Murray County Board of Education, Chatsworth, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2004

MURRAY COUNTY BOARD OF EDUCATION
CHATSWORTH# GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30# 2004
STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor

MURRAY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

DISTRICT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET ASSETS

3

B

STATEMENT OF ACTIVITIES

4

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

6

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS

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

12

G

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

13

H

NOTES TO THE BASIC FINANCIAL STATEMENTS

14

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

29

MURRAY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

SCHEDULES

SUPPLEMENTARY INFORMATION

2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

30

3 SCHEDULE OF STATE REVENUE

32

4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

34

5 ALLOTMENTS AND EXPENDITURES

GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE)

BY PROGRAM

35

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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

MURRAY COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 22, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Murray County Board of Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Ladies and Gentlemen:
We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through H) of the Murray County Board of Education, as of and for the year ended June 30, 2004, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Murray County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm1ons.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information ofthe Murray County Board ofEducation, as ofJune 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
2004ARL-11

In accordance with Government Auditing Standards, we have also issued our report dated July 22, 2005, on our consideration ofthe Murray County Board ofEducation's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope ofour testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through viii and page 29 respectively, are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement 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 Murray 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.
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 of Georgia Annotated section 506-24.
Respectfully submitted,

RWH:gp 2004ARL-11

State Auditor

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Introduction
Our discussion and analysis of the Murray County School District's financial performance provides an overview of the School District's financial activities for the fiscal years ended June 30, 2004 and June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance.
Financial Highlights
Key financial highlights for the fiscal years 2004 and 2003 are as follows:
On the District-wide financial statements, the assets of the School District exceeded liabilities by $45.9 million and $38.9 million, respectively, for the fiscal years ended June 30, 2004 and 2003. Of these amounts $3,178,162 and $1,579,718, respectively, for fiscal years 2004 and 2003 are available for spending at the School District's discretion.
The School District had $52.6 million and $53.6 million, respectively, in expenses for the fiscal years ended June 30, 2004, and June 30, 2003, relating to governmental activities. Only $39.7 million and $37.0 million of the above mentioned expenses for 2004 and 2003 were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) totaling $19.9 million and $16.8 million, respectively, for 2004 and 2003 were adequate to provide for these programs.
As stated above, general revenues accounted for $19.9 million or 33.4% of all revenues totaling $59.6 million for fiscal year 2004 and $16.8 million or 31.2% of all revenues totaling $53.8 million for fiscal year 2003. Program specific revenues in the form of charges for services, grants and contribution accounted for the rest.
Overview of the Financial Statements
This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements.
The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status.
The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Murray County School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
District-wide Statements
The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid.
These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities.
Fund Financial Statements
The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds.
Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial
11

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements.

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

Financial Analysis of the School District as a Whole

Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for fiscal years 2004 and 2003.

Table 1 Net Assets

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Assets Current and Other Assets Capital Assets, Net

$ 19,084,340 $ 23,802,163

46,419,796

35,555,517

Total Assets

$ 65,504,136 $ 59,357,680

Liabilities Current and Other Liabilities Long-Term Liabilities

$ 10,471,795 $ 8,469,522

9,125,000

12,025,000

Total Liabilities

$ 19,596,795 $ 20,494,522

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

$ 37,132,028 5,597,151 3,178,162

$ 33,049,767 4,233,673 1,579,718

Total Net Assets

$ 45,907,341 $ 38,863.158

Table 2 shows the Changes in Net Assets for fiscal years ending June 30, 2004, and June 30, 2003.

111

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 2 Change in Net Assets

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

$ 2,370,512 34,818,227 2,485,716

$ 2,210,261 34,629,034 155,965

Total Program Revenues

$ 39,674,455 $ 36,995,260

General Revenues:

Taxes

Property Taxes

For Maintenance and Operations

$ 12,032,078 $ 9,684,878

For Debt Service

-2,009

4,736

Railroad Cars

12,265

Sales Taxes

Special Purpose Local Option Sales Tax

For Debt Service

3,505,923

3,282,914

Real Estate

99,513

42,327

Grants and Contributions not Restricted to

Specific Programs

3,761,377

2,614,533

Investment Earnings

264,519

423,650

Miscellaneous

272,836

734,882

Total General Revenues

$ 19,946,502 $ 16,787,920

Total Revenues

$ 59,620,957 $ 53,783,180

Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt

$ 35,938,518
1,773,740 1,124,943
881,473 451,204 2,652,448 262,625 3,019,776 1,789,660 737,370
68,109
3,420,348 456,560

$ 37,597,625
1,402,426 1,143,150
924,491 460,218 2,467,155 266,742 2,906,491 1,740,407 716,374
46,380
133 3,469,232
434,633

Total Expenses

$ 52,576,774 $ 53,575,457

Increase in Net Assets

$ 7,044.183 $===2==07-,7==2==3

IV

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity.

Table 3 Governmental Activities

Total Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Net Cost of Services

Fiscal

Fiscal

Year 2004 Year 2003

Instruction

$ 35,938,518 $ 37,597,625 $

Support Services

Pupil Services

1,773,740 1,402,426

Improvement of Instructional Services

1,124,943 1,143,150

Educational Media Services

881,473

924,491

General Administration

451,204

460,218

School Administration

2,652,448 2,467,155

Business Administration

262,625

266,742

Maintenance and Operation of Plant

3,019,776 2,906,491

Student Transportation Services

1,789,660 1,740,407

Central Support Services

737,370

716,374

Other Support Services

68,109

46,380

Operations of Non-Instructional Services

Community Services

133

Food Services

3,420,348 3,469,232

Interest on Short-Term and Long-Term Debt

456,560

434,633

6,669,673 $ 10,318,975

1,278,113 419,301 218,554 -353,864
1,468,068 258,891
1,028,588 875,132 729,236 -107

1,002,772 640,626 277,484 -381,507
1,268,702 266,742 985,373 799,084 706,774 -20,841

-145,826 456,560

281,380 434,633

Total Expenses

$ 52,576.774$ 53,575,457 $ 12,902,319$ 16,580.197

Financial Analysis of the School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $59.6 million and total expenditures of $65.6 million for fiscal year 2004 and total revenues of $53.9 million and total expenditures of $56.8 million for fiscal year 2003.

General Fund Budgeting Highlights

The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal years 2004 and 2003, the School District amended its general fund budget as needed.

V

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
During fiscal year 2004 the General Fund had final actual revenues totaling $53.4 million, which exceeded the original budgeted amounts totaling $51.1 million by $2.3 million. This difference (final actual vs. original budget) was primarily due to an increase in state revenues over original budget by $0.8 million and revenues for services over original budget by $1.2 million; these increases in actual revenue over original budgeted revenue were offset by a decline in actual Federal revenue as compared to original budget by $0.3 million.
During fiscal year 2003 the General Fund had final actual revenues totaling $50.3 million, which exceeded the original budgeted amounts of $47.7 million by $2.6 million. This difference (final actual vs. original budget) was due primarily to an increase in Federal revenues over original budget by $0.8 million, state revenues over original budget by $0.7 million and revenues for services over original budget by $1.1 million.
The actual revenues for fiscal years 2004 and 2003 totaling $53.4 million $50.3 million, respectively, exceeded the final budgeted amount by $0.6 million and $1 .4 million.
Final actual expenditures and other financing uses during fiscal year 2004 totaling $51.4 million represented a decrease from the original budgeted amount of $51.9 million. The decrease in actual expenditures versus original budget expenditures totaling $0.5 million was due primarily to a decrease in actual instructional expenses as compared to expenses projected in the original budget.
Final actual expenditures and other financing uses during fiscal year 2003 totaling $51.8 million exceeded the original budgeted amount of $49.2 million by $2.6 million. This difference was primarily due to additional instructional expenses and our school principals' accounts not being included in the original budget process.
General fund revenues exceeded expenditures and other financing uses resulting in a surplus of $1,904,210 for fiscal year 2004. General fund expenditures and other financing uses exceeded revenues and other financing sources resulting in a deficit of $1,489,562 for fiscal year 2003.
It should be noted that the state reduced funding for fiscal year 2004 and 2003 in the amounts of $622,870 and $644,153 respectively, after the millage rate had been established for each year.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the fiscal year ended June 30, 2004, and June 30, 2003, the School District had $46.4 million and $35.5 million, respectively, invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation.
Vl

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004

Table 4 Capital Assets (Net of Depreciation)

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Land Construction in Progress Buildings and Improvements Equipment Land Improvements

$ 1,396,981 13,931,655 28,314,233 1,958,314 818,613

$ 1,396,981 2,265,099
29,004,465 1,957,305 931,667

Capital Assets - Net

$ 46Al9,796 $ 35,555.517

The net decrease in land improvements totaling $113,054 during fiscal year 2004 was due to the reclassification of various fixed assets to equipment. There was no change in the depreciation method or estimated useful lives.

Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations.

Debt

At the fiscal years ending June 30, 2004, and June 30, 2003, the School District had $12.0 million and $14.2 million, respectively, in bonds outstanding. Table 5 summarizes the School District's debt for general obligation bonds.

Table 5 Debt at June 30

Governmental Activities

Fiscal

Fiscal

Year 2004

Year 2003

Bonds Payable

$ 12,025.000 $ 14,225.000

At June 30, 2004, and June 30, 2003, the School District's assigned bond rating was "Aa2" as determined by Moody's Investors Services, Inc.

Current Issues

Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations.

Vll

MURRAY COUNTY BOARD OF EDUCATION MANAGEMENT'S-DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2004
Economic Slowdown - State funding for education has been stagnant and as a result more pressure is being placed on the local school districts to prioritize its educational programs and provide additional local funding. As the state continues to cut funding, the School District is forced to supply more local monies. Additional costs to the School District will be required with the continued implementation of House Bill 1187, which mandates lower teacher to student ratios, requiring additional teachers and additional classrooms. Despite these challenges, the Murray County School District remains optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students.
Capital Improvements - The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs.
Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Murray County Board of Education, 715 Chestnut Street, Chatsworth, GA 30705.
Vlll

MURRAY COUNTY BOARD OF EDUCATION

MURRAY COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2004
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 Within One Year Due in More Than One Year
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for
Continuation of Federal Programs Debt Service Capital Projects Permanent Fund Un restricted
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

$

9,534,188

3,441,514

1,286,741 4,000,504
738,735 8,904
73,754

1,396,981 13,931,655
1,873,788 35,875,496
5,410,509 -12,068,633

$ ===6=5=,5=0=4=1,=36=

$

1,659,300

4,719,461

229,866

950,572

12,596

2,900,000 9,125,000

$

19,596,795

$

37,132,028

687,454 3,881,706
981,597 46,394 3,178,162

$

45 907 341

$ ===6=5=,5=04='=13=6=

MURRAY COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30. 2004

EXPENSES

CHARGES FOR SERVICES

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities

$

35,938,518 $

1,773,740 1,124,943
881,473 451,204 2,652,448 262,625 3,019,776 1,789,660 737,370
68,109

3,420,348 456,560

52,576,774 $

1,258,438
1,112,074 2,370,512

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 Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous

Total General Revenues

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

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

$

25,812,440 $

495,627 695,822 662,919 803,150 1,155,149
3,734 1,951,519
771,239 8,134
68,216

2,246,989

$

34,674,938 $

2,197,967 $
9,820 1,918 29,231 39,669 143,289
207,111
2,629,005 $

-6,669,673
-1,278, 113 -419,301 -218,554 353,864
-1,468,068 -258,891
-1,028,588 -875,132 -729,236 107
145,826 -456 560
-12,902,319

$

12,032,078

-2,009

12,265

3,505,923 99,513
3,761,377 264,519 272,836

$

19,946,502

$

7,044,183

38,863,158

$ ===4=5=9=0=7-=3=41=

-5 -

MURRAY COUNTY BOARD OF EDUCATION BALANCE SHEET
GOVERNMENTAL FUNDS JUNE 30. 2004

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable, Net
Taxes State Government Federal Government Other Inventories

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 4,929,145 $ 4,569,504 207,221
361,239 4,000,504
738,735 8,904
73 754

Total Assets

$ 10,319,502 $ ==4=='=56=9-=,5=04=

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

$

1,443,165 $

4,719,461

12 596

216,135
229,866 950,572

$

6,175,222 $

1,396,573

$

613,700

73,754 $

3,063,799

3,456,826

109,132

$ 4,144,280 $ 3,172,931

Total Liabilities and Fund Balances

$ 10,319,502 $ ===,,;,4.,;;;,5;;;;,69;;.,,;;;;50~4;,,,

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

EXHIBIT"C"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$

12,272 $

3,211,166

662,741

23,267 $ 23,127

9,534,188 3,441,514
1,023,980 4,000,504
738,735 8,904
73 754

$ 3,886,179 $

46 394 $ =====1=8,=82=1=,5=79=

$

1,659,300

4,719,461

229,866

950,572

12 596

$

7 571 795

$ 3,886,179 $
$ 3 886 179 $ $ 3,886,179 $

$ 46,394 46 394 $

613,700 3,886,179
73,754 3,063,799
46,394
3,456,826 109 132
11249784

46 394 $ =======18,.,,8=2=1=57=9=

-7-

MURRAY COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS JUNE 30. 2004

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.
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

$ 11,249,784

$

1,396,981

13,931,655

1,873,788

35,875,496

5,410,509

-12,068,633

46,419,796

262,761

-12,025,000

Net Assets of Governmental Activities (Exhibit "A")

$ 45,907,341

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

MURRAY COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2004

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)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

DISTRICTWIDE
CAPITAL PROJECTS
FUND

$ 11,982,368 99,513
33,497,781 $ 4,780,167 2,370,512 108,428 565,942

2,485,716
73,077 8550

$ 53,404,711 $ 2,567,343

$ 35,303,478

1,773,740 1,120,432
881,473 450,323 2,639,020 262,475 $ 3,001,553 1,837,321 737,370
68,109 3,325,207

150 11,583,842

$ 51,400,501 $ 11,583,992 $ 2,004,210 $ -9,016,649

$

100,000

$

-100,000

-2,916,840

$

-100,000 $ -2,816,840

$ 1,904,210 $ -11,833,489

2,240,070

15,006,420

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

$ 4,144,280 $ 3,172,931

EXHIBIT"E"

DEBT SERVICE
FUND

NONMAJOR GOVERNMENTAL
FUND

TOTAL

$

379

3,505,923

82,238 $ $ 3,588,540 $

$
776 776 $

11,982,747 3,605,436
35,983,497 4,780,167 2,370,512 264,519 574 492
59,561,370

$

$ 2,200,000 456,560

$ 2,656,560 $

$

931,980 $

$ 2,916,840
$ 2,916,840 $ 3,848,820 $
37 359

$ 3,886,179 $

0 $
0 $ 776 $

35,303,478
1,773,740 1,120,432
881,473 450,323 2,639,020 262,625 3,001,553 1,837,321 737,370
68,109 3,325,207 11,583,842
2,200,000 456,560
65,641,053
-6,079,683

$
$ 776 $ 45 618

3,016,840 -3,016,840
0 -6,079,683
17,329,467

46 394 $ 11,249,784

- 11 -

MURRAY 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. 2004

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.
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

$ -6,079,683

$ 12,006,149 -1 141 870

10,864,279

59,587

2,200,000

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

$ ===7=,0=4=4=1'=83=

The notes to the basic financial statements are an integral part of this statement. -12-

MURRAY COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS JUNE 30, 2004
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Other
Total Assets
LIABILITIES Funds Held for Others

EXHIBIT"G"
AGENCY FUNDS
$ 153,451 371
$ ==1=53=,8=2=2=
$ ==1=53='=82=2=

The notes to the basic financial statements are an integral part of this statement.
- 13 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Murray County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Murray County Board of Education.
District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds.
- 14 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The School District reports the following major governmental funds:
General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund.
District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission 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 type:
Agency funds account for assets held by the School District as an agent for various funds, governments or individuals.
BASIS OF ACCOUNTING
The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. 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, except for principal and interest on general long-term debt, which are recognized
- 15 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities 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.
CASH AND CASH EQUIVALENTS
COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations.
INVESTMENTS
COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. 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,

- 16 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(7) Repurchase agreements, and

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

RECEIVABLES

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

PROPERTY TAXES

The Murray County Board ofCommissioners fixed the property tax levy for the 2003 tax digest year (calendar year) on October 1, 2003 (levy date). Taxes were due on December 1, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2003 tax digest are reported as revenue in the governmental funds for fiscal year 2004. The Murray County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2004, for maintenance and operations amounted to $11,970,103 and for school bonds amounted to $379.

The tax millage rate levied for the 2003 tax year (calendar year) for the Murray County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

15.5 mills

SALES TAXES

Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,505,923 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.

- 17 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

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

CAPITAL ASSETS

Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). 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 estimated 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 ofassets 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 Building Improvements Equipment

$

50,000

NIA

$

25,000

15 years

$

50,000

60 years

$

25,000

15 years

$

25,000 5 to 12 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

- 18 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. Ifa depository elects the pooled method (OCGA 45-8-13.1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case ofoperating funds placed in demand deposit checking accounts.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
- 19 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 3: DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS At June 30, 2004, the bank balances were $12,121,844. The amounts ofthe total bank balances are classified into three categories of credit risk:

Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name.
Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.)

The School District's deposits are classified by risk category at June 30, 2004, as follows:

Risk Category

Bank Balance

1

$ 3,973,895

2

1,420,728

3

6,727,221

Total

$ 12,121,844

CATEGORIZATION OF INVESTMENTS Investments are classified as to risk by the three categories described below:

Category 1 - Insured or registered, or securities held by the School District or the School District's agent in the School District's name.
Category 2 - Uninsured or unregistered, with securities held by the counterparty's trust department or agent in the School District's name.
Category 3 - Uninsured or unregistered, with securities held by the counterparty, or by its trust department or agent but not in the School District's name.

Funds invested in an investment pool managed by another government are not required to be categorized unless the investing entity owns specific, identifiable investment securities in the pool.

At June 30, 2004, the carrying value ofthe School District's total investments was $3,211,166 which is materially the same as fair value. The investments are classified as to risk categories as follows:

Type oflnvestment U. S. Government

Risk Categories

2

3

Carrying Amount

Fair Value

$ 3 211 166 $=====0 $=====0 $ 3 211.166 $ 3.211 166

-20 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

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, 2003 (Restated)

Increases

Balances Decreases June 30, 2004

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

$ 1,396,981

$

2,265,099 $ 11,666,556

0 $ 1,396,981 13,931,655

Total Capital Assets Not Being Depreciated $ 3,662,080 $ 11,666,556 $

0 $ 15,328,636

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements

$ 35,875,496 5,124,027 $ 1,820,677

$ 286,482
53,111

0 $ 35,875,496 5,410,509 1,873,788

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

6,871,031 3,099,463
956,269

690,232 352,732
98,906

7,561,263 3,452,195 1,055,175

Total Capital Assets, Being Depreciated, Net $ 31,893,437 $ -802,277 $

0 $ 31,091,160

Governmental Activity Capital Assets - Net $ 35,555,517 $ 10,864,279 $

0 $ 46,419,796

Current year depreciation expense by function is as follows:

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

$ 770,865

$

4,511

881

13,428

18,223

238,821

275,864 95 141

$ 1!141!870

- 21 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 6: RESTRICTED ASSETS

Special Purpose Local Option Sales Tax (SPLOST), general obligation bond proceeds, and the corpus of the Fred L. and Minnie B. Dunn Trust Fund are reported as restricted assets in the Statement of Net Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2004, were as follows:

Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Permanent Fund
Restricted Investments: Debt Services Permanent Fund

District-wide Capital Projects

Bond

SPLOST

Proceeds

Debt Service Funds

Permanent Fund

$
$ 1,888,917 $ 2,571,455

12,272 $

$ 3,211,166 $

23,267 23,127

Note 7: INTERFUND TRANSFERS

Interfund transfers for the year ended June 30, 2004, consisted of the following:

Transfer to

Transfers From

District-wide

General

Capital

Fund

Projects

District-wide Capital Projects Debt Service Fund

$ 100,000 $ 2,916,840

Total

$ 100,000 $ 2,916.840

Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as a supplemental funding source for capital outlay and to move SPLOST collections to the Debt Service Fund to pay current year Bond Principal and Interest as required in the Bond Resolution.

Note 8: RISK MANAGEMENT

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

- 22-

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 8: RISK MANAGEMENT

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

For claims filed prior to fiscal year 2002, the School District has designated an independent contractor to operate a risk management program for Workers' Compensation. The School District's General Fund reimburses claims paid by the contractor. Each fund budgets for estimated claims based on known claims and prior experience. Reimbursement to the General Fund is made from each fund based on actual claims paid. During the year under review, the School District's General Fund incurred expenditures of $33,431 for claims and related expenses incurred by the contractor.

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

2003 2004

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

$

0 $

67,332 $

67,332 $

0

$

0 $

33,431 $

33,431 $

0

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund or the School Food Service 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.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End ofYear Liability

2003 2004

$

0 $

2,505 $

2,505 $

0

$

0 $

4 385 $

4 385 $

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.

- 23 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 8: RISK MANAGEMENT

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

Position Covered

Amount

Superintendent Each Principal Director of Finance ROTC Director Driver Training Instructors Director of Alternative School Nutrition Director

$

25,000

$

25,000

$

25,000

$

25,000

$

25,000

$

25,000

$

25,000

Note 9: SHORT-TERM DEBT

The School District issues tax anticipation notes in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State of Georgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred.

Short-term debt activity for the fiscal year is as follows:

Beginning Balance

Issued

Redeemed

Ending Balance

Tax Anticipation Notes

$===c=o $ 1,000,095 $ 1,000,095 $====o

Note 10: LONG-TERM DEBT

GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows:

Purpose

Interest Rates

Amount

General Government - Series 2002

2.4%- 5.0%

$ 12.025.000

The changes in Long-Term Debt during the fiscal year ended June 30, 2004, were as follows:

- 24 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 10: LONG-TERM DEBT

Governmental Funds General
Obligation Bonds

Balance July 1, 2003

$ 14,225,000

Deductions Debt Retired

2,200,000

Balance June 30, 2004

$ 12,025,000

Portion of Long-Term Debt Due within One Year

$ 2,900,000

At June 30, 2004, 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

2005 2006 2007 2008

$ 2,900,000 $ 2,915,000 3,100,000 3,110,000

394,260 296,650 185,790
68,870

Total Principal and Interest

$ 12,025.000 $ 945.570

Note 11: ON-BEHALF PAYMENTS

The School District has recognized revenues and costs in the amount of $562,488 for health insurance and retirement contributions paid on the School District's behalf by the following State Agencies.

Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $542,205

Paid to the Teachers Retirement System of Georgia For Teachers Retirement System (TRS) Employer's Cost In the amount of $16,094

- 25 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT "H"

Note 11: ON-BEHALF PAYMENTS

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 $4,189

Note 12: SIGNIFICANT COMMITMENTS

The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2004, together with funding available:

Project

Unearned Executed Contracts

Funding Available From State

040-705-034

$ 4,203.367 $==2~7~6,~19~1

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

Note 13: SIGNIFICANT CONTINGENT LIABILITIES

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

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

Note 14: 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.

- 26 -

MURRAY COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2004

EXHIBIT"H"

Note 14: RETIREMENT PLANS

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

2004 2003 2002

100% 100% 100%

$ 2,792,585 $ 2,736,287 $ 2,497,704

-27 -

MURRAY COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30. 2004

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
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

$

12,070,320 $

11,917,470 $

11,982,368

99,513

32,666,189

34,076,332

33,497,781

5,105,142

5,206,557

4,780,167

1,130,500

1,083,527

2,370,512

40,000

105,343

108,428

125,000

410 343

565,942

$

51137151 $

52,799,572 $

53 404 711

$

36,372,062 $

34,815,832 $

35,303,478

1,408,562 1,022,807
886,884 447,736 2,270,929 296,887 3,018,342 1,973,602 757,574
74,905 3,370,400

1,354,226 1,098,354
840,528 446,084 2,248,886 258,740 2,844,305 1,787,195 729,235
68,109 3,322,868

1,773,740 1,120,432
881,473 450,323 2,639,020 262,475 3,001,553 1,837,321 737,370
68,109 3,325,207

$

51,900,690 $

49,814,362 $

51,400,501

$

-763,539 $

2,985,210 $

2,004,210

$

400,000 $

386,861

-400,000

-486 861 $

-100,000

$

0 $

-100,000 $

-100 000

$

-763,539 $

2,885,210 $

1,904,210

1,694,435

1,694,435

2,240,070

34482

-5 713

Fund Balances - Ending

$

965,378 $

4,573,932 $

4 144 280

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.

The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 29-

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Donation (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 Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Enhancing Education Through Technology Program Improving Teacher Quality State Grants Limited English Proficient Reading First State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Air Force R.O.T.C. Program
Total Federal Financial Assistance
NIA = Not Available

CFDA
NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

. 10.553
. 10.555

N/A N/A $
$

(2) 2,926,676
2,926,676

10.550 10.665

N/A N/A
$

192,585 (3) 3,119,261

. 84.027 . 84.173

NIA $ N/A
$

916,096 20 342
936,438

84.318 84.367 84.365 84.357 84.186 84.298 84.010 84.048

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

47,969 254,266
14,594 111,859 46,854 40,376 1,150,425 69132
2,671,913

$

42 875

$ ======-5,.,,,83=4;.,,0=4==9

- 30-

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30. 2004

SCHEDULE "2"

Notes to the Schedule of Expenditures of Federal Awards
(1) The amount shown for the Food Donation represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year.
(2) Expenditures for the funds earned on the School Breakfast Program ($470,023) were not maintained separately and are included in the 2004 National School Lunch Program.
(3) Funds earned on the National Forest Reserve, in the amount of $24,336, 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 Murray County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 31 -

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs Apprenticeship Program At-Risk Summer School Program Health Insurance K-3 Statewide Reading Program Mentor Teachers National Teacher Certification Preschool Handicapped Program Special Education Low Incidence Grant Teachers' Retirement Lottery Programs Student Information System - Conversion Student Information System - Reporting
- 32 -

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$

845,426

$

845,426

2,334,530 354,206
4,473,830 821,683
2,257,787 479,394
4,085,585 2,847,455
901,288
444,044 691,834 1,598,117 395,626
67,519 657,862
67,137 287,787 358,655 654,100 201,823 134,426
801,777 1,196,457 1,931,702
645,924 143,289
19,500 148,699
27,573 36,030 3,638,159 193,113 193,540 -1,475,275
33,250 53,379 542,205 100,506
8,575 10,011 78,589 57,413 16,094
49,267 33,701

2,334,530 354,206
4,473,830 821,683
2,257,787 479,394
4,085,585 2,847,455
901,288
444,044 691,834 1,598,117 395,626
67,519 657,862
67,137 287,787 358,655 654,100 201,823 134,426
801,777 1,196,457 1,931,702
645,924 143,289
19,500 148,699
27,573 36,030 3,638,159 193,113 193,540 -1,475,275
33,250 53,379 542,205 100,506
8,575 10,011 78,589 57,413 16,094
49,267 33,701

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2004

SCHEDULE "3"

AGENCY/FUNDING
GRANTS Georgia State Financing and Investment Commission Reimbursement on Construction Projects
Office of Treasury and Fiscal Services Public School Employees Retirement
CONTRACT Human Resources, Georgia Department of Family Connection

GOVERNMENTAL FUND TYPES

CAPITAL

GENERAL

PROJECTS

FUND

FUND

TOTAL

$ 2,485,716 $ 2,485,716

$

4,189

4,189

50 000

50 000

$ 33,497,781 $ 2,485,716 $ 35,983,497

See notes to the basic financial statements.

- 33-

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30. 2004

SCHEDULE "4"

PROJECT
Construction of a new addition at the School system's central office at 715 Chestnut Street in Chatsworth to house personnel presently working at the county office annex.
Old Eton School - a new HVAC and roof.
Purchase of computers and technology equipment for all schools in the School District.
The construction and equipping of a new elementary school in Murray County; the construction and equipping of a new middle school in Murray County; the renovation and equipping of the old rock building on the Bagley Middle School campus for use as a central office for the Board of Education; the acquisition of land for new schools; the construction of infrastructure to provide access and services to school facilities; the construction and equipping of a second new elementary school; and System-wide renovations, improvements and technology upgrades.

ORIGINAL ESTIMATED
COST (1}

CURRENT ESTIMATED COSTS(2}

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED
IN PRIOR YEARS (3) (4)

PROJECT STATUS

$

454,470 $

454,470

568,087

42,356

$

6,250 Ongoing

42,356 Completed

1,340,509

1,384,499 $

177,352

818,999 Ongoing

22,000,000

22,000,000

11,176,625

3,340,462 Ongoing

$ 24,363,066 $ 23,881,325 $ 11,353,977 $ 4,208,067

(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 Murray 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.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years

$ 2,258,696

Current Year

456,560

Total

$ 2,715,256

See notes to the basic financial statements.

- 34-

MURRAY COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE)
ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2004

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 CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL)
TOTAL DIRECT INSTRUCTIONAL PROGRAMS
Media Center Program Staff and Professional Development

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

ELIGIBLE QBE PROGRAM COSTS

SALARIES OPERATIONS

TOTAL

$

2,578,248 $ 2,657,218 $

97,292 $

2,754,510

446,699

275,864

7,188

283,052

5,005,945

6,018,933

272,375

6,291,308

1,054,040

610,868

9,856

620,724

2,519,316

3,077,383

121,895

3,199,278

586,034 4,628,515 3,190,517 1,015,248 3,590,393
713,388 77,610
324,357 387 819

364,116 4,684,316 3,935,674
838,290
1,148,913 1,890,268
133,872 203,141 373,478 114,586 301,402 379,384

5,410 150,510 115,507
80,650
4,157 9,350 599,492 11,116 27,412 13,087
5,252 1 051

369,526 4,834,826 4,051,181
918,940
4,157 1,158,263 2,489,760
144,988 230,553 386,565 114,586 306,654 380 435

$

26,118,129 $ 27,007,706 $

1,531,600 $

28,539,306

735,742 151 634

762,508 18 864

74,463 27 726

836,971 46 590

TOTAL QBE FORMULA FUNDS

$

27,005,505 $ 27,789,078 $

1,633,789 $ ===2=-9,._;,42;;;;2;.,;,8;;,;;6~7

(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.

- 35-

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 22, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Murray County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS 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 Murray County Board of Education as of and for the year ended June 30, 2004, which collectively comprise Murray County Board of Education's basic financial statements and have issued our report thereon dated July 22, 2005. 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Murray 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 an opinion on the internal 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 Murray 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-7051-04-01 and FS-7051-04-02.
2004YB-30

A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Murray County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the management and members of the Murray County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004YB-30

State Auditor

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
July 22, 2005

Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Murray County Board of Education
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULARA-133
Ladies and Gentlemen:
Compliance
We have audited the compliance ofMurray 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 ofits major Federal programs for the year ended June 30, 2004. Murray County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Murray County Board of Education's management. Our responsibility is to express an opinion on Murray 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 Murray 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 Murray County Board of Education's compliance with those requirements.
2004SA-10

In our opinion, the Murray County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2004.
Internal Control Over Compliance
The management of Murray 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 Murray 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 reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level ofrisk that noncompliance with applicable requirements oflaws, regulations, contracts and grants caused by error or fraud 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 Murray County Board of Education, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:gp 2004SA-10

State Auditor

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

MURRAY COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-7051-03-01 FS-7051-03-02

Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-7051-03-01

Due to a limited number of staff at the local school level, accounting functions were not appropriately segregated. During fiscal year 2004 measures were taken and accounting procedures implemented to separate bank reconciliation function from record keeping/voucher payment function. Procedures were implemented to ensure two persons are responsible for receipt process. This will be documented with proper signatures on receipt forms. In June 2004, a meeting with Principals was held to discuss specific instances noted in the fiscal year 2003 school activity audit. After completion ofthe state audit an additional meeting was held with school activity bookkeepers to review accounting procedures implemented in fiscal year 2004. Steps were taken to address the Inadequate Internal Control Procedures Finding, but due to budget constraints the resolution of the finding does not allow for hiring of additional personnel.

SECTION IV FINDINGS AND QUESTIONED COSTS

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

I SUMMARY OF AUDITOR'S RESULTS

1. Type of Report Issued on the Financial Statements The auditor's opinion on the Murray 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 Murray County Board of Education disclosed financial statement reportable conditions related to the following control categories.

Cash and Cash Equivalents Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements Employee Compensation

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

3. Noncompliance Material to the Financial Statements The audit of the Murray 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 Murray 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 Murray 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 Murray 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: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.027 Special Education - Grants to States 84.173 Special Education - Preschool Grants

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

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

- 1-

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Repeated From Prior Year Finding Control Number: FS-7051-04-01
Our examination of the Principal's accounts disclosed weaknesses in internal control as discussed below:
Cash and Cash Equivalents The bank reconciliation function is not separated from the record keeping and voucher payment functions.
Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Deposit slips do not contain adequate documentation. Based on a review of fifty deposits, four were not made in a timely manner.
Expenditures/Liabilities/Disbursements The check writing function was not separated from the record keeping or processing of signed checks. Based on a review of forty vouchers, nine did not have the proper approval for payment. One payment included sales tax. Seventeen expenditures did not have a purchase order or a requisition form.
These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal accounts sites, for the accounting functions and their failure to ensure established controls were functioning as designed. Management should implement additional procedures to ensure that the key accounting functions of custody, record keeping, and authorization are segregated.
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7051-04-02
During the fiscal year ended June 30, 2004, the School District entered into a contract with Live Oak Consulting, Inc. (LOC). The firm assists local school boards in reducing employer cost associated
-2-

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7051-04-02
with health insurance plans administered by the Georgia Department ofCommunity Health (DCH). LOC is paid a fee equal to 50 percent ofthe first year employer cost savings identified by LOC. The School District, following the recommendations ofLOC, moved certain employees from the Health Insurance Plan for Public School Teachers (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 1) to the Health Insurance Plan for Public School Employees (See OCGA Title 20, Chapter 2, Article 17, Part 6, Sub Part 2).
According to DCH, School District employees who are to be included as members of the Health Insurance Plan for Public School Teachers (PST) are either:
1. Employed in a professionally certificated position; employee holds a valid certification; employee is assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member of the Teachers Retirement System or other public school retirement system.
Or:
2. Employed in a professionally certificated capacity; employee holds a valid certification; employee is not assigned to a position that requires a certification as a qualification; employee's compensation is determined, at least in part, based upon the certificate; and employee is a member ofthe Teachers Retirement System or other public school retirement system.
With respect to membership in the Health Insurance Plan for Public School Employees (PSE) Georgia Laws OCGA 20-2-910 and 47-4-2 (20) provide that the definition of public school employee, for the purpose ofmembership in the Health Insurance Plan for Public School Employees, means classroom aides, paraprofessionals, noncertified administrative and clerical employees, school bus drivers, school lunchroom personnel, school maintenance personnel and school custodial personnel. Generally, in order to determine which School District employees are eligible for the PSE or the PST insurance plans, a comparison should be made of the employee's position and DCH's criteria listed above. Ifthe employee meets either test, then the employee is eligible for the Health Insurance Plan for Public School Teachers. If the employee fails both of the above tests, the employee is eligible for the Health Insurance Plan for Public School Employees.
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MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS EMPLOYEE COMPENSATION EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7051-04-02 From information provided by the School District, it is not clear that all ofthese 20 employees who were moved from the PST plan to the PSE plan are eligible for membership in the PSE plan under DCH's criteria. As of June 30, 2004, the School District made payments totaling $38,564 to Live Oak Consulting, Inc. Subsequent to the fiscal year end, additional payments in the amount of $41,910 were made to the consultant. The School District should establish policies and procedures to ensure that employer contributions for employee health insurance plans are paid in accordance with State Laws. In addition, the School District should contact the Georgia Department of Community Health to determine whether the employees who were moved from the PST plan were moved in error. Ifemployees were moved in error the affected employees should be returned to the PST plan and the School District should make payment to OCH for those employees. Ifall above referenced employees should have remained in the PST plan the amount due to OCH would be $160,948. Additionally, the School District should consult with its legal counsel regarding obtaining a refund for those employees who should not have been moved to the PSE plan. The amount of the refund from LOC could be as much as $80,474. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTIONV MANAGEMENT'S RESPONSES

MURRAY COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES
YEAR ENDED JUNE 30, 2004
Finding Control Number: FS-7051-04-01
We concur with this finding. However, the number of administrative staff available for accounting functions at the various principal account sites is severely limited due to budgetary constraints. With state revenue decreasing in 2005, additional staffing to ensure established controls are functioning and to provide for complete segregation of duties is not currently possible. Additional training has been implemented for all school level bookkeepers and to the extent possible, existing staff will be used to provide a more adequate separation of duties.
Finding Control Number: FS-7051-04-02
Currently, the Murray County Board ofEducation is not in a position to either concur or contest the finding in regard to Live Oak Consulting, due to ongoing litigation between the Department of Community Health and Live Oak Consulting. The Board will determine the proper action based upon the court decision. During 2005, the Board discontinued following the recommendations of Live Oak Consulting regarding health insurance.
Contact Person: Steve Loughridge, Director of Finance Phone: (706) 695-4531 Fax Number: (706) 695-8425 E-mail Address: steve.loughridge@murray.kl2.ga.us