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

MCINTOSH COUNTY BOARD OF EDUCATION
DARIEN, 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

MCINTOSH 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

11

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

12

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

25

MCINTOSH 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
March 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McIntosh County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) ofthe McIntosh 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 McIntosh County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons.
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 McIntosh County Board of Education, as of June 30, 2003, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2003-34ARL-11

As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method ofaccounting for the salaries ofcertain 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 McIntosh County Board of Education has implemented a new financial reporting model as required by provisions ofGovernmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003.
In accordance with Government Auditing Standards, we have also issued our report dated March 12, 2004, on our consideration of the McIntosh County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii 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 McIntosh 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,

RWH:gp 2003-34ARL-l 1

State Auditor

MCINTOSH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
The discussion and analysis of McIntosh County Board of Education's (School District) financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for 2003 are as follows:
The School District fully implemented GASB34 for fiscal year 2003. Due to this being the implementation year, many comparisons are not available that will be available for fiscal year 2004.
General fund revenues accounted for $14,014,539 or 77% of all revenues. The districtwide capital project (new high school) accounted for $4,222,246 or 23% ofrevenues.
The School District had $15.4 million in expenses related to governmental activities; only $12.7 million of these expenses was offset by program revenues (charges for services, grants, or contributions).
Among major funds, the General Fund has $14,014,539 in revenues, $14,752,598 in expenditures. The General Fund's balance decreased to $848,461 from $1,586,520 due in part to the state reductions in funding and the use of fund equity to offset some expenditures.
Using the Basic Financial Statements
This annual report consists of a series of financial statements and notes to these statements. These statements are organized so the reader can understand the McIntosh 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 School District, presenting both an aggregate view of the School District'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 shortterm as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds. In the case of the McIntosh County Board of Education, the General Fund is by far the most significant fund.
1

MCINTOSH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Reporting the School District as a Whole
Statement ofNet Assets and the Statement ofActivities
While this document contains the large number of funds used by the School District to provide programs and activities for the schools, the view of the School District 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 of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when the cash is received or paid.
These two statements report the School District's net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Nonfinancial factors include the School District's property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Assets and the Statement of Activities, the School District has one distinct type of activity:
Governmental Activities - All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school programs, principal's accounts and various others.
Reporting the School District's Most Significant Funds
Fund Financial Statements
Fund financial reports provide detailed information about the School District's major funds. The School District uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the General Fund and the Capital Projects Fund.
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the 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 School District'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
11

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

educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunds is reconciled in the financial statements.

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

The School District as a Whole

The perspective of the statement of net assets is of the School District as a whole. Table 1 provides a summary of the School District's net assets for 2003. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net assets comparison 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

$ 6,786,673 9,025,112

Total Assets

$15,811,785

Liabilities Current and Other Liabilities

$ 2,197,698

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

$ 9,025,112 3,535,846 1,053,129

Total Net Assets

$13,614,087

111

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

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

Table 2 Change in Net Assets
(in Thousands)
Revenues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions
Total Program Revenues
General Revenues: Taxes Property Taxes Sales Taxes Grants and Contributions not Restricted Investment Earnings Miscellaneous

Governmental Activities Fiscal Year 2003
$ 239,431 9,654,219 2,839,321
$12,732,971
$ 3,176,276 1,412,710 467,329 87,705 318.573

Total General Revenues Total Revenues

$ 5,462.593 $18,195,564

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 ofNon-Instructional Services Enterprise Operations Community Services Food Services
Total Expenses
Increase in Net Assets

$ 9,553,377
501,295 458,775 264,642 371,877 850,283 164,561 1,248,230 712,653
892 . 229,975
78,403 93,729 848,718
$15,377,410
$ 2,818,154

lV

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

Figure A shows the funding sources for revenues. 61 % of the School District's revenues are derived from state grants. Property Taxes make up 18% of the total funding, while an additional 8% is earned from the county's local option sales tax.

Sources of Revenue for FY2003 2% 1%

State Funds Federal Funds D Property Tax Sales Tax Charges for Services
Other

As shown in Figure B, Instruction comprised 62.7% of governmental program expenses. Administration and Other Services (6.2%) consist of the central office, business, community services and other operations of the School District.
Functional Expenses for FY2003
Instruction Maintenance and Operations Student Transportation Food Services Pupil Services Improvement of Instruction Educational Media School Administration Administration & Other Services

Governmental Activities
The Statement of Activities (Table 2) shows the cost of program services and the charges for services and grants offsetting those services. Since this is the first year the School District has prepared financial statements following GASB Statement 34, the cost of service comparisons are not available for fiscal year 2002. Although program revenues make up a majority of the funding, the School District is still dependent upon tax revenues for governmental activities.
V

MCINTOSH COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003
Over 44 percent of instruction activities are supported through property taxes and other general revenues, excluding special purpose local option sales tax and for all governmental activities general revenue support is 48 percent.
The School District's Funds
The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $18,236,785 and expenditures and other financing uses of $19,137,465. There was a decrease in the fund balance totaling $900,680 for the governmental funds as a whole. The General Fund had a decrease of $738,059.
General Fund Budgeting Highlights
The School District's budget is prepared in accordance with Georgia Law. The most significant budgeted fund is the General Fund.
During the course of fiscal 2003, the School District amended its General Fund budget as needed. The School District used site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management.
For the General Fund, the final budgeted revenues exceeded the original budgeted amount of $12,362,933 by $1,702,344. This difference was due to an increase in state revenues budgeted of $202,476, an increase in Federal revenues of $1,276,427 and an increase of $223,441 for other sources. The actual revenues of $14,014,539 was less than the budgeted amount by $50,738. The decrease in revenues was mainly the result of the austerity reduction.
The final budgeted expenditures of $15,880,637 exceeded the original budgeted amount of $13,880,835 by $1,999,802. This difference was due mainly to an increase in state and Federally funded grant expenditures.
The differences in the budgeted and actual beginning and ending fund balances is the result of the School District's decision to include the individual school activity accounts and the decrease in expenditures due to the austerity reduction.
Capital Assets
At the end of fiscal year 2003, the School District had $9,025,112 invested in capital assets, net of depreciation. Table 3 provides a summary of Capital Assets. The overall capital assets decreased in fiscal year 2003, due to a change in capitalization values from $1,000 to $5,000 and the booking of accumulated depreciation. Construction in Progress for the New High School Capital outlay project is included. The construction of the new high school should be completed in fiscal year 2004.
Vl

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

Table 3 Capital Assets (Net of Depreciation, in Thousands)

Governmental Activities Fiscal Year 2003

Land Construction in Progress Buildings and Building Improvements Equipment Land Improvements

$ 242,125 3,948,510 4,138,298 694,621 1,558

Total

$ 9.025,112

Current Issues

The McIntosh County School System consists of three campuses located in McIntosh County, a rural area with a population of 11,091 (2001). Current enrollment is approximately 1,991 students in grades PK-12. Among Georgia's 159 counties, McIntosh's per capita income is 59.5% of Georgia's total for 2001.

The county has suffered economically during the recent downturn in the economy. Sales tax revenue suffered with a decrease in its collection for the year 2003. The unemployment rate was just over 5.1 percent in 2002.

The School District and local government are the largest employers located in the county. The Outlet Mall has suffered economically during the past year with a number of stores closing and a reduction in sales. Many of the county residents worked outside of the county.

As of 2001, the per capita income was $16,971. About 11.15 percent of the county's adult population has college degrees ranging from professional to doctorate degree.

Contacting the School District's Financial Management

This financial report is designed to provide our citizens, tax payers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the funds it receives. If you have any questions about this report or need additional financial information, contact Debra H. Vickers, Fiscal Officer of the McIntosh County Board of Education, 200 Pine Street, Darien, Georgia 31305. You may also email your questions to dvickers@mail.mcintosh.k12.ga.us.

Vll

MCINTOSH COUNTY BOARD OF EDUCATION

MCINTOSH COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation
Total Assets
LIABILITIES
Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
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-

GOVERNMENTAL ACTIVITIES

$

4,252,962

716,788 1,549,417
206,962 43,911 16,633

242,125 3,948,510
373,797 7,237,595 2,165,888 -4,942,803

$ ======15=,8=1=1=7,=85=

$

309,380

1,182,660

394,921

309,307

1,430

$

2,197,698

$

9,025,112

190,133 3,345,713 1,053,129

$

13,614,087

$ ===15=,8=1=1=7,=85=

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

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES

Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services

$

9,553,377

501,295 458,775 264,642 371,877 850,283 164,561 1,248,230 712,653
892 229,975

78,403 $ 93,729 848,718

113,675 125,756

Total Governmental Activities

$ ======1=5=,=3=7=7=,4=1=0= $

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

239,431

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

EXHIBIT"B"

PROGRAM REVENUES

OPERATING

CAPITAL

GRANTS AND

GRANTS AND

CONTRIBUTIONS CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

$

6,508,361 $

216,647 235,635 158,839 353,666 350,835

491,487 362,511

184,911

73,000 718,327

$

9 654,219 $

1,230,999 $
52,632 122,870 163,235
72,500 83,421 1,008,401
105 263 2,839,321 $

-1,814,017
-284,648 -170,508
17,067 145,024 -426,948 -164,561 -673,322 658,259
-892 -45,064
35,272 -20,729 100,628
-2,644,439

$

3,176,276

1,314,991 72,232 25,487
467,329 87,705
318 573

$

5,462,593

$

2,818,154

10,795,933

$ ===1=3=6=1=4=0=87=

-5 -

MCINTOSH COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30, 2003

EXHIBIT"C"

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

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

988,629 $

3,264,333 $

84,505 1,001,291
206,962 43,911 16 633

237,482 548,126

4,252,962
321,987 1,549,417
206,962 43,911 16 633

$

2,341,931 $

4,049,941 $ ===='6,=39=1;,.;,8=7=2

$

309,380

1,182,660

$

1430

$

1 493 470 $

$ 394,921 309,307
704,228 $

309,380 1,182,660
394,921 309,307
1 430
2 197 698

$

173,500

$

$

3,345,713

16,633

658,328

$

848 461 $

3,345,713 $

173,500 3,345,713
16,633
658,328 4 194 174

$

2,341,931 $

4 049 941 $===,;;;,.6,.;;,39=1..,,8=7=2

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

MCINTOSH COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2003

EXHIBIT"D"

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

$

4,194,174

$

242,125

3,948,510

373,797

7,237,595

2,165,888

-4,942,803

9,025,112

394,801

Net Assets of Governmental Activities (Exhibit "A")

$ 13,614,087

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

MCINTOSH 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 Enterprise Operations Community Services Food Services Operation
Capital Outlay
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 3,217,497

$

97,719 $ 1,314,991

8,301,781

2,839,321

1,819,767

125,756

19,771

67,934

432,248

$ 14,014,539 $ 4,222,246 $

3,217,497 1,412,710 11,141,102 1,819,767
125,756 87,705
432,248
18,236,785

$ 9,243,261

$

507,494 445,840 234,447 331,762 832,466 164,561 1,227,730 530,338
892 229,975
78,403 93,729 831,700
$

4,384,867

$ 14,752,598 $ 4,384,867 $

$

-738,059 $ -162,621 $

1,586,520

3,508,334

9,243,261
507,494 445,840 234,447 331,762 832,466 164,561 1,227,730 530,338
892 229,975
78,403 93,729 831,700 4,384,867
19,137,465
-900,680
5,094,854

$

848,461 $ 3,345,713 $==4,;,i,1~9;,,;4,!,;1.;.74.;.

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

MCINTOSH 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.

$

-900,680

$

4,041,454

-281,399

3,760,055 -41,221

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

$ ==2=,8=1=8'=1,=54=

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

MCINTOSH 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
$ ===7=,6=18=
$ ======7=,6=1=8

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

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

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The School District reports the following major governmental funds:

General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.

District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds 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 ofwhen 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.

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
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 $148,125 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$16,790 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund Balance July 1, 2002

$ 1,789,885

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

148,125 16,790

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

906,664

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

1,274,944

General Fund Balance July 1, 2002 (Restated)

$ 1,586,520

CHANGES IN ACCOUNTING PRINCIPLES

The McIntosh 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

$ 1,586,520 3,508,334

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

$ 5,094,854 9,926,461 -4,661,404 436,022

Net Assets Beginning (See Exhibit "B")

$ 10,795,933

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.

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

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 McIntosh County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on October 8, 2002 (levy date). Taxes were due on January 8, 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 McIntosh 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 $3,217,497.

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

School Operations

15.194 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $1,314,991 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.

INVENTORIES

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

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

EXHIBIT "H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art.

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment

$

5,000

NIA

$

5,000

20 years

$

5,000

50 years

$

5,000 5 to 20 years

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

Note 3: DEPOSITS

COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) 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:

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

EXHIBIT"H"

Note 3: DEPOSITS
(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 ofthe 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.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $5,323,690. The amounts of the total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)
The School District's deposits are classified by risk category at June 30, 2003, as follows:

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

EXHIBIT"H"

Note 3: DEPOSITS

Risk Category

Bank Balance

1

$ 200,000

2

5,123,690

3

0

Total

$ 5,323.690

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

$ 242,125

$

$ 3,948,510

0 $ 242,125 3,948,510

Total Capital Assets Not Being Depreciated $ 242,125 $ 3,948,510 $

0 $ 4,190,635

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 7,237,595 2,072,944 $ 373,797

92,944

$ 7,237,595 2,165,888 373,797

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

2,956,764 1,332,401
372,239

142,533 138,866

3,099,297 1,471,267
372,239

Total Capital Assets, Being Depreciated, Net $ 5,022,932 $ -188,455

$ 4,834,477

Governmental Activity Capital Assets - Net $ 5,265.057 $ 3,760.055 $

0 $ 9,025,112

Current year depreciation expense by function is as follows:

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

EXHIBIT"H"

Note 5: CAPITAL ASSETS

Instruction Support Services
Improvements of Instructional Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 133,330

$

4,846

11,312

15,028

6,675

7,680

92,837

138,378 9 691

Note 6: RESTRICTED ASSETS

$==2==81-,3==9===9

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

District-wide Capital Projects SPLOST

Restricted Cash and Cash Equivalents: Capital Acquisitions

$ 3,417,538

Note 7: RISK MANAGEMENT

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

The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any ofthe past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated.

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

EXHIBIT"H"

Note 7: RISK MANAGEMENT

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

2002 2003

Beginning ofYear Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

0 $

0 $

0

$

0 $

650 $

650 $

0

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

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

Position Covered

Amount

Superintendent Each Principal

$ 100,000

$

25,000

Note 8: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of$167,228 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $141,796

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 $25,432

Note 9: SIGNIFICANT COMMITMENTS

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

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

EXHIBIT"H"

Note 9: SIGNIFICANT COMMITMENTS

Project

Unearned Executed Contracts

Funding Available From State

02/01 S-698-049

$ 5,404.740 $ 1,076.110

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

Note 10: 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.

Note 11: SUBSEQUENT EVENTS

On September 17, 2003, the voters of McIntosh County voted in favor of a Special Local Option Sales Tax referendum for education purposes. The imposition of the tax approved by voters, as stated on the Official Ballot of McIntosh County is as follows:

"Shall a one percent sales and use tax be imposed in the McIntosh County School District for a period of time not to exceed twenty consecutive calendar quarters and for the raising of not more than $8,000,000 for the purpose ofacquiring, constructing, furnishing, and equipping the following capital outlay projects: a Fine Arts Center, including classrooms, instruction and support space and an Athletics Complex, including buildings and equipment, fields, grounds and parking at the New McIntosh County High School; completion of the New McIntosh County High School including parking areas, grounds, and other external improvements; classrooms, instructional and support spaces at the New McIntosh County High School; additional classrooms, instructional and support spaces throughout the school district; school buses; renovations and remodeling for existing school district facilities; and, various items of personal property, including computers and technology?

If imposition of the tax is approved by the voters, such vote shall also constitute approval of the issuance of general obligation debt of the McIntosh County School District in the maximum principal amount of $5,720,000 for the above capital outlay purposes and to pay capitalized interest on such debt."

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MCINTOSH 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%

$ 773,570 $ 709,029 $ 798,050

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MCINTOSH 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 Enterprise Operations Community Services Food Services Operation
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL

ACTUAL AMOUNTS

$

3,278,946 $

3,278,946 $

3,217,497

50,000

50,000

97,719

8,043,999

8,246,475

8,301,781

727,288

2,003,715

1,819,767

194,700

194,700

125,756

44,000

44,000

19,771

24000

247 441

432,248

$

12,362,933 $

14,065,277 $

14,014,539

$

8,514,693 $

9,678,809 $

9,243,261

390,585 342,617 241,686 289,615 916,275 232,692 1,201,226 644,214
4,500 44,000
73,000 985,732

548,382 536,599 241,686 354,340 915,564 232,692 1,201,226 658,023
4,500 267,175 182,475
73,000 986,166

507,494 445,840 234,447 331,762 832,466 164,561 1,227,730 530,338
892 229,975
78,403 93,729 831 700

$

13,880,835 $

15,880,637 $

14,752,598

$

-1,517,902 $

-1,815,360 $

-738,059

1,852,423

1,842,423

1,586,520

Fund Balances - Ending

$

334 521 $

27 063 $ ====84=8=4=6=1

Notes to the Schedule of Revenues. Expenditures and Changes in Fund Balances Budget and Actual (1) Original amounts do not include budgeted revenues or expenditures of the various principal accounts.

See notes to the basic financial statements.

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MCINTOSH COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2003

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture. U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1)
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement
Total Special Education Cluster
Other Programs Pass-Through From 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 TitleVI Innovative Education Program Strategies Rural and Low Income Schools TitleX Fund for the Improvement of Education Christa McAuliffe Fellowship Program Vocational Education - Basic Grants to States High School Program Basic Grant
Total U.S. Department of Education

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A NIA $
$

(2) 776 361 (3)
776,361

10.550

NIA $

42 390 818 751

84.027 84.173 84.027

N/A $ NIA NIA
$

204,488 22,364 604
227,456

* 84.010 84.318 84.367 84.298 84.358
84.215
84.048

NIA NIA NIA NIA NIA
NIA
NIA $

677,568 (3) 18,776
130,982 16,286 (3) 40,625
9,850
36 786 (3) 1,158,329

Total Federal Financial Assistance
NIA = Not Available

-26-

$ ===1='=,9=7=7=,0=80.,.

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

SCHEDULE "2"

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 funds earned on the School Breakfast Program ($182,673) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source.
Major Programs are identified by an asterisk (*) in front of the CFDA number.
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the McIntosh County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

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

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors 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 Preschool Handicapped Program Student Information System Lottery Programs Assistive Technology Computers in the Classroom
Georgia Institute of Technology Student Information System

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

319,507

122,299

1,102,717

195,351

593,441

228,085

1,200,212

724,491

212,020

10,362 112,897 346,182
43,434 5,672
17,235 114,789
77,542 7,139
158,839 54,668 32,496

288,104 342,103 491,487

291,210 63,025 46,615 54,821 7,235 14,713 18,817
410,696 56,688 12,894
-197,662
21,934 26,387 141,796 17,379 16,689
5,251 40,089

65,326

$

319,507

122,299

1,102,717

195,351

593,441

228,085

1,200,212

724,491

212,020

10,362 112,897 346,182
43,434 5,672
17,235 114,789
77,542 7,139
158,839 54,668 32,496

288,104 342,103 491,487

291,210 63,025 46,615 54,821 7,235 14,713 18,817
410,696 56,688 12,894
-197,662
21,934 26,387 141,796 17,379 16,689
5,251 40,089

65,326

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MCINTOSH 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 School Readiness Pre-Kindergarten Program
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACTS Human Resources, Georgia Department of Family Connection First Steps

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

2,839,321 $ 2,839,321

$

273,148

273,148

25,432

25,432

73,000 15,226

73,000 15,226

$

8,301,781 $

2,839,321 $ 11,141,102

See notes to the basic financial statements.

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

SCHEDULE "4"

PROJECT
Constructing and equipping a new high school, parking areas and grounds, including acquisition of any necessary real and personal property, acquisition, construction and equipping additional classrooms, instructional and support space, as well as remodeling, renovating, furnishing and equipping existing school district facilities, including classrooms, instructional and support space, acquiring any necessary personal property, including computers and other technology and paying expenses incident thereto

ORIGINAL ESTIMATED
COST {1)

CURRENT ESTIMATED COSTS {2)

AMOUNT EXPENDED IN CURRENT YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS {3)

PROJECT STATUS

$ 8,000,000 $ 11,000,000 $ 4,384,867 $ 1,078,158 Ongoing

(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 project. Includes all cost from project inception to completion.
(3) The voters of McIntosh County approved the imposition of a 1% sales tax to fund the above project. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project.

See notes to the basic financial statements.

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MCINTOSH COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003

SCHEDULE "5"

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

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES

OPERATIONS

TOTAL

$

378,756 $

518,777 $

6,793 $

525,570

144,572

159,475

2,086

161,561

1,274,457

1,218,064

36,323

1,254,387

222,400

375,622

3,999

379,621

690,439

747,301

41,427

788,728

245,782 1,364,847
824,422 264,503 616,995
21,144 124,520
88,968 7,114

318,887 1,236,245
967,001 470,968
212,505 577,314
16,941 69,055 110,906 145,495 19,769

1,885 111,201 87,116
45,916
381 4,148
143 459 953 725
97

320,772 1,347,446 1,054,117
516,884
212,886 581,462
17,084 69,514 111,859 146,220 19,866

$

6,268,919 $ 7,164,325 $

343,652 $

7,507,977

183,475 37,810

180,084 2,986

51,444 34,900

231,528 37,886

TOTAL QBE FORMULA FUNDS

$

6,490,204 $ 7,347,395 $

429,996 $==.;,.7.;.77;,,;7,.;,3;,;;9~1

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

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
March 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McIntosh 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 ofMcIntosh County Board ofEducation as ofand for the year ended June 30, 2003, which collectively comprise McIntosh County Board of Education's basic financial statements and have issued our report thereon dated March 12, 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 McIntosh 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 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 McIntosh 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
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 McIntosh County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FS-6981-0301.

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 of the management, members of the McIntosh 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,

~ GO : ),11-4.,

,1,.

~Jsell W. Hinton

State Auditor

RWH:gp 2003-34YB-30

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
March 12, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the McIntosh 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 McIntosh 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, 2003. McIntosh County Board ofEducation's major Federal program is identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major Federal program is the responsibility of McIntosh County Board of Education's management. Our responsibility is to express an opinion on McIntosh 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 McIntosh 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 McIntosh County Board of Education's compliance with those requirements.
2003SA-10

In our opinion, the McIntosh County Board ofEducation complied, in all material respects, with the requirements referred to above that are applicable to its major Federal program for the year ended June 30, 2003.
Internal Control Over Compliance
The management of McIntosh 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 McIntosh 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 ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course 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 McIntosh County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2003SA-10

State Auditor

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

MCINTOSH 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 No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

MCINTOSH 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 McIntosh 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 McIntosh County Board ofEducation disclosed a financial statement reportable condition related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

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

3. Noncompliance Material to the Financial Statements The audit of the McIntosh 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 McIntosh 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 McIntosh County Board of Education's report on compliance with requirements applicable to major programs was unqualified.

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

7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act- Title I - Grants to Local Educational Agencies

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

9. Low Risk Auditee The McIntosh County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.

- 1-

MCINTOSH 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 EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-6981-03-01 Our examination ofthe principal's accounts located at the various schools, disclosed weaknesses in internal controls as discussed below: Cash and Cash Equivalents
The bank reconciliation function was not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions.
Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible at the various principal account sites for the accounting functions. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping and authorization are segregated. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
-2-