MONROE COUNTY BOARD OF EDUCATION FORSYTH, 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 MONROE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 9 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 10 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 13 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 14 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 15 I NOTES TO THE BASIC FINANCIAL STATEMENTS 17 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 33 MONROE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 34 3 SCHEDULE OF STATE REVENUE 36 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 38 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 39 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 April 2, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members ofthe Monroe County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Monroe 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 Monroe County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 Monroe County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 The Monroe County Board ofEducation has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Monroe County Board of Education has implemented a new financial reporting model as required by provisions of Governrnental 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 Governrnent Auditing Standards, we have also issued our report dated April 2, 2004, on our consideration of the Monroe 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. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 33 is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Monroe 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-l l 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. ------ w.4d Respectfully submitted, ~ RWH:as 2003-34ARL-11 State Auditor MONROE COUNTY BOARD OF EDUCATION MONROE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenues Long-Term Liabilities Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Capital Projects Permanent Funds Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 1,736,798 14,575,044 1.555,632 2,529,592 385,450 419,732 74,283 782,770 1,034,004 2,935,790 25,837,259 3,675,273 -12,499,589 $ ===4=3=,0=4=2=,0=38= $ 2,596,301 2,530,376 713,416 156,025 69,707 8,000,000 $ 14,065,825 $ 20,340,268 1,052,214 5,608,830 27,917 1946984 $ 28,976,213 $ ===4=3=,04=2=,0=38= MONROE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Changes in Net Assets Net Assets - Beginning of Year Net Assets - End of Year EXPENSES CHARGES FOR SERVICES $ 20,727,204 $ 639,022 692,729 473,615 614,873 1,590,681 433,110 2,394,663 2,074,564 196,766 131,846 1,360,625 146,201 $ 31,475,899 $ 48,474 506,686 555160 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 $ 11,032,891 $ 287,213 513,651 431,054 552,140 803,976 829,901 95,221 1,050,603 $ 15,596,650 $ 674,162 $ 4,105 188,418 1,045 27,145 894 875 $ -8,971,677 -351,809 -179,078 -473,615 -183,819 -1,034,436 -433,110 -1,590,687 -1,056,245 -100,500 -131,846 223,809 -146 201 -14,429,214 $ 11,396,054 1,830 15,822 648,117 3,520,328 234,821 69,220 253,317 111,680 750 442 $ 17 001 631 $ 2,572,417 26,403,796 $ ===2=8=,9=7=6'=2=13= -5- MONROE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND $ 1,371,780 $ 352,386 3,155,686 11,404,083 260,738 1,634,717 385,450 419,732 74,283 1,123,753 894,875 Total Assets $ 7,302,386 $ 13,775,097 LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Inventories Capital Projects Permanent Funds Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances $ 2,073,713 $ 2,530,376 69707 522,588 713,416 156,025 $ 4,673,796 $ 1,392,029 $ 977,931 74,283 $ 12,183,591 1,576,376 199 477 $ 2,628,590 $ 12,383,068 Total Liabilities and Fund Balances $ 7,302,386 $ 13,775,097 The notes to the basic financial statements are an integral part of this statement. -6- EXHIBIT"C" DEBT SERVICE FUND NONMAJOR GOVERNMENTAL FUND TOTAL $ 12,642 $ 1,736,808 15,275 14,575,044 $ 10 1,384,501 2,529,592 385,450 419,732 74283 $ 10 $ 21 917 $ ===2=1=,1..0...s....4...1...o.... $ 10 $ 10 $ 10 2,596,301 2,530,376 713,416 156,025 69707 $ 6,065,835 $ 977,931 74,283 12,183,591 $ 27,917 27,917 $ 0 1,576,376 199477 $ 0 $ 27 917 $ 15,039,575 $ 10 $ 27 917 $ ======2=1=,1=0=5=,4=1=0= -7- MONROE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2003 EXHIBIT D 11 11 Total Fund Balances - Governmental Funds (Exhibit "C") $ 15,039,575 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 $ 782,770 1,034,004 2,935,790 25,837,259 3,675,273 -12,499,589 21,765,507 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. 171,131 Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable -8,000,000 Net Assets of Governmental Activities (Exhibit "A") $ 28,976,213 The notes to the basic financial statements are an integral part of this statement. -9- MONROE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 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 Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Excess of Revenues over {under) Expenditures OTHER FINANCING SOURCES (USES} Proceeds of Long-Term Capital-Related Debt Capitalized Interest Total Other Financing Sources {Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND $ 11,289,969 304,041 $ 3,520,328 13,372,683 894,875 2,477,284 555,160 43,087 67,568 750,442 $ 28,792,666 $ 4,482,771 $ 18,383,917 639,022 692,729 473,615 614,873 1,576,304 356,136 $ 2,394,663 1,705,831 193,104 131,846 1,454,765 1,990 75,675 4,790,357 48,442 2 737 $ 28,669,974 $ 4,866,032 $ 122,692 $ -383,261 $ 8,000,000 $ 8,000,000 $ 122,692 $ 7,616,739 2,468,669 4,766,329 37,229 Fund Balances - Ending The notes to the basic financial statements are an integral part of this statement. - 10 - $ 2,628,590 $ 12,383,068 EXHIBIT"E" DEBT SERVICE FUND NONMAJOR GOVERNMENTAL FUND TOTAL $ 390 648,117 676 $ $ 649,183 $ $ 349 349 $ 11,290,359 4,472,486 14,267,558 2,477,284 555,160 111,680 750 442 33,924,969 $ $ 1,299 595,000 6990 $ 603,289 $ $ 45,894 $ 0 $ 0 $ 349 $ 18,383,917 639,022 692,729 473,615 614,873 1,576,304 433,110 2,394,663 1,705,831 193,104 131,846 1,454,765 4,792,347 643,442 9727 34,139,295 -214,326 $ -136 474 $ -136 474 $ -90,580 $ 90,580 $ $ 349 $ 27,568 8,000,000 -136 474 7,863,526 7,649,200 7,353,146 37,229 $ 0 $====2=7=9=1===7 $ 15,039,575 - 11 - MONROE 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") $ 7,649,200 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 $ 3,014,973 -932,828 2,082,145 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. 123,347 Bond proceeds provide current financial resources to Governmental Funds; however, issuing debt increases Long-Term Liabilities in the Statement of Net Assets. In the current period, proceeds were received from: General Obligation Bonds Issued -8,000,000 Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ 595,000 48,442 643,442 Food Inventories are expensed on the District-Wide Statements using the consumption method while on the fund level Food Inventories are recorded as expenditures when purchased. In the current period this difference amounts to. 74,283 Change in Net Assets of Governmental Activities (Exhibit "B") $ 2,572,417 The notes to the basic financial statements are an integral part of this statement. -13 - MONROE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 EXHIBIT"G" ASSETS Cash and Cash Equivalents Accounts Receivable, Net Other PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 24,791 - - - - $ _ _2_6~,0_01_ Total Assets LIABILITIES Cash Overdraft Funds Held for Others Total Liabilities NET ASSETS Held in Trust for Private Purposes $ 24 791 $ =====26=,0=0=1= $ 17,676 8,325 $ _ _2_6~,0_01_ $ _ _ _24~79_1_ Total Liabilities and Net Assets $ 24,791 $ ===26=,0=0=1= The notes to the basic financial statements are an integral part of this statement. - 14 - MONROE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2003 EXHIBIT"H" REVENUES Contributions Donors Investment Earnings Interest Less Investment Expense Net Investment Earnings Total Revenues EXPENSES Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 100 $ 262 42 $ 220 $ 320 $ 500 $ -180 24 971 $ ===24::!'=79=1= The notes to the basic financial statements are an integral part of this statement. - 15 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Monroe 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 Monroe 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. All remaining governmental funds are aggregated and reported as nonmajor funds. - 17 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private - Purpose Trust fund reports trust arrangements under which principal and income may be expended to provide scholarships for students who attend Mary Persons High School. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and - 18 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. 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 ofthe School District's School Food Services Fund and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $930,172 at July 1, 2002. For fiscal year 2003, these funds have been reported as part ofthe 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 of the various school activity accounts had a fund balance of $238,151 at July 1, 2002. This change is in accordance with generally accepted accounting principles. - 19 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 2,651,407 Add Funds Consolidated with General Fund: School Food Services Fund Federal Programs School Activity Account - Governmental Activity 901,180 28,992 238,151 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,510,051 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 2,861,112 General Fund Balance July 1, 2002 (Restated) $ 2,468.669 CHANGES IN ACCOUNTING PRINCIPLES The Monroe 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 of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund Permanent Fund $ 2,468,669 4,766,329 90,580 27,568 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable Capital Leases Payable Food Inventories Costing Differences $ 7,353,146 31,250,123 -11,566,761 47,784 -595,000 -48,442 -37,054 Net Assets Beginning (See Exhibit "B") $ 26,403,796 -20- MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables - 21 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 Monroe County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on November 12, 2002 (levy date). Taxes were due on January 21, 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 Monroe 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, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $11,274,147 and for school bonds amounted to $390. The tax millage rate levied for the 2002 tax year (calendar year) for the Monroe County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 11.98 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $4,168,445 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 district-wide financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. -22- MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"!" 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 of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA All 15 years All 20 to 50 years $ 10,000 5 to 14 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement ofNet Assets. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum ofmoney which has not been secured by surety bond, by guarantee 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. - 23 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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 (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 $3,320,761. 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.) - 24- MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 369,363 2 1,233,955 3 1,717,443 Total $ 3,320.761 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $14,473,362 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. - 25 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" 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 $ 641,840 $ 140,930 $ 782,770 207,514 2,213,300 $ 1,386,810 1,034,004 Total Capital Assets Not Being Depreciated $ 849,354 $ 2,354,230 $ 1,386,810 $ 1,816,774 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 24,355,695 $ 3,251,269 2,793,805 1,481,564 $ 424,004 141,985 0 $ 25,837,259 3,675,273 2,935,790 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 7,190,228 2,210,086 2,166,447 609,224 230,968 92,636 7,799,452 2,441,054 2,259,083 Total Capital Assets, Being Depreciated, Net $ 18,834,008 $ 1,114,725 $ 0 $ 19,948,733 Governmental Activity Capital Assets - Net $ 19,683,362 $ 3,468,255 $ 1,386,810 $ 21,765,507 Current year depreciation expense by function is as follows: Instruction Support Services School Administration Student Transportation Services Central Support Services Food Services $ 702,754 $ 4,279 196,409 1,090 201,778 28,296 $ 932f828 - 26- MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Capital Acquisitions $ 700,307 $ 4,135,922 $ 7,268,161 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 of the past three years. The School District participates in the Georgia School Boards Association Risk and Insurance Management System, a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members ofthe system. The School District pays an annual premium to the system for its general insurance coverage. Additional coverage is provided through agreements by the system with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse) and automobile risks. Payment of excess insurance for the system varies by line of coverage. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. -27 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 7: RISK MANAGEMENT Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid EndofYear Liability $ 0 $ 4 346 $ 4 346 $ 0 $ 0 $ 3 150 $ 3,150 $ 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 All Employees $ 50,000 $ 100,000 Note 8: OPERATING LEASES Monroe County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2003, for governmental funds amounted to $17,664. Future minimum lease payments for these leases are as follows: Year Ending Governmental Funds 2004 $ 17,664 2005 17,664 2006 17,664 2007 11,776 Total $==6==4-,7==6==8 - 28 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2003 2.48% $ 8,000,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2002 $ 48,442 $ 595,000 $ 643,442 Additions G.O. Bonds 8,000,000 8,000,000 Deductions Debt Retired 48 442 595,000 643,442 Balance June 30, 2003 $======0 $ 8,000,000 $ 8,000,000 Portion of Long-Term Debt Due within One Year $_ _ _~0 $ 0 $ 0 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 2009 - 2010 $ $ 1,515,000 1,550,000 1,595,000 3,340,000 137,227 198,400 179,614 141,608 102,610 83,576 Total Principal and Interest $ 8,000,000 $ 843,035 - 29 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 10: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $293,581 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $246,238 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 $47,343 Note 11: 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: Project Unearned Executed Contracts Funding Available From State New Monroe Elementary School, 03/02S-702-019, 03G/02S-702-032 and SAO 1S-702-019 Agri-Science Lab Modification Hubbard Middle School Conversion and Primary School Addition Mary Persons High School Gymnasium $ 8,263,057 $ 2,292,714 71,732 2,897,983 570,916 $ 11,803.688 $ 2,292.714 The amounts described in this note are not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. - 30 - MONROE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 12: SIGNIFICANT CONTINGENT LIABILITIES 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 13: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2003 2002 2001 100% 100% 100% $ 1,446,086 $ 1,380,101 $ 1,590,699 - 31 - MONROE 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 Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1} FINAL (1} ACTUAL AMOUNTS $ 11,848,174 $ 11,848,174 $ 11,289,969 140,000 140,000 304,041 12,632,848 12,632,848 13,372,683 2,234,012 2,110,757 2,477,284 504,221 504,221 555,160 43,990 43,990 43,087 101 300 101 300 750 442 $ 27,504,545 $ 27,381,290 $ 28,792,666 $ 17,670,181 $ 17,556,856 $ 18,383,917 487,554 544,610 449,222 533,219 1,580,652 315,385 2,099,307 1,748,668 264,124 126,985 1,547,847 486,772 836,869 449,222 557,888 1,583,557 315,385 2,114,307 1,748,668 264,124 94,559 1,547,847 639,022 692,729 473,615 614,873 1,576,304 356,136 2,394,663 1,705,831 193,104 131,846 1,454,765 1,990 51179 $ 27,367,754 $ 27,556,054 $ 28,669,974 $ 136 791 $ -174 764 $ 122,692 $ 127,209 $ 127,209 -264,000 -264,000 $ -136 791 $ -136 791 $ 0 $ -311,555 $ 122,692 3,029,930 3,029,930 2,468,669 40 249 40249 37 229 Fund Balances - Ending $ 3070179 $ 2,758,624 $ ==~2;,i,;,6;;;;2~8,~59~0~ Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements. - 33- MONROE COUNTY BOARD OF EDUCAITON 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) Pass-Through From Office of School Readiness Food and Nutrition Program Child and Adult Care Food Program 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 School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality TiUeV Innovative Education Program Strategies Title VI Rural and Low Income Schools Vocational Education - Basic Grants to States High School Program Basic Grant Total U.S. Department of Education Total Federal Financial Assistance N/A = Not Available - 34- CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 N/A N/A $ $ (2) 1,241,295 1,241,295 10.550 10.558 N/A N/A $ 103,796 {2} 1,345,091 84.027 84.173 84.027 N/A $ N/A N/A $ 480,510 37,819 5495 523,824 * 84.010 * 84.010 84.318 84.367 84.298 84.358 84.048 N/A NIA N/A NIA N/A N/A N/A $ 678,692 7,523 22,855 177,379 23,207 74,924 44 343 1,552,747 $ ===2=,8=97..;,8=3=8 MONROE COUNTY BOARD OF EDUCAITON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "2" Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on Child and Adult Care Food Program ($6,349) and the School Breakfast Program ($223,412) were not maintained separately and are included in the 2003 National School Lunch Program. 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 Monroe County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 35 - MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program $ 670,503 $ Kindergarten Program - Early Intervention Program 100,424 Primary Grades (1-3) Program 1,856,424 Primary Grades - Early Intervention (1-3) Program 174,476 Upper Elementary Grades (4-5) Program 917,920 Upper Elementary Grades - Early Intervention (4-5) Program 221,478 Middle Grades (6-8) Program 1,783,426 High School General Education (9-12) Program 1,484,146 Vocational Laboratory (9-12) Program 373,739 Students with Disabilities Category I 1,399,375 Category II 5,161 Category Ill 28,762 Category IV 4,660 CategoryV 10,492 Gifted Student - Category VI 155,519 Remedial Education Program 60,559 Alternative Education Program 135,187 English Speakers of Other Languages (ESOL) 18,794 Media Center Program 263,481 20 Days Additional Instruction 89,863 Staff and Professional Development 52,547 Indirect Cost Central Administration 351,182 School Administration 492,350 Facility Maintenance and Operations 779,181 Categorical Grants Pupil Transportation Regular 681,468 Bus Replacement 142,019 Sparsity 19,000 Nursing Services 84,425 Principal Supplements 14,267 Vocational Supervisors 18,419 Food Services 107,404 Vocational Education 12,984 Austerity Reduction -386,343 Other State Programs 4-8 Statewide After School Program 30,039 K-3 Statewide Reading Program 42,064 Health Insurance 246,238 Mentor Teachers 4,980 National Teacher Certification 19,436 Post Secondary Options 3,048 Preschool Handicapped Program 33,688 Lottery Programs Assistive Technology 9,166 Georgia State Financing and Investment Commission Reimbursement on Construction Projects $ 894,875 TOTAL 670,503 100,424 1,856,424 174,476 917,920 221,478 1,783,426 1,484,146 373,739 1,399,375 5,161 28,762 4,660 10,492 155,519 60,559 135,187 18,794 263,481 89,863 52,547 351,182 492,350 779,181 681,468 142,019 19,000 84,425 14,267 18,419 107,404 12,984 -386,343 30,039 42,064 246,238 4,980 19,436 3,048 33,688 9,166 894,875 - 36- MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement Middle Georgia Regional Educational Service Agency Drug Prevention CONTRACT Education, Georgia Department of Academic Decathlon GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND TOTAL $ 768,435 47,343 16,454 $ 768,435 47,343 16,454 28,500 28,500 $ 13,372,683 $ 894,875 $=~14,;,_,2;;;6;,;.71,,;;,5,;;;;58:;,. See notes to the basic financial statements. - 37 - MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT Payments in full of the principal and interest due on the Monroe County School District's Series 1993 General Obligation Bonds from January 1, 2000 through and including final maturity of January 1, 2005 Acquisition, construction and equipping additional classrooms, instructional and support space, as well as remodeling, renovating, improving, furnishing and equipping existing school district facilities, including classrooms, instructional areas, support space, physical education and athletic facilities, administrative facilities and grounds, 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 $ 1,439,905 $ 1,439,905 $ 603,289 $ 806,847 Completed 17,485,095 17,485,095 4,852,707 7,950,508 Completed $ 18,925,000 $ 18,925,000 $ 5,455,996 $ 8,757,355 (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion. (3) The voters of Monroe County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. See notes to the basic financial statements. - 38- MONROE COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30, 2003 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle 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) 943,772 $ 142,217 2,602,069 258,966 1,286,542 957,613 $ 113,946 2,592,082 280,905 1,468,147 299,500 2,488,572 2,107,623 531,900 1,983,813 217,352 82,932 190,622 22,872 167,553 2,433,368 2,361,344 567,258 1,228,026 419,961 82,227 246,803 66,503 333,006 57 792 10,791 $ 1,345 58,292 1,334 37,496 623 73,929 142,499 15,091 29,633 254 5,927 155 4,074 944 968,404 115,291 2,650,374 282,239 1,505,643 168,176 2,507,297 2,503,843 582,349 1,257,659 420,215 82,227 252,730 66,658 337,080 58 736 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 13,158,752 $ 13,376,534 $ 382,387 $ 13,758,921 Media Center Program Staff and Professional Development 370,287 74659 393,741 16,959 52,892 69,553 446,633 86,512 TOTAL QBE FORMULA FUNDS $ 13,603,698 $ 13,787,234 $ 504,832 $ ==1=4;,!;,2=9=2'=,0=66= (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. - 39- 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 April2,2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Monroe 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 ofMonroe County Board ofEducation as of and for the year ended June 30, 2003, which collectively comprise Monroe County Board of Education's basic financial statements and have issued our report thereon dated April 2, 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 Monroe County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Monroe County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-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 Monroe County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions of management in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7021-03-02 and FS-7021-03-03. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, ofthe reportable conditions described above, we consider item FS-7021-0302 to be a material weakness. This report is intended solely for the information and use of the management, members of the Monroe County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~.~ RWH:as 2003-34YB-40 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 April 2, 2004 Honorable Sonny Perdue, Governor Members ofthe General Assembly Members ofthe State Board of Education and Superintendent and Members of the Monroe 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 ofMonroe County Board ofEducation with the types ofcompliance requirements described in the US. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Monroe County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe 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 Monroe County Board of Education's management. Our responsibility is to express an opinion on Monroe County Board of Education's compliance based on our audit. We conducted our audit ofcompliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Monroe 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 Monroe County Board of Education's compliance with those requirements. 2003SA-65 As described in item FA-7021-03-01 in the accompanying Schedule of Findings and Questioned Costs, Monroe County Board of Education did not comply with requirements regarding Activities Allowed/Unallowed and Allowable Costs/Cost Principles that are applicable to its Child Nutrition Cluster. Compliance with such requirements is necessary, in our opinion, for Monroe County Board of Education to comply with requirements applicable to that program. In our opinion, except for the noncompliance described in the preceding paragraph, the Monroe County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Monroe 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 Monroe County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Monroe County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-7021-03-02. 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 the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. The reportable condition noted above is also considered to be a material weakness. 2003SA-65 This report is intended solely for the information and use of the management, members of the Monroe 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, w:=tik RWH:as 2003SA-65 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS MONROE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7021-01-01 FS-7021-02-01 FS-7021-02-02 Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-7021-02-01 Most of the circumstances which led to this finding can be tied to the School District's conversion to a new system-wide financial software system in July of2002. As a part of the conversion, the School District went online with the new system after the fiscal year had ended but before closing its books for the new year. In hindsight, this greatly complicated the closeout process. The reconciliation ofbank statements to general ledger proved to be a difficult and time-consuming effort which was greatly complicated by the conversion ofdata to the new software system. In addition, although employees had been trained to operate the new system prior to its installation, the practical operation of the system was somewhat an additional learning process and, admittedly, errors were made and had to be corrected. With a year's learning and practical experience behind it, with additional training (much of it on-the-job), and with enhancements and improvements made by the software vendor to make the system more applicable to Georgia education users, virtually all ofthe problems have been corrected and these will not be repeated. - 1- MONROE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-7021-02-01 Unresolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Inadequate Accounting Procedures Finding Control Number: FA-7021-02-01 The School District had reviewed this finding with the School Nutrition Director and Bookkeeping Staffand internal controls have been reviewed and revised. Necessary steps have been implemented and monitored to assure that such a finding is not repeated. -2 - SECTION IV FINDINGS AND QUESTIONED COSTS MONROE 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 Monroe 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 Monroe County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents General Ledger Expenditures/Liabilities/Disbursements All of the control categories described above include reportable conditions which are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit of the Monroe 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 Monroe County Board ofEducation disclosed a reportable condition in internal control over major programs for the following compliance requirement. Allowable Costs/Cost Principles The reportable condition described above is considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Monroe County Board ofEducation's report on compliance with requirements applicable to major programs was qualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Monroe County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food and Nutrition Program - Food Services - School Breakfast Program 10.555 Food and Nutrition Program - Food Services - National School Lunch Program 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I -School Improvement - 1- MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Monroe County Board of Education did not qualify as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Uncollateralized Deposits Nonmaterial Noncompliance Finding Control Number: FS-7021-03-01 As of June 30, 2003, the School District failed to have its bank balances fully collateralized as required by the Official Code of Georgia Annotated Section 45-8-12, which states, in part, as follows: "The collecting officer or officers holding public funds may not have on deposit at any one time in any depository for a time longer than ten days a sum of money belonging to the public body when such depository has not given bond to the public body as set forth in this code section. 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 of the public funds being secured after the deduction ofthe amount of deposit insurance" This noncompliance occurred because of management's failure to adequately monitor the collateralization of balances at individual banks. The School District should implement adequate procedures to monitor the collateralization of bank balances to ensure compliance at all times with State laws governing deposits and investments. CASH AND CASH EQUIVALENTS EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7021-03-02 Accounting procedures for Monroe County Board of Education were found to be deficient in the following control categories: -2 - MONROE 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 EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Inadequate Accounting Procedures Reportable Condition - Material Weakness Finding Control Number: FS-7021-03-02 Cash and Cash Equivalents Bank reconciliations for the operating account were not properly completed for the year under review. Due to the poor condition of the accounting records, cash could not be properly reconciled from the bank statement balances to the general ledger. Bank reconciliations for the School Nutrition account were not properly completed for the year under review. The reconciliation performed did not reconcile from the bank statement to the general ledger. Expenditures/Liabilities/Disbursements There was no documentation of review or approval for School Food Expenditures. Purchase orders, contracts, and invoices were attached to the voucher package without any approval prior to disbursements being made. The deficiencies noted in the above control categories occurred because ofmanagement's failure to establish procedures to analyze and reconcile balances on the general ledger with supporting records and obtain approved documentation to support expenditures prior to the disbursement of funds. The School District should implement appropriate procedures and controls to ensure that all bank statements are reconciled to the general ledger in a timely manner and ensure that reconciling items are identified and corrected promptly. The School District should review the accounting procedures in place, design procedures relative to the above control categories and implement procedures to strengthen the internal controls over the accounting functions. GENERAL LEDGER Financial Statements Not Supported By Subsidiary Records Reportable Condition Finding Control Number: FS-7021-03-03 The School District's internal controls over the subsidiary records supporting various balance sheet accounts were determined to be insufficient. The School District could not provide a listing of Accounts Payables or Accounts Receivables as of June 30, 2003. In fiscal year 2002, the School -3- MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Financial Statements Not Supported By Subsidiary Records Reportable Condition Finding Control Number: FS-7021-03-03 District converted its financial software to a new system, this software did not have separate subsidiary ledgers. This deficiency resulted from management's decision not to purchase separate Subsidiary Ledger software and their failure to establish procedures to provide and maintain subsidiary ledgers. The School District should establish appropriate internal controls over subsidiary ledgers in order to produce listings of Accounts Payable and Accounts Receivables. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED/UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES Unallowable Expenditures U. S. Department of Agriculture Through Georgia Department of Education Material Noncompliance Questioned Costs: $70,231 Finding Control Number: FA-7021-03-01 Our review ofpersonnel costs charged to Child Nutrition Cluster Food (CFDA 10.553 and 10.555) included $70,231 for the School Food Director charged entirely to the Child Nutrition program. Through various inquiries it was determined that the Director had other duties assigned that were not associated with Child Nutrition and there was no documentation to verify the amount of time working on these other duties. This deficiency occurred because of management's failure to establish procedures to ensure that personnel salaries are charged to the program that benefited from the services rendered. The School District should implement procedures to ensure that all personnel salary costs charged to Child Nutrition Cluster are for only those personnel whose time has been confirmed as expended on Child Nutrition program activities. The Georgia Department of Education should review this matter and determine if a reclaim of grant funds is appropriate. -4 - MONROE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ALLOWABLE COSTS/COST PRINCIPLES Inadequate Accounting Procedures Reportable Condition - Material Weakness U.S. Department of Agriculture Through Georgia Department of Education Finding Control Number: FA-7021-03-02 An examination of expenditures revealed there was no documentation of review or approval for Child Nutrition Cluster Food (CFDA 10.553 and 10.555) expenditures. Purchase orders, contracts, and invoices were attached to the voucher package without any approval prior to disbursements being made. This deficiency occurred because ofmanagement's failure to establish procedures to obtain approved documentation to support expenditures prior to the disbursement of funds. The School District should implement appropriate procedures and controls to ensure expenditures are approved prior to disbursement. -5 -