (Alternative Education Program) Other Auxiliary Facility
TOTAL
(1) Comprised of State Funds plus Local Five Mill Share.

ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1)

ELIGIBLE QBE PROGRAM COSTS

$

1,597,202.00 $

1,521,280.39

1,669,510.00

1,687,421.39

3,758,532 00

3,854,671 74

3,034,179.00

3,259,132.07

2,295,948 00

2,225,740.31

1,891,456.00

1,907,724.14

290,280.52

202,522.00

17,762.27

224,609.99

$

14,449,349.00 $ 14,988,622.82

See notes to the general-purpose financial statements - 35 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

1USSELL W. IIINTON
STATE AUDITOR (404) 656 2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie 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 McDuffie County Board of Education as of and for the year ended June 30, 2002, and have issued our report thereon dated August 5, 2003. This report was qualified for various departures from generally accepted accounting principles, as identified in the auditor's report on the general-purpose financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether McDuffie 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 of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered McDuffie County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal
2002YB-40

control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over financial reporting that, in ourjudgment, could adversely affect McDuffie County Board of Education's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items FS-6971-02-01 and FS-6971-02-02.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, ofthe reportable conditions described above, we consider item FS-6971-0202 to be a material weakness.
This report is intended solely for the information and use of the management, members of the McDuffie County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2002YB-40

State Auditor

~USSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washmgton Street, S.W Suite 214 Atlanta, Georgia 30334-8400
August 5, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McDuffie County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133
Ladies and Gentlemen:
Compliance
We have audited the compliance of McDuffie County Board of Education with the types of compliance requirements described in the U.S. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2002. McDuffie 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 McDuffie County Board of Education's management. Our responsibility is to express an opinion on McDuffie County Board of Education's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular Al 33, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the McDuffie 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 McDuffie County Board of Education's compliance with those requirements.
2002SA-10

In our opinion, the McDuffie 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, 2002.
Internal Control Over Compliance
The management of McDuffie 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 McDuffie County Board of Education'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.
Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the management, members of the McDuffie County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~
Ru sell W. Hinton State Auditor
RWH:gp 2002SA-10

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

MCDUFFIE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-6971-00-02 FS-6971-01-01 FS-6971-01-02

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

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS GENERAL LEDGER Inadequate Internal Control Procedures Finding Control Number: FS-6971-01-01

On the School Nutrition journal entries, proper backup for the journal entries was not properly attached for all journal entries. However, beginning July I, 2003, Ms. Childers has implemented a procedure where all journal entries have supporting documentation attached.

GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Finding Control Number: FS-6971-01-02

We have had the CSRA Regional Educational Service Agency hire a fixed asset consultant to inventory and tag our fixed assets. CSRA Regional Educational Service Agency has also purchased software to record our fixed assets as either GASB 34 related or control related. This finding should be resolved in Fiscal Year 2003.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-6971-01-01

Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002

I SUMMARY OF AUDITOR'S RESULTS

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

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

General Ledger

General Fixed Assets

Of the reportable conditions described above, General Fixed Assets is considered to be a material weakness.

3. Noncompliance Material to the Financial Statements The audit of the McDuffie 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 McDuffie County Board ofEducation did not disclose any reportable conditions in internal control over major programs.

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

6. Audit Findings Required to be Reported by Section .51 0(a) of 0MB Circular A-133 The McDuffie County Board of Education's audit did not disclose audit findings required to be reported by section .510(a) ofOMB Circular A-133.

7. Major Programs Federal awards audited as major programs are as follows: 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 Flow Through 84.173 Individuals with Disabilities Education Act - Part B - Special Education Preschool 84.173 Individuals with Disabilities Education Act - Part B - Special Education Capacity Building Improvement 84.287 Twenty-First Century Community Leaming Centers

- 1-

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
I SUMMARY OF AUDITOR'S RESULTS
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.00.
9. Low Risk Auditee The McDuffie County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-6971-02-01
A review of the School District's internal control policies and procedures noted deficiencies in providing for adequate internal control in the separation of duties over the journal entry process. Journal entries were not reviewed and approved by someone independent of the general ledger journal entry function. In addition, journal entries were not consistently supported by adequate documentation and explanations. This condition was a result ofmanagement's decision to limit the number ofadministrative staffmade responsible for accounting functions and their failure to institute proper control over this area. The School District should review the accounting procedures in place, design procedures which would enhance segregation ofduties and proper internal controls relative to the above control category and implement those procedures to strengthen the internal control over the accounting functions.
GENERAL FIXED ASSETS Failure to Maintain General Fixed Assets Account Group Reportable Condition - Material Weakness Repeated From Prior Year Finding Control Number: FS-6971-02-02
The McDuffie County Board of Education did not maintain a system-wide General Fixed Assets Account Group within the formal accounting records as required by generally accepted accounting principles. This condition results in the general-purpose financial statements of the School District being incomplete and not in accordance with generally accepted accounting principles. Appropriate action should be taken by the School District to establish accounting controls and procedures to provide for the maintenance of a General Fixed Assets Account Group. These subsidiary records should include an inventory of land, buildings and equipment owned by the School District and should include, but may not be limited to, date acquired, acquisition cost, estimated replacement cost, location and description. Detailed records should be maintained of all additions and deletions to the General Fixed Assets Account Group.
-2-

MCDUFFIE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-3-