ROCKDALE COUNTY BOARD OF EDUCATION CONYERS, 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 ROCKDALE 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 5 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 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 11 I NOTES TO THE BASIC FINANCIAL STATEMENTS 13 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 29 ROCKDALE 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 33 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 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 February 20, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Rockdale County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Rockdale County Board of Education, as of and for the year ended June 30, 2003, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility ofthe Rockdale County Board ofEducation's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our op1mons. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective position ofthe governmental activities, each major fund, and the aggregate remaining fund information of the Rockdale County Board of Education, as of June 30, 2003, and the respective changes in financial position, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2003-34ARL-11 As discussed in Note 2 to the basic financial statements, during fiscal year 2003, the Board consolidated its individual school activity accounts for inclusion in the basic financial statements and changed its method 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 Rockdale 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. In accordance with Government Auditing Standards, we have also issued our report dated February 20, 2004, on our consideration of the Rockdale County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through ix 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 ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Rockdale 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-11 State Auditor ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 INTRODUCTION Our discussion and analysis of Rockdale County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2003. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the 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 2003 are as follows: The School District implemented GASB 34 for 2003. Due to this being the implementation year, many comparisons are not available that will be available for 2004. On the district-wide financial statements, the assets of the School District exceeded liabilities by $92.8 million. Of this amount, $10 million is unrestricted and is available for spending at the School District's discretion. The School District had $108.3 million in expenses relating to governmental activities; only $60.3 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $48.9 million were adequate to provide for these programs. As stated above, general revenues accounted for $48.9 million or 45% of all revenues totaling $109.2 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. OVERVIEW OF THE FINANCIAL STATEMENTS This report consists of several parts including 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 andfundfinancial 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. 1 ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 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 Fiduciary Funds statement provides 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 Rockdale County School District, the General Fund, District-wide Capital Projects Funds, and Debt Service Funds 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 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 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. 11 ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 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 year-end 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 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 within 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 this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, net asset comparisons to fiscal year 2002 are not available. ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 1 Net Assets (in Thousands) Governmental Activities Fiscal Year 2003 Assets Current and Other Assets Capital Assets, Net $ 25,789,134 90,238,819 Total Assets $116,027,953 Liabilities Current and Other Liabilities Long-Term Liabilities $ 9,941,342 13,325,000 Total Liabilities $ 23,266,342 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted $ 76,913,819 5,998,779 9,849,013 Total Net Assets $ 92,761,611 Table 2 shows the Changes in Net Assets for this fiscal year. Since this is the first year the School District has prepared financial statements following GASB Statement 34, revenue and expense comparisons to fiscal year 2002 are not available. IV ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 2 Change in Net Assets (in Thousands) Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Total Program Revenues General Revenues: Taxes Property Taxes For Maintenance and Operations For Debt Service Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Defeasance Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and O{'eration 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 Expenses Increase in Net Assets Governmental Activities Fiscal Year 2003 $ 2,936,554 57,377,826 $ 60,314,380 $ 36,564,245 2,678,085 7,584 3,914,373 1,673,022 300,624 1,785,136 415,336 3,327,500 -1,751,698 $ 48,914,207 $109,228,587 $ 70,107,143 3,537,337 2,096,109 2,914,932 1,111,057 6,075,594 1,419,405 8,020,984 4,026,651 1,490,271 742,572 5,448,901 1,281,820 $108,272,776 $ 955.811 V ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 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. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Since this is the first year the School District has prepared financial statements following GASB Statement 34, cost of service comparisons for fiscal year 2002 are not available. Table 3 Governmental Activities (in Thousands) Total Cost of Services Fiscal Year 2003 Net Cost of Services Fiscal Year 2003 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 ofNon-Instructional Services Food Services Interest on Short-Term and Long-Term Debt $ 70,107,143 $ 20,073,113 3,537,337 2,096,109 2,914,932 1,111,057 6,075,594 1,419,405 8,020,984 4,026,651 1,490,271 742,572 2,773,161 1,548,148 1,768,829 837,975 6,011,060 1,419,050 8,019,536 2,520,854 1,144,009 212,744 5,448,901 1,281,820 348,097 1,281,820 Total Expenses $108!272!776 $ 47!958!396 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 and other financing sources of $111,272,505 million and total expenditures and other financing uses of $128,521,294 million. Vl ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law and board policy. The most significant budgeted fund is the general fund. During the course of fiscal year 2003, the School District amended its general fund budget as needed. The School District uses a system wide and site based budgeting process. This process includes input from all schools, central office departments, parents, community members and school councils. The budgeting systems area designed to control total site and program budgets but provide flexibility for site management. The School District budget goals for fiscal year 2003 were - 5% average pay raise (3.25% + step for certified) Maintain low student: teacher ratios Implement K-12 benchmarks for regular student achievement assessment Adding Career Tech offerings (Manufacturing course, Teacher Apprenticeships) Computer and networking upgrades Opening Peek's Chapel Elementary School For the General Fund, the actual revenues of $103,985,350 were over the final budgeted amounts of $101,166,703 by $2,818,647. The state revenues were under budget by $4,368 due to cuts in funding by the legislatures mid year because of shortfalls in overall state revenues. The inclusion of the principals' accounts in our financial statements but not in our budget contributes to the increase of actual miscellaneous revenues when compared to the budgeted revenues. The actual expenditures, of $104,027,530 exceeded the final budgeted expenditure amount of $102,608,182 by $1,419,348. The principals' account expenditures have been added to the year end financials because of a new GASB-34 requirement but are not budgeted for each year. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2003, the School District had $90.2 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation. Since this is the first year the School District has prepared financial statements following GASB Statement 34, capital assets comparisons to fiscal year 2002 are not available. Vll ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Table 4 Capital Assets (Net of Depreciation, in Thousands) Governmental Activities Fiscal Year 2003 Land Construction in Progress Buildings and Improvements Equipment Land Improvements Total $ 5,343,324 77,914 78,325,398 2,505,303 3,986,880 $ 90,238,819 Due to the ongoing growth in the county, the School District has numerous construction projects including new buildings, additions and renovations. Debt At June 30, 2003, the School District had $13.3 million in bonds outstanding with $2.3 million due within one year. Table 5 summarizes the School District's debt which includes general obligation bonds. Table 5 Debt at June 30 (in Thousands) Governmental Activities Fiscal Year 2003 General Obligation Bonds $ 13,325,000 At June 30, 2003, the School District's bonds have assigned ratings of "Al" 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 the financial position or results of operations are as follows: Vlll ROCKDALE COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Economic Slowdown - State funding for education has not only been stagnant but actually decreased. For the last several years, we have increased the percentage of local funding required to balance our general fund budget each year. This puts more pressure on the School District to prioritize its educational programs and provide additional local funding. Although we haven't increased our tax millage rate, we have cut personnel and even eliminated instructional programs or not purchased needed instructional materials to balance the budget this year. We don't anticipate that this will be any better next year. Additional costs with the continued lowering of class sizes during the phased in implementation of House Bill 1187 will continue to put a strain on our financial operations for at least two more years. Our school system continues to grow at between 175 - 225 students per year. This growth in combination with the economic slowdown discussed above puts an additional strain on the financial position of the school system. In the area of local tax revenues we have benefited in increased revenues due to the growth but have been impacted negatively by the state revenue cuts discussed above. With this continued growth, it is hard to project accurate enrollment and maintain state mandated class sizes from fall to spring of every school year. It also requires the purchase of instructional materials such as textbooks for the anticipated growth prior to receiving any state or local revenues generated due to the growth. Capital Improvements - the School District plans capital improvements as future capital needs arise due to increased student population and facility repair or maintenance needs. Specific capital expenditure plans are formalized in conjunction with anticipated SPLOST receipts and anticipated annual receipts for capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs and has a board as well as state approved 5 year Facilities Plan that documents our needs and plans to address them. Despite these challenges, the School District is strong financially and we remain optimistic about the ability of the School District to maximize all of the financial resources to provide a quality education to our students. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's, 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 Mr. Brad C. Boling, Director of Business Services for the Rockdale County School System, 954 North Main Street, Conyers, Georgia 30012. You may also email your questions to Mr. Boling at bboling@rockdale.k12.ga.us. IX ROCKDALE COUNTY BOARD OF EDUCATION ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2003 Cash and Cash Equivalents Investments Accounts Receivable. Net Taxes State Government Other Inventories Capital Assets Land Construction in Progress Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Retainages Payable Deposits and Deferred Revenues 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 EXHIBIT"A" GOVERNMENTAL ACTIVITIES $ 3,601.407 11.485,858 3,419,734 6,962,665 96.480 222,990 5,343,324 77,914 9,299,374 106,981,518 12,608,966 -44,072,277 $ ===1=16~02=7=9=5==3 $ 1,997,903 7,773,631 67,297 102,511 2,275,000 11,050,000 $ 23,266,342 $ 76,913,819 1,445 605,864 1,152,729 4,238,741 9,849,013 $ 92,761,611 $ ===1=16=='=02=7""'9=5==3 The notes to the basic financial statements are an integral part of this statement. -3 - ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30. 2003 EXHIBIT"B" 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 EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 70,107,143 $ 3,537,337 2,096,109 2,914,932 1,111,057 6,075,594 1,419,405 8,020,984 4,026,651 1,490,271 742,572 5,448,901 1,281,820 $ 108,272,776 $ 228,809 $ 2,707,745 49,805,221 $ 764,176 547,961 1,146,103 273,082 64,534 355 1,448 1,505,797 346,262 529,828 2,393,059 2,936,554 $ ===~:5,7,,3:.7;7,,8;2;~6 $ -20,073, 113 -2,773, 161 -1,548,148 -1,768,829 -837,975 -6,011,060 -1,419,050 -8,019,536 -2,520,854 -1, 144,009 -212,744 -348,097 -1,281,820 -47,958,396 General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars 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 Special Items Defeasance Total General Revenues Change in Net Assets Net Assets - Beginning of Year $ 36,564,245 2,678,085 7,584 3,914,373 1,673,022 300,624 1,785,136 415,336 3,327,500 -1 751 698 $ _ ____;4:,;,8:,:9""1c:,:4,:2:::;07'- $ 955,811 91,805,800 Net Assets - Ending of Year $ ===9=2.i.7..6..1."'=6=1=1 The notes to the basic financial statements are an integral part of this statement. -5- ROCKDALE 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 Other Inventories Total Assets GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,896,234 $ 460,122 $ 245,051 $ 3,601,407 9,195,512 1,463,388 826,958 11,485,858 1,194,962 6,962,665 96,480 222,990 2,383,182 80,720 3,658,864 6,962,665 96,480 222,990 $ 20,568,843 $ 4,306,692 $ 1,152,729 $ 26,028,264 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Salaries 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 Designated for Self-Insurance Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances $ 1,997,903 7,773,631 $ 102,511 $ 9,874,045 $ 67,297 67,297 $ 1,997,903 7,773,631 67,297 102,511 $ 9,941,342 $ 1,445 382,874 222,990 $ 7,414 10,080,075 $ 10,694,798 $ $ $ 1,152,729 4,238,741 1,445 382,874 1,152,729 222,990 4,238,741 7,414 10,080,075 654 654 4,239,395 $ 1,152,729 $ 16,086,922 $ 20,568,843 $ 4,306,692 $ 1,152,729 $ 26,028,264 The notes to the basic financial statements are an integral part of this statement. -6- ROCKDALE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2003 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") $ 16,086,922 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 $ 5,343,324 77,914 9,299,374 106,981,518 12,608,966 -44,072,277 90,238,819 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. -239, 130 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 -13,325,000 Net Assets of Governmental Activities (Exhibit "A") $ 92,761,611 The notes to the basic financial statements are an integral part of this statement. -7- ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Capital Outlay Debt Services Principal Interest Payment to Bond Refunding Escrow Agent Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 36,341.091 $ 2,661,455 $ 1,869,443 $ 3,914,373 104,203 52,841,056 6,321.906 2,973,791 179,193 21,089 215,054 3,458,870 39,002,546 5,888,019 52,841,056 6,321,906 2,973,791 415,336 3,458,870 $ 103,985,350 $ 3,935,462 $ 2,980.712 $ 110,901,524 $ 68,042,910 $ 68,042,910 3,463,202 2,096,109 2,749,466 $ 1,247,250 5,950,209 1,398,632 7,498,495 3,980,285 1,449,649 742,572 5,408,751 65,333 168 $ 17,559 1,936,989 20,605 3,463,202 2,096,109 2,814,799 1,247,250 5,950,209 1,419,405 7,516,054 3,980,285 1,449,649 742,572 5,408,751 1,936,989 3,355,000 1,281,820 17,456,698 3,355,000 1,281,820 17,456,698 $ 104,027,530 $ 2,020,049 $ 22,114,123 $ 128,161,702 $ -42 180 $ 1,915,413 $ -19,133.411 $ -17,260,178 $ $ -370,981 $ -370,981 $ $ -413,161 $ 11,107,959 370,981 $ 370,981 $ 2,286,394 $ -19,133,411 $ 1,953,001 20,286,140 370,981 -370,981 0 -17,260,178 33,347,100 $ 10,694,798 $ 4,239,395 $ 1.152,729 $ 16,086,922 The notes to the basic financial statements are an integral part of this statement. -8- ROCKDALE 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") $ -17.260,178 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: Land - Donation Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense $ 220,000 2,337,696 -3,583,031 -1,025,335 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. 247,368 In the Statement of Activities, only the gain on the sale of the (land/building/equipment) is reported, whereas in the Governmental Funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the (cost of the land/carrying value of the building/equipment) sold. -66,044 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 Payments to Bond Refunding Agent for Principal Retirement Total Long-Term Debt Repayments $ 3,355,000 15,705,000 19,060,000 Change in Net Assets of Governmental Activities (Exhibit "B") $ ===95=5=,8=1=1 The notes to the basic financial statements are an integral part of this statement. -9- ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2003 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Local Government Investment Pool Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 18,750 $ 194,463 55,720 $ 74,470 $ ====1=9=4=,4=63= $ 194,463 $ _ _ _7_4.._,4_70-'-- $ 74 470 $==1=9=4=,4=63= The notes to the basic financial statements are an integral part of this statement. -10- ROCKDALE COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30. 2003 EXHIBIT"H" REVENUES Contributions Donors Investment Earnings Interest Total Revenues EXPENSES None Noted Change in Net Assets Net Assets - Beginning Net Assets - Ending PRIVATE PURPOSE TRUSTS $ 18.750 790 $ 19,540 $ 0 $ 19,540 54,930 $ ===7=4=4=70= The notes to the basic financial statements are an integral part of this statement. - 11 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30. 2003 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Rockdale County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Rockdale 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 ofgoods 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: - 13 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" 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 to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: The Private - Purpose Trust fund reports a trust arrangement under which the income earned on the trust may be expended to provide college scholarships to students from Rockdale County, Georgia. Agency funds account for assets held by the School District as an agent for various funds, governments or individuals. BASIS OF ACCOUNTING The basis of accounting 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 - 14 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. For fiscal year 2003, the School District changed its method of accounting for the final two payments on one hundred and ninety day contracts and for the related revenue due from the State to fund these contracts. Adjustments have been made in the fiscal year 2003 financial statements to record costs for salaries and fringe benefits earned by employees through June 30, 2003, (even though paid in July and August 2003) and the related revenue due from the State to fund these contracts. Adjustments were also made for the similar salaries, benefits and related State revenues earned in fiscal year 2002 and recorded in fiscal year 2003. The net effect of the above accounting treatment results in the accompanying financial statements reflecting costs for those salaries and benefits earned by employees during fiscal year 2003 and the related State revenue to fund these contracts. In addition, both the net assets and fund balance at July 1, 2002, have been restated for salaries and benefits earned by employees in fiscal year 2002 but not paid until July and August 2002 and for the related State revenue for these contracts. This change is in accordance with generally accepted accounting principles. See Restatement of Prior Year Fund Balance. RESTATEMENT OF PRIOR YEAR FUND BALANCE - GENERAL FUND In prior years, the financial activities 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 $515,754 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$637,025 atJuly 1, 2002. This change is in accordance with generally accepted accounting principles. - 15 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Fund Balance July 1, 2002 $ 11,420,389 Add Funds Consolidated with General Fund: School Food Services Fund School Activity Account - Governmental Activity 515,754 637,025 Add: State Revenue Related to July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 6,946,449 Deduct: July and August 2002 Salary Payments Earned by Employees in Fiscal Year 2002 -8,411,658 General Fund Balance July 1, 2002 (Restated) $ 11,107,959 CHANGES IN ACCOUNTING PRINCIPLES The Rockdale 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 $ 11,107,959 1,953,000 20,286,140 Governmental Funds (Restated) July 1, 2002 Capital Assets Accumulated Depreciation Property Tax Revenue Timing Differences Bonds and Notes Payable $ 33,347,099 132,778,081 -41,44 7,883 -486,497 -32,385,000 Net Assets Beginning (See Exhibit "B") $ 91,805,800 - 16 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the Board to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables - 17 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Rockdale County Board of Commissioners fixed the property tax levy for the 2002 tax digest year (calendar year) on August 8, 2002 (levy date). Taxes could be paid in two installments on October 20, 2002 and December 20, 2002 (due dates). 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 Rockdale County Tax Commissioner bills and collects the property taxes for the School District, withholds 1% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2003, for maintenance and operations amounted to $36,333,507 and for school bonds amounted to $2,661,455. Tax millage rates levied for the 2002 tax year (calendar year) for the Rockdale County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds 21.48 mills 1.40 mills 22.88 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $3,914,373 and is to be used for capital outlay for educational purposes and 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 of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. - 18 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time ofpurchase. On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment All NIA $ 5,000 20 years $ 5,000 10 to 58 years $ 5,000 5 to 20 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. 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. In addition, general obligation bonds have been issued to refund existing general obligation bonds. 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 - 19 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS 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 ofthe 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 $7,152,891. 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.) - 20- ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The School District's deposits are classified by risk category at June 30, 2003, as follows: Risk Category Bank Balance 1 $ 225,065 2 0 3 6,927,826 Total $ 7,152,891 CATEGORIZATION OF INVESTMENTS At June 30, 2003, the carrying value of the School District's total investments was $11,541,578 which is materially the same as fair value. This investment consisted entirely of funds invested in the Local Government Investment Pool administered by the State ofGeorgia, Office ofTreasury and Fiscal Services which are not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy ofthe State ofGeorgia, Office of Treasury and Fiscal Services for the Local Government Investment Pool (Primary Liquidity Portfolio) does not provide for investment in derivatives or similar investments. A description ofthe Primary Liquidity Portfolio is as follows: The Primary Liquidity Portfolio consists of Georgia Fund 1, which is a combination local and state government investment pool, and Fund 6. Georgia Fund 1 is a stable net asset value investment pool which follows Standard and Poor's criteria for AAAm rated money market funds. The pool is not registered with the SEC as an investment company but does operate Georgia Fund 1 in a manner consistent with Rule 2a-7 ofthe Investment Company Act of 1940. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1.00 per share value). Net asset value is calculated daily and reported to the rating agency to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and values participant's shares sold and redeemed at the pool's share price, $1.00 per share. Pooled cash and cash equivalents and investments are reported at cost. The pool does not issue any legally binding guarantees to support the value of the shares. Participation in the pool is voluntary and deposits consist of funds from local governments; operating and trust funds of Georgia's state agencies, colleges and universities; and current operating funds of the State of Georgia's General Fund. Investments in Georgia Fund 1 and Fund 6 are directed toward short-term instruments such as U.S. Treasury obligations, securities issued or guaranteed as to principal and interest by the U. S. Government or any of its agencies or instrumentalities, banker's acceptances and repurchase agreements. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2003, was 30 days. The average investment duration for Fund 6 on June 30, 2003, was 0.39 years. - 21 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements Total Capital Assets, Being Depreciated, Net Governmental Activity Capital Assets - Net Balances July 1, 2002 Increases Balances Decreases June 30, 2003 $ 5,123,324 $ 220,000 $ 5,343,324 5,155,185 77 914 $ 5,155,185 77 914 $ 10,278,509 $ 297,914 $ 5,155,185 $ 5,421,238 $100,561,013 $ 6,420,505 $106,981,518 12,832,809 800,838 $ 1,024,681 12,608,966 9,105,750 193,624 9,299,374 26,319,964 10,258,868 4,869,051 2,336,156 803,432 443,443 958,637 28,656,120 10,103,663 5,312,494 $ 81,051,689 $ 3,831,936 $ 66 044 $ 84,817,581 $ 91,330,198 $ 4,129,850 $ 5,221,229 $ 90,238,819 Current year depreciation expense by function is as follows: Instruction Support Services Pupil Services Educational Media Services School Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services $ 68,632 98,417 180,095 507,755 347,825 44,827 $ 2,132,891 1,247,551 202,589 $ 3,583.031 - 22- ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) and property tax levied specifically for retirement of outstanding bond principal, interest and paying agent's fees (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 SPLOST Debt Service Funds Restricted Cash and Cash Equivalents: Debt Services Capital Acquisitions Restricted Investments Debt Services Capital Acquisitions $ $ 392,794 $ $ 1,462,765 245,051 826,958 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2003, consisted of the following: Transfer to Transfers From General Fund Capital Projects $==3==70-,9-8-1 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as required match or supplemental funding source for capital construction projects. 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. The School District has obtained commercial insurance for risk ofloss associated with torts, assets, errors or omissions and acts ofGod. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. - 23 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 8: RISK MANAGEMENT The School District has established a limited risk management program for workers' compensation claims. In connection with this program, a self-insurance reserve has been established within the General Fund by the School District. The School District accounts for claims within the General Fund with expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $225,000 loss per occurrence, up to the statutory limit. Changes in the workers' compensation claims liability during the last two fiscal years are as follows: 2002 2003 Beginning of Year Liability Claims and Changes in Estimates $ 0 $ 116 689 $ $ 0 $ 154 454 $ Claims Paid End of Year Liability 116 689 $ 0 154 454 $ 0 The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with 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 $ 6 266 $ 6 266 $ 0 $ 0 $ 10 304 $ 10 304 $ 0 The School District has purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount Superintendent $ 100,000 Note 9: LONG-TERM DEBT ADVANCE REFUNDING During fiscal year 2003, the Rockdale County Board of Education defeased $15,705,000 of outstanding Bonds. The School District utilized $17,394,214 ofSpecial Purpose Local Option Sales Tax proceeds plus $62,484 of Debt Service Funds to fund this defeasement. These funds were deposited in an irrevocable trust with an escrow agent to provide the future debt service payments on the 1995 Bond issue. As a result, the 1995 Series Bonds are considered defeased, and the liability has been removed from the District-wide Statement of Net Assets. - 24 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 9: LONG-TERM DEBT GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Amount General Government - Refunding - Series 1993A 2.5% - 5.4% General Government - Refunding - Series 1993 2.7% - 4.9% $11,695,000 1,630,000 $13,325,000 The changes in Long-Term Debt during the fiscal year ended June 30, 2003, were as follows: General Obligation Bonds Balance July 1, 2002 $32,385,000 Deductions Debt Retired 19,060,000 Balance June 30, 2003 $13,325,000 Portion of Long-Term Debt Due within One Year $ 2,275,000 At June 30, 2003, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 General Obligation Debt Principal Interest 2004 2005 2006 2007 2008 2009 - 2012 $ 2,275,000 1,580,000 1,675,000 1,780,000 1,885,000 4,130,000 $ 695,371 583,253 502,673 414,735 318,615 328,388 Total Principal and Interest $13,325,000 $ 2,843,035 - 25 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 10: ON-BEHALF PAYMENTS The Board has recognized revenues and costs in the amount of$1,115,096 for health insurance and retirement contributions paid on the Board's behalf by the following State Agencies. Georgia Department of Education Paid to the Georgia Department of Community Health For Health Insurance ofNon-Certified Personnel In the amount of $928,462 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 $186,634 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2003: Project Unearned Executed Contracts J. H. House Waste Water Treatment Facility Improvement Rockdale County High School Sewer Collection System $ 152,978 95,050 $ 248,028 The amounts described in this note are not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. 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. - 26 - ROCKDALE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2003 EXHIBIT "I" Note 13: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2003 2002 2001 100% 100% 100% $ 5,785,362 $ 5,501,257 $ 6,301,469 - 27 - ROCKDALE COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30. 2003 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Inventory - Net Change in Period NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 36,821,817 $ 36,821,817 $ 36,341,091 1,200,000 1,200,000 1,869,443 52,845,424 52,845,424 52,841,056 6,428,434 6,428,434 6,321,906 3,118,528 3,118,528 2,973,791 350,000 350,000 179,193 402 500 402,500 3,458,870 $ 101,166,703 $ 101,166,703 $ 103,985,350 $ 66,905,512 $ 66,571,363 $ 68,042,910 2,699,153 2,039,493 2,504,109 1,131,376 5,816,528 1,330,638 7,715,852 3,609,137 1,537,542 1,800 5,639,633 2,882,320 2,216,200 2,528,982 1,369,902 5,822,355 1,460,487 7,969,284 4,062,581 1,645,599 35,923 5,672,206 370 980 3,463,202 2,096,109 2,749,466 1,247,250 5,950,209 1,398,632 7,498,495 3,980,285 1,449,649 742,572 5,408,751 $ 100,930,773 $ 102,608,182 $ 104,027,530 $ 235,930 $ -1,441,479 $ -42 180 $ 470,956 $ 470,956 -580,956 -580 956 $ -370,981 $ -110 000 $ -110,000 $ -370,981 $ 125,930 $ -1,551,479 $ -413,161 10,991,409 10,991,409 11,107,959 -345 393 -345 393 Fund Balances - Ending $ 10 771 946 $ 9,094,537 $===1=!0,=69=4=,7=9=8 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. - 29 - ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food and Nutrition Program Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food and Nutrition Program Food Distribution Program (1) Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Individuals with Disabilities Education Act Part B - Special Education Flow Through Preschool Capacity Building Improvement Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration Project Elementary and Secondary Education Act Title I Grants to Local Educational Agencies Title II Eisenhower Professional Development Improving Teacher Quality Enhancing Education Through Technology Title Ill Limited English Proficient Title VI Innovative Education Program Strategies Safe and Drug-Free Schools and Communities 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 NIA NIA $ $ (2) 5,117,985 (3) 5,117,985 10.550 NIA $ 258,098 5,376,083 84.027 84.173 84.027 NIA $ NIA NIA $ 1,480,138 63,060 50108 1,593,306 84.332 * 84.010 . 84.281 84.367 84.318 84.365 84.298 84.186 84.048 NIA NIA NIA NIA NIA NIA NIA NIA NIA $ 194,377 1,364,955 40,291 400,346 32,388 54,895 67,383 60,327 107 979 3,916,247 - 30- ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30. 2003 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Defense, U.S. Department of Direct U.S. Marine Corps R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD $ 275,452 (4) Total Federal Financial Assistance N/A = Not Available $ =====9,=56=7=7' =8=2 Notes to the Schedule of Expenditures of Federal Awards (1) The amounts shown for the Food Distribution Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the fund earned on the School Breakfast Program ($447,582) were not maintained separately and are included in the 2003 National School Lunch Program. (3) Expenditures for this program include State, and/or Other Funds. Expenditures are not maintained by fund source. (4) Expenditures for this program were supported by $108,351 in Federal assistance (Marine ROTC) and the balance from State, and/or local funds. 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 Rockdale 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. - 31 - ROCKDALE COUNTY BOARD OF EDUCAITON SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2003 AGENCY/FUNDING GRANTS Education. Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV CategoryV Gifted Student - Category VI Remedial Education Program Alternative Education Program 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 Nursing Services Principal Supplements Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs 4-8 Statewide After School Program K-3 Statewide Reading Program Health Insurance Mentor Teachers National Teacher Certification Pay for Performance Post Secondary Options Preschool Handicapped Program Lottery Programs Assistive Technology Computers in the Classroom Student Information System Georgia Institute of Technology Student Information System Office of School Readiness Pre-Kindergarten Program Office of Treasury and Fiscal Services Public School Employees Retirement See notes to the basic financial statements. -33- SCHEDULE "3" GOVERNMENTAL FUND TYPES GENERAL FUND $ 3,007.410 533,512 7.213.087 1,230,109 4,029,531 534,969 7,758,356 6,922.571 1,195.548 458,612 694,983 2,800,664 800,832 186,054 1,666,131 64,971 588,467 372.873 1.132.414 383,843 228.783 1.246.045 2,249.467 3,423,023 1,165,822 260,643 272,466 52,607 60,311 1,061,021 325.964 196,491 -1.469,603 99,234 136,381 928,462 15,604 25,271 153,900 8,553 171,184 18,291 2,048 48,080 50,449 348,988 186 634 $ 52,841,056 ROCKDALE COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30 2003 SCHEDULE "4" PROJECT Rockdale County High School renovation, construction of a new elementary school, the addition of three new auditoriums for the existing high schools and the improvement of existing school buildings and other buildings and facilities Retirement of the Series 1987 and 1995 Bonds The cost of acquiring, construction, and equipping one new elementary school, one new middle school, and one new high school, acquiring land for future schools and instructional and administrative technology improvements for existing schools, adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal. The cost of acquiring school buses, acquiring, construction, and equipping one new stadium for an existing high school, adding to, renovating, repairing, improving, and equipping existing athletic facilities and other facilities useful or desirable in connection therewith, and acquiring any necessary property therefor, both real and personal The cost of retiring a portion of the prior bonds by paying or making provision for the payment of the principal of and interest on the prior bonds coming due on January 1, 2004 through January 1, 201 O ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR(3) AMOUNT EXPENDED IN PRIOR YEARS(3) PROJECT STATUS $ 27,300,000 $ 33,170,243 $ 1,649,056 $ 31,521,187 Ongoing 29,000,000 31,624,480 19,205,138 12,419,342 Complete 65,000,000 65,000,000 15,000,000 15,000,000 Ongoing Ongoing $ 136,300,000 $ 144,794,723 $ 20,854,194 $ 43,940,529 (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 Rockdale 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 project. See notes to the basic financial statements. - 34- ROCKDALE 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 Grades (6-8} 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 Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL} 3,615,279 $ 591,648 8,741,250 1,352,655 4,866,410 567,011 9,211,865 8,268,511 1,465,436 5,956,942 2,015,934 82,040 701,004 460,030 3,699,071 $ 185,812 10,537,004 655,912 6,632,268 214,273 13,214 9,862,058 10,628,005 1,376,211 664,099 863,126 4,596,247 231,353 1,293,635 200,452 530,696 655,463 114,336 $ 366,096 272,580 394,681 620,078 180,286 27,792 46,547 36,801 703 7,758 1,647 10,132 11 370 3,813,407 185,812 10,903,100 655,912 6,904,848 214,273 13,214 10,256,739 11,248,083 1,556,497 691,891 909,673 4,633,048 232,056 1,301,393 202,099 540,828 666,833 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 47,896,015 $ 52,838,899 $ 2,090,807 $ 54,929,706 Media Center Program Staff and Professional Development 1,356,033 274,978 1,889,490 89 797 229,459 167 121 2,118,949 256,918 TOTAL QBE FORMULA FUNDS $ 49,527,026 $ 54,818,186 $ 2,487,387 $ =~5~7,~3~05;;.;,5~7~3 (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 254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400 February 20, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Rockdale 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 ofRockdale County Board ofEducation as ofand for the year ended June 30, 2003, which collectively comprise Rockdale County Board of Education's basic financial statements and have issued our report thereon dated February 20, 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 Rockdale 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 Rockdale County Board ofEducation's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal 2003-34YB-10 control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Rockdale 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-10 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 February 20, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Rockdale 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 Rockdale 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. Rockdale County Board ofEducation'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 Rockdale County Board of Education's management. Our responsibility is to express an opinion on Rockdale 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 ofStates, 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 Rockdale 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 Rockdale County Board ofEducation's compliance with those requirements. 2003SA-10 In our opinion, the Rockdale County Board ofEducation 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 Rockdale 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 Rockdale County Board of Education's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level of risk that noncompliance with applicable requirements of laws, regulations, contracts and grants that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the management, members of the Rockdale 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, u).