OGLETHORPE COUNTY BOARD OF EDUCATION LEXINGTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor OGLETHORPE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 3 B STATEMENT OF ACTIVITIES 4 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 6 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 7 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 8 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 9 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 10 H NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 27 OGLETHORPE COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 28 3 SCHEDULE OF STATE REVENUE 30 4 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 32 5 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 33 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 April 8, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oglethorpe 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 Oglethorpe County Board ofEducation, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Oglethorpe 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 op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Oglethorpe County Board of Education, as of June 30, 2003, and the respective changes in financial position thereoffor the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 The Oglethorpe County Board of Education has not presented Management's Discussion and Analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not to be part of, the basic financial statements. As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board completed a comprehensive inventory of its capital assets for inclusion in the basic financial statements, consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method of accounting for the salaries of certain ten-month employees from a cash basis to a basis that is generally accepted. These changes are in accordance with generally accepted accounting principles. As described in Note 2, the Oglethorpe County Board ofEducation has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. In accordance with Government Auditing Standards, we have also issued our report dated April 8, 2004, on our consideration of the Oglethorpe County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on page 27, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, regarding the presentation of the 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 Oglethorpe County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 5, which includes the Schedule of Expenditures of Federal Awards as required by U.S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 2003-34ARL-11 A copy ofthis report has been filed as a permanent record in the office ofthe State Auditor and made available to the press ofthe State, as provided for by Official Code ofGeorgia Annotated section 506-24. Respectfully submitted, RWH:as 2003-34ARL-l l State Auditor OGLETHORPE COUNTY BOARD OF EDUCATION OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30. 2003 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items 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 Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted Total Net Assets Total Liabilities and Net Assets The notes to the basic financial statements are an integral part of this statement. -3- EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 2,564,732 3,992,529 338,600 1,348,229 321,066 2,267 3,990 13,050 3,000 4,314,479 426,023 7,741,502 4,801,748 -6 919 529 $ ===18=,9=5=1=6=86= $ 307,593 1,368,173 603,116 163,868 168,217 33,310 5 065 319 $ 7 709 596 $ 7,764,159 5,692 123,570 528,861 996,040 1,823,768 $ 11,242,090 $ ===18=,9=5=1=6=86= OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year Net Assets - Ending of Year EXPENSES CHARGES FOR SERVICES $ 11,726,709 $ 726,817 719,822 371,842 272,780 1,070,074 196,807 960,283 911,326 303,300 191,751 770,589 6,240 $ 18,228,340 $ 134,929 369,213 224,350 728,492 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 $ 9,190,971 $ 197,711 411,348 199,567 410,577 134,956 466,000 1,207,485 133,861 484,930 $ 12 837 406 $ 415,815 $ 117 18,236 4,682 6,210 85 203,552 22,264 670 961 $ -1,984,994 -528,989 -308,474 -154,039 142,479 . -935, 118 275,403 -960, 198 499,711 -169,439 177,462 -39,045 -6,240 -3,991,481 $ 3,708,650 558,956 151,938 59,447 596,406 125,632 170 687 $ 5371716 $ 1,380,235 9,861,855 $ =====1==1e:2==42=09=0= -5- OGLETHORPE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30. 2003 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Prepaid Items Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries Payable Contracts Payable Retainages Payable Deposits and Deferred Revenue Total Liabilities FUND BALANCES Reserved for: Bus Replacement Continuation of Federal Programs Debt Service Inventories Capital Projects Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,175,243 $ 1,389,489 $ 337,641 3,126,027 $ 528,861 2,564,732 3,992,529 142,001 1,276,742 321,066 2,267 3,990 13 050 99,646 71,487 241,647 1,348,229 321,066 2,267 3,990 13 050 $ 3,272,000 $ 4,686,649 $ 528,861 $ 8,487,510 $ 307,593 1,368,173 $ 58,217 $ 1,733,983 $ 603,116 163,868 110,000 876,984 $ 307,593 1,368,173 603,116 163,868 168217 $ 2,610,967 $ 5,692 $ 5,692 110,520 110,520 $ 528,861 528,861 13,050 13,050 $ 3,323,107 3,323,107 1,408,755 486,558 1,408,755 486,558 $ 1,538,017 $ 3,809,665 $ 528,861 $ 5,876,543 $ 3,272,000 $ 4,686,649 $ 528,861 $ 8,487,510 The notes to the basic financial statements are an integral part of this statement. -6- OGLETHORPE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30. 2003 EXHIBIT" " 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 and Notes Payable Capital Leases Total Long-Term Liabilities $ 5,876,543 $ 3,000 4,314,479 426,023 7,741,502 4,801,748 -6,919,529 10,367,223 96,953 $ -5,000,000 -98,629 --5,098,629 Net Assets of Governmental Activities (Exhibit "A") $ 11,242,090 The notes to the basic financial statements are an integral part of this statement. -7- OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Interest Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,658,448 211,385 $ 10,646,536 2,787,276 728,492 17,925 170 687 558,956 548,686 48,250 88,346 $ 74 025 $ 18,220,749 $ 1,318,263 $ $ 19,361 3,658,448 770,341 11,195,222 2,835,526 728,492 125,632 244 712 19 361 $ 19,558,373 $ 11,436,394 $ 726,473 719,822 333,813 262,011 1,060,858 196,807 976,299 885,248 303,300 191,751 751,023 $ 4,081,390 42,422 6,240 $ 17,892,461 $ 4,081,390 $ $ 328,288 $ -2,763,127 $ 1,209,729 6,572,792 0 $ 11,436,394 726,473 719,822 333,813 262,011 1,060,858 196,807 976,299 885,248 303,300 191,751 751,023 4,081,390 42,422 6 240 0 $ 21,973,851 19,361 $ -2,415,478 509,500 8,292,021 $ 1,538,017 $ 3,809,665 $ 528,861 $.====5=,8=7=6=,5=43= The notes to the basic financial statements are an integral part of this statement. -8- OGLETHORPE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30. 2003 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay $ Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. 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: Capital Lease Payments $ -2,415,478 4,224,297 -521,208 3,703,089 50,202 42 422 Change in Net Assets of Governmental Activities (Exhibit "B") $ ====1,=38=0=,2=3=5 The notes to the basic financial statements are an integral part of this statement. -9- OGLETHORPE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Total Assets LIABILITIES Funds Held for Others EXHIBIT"G" AGENCY FUNDS $ 10,660 20,000 $ ===30='=66=0= $ ===30='=66=0= The notes to the basic financial statements are an integral part of this statement. - 10 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Oglethorpe 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 ofall 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 Oglethorpe 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. The School District reports the following major governmental funds: - 11 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources including Bond Proceeds and grants from Georgia State Financing and Investment Commission and Special Purpose Local Option Sales Tax proceeds to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for the accumulation ofresources for the payment ofgeneral longterm 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 or individuals. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. - 12 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities of the School District's School Food Services Fund, Lottery Programs and Federal Programs were reported as Special Revenue Funds. These funds had a combined fund balance of $145,049 at July 1, 2002. For fiscal year 2003, these funds have been reported as part of the General Fund. In addition, governmental fund activity from the various school activity accounts, which were not reported in the prior year's financial statements, have been reported within the General Fund for fiscal year ended June 30, 2003. The governmental fund activity ofthe various school activity accounts had a fund balance of$125,722 at July 1, 2002. This change is in accordance with generally accepted accounting principles. - 13 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 1,293,586 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 145,049 125,722 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,208,084 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 1,562,712 General Fund Balance July 1, 2002 (Restated) $ 1,209.729 CHANGES IN ACCOUNTING PRINCIPLES The Oglethorpe County Board of Education has implemented a new financial reporting model as required by provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of June 30, 2003. The provisions of GASB Statement No. 34 require the inclusion of a Statement ofNet Assets. The elements comprising Net Assets - Beginning include the following: General Fund (Restated) July 1, 2002 Capital Projects Fund Debt Service Fund $ 1,209,729 6,572,792 509,500 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable Capital Leases Payable $ 8,292,021 13,211,383 -6,547,249 46,751 -5,000,000 -141,051 Net Assets Beginning (See Exhibit "B") $ 9.861.855 - 14 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables - 15 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Oglethorpe County Board ofCommissioners fixed the property tax levy for the 2002 tax digest year(calendaryear) on February 13, 2003 (levy date). Taxes were due on April 23, 2003 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2002 tax digest are reported as revenue in the governmental funds for fiscal year 2003. The Oglethorpe County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes collected as a fee for tax collection and remits the balance oftaxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $3,658,448. The tax millage rate levied for the 2002 tax year (calendar year) for the Oglethorpe County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 12.00 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $558,956 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories ofdonated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. PREPAID ITEMS Payments made to vendors for services that will benefit periods subsequent to June 30, 2003, are recorded as prepaid items. - 16 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost ofnormal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment ALL NIA $ 5,000 20 to 80 years $ 5,000 80 years $ 1,000 5 to 50 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net 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. - 17 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS If a depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. OCGA Section 45-8-11 (b) provides an officer holding public funds may, in his discretion, waive the requirement for security in the case of operating funds placed in demand deposit checking accounts. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2003, the bank balances were $3,647,364. The amounts of the total bank balances are classified into three categories of credit risk: Category 1 - Cash that is insured (e.g., Federal depository insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Uncollateralized deposits. (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name.) - 18 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 3: DEPOSITS AND INVESTMENTS The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 203,863 2 2,561,001 3 882,500 Total $ 3,647.364 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value ofthe School District's total investments was $3,931,733 which is materially the same as fair value. The investments are classified as to risk categories as follows: Type of Investment Carrying Amount Fair Value Investments Not Subject to Categorization Local Government Investment Pools Guaranteed Investment Contract $ 3,402,872 $ 3,402,872 528,861 528,861 Total Investments $ 3,931,733 $ 3,931,733 The carrying amounts shown above includes amounts maintained in an investment pool by the State ofGeorgia, Office ofTreasury and Fiscal Services in which the School District owns no identifiable securities. The investment policy ofthe State of Georgia, Office ofTreasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the Securities and Exchange Commission as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety ofcapital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is - 19 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 3: DEPOSITS AND INVESTMENTS voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U. S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Balances July 1, 2002 Increases Balances Decreases June 30, 2003 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 3,000 214,687 $ 4,099,792 $ $ 3,000 0 4,314,479 Total Capital Assets Not Being Depreciated $ 217,687 $ 4,099,792 $ 0 $ 4,317,479 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 7,741,502 4,826,171 $ 426,023 124,505 $ $ 148,928 7,741,502 4,801,748 426,023 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 2,789,287 3,491,698 266,264 161,923 337,984 21,301 148,928 2,951,210 3,680,754 287,565 Total Capital Assets, Being Depreciated, Net $ 6,446,447 $ -396,703 $ 0 $ 6,049,744 Governmental Activity Capital Assets - Net $ 6,664.134 $ 3,703.089 $ 0 $ 10,367.223 Capital assets being acquired under capital leases as of June 30, 2003, are as follows: -20- OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 5: CAPITAL ASSETS Equipment Less: Accumulated Depreciation Governmental Funds $ 147,699 24,615 Current year depreciation expense by function is as follows: $=====1==23'='=.0==8==4 Instruction Support Services Pupil Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 306,669 $ 344 37,954 10,750 9,190 884 135,943 195,065 19 474 $ 521,208 Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and general obligation bond proceeds specifically for retirement of outstanding bond principal and interest (Debt Service Funds) are reported as restricted assets in the Statement ofNet Assets because their use is limited by applicable bond covenants or statutory provisions. Restricted assets at June 30, 2003, were as follows: District-wide Capital Projects Bond SPLOST Proceeds Debt Service Funds Restricted Cash and Cash Equivalents: Capital Acquisitions Restricted Investments: Debt Services Capital Acquisitions $ 804,824 $ 59,594 $ $ 3,126,027 528,861 - 21 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the Board's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to and acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount ofthat loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates Claims Paid End ofYear Liability $ 0 $ 0 $ 0 $ 0 $ 0 $ 2 770 $ 2 770 $ 0 The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 100,000 $ 100,000 Note 8: LONG-TERM DEBT CAPITAL LEASES The Oglethorpe County Board of Education has entered into various lease agreements as lessee for buses and office equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. - 22- OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 8: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2001 0% $ 5,000.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2002 $ 141,051 $ 5,000,000 $ 5,141,051 Deductions Payments 42,422 42,422 Balance June 30, 2003 Portion of Long-Term Debt Due within One Year $==-98='=.6"""2"""9 $ 5,000.000 $ 5,098.629 $ 33,310 $_ _ _ _0 $_~3~3,~31~0 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 CaQital Leases PrinciQal Interest 2004 $ 33,310 $ 3,362 2005 32,133 2,141 2006 33,186 1,088 Total Principal and Interest $ 98.629 $ 6 591 Fiscal Year Ended June 30 General Obligation Debt PrinciQal 2007 - 2013 $ 5,000.000 - 23 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT"H" Note 9: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of $159,672 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance of Non-Certified Personnel In the amount of $140,500 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 $19,172 Note 10: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003: Project Unearned Executed Contracts Oglethorpe County Middle/High School $ 2,344,341 The amount described in this note is not reflected in the basic financial statements. Note 11: 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. Note 12: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. - 24 - OGLETHORPE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "H" Note 12: 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 2003 2002 2001 100% 100% 100% $ 937,928 $ 865,420 $ 998,372 - 25 - OGLETHORPE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDEDJUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 3,522,752 $ 3,522,752 $ 3,658,448 211,385 10,381,763 10,615,931 10,646,536 2,289,947 2,475,712 2,787,276 225,000 225,000 728,492 61,000 61,000 17,925 170,687 $ 16,480,462 $ 16,900,395 $ 18,220,749 $ 10,867,738 $ 11,131,565 $ 11,436,394 740,843 725,468 361,995 276,280 971,805 281,422 986,120 1,030,269 358,514 755,000 40,000 773,004 958,994 361,995 284,780 1,074,912 289,922 986,120 1,043,022 419,494 755,000 40,000 726,473 719,822 333,813 262,011 1,060,858 196,807 976,299 885,248 303,300 191,751 751,023 48,662 $ 17,395,454 $ 18,118,808 $ 17,892,461 $ -914 992 $ -1,218,413 $ 328,288 $ 30,000 $ 30,000 -30,000 -30 000 $ 0 $ 0 $ -914,992 $ -1,218,413 $ 328,288 1,610,049 1,610,049 1,209,729 -52,088 -52,088 0 Fund Balances - Ending $ 642,969 $ 339 548 $ ===1=,5=3=8'=01=7= Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. See notes to the basic financial statements. - 27 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Pass-Through From Office of Treasury and Fiscal Services National Forest Reserve Funds Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Improvement Grant Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Elementary and Secondary Education Act Title I Grants to Local Educational Agencies School Improvement Title II Enhancing Education Through Technology Improving Teacher Quality Title VI Innovative Education Program Strategies Rural and Low Income Schools TitleX Charter Schools Reading Excellence - Local Reading Improvement Safe and Drug-Free Schools and Communities School Renovation Technology Vocational Education - Basic Grants to States High School Program Basic Grant Total U.S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 N/A N/A $ $ (2) 706,731 706,731 10.550 10.665 N/A NIA $ 44,289 {3} 751 020 84.027 84.173 84.173 N/A $ N/A N/A $ 351,239 62,748 11 808 425,795 * 84.010 * 84.010 84.318 84.367 84.298 84.358 84.282 * 84.338 84.186 84.352 84.048 N/A N/A N/A N/A NIA N/A NIA NIA N/A N/A N/A $ 502,145 5,366 13,685 112,624 15,673 39,560 265,589 488,876 13,389 48,250 34 919 1 965 871 - 28 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Labor, U.S. Department of Pass-Through From Georgia Department ofTechnical and Adult Education Georgia School to Work CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 17.249 N/A $ 430,095 (4) Total Federal Financial Assistance N/A = Not Available $ =====3,=14=6=,9=8=6 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the School Breakfast Program ($83,533) were not maintained separately and are included in the 2003 National School Lunch Program. (3) Funds earned on this program of $8,884 do not require reporting of expenditures. (4) Includes Federal Assistance of $29,131 provided to subrecipients. Major Programs are identified by an asterisk (*) in front of the CFDA number. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Oglethorpe County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the basic financial statements. See notes to the basic financial statements. - 29 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 SCHEDULE "3" AGENCY/FUNDING GOVERNMENTAL FUND TYPES CAPITAL GENERAL PROJECTS FUND FUND GRANTS Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program $ 496,782 $ Kindergarten Program - Early Intervention Program 53,616 Primary Grades (1-3) Program 1,378,825 Primary Grades - Early Intervention (1-3) Program 167,120 Upper Elementary Grades (4-5) Program 772,093 Upper Elementary Grades - Early Intervention (4-5) Program 98,771 Middle School (6-8) Program 1,337,724 High School General Education (9-12) Program 843,533 Vocational Laboratory (9-12) Program 499,374 Students with Disabilities Category I 202,968 Category II 258,947 Category Ill 839,770 Category IV 158,439 CategoryV 31,856 Gifted Student - Category VI 114,488 Remedial Education Program 60,952 Alternative Education Program 95,673 Media Center Program 201,964 20 Days Additional Instruction 66,996 Staff and Professional Development 42,094 Indirect Cost Central Administration 394,946 School Administration 458,422 Facility Maintenance and Operations 599,761 Categorical Grants Pupil Transportation Regular 412,749 Bus Replacement 94,799 Sparsity 19,000 Nursing Services 59,454 Principal Supplements 9,040 Vocational Supervisors 17,633 Education Equalization Funding Grant 646,500 Food Services 54,254 Vocational Education 11,467 Austerity Reduction -250,683 Other State Programs Health Insurance 140,500 National Teacher Certification 2,471 Preschool Handicapped Program 18,711 Special Education Low Incidence Grant 21,447 Statewide After School Program 4-8 17,937 Statewide Reading Program K-3 28,628 Lottery Programs Assistive Technology 5,373 Computers in the Classroom 44,835 Georgia Institute ofTechnology Student Information System 48,135 Georgia State Financing and Investment Commission Reimbursement on Construction Projects $ 548,686 - 30- TOTAL 496,782 53,616 1,378,825 167,120 772,093 98,771 1,337,724 843,533 499,374 202,968 258,947 839,770 158,439 31,856 114,488 60,952 95,673 201,964 66,996 42,094 394,946 458,422 599,761 412,749 94,799 19,000 59,454 9,040 17,633 646,500 54,254 11,467 -250,683 140,500 2,471 18,711 21,447 17,937 28,628 5,373 44,835 48,135 548,686 OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30. 2003 SCHEDULE "3" AGENCY/FUNDING GRANTS 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 $ 19,172 $ 19,172 50,000 50 000 $ 10,646,536 $ 548,686 $ =====11=!,,1=9=55,22=2= See notes to the basic financial statements. - 31 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30. 2003 SCHEDULE "4" PROJECT Remodeling. renovating, expanding and equipping existing classrooms, instructional and support space and grounds at the primary, elementary, middle and high schools, as well as the bus garage, acquiring any necessary real and personal property, purchase of school buses and paying any expenses incident thereto Rehabilitating, repairing, renovating, extending and improving Oglethorpe County Middle/High School, Oglethorpe County Primary School, and related facilities useful or desirable in connection therewith, including without limitation roof replacements and repairs, mechanical system repairs and replacements, additional parking and paving, and security systems; acquiring technology additions and improvements; purchasing school furnishings, equipment and fixtures, and paying expenses incident to accomplish the forgoing ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) AMOUNT EXPENDED IN PRIOR YEAR (3) PROJECT STATUS $ 3,100,000 $ 3,100,000 $ 948,416 $ 1,142,442 Ongoing 4,000,000 7,001,853 3,130,364 Ongoing $ 7,100,000 $ 10,101,853 $ 4,078,780 $ 1,142,442 (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 Oglethorpe County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the project. See notes to the basic financial statements. - 32 - OGLETHORPE COUNTY BOARD OF EDUCATION GENERAL FUND - QUALITY BASIC EDUCATION PROGRAM (QBE} ALLOTMENTS AND EXPENDITURES - BY PROGRAM YEAR ENDED JUNE 30. 2003 SCHEDULE "5" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program 559,622 $ 61,736 1,539,113 188,726 860,092 111,876 1,471,773 947,062 552,304 1,672,971 129,336 67,467 106,107 659,850 $ 137,228 1,498,930 210,893 902,200 107,703 1,451,119 1,286,032 493,133 192,408 1,157,633 109,285 48,949 134,205 61,666 124,320 15,261 $ 379 66,605 2,956 38,637 281 48,530 69,712 63,318 5,102 77,294 2,591 362 2,462 787 1,553 675,111 137,607 1,565,535 213,849 940,837 107,984 1,499,649 1,355,744 556,451 197,510 1,234,927 111,876 49,311 136,667 62,453 125 873 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 8,268,185 $ 8,575,554 $ 395,830 $ 8,971,384 Media Center Program Staff and Professional Development 225,286 47 519 289,129 15,308 44,048 30,389 333,177 45 697 TOTAL QBE FORMULA FUNDS $ 8,540,990 $ 8,879,991 $ 470 267 $ ===9,!,=,35=0.,.,2=5=8 (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. - 33- SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 April 8, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oglethorpe County Board of Education REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Oglethorpe County Board of Education as of and for the year ended June 30, 2003, which collectively comprise Oglethorpe County Board of Education's basic financial statements and have issued our report thereon dated April 8, 2004. 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 of the United States. Compliance As part of obtaining reasonable assurance about whether Oglethorpe County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective ofour audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Oglethorpe County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-30 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 Oglethorpe County Board of Education's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-7091-03-01 and FS-7091-03-02. A material weakness is a condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the management, members of the Oglethorpe County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:as 2003-34YB-30 State Auditor RUSSELL W. HINTON STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 April 8, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Oglethorpe County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Oglethorpe County Board of Education with the types of compliance requirements described in the US. Office ofManagement and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2003. Oglethorpe County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section ofthe accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements oflaws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Oglethorpe County Board of Education's management. Our responsibility is to express an opinion on Oglethorpe 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 Oglethorpe 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 Oglethorpe County Board ofEducation's compliance with those requirements. 2003SA-30 In our opinion, the Oglethorpe County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2003. Internal Control Over Compliance The management of Oglethorpe 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 Oglethorpe County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted certain matters involving the internal control over compliance 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 compliance that, in our judgment, could adversely affect the Oglethorpe County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FA-7091-03-01, FA-7091-03-02 and FA-7091-03-03. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level of risk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the management, members of the Oglethorpe County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~.4:k RWH:as 2003SA-30 State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS OGLETHORPE COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-7091-01-01 FS-7091-02-01 Further Action Not Warranted Previously Reported Corrective Action Implemented SECTION IV FINDINGS AND QUESTIONED COSTS OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Oglethorpe County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Oglethorpe County Board ofEducation disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Capital Assets None ofthe reportable conditions described above are considered to be a material weakness. 3. Noncompliance Material to the Financial Statements The audit of the Oglethorpe 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 Oglethorpe County Board of Education disclosed reportable conditions in internal control over major programs for the following compliance requirements. Activities Allowed or Unallowed Special Tests and Provisions Allowable Costs/Cost Principles Subrecipient Monitoring Procurement and Suspension and Debarment None ofthe reportable conditions described above are considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Oglethorpe 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 Oglethorpe County Board of Education's audit disclosed audit findings required to be reported by section .510(a) of 0MB Circular A-133. These audit findings are included in section IV of this report. - 1- OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 84.010 Elementary and Secondary Education Act - Title I - Grants to Local Educational Agencies 84.010 Elementary and Secondary Education Act - Title I - School Improvement 84.338 Reading Excellence - Local Reading Improvement 17.249 Georgia School to Work 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Oglethorpe County Board of Education qualified as a low risk auditee as defined by Section .530 of 0MB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7091-03-01 Our examination of the various principal's accounts disclosed weaknesses in internal controls as discussed below: Cash and Cash Equivalents The bank reconciliation function was not separated from the record keeping and voucher payment functions. Revenues/Receivables/Receipts Deposit preparation was not separated from the record keeping and cash custody functions. Expenditures/Liabilities/Disbursements The check writing function was not separated from record keeping or processing of signed checks. These deficiencies were a result ofmanagement's decision to limit the number ofadministrative staff made responsible, at the various principal account sites, for the accounting functions and their failure -2 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Reportable Condition Finding Control Number: FS-7091-03-01 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. Management's Response: CAPITAL ASSETS Inadequate Capital Asset Records Reportable Condition Finding Control Number: FS-7091-03-02 The Oglethorpe County Board of Education capital asset records failed to include a modular classroom building purchased in the prior year and the current year additions oftwo buses and the related depreciation cost ofthose items. In addition, a physical inspection ofassets from the capital assets listing identified three items that could not be located and one item that was incorrectly identified. The School District should establish appropriate polices and procedures designed to ensure that Capital Assets and depreciation cost are reported accurately within its basic financial statements as required. Management's Response: III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7091-03-01 During the year in review, the School District identified three schools as participating in a schoolwide program. While Federal provisions prescribe that multiple funding sources (Federal, State or -3- OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ACTIVITIES ALLOWED OR UNALLOWED ALLOWABLE COSTS/COST PRINCIPLES SPECIAL TESTS AND PROVISIONS Fiscal Requirements of School-wide Program Not Fully Implemented Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7091-03-01 Local) are required to support a school-wide program, we noted that the Title I program (CFDA 84.010) was identified as the only funding source supporting the school-wide program concept at the participating schools and, in contrast with Federal requirements, the School District arbitrarily charged the Title I fund with school-wide expenditures. In accordance with provisions ofU. S. Department of Education Instructions and 0MB Circular A133, Compliance Supplement provisions, eligible schools are able to use their Title I, Part A funds, in combination with other Federal, State and local funds, in order to upgrade the entire educational program ofthe school and to raise academic achievements for all students. By combining funds from Title I and other eligible U. S. Department ofEducation funded programs in support ofa school-wide program, U. S. Department of Education Instructions provide that specific school-wide program costs lose their identity but only in those circumstances when funds are combined in a school-wide program. In line with 0MB Circular A-87 requirements, school-wide expenditures should be charged to those Federal funding sources supporting the school wide program in a reasonable manner. If there is only one Federal funding source, then costs should be charged to the Federal program based on the specific benefits derived from that cost. When more than one Federal program supports a school-wide program, then school-wide program expenditures may be allocated to specific Federal funds in proportion to the different Federal funds provided in support of the school-wide program. It was the School District's understanding that costs related to a school-wide program lose their identity and therefore any school-wide program cost can be charged to the Title I program. They were unaware that this was only applicable when there is more than one funding source supporting the school-wide program. The School District should implement procedures to assure that ifthe Title I program continues to be the only funding source in support ofa school-wide program, only those costs that specifically relate to the Title I program may be charged to the Title I fund. If more than one funding source is to support the school-wide program in the future, then procedures should be developed to (1) combine such funds as prescribed by U.S. Department ofEducation and (2), in line with 0MB Circular A-87 provisions, allocate such school-wide program costs to the respective Federal fund in a reasonable manner. The School District should seek Georgia Department of Education guidance in implementing fiscal procedures for combining and allocating school-wide program expenditures to Federal programs. -4 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS PROCUREMENT AND SUSPENSION AND DEBARMENT Inadequate Controls over Suspension and Debarment Certifications Reportable Condition U.S. Department of Education Through Georgia Department of Education Finding Control Number: FA-7091-03-02 The Oglethorpe County School District's internal controls over procurement and suspension and debarment for the Reading Excellence Program (CFDA #84.338) were determined to be insufficient to ensure that suspension and debarment certifications were obtained prior to contracting with vendors for goods or services equal to or in excess of $100,000. In December 2002, the School District contracted with Pearson Education for software totaling $187,764, however, no suspension and debarment certification was obtained from this vendor. As set forth in 34CFR 85.505 and 0MB Circular A-13 3, Part 3, Section I, contractors receiving individual awards for $100,000 or more must certify that the organization and its principals are not suspended or debarred. This deficiency occurred because management failed to establish internal controls over procurement and suspension and debarment. The School District should establish and implement internal controls to ensure that suspension and debarment certificates are completed for all vendors who contract to supply goods or services equal to or in excess of $100,000 that are paid from Federal grants as required. SUBRECIPIENTS MONITORING Inadequate Controls over Monitoring Subrecipients Reportable Condition U.S. Department of Labor Through Georgia Department of Technical and Adult Education Finding Control Number: FA-7091-03-03 The local School District did not fulfill its subrecipient monitoring responsibilities for the SchoolTo-Work program (CFDA No. 17.249). On August 12, 2002, the School District entered into a contract with the Athens Technical College to perform program services related to the School-ToWork program. As set forth in 34 CFR 80.37 and 0MB Circular A-133 Compliance Supplement, the local School District was responsible for identifying the Federal award information and related Federal compliance requirements imposed upon Athens Technical College by Federal statute and regulation in the agreement. Such provisions ofthe agreement should include that the results ofthe College's annual Single Audit be supplied to the local School District. Our review of the Board's contract with the College revealed that it did not contain information to identify the Federal funding source supporting the program activities to be performed and those compliance requirements that apply to the program. There were no provisions in the contract requiring that the results of the College's annual Single Audit be furnished to the Board. We noted that the Board neither requested nor received the results ofthe College's annual Single Audit so that -5 - OGLETHORPE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS SUBRECIPIENTS MONITORING Inadequate Controls over Monitoring Subrecipients Reportable Condition U.S. Department of Labor Through Georgia Department of Technical and Adult Education Finding Control Number: FA-7091-03-03 the Board could review the audit and, if applicable, take corrective action on any findings related to the School-To-Work program. These subrecipient monitoring discrepancies occurred because management did not establish controls to assure that it performed its responsibilities. The local School District should implement internal controls to ensure that School-To-Work funded contracts awarded to the College contain sufficient Federal award information and applicable Federal compliance requirements. Provisions of such contracts should require the results of the College's annual Single Audits be furnished to the Board. In addition, the Board should develop procedures to ensure that it receives and reviews such reports, and where applicable, take corrective action on School-To-Work Federal compliance findings. -6-