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

MORGAN COUNTY BOARD OF EDUCATION
MADISON, 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

MORGAN 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

5

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

6

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

7

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

8

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

9

H

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

10

NOTES TO THE BASIC FINANCIAL STATEMENTS

11

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

23

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

24

3 SCHEDULE OF STATE REVENUE

26

MORGAN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

28

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

29

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133

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

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
August 13, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Morgan 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 Morgan 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 Morgan 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 opm10ns.
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 Morgan 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-l l

The Morgan County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements.
As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements and consolidated its individual school activity accounts for inclusion in the basic financial statements. These changes are in accordance with generally accepted accounting principles.
As described in Note 2, the Morgan 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 August 13, 2004, on our consideration of the Morgan County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 23, 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 Morgan 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-11

State Auditor

MORGAN COUNTY BOARD OF EDUCATION

MORGAN COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003
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 Retainages Payable Deposits and Deferred Revenues
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Unrestricted
Total Net Assets
Total Liabilities and Net Assets

EXHIBIT"A"

GOVERNMENTAL ACTIVITIES

$

6,299,972

815,564 1,716,621
595,176 11,226 26,313

148,834 1,389,263
211,076 11,956,034 2,956,151 -7,971 001

$ ===1=8=,1=5=5,522=9=

$

731,275

2,037,197

114,425

8,872

$

2,891,769

$

8,690,357

316,423 6,256,680

$

15,263,460

$ ===1=8=,1=5=5=,2=29=

The notes to the basic financial statements are an integral part of this statement. -3-

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

EXHIBIT"B"

EXPENSES

PROGRAM REVENUES

OPERATING

CHARGES FOR

GRANTS AND

SERVICES

CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET ASSETS

GOVERNMENTAL ACTIVITIES

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

$ 17,698,902 $
759,233 895,587 395,498 337,873 1,332,267 362,650 1,391,205 974,222
2,000 17,755
2,345 1,135,933
$ 25,305,468 $

529,289 $

10,134,229 $

634,905 164,395 233,517 467,430 508,573 507,743 746,074 601,234
2,543 25,790

319 234

1,259 696774

848 523 $ ==~14~ 724~46~ 6 $

-7,035,384
-124,328 -731,192 -161,979 129,557 -823,694 145,093 -645,131 -372,988
543 8,035
-1,086 -119 925
-9,732,479

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

$

8,216,097

2,172,329 189,226 48,914 243,477 108,994 164 031

Total General Revenues

$ _ ___,1~1.L.!1.::;43=06,,,8'--

Change in Net Assets

$

1,410,589

Net Assets - Beginning of Year

13,852,871

Net Assets - End of Year

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

MORGAN 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
Cash Overdraft Accounts Payable Salaries Payable Retainages Payable Deposits and Deferred Revenue
Total Liabilities
FUND BALANCES
Reserved for: Continuation of Federal Programs Inventories
Unreserved Undesignated Reported in: General Fund
Total Fund Balances
Total Liabilities and Fund Balances

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$

6,546,771

291,101 $
1,716,621 595,176 11,226 26,313

$ 6,546,771

370,625

661,726 1,716,621
595,176 11,226 26,313

$

9,187,208 $

370,625 $ 9,557,833

$

$

721,874

2,037,197

8872

$

2,767,943 $

246,799 $
9,401
114,425

246,799 731,275 2,037,197 114,425
8872

370,625 $ 3,138,568

$

290,110 $

26,313

6,102,842

$

6,419,265 $

0 $

290,110 26,313

6,102,842
0 $ 6,419,265

$

9,187,208 $

370,625 $ 9,557,833

The notes to the basic financial statements are an integral part of this statement. -5-

MORGAN 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.

$

6,419,265

$

148,834

1,389,263

211,076

11,956,034

2,956.151

-7 971 001

8,690,357

153 838

Net Assets of Governmental Activities (Exhibit "A")

$ 15,263,460

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

MORGAN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003

EXHIBIT E 11 11

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

TOTAL

$ 8,224,438

$

238,140 $ 2,172,329

12,890,350

2,077,593

848,523

103,565

5,429

164,031

$ 24,546,640 $ 2,177,758 $

8,224,438 2,410,469 12,890,350 2,077,593
848,523 108,994 164 031
26,724,398

$ 16,986,428 $

369,306 $

753,227 885,246 395,496 334,964 1,332,267 361,034 1,374,124 883,343
2,000 17,755
2,345 1,114,331
10,000

6,006
1,616 227,055
2,082,167

$ 24,452,560 $ 2,686,150 $

$

94080 $ -508,392 $

17,355,734
759,233 885,246 395,496 334,964 1,332,267 362,650 1,374,124 1,110,398
2,000 17,755
2,345 1,114,331 2,092,167
27,138,710
-414 312

$

136,193

$

$ -136,193

$

136,193 $ -136, 193 $

$

230,273 $ -644,585 $

6,188,992

644,585

136,193 -136,193
0 -414,312 6,833,577

$ 6,419,265 $

0 $ =====6..,.4=1=9'=26=5=

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

MORGAN 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.

$

-414,312

$ 2,280,051 -446,809

1,833,242 -8 341

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

$ ======1,=4=10:!:,5=8=9

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

MORGAN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2003

EXHIBIT"G"

ASSETS Cash and Cash Equivalents Investments
Total Assets
LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities NET ASSETS Held in Trust for Private Purposes
Total Liabilities and Net Assets

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

1,750 $

61,082

9667

$

11,417 $ ===61='=08=2=

$

1,000

$

61,082

$

1,000 $

61,082

$

10 417

$

11,417 $===61='=08=2=

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

MORGAN 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 Total Revenues
EXPENSES Scholarships Administrative Expenses Total Expenses Change in Net Assets
Net Assets - Beginning
Net Assets - Ending

PRIVATE PURPOSE TRUSTS

$

2,925

201

$

3,126

$

3,175

79

$

3,254

$

-128

10 545

$ ===10=4=1=7=

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

MORGAN 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 Morgan 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 Morgan 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 of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds.

- 11 -

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

MORGAN 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 funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.

A substantial number of personnel of the School District were employed for a one hundred and ninety day period beginning in August 2002 and ending in early June 2003. Employment contracts for these employment periods typically specify that compensation be paid in twelve equal monthly payments beginning in September 2002 and ending in August 2003. State grants to fund the State's share of these contracts are disbursed to the School District in the same twelve month period. In accordance with generally accepted accounting principles, salary and fringe benefit costs and the related revenue from the State to fund these contracts are recorded in the fiscal period covered by these financial statements.

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, Federal Programs and Athletic Fund were reported as Special Revenue Funds. These funds had a combined fund balance of$323,037 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$104,787 at July 1, 2002. This change is in accordance with generally accepted accounting principles.

General Fund Balance July 1, 2002

$ 5,761,168

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

323,037 104,787

General Fund Balance July 1, 2002 (Restated)

$ 6,188,992

CHANGES IN ACCOUNTING PRINCIPLES

The Morgan 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:

- 13 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Fund (Restated) July 1, 2002 Capital Projects Fund
Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences
Net Assets Beginning (See Exhibit "B")

$ 6,188,992 644,585
$ 6,833,577 14,648,608 -7,791,493 162,179
$ 13,852,871

CASH AND CASH EQUIVALENTS

COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash 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 of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate 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,

- 14 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(7) Repurchase agreements, and

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

RECEIVABLES

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

PROPERTY TAXES

The Morgan County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on September 26, 2002 (levy date). Taxes were due on December 20, 2002 (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 Morgan County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $8,224,438.

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

School Operations

16.0 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,172,329 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

- 15 -

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

EXHIBIT "I"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at 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

$

5,000 20 to 80 years

$

5,000 10 to 80 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 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 of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. If a depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool

- 16 -

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

EXHIBIT "I"

Note 3: DEPOSITS AND INVESTMENTS
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 ofthe State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $7,310,568. The amounts ofthe total bank balances are classified into three categories of credit risk:
Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

- 17 -

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

EXHIBIT"!"

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

$ 108,891

2

0

3

7,201,677

Total

$ 7,310.568

CATEGORIZATION OF INVESTMENTS At June 30, 2003, the fair value of the School District's total investments was $776 and this entire amount consisted ofmoney market account which was insured or registered, or securities held by the School District or the School District's agent in the School District's name.

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

Decreases

Balances June 30, 2003

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

$ 140,334 $

8,500 $

0

1,389,263

0 $ 148,834 1,389,263

Total Capital Assets Not Being Depreciated $ 140,334 $ 1,397,763 $

0 $ 1,538,097

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 11,758,842 $ 2,749,431 0

197,192 474,020 $ 211,076

$ 11,956,034

267,300

2,956,151

211,076

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

6,021,842 1,769,650
0

242,531 199,001
5 277

267,300

6,264,373 1,701,351
5 277

Total Capital Assets, Being Depreciated, Net $ 6,716,781 $ 435,479 $

0 $ 7,152,260

Governmental Activity Capital Assets - Net $ 6,857.115 $ 1,833.242 $

0 $ 8,690.357

- 18 -

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

EXHIBIT "I"

Note 5: CAPITAL ASSETS

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 247,285

$

7,080

1,992

11,695

163,966

184,733 14 791

Note 6: INTERFUND TRANSFERS

$==4==4="6='=80'==9

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

Transfer to

Transfers From District-wide
Capital Projects

General Fund

$====1=36=,-19='=3

Transfers are used to move residual SPLOST funds to the General Fund to be used for maintenance and operation of the School District.

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

The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the 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 of that loss can be reasonably estimated.

- 19 -

MORGAN 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

End of Year Liability

$

0 $

1 421 $

1 421 $

0

$

0 $

4445 $

4 445 $

0

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

Position Covered

Amount

Superintendent Each Principal

$

20,000

$

5,000

Note 8: ON-BEHALF PAYMENTS

The Board has recognized revenues and costs in the amount of $230,872 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 $194,093

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 $36,779

Note 9: 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.

- 20-

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

EXHIBIT "I"

Note 10: 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%

$ 1,256,718 $ 1,170,949 $ 1,317,174

- 21 -

MORGAN COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2003

SCHEDULE "1"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Community Services Food Services Operation
Capital Outlay
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
Adjustments

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

$

8,357,343 $

8,357,343 $

8,224,438

145,000

145,000

238,140

11,372,097

11,776,502

12,890,350

1,015,111

2,077,898

2,077,593

379,215

379,215

848,523

131,472

131,472

103,565

40650

41150

164 031

$

21,440,888 $

22,908,580 $

24,546,640

$

15,894,058 $

16,784,309 $

16,986,428

625,734 99,245
430,510 349,261 1,466,934 369,026 1,404,559 855,343
1,500 17,920
1,081,210

803,202 323,344 430,510 358,356 1,466,934 369,026 1,404,559 891,566
8,300 17,920
759 1,181,210
10 000

753,227 885,246 395,496 334,964 1,332,267 361,034 1,374,124 883,343
2,000 17,755
2,345 1,114,331
10 000

$

22,595,300 $

24,049,995 $

24,452,560

$

-1154 412 $

-1 141 415 $

94 080

$

110,512 $

110,512 $

136,193

-110 512

-110 512

0

$

0 $

0 $

136,193

$

-1,154,412 $

-1,141,415 $

230,273

7,039,282

7,039,282

6,188,992

-497 333

-497 333

0

Fund Balances - Ending

$

5,387,537 $

5,400,534 $ ==,;;;,6,~4,;,,;;19~,2;;;;;6;;,,,5

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.

- 23-

MORGAN 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) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds
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 Eisenhower Professional Development Improving Teacher Quality Title IV Safe and Drug-Free Schools and Communities TitleV 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

CFDA NUMBER

PASS-
THROUGH
ENTITY
ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

N/A N/A $
$

(2) 960 573
960,573

10.550 10.665

N/A N/A
$

61,610 (3) 1,022,183

84.027 84.173 84.027

N/A $ NIA N/A
$

410,532 32,189 5 401
448,122

84.010 * 84.010
84.281 84.367 84.186 84.298 84.358
84.048

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

657,318 5,617 5,574
142,054 17,919 17,283 60,217
38 014 1 392 118

- 24 -

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

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Health and Human Services, U.S. Department of Pass-Through From Office of the Governor Abstinence Education Block Grant
Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

93.235

N/A

$ _ _ _ _2_6~9_1_3

$ _ _ _ _4_3~8_6_9

Total Federal Financial Assistance
N/A = Not Available

$ ===2,=4=85=,0=8=3

Notes to the Schedule of Expenditures of Federal Awards

(1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds on the School Breakfast Program ($127,798) were not maintained separately and are included in the 2003 National School Lunch Program.
(3) Funds earned on this program in the amount of $1,021 do not require reporting of expenditures.

Major Programs are identified by an asterisk (*) in front of the CFDA number.

The School District did not provide Federal Assistance to any Subrecipient.

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Morgan 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.

- 25 -

MORGAN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Community Affairs. Georgia Department of Building Acquisition
Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program 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 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 Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Apprenticeship Program Health Insurance Mentor Teachers National Teacher Certification Next Generation Schools Preschool Handicapped Program
-26-

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

169.507

10,000

654,054 50,294
1,569,501 175,451 863,598 134,922
1,478,139 1,138,077
476,537
129,848 234,213 758,839 220,480 173,822 198,638
42,745 114,208 232,168
76,796 51,356
1,330,461 468,498 746,074
454,367 105,150
19,000 75,998 12,245 24,596 120,458 83,102 171,527 -320,767
25,252 36,329 33,250 194,093
4,316 3,138 102,086 77,558

MORGAN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003
AGENCY/FUNDING
GRANTS Education, Georgia Department of Lottery Programs Assistive Technology Computers in the Classroom Post Secondary Options
Georgia Institute of Technology Student Information Systems
Northeast Georgia Regional Development Center Schools that Work
Office of Treasury and Fiscal Services Public School Employees Retirement

SCHEDULE "3"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

3,467

62,602

1,868

56,069

9,641

36779

$ ===12=,8=9=0,=35=0=

See notes to the basic financial statements.

-27-

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

SCHEDULE "4"

PROJECT
Morgan County High School renovation, modernizing, expansion, equipping and improvements, plus purchasing equipment with an extended useful life.
New Facility Construction for Morgan County school buses and purchase of school buses with an extended useful life.
Renovating, modernizing, equipping and improving the existing facilities at the Morgan County Primary School, which costs shall not exceed the sum of $663,000; constructing new facilities and renovating, modernizing, equipping and improving existing facilities at the Morgan County Elementary School, which costs shall not exceed the sum of $893,000; constructing new facilities and renovating, modernizing, equipping and improving existing facilities at the Morgan County Middle School, which costs shall not exceed the sum of $3,688,000; renovating, modernizing, expanding, equipping and improving existing facilities at the Morgan County High School, which costs shall not exceed the sum of $2,528,000; and renovating, modernizing, equipping and improving facilities at the Board of Education Central Office, plus purchasing school buses with an extended useful life, which costs shall not exceed the sum of $505.000.

ORIGINAL ESTIMATED
COST(1)

CURRENT ESTIMATED
COST(2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

AMOUNT EXPENDED
IN PRIOR YEARS (3)

PROJECT STATUS

$ 1,000,000 $ 1,041,662 $

487,084 $

554,578 Completed

710,000

702,660

16,841

685,819 Completed

8,277,000

8,277,000

2,182,225

Ongoing

$ 9,987,000 $ 10,021,322 $ 2,686,150 $ 1,240,397

(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 Morgan County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

See notes to the basic financial statements.

- 28-

MORGAN 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 I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program
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

$

809,249 $

608,069 $

8,032 $

616,101

64,057

301,805

1,612

303,417

1,950,721

2,279,520

71,563

2,351,083

216,806

371,058

6,643

377,701

1,068,521

1,304,604

69,290

1,373,894

153,678 1,900,272 1,454,005
624,006 1,895,713
240,194 46,952
146,478

129,932 2,433,963 2,293,683
637,313
39,660 335,465 1,408,510 119,352
43,668 345,933
25,475 187,188

826 69,479 155,852 59,688
103,709
2,944 10,636

130,758 2,503,442 2,449,535
697,001
39,660 335,465 1,512,219 119,352
43,668 348,877
25,475 197,824

$

10,570,652 $ 12,865,198 $

560,274 $

13,425,472

291,476 64,103

350,212 20,938

37,150 31,634

387,362 52,572

TOTAL QBE FORMULA FUNDS

$

10,926,231 $ 13,236,348 $

629,058 $ =~1,;,;3,~86;;,;5;,.,.4;,;;0~6

(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.

- 29-

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
August 13, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Morgan County Board of Education
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Morgan County Board ofEducation as of and for the year ended June 30, 2003, which collectively comprise Morgan County Board of Education's basic financial statements and have issued our report thereon dated August 13, 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 Morgan 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 ofour 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 Morgan 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-10

control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation ofone 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. We noted no matters involving the internal control over financial reporting 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 Morgan County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2003-34YB-10

State Auditor

RUSSELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
August 13, 2004

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Morgan 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 Morgan 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. Morgan County Board of Education'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 oflaws, regulations, contracts and grants applicable to its major Federal program is the responsibility of Morgan County Board of Education's management. Our responsibility is to express an opinion on Morgan 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 Morgan 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 Morgan County Board of Education's compliance with those requirements.
2003SA-10

In our opinion, the Morgan County Board of Education 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 Morgan 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 Morgan 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.
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 Morgan 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,
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RWH:gp 2003SA-10

State Auditor

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

MORGAN 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-7041-01-01 FS-7041-02-01

Further Action Not Warranted Previously Reported Corrective Action Implemented

SECTION IV FINDINGS AND QUESTIONED COSTS

MORGAN 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 Morgan 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 Morgan County Board of Education did not disclose any reportable conditions related to the financial statements.
3. Noncompliance Material to the Financial Statements The audit of the Morgan 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 Morgan County Board of Education did not disclose any reportable conditions in internal control over major programs.
5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Morgan County Board ofEducation's report on compliance with requirements applicable to major programs was unqualified.
6. Audit Findings Required to be Reported by Section .510{a) of 0MB Circular A-133 The Morgan 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 84.010 Elementary and Secondary Education Act - Title I - School Improvement
8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000.
9. Low Risk Auditee The Morgan County Board ofEducation qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133.
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
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MORGAN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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